Fashionably Late

After years of searching for expansion capital, this fashion designer has realized that it was just a matter of style.
Magazine Contributor
4 min read

This story appears in the September 2001 issue of Entrepreneur. Subscribe »

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."

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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