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
00:40:38 · Guillaume Moubeche, Pete Maldonado
[00:40:38] S1: play poker too much. But [00:40:40] S0: Yeah. Exactly. Or my my wife goes shopping for purses or something like that. But, yeah, that's a... But... No. I I... That was the goal. And so, again, like, it was such a a weight lifted off of our shoulders. And we didn't really real... I'll be honest. We didn't realize how much of a of a relief it would be and how we can make decisions in such a different way. Thinking about... I'll give you an example. Like, so so up until that point, everything was all about getting an immediate ROI. So if I was investing money, I needed to get paid immediately. So what does that mean? I'm only serving the bottom of the funnel. I'm I'm missing all of my mid top of funnel. So what's happening there? Brand awareness is suffering. Right? And so we're not casting a wide enough net. And this is actually something that... So Stride Consumer Partners is our our private equity partner. That's one of the things that they actually, like, forced into our brain. Like, what are you guys doing? Like, you you... You're you're too efficient here. Your ROAS is, like, multiples higher than it should be. You need to bring that down. You need to be spending for top of funnel and get the brand awareness out there. So that's exactly what we started doing, and there was a massive unlock. And so, again, like, we would not be scaled to the point where we are right now without that investment.
00:41:56 · Guillaume Moubeche
[00:41:56] S1: And with the secondary fund, like, coming in, what's kind of, like, their their view on on the... A path for liquidity for them? Like, do they want to... Is it a fund that's gonna, like, take more and more of the business? Or eventually, do they want to exit? Like... Yeah.