Oct 16, 2019

Share to facebook Sheex The idea for a company can happen in an instant. That was the case for Susan Walvius, who at the time was the head coach of the women's basketball team at the University of South Carolina, and Michelle Brooke-Marciniak, who was an assistant coach there. In 2007, both were wearing athletic wear made from performance fabric. The fabric is moisture-wicking, quick-drying, and breathable. "I would love to have bedsheets made out of this stuff," said Walvius. Such sheets would keep sleepers cool and prevent waking up from becoming hot and sweaty in the middle of the night. Brooke-Marciniak said, "Let's do it." I would love to have bedsheets made out of this stuff. Susan Walvius, Co-founder and Co-CEO, SHEEX They approached the dean at Darla Moore School of Business at South Carolina for help. With the school's help, they conducted research, developed a feasibility study, and wrote a business plan. In 2008, the duo patented their idea, quit their coaching jobs to become co-CEOs of SHEEX, and launched the company. Little did they know they were creating a new product category — "performance bedding." Like many entrepreneurs, with opportunity came challenges. Initially, the two sold directly to consumers. The pair hustled and got a meeting with Bed Bath & Beyond. It didn't just want to test the idea; it wanted to sell SHEEX in 600 of its stores. Manufacturing and developing a back-end operation became an obstacle. The solution — license the manufacturing to Li & Fung, a supply-chain management company. After about five years, SHEEX took back its license. SHEEX SHEEX With the help of Cindy DiPietrantonio, a former COO of Jones Apparel, SHEEX built a back-end team to manufacture and distribute its product. "Initially, we were laser-focused on sheets," said Walvius. But customers wanted more. SHEEX expanded into pajamas, pillows, comforters, duvet covers, and mattress pads. Still, more pivots were on the horizon. Retail was changing, back to the basics. To better understand its customers, SHEEX needed to refocus on building a direct relationship with them as well as maintaining the relationship through Bed Bath & Beyond. The direct-to-consumer distribution channel had the added benefit of higher margins. However, to reinvigorate this line of business, SHEEX needed to raise money for direct response television advertising, inventory, and customer service. Walvius and Brooke-Marciniak had previously raised money through friends, family, and angel investors. They took money in small increments as they needed it. This time, the company needed more money than those sources could provide. The pair spoke to venture capitalists, private equity firms, family offices, and revenue-based financing companies. Venture capital has its benefits. In addition to money, VCs provide introductions and advice. They also require a "growth at all costs" mentality. Walvius and Brooke-Marciniak wanted sustainable growth. With a strong management team, a terrific group of advisors, and as part of EY Winning Women's program, they felt the rewards of venture capital were not worth the risks. The Winning Women program provides leadership education, business guidance, and a community of peers. The duo also did not want to dilute friends, family, and angel investors, who had been their early supporters. Revenue-based financing is a form of capital that allows founders to retain equity while still fueling growth-stage companies. This type of funding works for established businesses in an array of industries, including technology companies, tech-enabled companies, healthcare, business services, and consumer products. Companies need to have a proven revenue model from which they can accurately project sales. They pledge a percentage of future revenues in exchange for money invested. A portion of revenues is paid to investors at a pre-established percentage until a certain multiple of the original investment has been repaid. The typical repayment period is four to five years. It is more expensive than a loan but less expensive than equity. At first, Walvius and Brooke-Marciniak were leery. The lack of regulation of this type of financing, meant some revenue-based lenders are untrustworthy and predatory. The SHEEX finance and legal teams spent time evaluating Decathlon Capital Partners and John Borchers, the co-founder and managing director. The SHEEX team built a level of trust before moving forward with a seven-figure investment from Decathlon. They had also tested direct-to-consumer advertising and were comfortable that they could meet their sales projections.