Imagine this: You've been fundraising fruitlessly for almost a year, and suddenly you win $500,000 in a startup competition. What do you do?

If you're Muhga Eltigani, you turn it down.

Eltigani is the 28-year-old founder and CEO of NaturAll Club, a Philadelphia-based subscription service for natural hair-care products. The prize, which she won last November, came courtesy of 43North, a Buffalo, New York-based organization trying to attract promising entrepreneurs to that city. Acceptance of the money was conditioned on a move north. 

But Philadelphia is where Eltigani launched her company, in 2015. And it is in Philly where she wants to stay. "My customers were not in Buffalo, and that was tugging on me," she says. "But I felt backed into a corner."

"That's when I met Rich."

Rich is Richelieu Dennis, the Liberian-born entrepreneur who in 2017 sold his company, Sundial Brands, to Unilever for a reported $1.6 billion. While agonizing over Buffalo, Eltigani got an email from the New Voices Fund, Dennis's $100 million fund targeting entrepreneurial women of color. Within a few weeks of their first meeting in New York, Eltigani and Dennis closed on a $1 million investment. In April, Eltigani returned from a winter spent at YCombinator with grander visions for R&D, technology, and customer involvement with the product. Dennis put in another $4 million.

With that investment, Eltigani--one of Inc.'s 30 Under 30 winners from 2018--joined the dismayingly sparse ranks of black women entrepreneurs who have raised more than $1 million in venture funding. (The exact number is difficult to pin down, but it is fewer than 50, according to data from the Atlanta organization Digital Undivided, updated with recent investments from New Voices.) "It is such a sad number," says Eltigani. "The problem is institutional: Who is making the decisions?" Eltigani creates shampoos, conditioners, and serums for curly and kinky tresses that--like her own--are tough to manage. Black women's hair products make up a roughly $3 billion market, but one that is alien to most VCs. "If you don't think my pain point is worth addressing, you are not going to fund me," says Eltigani.

Dennis is tackling that problem with what he calls an "ecosystem" that includes both the fund and a foundation providing expertise and other resources to women of color. He says that since 2018, investments from the fund, which is also backed by Unilever, have increased the number of black women receiving more than $1 million in funding by a third. 

"The facts about investments in women of color entrepreneurs, particularly black women, are astonishing," Dennis said in an email. "Entrepreneurship among women of color has increased more than 320 percent, but less than 1 percent of those women receive access to the funding needed to sustain and grow their businesses. This is unacceptable."

Endless rejections and a new tactic

Eltigani's fundraising saga--which she calls "a gruesome process"--began in January 2018. For the first two years, NaturAll Club's only source of outside capital was winnings from business pitch competitions: $120,000 from organizations such as the Harvard Business School Club and Under Armour. Eltigani's networks are as luxuriant as her hair--they helped her land roughly 110 meetings over 11 months with potential investors in New York, San Francisco, Philadelphia, and Atlanta. But the next steps were elusive. "I got 10 to 15 second meetings," says Eltigani, who was looking for $2 million. "I wasn't sure if they were doubting me, the market, or the product."

Product-wise, NaturAll's greatest strength was also its greatest weakness, Eltigani knew. Chemical-averse customers love that her products are made from fresh ingredients like avocado, coconut oil, and shea butter. But they require refrigeration; and that creates shipping and storage challenges. "Our hypothesis is everyone is going to be moving to the fridge eventually, and we want to get ahead of that curve," says Eltigani. 

Eltigani now regrets that she spent so much time pursuing investors who didn't get her or her business. "I didn't understand the cues of a no. I thought they were all interested," she says. What did interest them was receiving seemingly endless reports on the industry and her company, which Eltigani kept churning out in hopes of a breakthrough. 

At the time, sales had been growing 5 to 10 percent a month from a base of $50,000 a month. The company had a large percentage of repeat customers and an enthusiastic social media following. "I believed if my white male peers could raise a million dollars on just an idea, I could surely raise that with traction, customers, and a product," she says. 

As the year's end approached with no deal, Eltigani's hopes dimmed. That's when she fell back on her proven funding method: business competitions. She chose 43North for its substantial payout.

For some investors who'd showed interest, her $500,000 in winnings counted as "first money in." Suddenly people wanted to talk--including a member of Dennis's team whom she had spoken to earlier.

A meeting was quickly arranged. Eltigani was gratified but not surprised when Dennis got it immediately. This was, after all, an entrepreneur who had made his fortune on natural hair and body products with ingredients and a market similar to NaturAll's. "He understood that the next wave is refrigeration," says Eltigani. "He understood how my being the face of the business was going to help us grow."

Eltigani is only now announcing the full investment from Dennis. She's spent most of this year introducing new products--including a flaxseed line that more than doubles her SKUs to 25--and building her team to 35 employees. Revenue through early September is double last year's, although Eltigani won't release numbers.

Eltigani knows other black women contemplating entrepreneurship will look to her for inspiration and guidance. It makes her a little nervous. "The more success I have, the more eyes are on me," she says. But when those aspiring founders ask for advice, she knows what she will tell them.

Find investors who understand your market. Establish a network of like-minded people who will not just make introductions but also motivate you. Believe in yourself and don't change just because a potential investor wants you to. Assume you will not get funding at all.

"If you start that way you won't be disappointed," says Eltigani. "And your company has more of a chance of surviving."