She's outfitted Brooke Shields and the cast of Friends.
You'd think Paula Hian, whose clothing line is sold at
Nordstrom, would have no problem finding expansion capital.
But that surprisingly isn't so. "The fashion industry
is a risky business," explains Hian.
Hian operates one flagship retail store and would like to add a
second one. She has negotiated with venture capitalists and
bankers, but so far, her requests for capital have been denied.
She's confident that eventually she'll raise the money for
her new store, but so far, nobody else seems certain. Hian hired
one pessimistic consultant, recommended by an investment banker
friend, who told her flat out, "Nobody's going to give you
any money."
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Seven years ago, she took part in a local university program in
which a student wrote a business plan for her to lure venture
capitalists with. "I showed the business plan to an
accountant," says Hian, "and he said, 'Don't show
this to anybody.'"
Down, But Not Out
So what should Hian do to raise the $2 million to $3 million she
needs?
To find out, we questioned Mary Kay Schneider, senior vice
president of small-business banking for National City, a large
Midwest bank. Although Hian's collateral, clothes, isn't as
sure a thing as, say, cars, Schneider feels Hian's biggest
liability is that she's not surrounding herself with people who
can help her develop a comprehensive business plan that will
attract venture capitalists, bankers or angel investors.
Schneider recommends Hian put together a formal advisory board
of professionals to give her advice about expansion capital,
improving her business plan and more. One way to do so, says
Schneider, is by applying to participate in something like the
Athena
PowerLink Program, part of the nonprofit Athena Foundation and
partly underwritten by National City. Athena Powerlink matches
established women business owners and professionals with women
entrepreneurs trying to grow their companies.
"They'll spend a year helping her company reach the
next level," says Schneider. "Paula would have to be open
to sharing a lot of personal and financial information to get the
most out of it, but the mentors would basically serve as a panel of
advisors on an unpaid basis for a year, to help her grow her
business."
And if Hian isn't accepted into such a program? She'll
need to recruit her own advisory board of professionals, complete
with an industry heavyweight or two and someone from the investment
community, such as an investment banker. She should begin her
search for these folks by talking to a trusted accountant, attorney
or banker and by networking with other business owners.
With an advisory board in place, Hian will be in better shape to
try Schneider's other ideas:
- Approach a "boutique" investment firm. These
are small to midsized investment firms. Schneider suggests that
Hian find a firm with clients who are looking for alternative
equity investments. This simply means she needs to find fund
managers with wealthy clients who want to invest in privately held
companies.
- Unearth an angel investor. Hian should find someone
"who really believes in her and has the connections to open
some other doors," says Schneider. Finding one won't be
easy, however. "Angel investors are low-profile," notes
Schneider. "They respond to personal introductions by someone
they trust."
Schneider doesn't deny that Hian is in for a lot of work.
"She's going to need to devote time to this process of
searching for capital," she says, "and be willing to look
at more than just traditional bank financing."
Geoff Williams
is a writer in Cincinnati.
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