Growth Capital: The Big Money

A review of how the Williamsburg Winery has raised more than $6 million through ingenious financing.

Tweet

Over the past seven years, the Williamsburg Winery has exhibited financing ingenuity seldom seen in other small private companies -- and raised more than $6 million along the way. Here's how

Few entrepreneurs need to scrounge together as much capital as Patrick Duffeler and his wife, Peggy, have raised over the past seven years: more than $6 million. Nevertheless, the progression of the Duffelers' savvy and comprehensive financing strategy offers a wealth of ideas and techniques to support any fast-growing business.

Financing headaches come with the territory when you're starting and running a new business. And for Patrick Duffeler, the 50-year-old founder and chief executive of the Williamsburg Winery, a $2-million-plus wine producer in Williamsburg, Va., the search for capital has often assumed nightmarish proportions, requiring a level of financing ingenuity seldom seen in small private companies.

Wine producers assume they need to make an initial investment of $2 to $3 in land, grapes, barrels, and laboratory equipment for every $1 worth of revenue they will eventually produce. Few of the standard rules of business management apply: upscale producers, for example, anticipating that their wines will appreciate in value over time, seek to build rather than turn over their inventories. Factor in the impact of unpredictable weather conditions, along with the standard uncertainties related to competition and consumer tastes, and it's little wonder wine making has earned a reputation as a rich man's hobby, as well as a distinctly poor odor among bankers and potential investors.

Duffeler was born in Brussels and came of age in the chaos of post-World War II Europe, with an enthusiasm for the American Bill of Rights and the United States as "a place of optimism and pioneering." He emigrated in 1959, earned a degree in economics and finance from the University of Rochester, and embarked on a career as, in his own wry assessment, an "international industrial mercenary."

Duffeler worked first for Eastman Kodak (where he mastered the company's approach to new-product development and marketing) and then for the international marketing division of Philip Morris (where he learned that there are advantages to a lean, entrepreneurial management style). His own flourishing entrepreneurial instincts eventually led him to join a European investment company, where he lost 45¢ for every dollar he'd invested. But, as he recalls, it was through one of that company's troubled holdings that he learned he "liked the wine industry immediately. It is one of the last unstandardized food products in the world -- with room for tremendous value in the product."

In need of restoring his savings (and credibility), Duffeler returned to the corporate world to run an international privately held fragrance manufacturer. During his five-year stint with Fragrance Selective, he researched a project closer to his heart: the launch of a winery in Virginia's historic Williamsburg. Williamsburg symbolized for him the best of the American spirit, in the midst of "echoes," as Duffeler puts it, "of the American Revolution, of Thomas Jefferson, Patrick Henry, and George Washington."

By 1986 Patrick and Peggy Duffeler had cashed in their retirement accounts and other savings and bought a 300-acre cattle and grain farm in Williamsburg. They'd formed a limited partnership, with $180,000 of capital, as the first stage in converting that farm to an upscale winery. Just about two-thirds of the financing came from their personal savings; the additional $65,000 was raised from friends and business colleagues.

It was typical financing for a start-up, albeit at a pricier level than most. But what distinguishes Duffeler from many company founders is that from the beginning, "I made a clear-cut decision that I would continue to seek participation from outside investors -- and that, while I was doing so, the issue of retaining control would never be an issue for us." He pauses. "I've always believed that if a single-minded individual wanted 100% control of his company, he might be giving himself a lot of freedom, but he would be putting a tremendous burden on his company."

Duffeler had other burdens to consider. That initial $180,000 disappeared faster than, well, a cool glass of chardonnay: 2,500 grape plants, production-equipment rental fees, and a "test crush," or trial production run, quickly swallowed those funds.

 1 | 2 | 3 | 4  NEXT 

Sign-up for our Innovation Newsletter

Email Address: