How a company that manufactures protective gloves raised venture capital
CEO: Ed Jaeger Company: Ironclad Performance Wear Corp., in Santa Monica, Calif. Business: Manufactures and distributes protective gloves for the construction and automotive industries Founded: 1999 Number of employees: 7 1999 revenues: $300,000 Stage of financing: Seed Venture capital firm: Colorado Venture Management Equity Funds Amount: $680,000 Equity taken by VC: 23% Ace in the hole: Used a financial services broker who was friends with a partner at CVM Equity Funds
"I decided to use a broker to find capital, because I didn't know any venture capitalists or angel investors myself. The broker, Ken Greenberg, who works out of the Denver office of J.W. Genesis Capital Markets Inc., had been an acquaintance of mine for years. In the spring of 1999, I held a money-raising session in Venice Beach for some seven friends and family, and Ken, who happened to be in town, came too. When he saw my business plan, he told me he wanted to follow the company. The meeting generated Ironclad's first $25,000 and allowed me and my four partners to incorporate.
"True to his word, Ken got back in touch in the fall and agreed, for a 6% commission, to work for us. In November he sent our business plan to 20 or 30 funding sources. Most of the VCs he contacted were interested primarily in new dot-coms, but CVM Equity Funds, which is based in Boulder, was different. Not only was CVM looking to set a trend in the nontech sector, but Ken also had a personal connection there -- he knew Gary Bloomer, the son of the firm's general partner.
"Several weeks after Ken had sent our materials to Gary, we attended our first trade show, in Denver. I invited Ken to the show as my guest, to let him see how big the industry was. It was there that our company really came to life. Our booth was approached not only by retail outlets that wanted to buy from us direct but also by individual reps and rep groups -- folks that handle big names like Stanley and Owens Corning. We immediately started taking orders -- tens of thousands of dollars' worth of them -- and hiring reps.
"Ken was amazed. The first call he made the next day was to CVM Equity Funds to say what a bang-up job we'd done. Within two weeks Gary Bloomer was flying to our new, 1,100-square-foot office in Santa Monica to begin the due diligence process. Ironclad at that point was valued at $2 million.
"All was not a bed of roses, however. At the 11th hour -- we'd already gotten a term sheet -- the Ironclad partner that CVM Equity Funds had determined should serve as our CEO started pressuring me for more stock in the company. I didn't want to give him more -- he already had a tremendous amount. I suggested that he call Gary to see if his request was appropriate. 'I just gave you guys the litmus test,' Gary said after receiving the call. 'And you failed.' Gary had perceived not only the culture clash that existed between some of us but also that we couldn't settle our own conflicts. He knew that we wouldn't be able to work together well enough to triple or quintuple CVM's money in a short period of time and refused to invest in us if that founder stayed.
"On April Fools' Day, three weeks after that founder left Ironclad, CVM Equity Funds sent us a check for $680,000. You know when you've hooked up with the right VC; it's like finding the right woman after you've been dating around." --From an interview with Thea Singer