Been There, Done That
Growing an entrepreneurial empire? Turn to the big names in business if you need help.
Obtaining funding in today's economy remains difficult, but
a small group of companies has hit a jackpot: They've linked up
with VC funds founded by mega-entrepreneurs like Ben Cohen of Ben
& Jerry's fame--men and women who can provide young
businesses with a double dose of capital and management
expertise.
Cohen is hardly the only entrepreneurial superstar to start a
vanity venture fund. Howard Schultz, founder of Starbucks, is a
major investor in Maveron, a fund focusing on retail companies that
show breakout potential. And Frank Biondi, the chief executive who
helped turn Home Box Office into an international powerhouse, has
co-founded Waterview Partners, a fund focused on media and
communications companies.
Many of these entrepreneurs are looking for businesses that have
the same qualities that made their own companies successful.
"We search for entrepreneurs who already have a segment of
their market staked out and are interacting closely with core
customers," says Chuck Lacy, president of Cohen's The
Barred Rock Fund.
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Paul Schervish, a sociology professor at Boston College who has
studied a range of investor funds, agrees that the big names
aren't looking for businesses that are just throwing around
ideas: "Successful entrepreneurs inherently understand small
business. To them, the most important thing is that a young
organization has identified a clear demand in the market and
already is on the ground meeting that demand rather than just
drawing up future plans."
Because leading entrepreneurs remember founding a company, they
also may be easier to work with than traditional venture funds.
"Ben and Chuck are more willing to provide expertise from the
sidelines but leave control in the hands of people running the
business," says Bill Dunn, vice president of Sun & Earth,
a 14-person Pennsylvania natural soap company part-owned by The
Barred Rock. "They know small companies' management has to
be able to make quick decisions."
What's more, while many VCs are pulling back,
mega-entrepreneurs' funds remain loaded. Maveron raised $340
million the last time it went back to its investors. "Having a
prominent figure helps us attract capital," says Pierre
Ferrari, president of the Hot Fudge Social Venture Capital Fund,
another of Cohen's enterprises. Ferrari suggests that small
businesses looking for entrepreneurial heavyweights to back them
should contact VC groups like the Social Venture Network, which can
help companies find funds that might match their needs. Ferrari
also suggests entrepreneurs attend as many local VC road shows as
possible and not shortchange themselves when asking for cash:
"[Ask for] enough cash to ensure you won't always be
walking a liquidity tightrope."
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