Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerA few months ago I posted a story about a possible new niche organic food company I might invest in. The founder of the company was looking for seed capital and follow-on funding. He has been developing the product for several years and has most details of his business plan worked out. However, he has no funding as of yet, and while he has numerous connections in the food industry, he is light on all of the other things that go into the management and execution of the business. Based on four months of discussions and assisting him as part of his unofficial advisory board, we moved closer to striking a deal.
My own knowledge of the food industry is severely lacking, and I am not very well-versed in retail sales or distribution either, but many of our skill sets were complimentary. The founder is a family acquaintance (caution lights blinking) and I was interested in helping him out if I could. I do believe the business is viable.
We got into discussions more recently about whether to go public (penny stock) or stay private. The potential to raise capital using different approaches and, most importantly from my perspective, how critical it was to start up with a bang or take a go-slow approach. This proved to be one of our major points of contention. I was in favor of bootstrapping the company along and not taking on very much debt, funding growth out of profits. My associate wanted to scale-up fast and was willing to take on greater debt to develop a few additional products that he had in mind to expand the line, even before we had established the initial product in the market. While I credit him for knowing his industry and the potential market, my own general business principles started to be tested.
Since I could not offer much of my time, I introduced my entrepreneur friend to another good friend that does have the time, knowledge, capital, and experience to help with the execution of the business on a full-time basis. He was actually looking for his next venture and has a personal interest in gourmet food. His experience also includes business development and international sales for a Fortune 500 company -- perfect I thought. Just like the big venture capitalists, I would bring cash and business leadership and all would be right in the world.
So we all got together on several occasions to discuss the conditions for going forward. Well all was not right in the world. In addition to cash and management, I offered my relationships to set up the banking, insurance, legal, accounting, and any other needs of the business plus contribute office space to get started. I offered everything the average person wishes they could get but does not have when they are starting a business.
To bring this to a close, we got into silly discussions about executive titles (I did not need one, I get called plenty of things on this blog site); whether the founder would have ultimate control or it would be a board-run company; questions about the transparency of my associate's business dealings; the time frame for executing the plan; the scaling of the plan; and a few other tidbits. In the end I decided that I was not going to be able to associate with this company in any form. I did help create the potential for the company to get started without me and backed away to allow the others to see if there was a way for them to move forward.
As I write this I am not sure whether the founder has what it takes to be successful. The other people that remain interested are trying to get a deal done this week or next. I wish them luck, but for me it makes no sense to associate with someone whose business principles and demeanor are incompatible with mine at the onset. Most companies that fail do so for the want of capital, and have poor execution. Hopefully my friend will figure this out for himself and in time to make a go of it. He has many good advisers now -- I hope he is capable of taking some advice.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.
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Reader Comments (Page 1 of 1)
3-24-2007 @ 11:33AM
Jay said...
I think this highlights an unspoken fact. Perhaps most entrepreneurs start their own companies so they can obtain a title they might not otherwise acheive in the corporate world.
As a former business owner, I must sheepishly admit that was the case for me at the start. However, when it came down to it, providing excellent service and watching your dream grow from a bedroom office to a fully-functioning company is better than any title in the world.
4-24-2007 @ 12:02AM
James Lowery said...
I recently survery angel investors for an article. Alternative energy seems to be a focus for many. I spoke to Peter Klamka who used a public shell as vehicle to invest in a solar company.