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Genevieve Gagnon, right, president of La fourmi bionique, and her sister Valerie Gagnon, vice-president.

Christinne Muschi/christinne muschi

Geneviève Gagnon wanted to start her own business. But, like so many other would-be entrepreneurs, she had too little cash and too much fear. To mitigate her worries about running her own company, she started off small. Very small.

"I tried running an organic restaurant from my apartment," recalls the 34-year-old Montreal native of her first venture in 2002. Normally, a restaurant startup equals high risk, but not the way Ms. Gagnon went about it. She had 20 people dine in her apartment once a month (friends and friends of friends, to get around licensing issues) at about $20 a head.

Ms. Gagnon kept her day job as an event co-ordinator and satisfied her entrepreneurial urge with this unofficial venture. A year later, she was ready for more. But she felt that taking her "restaurant" public was a risky proposition that would be tough to sell to investors. After a little research, she felt the odds of securing financial support would be better for a manufacturing company.

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That's how she got the idea for her company, La fourmi bionique. Ms. Gagnon quit her day job in 2003 and dedicated herself to developing granola recipes and building a business plan.

Ms. Gagnon chose to manufacture organic granola because breakfast is her favourite meal. And she knew from hosting brunches that granola is a popular item. She also felt there was strong growth potential for such a business because the adult cereal market was poised to gain a larger share of the cereal market, thanks to aging baby boomers willing to pay for gourmet, high-end products.

Ms. Gagnon had only $2,000 to start her business, so after launching La fourmi from her kitchen in 2004, she applied for every grant she could. "I won best startup from the Quebec Entrepreneurship Contest and got $2,000, which meant I had double the money."

In 2007, she eclipsed that, winning the Canadian Youth Business Foundation's National Best Business Award and taking home $20,000.

La fourmi bionique grew thanks to various grants, prizes and loans. But Ms. Gagnon (and her twin sister, Valérie, who joined the company as vice-president in 2005) desperately needed an injection of capital. "I felt like I was building an empire on a shoe string," Ms. Gagnon says. "When you have such few funds, there really is no room for error."

Despite the tight finances, she had managed to double her sales each year after her first year of business, and expand her distribution across Quebec. But she simply didn't have the money to go beyond.

At least until Herschel Segal, founder of Canadian clothing retail chain Le Château Inc., approached her to invest in her company. This wasn't the first time she had been courted by a potential investor. "The previous times, there was always an element missing," she says.

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Mr. Segal had been looking for both angel and seed investment opportunities, and when his nephew drew his attention to a bag of La fourmi bionique granola, he was immediately interested.

"They saw it as an old recipe that we had reinvented," Ms. Gagnon says. "And he liked that it was retail-related."

She first met with Mr. Segal's team in February, 2008. "It's all a bit like dating," she says. "You want to show off your features, but at the same time you have to be interested in the other party - what about you, what do you have to offer?" She says the experience was at times nerve-racking. "It was intimidating, but we took our time. It was weeks of getting to know each other."

Ms. Gagnon was won over by Mr. Segal's interest in her vision. "He wasn't preoccupied with my data or looking through my accounting to see if I had paid my taxes," she says. "He was more interested in where I saw my business going because he wanted a long-term relationship."

Her main fear was taking on an investor who would want to pull out soon after, demanding a chunk of cash she might not have. She also had worries about overinterference. "I have discussions with my sister about the business, but with someone you don't know and someone who has financial power, it's a whole other dynamic," Ms. Gagnon says.

Above all, she demanded trust and respect. "I'm young and don't have previous manufacturing experience, but I know my company and product better than anyone else. I had to feel that he saw me as the expert of that."

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To limit possible tensions, Ms. Gagnon had her business mentor - an executive she had been working with since 2006 - deal with the intricacies of the actual negotiations, along with a lawyer who became involved at the end. "This way, the power struggle was handled by an intermediary," she says.

It took Ms. Gagnon and Mr. Segal four months to sign a deal. "That in itself was a risk for me, because I devoted a lot of time to this relationship, as well as lawyer fees," she says. "If the deal didn't go through, I was going to lose a lot of money. I never had a lawyer meter clicking like that before."

Last July, Mr. Segal became an investor in La fourmi bionique. Ms. Gagnon will not disclose the sum of money she received but will say that Mr. Segal now owns 25 per cent of her company.

"It has opened many doors for us," she says. "First, it's financial leverage. Before, I couldn't ever carry any inventory - I was just producing and shipping. Now I'm able to carry inventory, which means I can sell more in a month."

The financial help also allowed Ms. Gagnon to invest in more supermarket shelf listings (fees paid to grocery chains to have a product stocked in their stores) to get her gourmet goods into more Sobeys, Loblaws and Metro stores. Her granola is now sold in 700 stores and hotels across Quebec, as well as a few in France and Ontario.

But the biggest news is that Mr. Segal's investment has given La fourmi bionique the boost it needs to expand beyond Quebec. Ms. Gagnon hired a marketing consultant to help plan her expansion, which she intends to complete by the end of the year.

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Then there's the strategic advice Mr. Segal gives Ms. Gagnon, using his business acumen to help her identify opportunities and negotiate deals, as well as the valuable contacts he shares. For example, he brought her together with the marketing consultant who will help plan the expansion into Ontario.

And because the deal was signed last summer, Ms. Gagnon says it helped cushion the blow of the economic crisis. "My company is now less vulnerable than it was if I was solely relying on credit. It's given me a safety net."

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