Rebecca Wright04.01.07
As I wrapped up this month's investment piece, I happened to come across an interesting article in the Wall Street Journal, which talked about the rise of Sambazon-the company that made açai a household name and helped rocket the category to over $13 million in just two years-and its perils of being first to market. While the two founders, Ryan and Jeremy Black, seem pleased with their early success, their road to profitability has been littered with many challenges. And according to the Wall Street Journal article that profiled the two entrepreneurs, Sambazon faces another predicament: "whether to sell out if an offer is made." The article continued on to say that the option to sell out is not a choice totally up to the Black brothers-their angel investors now own one-quarter of the company. Ryan Black said, "I was in one board meeting, and I said, 'I started this to do positive things with the world and to do good in the Amazon, not necessarily to get a big payout'…And one of these guys looked me in the eye and said, 'Well, the problem is, then you went out and took $9 million of other people's money.'"
In the business world, Sambazon is not unique in its naiveté. In fact, there are probably thousands of entrepreneurs that start out, particularly in this industry, who are driven mostly by their philosophies rather than business acumen. The problem is the business world tends to spit out entrepreneurs that don't possess a perfect blend of both.
Although it may sound cliché, most of this industry's veterans started out with a mission to help make the world a better place (i.e., Dr. Andrew Weil, Gary Hirshberg, John Mackey), whether through healthier food, adopting environmentally-friendly manufacturing standards or producing supplements to help prevent, reduce the risk of or even treat disease-and in some cases, to do all of the above. But the various segments of the health and wellness market today are facing a paradox of sorts, which a BusinessWeek article published last year summed up perfectly in the context of organics: "The movement's adherents have succeeded beyond their wildest dreams, but success has imperiled their ideals…the movement is shedding its innocence." The business world rarely has time for warm, fuzzy messages and do-gooders unless they contribute significantly to the bottom line, which begs the question: are this industry's products meant for the mainstream? Well, investors seem to think so.
In this month's investment article, which starts on page 76, authors Alex Merolli and Nancy Fogg-Johnson, PhD, comprehensively discuss what investors are looking for from companies operating in the health and wellness space. They say while significant barriers to commercialization and market opportunity exist, consumer demand remains strong, presenting an opportunity for entrepreneurs who can overcome the challenges. This a straightforward, almost tutorial piece that should be required reading for entrepreneurs and mid-size companies seeking investment partners. One notable piece of advice offered in the article that perhaps the Black brothers could have used before they embarked on their idealistic mission to bring açai to the masses: "Founders must consider an exit strategy when developing their initial business plans. A founder who wants to create a business that he/she can run until retirement had better not plan on seeking outside investors."
Rebecca Wright
In the business world, Sambazon is not unique in its naiveté. In fact, there are probably thousands of entrepreneurs that start out, particularly in this industry, who are driven mostly by their philosophies rather than business acumen. The problem is the business world tends to spit out entrepreneurs that don't possess a perfect blend of both.
Although it may sound cliché, most of this industry's veterans started out with a mission to help make the world a better place (i.e., Dr. Andrew Weil, Gary Hirshberg, John Mackey), whether through healthier food, adopting environmentally-friendly manufacturing standards or producing supplements to help prevent, reduce the risk of or even treat disease-and in some cases, to do all of the above. But the various segments of the health and wellness market today are facing a paradox of sorts, which a BusinessWeek article published last year summed up perfectly in the context of organics: "The movement's adherents have succeeded beyond their wildest dreams, but success has imperiled their ideals…the movement is shedding its innocence." The business world rarely has time for warm, fuzzy messages and do-gooders unless they contribute significantly to the bottom line, which begs the question: are this industry's products meant for the mainstream? Well, investors seem to think so.
In this month's investment article, which starts on page 76, authors Alex Merolli and Nancy Fogg-Johnson, PhD, comprehensively discuss what investors are looking for from companies operating in the health and wellness space. They say while significant barriers to commercialization and market opportunity exist, consumer demand remains strong, presenting an opportunity for entrepreneurs who can overcome the challenges. This a straightforward, almost tutorial piece that should be required reading for entrepreneurs and mid-size companies seeking investment partners. One notable piece of advice offered in the article that perhaps the Black brothers could have used before they embarked on their idealistic mission to bring açai to the masses: "Founders must consider an exit strategy when developing their initial business plans. A founder who wants to create a business that he/she can run until retirement had better not plan on seeking outside investors."
