Superior Water Technologies obtained $200,000 in VC funding to support R&D, hiring and business growth.
Superior Water Technologies Inc. has been designing and servicing water disinfection facilities and systems for municipal and private clients since 2003. After a dip in sales during the recession, the company got back on track and doubled its sales every year for three years since 2012.
As a small business competing with global corporations for customers, Superior Water Technologies frequently struggled with cash flow. In 2014, company founder Mark Malmquist turned to two investors who had previously lent the company operating capital. “We were talking to them about borrowing more,” Malmquist recalls. “They liked our business model, and suggested rather than just borrowing from them, they’d like to [invest venture capital] and become partners.” To make a decision on how best to grow the company, Malmquist visited the Small Business Development Center hosted by the University of La Verne.
Business Advisor Malcolm Geffen, who had a previous consulting relationship with Malmquist and had guided Superior Water Technologies through the 2008 recession, helped Malmquist position the company to promote the opportunity to investors, review the investment proposal, and structure a $200,000 investment that aligned with his long-term growth strategy.
“Without my advisor’s direct assistance, I doubt I would have achieved what we have accomplished so far. Because of the SBDC and the successful business experts who give their time so generously, so many doors have opened to us.”
Mark Malmquist, President Superior Water Technologies
“In our search for venture capital, we found that for very small companies, especially coming out of the recession, access to venture capital was almost nonexistent,” Malmquist explains. Having VCs approach him was a huge opportunity for the business to grow. “Malcolm assisted us in positioning our company so VCs could look past our current position, and instead look at the opportunity our company represented. He helped us paint a picture of our industry’s potential and what our company could be.”
Know When To Let Go
Malmquist knew the VC investment would benefit his company. However, he had reservations: “As an entrepreneur and inventor, giving away some control of something [I] created and spent 10 years developing is very difficult,” he admitted.
Fortunately, Geffen was there to guide Malmquist in resolving his concerns. “As a fellow long-term entrepreneur and business owner, he was able to share his personal experiences and insights, and apply those to my situation and my mind-set,” says Malmquist. “[Having] someone who’s already been on the road you’re on, and can tell you the pitfalls and turns in that road, gives you a great advantage.”
Ask The Right Questions
After identifying Malmquist’s concerns about the investors, Geffen worked with him to come up with questions he could ask and information he should share to ensure that the relationship would benefit both sides. “We discussed the topics I should address with them, the risks and benefits of having shareholders in a closely held corporation, the responsibilities we would have to give shareholders, what amount of control our company would have to give up, and what effect having shareholders would have on me personally as the primary shareholder,” Malmquist recalls. After discussing these issues and taking the time to get to know the VCs, Malmquist felt satisfied that accepting the investment would be a win-win situation.
Superior Water Technologies obtained $200,000 in funding from its new shareholders, which the company is investing in strengthening its management team and growing its customer base. The company is on track to double revenues in 2015.
Although Superior Water Technologies operates now with six employees, it projects expanding to twenty employees over the next two years and over forty within the next five years.
National expansion is next, and Malmquist believes the business ultimately has global potential. “We’ll pace growth so we do it intelligently—and Malcolm, of course, is participating on an ongoing basis to help us do it properly.”