First Aid Beauty

In 2008, Lilli Gordon, an experienced financial and skincare entrepreneur, founded First Aid Beauty (FAB). She had discovered a white space in the prestige beauty market: high-end skin solutions that were suitable for sensitive skin. After initial success through Sephora and QVC, the company’s growth began to slow, prompting Sephora to consider pulling distribution. Gordon responded quickly, raising another round of funding and selling her house. The gamble paid off and the private capital offers starting rolling in. Gordon had been an entrepreneur her whole career and was hesitant to bring outside investment partners into the business. She did not want someone trying to micromanage the company she had built. She wasn’t even sure if the company truly needed the money. But FAB’s near-death experience also demonstrated to her the value of an “insurance policy” and high working capital needs were forcing her to obtain an increased line of credit at the bank every year. Gordon had some decisions to make. Was FAB’s cash flow from operations enough to fund the company? Should Gordon cash out some of her shares to get that “insurance policy?” Gordon narrowed it down to two term sheets. How should she choose between them?