Republished with Permission of WorldofDirectSelling.com

November 23, 2015 by Hakki Ozmorali, Editor of World of Direct Selling

Investments that are directly made into a private company or that are used to buyout in order to delist a company from a stock exchange is “private equity”. It can be raised from individual investors, institutional investors or sometimes, from a group that act together. As a source of fund, private equity can be used by company managements for a variety of purposes, ranging from turning around a distressed business to further accelerating the already existing growth.

When investing, usually the investor sets an objective and a time frame to achieve it. As soon as that objective has been met, investor sells its stake and “exits”.

Obviously, outside investors pick the industries and companies to invest from those that are promising to them. Let’s see then, how attractive the direct selling industry has been to these investors. We will briefly review this week, some of the prominent examples from the industry.

5LINX

Founded in 2000, 5LINX is a direct-sells three main categories of products: Home essentials like telecommunications and energy, wellness products, and business services such as mobile marketing and payment processing. As of end-2014, 5LINX reported $109 million sales.

In 2006, Trillium Group and the New York State Common Retirement Fund made a $1.7 million investment in 5LINX. Eight years after this in 2014, New York State Comptroller’s Office reported this investment had generated a $6.7 million return – close to four times the original investment.

Arbonne

In 2004, Harvest Partners purchased NPG, Arbonne’s parent company. Things did not go so well, though. Arbonne’s holding company and all its subsidiaries filed for bankruptcy in 2009. The company’s board made the decision to restructure the debt to equity and allowed the company’s lenders to become the owners. The company officially declared bankruptcy in January 2010. But in several weeks, Arbonne emerged from bankruptcy. Arbonne announced in early 2011 that its parent company NPG had been named the winner of the “Corporate Turnaround of the Year” award by the M&A Advisor magazine.

Having survived this turmoil, Arbonne stands now as the world’s 36th largest direct seller with 2014 sales of $486 million in the Direct Selling News Global 100 list.

Blyth

Blyth is known as the parent company of PartyLite that also owned the majority of the shares in ViSalus between 2012-2014. In August 2015, The Carlyle Group announced it would acquire Blyth for $98 million. The price paid for shares represented a premium of approximately 105% percent over the closing price of Blyth common stock at that date.

CAbi

“CAbi” stands for “Carol Anderson by Invitation”. It was founded in 2001 as a clothing direct seller. CAbi was bought in 2012 from its founders by the private equity firms Irving Place Capital and J.H. Whitney.

With its more than 3,000 “Stylists”, company’s revenue exceeds $250 million.

CVSL

CVSL is definitely a unique case in the global direct selling industry. The company defines itself as “a unique portfolio of direct-to-consumer companies, led by an experienced management team, engaged in a long-term process of acquiring companies in this sector and maximizing returns for shareholders.”

CVSL is led by John P. Rochon, a well-known figure in the industry. So far, the company has invested in the direct sellers Agel, Betterware, Kleeneze, Longaberger, Paperly, Tomboy Tools, Uppercase Living, and Your Inspiration at Home.

CVSL is a public company whose shares are being traded on the New York Stock Exchange.

LegalShield (formerly Pre-Paid Legal Services)

LegalShield was founded in 1969 by Harland Stonecipher under the name of Pre-Paid Legal Services. As its name implies, the company sells legal service plans to individuals and businesses.

MidOcean Partners, a private investment firm acquired the company in 2011 through a cash transaction valued at approximately $650 million.

LR Health & Beauty Systems

Called “LR” in short, this is a well-known Germany-based direct selling company. It was founded in 1985 by two entreprenuers, Helmut Spikker and Achim Hickmann.

In 2004, Apax Partners invested in LR and then gradually acquired a majority share. Apax Partners is a leading private equity investment group, with the funds under the advice of Apax Partners exceeding $35 billion around the world.

Apax Partners said in 2012, it had agreed to sell its stake at LR to a private equity consortium of Bregal Capital and Quadriga Capital.

LR’s 2014 revenue exceeded $300 million.

Oriflame

Oriflame was founded in Sweden in 1967 by the brothers Jonas af Jochnick and Robert af Jochnick and their friend Bengt Hellsten.

While its shares were being traded on the London Stock Exchange, Industri Kapital, a leading European private equity firm bought 45% of Oriflame’s shares in 1999. With this transaction, Oriflame was delisted from the stock exchange, too. Industri Kapital’s this transaction valued Oriflame at approximately 450 million Euros at that time.

In line with the initial plans, the management listed the company on the Stockholm Stock Exchange through an IPO (“Initial Public Offering”) in 2004. Following this, Industri Kapital started selling its shares on the stock exchange and exited by selling its remaining 4.5% stake in August 2006.

Origami Owl

Origami Owl is a custom jewelry direct seller founded by a teenager, Bella Weems and her family in 2010. Two years later in 2012, company’s revenue exceeded $24 million. Origami Owl’s 2014 sales was $250 million.

In October 2014, Origami Owl received $43 million from Gauge Capital. Satori Capital had also invested in Origami Owl an amount not disclosed.

Pampered Chef

Pampered Chef is probably the most publicized of these examples due to its investor’s very high profile.

In 2003, Warren Buffet’s company Berkshire Hathaway which owns stakes in big names like American Express and Coca-Cola, announced it would buy Pampered Chef, few days after Buffett reviewed its financials. At that time, Warren Buffet said, “We are extremely excited by Pampered Chef. Doris Christopher has created from scratch an absolutely wonderful business.”

Doris Christopher founded Pampered Chef in 1980 to direct-sell kitchen tools by borrowing $3,000 on a life insurance policy. By 2001, company’s annual sales reached $740 million.

In late 2014, Warren Buffet appointed his aide Tracy Britt Cool as the CEO of Pampered Chef. At the age of 30, Cool was known to be one of Buffett’s most trusted advisers,

Pippa&Jean

Pippa&Jean is a German direct sales company selling accessories. The company received investments from Holtzbrinck Ventures, Klingel Gruppe, SevenVentures, and Vorwerk Direct Selling Ventures.

Stella & Dot

This company was founded by Jessica Herrin and Blythe Harris in 2007. In 2010, Sequoai Capital, that was said to control nearly 14% of Nasdaq, invested $37 million in Stella & Dot. With this, Sequoia owned 10% of the company, valuing Stella & Dot $370 million. Before this, the company had also raised about $5 million from Radar Partners

Stella & Dot’s sales in 2009 was $33 million. It more than tripled in 2010 reaching $104 million. This became $220 million in 2013.

It is true that capital raised from private equity companies helps businesses a lot. However, raising capital from institutional investors is not an easy task. The future of the industry, founders’ success till then and their visions, all play a part in attracting investors’ initial interest. Shortly after these though, comes their search for professionalism within the company, including of the founders’ and top management’s. It’s always worth remembering that only those that pass all these tests can win that valuable financial support.

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Raising capital to fund your network marketing startup company can be tricky. In fact, there is no clear-cut answer to finding funding. However, there are options available to MLM company owners. There are several giant direct sales companies operating today that began with a very limited budget, just like you: in their basements, bathtubs, garages, and space bedrooms. Many of these companies grew organically to the huge size that they are now. You, however, may be in a different situation, where an influx of capital is absolutely necessary to keep your business afloat.

This article will help to provide you with details about how you can get free and trusted information about how to fund your MLM business. Experts generally suggest that it costs around $100-$200 thousand to start up a direct selling company. This article will provide you with some ideas as to where to find startup funding and links to information online, written by experienced MLM industry experts who’ve been asked thousands of times, “Where can I find funding to start and grow my MLM business?”

Here are three of the most common options MLM business owners consider when they are looking to fund their network marketing startup:

1)      Do you have a substantial recruiting background? If you are a seasoned recruiter and are able to attract a strong line of consultants then your need for capital will decrease considerably. Expert MLM Attorney Jeff Babener always says, “Your need for capital is in direct inverse proportion to your ability to recruit.” If you are able to attract a strong sales force then your need to raise capital outside of the company may greatly diminish. Consultants will be the key to your success. If you are not a seasoned recruiter, then you may want to consider hiring someone who does have recruiting experience.

2)      Do you have personal capital? MLM startups often find the capital that they need in their own bank accounts, or the bank accounts of family and friends (often referred to as your ‘warm market’). In some cases, an angel investor will be willing to invest in the company (a wealthy uncle, perhaps?). These sorts of investments are based primarily on the personal relationship, as well as trust and loyalty.

3)      What about public financing? Unfortunately, not many venture capital firms are interested in investing in startup network marketing companies. The startup MLM company has the tendency to be run by inexperienced business owners needing only a few hundred thousand dollars, which isn’t very attractive to large investors. In nearly all cases, investment into the company will come from a close source. Once your business is worth millions, then the investment firms will take notice. You can read about some of the most famous MLM success stories on these pages: Silpada, Herbalife, Pampered Chef, and Visalus.

Another great place to get information on raising capital for your business is at the Starting and Running the Successful MLM Company Conference where industry experts will provide you with individual, one-on-one time and attention. Each speaker will sit with you and discuss your personal situation and specific needs. The easiest was for you to attend the conference on a budget is to visit the page of our Innovation Campaign. The October 2015 Innovation Campaign offers network marketing company owners the ability to receive two free tickets to the next Starting and Running the Successful MLM Company Conference in Las Vegas (a $345.00 value!). All you have to do is fill out a brief survey at our sister website: www.mlmattorney.com, and we will contact you right away to confirm your free tickets to the event! Attending this event will give you direct access to several MLM industry experts, including capitalization experts and MLM legal expert, Jeff Babener. Visit our Innovation Campaign page for complete information about the conference, including the topics that will be covered, the speaker/expert list, videos, and much more. For additional questions call 800-231-2162.

It won’t be easy raising capital to fund your MLM startup, but we hope that we’ve given you some ideas on where to start. We also hope that you better understand that it is possible to start small and make it big in this industry. For more information on raising capital visit www.mlmlegal.com and www.mlmattorney.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place October 22 and 23, 2015 in Las Vegas. View our conference flyer and speaker list online. Participate in our Innovation Campaign for your chance to receive TWO FREE TICKETS to attend our next conference.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

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