In 2003, Geneviève Gagnon quit her day job as an event co-ordinator to pursue her entrepreneurial ambitions in the gourmet food industry.
She launched La fourmi bionique, an organic granola company, from her Montreal kitchen the next year with $2,000 in start-up capital.
La fourmi bionique grew thanks to various grants, prizes and loans. But Ms. Gagnon desperately needed an injection of capital.
In 2008, Herschel Segal, founder of Canadian clothing retail chain Le Château Inc., met with Ms. Gagnon to discuss investing in her company. It was not the first time she had been approached by potential investors, but the fit had never seemed right. Ms. Gagnon was won over by Mr. Segal's interest in her vision and decided to sell a 25-per-cent stake in her business in return for investment capital.
That decision turned out to be the company's breakthrough and gave it the boost it needed to expand her company's presence outside Quebec. In addition to financial help, Ms. Gagnon says she receives invaluable strategic advice from Mr. Segal. For example, he brought her together with the marketing consultant who will help plan an expansion into Ontario this year.
Ms. Gagnon joined us earlier to discuss her company's breakthrough.
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Dianne Nice: Geneviève, thank you for joining us today to talk about your organic granola company, La fourmi bionique. Can you tell us a bit about your background and how you transitioned from being an event co-ordinator to a gourmet food producer? Have you always been interested in food?
Geneviève Gagnon: It is my pleasure to be able to share my experience with your readers. I have a bachelor in psychology and one in communications and I have worked in the private, not-for-profit and consulting sectors for six years in a variety of communications-related functions prior to launching LFB (La fourmi bionique).
The transition from event co-ordinator, at the time, to gourmet food producer was a few years in the making. I got back in touch with my love for cooking after stopping for many years. Also, I realized that if I were to launch a business and invest myself in such a commitment, I had to be passionate about what I was doing ... and I am passionate about food. So that's how and why I directed my focus to food. Also, my parents own a convenience store and they were also co-owners of a supermarket when I was younger so the retail-food sector was familiar to me.
Thomas Deans from Hockley Valley, Ont. writes: This is a hugely important subject -- with traditional bank financing drying up, business owners need alternative strategies to finance their growth. I think Canadians have always demonstrated great creative energy in the products and services we have brought to market but have stumbled in exercising the same creative solutions to financing the dreams and aspirations of relatively small and mid-sized enterprises. One of the potential up-sides to the current liquidity crisis is the range of novel financing solutions that private equity, for example, can offer stewards of the next great big idea.
Geneviève Gagnon: Hello Mr. Deans. Indeed, business owners have to be creative in these economic times. In my case, since I started with such little means, financing had always been an issue and alternative financing strategies have always been the solution. I think it's an entrepreneur's job to always think outside the box!
Dianne Nice: How will La fourmi bionique cope with the economic downturn?
Geneviève Gagnon: The economic downturn brings a day-to-day vigilance in management. This being said, we manage our financial resources and our production resources with a very focused approach and we are very attentive to our sales and our clients. Also, since we are in expansion mode, we compensate for some sector slowdowns by focusing on our new markets/collaborations.
Dianne Nice: How did you find out about the loans and grants you received when you were starting out?
Geneviève Gagnon: I did a lot of research and was in contact with many youth entrepreneurship organizations that informed me of all the programs. But you have to be alert and ready to invest time and energy because it demands a certain time commitment to participate and you never know for sure if you are going to win/get the grant.
Viktor O. Ledenyov from Kharkov Ukraine writes: What should be the most successful strategy in finding the right investor in a time of economic downturn, when the problem of drying credit liquidity appears to be a real challenge for the business founders and owners?
Geneviève Gagnon: Hello, Mr. Ledenyov. I think it must be more difficult to negotiate when potential investors currently have the upper hand. When you have different options, you can afford to chose and negotiate. In these times, I think it takes much conviction to get the proper valuation. This being said, there no one strategy; you just have to keep looking for the right situation until you get the right outcome.
Viktor O. Ledenyov: What are the guiding principles during the intensive search of the right domestic/foreign investors in the case of a startup or to expand a well-established business in Canada?
Geneviève Gagnon: I'm not sure I can develop on guiding principles, as I am no expert on the subject. I believe M&A consultants and lawyers hold the answers.
Gary Collins from Markham, Ont., writes: In addition to strategic advice, has your investor helped you find business opportunities? And was this important in your decision?
Geneviève Gagnon: Hello, Gary. Our investor did suggest business opportunities. Nonetheless, we stayed the course of our initial action plan and this was a plus but not crutial in our decision.
Dianne Nice: Geneviève, how did you get involved with your business coach? What should an entrepreneur look for in such a mentor?
Geneviève Gagnon: I have had a few mentors assist me on my entrepreneurial path and they all have been very helpful at different stages of my development. The key to finding a mentor or business coach is to network abundantly in the first few years. It is important to express your needs and people will use their contacts to introduce you to a potential mentor. I met my first mentors thanks to a networking organization for food manufacturing companies and then I met my business coach through a contact I had made in an angel investors contest. The more advanced you are in your business venture, the more appeal you have for a potential mentor. So you need to do your homework and get started on your own before they'll come on board (they won't help you create your business idea, but they'll help you expand your business model).
Dianne Nice: You described getting to know your main backer, Herschel Segal, as a bit like dating. How has your relationship progressed? Do you still use a mediator?
Geneviève Gagnon: It has only been six months since we have been partners. My coach still updates Mr. Segal and I also update him on a monthly basis. I think we are mutually satisfied with our current collaboration.
Jacoline Loewen from Toronto writes: Good entrepreneurs know to network and you demonstrate what to do once you meet someone who could add a great deal to the business, not just capital. This exciting alternative to banks is still not well known or understood and is called private equity. If you phone your bank, you will not get a loan right now. In contrast, private equity has lots of money and is looking for companies at all levels of revenues. Ms. Gagnon, you demonstrate that money is out there looking for a place to go. Sounds as if you had other offers but held out for the right partner. The big question for entrepreneurs is not 'Where do I find money?' but should be 'How do I get someone to open their cheque book and invest with me?'
Geneviève Gagnon: Ms. Loewen, indeed you are right. I know the odds of getting financing from my bank right now are quite low (in fact they have always been for me). In response to your question, I think that investors all look for passion and a solid business plan as key ingredients. Above all, they are investing in an individual and they have to feel how committed the entrepreneur is to the venture. In the end, the financial data is not the first consideration, it is one of many.
Dianne Nice: What should an entrepreneur look for in an investor? What makes the right fit?
Geneviève Gagnon: There are four ingredients/aspects (the 4 "F"s): Fit (compatible vision), Fun (compatible profiles/approach to business), Finances (tolerance to risk/subjective valuation) and Faith (trust/instinct).
Dianne Nice: The fit, finances and faith elements of a partnership seem logical, but fun? Where does fun come in? Can you explain?
Geneviève Gagnon: I believe that such a challenging venture as entrepreneurship should also have elements of enjoyment. The fun, therefore, can be derived from the positive business relationships, more specifically, the people you work with. If you have a positive contact with a business partner, then the phone calls and the meetings will be joyful, positive and provide good vibes ... that's the fun element.
Dianne Nice: What was it like in the beginning, when you were working with such a small budget? How did you make ends meet?
Geneviève Gagnon: Making ends meet in the beginning was quite difficult and stressful. I used all my RRSP savings to pay my own rent and it took two years before I could pay myself a small salary. I made a lot of sacrifices. I still do. Being an entrepreneur is a lifestyle and it takes years to build wealth (for most). A lot of people have helped me for free (or cheap) along the way and I will forever be grateful for their generous support.
Vikram Varma from Kingston, Ont., writes: Hi Geneviève. Congratulations on your success. I have two ideas for food products and I wanted to know what validation steps you followed from idea to creation of your business? One idea is for a product that could be sold in stores, and the other is more like a fast food franchise product. Thanks.
Geneviève Gagnon: Hello, Mr. Varma, and thank you. I developed my recipes thanks to a group of testers. I would regularly give them samples and they had to provide their feedback (using a detailed evaluation sheet). I would then gather their comments and proceed with the adjustments (over the course of four months). In the meantime, I developed the business plan, did my market research and ended up with a very elaborate document!
I then focused on the marketing and production aspects. It took a year to really test the market, the prices, the packaging, the production processes and make the necessary adjustments (once the business was launched in 2004). After that, all the bases were in place for growth the second year. You have to expect to make adjustments along the way. I don't believe you can always get it right the first time!
Brian FitzGerald from Vancouver writes: I'm sure as an entrepreneur you have many stories of significant challenge getting your business off the ground. If you could speak to one of these, perhaps the most difficult one, and how you have been able to meet this challenge and what you learned along the way. Thanks, Brian.
Geneviève Gagnon: Hello, Mr. FitzGerald. That is correct, I have many, many stories of significant challenges. I guess the fun part is that the challenges evolve, so as soon as you overcome one, another one comes along ... and that's all part of the game.
The biggest challenge for me was the lack of manufacturing experience. Making the transition from the home oven to the commercial kitchen was very daunting for me. I actually cooked the granola for the first 2 years on weekends and worked full-time at developing the business during the week. All at once, I had to learn to use commercial equipment in a friend's catering kitchen I rented, adapt the recipes and process as the volume grew, train just about anyone who would come help me produce at odd hours (the neighbours, friends, etc.) ... while I was watching the ovens so the granola didn't burn.
Overcoming my lack of experience and finding the right resources to help me was very challenging. In the end, the solution was to develop the business enough to pay for my own production facilities (which happened in May, 2005). Since then, my manufacturing process has not changed much but what has changed is that I am no longer part of it! I sometimes help out in production, when there is a crunch, but I mostly manage operations now.
I have great people who have experience and are committed artisans. I value their work and I now understand manufacturing from the kitchen and the office perspectives! What I've learned.: Surround yourself with people who know, when you don't.
Dianne Nice: Geneviève, thank you again for sharing your experience with us. It's always great to hear about a Canadian small-business success story, especially nowadays. Best of luck with your expansion this year. Is there anything you would like to add?
Geneviève Gagnon: It was my pleasure to share with your readers. In closing, two words best describe my entrepreneurship experience: Demanding and Rewarding.
I look forward to my expansion in the rest of Canada. In the meantime, just remember these letters: "LFB." That's all you need to look out for when La fourmi bionique makes its way across the Ontario border in spring, 2009.