Latest / Imagine If with Doone Roisin | Health, Wealth & Wisdom for Women (formerly Female Startup Club Podcast) / GEMS: How to Split the Equity Pie with Freck Beauty founder Remi

Transcript

GEMS: How to Split the Equity Pie with Freck Beauty founder Remi · Imagine If with Doone Roisin | Health, Wealth & Wisdom for Women (formerly Female Startup Club Podcast)

• 0:09
  The other thing I would say, like if I were to go back to myself in those critical six months, I actually brought on a business partner as well. And she's my COO and head of sales. Her name is Des Wilson. She's also my best friend and already was my best friend. And I'm the...
• 0:23
  godparent to her baby. Like we're so close, which probably was kind of a crazy decision to make. But again, I was just trying to figure it out. Her background was in distribution for wholesale fashion. She ran a showroom and I already like knew her work and respected her so much. And she, again, like the accountability of us together was really helpful for me as a person. And I think
• 0:53
  But also we were able to kind of like divide and conquer. And I was able to kind of give her some of those like supply and demand issues and keeping things in stock and making sure that things are like moving along. Meanwhile, she's trying to grow our our distribution in Europe because I knew that we had a strong audience in UK.
• 1:12
  And that allowed me to free up some time to focus more on marketing initiatives. So I don't think everybody needs to get a partner right out the gate. It definitely can be done without one. But I had learned everything that I had learned from those investors. I then was like, OK, five year best schedule, like, you know, all of those things. And how did you like value the business at that point then? Because obviously, first time around, you've given away 20 percent, which what does that equal, like 50 grand or 50 something thousand? Fifteen. Fifteen.
• 1:40
  No, but what is it? Oh, yeah. Valuation is like, I see. I see. Minimal, right? Yeah. It's like 45 crud. Yeah. Whereas this time around, you are probably well versed in negotiation. You know what not to do. Yeah. But it's a friend and someone that you truly care about and you want to entice them into the business and make it worthwhile. So how did you find a number? And if you're happy to share, what did you land on? Yeah, totally. No pressure. Yeah.
• 2:06
  No, no, no. Des, if you're listening, hope you're okay with this. So she kind of came in, she came in strong. She was like, well, I was thinking 40, 60. And I was like, I was thinking not that. So, but you also have to like backing it up, you know, again, we're making like $60 a day in sales. She was getting X percent of nothing. Like it was enough. It was an idea, a potential of a business. And she had actually,
• 2:32
  followed the brand, um, out before we knew each other from the Kickstarter days. So she was very, you know, she knew like kind of where the, she could see the little nugget and she was like, I'd be down to like figure this out with you. Um, so what we ended up landing on if, if she was not my friend, I think I would have, um, offered her 10%, but because she is my friend and again, like, you know,
• 2:58
  10% of nothing. Like it was a lot of sweat equity. Like it was a lot of sweat for the equity and it was unpaid. Um, so we landed on 20% vested over five years and we didn't start paying ourselves. We were both working our separate jobs. Um, so she came full time and was able to finally leave her positions at the end of 2019.
• 3:22
  I think beginning of 2019. Sorry. Yeah. So that's how we ended up. And with a deal like that, for someone who's essentially in the distribution side, so sales, are they, or not necessarily her, but in general, are they incentivized by the, like a commission structure as well as, or is it just like the 20% and that's it?
• 3:43
  It's a great question. We did not structure it that way. I also didn't want to structure it that way because for me, it's not about going and plugging us into every single little small boutique in Silver Lake. It's about the key players and getting the right partners because running wholesale business is really expensive. Like paying for somebody to pack it up, even if it's like, um, someone who's big, but not that big, like, um,
• 4:11
  I won't say the name, but one of the retailers that we work with, we realized that we almost were making no money because of how, you know,
• 4:19
  intensely you have to pack out the order. You know, it's like bottom label, poly bag, stick it, another poly bag. Then you need to put 50 into a case count, poly bag that, then pack it up. It's like, and every single retailer has a different, uh, it's called a routing guide. So every single person has a different routing guide. You have to have somebody who knows how to pack all that out. It's super expensive. It's super time consuming. And then also you have to think about what's your margin with your retailer. So, um, yeah,
• 4:45
  That we realized that later, but in the beginning, I didn't want to structure her based on commission because I was like every single dollar needs to go back into the business to grow it. So frankly, if you're looking at this like a commission structure, like you're not going to be the partner for me because this is this is not a one year. Let's make some cash. This is like five, 10 year long play. And then let's make some cash. Yeah, 100 percent.
• 5:13
  Hey, it's June here. Thanks for listening to this amazing episode of the Female Startup Club podcast. If you're a fan of the show and want even more of the good stuff, I'd recommend checking out femalestartupclub.com where you can subscribe to our free newsletter. We send it out weekly covering female founder business news, insights and learnings in D2C, and interesting business resources.
• 5:38
  And if you're a founder building an e-commerce brand, you can join our private network of entrepreneurs called Hype Club at femalestartupclub.com forward slash Hype Club. We have guests from the show joining us for intimate Ask Me Anythings, expert workshops, and a group of totally amazing, like-minded women building the future of D2C brands.
• 6:00
  As always, please do subscribe, rate and review the show, and post your favorite episodes to Instagram stories. I am beyond grateful when you do that.