Ladies Who Launch

2. Wrong financing source.

Charles has the opportunity to buy an Asian mobile gaming company with multimillion-dollar revenue for a rock-bottom price. His plan is to buy the company, start a new one with headquarters in the U.S., keep the Asian business going, and localize the games to appeal to an American audience. His target market has not been successfully tapped yet—it’s huge and wide open. Charles and the rest of his team are dealmakers but have little operational experience.

What’s broken: Charles has been pitching to venture capitalists for almost a year and no one wants in. Why? The deal is too messy. The capitalization table is weird. There’s a majority silent investor in the Asian company who owns over 70%, and the rest of the stock is owned by the founder. That’s it. Nothing for the employees. The silent investor is fickle, often unavailable, and it appears it’ll be tough to get him to approve the deal. The founder wants to stay in Asia and has no plans to relocate to the U.S., yet he wants to be CEO of the American company. How will this work? Who’ll manage the American team? Will there be trouble with the owners of the intellectual property in Asia?

How to fix it: Charles should simply pay a fund-raiser to do a private raise for him. He can use a merchant bank, a boutique investment banker, or anyone who specializes in sub-$5 million raises. Messier deals have been financed, and this is how you do it. With the money, justified by the Asian company’s reliable and growing revenue stream, he should set up a U.S. corporation and assign all the Asian assets to it. He needs a killer gaming CEO, too, whom he should be recruiting now. The Asian company can be a wholly owned subsidiary, or better yet an engineering outpost of the American corporation. The silent investor needs to sign a binding term sheet now, before fund-raising starts.

3. Wrong time to sell via a mass retailer.

Sue has created a line of amazing skin-care products. I know this, because I’ve tried her moisturizer. It’s unlike anything I’ve come across, and I know moisturizers. She has identified the exact target market, has manufacturing and packaging contractors lined up, but she still needs to get her distribution channels nailed. Her dilemma is whether she should sell via a mass retailer like Costco, as one has expressed interest.

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