Start-Up Diaries: A Vexing Catch-22
Start-Up Diaries: Update
Unable to find funding, 10 Minute Manicure reluctantly takes a step backward
10 Minute Manicure
Company: Would-be chain of manicure kiosks in airports
Founders: Vivian Jimenez, 32; Lorraine Brennan O'Neil, 36; and Karen Janson, 34
Making the call to the Pittsburgh Airport Authority was one of the toughest things that 10 Minute Manicure cofounder and CEO Karen Janson ever had to do. She was, she knew, admitting defeat. Janson and her cofounders -- Vivian Jimenez and Lorraine Brennan O'Neil -- had to back out of their hard-won agreement for space for the first of what they had hoped would be a chain of manicure-on-the-fly kiosks in airports throughout the country. Stepping back from that dream "was absolutely not what I wanted," Janson recalls. But instead she did have something else that she had wanted for much longer -- her first child was on the way.
And with the unexpected, but happy, news of her pregnancy, Janson and her colleagues found themselves in a vexing catch-22. They had already achieved what everyone -- in their minds -- had doubted they could in getting the airport contract in the first place. "It was beyond our wildest dreams that we got Pittsburgh to buy into our concept," says Janson.
But the one thing they had failed to do was to find a much-needed financial backer. "So far we still haven't found cushion money," explains Janson. "You go to these meetings with a certain little bit of cynicism at this point. We've met with so many people."
Originally, the three women had thought that Janson, the only cofounder who had completely given up a job to launch the business, could travel regularly to Pittsburgh until they had the funds (a minimum of $250,000, they calculated) to hire permanent staff. But Janson's pregnancy changed all that, and finding a backer became essential.
Months into the money hunt, the women were becoming used to the objections: most prospective investors wanted to see proof of concept, up and running. "Most of them don't want to put money in a concept without money on the books," says Janson. "They'd like to see the actual thing happening." But perhaps more frustrating was the fact that many of the investors that they talked to had unrealistic expectations -- anticipating a return on investment in line with some of the Nasdaq stars. "One company we talked to wanted, in three years, $100 million," says Janson. "We just can't compete with that."
For now, the women have not given up. They are allowing themselves another 90 days (from June 1) to see if they can launch a more modest site closer to home -- perhaps in a local Miami office building. "We've already started talks with several different leasing companies that manage buildings in both Miami and Fort Lauderdale," Janson reports. "We felt like if we can get one store up and running, we'll go back to the investors who said maybe." But they know that time is starting to run out. If they can't get a site launched in the next few months, Janson says, "it's going to be very difficult for us to overcome."
In hindsight the founders realize that pursuing only the airport-kiosk business was probably a strategic mistake. But for the time being, they are still willing to stick it out longer if there is a chance of success.
Even if 10 Minute Manicure fails to get off the ground, the experience already has been life changing for at least one of the cofounders. "Even if this disappears, I've had a taste of this kind of life," Jimenez explains. "I can't imagine going back to the drudgery of the corporate world." --Karen Dillon
Where they are now
Company: edu.com, in Boston, creator of a Web site where college students can buy stuff cheap and where the companies selling that stuff can do research on a students-only audience
Founder: Adam Kanner, 29
Status: Kanner has been in Mike Wallace mode recently: all he seems to do is interview people. Edu.com's founder and CEO spent most of the spring sizing up close to 75 candidates for a slew of senior-management positions -- -including a chief technology officer, a vice-president of customer insight, and, most important, a president. "We were looking for a COO but hired a CEO-caliber person, meaning he and I are going to run this business in partnership," says Kanner.
The president will free Kanner from "process and organization and all those wonderful internal things," says the CEO. It also means a new, probably healthier, reporting relationship for Linda Kanner, vice-president of marketing and Adam's mom. "That's going to be good for us," says Adam Kanner.
Meanwhile, the CEO, who still lives in a fourth-floor walk-up the size of a postage stamp, is contemplating buying a washer and dryer for Edu.com's offices. "It would certainly make my life easier," he says. --Leigh Buchanan
License for success
Company: Application Technologies, in San Diego, a licenser of new packaging technology, notably the Appli-K Pouch
Founder: Johann Verheem, 34
Status: Solid licensing agreements mean the pouch will be used in dozens of skin-care and medical products by mid-2001. The company won't break $1 million in revenues this year, but long term, revenues should well exceed expectations. In six to nine months the technology will be established, and Verheem is already thinking exit strategy and on to the next venture. --Michael Warshaw
On the shelf
Company: Inca Quality Foods, in South Bend, Ind., a distributor and "micromerchandiser" of Hispanic foods in grocery stores
Founder: Luis J. Espinoza, 49
Status: Espinoza, after exploring a few potential joint ventures that have not worked out, has reduced Inca Quality Foods to a warehouse operation for local Hispanic grocery stores in the South Bend area. He has several ideas for future projects, but none has been compelling enough to pull him away from his full-time job and the pension he'll be eligible for in two years. --Nancy Lyons
Company: FÚxito Worldwide Inc., in Cambridge, Mass., a Web site offering E-commerce, news, and recruiting data for the international soccer community
Founders: Richard Powell, 21; and Daniel Hoffer, 22
Status: When interviewed on his 21st birthday, CEO Powell knew exactly what would make an ideal gift: $10 million. Not coincidentally, that's how much FÚxito hopes to raise in its second round of funding. In the meantime, in order to "make sure we can last out any hiccups in the Nasdaq or in general investor sentiment," Powell negotiated a short-term cash infusion from existing investors. He'll spend the money acquiring and creating content for the site, which has lately grown to include coverage of women's soccer and has introduced a 3-D component. "We're seeing a consolidation in our market, but we're unfazed," says Powell, who expects to return to Harvard University as a senior this fall. "We've built our company on a solid foundation." --Joshua Hyatt
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