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.
00:42:14 · Pete Maldonado
[00:42:14] S0: They will eventually look for a liquidity event of some some sort, but I would say they are incredibly patient. Even like... So we have, like, a contract, obviously, when they bought the thing, but at some point, we're supposed to have to deliver equity back to them, and they are, like, verb... Verbalizing that, like, they have no interest in even... They'd rather... They'll stay in for the next ten years if they if they can. I would say that for all of us, we need to be thinking about what is the exit strategy because you should have something at some point. And at and at our scale right now, we're realizing the buyer pool from, like, a... For a strategic to be able to come and buy us. It's dwindling. There's only so many people that could actually acquire us at this stage. So now it's like, okay. And and we are we are always about having that optionality. I think optionality is... Has so much value. Right? Like, because you could do anything with the business. We could do another private equity raise. We can do a dividend recap because we're profitable. We can, you know, again, exit to a strategic or IPO. And so that... The IPO discussions becoming more and more real, the bigger that we get. And I think that... I think there's a massive opportunity for someone to come into the public markets with a better for you CPG company that's focused on food and beverage that... That's all they do. Right? And so you've got all of these... The the stand... You know, the the typical big CPGs that you have right now. Their stocks are suffering right now because they're being pulled down by these portfolios that are made up of products that nobody wants anymore. It's ultra processed foods. It's just a bunch of crap loaded with sugar and preservatives and all that. And and it's like, quite honestly, that's gone. That's not coming back. That's not... There's no cycle for that. Right? Like, this is like a cultural shift. People are too smart. They know what they're eating. And so we see that as a huge opportunity for Summit to build a portfolio of products that are only delivering on modern day, you know, dieting and food for the future. And so that's where, you know, I think we could I think we could accomplish that and starting with Chomps. Right? And with these meat sticks.