For the first 10 years of her company's life, Laura Peck Fennema was content to grow Essentiel Elements using internal financing.
Then came the decision to add a skin-care line to a product mix that already included aromatherapy body and hair items sold to spas and specialty stores. "Launching a skin-care line requires a much larger budget," says Fennema, 42, of her need for outside funding. "And we needed to hire our own direct sales force. That takes deeper pockets."
Going the venture capital route was a natural for Fennema, who had worked as a technology stock analyst in investment banking for eight years prior to starting her San Francisco company with $50,000 in savings in 1989. But even Fennema didn't realize how naive she was about the process.
"In the thick of it, for three or four months, searching for venture capital consumed about a third of my time. I was meeting with people constantly, sending out business plans, responding to questions and revising my financing," she says. She eventually ended up with a first round of financing in March 1999--a combination of $500,000 in venture funding and $750,000 in private equity capital. "I approached only about five venture capitalists, and when I realized they were going to have to do so much due diligence to close the deal, I decided to take another route."
Fennema, who believes the lengthy due-diligence process is the nature of the venture capital beast, also cautions women to understand that going to traditionally male-dominated venture funds can be an iffy proposition. This is particularly true if you're pitching a deal that might be viewed as a "women's issue," such as a company only selling services and products aimed at women.
While Fennema was surprised at the level of intensity required to raise her $1.25 million in equity capital, she's extremely pleased with the results--and her 1999 sales of $10 million: "It has allowed the company to grow pretty dramatically."
Koplovitz & Company, (212) 551-3585
National Foundation for Women Business Owners, (301) 495-4975, ext. 13, http://www.nfwbo.org
Viiridian Capital, 220 Montgomery St., #946, San Francisco, CA 94104, (415) 391-8950