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Last Update: Saturday December 16, 2017

Key Idea: Take Dozens Of Investors

Chef Thomas Keller sought safety in numbers--many investors investing small amounts of money--to launch what has been called one of the best restaurants in the world. 

Key Question:

A: 

Yes.  No one is going to invest in you until you have demonstrated your personal commitment.  Thomas Keller emptied his bank account to buy a building for his restaurant in Napa Valley.  With the help of his attorney, a broke Thomas Keller put together a sophisticated financial package to raise more cash.

Q: Where did the money come from?

A:
First he borrowed money against his own credit cards. Second, he put his plan in writing in such detail that the attorney trusted Thomas to make what he had written about happen. Third, a bank was willing to finance the property and on top of that, the SBA backed an additional loan for operating funds. And fourth, he convinced 48 separate investors to join him on the the venture.

Q: Since most businesses are launched with less than $10,000 why did Thomas need four cash sources?

A: Mainly because he was buying real estate but also because his experience had taught him that a startup needs plenty of cash. In fact, there is usually never enough. In the first year, even with servicing all of the debt, he was able to eke out a $6 profit. Yes. Six dollars. That was a victory for Thomas and he took it as a sign that he would succeed in Yountville.

Q: Why so many investors?

A: This was intentional. Thomas told us he didn't want to take a large amount from any one person for two reasons. First, if he failed no one person would lose too much. And second, Thomas didn't want to have to coddle a single large investor. This is time consuming and draining. We think this is brilliant.

Q:
Do you have to use an attorney to help raise money from investors?

A: No, but if you take money from an investor, you should have an attorney structure the deal. Borrowing from family or getting a loan from a bank doesn't require you to have your own attorney, but if you do seek investors, use an attorney.

Q: Is Thomas Keller a salesman?

A: Yes and no. He said, "I wanted it so bad that I made it happen." This means that, even though he doesn't consider himself a salesman and he doesn't enjoy asking people for money, he did it anyway to make his dream come true. So, he had to be a salesman to achieve his goal.

Think about it

What could you do with a large injection of cash? Is it time to take on investors? Is it time to buy your own building?

Clip from: Money: All about Financing Your Business

Silicon Valley, New York City, Sydney and the World:   When you are just  starting, it is usually about your money, called MOM, an acronym for My Own Money. It is also called "skin in the game."  Very few of us have a track record and can write a business plan that is so compelling that we begin with Other People's Money (OPM).

If you are growing, there is an abundance of stagnant capital that may be looking just for you.  Qualified investors (and people who believe in you) are looking for ways to grow their money either as a loan or as an investment for equity. It will require an excellent business concept, a well-detailed business plan (your story), and real financial projections. They will also require that you understand your financials, even if they are quite modest. Those numbers are the organics of a business, the basic 1-2-3s.

Business is just a series of problem-solving exercises. That's its nature.  If you do not have the stomach for it, get a job. If you think money is going to be given to you just because you have a good idea, keep your job!

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French Laundry

Thomas Keller, Owner

6640 Washington Street
Yountville, CA 94599
707.944.2380

Visit our web site: http://www.frenchlaundry.com/

Office: 707.944.2380

Business Classification:
Restaurant

Year Founded:

Take Dozens Of Investors

Meet one of America' Finest Chefs
HATTIE: The famous American Chef, Thomas Keller, was flat broke when he found the location that is now his one-of-a-kind, white-tablecloth restaurant, The French Laundry. He pounded the pavement to find cash.

THOMAS KELLER: I said, `Listen, Bob, I really don't have any money. You know, I just started this olive oil company,' and, you know . . .

HATTIE: `Would you take a case of olive...'

THOMAS: `Would you do it on spec?' And he said, `Well, I won't do it on spec, but if you can raise $5,000 as a retainer, I'll do it.' So I said, `OK.' So I went out to all my credit card machines and started...

HATTIE: Oh, you mean ATMs? You went to the ATMs and got some cash?

THOMAS: ATMs and whatever, got some cash, and I gave him $5,000. And he did it all on spec. Now keep in mind also, once this process started, I needed to come up with money to...

HATTIE: Oh, my gosh.

THOMAS: I didn't even...

HATTIE: You haven't even started!

THOMAS: Right.

HATTIE: The $5,000's nothing!

THOMAS: I said, `I don't have any money, Don and Sally. But I'm gonna do this, really. Believe me.' And they had the confidence. They had the confidence that I was going to be able to pull it off. And I gave them $5,000.

HATTIE: From the ATM machines?

THOMAS: From the ATM machines, from my credit cards, yeah.

HATTIE: You spent this money and you still don't have any ownership yet.

THOMAS: Yeah. I still don't have any ownership. It was a big leap of faith for me. It was a big leap of faith for now the attorney. It was certainly a big leap of faith for the Schmidts, because they're going into a position where now they're gonna close their restaurant because they believe that I'm gonna buy it, and...

HATTIE: So they're going to lose opportunity.

THOMAS: They're going lose opportunity, they're going to lose revenues.

HATTIE: And you're going to cause them to lose that opportunity if you don't come through....

THOMAS: Yeah. But everybody believes that it's gonna happen. Nobody knows how long it's going to take, and nobody knew it was going to take 18 months. I mean, we had many dates where, you know, the deal....I was supposed to sign...

HATTIE: You missed them! You missed those dates!

THOMAS: And we'd come back to the Schmidts and say, `I'm close. This is happening, please...' bear with me and believe in me for another three months.' And Don and Sally said, `OK. You know, we'll believe in you.'

HATTIE: Do you think your failures, -- the one at 21 and then the one in Palm Beach, and then the one in New York -- did that teach you? Did that give you courage?

THOMAS: It gave me a lot of confidence, because I had been through it before. But I'd been through it with other people's money before, so that was a little easier. Fortunately, my attorney had a base group of people; he had done this for other restaurateurs. I started sending people to him. And, I sent him out to people that I had known -- Bob, Michael, my two initial contacts...

HATTIE: So the attorney went on your behalf.

THOMAS: The attorney went on my behalf. This was a few of his core group of people that he thought might invest in a restaurant: And I just started making cold calls to people. And I'd ask you...`Do you want to invest?' `No, I don't want to invest.' `Well, do you know somebody who would?' `Well, maybe this person,' and before you know it, you're talking to people that you don't even know. And you wake up in the morning, and you have a list of 10 people that you want to call, and sometimes I'd get through three of them.

Sometimes I would get through all 10 of them because it was a good day, and I had two people that wanted me to send them the prospectus. I'm not even--they're not even saying they want to invest, they're just saying, `OK, send me the document and let me take a look at it, and then call me back in...two or three weeks.''

HATTIE: Thomas, you're selling. You're selling.

THOMAS: I'm selling. Yeah.

HATTIE: You're not being a chef. You're not cooking, you're selling.

THOMAS: No. No. The bank gave us a real estate loan. The SBA gave us a business loan. And then the investors came up with the rest.

HATTIE: OK, so you have how many investors?

THOMAS: Forty-eight.

HATTIE: Forty-eight individual investors.

THOMAS: My philosophy there was to have a lot of investors investing a small amount of money. No one would lose a lot if the business went to failure, and no one could tell me what to do.

HATTIE: Growing your business is a very different story. Sometimes our visions of the future are bigger than our personal assets and our retained earnings. That's when some OPM, other people's money, has to come in.

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