Convincing others to back your concept is a vital step in getting an idea off the drawing board or scaling up a nascent business. But how do people actually go about achieving that? Finding out can be tricky: most of the advice available seems to be aimed at aspiring technology entrepreneurs hoping to secure speculative millions from venture capitalists.
For many small-business owners, however, gaining financial backing at any stage of their company’s life is as much about calling on friends, family and former colleagues as it is about pitching to venture capitalists. And often it’s those smaller sums that end up making a really big difference.
Over the following pages we meet a handful of entrepreneurs who have managed to secure financial support for their businesses, either from their nearest and dearest or passionate fans of their brand. Their experiences are instructive: when it comes to finding investors, it turns out that trust, belief, passion and a healthy dollop of hard work are the essential ingredients.
“When you walk into Forest you’re transported into a jungle in the middle of Dulwich,” says Lana Elie, founder and CEO of Floom, an online marketplace for bouquets made by independent florists. “We want to transport our customers into the lives and shops of florists we support.”
Forest, which belongs to The Fresh Flower Company, is one of dozens of UK flower shops listed on Elie’s website. Each florist uploads photos of its blooms weekly.
The idea came to Elie when she was working as assistant to Greg Stogdon, senior vice-president of creative media at Burberry. She was tasked with sending flowers every day but found few businesses and arrangements that matched her company’s standards. “Once I started researching the idea I couldn’t imagine doing anything else,” says Elie. “I was so emotionally and physically addicted to starting this journey that I never had ‘the fear’.”
She had a bulletproof business plan within three months and approached her first investor, Tom Singh, the founder of retailer New Look. She then turned to crowdfunding platform Crowdcube; that’s when Stogdon came on board. “The imagery and style of her site were absolutely perfect; everything felt fresh,” he says. Investing more than £7,000 (€7,850) in Floom was a no-brainer. “It’s the first company I’ve invested in and I now use it whenever I send flowers.” Elie flashes him a big smile: “Greg’s probably our biggest customer.”
Most of Floom’s 331 Crowdcube investors – who raised £520,000 (€580,000) – already knew Elie. “Everyone was funneled through the Crowdcube mechanism because otherwise it would have needed to be treated as a separate round of funding,” she says. Yet when Australian-born backer Maria-Christina Copinger-Symes steps into Forest this morning, it’s her first time meeting the founder. “She’s an incredible girl, isn’t she?” she says to Stogdon after a short chat with Elie. “I loved the product and thought it was so unique how she packaged it.”
Elie wants to build her network to 500 florists and launch in Paris, Milan and New York in the next three years, while turnover is expected to reach £1m (€1.1m) in 2018. “My vision is that if you ever want to send flowers in whatever area of the world, you go to Floom. Then, one day, it’s the Google of flowers.”
Name: Greg Stogdon
Profession: Senior vice-president of creative media, Burberry
Relationship: Friend and former colleague Size of investment: Invested more than £7,000 (€7,850) as a shareholder
Wise words: “I literally feel invested in Floom; I’ve developed a weird interest in florists. Whenever I walk past one, if I think of things I’ll drop Lana an email.”
Name: Maria-Christina Copinger-Symes
Relationship: Purely business
Size of investment: Invested more than £7,000 (€7,850) as a shareholder
Wise words: “It’s a cheerful, beautiful product to invest in and I’d like to invest more in the future.”
As many entrepreneurs will attest, mixing business and family can be explosive. Yet that didn’t deter sisters Marta and Patricia Faustino from teaming up to create one of Lisbon’s newest hotels, 1908 Lisboa. Today the 36-room property, housed in a restored historical building, overlooks Largo do Intendente. But the project wouldn’t have seen the light of day without the investment and expertise of the pair’s father, Adérito, who first spotted the building and injected €5m into the project.
“Dad has been in construction all his life,” says Patricia. “He saw the potential of this building and encouraged our plans, providing the money and expertise to get it off the ground. I quit my job as a biologist and we formed a family company.” Marta’s husband Daniel Matias, a civil engineer, joined the company a few months later. Marta and Patricia oversaw the concept, design and specifications; Matias and his father-in-law managed the build.
Working closely with a family investor enabled the development to move quickly: planning began in mid-2014 and the hotel opened in January this year. Partway through the project, the team saw the opportunity to add three more rooms to the space and upgrade the quality rating from three to four stars. “With family funding it means you can make these decisions much more quickly and easily,” says Matias. “The budget obviously had to increase but rather than having a debate with a bank and putting together an entire business plan, we just had a family conversation.”
That’s not to say that working with family is entirely painless. “I was a little bit worried about working with my father,” says Patricia. “The relationship can be difficult and there was definitely a clash of generations. He’s used to leading projects so letting go of decision-making, especially to his daughters, was hard for him. Similarly, some of the things he suggested that we didn’t want to listen to turned out to be 100 per cent right.”
Adérito echoes this sentiment: “Trusting in their decisions was hard to begin with and I didn’t always agree, but the result has exceeded my expectations. The combination of my experience and their youthful taste worked really well.” And the secret to running a family business? “You need to be rational and focused and honest with each other but also open to learning from each other,” says Marta. “And you need to try to separate work from home,” adds Matias. “We never seem to have a family lunch that isn’t about the project anymore!”
Name: Adérito Faustino
Profession: Retired, background in the construction business
Size of investment: €5m
Wise words: “The challenge is to separate family feelings from decisions,” says Patricia.
Adds Marta: “It’s a privilege to share this with family. When it comes good the feeling is so much better because we did it together.”
Jaime Schmidt is a quintessential kitchen-table entrepreneur. After a business degree and a spell in HR, she decided to transform a humble, everyday product. “The deodorant industry was so bland – it needed something exciting,” she says. “Natural products had stigma too. I wanted to make something healthy that looked cool.”
Schmidt “wasn’t looking for money or help” so when Michael Cammarata contacted her she was puzzled. His track record was idiosyncratic: born on Long Island, he started a business as a teenager, ran web-hosting, digital-advertising and consumer-electronics firms, then managed California pop band Big Time Rush. “It taught me about the female consumer market,” he says. “Girls would pay $500 for a meet-and-greet and I noticed they would talk to the guys about natural products: what they used, what they liked.”
Cammarata gravitated to Schmidt in 2014 because of her products’ reputation. “Nothing else had a fanbase like this,” he says. He admits to brief second thoughts after his first visit to the then-HQ in Portland: a 100 sq m box with four employees and a pet turtle. But he soon came on board with distribution and manufacturing expertise – and lofty goals.
Expansion followed, to 14,000 retail locations and more than 120 employees. Eco-friendly hallmarks remain: a recent product line benefits environmental group Surfrider Foundation. “What we’ve done with one product shows people want safe, healthy ingredients,” says Schmidt.
Name: Michael Cammarata
Profession: Serial entrepreneur; former pop-band manager; investor via his firm Random Occurrence
Relationship: Purely business
Size of investment: Undisclosed but Cammarata initially invests up to $5m (€4.3m) in a given business
Wise words: “Whole industries are being redefined but it hasn’t really happened in consumer goods. There are about three big players in the US and they’ve been around for a long time,” says Cammarata.
Adds Schmidt: “We’re selling a service, not just a product. We provide a lot of education for customers on health – they’re hungry for it and no one else is giving them what we are.”
While studying at New York University, César Vega had a moment. He’d been staying up late poring over his photography coursework and topping up his caffeine levels with cheap hits from a local coffee shop, when he realised it “wasn’t good fuel” and he needed to try something else.
For a while he tried to abandon coffee but gradually recognised that the key was quality. Born in Nicaragua and raised in Miami before moving to New York, César started to delve into his birth country’s coffee heritage. He was perplexed. Nicaragua was breaking records auctioning its beans and yet in New York it was virtually unknown. He had the idea of selling green Nicaraguan beans wholesale to roasters in the Big Apple under the Café Integral imprint. “He called me up and said, ‘I can’t find any good Nicaraguan coffee,’” says his mother Helvia with a grin, “‘and I’m going to do something about it.’”
César, a clean-cut 29-year-old wearing a white Oxford shirt, and his mother, dressed in black, have come a long way since then. Indeed, since August last year César has opened his own coffee shop in Nolita: it is minimalist, light-filled and bustling. His mother – now a partner – was the first to invest. César was initially wary of traditional investment. He’d lived with business students at university and had seen their start-ups, funded by outside capital, rise and fall. “I was like, ‘Apple has investors, not me’.” Instead he did what he calls the Latin American thing of approaching family, with his mother injecting about $20,000 and then his grandfather – still based in Miami – offering $30,000 18 months later. “We never thought this would fail,” says Helvia.
Both César and Helvia say having family investors encourages you to plan more – and you have someone to apply the brakes if you’re tempted to overspend (in César’s case, his accountant grandfather).
He shifted the concept in 2012 when the wholesale business wasn’t making enough cash. Buying second-hand roasting equipment online, he opened a café in the American Two Shot shop through friends of friends, then went out alone, all the time sourcing the best-grade Nicaraguan coffee.
Now Café Integral is in partnership with Freehand Hotels, giving it a presence across the country in places such as Miami Beach, Chicago and Los Angeles. The toil seems to be paying off and external investors have started to call. “We’ve been thinking about it for growth,” says César. “But suddenly you’d have someone to answer to and with family it’s more relaxed.” Something to percolate, perhaps.
Name: Helvia Vega
Profession: Business partner at Café Integral
Size of investment: $20,000 (€17,150)
Wise words: “We are conservative with money. I was like, ‘Let’s plan things well.’”
“It takes family, friends and fools to make a business work,” says Laszlo Raphaël. The native Mexican, now living in Hong Kong, has certainly called upon the first two since he and his wife Michele launched craft-beer brand Moonzen in 2013.
Laszlo was a home brewer working full-time as an oil engineer when he decided to quit and plough his savings into setting up a pocket brewery in Kowloon. After 18 months working seven days a week – for Michele, sticking on labels and collecting bottles in her evenings after work – the pair decided to scale up and move to new premises. They reckoned the process would need hk$10m (€1.1m) of investment. Instead of writing a business plan, they turned to loved ones.
The duo’s tireless work helped convince those close to them that Moonzen was worth investing in. “We had established the brand and our small factory was up and running; all that was tangible,” says Michele, who has since given up her academic career to run Moonzen. Close friends, such as banker Hector Torres, stumped up one-tenth; the rest came from savings and family, including Michele’s brother Glenn Wong, who works in finance. Luke Byrne, a technology entrepreneur and another long-time friend, also took the plunge. “They really care about the brand,” he says. “They’re taking craft beer to a whole new level.”
Moonzen (named after the Cantonese word for traditional guardian icons placed by front doors) produces 30,000 bottles per month and has just launched in Thailand. For Michele, the moral of the story is hard work wins support: “Building trust is about pushing your car when it stalls on the highway instead of merely waving for help on the roadside. People will come and help if you show them through example.”
Name: Hector Torres
Profession: Derivatives researcher
Size of investment: About hk$300,000 (€32,800)
Wise words: “I’m very angry with Laszlo and Michele. I used to be able to drink any beer but now I can’t – they’ve spoilt me.”
Name: Luke Byrne
Profession: Founder of Jobable
Size of investment: About hk$300,000 (€32,800)
Wise words: “It’s important for partners to combine their skills and add value to the business.”
Name: Glenn Wong
Profession: Financial services
Relationship: Michele’s brother
Size of investment: More than HK$300,000 (€32,800)
Wise words: “Starting a business is hard but being able to sustain it is harder. You have to be very clear on your goals.”