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Business Plan Advisors™, a division of the A.Z.O. Group, is featured in The New York Times
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In the News: |
| Business Plan Advisors™, a division of the A.Z.O. Group, is featured in The New York Times -- Small Business -- In The Hunt |
| Love Your Idea (Don’t Want to Finance It) |
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| Published: April 10, 2008 |
AT age 62, Patrick Brooks believes he has identified the biggest winner yet of his entrepreneurial career: licensing rights to a Savile Row trademark, “Henry Milbourne & Son — established 1769.”
The magic of that brand name, he says, should give a major boost to his fledgling effort to sell luxury men’s apparel, made in Britain, over the Internet.
But while potential investors had only good things to say about his planned venture, few are willing to invest in it.
“Henry Milbourne has a great plan to combine the old-school industry of custom-tailored shirts with the modern Internet model,” said Michael Hammond, founder and chief executive of Copana Partners, a New York investment firm.
“Keep working this strategy; it has great potential,” said Marvin Wilcher, acquisition strategies consultant for Solar Capital in Benicia, Calif.
Still, neither Mr. Hammond nor Mr. Wilcher planned to provide money for Mr. Brooks’s venture, Henry Milbourne & Son Ltd. of Arcadia, Calif. (The Web site, http://henrymilbourne.com, is still in the works.)
Mr. Brooks said he had contacted about 500 angel investors and angel-investor groups and 40 venture capital firms and boutique investment bankers over the last year to raise the $2.5 million he thinks he needs. But only nine have put up any money, including his former wife. The total he has raised so far is $475,000.
To some extent, Mr. Brooks is snared in the Catch-22 paradox that bedevils many entrepreneurs who have come up with a promising product and marketing plan: investors are reluctant to open their wallets until they see a functioning business. But it is difficult to create a functioning business until the investors open their wallets.
In addition, he may be looking in the wrong places. Some of the investors he has contacted get involved only in deals worth at least $5 million.
“We have everything in place,” Mr. Brooks said. “We have the premises rented; the Web site under construction; the logo done; the marketing plan set up.” Even the boxes for the $365 custom shirts, $235 ready-to-wear shirts and $108 hand-made silk neckties, all British-made, have been designed, he said. (He plans to branch out from those core products to silk underwear, cashmere hosiery, toiletries, cufflinks and leather goods, and to fragrances made by the supplier to Truefitt & Hill, barbers to the British royal family.)
Moreover, he has invested $600,000 of his own money, including $300,000 for the Henry Milbourne & Son trademark rights, and has spent two years trying to put the company together, paying himself no salary.
Mr. Brooks, a native of St. Vincent in the West Indies, said his African heritage might also be an impediment. The issue is not racism, he said, but the fact that he does not have a network of well-heeled friends and acquaintances that he can tap.
Luke Visconti, co-founder of DiversityInc magazine, which covers diversity in the workplace, said aspiring black entrepreneurs are at a clear disadvantage. “There are almost no black-run venture firms and very few black angel investors,” Mr. Visconti said. “Successful black entrepreneurs are scarce, and they are getting hit on every day.”
As for family and friends, a traditional first stop for start-ups, Mr. Visconti said the average wealth of black households in the United States is one-tenth that of white households.
“The circle of wealth that black people can tap into is minuscule compared with what is available to well-connected white people,” he said.
Mr. Visconti added that the slowing economy might also be cutting into the funds available for a start-up.
Mr. Brooks conceded that investors were more cautious than they were a year ago, but he said he believed that there were still plenty of deep pockets in search of opportunities.
The real problem, potential investors he has contacted say, is that he needs to narrow his hunt for money.
Mr. Hammond of Copana Partners, for example, said the deal was too small for his firm. “Unfortunately, start-ups like Henry Milbourne often find themselves in no man’s land when looking for capital between $1 million and $5 million,” he said. “The capital requested is too small to attract big institutional investors.” On the other hand, it can be difficult to raise even $1 million from acquaintances or angel investors, he said.
Paul Azous, managing member of the A.Z.O. Group, a consulting firm in Seattle, said, “That much money for a start-up without a track record — I’ve never seen it happen.”
These investors did have some words of advice. Mr. Hammond urged Mr. Brooks to “better the odds by creating a proof of concept,” notably by developing a “full-blown professional-looking home page to communicate to investors his exact brand image, layout, style and Web site.” He also suggested that Mr. Brooks take a quick test of his products’ appeal by standing outside an office building and handing out fliers, then going inside and making pitches door to door. “Prove to investors that demand exists,” he said.
Mr. Azous encouraged Mr. Brooks to open a store, seek investors who specialize in retailing and, above all, be persistent. “It’s a marathon, not a sprint,” he said. For more information about Business Plan Advisors™, visit www.businessplana.com.
Mr. Brooks accepted some of the advice, like aiming at investors more carefully. But he rejected other parts, like going after tiny investments or peddling high-end apparel on the street.
He remains confident that he can meet his goal of raising $2.5 million by summer. Realizing he needs to jump-start the process, he has hired several professionals over the last month, including lawyers with connections to high-wealth individuals, to scout around for him. “Three or four good investors would take care of it,” he said.
In his favor, he has the entrepreneurial gene. As a child growing up in St. Vincent, he made money photographing villagers with his Kodak Brownie 127. In 1989, he started Bio-Dental Technologies with $16,000 in savings and built it into a $33 million distributor of dental products before selling it to Zila for $35 million in 1994, making a seven-figure profit for himself.
His other big money-making adventure was engineering reverse mergers, in which he created public companies, combined them with privately held firms that wanted to go public without dealing with a lot of regulatory problems, and cashed out. He completed eight such transactions, he said, grossing about $2 million.
He said he continued to make progress in his latest venture. Late last week, he said, two investors who previously were not interested in his company took a new look at it, and one wrote a check for $75,000, while the other seems close to making a commitment. He renewed talks with a third investor this week.
“We hope to be operational in about three months,” Mr. Brooks said. “This is a company whose time has come.”
