Most entrepreneurs set out for success when they launch a business—but if you don’t have a plan in place to grapple with rapid growth, you could fall victim to your own success. Some business owners don’t have much insight into what it’s like to have a business scale to the point of being attractive enough to be acquired, or if they do have knowledge of the process, they aren’t transparent about the challenges involved. Necole Kane isn’t one of those founders.
After being at the helm of the wildly popular media brand XONecole as CEO for a decade, she sold the platform to Will Packer in 2018, then officially stepped away from her advisory role with the company in 2022 to focus on her reproductive health brand My Happy Flo In a recent Twitter Spaces conversation, she spoke with me to share a bit more about what it takes to launch, scale, sell and rebuild a business.
{This conversation has been condensed and edited}
How have you spent your time building a culture for growth within your companies?
Honestly, I’ve always built businesses based on a pain point I may have had and a void that was in my community. In terms of growth, I would say that it’s an interesting thing because, again, I’ve always seen a huge void. When I pivoted from NecoleBitchie.com to XONecole, I asked myself, where are women going to get their information about sex, health, career and love? We had Cosmo and ESSENCE, but nothing really in-between. And so that’s where the idea behind EXO Nicole came about. And then, of course, with My Happy Flo, just hearing so many women’s stories about their reproductive health issues, I knew we deserved better. So I created something to speak to a need. The growth was easy from there.
How have you adapted to the evolving landscape of the entrepreneurial ecosystem?
I launched NecoleBitchie.com in 2007 when we were at a point where everybody was talking about being an entrepreneur. It was glamorized so much, right? And a lot of people jumped into entrepreneurship because they wanted to work for themselves, but they forgot the important piece, which is making sure it’s something you’re passionate about. And then, what pain point are you addressing? And so that’s how I’ve kind of gone about creating a brand and culture for growth, making sure that the people we hire aligns with the mission of the brand. And we’re all on the same page, and we know what the end goal is.
That’s so incredibly important. And I’m so glad that you went the route of making sure the listeners know that you have to have an exit strategy. So it’s a little ominous, I guess, but as a business owner, you kind of have to work backwards a little bit. But I want to back up to something that you’d mentioned surrounding your team, building a team that has completely bought into the culture you’re cultivating at the company. How do you ensure that from the top down, everyone is tapped into your purpose?
You can tell in the work who’s really engaged and not just there because it’s an extra check. And what’s interesting is when you build a business, especially a Black woman-owned it’s very hard for us to get funding. A lot of people may not realize that sometimes you have to be in business at least two to three years before you can even qualify to get a loan. Most of the loans that are available or lines of credit are very bad terms. Before you hit that two or three year mark, you have to pay it back within maybe a year or 18 months and face very high interest rates before you’re eligible for the SBA loans, et cetera. And so with that in mind, you’re going to be growing your business. And most of the people you hire are going to be contractors because it’s just very expensive to hire people on payroll and with salaries, et cetera. So I always look for the people who one know more than me in the area I’m hiring them for. You don’t have the resources to waste on anything else.
I don’t think conversations about VC funding disparities and what the cap table looks like for small Black founders are had enough. I know that you’ve been through an acquisition, and right now you’re in the capital raising process for My Happy Flow. What would you like to share about the ins and outs of raising funds, particularly as a Black woman? Because as you mentioned before, right now I think the percentage rate is like zero point. 35% of all VC funding goes to Black women. That’s nothing. What is it like, really?
It’s funny because we have this conversation about the small amount of money that goes to Black women-owned businesses, but then there is an uproar when a Black woman-owned business sells their company. And so I say that because I don’t think a lot of people know in order for you to raise money, especially from VC funds, they are expecting like a ten x return on their investment. And so the way that VC funds normally get their investment back is through when you decide to sell your company or go public. And that doesn’t happen often or at all for Black women—it’s very hard. So when you see a Black founder raising money, just know that that black founder will probably one day sell her company. And I think we just have to normalize the conversations around selling your company. I’m going to get back to your original question, but I want to say this because it’s hard to see such an uproar when people like Monique from Mielle Organics ends up selling her company, and it’s not to a Black-owned company.
And you have to realize that if she raised $100 million, first of all, she gave away a lot of equity to raise that much money, but that also raised her valuation to probably at least half a billion dollars. And so who can afford a half a billion dollar hair brand that is a Black-owned company? Not many people. And so your options when you grow and scale your brand to such a huge valuation is the big guys, the P&Gs of the world, the Unilevers of the world. And you always want to sell to someone that you know can make your brand even bigger than what you have, that has resources, they already have skin in the game when it comes to the product that you’re selling. And that can take your brand global if you’re not already.
What should entrepreneurs know about making themselves attractive to investors?
Well, I’ll say going back to capital raising, and this is probably why a lot of us do not have funding yet, is that they don’t know how to make themselves investable. A number of us think we are going to grow and scale our businesses if someone sees us online, and wants to give us money. But we don’t have a pitch deck together. We don’t have a data room. Inside that data room, we haven’t identified who the leaders are within your company. Do you have a board? If so, who’s on the board? What is your financial model? And are your financial projections three to five years out? So you have to have all of that together before you even think about approaching an investor. Because they need to see, first of all, your brand values, your missions, your goals. Where do you see yourself going in the next three to five years? How are you going to get distribution? Do you have distribution? Are of those things need to be considered before approaching investors at any stage.
We’ve talked about this before, but there’s such an emotional connection to scaling and eventually selling a business that many don’t understand. What are some considerations you’d want entrepreneurs to make to prepare themselves for that?
Let me tell you, I listened to Tristan Walker, who owned Bevel and he actually sold his brand to P&G, and he shared he’d gotten shingles from distress right before letting it go. And if he didn’t sell his business, they probably wouldn’t still be around. They would have had to go through layoffs because they were in so much debt. And that’s the reality of a lot of businesses before they sell, some of them are millions in debt. People look at your revenue, but they don’t understand a lot of times the debt that you’re in outweighs the profit. It’s important to be real about that and so many other things while aiming for scalability.
That’s why conversations like these are so important.