One of the toughest challenges that I have had has been capital.
Capital is a mandatory requirement to a business. Unfortunately, we still have A LOT - I mean A LOT of gaps in regards to accessing capital here in the United States whether you're a man or a woman. The running joke that I have heard is that everyone is willing to give you money when you need it least. I have found this to be true. Except for angel investors who swoop in out of nowhere and have your back no matter what. I now fully understand why the word angel was put in front of 'angel investor'. A big thank you to those reading it who have done that for me. You know who you are.
One of the challenges that I have personally experienced is the psychological attachment that comes with money. I can't wait to get my paws on this bad boy from the library. Looking back at old performance reviews where I had to ask for a raise makes me cringe. I distinctly remember being recruited for a job at a very prominent outdoor company based in Salt Lake City and having them ask what I made and saying they could give me a small amount above that. I was shocked. I could have told them anything but I hate lying. I tried asking them what they believe the salary should be instead of me leading but they wouldn't have it. I have heard countless stories from my friends (mostly women) experiencing the same cringeworthy feeling when it comes to money and quite frankly - I'm over it. I say this because I have witnessed firsthand my friends and family members who are male get stupid money and benefits without showing any additional value they will provide other than to bullshit when needed. I realize this is a gross accusation but I have found it to be true in many of my personal experiences which is why I am sharing it. It's time to talk about it so we can change this narrative. (If you really want to know my thoughts on the matter please reference Ayn Rand's Fountainhead).
One of the ways that I have moved through this capital challenge is by looking at it as a resource/tool to run the business and not an indicator of my value or worth or Anact's. Easier said than done. One of the ways that has helped me get through that is through financial modeling.
I have downloaded resources from the Small Business Development Center (SBDC) to create sales projections and work my way backwards into what is needed to get there capital wise. Creating these projections and ironing out the needs helps you determine the capital injection you need and what to ask for. Is it my strong suit, hell no. But does it make you realize what's working and not working - hell yes. It's also one of the skillsets that I am looking for most in a future co-partner.
One of the challenges that I have had is the assumptions required because as we have all personally experienced with 2020 - things can change on a dime. That's why I am sticking to one year projections with small growth increments (5-10%) because I believe slow is fast and that these unicorn/rocket businesses can't sustain, in my opinion. I am also falling in love with the journey these days and the moments created with others who believe in the same things that I do then pushing like a psycho to reach a financial goal (which I have done before). I did $100K in sales in 2020 so my goal is to do $150K in sales this year. Period.
When COVID first hit, I remember applying for a grant via iFundWomen where I had to disclose everything I had done to date to secure capital. It was the first time I realized how much of a discrepancy there was. Here were the items that I checked off:
- Pitch Fest
- An event where you pitch your idea for money. You have to be careful with these though because investors will go to them to find ideas and have the capital to execute them whether you win the pitch fest or not. The pitch fest I participated in was Thomas Jefferson University. I came in 2nd and won $5K but had to have my lawyer help me with the contract because it had a lot of stipulations in it to give access to the university to be an investor in my company, which we removed from the contract. The cost of lawyer fees, IRS fees, travel expenses, time invested and the opportunity to be potentially knocked off before you even get out of the gate left me with very little money to actually invest in the business and optimism about this forum for future use. Later on I found out that investors were the ones who had paid the university to host the event. Be careful. On the bright side, it did give me the proof of validation and the confidence to keep going.
- I haven't had much luck with these and am not a fan just because they are a one-time only thing and the reality is that you are always going to need access to capital so you might as well build a relationship with a person/entity that will foster a long-term relationship. For example, pitchfests are usually a one-time investment but they can open the door to connect with other strategic contacts and if covered by the press give you media visibility.
- Family + Friend
- This is where you raise money from your family and friends who believe in you. I did a GoFundMe around the holidays to raise $12K to develop the Anact towel with the factory and pay for our first round of sample production. I timed it with Giving Tuesday so people had an option to invest in something outside of a material gift. There was nothing that I promised to give anyone except the opportunity to help bring Anact to life. Once I realized how many samples the factory was giving us and the amount of people that I had donated, I was able to give each person who donated one towel before we went into mass production. I believe the success of this came from doing a video (I hired a local videographer) and from sharing my vision. Funny story, I actually got pinged from my old employer prAna threatening me to take the video down mid-campaign because they thought I was using their footage. I was not. All of the footage was my own. I share this with you to show you how competitive the space can be and another one of the challenges I personally experienced on my journey. The other piece that I realize might be hard to replicate but you can start doing now is to be transparent and kind to others. I have made a lot of relationships everywhere I go because I genuinely believe in being kind to one another and seek to understand others who are different than myself. When I left corporate, I had over 5,000 emails of people who I met over the years from when I was working at the Secret Service, to when I worked for a non-profit in Uganda, to when I worked corporate at Under Armour and prAna. While none of the people I met during this time knew that I was going to create Anact, they all knew my passion for human rights, sustainability and making the world a better place. Moral of the story: don't hide your light. Share what drives you even if you're not in a place where it makes sense. Acknowledging it and being transparent will eventually get you there. And yes it will be scary, yes you will be afraid of being judged but putting yourself out there will help you build confidence in yourself even if you don't yet believe in yourself. Something that my mom reminds me is that this life is so short so why not go for it. I truly believe that.
- Launching on Kickstarter was what allowed me to pre-finance my first round of inventory with the factory. The goal that I created was based off the cost to get that inventory here from production to freight to payment of the duty. What it didn't cover was the additional China duty that came into effect a month prior to my shipment leaving the factory, which added about $5K on to the total cost. Cue angel investor in the form of my dad on that one. Thank you, Matty K. The reason why I liked this capital tool was because it allows you to book sales so you know there is a market and you're able to use the leftover inventory to figure out the right formula without too much pressure which is what I did last year after launching during COVID.
- Personal Money
- I had a solid 401(K) when I left working corporate (thanks Mom & Dad for the guidance), savings and a lot of credit cards available to me because I was smart with my money over the years and never spent more than what I made. My thought process (since I was 28 years old at the time) was that I could make up the 401(k) + savings in time since I was (and still am) single, without children, without a mortgage. One of my dad's fears (and I get it) was that I would have trouble coming back into the workforce if they saw a gap in my resume. It took some reflection on my end to realize that the learnings and takeaways I would get from starting Anact (even if I couldn't keep it going) would be incredible skillsets that I would bring to any job, which I 100% stand behind. The only thing that is tough is that when you start your own company - you become used to doing it all, seeing the bottlenecks, creating your own schedule (I am writing this to you from my outdoor deck while I listen to the birds chirp - it's divine) and problem solving so when you tell yourself if you have to (like really have to) you can go back to a regular full-time job, you know that deep down inside you can't (unless it was really special) because you'll be so used to giving it your all and seeing what's amiss that you'll be not only personally unhappy but also a pain in the ass to the team if they don't support that type of entrepreneurial energy and spirit.
- Additional jobs
- I started my own consulting company to work with apparel and non-apparel brands to help them implement sustainability strategies. I remember my Uncle Johnny (founder of the Dummy books) telling me - you'll never be able to run two businesses at the same time. I didn't get it when he said it but I get it now. I do think consulting might be an exception because the work that I do with Anact is complimentary with my consulting services but for the most part - he's right. I also made the mistake of not consulting the key partners who had the clients I would be selling my services to until after making the leap so they didn't feel a part of the process, which made it hard for me to garner their support. As much as I want to say that your work should just speak for yourself (and I believe it should) sometimes you do need to have others vouch for you when you're first starting out. For example, several of the key people who felt left out ended up starting their own services identical to mine and because they had a direct relationship with the clients I wanted to focus on were able to take advantage of the opportunity effectively leaving me out of the game. Is consulting where I want to go long-term? No. But being able to make additional money to cover cost of living and freelancer expenses is quite nice to have in one's back pocket. Lesson here - consult that that you plan to sell to about your services prior to taking the leap so you have a bit of a fortified front. And if it doesn't pan out then take it as a sign from the universe it wasn't meant to be.
In the advent of COVID, several resources have come up that have been incredibly helpful. I was able to quality for Economic Injury Disaster Loan, which allowed me to do the marketing campaign that you saw earlier this year in collaboration with Surfear Negra and Malcom Jackson. Shopify Capital has been amazing and gives you the money in one day based on your sales and then pulls the amount in increments as you sell. I've looked into all of the hippy resources sent from friends like ClearBanc, Kiva, etc., but unfortunately, Anact just doesn't qualify. I have scoured high and low through my entire network and my contacts and have found nothing.
I've also gone the traditional bank route but it requires at least 3 years financials and they want to see profit out of the gate. The things you think make you the most marketable are what the banks see as your biggest weaknesses. They want you to work full-time and do your business on the side, they want to know you are married so that they have someone to co-sign on the loan, they want you to own a home so they can pull from it if need be. Having a family, a home and a full-time job will hands down add at least 1-2 years more on the time it takes to get your business up and running but they don't care because they are in the business of ensuring they get their money back no matter what.
And then you have the investor route: angels, venture capitalist and private equity. Are you looking for debt or equity investors? What's your valuation? How much do you want to give away? What are your projections? What's your EBITDA (earnings before interest, tax, deductions? How quickly can you get the return back for the investor and and what's your exit strategy? What sucks is that a lot of investors have become used to the tech space which can offer 10x return in two years or less. Create the app, sell the technology and boom, you sail off in the distance. The notion of meeting a founder where they are at and problem solving together takes a very special type of investors I have personally found.
On top of that, everyone has different requirements and requests so you can find yourself running around with your head chopped off and not focusing on the business. When they say raising capital is a full-time job, they weren't joking.
I have written about my experience here to help others but also as a space to share what I am going through because it is lonely. It is scary. It does make you wonder if you'll ever figure it out. It makes you wonder why you don't have a rich grandparent who will just front you money when you need it but then you see other founder stories and the capital they secure and the money wasted because you think you're safe so you keep it moving and you are quite frankly required to surrender and trust the process. To be comfortable with money loss and time loss because you're learning, you're growing, you're having an experience that many people will never have that allows you to tap into everything that you're made of and be connected to your essence. I write this because I HAVE TO remind myself otherwise I will just hit refresh on our Shopify page for hours and not leave the house.
What's next on the docket you ask? I have to secure our second round of inventory before Chinese New Year (CNY) in the next few weeks. Line of credits, PPP aren't possible because we don't sell enough yet and we don't make enough in sales to finance the volume of inventory we are bringing in so it's say a prayer and Hail Mary, do your best and trust the process. There's a reason my personal stationary currently says there is beauty in the unknown.
If I have missed a potential capital source or you know someone who is interested - feel free to send me an email at firstname.lastname@example.org. I'm all ears.