How the Fine Print in an Acquisition Offer Can Leave You Penniless

 

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Before the pandemic, fancy salad bars were popping up in major cities across the US, making the category one of the fastest-growing sectors of the restaurant industry. Despite their popularity in major cities, when Ana Chaud moved to Portland, Oregon, she was surprised to see a shortage of good salad options.

Chaud started Garden Bar to offer fast-casual salads to Portland hipsters. The first store was a success, but the restaurant industry’s thin margins inspired her to grow to get some economies of scale. She raised two rounds of outside capital, including one from a group of convertible noteholders. Chaud skimmed the term sheet but trusted her investors, so she didn’t think much about a clause that gave noteholders 2.5 times their money if Chaud sold the business before the note expired.

Chaud continued to grow to nine locations with a 10th on the way when she attracted an exciting offer from Evergreens, Seattle’s fastest-growing salad restaurant. Things were going according to plan right up until Chaud’s lawyer pointed out the investor’s clause, which had the potential to wash out all her equity.

In the end, Chaud agreed to give all the proceeds of her acquisition to her investors and negotiated an earn-out, which would allow her the possibility of a return on her years of sacrifice. Then COVID-19 hit, Portland restaurants were ordered closed, and Chaud ended up with nothing.

Despite the catastrophic financial outcome for Chaud, Garden Bar offers three priceless lessons for aspiring value builders:

  1. Ideas Are Overrated: Many would-be founders sit on the sidelines and never start a business for fear of not having a winning idea. As Chaud’s example shows, you don’t need a brand-new concept to have a successful business. In many cases, being the first to bring a successful idea to your city is all you need.
  2. Do Something Unique: As Chaud began to grow, competitors sprang up, but Chaud had something that made her chain different. She offered customers a re-usable container they could put a deposit on. When they returned the dirty box to any one of her 9 locations, Garden Bar made their next salad in a newly cleaned container, putting the dirty bowl in the wash. It was one of the reasons Garden Bar was so famous among Oregon’s eco-friendly diners.
  3. Read the Fine Print: Chaud glossed over the 2.5 x return clause in her convertible note agreement, reasoning she trusted the people drafting it. In hindsight, Chaud wishes she’d paid more attention and had impartial advice.

This episode also comes complete with definitions for some of the typical investor lingo you’ll run into if you choose to raise money, including buzzwords like: “convertible notes,” “preferred vs. common shareholders,” “pre and post-money valuation”, “shareholder waterfalls.”

Chaud relied on her investors for advice, but in the end, she realized they had an inherent conflict of interest. If you’re looking for an impartial advisor who understands how to build and sell a company, consider requesting a phone call with a Certified Value Builderâ„¢.

Our guest

Ana Chaud started her career as a financial and business manager in the San Francisco Bay Area where she built a thriving management consulting practice with a client base of over 80 companies, for over 10 years. In 2014, Ana co-founded Garden Bar, the first fast-casual, salad concept restaurant in the NW. Garden Bar was quickly recognized as the "place to go" for fast, healthy casual meals. The chain grew to 9 stores across the Portland metro and grew 600% in revenue in five years. Ana handled all aspects of company finance and operations, including the funding strategy which featured a blend of equity funding, convertible notes and traditional financing. In 2019, Garden Bar was acquired by Evergreens, a fast-casual salad chain based in Seattle WA. The acquisition provided Ana with the full-circle experience of the life cycle of her company - from concept to exit. Ana was a finalist for the OEN Tom Hulce Entrepreneurship Award, which recognizes the most influential entrepreneurs in Oregon.

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Transcript

John Warrillow:

Ever been in one of these fancy salad restaurants where you go in and you can order all kinds of different fixings and toppings for your salad. Well, when Ana shoud move to Portland, Oregon, she discovered that there were really no good salad options for people on the go. And so she started a restaurant called Garden Bar and Garden Bar was a success. She had one location she got to to ultimately built it to nine locations. To finance her growth, she got some investors, and little did she know along the way, she signed an agreement that had a ticking time bomb that was about to explode. It exploded at exactly the wrong time when she got an acquisition offer from one of Seattle’s fastest growing salad bars a company called Evergreens. I don’t want to spoil the story here is Ana Chaud to tell you the rest.

John Warrillow:

Ana Chaud welcome to Built to Sell Radio?

Ana Chaud:

Thank you. Hi, it’s so nice to be here today.

John Warrillow:

Yeah, for sure. So tell me a little bit about this company Garden Bar. What did you guys… Restaurant I guess?

Ana Chaud:

Yes. So Garden Bar is a chain of fast casual restaurants that specialize in salads only. So if you think about it, it’s counter service, you walk in, you go down the line, you choose ingredients, the products meet in front of you. You pay you go. So I like to say Chipotle style but we specialize in salads only. Our goal was to actually give people the option of a meal that was fast, but healthy and that’s what Garden Bar is.

John Warrillow:

And so how did you come up with the idea for this?

Ana Chaud:

Yeah, that is a question I get asked a lot. So what happened was I’ve always been very much of a nutrition enthusiast. And as a matter of fact I moved to Portland, Oregon in 2008 from San Francisco. And one of my goals was to become a nutritionist. So that was what I had in mind and I was going to do it. But then a year later life happened and I got divorced. And so when that happened my goals and dreams of becoming a nutritionist had to be stopped but I still wanted to be in the health world and in the health industry. So-

John Warrillow:

Can I ask you, what does divorce have to do with your choice of career?

Ana Chaud:

Oh, good question. Well, what happened was, so going back to San Francisco, I had a consulting practice and as a consultant as you know you are self employed, you have clients, you have customers, you do all this stuff, but I let go of the consulting practice to move to Oregon.

Ana Chaud:

So I had no clients here in Oregon and I thought, ‘Okay, I’m just going to rebrand and become a nutritionist.” So I was not working as a consultant. I was going to school full time. When we got divorced that had to be paused because I had to go back to work full time because now financially I needed to go back to support my kids. So I had to figure out a way to get myself in the workforce again. And when you’re consultant as much as you are it was hard for me to find a client base here that was similar to what I had in California. So I started out, I went back to business operations and it started out as a controller.

Ana Chaud:

And that first job that I got back right after the divorce, it was a good job in some respects but it was a very, very demanding job. And I only had half hour for lunch every day. So I wasn’t as health and it was in diets and at the time I was doing paleo and I couldn’t find a place that I could just go grab something fast and leave. So I found myself going to Chipotle a lot. And I kid you not, I was having a salad at Chipotle every day. And all I could think is can I just have more than six ingredients? I started getting really, really tired of it. So I started to look for a place that had salads in that format. And I was just very interested that Portland didn’t have one-

John Warrillow:

Were you aware of some of the other sort of salad only concepts like Freshii was one, I’m not sure when they started. Did they start around that time or were they after you guys?

Ana Chaud:

Freshii, I don’t know when they started but there were not really a direct competitor. The direction competitors were like Sweetgreen was a big much of a direct competitor and Chopt. They were mostly in the East Coast. And yes, the concept was widely popular in New York and Washington DC. And I was very intrigued by the fact that we didn’t have it in Portland. In San Francisco which is where I had moved from, I was actually inspired by, there was a place called [Puddo’s 00:04:14] that had something that started that way and then Mixed came in, became sort of the name brand in California for that concept. So I was aware of that but a little bit intrigued by the fact that nothing like that had happened in Portland yet.

Ana Chaud:

So the idea had come to me, but I simmered on the idea for about a year and a half trying to get myself back on my feet after divorce, be able to go back work again. And then about a year and a half and two years my ex husband and I had an agreement that we were going to figure out what to do with our house. And he ended up buying me out of the house and I got a little bit of money. And this is a true story, I thought I am going to open a business with this money. But I remember having dinner with my boys and my nine year old at the time sitting and eating like he’s Yoda style. And he’s like, “Are you going to buy a house?”

Ana Chaud:

And I said, “I don’t know. I’m either going to buy a house or I’m going to start a business. I’m not sure yet.” And he said, “Well, if you start a business, you might be able to buy any house you ever want.” And I thought, “Oh, wise words. I think it’s what I’m going to do.” So I decided that I was going to use those funds to open the business. And the idea of Garden Bar came to me. I researched it. We had nothing in Portland, but also I was very aware that I had new restaurant experience. And so when you tell anyone about opening a restaurant, you know what the reaction is. Everybody just go like, “What? they fail.” And I said, “I know.”

Ana Chaud:

So at the time I met, who was my co founder, and he was in the restaurant world and he was in the fine dining world and he had a couple of restaurants in Portland. So he and I got together and I said to him, “Hey, I have this much money. Are you able to make it happen?” And he said, “I’ll make it happen.” So we did. We strategized over it. We had very clear delineation of duties. He was working on building the actual physical restaurant. I was working on the business and getting everything set up, the infrastructure, everything we needed to do. And then together we started. And then we built our first location.

John Warrillow:

How did you guys figure out the equity? Because you were bringing cash to the table, were you 50-50 partners or did he bring cash as well or how did you sort that out?

Ana Chaud:

No, he did not. At first, and this is a little bit tricky because there was a little bit of a settlement unfortunately we had to part ways after so I can’t really be extremely specific on numbers, but at first we had an arrangement, but restaurants need to be able to raise money and conventionally and from investors. So we had to figure out an equity distribution that would allow for us to be able to go to banks. And so I ended up having a little more equity. He had some equity, but not 50-50. And so he had a bit of it and I had a little more and because I was the one who was going to get the conventional financing and all that and he had already a lot of conventional finance in his name so that wouldn’t allow for him to join me in that journeying out financing.

Ana Chaud:

So he did not bring any cash. I brought the cash, it wasn’t a lot of cash but I did bring the cash. And we started by creating that first location. So the idea was, we’re going to create this prototype. And let’s make sure that the city loves it and then it works. And we decided to open it. I don’t know if you know Portland, but there was an area called the Pearl, which is a very… It’s dense it’s where things happen-

John Warrillow:

A trendy.

Ana Chaud:

Kind of the trendy area. So we had a be in the Pearl and we found a location right across the street from Powells Bookstore, which is a big landmark in our city. And that’s where we started that first location. Yeah.

John Warrillow:

What did you invest in that first location? Like how much cash did you inject yourself? Like what was the financing model?

Ana Chaud:

Yeah, so I self-funded that location completely. And I spent $68,000. It wasn’t a lot.

John Warrillow:

I’m assuming you also sort of signed a lease and did you personally have to sort of guarantee that?

Ana Chaud:

I personally guaranteed my 10 leases if you want to know the truth. It was very hard even after 10 locations, they don’t let you off the hook. So that’s important for everybody to know. You have to have a huge appetite for risk, which I do. But you just have to-

John Warrillow:

So you personally guaranteed 10 leases?

Ana Chaud:

Correct? Yes. And I still have a few under my name even after the sale. So it’s important to put this out there.

John Warrillow:

So Ana that would be enough to… I’m assuming that would be enough to bankrupt you if it hadn’t worked.

Ana Chaud:

Oh, 100%. Oh, this does not describe the potential for bankruptcy that I had throughout the entire journey. Yes. But you know-

John Warrillow:

How did you reconcile that as the primary caregiver for your boys…

Ana Chaud:

You just do it. I knew that if I worked on this correctly and I knew that I could do it and I’m very… I was a business consultant for 12 years in San Francisco and I knew how to run a business. What I did not know is how to run restaurants. So what I did was from the get go, I was determined that I was going to run it like a business because restaurants have their own way of operating sometimes that doesn’t necessarily equate to efficiency or… So a lot of times I knew restaurants do some things a certain way. And I said, “Well, but let’s try it this way and see if we can make this work better.”

Ana Chaud:

So I was really aware of the need for operational excellence. You have to be on top of it the whole time. So to answer your question on the first lease, yes. Not only I personally guaranteed it but actually my business partner at the time did too. The biggest issue for us was that we had no proof of concept. So we were describing this concept and because this location is such a prime location it was interesting to try to convince some landlords that we could make this happen.

Ana Chaud:

So they gave us a shot, but it wasn’t the best terms on the lease. So I always say I didn’t have a choice. We just had to do what they asked us to do. We got the first store open and it was and it was an immediate success for the city. Like the city was so happy to get that concept. It was immediately embraced. And we started to realize that it was really a need for the concept in our city.

John Warrillow:

How profitable was that first store, like how much were your margin net after all your expenses, your food, your staff, like what were you clearing on that first store?

Ana Chaud:

John, do you know what the margins are for restaurants in general?

John Warrillow:

Very low. That’s why I’m asking.

Ana Chaud:

So this is why, I’m going to preface with the reason why we had to scale is because you can never make it on one. So restaurants have very low margins, very low margin. So we really, really, really shoot for two to 5%, if we can, if nothing goes wrong, if you’re like everything’s great. But also let me say something like this Garden Bar, we had no alcohol which for several restaurants, that can be something that augments your margins. We didn’t have that. And also we have very expensive food quality. So if you go to a lot of different chains, they may have good quality that’s half of what our cost was. So we were caught a little bit between a rock and a hard place where I really was very particular about the food integrity, but that was a very tough, tough, tough choice.

Ana Chaud:

Also with one store, you don’t have economies of scale. So the idea is if you scale that business, now my lettuce provider is not providing for one store they’re providing for 10 stores. I’m able to negotiate prices a little better. So the idea of scale I knew about that from day one. Once I started looking at that business model and I spent hours looking at those projections, and I’m thinking, “I cannot make this work with one store.” So with restaurants, it’s not so much the margin is your revenue growth. So if you think about it, first store which we started the first year, we had the first little… It’s a tiny little store and we had no kitchen, John. We ran an entire year with one induction oven and one electric oven and we made Vitamix and every single dressing was made from scratch. Every meat was cooked from scratch, everything’s made by hand.

Ana Chaud:

And so the first year was a tiny little kitchen, no oven, a lot of calls from the fire department because chickpeas would smoke. It was like, I would give some salad to the fire department and apologize every day. But yeah, so first year we had 500,000 in revenue. The second year we doubled and it’s just continued going from there. So one year in, we decided that we needed to scale and we had no kitchen. So we found a location that was our location of a two that was literally about six or seven blocks from location number one. And the reason why we did that is because it was a good location, you had a nice kitchen. We would be able to provide both stores but what we discovered by having two locations close to each other was that that concept was not a destination concept it was a convenience concept.

Ana Chaud:

And the bubbles didn’t intersect. People wanted to go… It’s like Starbucks, you go to the nearest Starbucks that you have. So even if you have a Starbucks here in one, three blocks over, they don’t compete for same customers. This is what we wanted to develop. So we worked on clustering, the downtown Portland and setting territory. So we ended up having five locations in downtown Portland and they were all walking distance, 10 minutes from each other but it was great because every Garden Bar had its home bubble and people would like, they didn’t want to go farther than two, three blocks to eat at Garden and Bar. But what it allowed them to do is go to Garden Bar three to four times a week. It became something that you would do regularly.

John Warrillow:

Because these downtown hipsters sort of would spend most of their life in the downtown core. And no matter where they were downtown, they weren’t going to the suburbs to eat lunch.

Ana Chaud:

Correct. Yes, yes, exactly. The downtown workforce likes to walk a radius of two, three blocks max. But what we were trying to do is be close enough to create the habit that they would want to eat in a Garden Bar every single day. And-

John Warrillow:

No matter where they are there is one close by.

Ana Chaud:

No matter what they are. Yeah. And it was very successful. People really started to do that and especially when we introduced our reusable containers, where then people start feeling okay. Because every time you go out, if you have a disposable container, it started creating the guilt piece. And then we ended up creating a reusable container program. And there just our sales just went off the roof because people started to come back three to four times a week and they would just bring their container. We would give them a new one. It was rewashed. So that was a very, very popular thing we did. But-

John Warrillow:

So wait, I’m familiar with… So you had this reusable container, I’m familiar with like Starbucks you bring your own mug. So in what way was yours similar or different than that? Like you just bring your own container and you would fill it up. Is that how it worked?

Ana Chaud:

No, because Oregon law does not allow you to use someone else’s container. Starbucks, yes but if you go to a restaurant and you try to bring your own container, you have to run through your own dishwasher. You cannot take someone else’s container. It’s against the law. So the way we did that is we purchased a ridiculous amount of usable containers. They’re like BPA free, I don’t have one here but I could show you. But they’re BPA free containers and we would have them there and a guest they would pay the deposit, a sale of $10, and so when they place their order, which a lot of orders were online or in person they would say, I would like that in a reusable container. We would give you the reusable container, you’ll eat your salad. The next time you come to Garden Bar, you’ll give me your dirty container and I’ll give you a salad on the fresh new container.

Ana Chaud:

So you just keep bringing back your old container. I’ll take it from you, I’ll wash it and then we give you a fresh one. So that way the containers will always… There would like in the dishwasher but you wouldn’t feel guilty of having to order that every day. And so we got a lot of feedback from guests. They were saying, “Now we can go four times a week.” Companies were actually buying a stock and putting in their kitchens and leaving for the employees that wanted to go to the Garden Bar. They could just grab one and take it. Yeah.

John Warrillow:

And so how we’re you with such thin margins, when you say 2-5% on the first store, would that include a salary for you as the kind of person running the store?

Ana Chaud:

No, not really. Not in the beginning no. The salary for the owners or for me in particular was very low throughout the acquisition. A lot of the labor… When I accounted for labor, it was for the labor at the store. What you do is you have your food and you say, “Okay, a percentage of that is…” If you have a salad, you see a percentage of that, the cost of the food and the percentage of that, the cost is the labor. So if you just stick to that alone, it is about 60 to 65% of the salad. So imagine for every dollar 65 cents goes to food and labor, just the store labor. And then you take your rent another 8-9%. So then you keep going down. So no, I did not pay myself for the first year and a half. And then I started getting a small amount that I would pay myself but really not a lot.

John Warrillow:

How did you find people to run the stores because you grew this business quite quickly and obviously couldn’t afford to pay, I’m assuming those managers at king’s ransom, that you’d have to pay them modestly wouldn’t you?

Ana Chaud:

You do. You do. Yeah. So this is an interesting thing that goes with the whole strategy of sale or how you actually build a company. The idea is I was very much focused on building my team at the stores. So in the beginning what you do is you have what we call our Garden chefs, and then you have your supervisors. And then we did have managers but we would say… Let’s say the first five, six stores, we would have two managers and then one manager would take three stores and then the other manager would take three stores.

Ana Chaud:

And then you start growing and you have more managers. At the end, at nine stores each store had its own manager. And then the manager of the store, the general manager or whatever you call them, but the one that owns the store. So then I had an operations person that managed all the managers and then I was in corporate. But-

John Warrillow:

How did you fuel the growth from one to two, two to three? Like how did you get the money to do that?

Ana Chaud:

Yeah, so I really follow the evolution of fundraising. It’s like the textbook evolution of fundraising. So the first store was a self funded, as I mentioned and I had a very small line of credit that I used not a lot. And then second store I got a very small SBA loan, which was personally guaranteed in addition to the leases. And I had a supplement from friends and family. So I had friends and family who loan me money and it was from searing note. And that’s what funded the second store.

Ana Chaud:

When I had those two stores and I was able to prove the model, with the kitchen that’s supplementing the two stores, then I went for an equity round and I had a fundraise which I brought in 18 investors and it brought in $500,000. And with $500,000, I was able to give them all the way through store six. And no one knows how I did it. I don’t know how I did it actually, but we did it. So for the first round of investment, the equity round, these investors took 20% of the other company in equity. And then I used that money to fund through store six.

Ana Chaud:

And then from store six to a store nine, and then the lease of the 10th, because we were about to build the 10th when we sold, I had an equity, a convertible note, sorry not an equity, a convertible note round. And then I brought in another group of investors and their convertible note. So I had two groups of the investors, the equity holders and the note holders.

John Warrillow:

Can you describe what a convertible note is?

Ana Chaud:

Yes. So a convertible note is… So you know equity [inaudible 00:23:26] So you give money and you get a percentage of the company. A convertible note what you do is you get money upfront and it accrues interest and then you give a maturity date for the convertible note. And when that note is due, the investors have the option to take the money that they invested plus the accrued interest and then they convert into equity.

Ana Chaud:

But in a convertible note, we have terms. And the terms are usually you offer a discount and you also offer a valuation cap. And the reason for that is because we’re giving these investors a motivation to give me the money right now and not two years from now. So if they give him the money right now in two years from now, I do another equity raise the guy who comes two years from now is going to pay a little bit of a more expensive price for the share than this convertible note holder, because this convertible note holder gave me the money ahead of time. Does that make sense?

John Warrillow:

It does. Indeed. When you did the first kind of institutional round, I’ll use quotes of $500,000 to get the six stores, I’m not very good at math but I’m getting it two point $5 million valuation for 400%-

Ana Chaud:

That’s right.

John Warrillow:

Is that right? So how’d you come up with the 2.5 million valuation? Yeah. Like what was the metric you were using to value the business?

Ana Chaud:

Well, the pre money evaluation was 1750-

John Warrillow:

Okay. Plus the 500 gets you to-

Ana Chaud:

Yeah, the post-money? So the way we came up with the pre money was basically roughly one X revenue of both stores. So if you took both stores for the year and just kind of did the one X revenue, that’s how we came up with that. And then that’s how it sort of like the price pinned out. But there’s a lot of… That’s a whole other podcast thing. There’s a lot of negotiation like you talk to the lawyer and then this is it. And then these investor that you have, they’re the lead investor and the lead investor has their notes. So fundraising is an art in itself I’d say and I learned a lot. I had no idea what I was doing, no idea. But I learned a lot and that’s one of the things that I’m actually helping right now is people understand what it means.

John Warrillow:

What do you think… What was the most surprising lesson you learned during that fundraising? You’re a savvy business woman. You’ve been involved in business consulting for quite some time. You were on a successful company yet it sounds like there were lessons that you learned in that fundraising. I’d be curious to know kind of as you look back, what was the most surprising lesson you learned about fundraising?

Ana Chaud:

I did not understand the terms of my convertible note well.

John Warrillow:

What specific terms didn’t understand?

Ana Chaud:

You understand the basic, you understand the 20% discount and you’re trying to set your evaluation cap, but I didn’t understand like for example this is something that happened to me, which was the killer piece, was that if my company got acquired prior to converting, these investors would be entitled to have two and a half X investment. So that was something I had no idea going in and to no one’s fault I did not know what that meant. At the same time when I did the convertible note, I didn’t know when the sale was going to happen. I didn’t even if I say it was going to happen. And sometimes the sale was an opportunity and so you had to weigh these things.

Ana Chaud:

Another thing I did not know is that I would not have gone for an equity round right off the bat. I would have started with a convertible note. I would have planned better when to do the equity round. I would have started with the convertible note, I would have looked at the maturity rate. I would have lined up my growth plan with investment maturity dates and all that. I didn’t do that. I didn’t know that the way that the investment timeline flows should be in sync with your growth plan. I had my growth plan and I had these investors who gave me money I was super excited. I’m like, “Oh my God. Oh my God, it’s great. They love me.”

Ana Chaud:

And I knew I had to do it and one thing for me too, John is like when I told my investors, “I’m going to get this money and I’m going to deliver this.” I knew I had to deliver exactly what I told them I was going to deliver and I did. But I had no idea how that was playing out with investment timeline so that’s one of the things that I would have gone back and I would have sync them up. If that makes any sense. It’ll make sense more when I talk about the deal in general, but yeah.

John Warrillow:

Yeah. Well, let’s get to it because, so you had the $500,000 that got you to store six, for which you gave up 20%.

Ana Chaud:

Yes.

John Warrillow:

And then you had these convertible notes and one of the stipulations of the convertible notes was that in the event that you were acquired, they would get two and a half X their investment.

Ana Chaud:

If I were acquired before converting. Right.

John Warrillow:

I’m assuming that happened.

Ana Chaud:

This is the part that was fascinating, which I know this is… So the convertible note was due a year and a half after I raised the money. So technically September of 2018 was when it was due. I was not into the acquisition process then and so the notes were going to automatically convert into equity because that’s what happens. But at the time I didn’t have a very good financial advisor… One of the things I’m very good financially savvy but when you’re running your own company you need somebody. It’s like if you a therapist you need to have a therapy. Like I needed somebody but I didn’t have anybody to bounce off and I just said, “Okay, let’s just extend this note.” And we did.

Ana Chaud:

So we extended the note another year and then three months in… So we didn’t convert that’s what I knew. We didn’t convert the note. We asked for an extension for conversion. And then as fate happens, the whole thing with the acquisition, we got the offer only three months later. So again there was a clause in the convertible note terms that said, “If the company is acquired before converting, then these investors need to get two and a half X their investment.” And because we extended the conversion, they would not convert it. So because we were doing an acquisition that was what the term was.

John Warrillow:

And when did you learn about that term was in the contract and a convertible note?

Ana Chaud:

I learned right away because… Well, not right away. When we were going through the term sheet and-

John Warrillow:

Which term sheet?

Ana Chaud:

The term sheet for the acquisitions. So-

John Warrillow:

From Evergreens?

Ana Chaud:

From Evergreens, yeah, you’ll get an LOI, you get a letter of intent. And then when negotiating the terms of the term sheets, the one thing you have to think about is what we call the waterfall. How are the funds are going to be distributed. So that’s when my attorney is like, “Oh, not so good news for you.” I’m like, “Okay, well.” So that’s when we had to really kind of work through because depending on how the waterfall was going to happen, we had to negotiate our terms with the acquirers with Evergreens.

Ana Chaud:

So there was a lot of conversation in between my attorney and and me ans we were discussing this and how we were going to go back to the buyers to negotiate the payments and all that. So that was very tricky John because like I said, I learned a lot, this was my first time doing this and I wouldn’t do it the same but I had a very peculiar situation because note holders, as you probably know have liquidation preference. So these note holders level liquidation preference and they are entitled to have two and a half X their investment. But in my case, the unit holders were the ones that had to approve the deal.

John Warrillow:

Unit holders.

Ana Chaud:

The equity people.

John Warrillow:

The original people that had the six…

Ana Chaud:

Yeah.

John Warrillow:

So the unit holders had to approve-

Ana Chaud:

The deal.

John Warrillow:

… the deal. Interesting.

Ana Chaud:

But they’re not going to get two and a half X their money. You see?

John Warrillow:

Yeah. So wait a minute. So the unit holders you gave up 20% of equity to the unit holders. Why would they have to approve the acquisition? You still had the majority of shares didn’t you?

Ana Chaud:

Because they were preferred shareholders and that’s part of it. So they were a different class. I was common and they were preferred.

John Warrillow:

This is complicated Ana.

Ana Chaud:

I know.

John Warrillow:

Okay. So these unit holders are the ones who put in the first 500K. They’ve got a class of shares which gives them priority over-

Ana Chaud:

Correct. Exactly. So they get priority. So the class of share. So the unit holder… This is like a total finance lesson right here. Okay. So imagine that. So yeah. So the preferred shareholders, they… I’m common. So they have preference over me to get the funds back.

John Warrillow:

To get their 500 grand back.

Ana Chaud:

Correct. Yes.

John Warrillow:

With the return or just their 500 grand back?

Ana Chaud:

Well, they get their $500,000 back for sure but if there was enough for a return, they’ll get the return because what happens is you pay all your debt holders first. So you have all your debts paid first. And then what’s left is then distributed to the unit holders. They get their amount, the common get their amount, and then everybody else shares whatever is left. So they get their first-

John Warrillow:

This is what you are describing as a waterfall. Right?

Ana Chaud:

Exactly. It’s a waterfall. And I learned how to dance on that one. That was like one of those things where as things are happening, you’re like, “Gosh, I knew nothing about this.” And it’s a total different perspective now but amazing lesson. Amazing lessons.

John Warrillow:

Okay. Let’s go through it. So you’ve got the convertible note holders who have loaned you some money to get from six stores to 10 stores.

Ana Chaud:

Correct.

John Warrillow:

And there’s a coupon or a percentage that they’re getting for their money that is something that they essentially don’t take but when the note converts, they then get their return.

Ana Chaud:

That’s correct. And the interest. Yes.

John Warrillow:

Yeah.

Ana Chaud:

Yes.

John Warrillow:

And they can roll that into equity.

Ana Chaud:

That’s correct. So they have a percentage interest and then when that accrues and then it becomes part of the total money and then when, yeah, exactly.

John Warrillow:

How much did you have in convertible notes?

Ana Chaud:

I had one point $1.1 million in convertible note.

John Warrillow:

Wow. So two and a half times that’s a big nut.

Ana Chaud:

Exactly.

John Warrillow:

Okay so two and a half, yeah.

Ana Chaud:

Yeah. But also remember there is an interest in piece to that convertible note, the 1.1 million, they funded store stores seven to 10 but they also had to fund the operational needs. Which most people don’t like. Because restaurants are an interesting industry. If you are an investor and you give me money, you want to see stores. Because you like to say, “Look at Garden Bar. Look at that. They have 10 stores. It’s great.” Investors just love to see stores.

Ana Chaud:

So it was a very tough thing for me to convince them that, hey, stores can not run on and on. I need to create supply chain. I have to have a commissary kitchen, I have to buy trucks, I have to buy refrigerated trucks, to get technology. There’s a lot of infrastructure expenses that is very hard to sell to an investor team. They don’t like to fund operations. So the convertible note holders were willing to help me fund operations. The equity holders were not so keen on that.

Ana Chaud:

So that’s a little bit of that. They come later in the game and they also come later in the fact that some note holders were funding me all the way through the end, meaning they’re taking more risk because as you going through their risk is higher. Sometimes there’s not an understanding. The equity holders feel like they’re entitled but it because they are the seed money, which I appreciate more than you know. And by the way, I love all my investors to death. And I’m so grateful for all of them. But they play like they’re like in the playground. No, I’m better than you. No, I’m better than you because I came in early. No, you came early. It’s like, “Okay, you guys play in a sandbox. I’m going to go run the company and we’ll talk later.” A little bit of that.

John Warrillow:

Yeah. So how did you sort all this out?

Ana Chaud:

A lot of negotiations. So again you have to think about the landscape of the company. You also have to think about we had nine locations, another one coming, we’re in Portland, Oregon, which is a little interesting because top line revenue in Portland is not the industry average in the country. So even though we were doing really well for our state, if you compare Portland, Oregon to California or New York or even Seattle, it’s usually 50% less. The reason I say that is because to give you perspective, I put the number 10 in my head as when I hit 10 stores, I was going to figure out a way to decide what to do for the next round of growth. And I decided that I wanted to get an amount of money to buy out my investors, because all my investors were in the angel category, I didn’t have really institutional investors.

Ana Chaud:

And so if you are in angel category, most people who are probably listening, know what that means. An angel investor comes in, they love your story, they trust you, they believe in you, they give you 50 grand. They don’t bother you. You go run the company and then I wanted to make them proud and I want everyone to get their money back. But then once you graduate from angel investing, then you go to maybe institutional money, then you go to private equity.

Ana Chaud:

And then with private equity money, what they do is they will infuse a lot more money, but they will also work with you to go from point A to point B. You’re not doing this alone. You’re not… So there’s a little bit of a different mentality. The reason I say that it’s because what I had in my head, when I hit 10 stores, I want to find either the private equity money or an acquisition to buy out my investors. So that was the trigger for me.

John Warrillow:

Did you have the rights to buy them out? Like how would that have worked? Did you have the rights to just turn around the unit holders and buy them out?

Ana Chaud:

Okay. So what I say buy them out I mean offer them an exit. So yeah. You always have the right to offer the investors an exit. Let’s say that I had gone to private equity and we decided that, “Okay, now we’re going to take this from 10 to 100.” Okay. And they come back, they would probably offer them an exit. And I would say, “Yes, you have the right to do that.” And they have the right to say no, but very rarely an angel is going to say, “No, I’m not going to take my money back.” Unless they want to buy back in which then could have been an option but there was not that option that we offered them.

John Warrillow:

Okay. Were the preferred note holders different than the unit holders? When the preferred note came due, I’m assuming that you would have had the option to pay their yield, pay the coupon and pay them out directly.

Ana Chaud:

Yes, I did. But that option I didn’t have the money to do it.

John Warrillow:

Yeah. So did you consider… So you had this acquisition offer from Evergreens, which it sounds like a similar company. Tell me a little bit about Evergreen.

Ana Chaud:

Yeah. So this is an interesting piece. So evergreens is a similar company. They started in Seattle by two incredible people that, no longer with the company, but that I love to death. And what happened is that, so they started in Seattle, same idea, same response, the city embraced. And at the point in time, when I was looking at my expansion growth our next step would be to go to a second market.

Ana Chaud:

And so we started contemplating going to Seattle because geographically we’re so close. They were doing the same actually. They were like, “Okay, well we want to go to a second market.” At the time we had very similar number of stores. They started growing faster but at the time that we were thinking about this, this was about 2017-ish. Actually one of the founders of Evergreens reached out to me via LinkedIn and said, “Hey, we hear that you guys are doing really well over there. We’re thinking about going down, you guys are coming up, do you want to chat?”

Ana Chaud:

So we started a conversation almost two years prior to the actual acquisition. And it was one of those, let’s get to know each other better. What are you doing? What are your values? What are your goals? We started to get to know each other a lot over the course of about two years. And we were always talking about what the possibilities would be for us to get together. And the reason for that John is because Portland is a small town still and we have a very limited amount of people here. So the idea was okay, Evergreens you come, we are going to lose going to lose market share. Because right now Garden Bar pretty much had the entire market share.

John Warrillow:

Yeah, the market.

Ana Chaud:

They would have cut me… Yeah. They would come in and take a little bit. But the honesty is that we were both not going to be able… We were not going to have enough density to make both chains successful. So we thought if we bring it together, now Evergreens, Garden Bar together we would be the fourth largest salad chain in the nation behind Sweetgreen and a few others and Chopt and so we thought this would be a much better way to put the Northwest and have a Northwest brand as opposed to for us trying to compete for customers that are just not here because we don’t have that.

Ana Chaud:

So I honestly felt that that would be a much better option for Garden Bar because also Evergreens, they were very highly capitalized, they were very well funded and honestly I thought, “Oh my goodness, for me to compete I would have to really go for a really high money for a private equity.” And so which I could have gone, but I felt, yeah-

John Warrillow:

So when you raised the first round to the unit holders, you used one times revenue as the sort of valuation metric. What was the valuation metric in your mind as you start to have these conversation with Evergreens? Are you still in the kind of one times revenue?

Ana Chaud:

Yeah. A little bit. Yes. Because it’s typical for what we do. Restaurants are typical that way. And honestly it’s a very, very hard industry. Especially now you probably hearing all the ones that are closing.

John Warrillow:

Yeah.

Ana Chaud:

It’s a tough one because it’s capital intensive, the amount of money you have to put in to build a restaurant is insane. But we had the brand which was very valuable and we created a lifestyle brand with what we did. When we thought about Garden Bar there was a lot that we did for… We invested very little in marketing. It was all community engagement and partnerships and creating unity with people who could promote our brand. So we had that brand, but still the one X is usually where we’re at when we go to restaurants. Yes.

John Warrillow:

And so what was your reaction when Evergreens made you an offer?

Ana Chaud:

Well, it wasn’t so much because I had to go and ask them to put the ring on my finger. So the way it worked is we’re dating, dating, dating, dating. I’m like, “Okay, when is this going to happen? This is going to happen.” When I decided that I was going to pursue the suitor because I thought, “Okay, I had two options, right? So I’m either going to get private equity money or I’m going to get a suitor to acquire us.” And I was going both sides and I was talking to private equity companies, Chicago, Los Angeles, San Francisco, different places. And I also was going to start pursuing a suitor.

Ana Chaud:

So what I did is I made a trip to Seattle and I met with those guys and I said, “Hey guys, this is what’s going to happen. I am going to start pursuing a suitor if you guys are real about this, you got to make an offer.” And so I did sign a few NDAs with different companies that I told them, I said I am talking to different companies and because they were coming here and they didn’t want to lose that opportunity, and also they didn’t want to come here and then face a national chain all of a sudden. So this was October and then they sent me an LOI sort of like maybe a few weeks later. And then by December 28th, we had signed the term sheet. So it was about a three months. Yeah.

John Warrillow:

What was your reaction to the LOI?

Ana Chaud:

I was happy to see it happen actually because it was in the making. I’m like, “Okay, we’re talking about this we’re going to do it.” And that’s when the fun starts because then you don’t know how to negotiate. I couldn’t negotiate in behalf of my investors. You can’t because I’m too much into this company and I wouldn’t be the best person to negotiate it. So when the LOI came, I had to work with other people to help me assess the deal and then start negotiating on behalf of the investors and the company and me and all that. But I was not the one who could do. I was always with them and we were discussing it. But when the negotiating started, I had to step aside and let one of the most amazing people help me with it.

Ana Chaud:

And he was one of our investors and they especially do M&As all the time. And I was very lucky because I was going to engage an M&A specialist to help me through this. But one of my investors they are amazing, brilliant. And this man, his name is Sam he helped me through the whole thing and he is unbelievably incredible. And he did the whole thing.

John Warrillow:

So Sam was a preferred shareholder or a [crosstalk 00:47:50]

Ana Chaud:

There were note holder.

John Warrillow:

How did you get comfortable with the idea that Sam was looking after your interest and not just looking after his interests. Because obviously he was conflicted, right? He wanted to get… As a preferred shareholder he wanted-

Ana Chaud:

As a note holder.

John Warrillow:

That’s right.

Ana Chaud:

Well, as a note holder because there was really not a lot of levels there it’s not like… He was trying to get what was the best option that we possibly could have. So we were not like… Well, first of all, we didn’t have a lot of cash. There was a lot of issues. There was a lot of reasons why I needed… So here was the thing I needed to get more funding. If I were not going to go through the acquisition, I was going to have to raise again. To help us with 10 store to help us with all the operations.

Ana Chaud:

So there were some limitations on how much we could have. What Sam was helping me negotiate were the terms of the purchase? When do we make the first payment, what’s the first payment going to look like? What are the terms later? How do we pay? So he did a fantastic job working with their board to get these terms negotiated. And then I had an attorney who was in the back end like working with me and helping me understand and helping me draft the documents and all that stuff that needs to happen.

John Warrillow:

Got it. So if I’m understanding this correctly there’s a few parallel negotiations going on. Tell me if I’m getting this right. But your negotiation you’re negotiating with Evergreens to maximize the value you can get and get the best possible terms. And at the same time you’re trying to negotiate with the note holders to reduce their expectations on the two and a half X on a liquidity event. You’re saying, “Come on guys. That’s going to wash out most of the proceeds.”

Ana Chaud:

Yes.

John Warrillow:

And what possible motivation would they have to play ball but in particular those note holders. Why would they be-

Ana Chaud:

Play ball.

John Warrillow:

Willing to yeah. What would be in it for them?

Ana Chaud:

Yeah, excellent question. So, first of all you’ve got it completely right. Here we’re, we are negotiating with the buyers but I had to personally negotiate with the investors to work with our note holders to take a lower return which they did there. Their motivation was a quick and early exit. Because a lot of investors are savvy enough to understand that staying longer in the game doesn’t mean a better return.

Ana Chaud:

And if now they’re listening to this and hopefully they will, they’re probably very grateful because after COVID, they’re like, “Yes, this was the best thing ever.” But their motivation to play ball is when you are an angel and you have the opportunity to recapture your funds with some return, then you can use that to the next one. First of all, a lot of them love this game of investing. It gives them some money to invest with someone else, it gives you this exit feel. So they don’t want to be there for the longterm. And a lot of them don’t think, “Oh, okay, well, hold on. If we stay another three years maybe you’re going to get more money later.”

Ana Chaud:

They are savvy enough to understand the restaurant world. And also just if you’re look in Portland alone not a lot of companies here. We had one company that got acquired, one hamburger chain that got acquired, but there’s not a lot in FMB world here in our area. So they know these things and they knew that this was the opportunity to get the deal done. So I basically said, and I had to be honest with them. I’m like, “I could take the deal. If the deal doesn’t happen, I don’t know what’s going to happen.” So the risk is higher. And they understood that… There’s another thing too. It’s important to understand that I stretched myself thin a lot and because I was so focused-

John Warrillow:

I’m getting that sense all-

Ana Chaud:

What’s that?

John Warrillow:

I’m getting that sense that you tend to stretch yourself.

Ana Chaud:

Yeah, I did not build a very large corporate team. It was me and another person, my beloved Nicole who was my left hand, right hand, my octopus. But the two of us did everything. And when you’re running a company with 150 employees and there’s two people in the cockpit it is insane. I was CEO, CFO, COO, and I was behind the line trying to help out with salads. So I didn’t do a good job creating the infrastructure for the c-suite because I was focused on creating the best team for the stores.

Ana Chaud:

So what happened was I was not… If I didn’t build the C-suite, if I didn’t have a real good COO next with me, I don’t know that we could go to that expansion that I was hoping for. And to get a great COO, I would have to be able to pay a lot of money. So I would have to raise money for that particular position. So my investors are very aware that I was doing it all by myself. And there was so much I was going to be able to on my own.

John Warrillow:

So the note holders who are these people who had the two and half times their money clause, if there was a liquidity event, they were motivated. And you said the downside was, “Look, you guys could take a lesser amount and kind of get out quickly. Or you could really cling to this clause and a couple of things might happen. One, I might go bankrupt. Two, I could get a private equity company to basically refinance the company. And then just basically pay you guys your preferred return or your note when the note matures. And you’re going to get a lot less or you can take a lesser than the two and a half times.”

Ana Chaud:

That’s correct.

John Warrillow:

Yeah.

Ana Chaud:

Another option-

John Warrillow:

Yeah. That’s the sort of conversation you were having?

Ana Chaud:

The conversation was exactly that. You can take less than two and a half or if I get a private, it’s exactly what you said. If I get a private equity invest in the company that is considered a liquidity event, you convert. And when they convert they would have get a fraction of what they were going to get at that multiple. So it wouldn’t make any sense for us to continue on and get somebody else to invest. So financially they were much better off accepting that multiple, because if we had to convert them, they would get a lot less than the original.

John Warrillow:

Got it. And were the note holders acting as one group? Did they have one representative that was essentially acting as the spokesperson or were you herding cats and trying to get all of them to kind of agree at the same time?

Ana Chaud:

No, no. We had two, what we called the lead one. So even though there are multiple there’s always one or two that put a lot more money. And these two, which Sam was one of them they sort of represented the group. And then they also took two of the group of the unit holders and they kind of had a little committee.

John Warrillow:

Interesting.

Ana Chaud:

That’s the best way to play nice with each other. So the committee of investors from both groups talked and discussed what will be the best way for them to divide the money.

John Warrillow:

Because the unit holders, these preferred shareholders, the first round, they had veto over accepting the deal. So they had the cards in their hand as well. So they weren’t going to accept a deal that paid out two and a half times for these guys who rule in the last minute.

Ana Chaud:

Yeah. They wouldn’t. They were not excited about approving a deal where those guys got two and a half and they didn’t. So they’re not[crosstalk 00:56:40]

John Warrillow:

Yeah, of course. Yeah. And so there was that negotiation. I’m curious to know, to what extent this was a dollars and cents negotiation, where it was simply just what’s the best way to get us the maximum return. Or if your personal equity, your relationship equity with either of the two shareholder groups, did that play a role? Were you able to say, “Hey, come on guys. I’ve been working at this for X number of years. I’ve put my life on the line. I need to get some return as well.” Like, did that relationship equity play a role or was it totally dollars and cents? You know what I’m asking?

Ana Chaud:

Yeah, totally. I understand. I wanted to tell you the truth because it’s not going to be a fun truth. I gave up everything for them. And that was because in my mind they provided me with the opportunity to build something that it was everything I always wanted to build. And I learned and I am talking to you and I am now helping others. That to me is priceless. And I created something really meaningful for this town. And so my first goal was to get everyone else paid first. Even if there was not going to be anything left for me. I was a hundred percent comfortable with that because also you have to remember, I had a lot of debt. The company had debt that I was personally guaranteeing aside from the leases we had one conventional loan of 300, we had credit cards, we had things that was all me and those guys were going to be all paid because there’s also debt holders.

Ana Chaud:

So all the debt load was going to be paid out. My credit score was going to go up because my credit score was so bad. I could not rent a house just to give you an idea how bad it was. Like, I got refused. I could not rent homes for two years. I got denied. It’s unbelievable that you can own a company and you have management companies deny you for renting houses, which I had to plead to owners. It’s a whole other story. But my point is I knew that I was going to go back to a beautiful credit score, which I have now, I have an incredible legacy that I’m leaving behind.

Ana Chaud:

So to answer your question, yes I put a lot of heart and soul on this but I loved every minute of it and I learned a lot from it and I got a lot from it. So financially I decided that I wanted to meet my investors whole first. And that was very important to me. I wouldn’t be able to sleep at night if I didn’t do that. So the way that the deal ended up getting structured is that we were going to get a chunk of money upfront at the closing and then an earn out after two years, which then would take care of everyone. I would get a payout later. So the first closing amount got distributed to all the investors the way I wanted it. But now we are trying to figure out what’s going to happen with COVID because there is no stores open. So the stores are now closed.

Ana Chaud:

So that’s an unfortunate piece and this has nothing to do with the deal. And it has nothing to do with them and it has nothing to do with me it has to do life. And unfortunately they had to close all the stores. And I don’t know if they’re going to reopen and unfortunately, I don’t even know if they’re going to come back. And so chances are we won’t get… I’m pretty sure we’ll probably won’t get there now. But it’s okay. I mean, it’s not okay it’s just one of those things where these things happen and I have to keep moving on and build the next thing.

Ana Chaud:

So I’m motivated to continue on in building the next thing, but things like that happen, they really do. And it was not in the cards. We were on target to get that earn out. The target for the earn out was really achievable. We actually negotiated a target [inaudible 01:01:22] back and forth so many times that when I agreed to the metrics for the earn out, I knew it was doable. It was almost like, of course, we’re going to get this right now. The stores were going to be great, they’re going to have operational efficiencies, we’re going to be fine, everything is great.

John Warrillow:

And to be clear when you say, we are going to get this earn out who was in line to get the proceeds of the earn out. Was it just you or were any of the original shareholder also be compensated?

Ana Chaud:

Yeah. Yeah. So the shareholders I’d say this. So the unit holders got a hundred percent of their money back, but no… Everybody got pretty much their money back. The note holders got just a scoach, maybe 95% of their earn out but they really didn’t lose a lot. And then the rest was all going to come in the earn out. So all the extras for everybody, all the return-

John Warrillow:

Including you.

Ana Chaud:

Including me. All the returns for the investors were going to come at the earn out. And everybody was comfortable with that because it was a year and… It was 2020 and we were going to get it into early 2021. But then we closed the store. The stores had to be made mandatorily closed. There was no way to continue with COVID. So it’s a bummer. It’s a real bummer. They’re still closed because we’re still not open here in Oregon. So, yeah a bummer.

John Warrillow:

Wow.

Ana Chaud:

Yeah. Right. I know.

John Warrillow:

You should write a book kid.

Ana Chaud:

Yeah. I know it’s a lot to take in, isn’t it? I’m like-

John Warrillow:

I need a drink.

Ana Chaud:

[crosstalk 01:03:16] and I’m like, “Oh my gosh. You look so tired. Am I exhausting you?” But you know-

John Warrillow:

What a story. So look if you were advising another entrepreneur who maybe had a business and they thought, ‘Okay, I’m going to raise some money.” What might you share with them? What experience might you do differently? What would you say you would do differently if you could go way back. Obviously you can’t control a pandemic but maybe there’s something you would do differently. What would you say that is?

Ana Chaud:

Well, I would definitely strategize the fundraising differently. Now that I understand what it does, how it works, what’s the timeframe to give it back, like what the angels are expecting, the different types of funding, things that I had no idea. I was learning every single thing as I was doing it. So one thing-

John Warrillow:

The 2.5 times liquidity preference that you had in the note holders, that was something you glossed over. Did your lawyer not point that out when you signed that or how did that happen that it was sort of a surprise to you when you got the Evergreens offer?

Ana Chaud:

I was working with a financial advisor at the time. There was a little bit of an issue there. And it is nothing but my fault and I’m not going to… Okay. So he ended up… It’s almost embarrassing, but what happened was he was a financial advisor and he decided to be an investor as well. But I trusted him with my heart. I really did. And when you’re doing everything alone and you have somebody, I’m very trustworthy and I think people have the best interest. When he worked on this note terms, my attorney at the time, which was not the same attorney that did the deal he tried to bring me in and advise me on that. And he said, “I feel like there is a conflict of interest here, and I need to point this out.”

Ana Chaud:

And I said, “No, he’s here. I trust him with my heart. And I know that he’s doing what’s best for me.” So this attorney felt really uncomfortable. And he was trying to advise me. And honestly, John I didn’t believe I thought, no. This man has absolutely the best interest at heart for me. Needless to say the relationship deteriorated a year and a half later and it was a terrible sort of a breakup, but at the time I believed and I trusted. So yes. Did I gloss over? Yes, because I had him help me write these and he did, he told me that was the right thing to do, but also in his defense, I guess he didn’t know there was going to be an acquisition before an equity event, because in his mind at the time we were going to pursue an equity event.

Ana Chaud:

So I don’t think it’s all his fault. I don’t think he was like there to get me because he’s not the one who also pursued the acquisition. I pursued the acquisition. I’m very big on taking ownership. And I own this mistake because when I was very conflicted with what our need to do, I was giving people the responsibilities that I should had. So one thing I would have done differently, absolutely I would have learned the terms of financing. And now I overcame that fear because I understand that people are so afraid of numbers. I know how some founders don’t want to know about financials and I’m always so shocked by it because I feel like if you don’t know how to read your numbers, you can’t run a company.

Ana Chaud:

I am a finance person so I understand and I’m comfortable with that but I did have a little bit of fear of the fundraising piece. And I had to overcome that. So now looking back, I would never resign or create a term sheet for potential investors without knowing every single possibility. But I’m going to mention something I mentioned earlier in the interview, which is what I would have done and what I would do and I would advise every entrepreneur to do is try to understand the timeline of the note holders.

Ana Chaud:

For example when is maturity, what are the terms and see how that syncs up with your plan of action to grow. Because you want to make sure those are lined up. Because let’s say that you know you need to raise some more money but this is going to convert, how do we do it? So we have to really put these two timelines together and see how the coincides or not and then create a good strategy. A good strategy is everything. Most entrepreneurs should know that. It’s some sort of like what’s the big picture plan and then how are we going to fund that big picture plan. So-

John Warrillow:

You mentioned the aligning the investment path with your[crosstalk 01:08:58]

Ana Chaud:

Yes.

John Warrillow:

I have to ask. What about those leases you personally signed in stores that or now closed? What happens to those?

Ana Chaud:

Well, so from the 10 leases I was able to get about six of them, I was able to get out of my personal guarantee. Four of them are still there. And I’m still negotiating. I’m talking to the buyers right now to find out what they’re going to be doing but there is a clause in our purchase agreement that indemnifies me. Like the deal if something happens they are going to take it. So there is some protection in there. Yeah, of course. I wouldn’t have done that but it’s still unsettling. It’s still unsettling and I know that every restaurant owner right now is trying to deal with that same issue.

Ana Chaud:

So we’ll see with COVID what the response is going to be but it’s unsettling. And I feel it’s very sad to see what’s happening to the food and beverage industry especially in our town because for Portland the restaurant world is very much of the soul of the city. It’s hard to see so many people just going on there right now. We don’t know what’s going to… We’re still not open, so I don’t know what’s going to happen. Yeah. So hopefully there’s going to be some resolution there, but I don’t have that. I don’t know what that is yet.

John Warrillow:

Yeah. Yeah. So many things seem so up in the air for so many people right now and-

Ana Chaud:

Oh, it’s hard. It’s very hard.

John Warrillow:

Ana, I’m so grateful for you sharing your story with so much humility. Where can people learn about you? What are you doing now? Where can people learn about what you’re up to now?

Ana Chaud:

Thank you. Yeah. So interesting because as I mentioned earlier in the interview I was a business consultant for 12 years in San Francisco before I moved to Portland. So after the acquisition I sort of like slipped back into that role again and I’ve been helping companies. But what I want to do and what I’m doing now, actually I started a company called 360 advisory. There’s a website that’s 360-advisory.com. And basically what we do is we work with early stage founders, people who… We have concept stage founders, people who are trying to get their companies off the ground, there are people who just started, are getting to market. And then we work with them until they grow to about two to three million. And then once they’re in two to three million then we take the training wheels off and then they can just go and find other companies.

Ana Chaud:

But the idea is to find the best way to fundraise if they need to be fundraised. Like sometimes there is this idea right now that everyone has to get investment. We don’t necessarily do that. Like you can try to find ways to bootstrap and not have to get investment. So I’m trying to work with everybody to find out what’s the best path forward to get your company, get to market and how to grow it to one or 2 million. And there’s also don’t understand that there are milestones in between. So before we get to the one or 2 million, how do we get from zero to 200? And then once we go from 200, then how do we get to the million? So designing plans and working on execution is what I’m doing. And I’m doing that in different ways.

Ana Chaud:

Of course I do one on one but I am much more inclined to work in peer group formats because it is a very good way of getting people to go forward by working with each other and learning from their peers. So that’s what we’ve been working on. And I’m actually working with two of my investors which is NISO, which is an incredible organization that I recommend people look up and also TA angels. And those are two groups that invested in Garden Bar and now I joined the board of those two groups and I’m working with their portfolio companies and their clients to help them forward. So it’s been a really amazing experience. Yeah.

John Warrillow:

And I’m assuming you’re on LinkedIn.

Ana Chaud:

I am on LinkedIn.

John Warrillow:

We’ll just let people know it’s Ana Chaud but it’s spelled a bit differently. It’s C-H-A-U-D.

Ana Chaud:

It’s hot in French by the way. It really is. I’m not kidding. I get that a lot. But it is like I always say, if you don’t know how to spell it, look at your Starbucks cup. It says hot in French just take that name, copy it, there you go. You got it.

John Warrillow:

Yeah. Okay. So LinkedIn, the website… I’m so grateful for you sharing some time Ana it was amazing.

Ana Chaud:

I appreciate the was amazing to have this conversation. Thank you. And thank you for letting me talk freely. I appreciate it very much.

John Warrillow:

Oh, my gosh. It was great. Thank you again.

Ana Chaud:

Thank you. Bye bye.

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