In early January I got an email from my old boss Steve. “Just wanted to say Happy New Year, and I miss you.” Really? I thought to myself. You miss me after you’ve screwed me, you son of a bitch.
We exchanged pleasantries for a minute. He made it clear he wasn’t willing to commit any of his company’s money to Serious Eats. Then the yelling started. Fine, I admit that I started it. “You all f**ked me big time. And you know it.” He replied, “I don’t know it because I don’t think we did. But if you think that, fine. What do you want to do going forward? Just tell me what you want to do.”
“I want all of you out of Serious Eats. Now. That’s what I want.” I have to admit that I shocked myself as well as Steve when I spat those words at him. It was completely out of character for me, and it most assuredly was not part of some grand strategic plan. When I’d made the date, I really was just hoping to come away with some much-needed operating capital.
Steve yelled back, “Fine, Ed, you got it!” I tossed my napkin on the table and walked out. I think I got my point across. And he had to pay the check. I walked back to the office enraged and disappointed by what had just transpired. Steve had not redeemed himself, and he wasn’t going to help solve our cash-flow problems. A few days later a mutual friend, an entertainment lawyer we both trusted, negotiated a settlement. If I paid Steve and Bill the consulting fees they claimed I owed them, and paid Steve for all the back rent, they would relinquish their equity in Serious Eats.
For less than $100,000 I was getting back their 15 percent equity interest in Serious Eats, which of course would exacerbate our cash-flow problems. I consulted with Mike before signing the deal. He said, “That’s a big chunk of the cash you have on hand, especially considering your cash flow problems, but I think it’s worth it, especially considering how much momentum you and Adam and Alaina and Meg are building. Those three seem to be really smart and know what they’re doing.” Being smart and knowing what you’re doing were the two highest compliments Mike could pay someone.
Mike gave his blessing to this not-so-little financial maneuver with the following kicker: “And I am recommending this as someone who has been telling you to carefully consider every dollar that goes out of the Serious Eats bank account.” (Mike would question even the smallest items on our expense ledger, like desk lamps and copy paper. “Can’t you use recycled paper for that stuff?”) Then Mike issued the clincher: “You probably noticed that I had my issues with those guys at NNN.” “Issues” was a Mike euphemism for lack of respect.
In February we had to go out for operating capital again. In fact, I can’t remember a moment in Serious Eats history when I wasn’t trying to raise money. Our presentation then started with “Serious Eats: Fresh, Hot, Delicious Food Content Served Daily.” It went on, “The goal of Serious Eats is to be the home base for eaters on the web.” How were we going to do that? With a combination of original video and text and photo content, aggregated and carefully curated links to other great stuff we found on the web, and a passionate, discerning, and welcoming environment.
Our growth pitch paragraph: “To broaden our reach beyond our sites, we’ve established a content syndication relationship with Yahoo!, which places our original content in front of a larger segment of the web. And this is only the beginning. We are also in negotiations with ABCNews.com, AOL, and the New York Times to introduce new audiences to our content.” Note the “we are also in negotiations” line.
Those negotiations, which sometimes consisted of a single email exchange or a series of unfruitful meetings, invariably ended in failure or, worse yet, ended in an agreement that generated nothing for Serious Eats. Everybody wanted in at Serious Eats, but nobody wanted to pay an entrance fee. As the late Albert King sang, “Everybody wants to go to heaven, but nobody wants to die.”
Yet my pitches always ended with the same optimistic, naive take on the Serious Eats business. “We are seeking to raise $1 million to grow the business over the next eighteen months. At that point we anticipate being cash-flow positive and do not expect to raise further funding.” Ah, the lies we tell ourselves.
Going into a constantly evolving business segment like digital publishing with insufficient capital is a recipe for constant agita and probable failure. We were a soufflé ready to fall. When you’ve never raised money for a business before, you don’t understand how much money you need, much less how to raise it. I also didn’t understand how fast you burn through capital when something doesn’t go according to plan. And I didn’t understand that I needed to plan for the plans going awry.
Our pitch for money generated negligible results. One prominent billionaire VC Meg knew kept nodding off during our presentation. His chief lieutenant explained that he’d gotten home very late from a ski trip in Vail the night before. Meg and I flew out to San Francisco to try to tap some of her contacts in the venture community. We came back with nothing but a few worthless pats on the back. “You guys are doing great stuff, but I don’t think you’re far enough along for us to invest” was the refrain.
In the spring of 2007 friends-and-family money continued to dribble in. Steve Trost’s eighty-five-year-old father-in-law, Harold Snyder (now deceased), who’d built a very successful generic drug manufacturing business from the ground up, liked to invest in passion-based startups. After a crudo-filled dinner at the now-defunct Onera with Harold, Beryl, and Steve, I had my first octogenarian investor (he invested $100,000). Eventually Beryl also invested in Serious Eats. The Snyder-Trost family turned out to be incredibly supportive and helpful. Howard, an old college friend whom I’d barely seen since we had both moved to New York after graduation, had become a senior partner at one of the nation’s largest investment banks. After much cajoling he reluctantly agreed to invest $100,000. Marc Lasry invested another $150,000.
A tip I learned the hard way: raising money in small increments for a startup is not advisable because it forces you to be in constant moneyraising mode. I never went more than a month without having to raise capital. Everybody tells you that it takes the same amount of time and energy to raise $1 million as it does to raise $100,000. I found out that it also takes the same amount of time and energy to be turned down for amounts large and small.
The last bit of money came in that spring from my best and closest friend, Bob Rosen. Bob was incredibly smart but unpretentious, steadfastly loyal, and one of the most generously spirited people you could ever meet. He was also a die-hard Mets fan, just like Steve Trost.
Bob quickly became my most trusted confidant. And he knew my brother Mike and the entire backstory of our relationship, so he was someone I could and did turn to on an almost daily basis for emotional and psychological support and business advice. Bob was always up for a food adventure on a moment’s notice. He likes food well enough, but mostly he liked and believed in me at all times.
I called him up, feeling incredibly discouraged after another day of unsuccessful dialing for dollars. “Man, raising money is really hard.” Bob, who knew the ins and outs of the Serious Eats business as well as or better than me, said, “You know, I’ve been talking to Marcia [his wife], and we want to invest in Serious Eats. We can put in $50K. It won’t get you all the money you need, but it will help.”
I was overwhelmed by this show of support because, unlike all the other investors, Bob really didn’t have this money to lose. This was money that he had earmarked for their retirement. “I don’t know, man,” I said. “I would be really upset if I lost your money.” He said, “It’s all right. I think you have something here, so I think it will turn out to be a profitable investment for us.”
I really didn’t want to take Bob’s money, but I had no choice. Friends and family might get you the cheapest money, with low interest rates and the fewest strings attached. But the strings were attached to my heart.
This dynamic played out many times moving forward. I went to friends and family for money because I had no choice, and every ask was accompanied by two huge side orders of guilt and pressure. Institutional money may be more expensive, but it’s not personal. Of course, I’m talking theoretically here. I was never able to raise one dollar of institutional money for Serious Eats.
In the midst of the endless pitches for money, plaudits continued to roll in. One morning when I arrived at the office, Alaina practically shouted at me (an unusual occurrence because Alaina never yelled), “Ed, wait until you see this. We won a 2007 Editors’ Award for Online Excellence from the Morning News!” At that time, the Morning News was one of the most popular and influential aggregator blogs.
And the hits just kept coming. Traffic was going up, and plaudits were coming in left and right. But the money wasn’t following. Critical acclaim and love were once again not enough. It was just like after New York Eats was published in 1992.
All those great nicknames given to me back then by big-name journalists at the New York Times—the “Nabob of Nosh” (Robert Lipsyte); the “Homer of Rugelach” (Florence Fabricant); the “Missionary of the Delicious” (Ruth Reichl)—didn’t amount to squat. Fifteen years later, only the names, nicknames, and dates had changed, with the same sorry results. I clearly hadn’t learned my lesson. I was being tripped up again by the same things that had tripped me up in my old-media days. Nicknames and plaudits are good for the soul, but not necessarily for the bottom line.
By this time the American Express campaign was long since over. Its agency, Digitas, had, as many digital ad agencies are wont to do, moved on to the new, next “big thing.” Our ad sales numbers were running pitifully short of our admittedly rosy projections. With the business hemorrhaging money, I would dread my monthly visit to Mike’s to show him the numbers. I would cram for these visits like I was studying for a final in college, to no avail. “If you don’t know the numbers, they will kill you. You won’t even recognize the problems you have to solve. Eventually you will run out of money, and when you run out of money, you lose control of your business.” I was running out of money. By December of 2007 there was less than $50,000 in the Serious Eats bank account. That was exactly one month’s operating capital. The rule of thumb for startups is you’re always supposed to have a minimum of three months’ operating capital in the bank. I knew from looking at our accounts receivable that the coming winter months would not improve our situation. I started thinking about salary cuts in the new year for everybody else, and a salary furlough for me.
Here was the kicker. Steve Trost’s $100,000 promissory note was coming due. I got an email from him alerting me to that fact. If Steve called in his note, that would be the end of Serious Eats. And it would be the end of Bob’s money and Mike’s money and every other Serious Eats investor’s money, for that matter.
With all these disastrous numbers rattling around my brain, I had to pay my monthly visit to my brother to go over the Serious Eats financials. It was the day before Christmas Eve. I hoped he would be in a holiday mood. Alaina had gamely agreed to be our bookkeeper, even though bookkeeping was not in her skill set. She would even occasionally come on these monthly forays to show Mike the numbers, but I decided to spare her the discomfort this time around. Mike was my brother, not hers. Plus, to prepare for this particular meeting, hoping to avoid the usual bloodbath, I had sought the help of an actual accountant. Not enough help, as it turned out. When your numbers suck, your numbers suck, and the best accountant in the world can’t save you from that fact.
Mike ripped into me, his usually controlled voice so loud I think the Whole Foods shoppers on the first floor of his building must have covered their ears. We argued about what the numbers showed. It wasn’t much of an argument. Mike was winning it from the moment I walked in his door. He lectured, “If you really understood these numbers you’re showing me, you’d know just how f**ked you are. And because you really don’t know them, you won’t be able to diagnose your problems, much less solve them. I’ve been telling you the same thing for months.” He was right, of course. Deep down I did know how dire the numbers were. I just couldn’t admit it to Mike. But that didn’t stop me from leaving enraged. “Happy holidays to you too,” I said over my shoulder as I left his apartment. I arrived home in a heap, and Mike, perhaps thinking he had gone too far with his tough-love approach, kept calling to continue the conversation. I didn’t call him back until the next day.
In the meantime I emailed Alaina with the subject line “the bludgeoning at my brother’s.” “Hi Alaina, I thought I might spare you the bloody details of my meeting with my brother until after Christmas, but then I figure you might get annoyed if I didn’t tell you. It didn’t go well. To get this numbers stuff right I am going to need the AP [accounts payable], Receivables and Cash Position numbers every day. We are going to compute our cash flow numbers weekly. AND IT’S UP TO ME TO DEAL WITH THOSE NUMBERS.”
When I did take Mike’s phone call, I was still so upset my voice was quivering when I started to speak. Mike, perhaps realizing that he had pushed a little too far, said consolingly, “This shit is hard, Ed. But you will figure it out.” God, I hope he’s right, I said to myself as I hung up the phone.