One Small Step, One giant Leap: Nick Schwefel
Issue 32, September 2004
Children’s shoe shop chain One Small Step, One Giant Leap, has taken some significant strides since we last spoke. Founder and managing director Nick Schwefel tells Ian Wallis about progress and its efforts to raise finance.
Almost a year ago Nick Schwefel was sat in a brand new children’s shoe store in Sheen, south-west London. His business, One Small Step, One Giant Leap, a chain of shops targeting discerning but weary parents, was in its infancy.
He had achieved a contemporary, modern atmosphere, with space, a great range of shoes and brands, and sufficient staff numbers to serve shoppers quickly. But there was no proof of concept, which was needed to raise funding for a larger scale roll-out. What a difference a year makes.
The company has just opened its third store in London’s Notting Hill, to add to its flagship Sheen shop and one in Bath. Like-for-like sales are up 35% on last year and around 7% up on budget. The Bath store is already turning a monthly profit and Notting Hill immediately performed, nestled, as it is, among popular boutiques. “Customers are definitely buying into the concept. We’ve been amazed how accurate forecasts have been,” says Schwefel proudly.
Another huge boost came when growth culminated in the company winning the Draper’s Records’ Children’s Footwear Retailer of the Year, which is considered highly prestigious in the children’s footwear market, and Adidas agreeing to supply the company. “It’s rare for Adidas to supply to kids’ shoe shops, so while it might not sound much, it was something of a coup,” he says. There have also been appearances from supermodel Elle MacPherson and Jonny Depp’s partner Vanessa Paradis.
THE FUTURE’S BRIGHT The future’s bright too. Schwefel has finalised deals on two more shops and expects six by 2005. Originally, the plan was to open nine. But to avoid over dilution for him and his private investor backer, he decided a more modest approach to funding would preserve cash slightly longer, giving the company a stronger hand with investors.
The sum sought was also an issue. He began the process in December seeking £1.5m and targeted a handful of venture capital outfits and private investors. But it was soon obvious a very early stage business seeking such a sum would mean Schwefel and his investor giving up most of the business’s equity.
As the process was taking longer than the three months he had expected it gave him time to reassess (ironically he had chosen not to pursue one investor’s interest because its process typically took four months). He reduced the amount of finance sought to £1m, and along with slowing the roll-out slightly, was able to hold out for a better deal.
It’s certainly been illuminating for Schwefel who is now concluding the deal to take £750,000 from private investors and £250,000 from a small VC. “Overall, it’s been very positive and we had a good reaction to the plan. There’s been considerable demand so we’ve raised the money we need.”
The process taught Schwefel raising finance takes longer than you’d expect. “From getting the plan absolutely right, followed by the first round of meetings, to waiting for decisions from investors, it’s been fairly arduous. But the positive thing is it allowed us to be flexible and take into account other factors, such as growth in the interim. There’s now a better product to sell to investors and to demonstrate to landlords, helping us secure further premises.”
The slightly more mature One Small Step will now seek a third-round of £1m early next year, which he admits amounts to near back-to-back fundraisings. Not something to enter into lightly, but Schwefel’s keen to keep up the momentum.
SCHWEFEL’S FUNDINGLESSONS … Be realistic about what you can raise and how long it takes … Don’t assume investors know everything – spell it out … Be clear about the financial benefits – focus on the balance sheet, margins and costs … Let them see what they’re getting by showing them round … Highlight management gaps … Only seek funding when you have proof of concept