To grow to exponential heights or sustain linear progression? It’s the crossroads that many founders encounter at some point during their business journey. When sales are solid and the team stable. When feedback is positive and a steady stream of customers arrive without trouble, what should the next step be? Do we need funding? How would we spend it? Should we relinquish some of the pie in a quest to make it bigger?
Company founders Rachael Corson and Joycelyn Mate of Afrocenchix are two entrepreneurs who recently made this decision, securing $1.2 million in seed funding for their afro hair product brand, which aims to “give every person with afro and curly hair access to our safe, effective, natural products and expert guidance they can trust.” Corson explains the reasons behind their bold move.
Beginning with bootstrapping
After meeting at university in 2008, Mate and Corson “bonded over health, hair and beauty.” Afrocenchix launched in 2010 to solve their problems of alopecia and eczema, and help others like them. Their first products were a hair oil and a scalp oil, and they started blogging about hair care topics. Although the product was selling to friends, family and further afield by using social media, the brand was bootstrapping. “We couldn’t get into any stores for ages,” said Corson. “Then our glass bottle supplier, who also had a store, noticed we were buying more bottles and we started talking about stocking our products there.” This break gave Afrocenchix the retail experience they needed to become the first brand for afro hair to launch in Whole Foods UK, then Holland & Barrett and now Superdrug, with more on the horizon. Afrocenchix had sold over 65,000 pre-funding units since its inception; perfect for generating a healthy valuation and interest from investors.
Talking of their main drivers in the decision to seek funding, Corson explained they, “bootstrapped for years and learnt a huge amount from doing so, but it meant we couldn’t keep up with our rate of growth.” Their products and customer base were solid, “customers love our products so we grew through word of mouth without any marketing spend,” but it was tough to “fulfil the orders and keep the company running whilst balancing full time jobs, so we went part time.” But because they wanted to reinvest every cent the brand earned; this strategy wasn’t sustainable. “Seeking funding was about scaling sensibly,” explained Corson, but it was also about going full time on the promising brand they had created.
Securing investment to scale at speed
In the case of Afrocenchix, the investment will buy them speed. “Without investment,” explained Corson, “we’d still go after our goals, but it would be much slower. We’d be in a position where we would have to take bad retail deals and we wouldn’t have the liquidity to give selling directly to consumers our best shot.” They are expecting new challenges that require a big shift in their mindsets, as they now “actually have resources and don’t have to hack everything!”
The founders expect this funding round to establish their position as leaders of the U.K. market, “which means securing 12.5% market share.” After that, the focus is global expansion. “We’ve already shipped to twenty-three countries worldwide, so we will analyze the data to decide where to double down.” Corson is busy “finding the right people to grow our team; people who care about our community and value authenticity, collaboration and excellence as much as we do.”
When asked for the advice she would give to others in the same position, with an established and growing brand looking to take the next step, Corson said, “make a clear plan, a backup, and use a risk matrix to assess your approach.” Securing funding for Afrocenchix took nine months, and it was meticulously planned. “We created a Trello board and listed the investors we wanted to secure. We also had investors reaching out to us after winning an award, so PR can certainly help.”
Corson advised that founders don’t raise investment without thinking it through. “Get lots of input then create a budget and figure out required cash injections.” Bank lending, angel investment or crowdfunding are all options to consider. “Avoid VC unless you need to, or unless the rewards and impact of your brand will be massive, it’s not for the faint of heart,” she added. Even having successfully secured their investment, Corson knows, “there are so many things I’d do differently.”
The brand spent a lot of time nurturing the first few investors before starting relationships with new ones. They didn’t cast their net as widely as they could have.
For their next round, Corson plans to “front end the pitches to get to term sheets quickly so that we’re in a strong negotiation position” as well as not waiting on promised introductions. “Be proactive when raising. Waiting for others to act is time wasted. Make sure you are consistently driving forward.” Make raising investment a “sprint, so you don’t end up crawling over the finish line” and, more importantly, so your business doesn’t suffer with the distraction of raising capital.
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