Advice Line with Perry Chen of Kickstarter

Transcript from https://podmenti.com/t/dfe94b86c98b60d7

Hello and welcome to the advice line on how I built this lab.
I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will help me try to help you.
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Alright.
Let's get to it.
Joining me this week is Perry Chen. He's the co-founder of Kickstarter. Perry, it's great to have you back on the show.
Great to be here, guy.
Alright, so you were first on how I built this back in 2017. Uh, and if you guys haven't heard that episode, of course, we will put a link in the episode description.
Perry got the idea for Kickstarter when he tried to put on a concert in New Orleans in the early two thousands, and he thought, Hey, wouldn't it be great if we could fund this event in advance? Well, that idea never panned out, but after almost a a decade of kind of refining it, Perry built a platform that today has funded
More than a quarter of a million projects, uh Perry, it is
Such an awesome story.
Uh and before we get to our callers today, can you give us an update on on what you're doing these days? I know the last time you were on the show, this was back during the pandemic.
You were no longer the CEO of Kickstarter, you were the chairman of the board.
Tell us a little bit about what's going on in your life right now.
Yeah, um and it's great to be back. And um you know, I was chairman yeah last time I came. Now I'm off the board completely. I went from CEO
Stayed on as chairman for many years, then was just a board member, brought on a new chairman, and and then really as of about six months ago, I am now uh liberated.
Yeah.
And so I re after that, I after I left as CEO, I went into the the art world and
You know, I did some shows with some galleries and and even uh a few things at a museums.
But
I have since returned to music my first love and so the music stuff is kinda still
It's under wraps. Yeah. But it's been going really well.
And this is now.
This is now where I put my energy.
Perry, I think okay, this is my sort of, you know, back of the envelope, guy in the corner of the bar's theory, but I think we are on the cusp of a
different here.
We're leaving the industrial age and we're entering or maybe we've already entered it, but with AI it's a completely new age.
And s I think that in the not too distant future it's gonna be difficult to discern what is AI generated and what's human generated in certain
creative spaces, music and books, even podcasts, even what I'm doing now. And so I want to get your take on building a business around
being creative because that's really what Kickstarter initially
you know, enable people to do it.
Do you think that
that the future of earning a living by being creative is under threat.
If you're thinking more in the creative arts spaces
You know, the music, the art.
Film, dance, theater.
You know, I don't think it's ever been really stable for people working in those spaces.
And so it's like each of these radical changes that we are going through
I think as long as it continues to
Open up opportunity for people?
Not just close up opportunity. I think then that's just normal change. We are just experiencing it in like such a condensed rapid
Fashion.
Yeah.

Perry, I I before we get to the callers, I suspect that many or some today are gonna have questions about raising money, right, to fund a business. And I'm just curious, I mean, what are some of the projects that do really well on Kickstarter? Like what is the pitch
that people make that attracts more capital.
Well, one, there's people that have existing audiences that they can start the promotion on.
If your audience is much smaller.
You're trying to tap into things that have
existing communities.
Um if you're doing a documentary film on a subject, let's say on autism.
you may not have a built in audience as a filmmaker or that may be limited.
But you can go try to promote that in those in communities online where people gather around that topic.
So whatever that is, in whatever area of what you're doing, I think that
You're really trying to think to try to understand how
How big is my audience here?
You're probably trying to think is like what communities exist that I can go to and say
Hey, I'm doing something that might already interest you.
Yeah.
Well Perry, why don't we go ahead and take our first
Colour. Uh you ready?
Yeah.
All right, hello caller. Welcome to the advice line around with Perry Chen, co founder of Kickstarter. Tell us your name, where you're calling from, and a little bit about your business.
Hey, what's up, guy? I'm Perry. My name is Jesse Hodge from Dallas, Texas, and I'm the co-founder of ModTab.
Modeb manufactures and sells coal plunges direct to consumer and these coal plunges keep the water
Cold and clean with no need for ice.
Awesome. Jesse, welcome to the show. Thanks for calling in. Mod Tub. Okay, so these are
Like a round hot tub, like what does it look like?
So we started modifying a massive cooler, like a Yeti style cooler, so it looks like a big tub plastic tub.
Okay.
And basically that's connected to
Some device that cools the water inside?
Exactly. Yeah. So we modify that cooler to connect it to a pump.
A filter and a chiller, which is what brings the water down to temperature.
Okay, filled with water.
There's a an external device that cools the water to what what temperatures.
It can go as low as thirty nine degrees. Wow. But that is very, very cold. We recommend starting around fifty five.
All right, let's talk about a little bit about how you started this business.
Tell me the background, the quick background, sorry.
Yeah, so we launched Mod Tab in February of twenty two.
And
It started from the side business in my garage refurbishing used hot tubs.
uh it was a random thing I got into. My wife and I bought our first house and we wanted a hot tub, but we were poor, so we bought this junky old hot tub off Craigslist and
uh I just really enjoyed working on it. I enjoyed fixing it. I've been refurbishing it in my garage. So
that led us to start mod tub originally as a new hot tub company. So we would we're a dealer essentially selling new hot tubs. That business was very hard and we had a very tough year, but we saw the rise of Cold Plunge and because of all I knew about hot tubs, we were able to make our own coal plunge out of my garage.
And uh kind of took off from there.
Okay, so you switch from hot tubs to coal plunge. It makes so makes a lot of sense because it's a hot trend and I think will become more more than just a trend. Did you design these tubs? I mean, is it your original design?
Yeah, that's one thing that makes us different from a lot of coal plunges out there today. Um, a lot of them are bought and resold or drop shipped from overseas, but we
make these ourselves. So we designed it. My brother and I would tinker in my garage every Friday, trying different fittings, different pumps, different tubs, uh, and eventually on the design we have today.
Where are they manufactured?
The tubs are now made in Tennessee, so
The components kinda come from all over, but Final Assembly is is here in Dallas. Wow, so the actual tubs they're made in the US.
Correct, yes.
Wow. And do you have a patent on this design?
So we actually just launched our modte two point oh. So this second version is our proprietary design. So we we have a design patent on this new one.
Tell me a little bit about the business.
How were your sales last year?
Yeah, so last year was really good. We did just over five million dollars. Um that's wow doubling from the prior year. So
Yeah, so we're at. Five million. So and and these are how much do do these go for? What's cost?
Uh three thousand dollars. Our new one's thirty three hundred.
And are you profitable yet?
Yeah, so we've been profitable ever since we launched the cold plunge, we've been profitable. We we lost a good chunk of money doing hot tubs, but then the cold plunge has recouped most of that back.
Amazing. Um, okay, lots of questions for you, but before we get to Perry bring him in, tell me what your question is for for us today.
Yeah, so we're a little over three years in and have had a lot of fun building this. I get to do this with my brother
Uh, but lately we've been getting approached by people interested in potentially buying modtub or investing in modtub. So
Looking for advice to know if and when is the right time to go down one of those paths.
Alright, Perry, before we answer
The question Do you have any questions
Of your own for Jesse?
Oh sure.
I kinda wanna ask what you want.
You know, what's your vision, how you feeling about how things are going, like what are you
Yeah, what what do you want?
Yeah, it's a good question.
I think I've felt a lot of
maybe where I feel like I'm towards the edge of my rope or I've taken it as far as I can go and now I feel
Just this pressure or maybe some imposter syndrome of like
man, I'm not the face of this health and wellness company. I'm not sure if I can
Take it to the next step. It might be better in someone else's hands.
Um and I'm kinda wrestling through some of that
just insecurities I need to push through to keep growing the company, or is that indicative of
You know, maybe it really is a good time to let go of some control and and get
Get some more outside perspective.
Have you had any credible offers?
Yeah, so we turned down a a credible offer last year.
Um at the time we felt like it was
Too low and
I think as as time's gone on
I've maybe realized the offer was better than I originally thought. It's a tough industry. I mean, we essentially sell one skew that people buy one time. So
It's hard to sustain a business with with that model, so
You know, we really need to
Watch new products or be a part of a catalogue of other products who who sell
Gym equipment and other kind of wellness modalities.
It makes me think of two episodes, many episodes of the show. One is Therabody
Theragun was their sort of hero product, um, and Jason Worsland found somebody to partner with him who kind of became the CEO and they turned that into a sort of a of lifestyle
Brand, right?
And then the other one that I think of is uh some of these brands like Solo Stove, again
very successful product. The co founders hit a certain level and they brought in a sort of a quote unquote professional CEO.
to really build the company with the idea of selling it, you know, in two or three years. So some interesting ideas. A qu quick question for you, how did you I mean f you've got some great momentum
And I shouldn't we should mention the the benefits of cold plunging are well known on your metabolism.
Yeah, I think that's one thing about it is that you know, we love it. We love the community, we've love the culture. It's it's a lot of people who care about their health, who
Are willing to do
The hard thing of coal plunging which builds resilience. So
We're still having a lot of fun with it, which is, you know, another factor that kinda plays into our decisions of to sell or to take on money or kind of what's next.
I wanna just like
Dive a little bit deeper into the kind of the you were saying.

Potential imposter syndrome and
How much of that is that you're just like you wanna do right by the the business and you don't wanna obviously start to get into areas where you're not you may not be the right person for that? And how much of that might be that you're kind of getting a feeling that like look
That's not who I am or where I want to be spending my time.
You're really like I'd be happy to let somebody kinda come in here and knows what they're doing and and you could focus on the things that you want to focus on.
Yeah, I think there's two parts to that. Uh one is the imposter syndrome part. I mean I'm
I'm not the face of health and wellness. I I love my beer and my pizza. I'm so it's a
you know, I'm not this ultra biohacker kinda guy that most of the coal plunging community is.
So there's some of that of just, you know, am I the right person to lead it when
I don't know that I totally fit our target.
Demographic perfectly.
And then the other component is kinda what you're saying that I think starting Mata, pivoting to cold punching, like all of that was so fun.
I think running the business, trying to scale it, kind of operating it.
I've not enjoyed to the same level that I enjoy starting something. So
I do kinda have an itch to go start something else entirely, so
you just have itchy feet. I mean, you've been doing this, it's been fun, but you'd rather move on. I mean there are a couple of options. I mean option one is again to sort of go the dollar shave club route or the halo top route is just to find a buyer.
there are these um these websites where you can post your company as a as a target for acquisition range, I think is one of them.
Um, the other is to find a professional or quote unquote professional CEO, give them significant equity and say, look
Here are the metrics. If you can get our business up to X dollars or X revenue
uh and we can sell it for
X Y or Z
Based on these metrics you get this, this, this or that.
that could also be an interesting thing to do, which would which would enable you to kinda step away from the day to day r running the business, but of course you would give up some equity to somebody who you had confidence in.
Yeah, I like that idea of of finding a CEO to come in who
who maybe's done this before is scaled kinda to the next level because
I always feel like there's like some silver bullet that everyone knows that I don't and I'm just out there trying to find it and if we got the right person in there.
they would, you know, triple our revenue overnight and
Maybe that's true, maybe it isn't, but
I do feel
That there probably is someone better suited to take us there.
Yeah, I think that
It really has to come from what you want.
There is no better question than just keep asking yourself. It's not an easy question. You know, some people got into their business and they're trying to really they wanna get into the optimal window for sale to sell it and they're willing to stay in the business as long as that takes because that's why they got into the business.
Other people, seems like yourself, you were just like look.
I'm into this.
this seems like better than what I'm doing economically, and I'll just see where this takes me. And now you're kind of maybe you seem to have success. You bootstrapped it, it sounds like
I'd say that
You know, for an imposter, you s sure seem like you know what you're doing. I appreciate that. And I you know, I'm gonna make it hard on you. I think you gotta accept that a little bit. Um also, you know, you could always hire somebody if you feel like there needs to be an image of somebody standing there and and also
you know, in an industry where everybody kinda looks like the same archetype, like having a different vibe.
ends up often being like really powerful because as the market is expanding, it's not everybody who looks like
You know, like they haven't had a carb in twenty years.
Yeah.
And no shade to Chip Wilson, the founder of Lulu Lemon, who's no longer involved in the company, but
He's a a fit guy, but he certainly doesn't look like a Lulu Lemon model.
And I think if Chip was listening to this right now, he'd agree. So you don't necessarily have to look like but I think I do think, Jesse, you have answered Perry's question. I I think that you really want to move on.
I mean, it sounds to me like you're ready for the next challenge. It sounds to me like you want to try something new.
So
I do think it's worth exploring either a sale or trying to find somebody in
willing to take a risk in exchange for significant ownership.
to see what they can do with the spread.
And then with any of these cases, selling it in whole maybe selling uh controlling stake
And then you keep some stock if if uh if a buyer is willing to do that.
Or bring in somebody who kind of will lead operations and let you kind of like slide down to what you want and maybe you'll have a little space to work on what might be next for you.
Like imagine like those scenarios like what are you really gonna need?
uh what do you really want? And maybe that comes in a few forms. It could come in an acquisition form, it could come in the form of uh somebody who's coming on as a as more of a business partner.
Yeah, and the and the beauty of that is that if you sold or gave away a significant amount of equity
for a certain amount now.
And that you know, the the next owner's able to really scale this brand. I mean, your tiny bit of equity that you have could be worth much more.
All of these options are interesting options. I think they're worth exploring. Um, Jesse Hodge, the brand is called Mod Tub. Thanks so much for calling in. Good luck.
All right. Thanks guys.
Thanks, Jesse.
Thank you.
You know, I I'm kind of a one trick pony guy because in a way it's like
There's two ways to hand a lot of these questions. Like one is just like
From a business perspective, how could this the business have
like legs and be you know, sees the best opportunity it might have in front of it.
And the other side, which is again, what does the entrepreneur want? Because at the end of the day, if there's a dissonance between what the entrepreneur wants,

And what they may realize is like a way of seizing the opportunity economically.
That is gonna really be a weight on the whole thing and can cause a lot of problems both for the business and then also for the person who's like what I've been doing my life.
We're gonna take a quick break, but when we come back, another caller, another question, and another round of advice.
I'm Guy Raz, and we're answering your business questions right here.
The advice line.
on how I built this lab.
Welcome back to the advice line on how I built this lab. I'm Guy Raz, and my guest today is Perry Chen, co-founder of Kickstarter. Perry, uh, let's take another call.
Great. Let's do it.
Let's bring in our next caller. Hello, welcome to the advice line. You are on with uh Perry Chen, co-founder of Kickstarter. Welcome, tell us your name.
Uh where you're calling from and just a little bit about your business.
Hi, Guy and Perry, thanks so much. My name is Catherine Kerbis. I'm calling from Salem, Oregon, and I'm the co-founder along with my husband of Hitch. We're a chef crafted hot sauce brand.
We are known for our super flavorful hot sauces with slightly lower heat. So we call it heat you can handle. And our sauces are sold in grocery stores around the Northwest and in specialty stores around the country.
Awesome. Thanks for calling in, Catherine, and welcome to the show. And so all right, so hitch is a it's hot sauce, but it's not like gonna just burn your mouth and so that you can't taste anything, right? That's the idea behind it.
Exactly. Yeah. We were just tired of coming home with hot sauces that were way too hot for cooking and marinating and really enjoying. And so my husband's a chef and he was like, I'm gonna make us some hot sauces that are, you know, complex flavors, global, and that we can actually eat and enjoy.
But how did you guys decide to turn this into a business?
Yeah.
Oh gosh, it's actually it's actually a funny story. We were living and working in Costa Rica at a retreat center and he was making a lot of sauces from scratch with peppers and vegetables out of the garden. And then we moved back to Oregon to kinda get real jobs again. And um
We decided we'd love to return to Costa Rica, so why don't we come up with a business that we can start and then have passive income and within like two or three years we'll be living back in Costa Rica. And he said, I'm gonna make hot sauce and then we'll get it into grocery stores
And then we'll just have checks coming into our bank account and we can just be on the beach in Costa Rica. And we look back at that plan now. We're almost ten years in and like at first it was a two year plan and then it was a five year plan and now it's probably like a twenty year plan.
Is it your primary source of income? Is it your primary job? No, no. We have tried to make it our primary job and we just
couldn't make it like we're saying for retirement and stuff. Yeah. So we both have day jobs.
What's your day job?
I'm the marketing director for a vacation rentals company on the Oregon coast, and my husband, Matt, is a chef educator, so he teaches online for Escoffier Culinary School.
Yeah.
And so give me a sense of what what you guys did in sales like last year, for example. Last year was like a hundred and fifty seven thousand. So great for us. Our first year we did just under three thousand in sales. So we feel like you know, it's a lot of bottles of hot sauce sold.
Mm-hmm.
And you're mainly in I mean, you mainly sell through grocery or do you sell direct to consumer or do you sell like at farmers markets?
It's about a fifty-fifty split between our wholesale channels and our direct to consumer. So we certainly started out just selling at farmers markets and then within a couple of years we got into our first wholesale retailers in the Portland, Oregon area.
And now we are carried in um all the regional chains around the Northwest, and we did break in to some Kroger stores and did some trial runs and like Fred Meyer and King Supers, but it was really difficult as a tiny company with limited funds to support that kind of scale.
So we really are to the point where we wanna sustain the business without having to show up in prison because we're really tired of setting up ten foot canopies. All right. So tell us what your pain point is. What are you what what are you trying to solve for today? What's your question for us? Yeah, after nine years of building our business through farmers markets and selling into our regional grocery chains.
We would love some advice on how to scale successfully into national retailers without getting significant outside investment. And ultimately we want to position our brand in the marketplace.
So we can sell to a larger company.
Got it. Okay. Perry Chen.
Say hello to Catherine. Hi, Catherine. Hi, Perry. Wow, you know, for both of you having
Very busy schedules, full time jobs it seems, outside of this. How is that going? How much is that basically driving everything?
Yeah, yeah, it's it's been so fun. We love this brand so much. And honestly, it's really fun to go to markets and events and hear people's reactions to our flavors and so that part of it is very energizing. But I will say this year I kinda put my foot down because we've been working farmers markets on the weekends for eight years and
You know, we usually work like three to five markets a week, so we're splitting up
hustling and then when you have a day job, it's just like your life is taken over and then
All summer long your friends are like, What are you guys doing this weekend? Oh, never mind. We know what you're doing all weekend. So we're just ready to step back and also not have our faces be such a huge part of the brand so that if we can sell it to another company, it's not so tied to mostly to Matt because he's the chef behind the brand.
W one thing I wanted a to ask then is
Your question was like how do you maybe
Make it attractive for an outside um acquisition.
Yeah.
Without taking outside investment. And so I that seems like a a constraint that seems important to you.
Yeah, so we have gotten a small angel fund investment, like in twenty twenty, we got ten thousand dollars from a local angel fund group.
And we used to do a lot of cooking classes online and in person, and we also like culinary retreats. So we were taking groups to Costa Rica and we did a trip to Italy as well. So we were a little hesitant
hesitant to bring on investors because we didn't want them saying like, Hey, don't do all that fun stuff.
just focus on the bottom line with these hot sauce sales. But now that we're wrapping those parts up, I mean honestly we are open to outside investment now because we just want the company to
to be successful and to scale. And like I said, we did a trial run with Kay and two national stores. And what we discovered was without brokerage teams to kind of supervise that rollout among all the stores and without demo teams to show up immediately in all those stores and move those bottles quickly.
It's just really hard to support it with two people and a really limited marketing budget. So I feel like it's a turnkey brand if we could get investment.
Catherine, and the challenge, I'm just gonna be straight up with you, because I talked to m multi-million dollar and even billion dollar companies and brands.
It's a very hard time to raise money in consumer full stop, and you know, you're still too small
for m any professional investors to really get involved. I think if you're looking for some some funding, it's really worthwhile talking to people who know the brand in in your area and region, who who've used it, who love it. I mean those the people
that are going to be the most likely to, you know, to write a check for a thousand or five thousand or maybe more. One of the questions I have for you is have you I know so it sounds to me like you've got it in
regional grocery.
Mm-hmm.
And how much demoing are you able to do in the stores?

Oh gosh, we did a lot before Covid when the business was newer and and we had more energy. So we're currently not doing many demos. We do pay a professional occasionally to do demos, but now we're just not doing many. It just
Yeah, it's worth thinking about taking a risk and cutting into some of the revenue here, the sales r and or profits.
and using third party samplers to demo the product because
for people to discover the brand. There's a lot of brands and there's a lot of hot sauce brands. There's a lot you have to
Demo it.
People have to be made aware of it by trying it, and so
That is where
I think your biggest opportunity is. If you really want to
position this for an ultimate acquisition.
you might have to take a deep breath and
Really?
You and your husband sit down and say, Okay, let's
Let's think strategically about this because to to be an an acquisition target
You're gonna need to hit.
twenty million or more in sales, right? And so
To get there, you really have to be in grocery.
And to be in grocery, you've gotta demo the product and demo and demo and demo and demo.
Yeah, um
you know, you where you're coming from is that you're like look
the way we're doing it now isn't sustainable. And so like how do we find a way to where we're not putting in this much or even more work on this in perpetuity. Yeah. And so that's really good. You can use that and in a way I think maybe
As to what guy's saying.
You know, maybe you just have to come up with a number, you're like, look
Let's give it another whatever.
Year, two years, eighteen months, and you're like at the end of that.
If we can't get
It acquired
Like
You know, we've had a good run, so you you give yourself that emotional kinda like safety valve of like that you're not gonna do it forever and never see friends again. But within that you can work backwards to say, Okay, if that's what we're trying to do
Mm-hmm.
in the position where the where it has the opportunity to get acquired. And so as guy's saying, that releases you to maybe do things that like over the years you've been hesitant to do because you're like look, we're trying
We don't want to raise money or we wanna like you know preserve capital because we don't know how long we're gonna
And maybe it's like a Hail Mary or go all in.
Yeah. Figure out what does it really take and take your shot, even if it's just a you know, maybe it's
A one and
Five chance it could work, but
You know what you're working towards now. You have a goal in mind that you've already decided on.
Yeah. You just have to backward engineer from that.
I do love that,'cause sometimes it just feels like you don't know when it's gonna end, is it gonna go on forever, and you're like, I can't keep going at this pace forever. But if you put um a goal out there, I think you could sprint for the finish or something. Yeah, I love that.
I think you have a real sense of what you're up against and
And it is a hard business, but you know, some um business is just hard. Yeah.
Yeah. So just take the shot. Like don't be afraid. Like, you know, when it's like at down to this end, like just pull out all the stops to the things that you're like, let's just try it so you know that you you feel like you've given it the shot that
you're you're gonna feel proud of.
Yep.
I love that.
Can I say one more thing for Perry? I just
We heard in your original interview with Guy that you started Kickstarter because you were trying to raise money to a show for Kruter and Dorfmeister. Is that right? Mm-hmm. That's right. Well, all right, they're coming to Portland.
Oregon in September. So we wanted to invite you if you're in the area. Please feel free to you know, we'll get you a ticket. You can stay. I had no idea that they were still going, they're still going strong. All those all those nineties kids are still listening to Kruderdorf Meister today.
Um Catherine Kerbis, the brand is called Heat You Can Handle. Good luck. Thanks for calling in.
Thank you. Thank you. Bye.
Bye bye.
Stay with us because after the break, we'll talk to another founder working to take their business to the next level. I'm Guy Roz, and you're listening to the advice line right here on how I built this lab.

Welcome back to the advice line on how I built this lab. I'm Guy Raz, and today I'm taking your calls with Perry Chen of Kickstarter.
Perry, uh you ready for our next caller?
Yeah, let's go.
Alright, let's bring in our final caller. Welcome to the advice line. You're on with Perry Chen. Please tell us your name, where you're calling from, and a little bit about your business.
Hey guys.
Uh my name is Joe Fontana. I am the founder and owner.
Of Fry the Coop.
We are a chicken sandwich shop here in Chicago.
We fry everything in beef talo.
And uh right now we got ten locations.
And uh a little shy of two hundred employees.
Wow, Joe. Welcome to the show. Fire the Coup. So so you're growing like crazy. Well, before I ask you about the the story of just what what are your sales?
Uh so last year we finished at twelve point nine million.
And we're already on track to do fourteen point five million coming up this year.
How did you get into this business? Are you a chef?
I'm not a chef.
Although I can come to your house and make you a great meal. I love food. I'm just uh
Fat Italian guy who loves to eat. But I was uh my wife and I moved uh to Mekula, California. We grew up in Chicago.
And I was working some corporate job that I just really disliked.
So I did some soul searching, figured out that I love food and I wanted to open up a business in food.
At the time, uh there's a little place in uh San Diego called the Crack Shack.
And I was just obsessed with their chicken sandwiches.
And I and at the time I was living down the street from an In N Out burger.
So I kinda thought like
Gosh, like a handcrafted
Double fried chicken sandwich.
Like just kind of styled with a really s small menu like in and out.
I'm like this will do well anywhere.
But you figured you'd go back to where you're from, I guess.
Well
It wasn't actually that. It was uh I was trying to raise money in Temecula because we did we had no plans of coming back to Chicago. However, I couldn't raise any money. I didn't I didn't have any money
So I mean I would see a Bentley on the side of the road and I would put my business plan like in in the windshield wiper, like with a note Call me, please. And did that did that work?
No, no, it did it did not work. But my friend in Chicago, uh, who's now my partner, he was a real estate guy.
And they had a building there was a f uh kind of an over the counter service place that opened and closed within eight months.
And they had spent the money to all build it out.
So he called me up one day like
And he just said, Hey, I have a small window.
for you to move back to Chicago and you can open up your your fried chicken concept. And so my wife and I just had our first baby and uh
Just bought our first house. We had to sell that.
I had to talk my wife into moving pack across country.
And uh that's how we ended up back in Chicago. Wow, that's amazing. And this just proves that there is a lot of space.
in the chicken business. I mean it's super popular. Obviously you've had r in the last few years raising cane's and Dave's hot fried chicken and uh of course Chick fil A is you know huge
But there is a lot a lot of smaller regional chicken
places. Um w what are your sort of challenges right now? I mean you're growing
And that's amazing, ten locations.
I'm assuming you want to open more.
In the future.
Yeah, and really like um separating ourselves as the best of the best. Frying and beef tallow has been a huge differentiator for us.
Um we just put a lot of love into the quality of the product.
We go around and train our team on hospitality. Like touching tables is something that is kind of lost in the fast casual space, fast food. Like no no managers are going out and touching tables.
Nice. Very smart. And I think and and frying a beef jellow probably raises your cost too, right? It's more expensive than frying it in in a seed oil, I guess. Definitely. But the taste it is like
A million times better, and I think that's what makes us, you know, ignore
The extra expense.
That's awesome. Okay, so before we get dive into this, tell us what your question is or your challenge.
All right, so we have been funding all of our growth
Uh with our own cash flow.
But I have have an audacious goal to open up seventy five stores over the next ten years all around the Chicago land area.
Uh we have a huge market, so I think it's something we can accomplish.
And
What I'm figuring out now is that
you know, we can afford to open maybe one to two stores on our own with our current cash flow.
But we we will not get to our seventy five locations.
In ten years. It'll take you thirty years. It'll take us thirty years. Yeah. So I'm
We need to raise money about thirty million dollars. Our company's not even worth thirty million.
So how do we raise
Money
Or what vehicle.
And bank debt is not working.
to basically grow the company without selling off all of our equity or piecing it together and ending up with like a hundred different investors. All right, big challenge. Before we get to that question, Perry Chen questions for Joe.
Yeah, Joe. First of all, congratulations on all your success so far.
But I would ask, you know, like
Very specific plan, like I get a big hair, dash a skull, seventy five locations.
Why?
How did you come to that?
Uh that is a very good question. So I started working backwards from
What very attractive asset to purchase.
And
I kinda learned that if you want to take a company public.
Uh you need about twenty five million in Ebida.
And so I thought, Okay, so how do we get to twenty five million in EBITDA?
Well, for around two million per location, we're doing fifteen percent uh profit.
You know, we would need seventy five locations to get to that.
And then also there's a great brand uh that came out of Chicago called Potbelly. Yep. They're a publicly traded company, four hundred locations. I just thought I'd go, How many locations does Potbelly have in Chicago?
And you don't see'em everywhere. It's not like a Starbucks or Dunkin' Donuts where you're bouncing into'em.
And uh I look around and there's seventy seven.
Pop belly locations in the Chicago land area.
That's a magic number.
And do you I' a a quick question for you, uh right now, the ten locations you have, do you own any of the property or do you lease them all?
Uh we do. We own uh four of the buildings that we're in.
So it just uh I love real estate and I love commercial real estate. I would love to
Yeah.
why have bank loans been a challenge? I mean, I'm thinking right away, SBA loans, you've got
You've got assets to back them up, so why is that not an option?
Well, so the ba the we did use SBA loans to buy the real estate.
And they have um
a big mortgage on each property. So it's not like we own the properties outright.
And and technically when you get into the restaurant business, like as a restaurant
brand group, we don't have any assets. We have a little bit, but it's nothing that like we don't have a lot of collateral to back up the lines of credit.
Uh so we did try that. We partnered with a local bank. They gave us a first line of credit for three hundred thousand that we opened a location, but it was really bizarre after we got halfway through it, they called in the loan out of nowhere.
Like they were like, Hey, you know, you guys only owe a hundred and eighty grand and you still have cash in the bank. They were like, Why don't you just pay it off?
The bank acts like we're failing, you know, and we're try as you try to grow.
you become less profitable. And so then they really Yes. You know, they really dag you.
On that.
Yeah.
Is there something in the middle here? Like you know, you're you're painting a picture maybe where you're saying like, Okay, if you feel to open up seventy five locations in the period of time that you you would hope to do it
I'm guessing that
What you've estimated is that the capital you might need to do that given your current revenue and assets and all that stuff.
would put you in a position.
where you know, your equity get watered down well beyond where where you'd want.
Is that an assumption or is that something that like
You've stress tested and and so that's just how it is.
I think you're kinda hitting it where it was a little more of a paranoia.
And and let me paint you a picture that I think would be a perfect scenario is possibly we brought on an investor or a maybe a family office.
uh sell maybe twenty percent of the company to them.
Um but then get almost a line of credit.
Uh or a loan from them.
But the catch would be that we would try to avoid principal and interest payments.
So like say I need thirty million to grow these seventy five stores, like they would say, All right, here's here's the thirty million.
over you know the ten years
And we're not gonna charge you principal and interest.
But then we can like accumulate it maybe on a Excel sheet.
You know, so to speak. And then when we exit the company in ten years or set it up for an exit.
Or to exit them.
That's when they'll get their principle and interests.
And the the loan of it. And there are there are plenty of family offices in in the Chicago area.
It's an interesting idea. I mean it's it's essentially raising minority equity, right, from aligned investors. I wonder have you heard our episodes on on Dave's hot chicken or raising gains?
I have, I've listened to both of them. So you know how they went about it, both of them in different ways.
Dave's went the franchising model, and of course
Th here's the big F question.
What's your view on that? Because
That's a way to supercharge growth and it and doesn't require a whole lot of upfront capital.
A year ago I would have told you absolutely not. No franchising, like we want to own it, control it.
But now I am starting to change my tone a little bit. I'm starting to think, well, hey, maybe
you know, through franchising we could raise uh the capital to kind of
accomplish our goals and then maybe franchise like outside of Chicagoland area.
I don't take it lightly though. I've kinda learned that you know, if you franchise you have to be it's almost like opening up a whole separate corporation and you really have to take it seriously. Yeah. I don't love being on planes all the time.
I have uh three little kids at home, so you know, I don't wanna
Have to be living in hotels either.
Flying all around the country.
No, that makes sense. I mean look
Franchising is
it's risky, right? You there's a reason why every time you go to an in and out
It's the same.
It is consistent because it isn't they don't franchise. It's owned by the
by the company and it's the same with with raising canes.
And there's uh there are f franchise models where you do you see inconsistency from location to location.
So
It's tricky.
But it can also be
A great option.
Ga exactly, guy, you know.
I think
It always comes back to that show, which is
What do I want? Yeah. And it seems really important to you that
The customers experience the the business in this way, that is your vision.
Seems like obviously that's why there's tension with with franchising and
what it comes down to is like of all these things that you you want to achieve and how you want to feel about them.
Which are more important than the other.
To you.
Yeah, it's very true.
Yeah. I c I care deeply. I want everyone to be happy.
Yep.
I think you have got essentially three big options. It's either
some kind of bank loan, right, which you've tried and maybe you can try it and there are other banks that ha actually have restaurant lending divisions.
Um the other one is
You could do franchising.
Actually there are four options. The other one is you find a
some aligned investors to get some minority equity.
And give you a loan and then I think
The fourth option, actually there's five. I'm gonna give you two more. The fourth option is option four. This is complex, but could you do like a sale
of one of the properties that you own or two of them and lease b lease them back so you get cash in hand.
And then use that cash to
finance more locations, that's risky. And then the last one, which is I mean, things like operational efficiency, right? Can you centralize the food prep? Can you also
negotiate better prices on supplies. I mean anyway there are five different things that you can do.
And you're just gonna have to choose one or more of those or a combination of those.
What I would say is
You got this big Harry Dash's goal, and you've got cleasons why you think that this is something that that is worth going after. And I wonder if you kind of like
You know, you figure out more ways that that might be attainable, whether it's loans, whether it's investors.
And you give yourself time.
You know, whatever.
Nine months.
to like really kind of like build towards that work towards that.
And you also have like a plan B. You're like, Okay, if that doesn't happen, then
I think that where I can get to that's a step to that, and a goal I can now focus on is
something in the middle. The reason I say that is with with raising money, one of the big things is it's like how long can you keep your mind in
Fundraising brain versus operating brain.
And fundraising brain is really s you know, it's really stressful and your your eye isn't on the ball and also, you know
You don't want to hear no all the time, you know. It's it's not it's not what it's not how anybody wants to live. So give yourself
Give yourself some some box.
Some constraints, some time box around.
Plan, you know.
Plan big.
And then okay, if that doesn't work out in this amount of time, I'm gonna shift my
My mind.
I love that. Is it there um
Because we did one point five million on EBITDA last year.
Do you think we should wait till we're at two million or three million EBITDA? Or is there like a number you think that I should
Then kinda switch over to that.
You know, I'd almost defer to guy like it's so industry specific, I think, in a way. Like with the internet guy, it's not even real. It's it's sometimes they're like don't make any money, it's better if you have no revenue at all. Cause you can always s sell the dream of Yeah, the restaurant industry is not this different game.
No, and and you know, you've got to hit profit and growth to be
a target for acquisition or to go public. I mean that's really the name of the game now. It wasn't five years ago. Five years ago was growth, growth, growth. And so you had a lot of brands that did grow and didn't have to worry about uh staying profitable. Now it's different. So you know
A slower appro i I don't think you either it's either or it's either a slow or a fast approach. I think there's a middle ground, which is you might only be able to open up one or two locations for the next year or two while you are searching for the right partner who can help you really expand because
There's a scenario where you open one or two in the next year or two, and then year three from now
you're opening fifteen to twenty locations a year.
Right. I mean th there's a realistic scenario where that can happen if you find the right partner or you find the right financing model.
Yeah.
Love that. And I'm okay with that. If it takes a couple years and then we can really run, that sounds great.
Yeah.
Joe, I can't wait to try a sandwich of Fry the Coop.
Thanks for calling in. Good luck.
Thank you guys. Good luck.
I don't know.
Um, Perry before we let you go, a quick question that I I like to ask all of our returning guests, which is if you could go back to the Perry Chen from when you were just
Starting this.
you know, this idea when you're starting to really
find people to support you to build Kickstarter and you could go back to'em now knowing what you know. What what advice do you think would have been helpful?
Oh man.
I don't know. I would say this, you know, it's a I'm a I'm dodging the question, but I it's truth in it. The delusion that I had, and I think the delusion that we all have as entrepreneurs, if I cut through that delusion with some common sense from the future, to be honest, who knows if I would have gone through it then.
Fair point. Fair enough. I've I you know, I don't I don't think enough founders and entrepreneurs are are honest about that, but I do think it's worth it's a question worth asking yourself, which is like in ten years you want to look back and say
this was worth it. I think for the most part
The answer is yes for most people. I think it's still the answer for you because you built something of incredible value, cultural value.
It was absolutely worth it for me. And I think a lot of what I picked up on this show too and and kind of just in general engaging with entrepreneurs is that
There's a lot of interesting conversations to have around
You know, like should I keep going?
I think so many entrepreneurs just drive themselves to not fail, not fail their employees, not fail their investors, not fail
You know, success.
And we'll
add years and years and years onto businesses that they're running seventy, eighties hours a week.
that they really wish they could have back in the future and they the off ramp seems impossible.
to them and and I I've talked to many entrepreneurs like that. Most entrepreneurs statistically end up in that category. And um it's not something that really gets talked about a lot. And I think because of that often when people in that situation it's
It's really soul crushing.
Yeah.
But not for you.
Not for you.
Yeah.
Is it are people ready for the soul crushing uh business podcast?
I'm not sure anyone will listen to it. One star. That's Kickstarter co-founder, Perry Chen. Perry, thanks so much for coming back on the show.
My pleasure.
And by the way, if you haven't heard Perry's original How I Built This Episode, you can find a link to it in the podcast description. Go back, check it out. It's a great episode, and here's one of my very favorite moments from that interview.
Weren't you getting stressed out that somebody somebody else is gonna beat you to the punch and and do the same thing?
I think that certainly comes to mind.
But I think there's also like
We couldn't have tried to go any faster. There was just
Not that much was in our control.
We didn't have a lot of money, we didn't have a lot of influence, we didn't have a lot of connection. So
We were moving as fast as we could and and that's kind of as
That's as much as you can do.
Thanks so much for listening to the show this week. Please make sure to check out my newsletter. You can sign up for it for free at gyras.com.
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This episode was produced by Alex Chung with music composed by Ramteen Air Bluey.
It was edit by Andrea Bruce.
Our audio engineer was Neil Rauch.
Our production staff also includes Chris Massini, Carla Esteves, JC Howard, Casey Herman, Sam Paulson, Carrie Thompson, Catherine Cypher,
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I'm Guy Raz and you've been listening to the advice line.
on how I built this lab.