00:33:10 · Guillaume Moubeche
[00:33:10] S1: And I think, like, at some point, because you bootstrapped the business, I think at some point you you took some cash out. Can you maybe, like, walk us through of how exactly did you decide to take some cash out? What was the reasoning behind it? And maybe also the expectation of of a fund when they come in and what they expect in the future?
00:33:30 · Pete Maldonado
[00:33:30] S0: Absolutely. So... Okay. So we went through COVID. That was a scary time because we were kinda flying high all the way up into COVID and just kinda... We didn't think we're invincible. We knew we were smarter than that, but I think we were... We also... We thought we built a a very... Like, we always use this word durable. We thought we built a very durable company, and, you know, we can survive the the highs and lows and all of that. Right? And then COVID just kinda changed that. We didn't... Who could have ever, you know, forecasted that? But I think for us, it was a it was a tough one because it it came out... We came out of the gates, and I don't know if you remember, like, in the early days of of COVID, people are like, well, all the stores getting shut down. There's a meat shortage. So now you've got everyone pantry loading. So now velocities and demand went through the roof. So this was not just on our website and Amazon, but it was in our retailers. And so like a Trader Joe's, they are doubling their PO sizes. They're giving us more... Like, so we had millions and millions and millions of sticks that we were making against each of these channels. And then for instance, like a Trader Joe's, they decided that they had, like, a corporate policy. They're gonna limit the foot traffic in a store, to 10 people per store. So it went from doors wide open, product flying, to 10 people in the store at a time. And then on top of it, we were always at the cash registers, but they also wanted to protect their cashiers. So now they put up a plexiglass wall. So Chomps were behind the plexiglass wall. So it was like a like a Chomps museum. Right? So even if you wanted the product, you couldn't get it. So our sales there just went to next to zero overnight. And then so we... They, you know, went... List lasted for a few weeks, and they're trying to they're trying to gauge to see how long this is gonna last and all that. And finally, they were like, this is gonna be longer than we thought. We don't need that product anymore, so we're canceling all of those open POs. It's just like, what a gut punch. Like, oh my god. What are we gonna do? Because we already produced so much to fill all the demand in every other channel. We had no home for that.
00:35:38 · Pete Maldonado
But our team is so awesome that over time, it only took a few weeks actually, of them pounding the pavement and just getting super creative to figure out, like, all these new channels of where to sell the product. So it was like Thrive Market. It was... There was like a few other ones that were... We started getting, like, leaning really heavily into ecommerce. And we still have... These are new channels for us that we were never in before. And so we were like, this is kind of awesome. So we moved all that product, and then Trader Joe's opened the doors back up. So now suddenly demand is, like, picked back up. So... But during that period, there was this huge lull. We were out of cash, and it was either, like, we figure out, like, we get to lay people off. Like, what are we gonna do? Like, we couldn't lay people off. We took forever to build this little team that we have, and these people are superstars. We... So we decided we were like, we can let the team know. Like, we are in a really bad position. We need to put our heads together and figure out how to fix this. We're not gonna lay any of you guys off. We're not furloughing anybody. You guys are all keeping your jobs. We're gonna pay you to the very last cent that we have, but we all need to put the... You put our heads together and fix this. And so we did. And and it worked out, man. So we moved that product. Things opened back up. And when things opened back up, our velocities just went through the roof. And so... And just hasn't slowed down since. So, again, it was like... That year was a bad year, and we did almost a 100,000,000, but then we just continued doubling from there.
00:37:12 · Guillaume Moubeche, Pete Maldonado
[00:37:12] S1: And this is when you decided that after that, it was time to to take some capital [00:37:17] S0: to little bits. Yeah. Missed that point. Yeah. So we... So Rashid and I were always on the hook personally for personal guarantees on every bit. So we had some debt that we took out from banks. And then, you know, we were personally guaranteeing literally everything. And so to the point where during COVID, we literally [00:37:34] S1: talked Sorry to interrupt, but just for people to understand, whenever you, like, take a debt, it's on your business, but the bank was asking you to personally guarantee the the cash. Meaning that if you default the debt from the existing business, they can seize your property, your assets, etcetera, etcetera. Is that correct? [00:37:55] S0: Absolutely. Yeah. Okay. Okay. So that [00:37:57] S1: puts a lot of pressure.
00:37:58 · Pete Maldonado
[00:37:58] S0: A lot of pressure. And we both had kids. We both had families. And and so we were coming into this, you know, during COVID, we thought we were not only losing the business, but we thought we were losing our houses and and all of our own personal everything. And realizing then, you know, it wasn't just us anymore. And by the way, I'm the risk taker. Rashid is less of a risk taker, but he actually went along with a lot of these things because I... With my pushing. I'm like, we gotta do this. We gotta do this. And so it was just like a bad bad feeling, you know, that, you know, we we put it all on the line. Our kids never signed up for this. You know? And it was like, you know, we're putting their lives at stake, and I don't know. So we we got through it and we're like, man, that was not a fun thing at all. Now the business is back on track. Let's do something where we find a financial partner because if something like this were to ever happen again, we need to make sure we've got some some backing. And on top of that, we were also growing so quickly. And, again, like, you need doubling at... You're doubling from 5,000,000 to 10,000,000 or 10 to 20. Like, those are completely different business models. When you're doubling from a 100 to 200, like, you're at a totally different level, and you... The the infrastructure that you need is astronomical. It's just... It's crazy. There's just so much different infrastructure that that we needed. We didn't even know what we needed. That was the thing. Like, so we're kinda raising our hand. We're like, this has taken off. We need someone that's been there and done it. So who can we partner with? So it was trying to, you know, really checking off two boxes. It was derisk our families, but then also bring somebody in that... That's been there and done it. I mean, learn from their scar tissue because we were we were... We had enough scars at that point. But... Yeah. So... And and by the way, I I would just... On that raise that we did, it was a 100% secondary. We did... It was no primary capital. In the in the life the life of our business, we've taken on less than a million dollars of primary capital. So when we did our raise, it was purely to derisk the families and then other shareholders and that type of thing.
00:39:59 · Guillaume Moubeche, Pete Maldonado
[00:39:59] S1: No. It's nice. And personally, like, when I cashed out in 2021, we sold like 20% of the business for $30,000,000. And after that, you know, I was... It kind of like changed my vision on the on the business and the risk that I was able to take. Can you share, like, how it impacted you and your cofounder after the the the secondary? [00:40:22] S0: It's... That's that. That exact thing. Right? So now we we did we did enough to where it was like, okay. If we never made another dollar after this from Chomps, like, the families are okay. We're not gonna be homeless. Right? Like, that's like... That's what we need. And so that was Unless you go [00:40:38] S1: play poker too much. But