Why this Serial Entrepreneur does NOT Want Venture Capital for her Growing Business
Can you elaborate a bit on: "How did you fund it, with how much money, and what is the business model? This is for a lot of people great to read, how you did it, what route you chose, which hurdles etc. as for many this is a thing to consider when starting out. Also, on how you are dealing with the growth is interesting.
This is what I asked Charlotte Semler-West, serial entrepreneur and founder of Charlotte & Co, and prior thereto, founder of Myla. She replied:
I chose the fund the business start-up myself. I had previously founded and run a VC backed business start-up and I really didn’t want to go that way again. I can say the following….(probably more than you wanted!!!) (see further down in the interview, ed. SGB)
How did you come up with the idea of your venture?
I founded Charlotte & Co. when my twins were babies. As a mum I found that I was spending a lot of time at home and I wanted clothes that were comfortable and made me look good rather than tired and rumpled (which, let’s face it, was how I felt most of the time). I started out designing stylish nightwear – cotton pyjamas and nightdresses in high quality cotton and pretty prints. The Charlotte & Co. sleepwear and loungewear ranges have grown really fast thanks to word-of-mouth.
Over the last couple of years we’ve started adding coats and comfy-stylish daywear to the collection. Charlotte & Co. clothes now make mums look stylish at home, at work and on the school run. Check out our super soft jersey collection – these pieces feel cosy enough to lounge about the house in and look smart enough to go back to work in.
How did you form your team?
The team consists of women, all work flexibly from home. We have great people who really want to be part of an exciting business but who also want careers with time for their families and themselves.
How did you fund it, with how much money, and what is the business model?
The business is privately funded. I chose the fund the business start-up myself. I had previously founded and run a VC backed business start-up and I really didn’t want to go that way again. I wanted to maintain a strategic business focus on what was right for the business and for me personally. When you have outside investors the focus naturally and rightly shifts to growing the business in a way and at a pace that suits the VC model. You are never really your own boss, the business and the needs of investors become the key priority.
I believe that it is better to grow a business more slowly using less investment. My theory is that all business start-ups need to be SUSTAINABLE both in a financial and personal sense.
I believe that this expectation that businesses must and should grow rapidly in the early stages to be successful is a dangerous fallacy that adversely affects both the happiness of entrepreneurs and the viability of the businesses that they build.
The ‘rapid growth’ fallacy is a product of the tech bubbles and Venture Capital industry. The first decades of this century has seen technology companies grow from ideas to billion dollar multinationals in the space of half a dozen years.
Venture Capitalists have profited enormously by backing those businesses. Meanwhile, the actual businesses that the VCs backed and profited from have often been loss-making.
Most small businesses are not tech companies. And for them to model their growth plans on a bubble industry is like trying to live your personal life according to the pages of Hello Magazine. It’s not healthy and it won’t make you happy.
There is often a trade-off between profit and growth. Put simply: the faster your business is growing the less money it’s likely to be making. Of course it’s not true of all businesses but for most growing means acquiring new customers and developing new products both of which are generally loss-making in the short term.
The VC business model demands high growth and big losses in the hope of eventually reaching economies of scale to deliver profits and then selling the business.
The trouble is that if you don’t get to point of selling the business before you burn out your business will fail. That’s because dedicating yourself totally to your business is not sustainable in the long term.
Most entrepreneurs find that they can work 24/7/52 for 4-5 years before they hit a brick wall. Hitting the wall manifests itself in a multitude of ways:
- Physical and mental health problems
- Inability to see the wood from the trees and make decisions effectively
- Breakdown of personal relationships
- Breakdown of working relationships
It’s high risk and high return for the few lucky entrepreneurs who make it through the loss making years to the other side but the reality is that the vast majority of businesses need to be sustained by the profits they generate and the efforts of the founder for decades.
The myth of 24/7 super-human endeavor is promulgated by successful entrepreneurs who may think it’s true but who also have a vested interest in telling the world that they deserve their exceptional financial rewards because they have ‘worked for it’.
It’s also a classic macho piece of posturing: ‘look how hard I am, I can work 70 hours a week, sleep 4 hours a night and never see my kids’
This trade-off where you give up your life to build a successful business is a deal you do with the devil. Turn your back on it…….There is another way
Agriculture has its Slow Food movement born as a backlash against nutritionally bankrupt and culturally pervasive Fast Food – now we need a Slow Business movement.
We need a SUSTAINABLE business model that facilitates dynamic, innovative businesses which grow slowly, are rooted in long-termism and are sustained by entrepreneurs who are happy and fulfilled in their lives.
What makes you different from other players in your sector?
Charlotte & Co. offers luxury quality and designer styling. We think that to look good you need to feel good. What was your biggest challenge during the development & growth process and how can other start-ups learn from that? Getting the product right for your customer is key. Listen to the customer, put your heart into the design and never compromise on quality or service
Are you profitable?
How are your dealing with finance?
We have a part time female FD. The business is self funding.
Where is the company in 1 year?
We want to consolidate on the huge growth we have seen over the last 3 years. Slow things down for a year or two then have another growth phase in 2014/15.
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