Business District Magazine Publisher's Blog

Sweet Leaf Tea Founder talks to bootstrappers about the role of capital

Thu, 17 Apr 2008 09:34:16 GMT

With the Central Texas Entrepreneur Funding Symposium only a few days away, it was appropriate that I heard Clayton Christopher, CEO of Sweet Leaf Tea speak at the Bootstrap meeting on Monday. He recently raised $18 Million in capital after being in his 10^th year of business.

But it didn’t start out that way.

Christopher also spoke last year at our Austin Open4Business Conference, and the story of how he started the company is always inspiring—he talks about buying a few lobster pots for brewing, pillow cases to strain it, filling up bottles with garden hoses, buying an old refrigerated truck and fighting for shelf space with a product that was perishable after only a week or two.

Christopher makes no bones about how the good ol’ days were not the good ol’ days—and most bootstrap entrepreneurs can identify with just how difficult the constraint is (For more on the role of Constraint, see Business District June 2007 issue, article titled Constraint Creates Innovation). Christopher says he would never want to go back to those days, but he also reveals that had he taken funding from the beginning, not only would he not have known what to do with it, he would have burned through it and been done.

In fact, the value proposition for investors did not present itself for Sweet Leaf Tea until after three years of struggling in the Valley of Death. Christopher talks about how he raised $1Million in capital at that time, and where he could have raised more, he wouldn’t have known what to do with it. In fact, his bootstrapping roots continue to keep the company lean and mean, and search for opportunities that the competitors simply don’t have.

Ultimately, Christopher made the trade off to own a small piece of a much larger company rather than own a big piece of a small company. So for him, raising capital was the “right action at the right time,” especially since he attracted some venture capital that came with beverage experience—and according to Christopher, he learned more from them then he ever thought he would. Now, it’s interesting that he knows exactly what to do with the $18Million he’s raised.

Every entrepreneurial system is different, but the role of capital is not. Capital will accelerate and amplify growth but it will not solve the problems you encounter in the valley of death. Capital too early in the process can be detrimental. In Christopher’s case, they had emerged out of the VOD and were ready to grow the company in ways that they could not accomplish without capital—at least not in the accelerated time frame that they wanted.

Bijoy Goswami discusses the role of capital in the November 2007 issue of Business District in an article titled: Investor funding—much later than you think. If you or your company are seeking funding, our funding symposium will educate not only on how to go about finding investment, but what the options are out there that you may not know about, how to avoid the pitfalls of investment, working with investors, and legal issues.

Comments on Marc Katz's article on championing universal health coverage

Thu, 3 Apr 2008 12:44:09 GMT

    In the March 2008 issue of Business District, Marc Katz calls for US Businesses to champion universal health coverage.

    Since I tend to fall to the right politically, I cringe at calling for universal anything that is government controlled. But those that are for less government involvement should take the time to understand that Katz is not referring to a single payor system or to government-run healthcare.

    His article makes the point the burden is unfairly placed on businesses in this country, and it shouldn't be.

    Dr. Ken Shine, author of the 2006 Code Red report, explains how we got into this situation in our Dec 2006 issue's executive roundtable. He said, "We got into this situation by accident. After World War II, there were wage and price controls. As a consequence of that, many large companies decided that the way to compete for workers was to offer health benefits. As a result, the

U.S.

is one of only two countries in the world that connect health care with employment—and that’s the fundamental flaw.

    "We did not take on health insurance as a national requirement. We did move toward the deserving elderly with Medicare, because they were no longer employed. Medicaid was added to it on the grounds that there was a certain amount of other people that also wouldn’t be employed.

    "Any ultimate solution has to involve universal coverage of some kind. Not necessarily a single payor, and not necessarily nationalization.

    "So how do we provide the coverage? There have been a myriad of proposals including everything from expanding Medicare to cover the entire population to expanding things like the federal employees health system to the entire population.

    "The dilemma with those is that those people vote. They don’t want to see their plan which is working very well threaten to jeopardize by applying it broadly.

    "Massachusetts is doing it incrementally. What they did was make eligibility for state sponsored health care coverage substantially higher –200-300 percent of the federal poverty level. So they cover large numbers of people, and as a result, their uninsured rate is in the single digits.

    "So we got into it by accident, and we are only going to get out of it at a point at which some combination of businesses and government leadership decides that there needs to be fundamental switch from employer-based insurance to something that is much broader," Shine concluded.

    Katz's article is exactly along this line by calling for businesses to champion universal health coverage, and I agree.

    This doesn't mean we need to look to the government to solve our healthcare crisis. We need innovative solutions that come from every angle regionally, state-wide, and nationally. Just like the proposed plan from the Hospital district outlined in this issue's "Answering the Call."

    Market forces will drive reform when the pain gets bad enough (just look at what's happening in clean tech and alternative energy with rising gas prices) and Katz is saying we need to band together as businesses and declare our pain.

Rotary International close to eradicating polio worldwide

Tue, 25 Mar 2008 23:36:59 GMT

    In the midst of distributing our healthcare issue, it was appropriate timing to listen to a presentation by Jo Ann Settles at the Downtown Rotary Club on Rotary's involvement in eradicating polio worldwide.

    Settles is an associate professor of nursing at Virginia College and has been involved with Rotary's effort to distribute polio vaccinations in remote parts of the globe.

    Polio is a virus that enters the body through the mouth, gets into the intestines, into the blood stream, and causes paralysis (usually of lower limbs) and sometimes affects the base of the brain causing paralysis of the respiratory system.

    In 1957, there were 558,000 cases of polio in the United States. But because of vaccination efforts, the last case in the US was documented in 1979.

    In the same year, there was an outbreak of polio in the Philippines, and Rotary stepped in to distribute the vaccine. Three years later, they had completely eliminated the virus from the island.

    As Stan Tyler references in his October 2007 article on asking quality questions, Rotary International asked the question in 1985, what if we could eradicate polio from the planet?

    The results of their effort since that time are unbelievable. Rotary teamed up with The Center for Disease Control, UNICEF the World Health Organization, and as of 2007, there are only 1308 documented cases of polio in four countries.

     Settles cautions, that the fight is not complete until there are no more cases. It's like the last minute of a basketball game, where fouls and time outs stretch out the finale.

    For more information about Rotary's work with Polio, check out the following links:

Rotary.org

Endofpolio.org,

polioeradication.org

Behind the article: Answering the Call for Affordable Healthcare - March 08 issue

Mon, 17 Mar 2008 21:40:57 GMT

n November of 2006, we conducted a roundtable on healthcare, where we had area leaders from Seton, St. David, Humana, the Hospital District and more.

    I'm still referring people to that article a year and a half later because the content went a long way toward addressing Austin's biggest healthcare challenges.

    Obviously, one of the most troubling issues facing business owners is the high cost of providing health insurance to employees, especially in service industry businesses.

    I remember the owner of Chez Zee giving me an example of providing health insurance for a wait staff employee that would have cost over $10,000 per year. It doesn't make sense to provide it when you pay minimum wage or server wages (which is more than double paid out in wages).

    It's not hard to see why many small businesses cannot afford to provide health insurance--many simply pay more in salary and leave the employee to pick it up on their own. According the the Code Red Report that came out in 2006, the uninsured rate in Texas is around 24 percent, and it's about 18 percent in Travis County (about 2 percentage points higher than the national average).

    Dr. Kenneth Shine, Executive Vice Chancellor for Health Affairs at The University of Texas System and contributor to the Code Red report stated in the roundtable defined the makeup of the "working poor" as middle class individuals that work.

    Recently, I met with Keith Carmichael of McQueary Henry Bowles & Troy, and he informed me about a program that they were working on with the Travis County Hospital District to address the issue of covering the working poor. In a nutshell, the program splits the burden in three ways: the individual, the employer and the state. But the individual pays lest than $100/month and the employer pays about the same amount.

    I thought that this program was an innovative first step toward addressing a much larger problem and it warrants as much coverage as possible--and that's how it became March 2008's cover story.

    Another aspect that I like about this program is that it still provides an incentive for the individual to take responsibility for their own healthcare, which I believe is absent from a government-based, universal health care system.

    I think that most people would be willing to pay for health insurance if it was available at an affordable price (and this is comparable to car insurance).

    I urge all local business owners that currently don't (or can't) provide health insurance to their employees to look into this new options.