Yes, this is another post about Intrepid Life

In this instalment, I do something vaguely resembling “journalism” by actually discussing the situation with somebody privy to some details.

I know, right?

Before I get to that, here’s where the campaign and cafe stand publicly now:

  • Intrepid Life’s indiegogo campaign succeeded. They (and “they” I assume means the owner, Matt Victoriano) raised $28,643 USD.
  • After meeting the goal early, the campaign only raised $417 in its final three days. I’m guessing the announcement they were moving damped some of the enthusiasm.
  • Intrepid Life is, presently, closed. They vacated their Parrish St. location as scheduled this past weekend.
  • There are a couple of updates on the indiegogo campaign detailing future plans. Victoriano now intends to hire three managers and an event coordinator; I don’t know whether this is backfilling staff lost due to the shutdown or whether these are new positions.
  • Also from the updates, Victoriano wants to get backer perks fulfilled in “a month or so”

What follows includes information from that anonymous source (and no, I definitely can’t tell you who they are, even if you ask really nicely):

  • Intrepid Life’s financial struggles weren’t sudden, and the business was simply not ramping up fast enough to pay its rent. Quite the contrary – they were actually going further in debt.
  • The lease apparently allowed the Cafe to start off with a lower rent during its launch phase and ramp up to the full amount over time. The cafe was never able to pay the full rent from its operating budget.
  • This came to a head in August, as Victoriano learned that he needed to make a payment or vacate in September. In response, he posted to Facebook that he was closing. He quickly changed his mind and started the Indiegogo campaign to keep Intrepid Life “in Durham”
  • At the time he started the Indiegogo campaign, Victoriano knew that continuing to remain in the Parrish St. location would require him to pay back rent.
  • Even though the Indiegogo campaign succeeded, Victoriano opted to not pay and closed the shop instead. He posted to Facebook stating “The problem with downtown Durham is that it has Chapel Hill prices now.”
  • Victoriano is now attempting to negotiate an agreement to partially pay the back rent utilizing some of the indiegogo funds, while retaining the remainder for other purposes.

I asked my source whether they thought Intrepid Life’s crowdfunding success could have enabled the cafe to continue operating in its present location. Here was their response:

In theory the funds would have cleared their back rent debt and left them a bit remaining. I read in the N&O that they were running at a $12.5K / month loss during the summer which was a complete shock. So… I can’t square that circle on how the business could continue to operate at that loss without additional external capital in the $50-80K range. Can you? In the N&O article Matt also alluded to credit card and supplier debt, so…

So, now I’ll tell you my own speculation: I feel like Victoriano knew from the start of the campaign that he probably wouldn’t stay downtown even with a successful campaign. It appears that nothing materially changed about the rent situation since the beginning of the campaign, so he would have had a good understanding of what was needed to remain at the location from the start. Perhaps other debts came due around the same time, but if the money was required to pay off other, non-rent debts he should have known that going in, too.

As I mentioned last time, the campaign text walks a fine line of implying that the cafe could stay open on Parrish St. without ever stating that outright, and likewise the campaign never mentioned the possibility of moving at all. Victoriano could have disclosed the possibility that he would close the cafe even with a successful campaign, but he opted not to.

Since a majority of that crowdfunded money isn’t going to the back rent, where is it going? If that N&O article is correct, it only covers two months of operating losses for a business that had been open for 8 months, so there could be a great deal of outstanding debt.

I’m inclined to conclude that Intrepid Life does not presently have a functional business plan. Victoriano may well intend to reopen elsewhere and continue operating the business as before, but based on what I’ve learned it seems unlikely to me that he has a way to do that. If the cafe is to succeed, it really seems like they’re going to need more funds from somewhere, or perhaps a very different approach to running the business.

*** EDIT ***

The News and Observer has an article on the situation with additional information which supports what I was told. From that article, this was Victoriano’s response when asked why he opted not to pay the rent:

“It would be unethical to pay debt with the money that people paid with the full expectation that I would not be able to remain open,” Victoriano said.

The article also names Golden Belt as one of two locations that Victoriano is considering for re-opening the shop.

Read more here: http://www.newsobserver.com/2014/09/11/4143059_owner-of-durhams-intrepid-cafe.html?rh=1#storylink=cpy

2 thoughts on “Yes, this is another post about Intrepid Life”

  1. How about actually discussing the situation with the owner? If you tried and couldn’t get in touch, report that, too.

    I’m holding out optimism that Victoriano will make this whole mess as right as possible in the end.

    To me, this whole situation shows the value of a realistic business plan, including exit strategies if things go wrong, as well as the value of people who can honestly vet (no pun intended) such a plan before making loans. The building owners who loaned money and structured their agreements with Victoriano likely didn’t properly consider the plan and are now out some significant money. However, small community banks, which are ever rarer, and others that would make loans to small businesses, are over conservative and wouldn’t have seriously considered the positives in the business plan. That leaves crowdsourcing funding approaches to the fill the gaps, which are more designed around appealing to the feelings of donors instead of dollars and cents. Or Sense.

    Until now, Durham has had good luck with crowd-funding. Cocoa Cinnamon, Art of the Cool, doing well with their funds, and others seeing problems during the campaigns. This is the first high-profile problem and I hope supports and small businesses alike can learn from it. What we all will learn will definitely depend on Victoriano’s response ….

    1. I’m not planning to make a habit of actual “independent research” beyond what falls into my lap – not enough hours in the day, and this hobby is arguably chewing through too many of them as is. In this case somebody came to me and volunteered some details; ideally I’d rather the comment section does that for me, but I don’t look a gift horse in the mouth.

      I agree that it would be nice to hear what Victoriano has to say about his present situation, and I suspect the H-S and others will probably follow up with him.

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