Kickstarter Success! And some thoughts about preparing for a KS…

And we made it!  It’s a bit surreal that we hit our goal since we were still just over halfway there going into last weekend, but thanks to all our supporters, a few angel high reward investors, and a great push from all our friends/family, we were able to make our goal!  Wooohaaaa!!!!!!!

With the $8800 target, we hit $9733 in the end, and after Kickstarter took their 5% share and Amazon Payments took their 3.19% (up to 5% depending on types of pledges you get), we ended  up with $8935, before taxes.  From what I understand with discussions with my accountant though, is that while this is technically considered income, we balance against the capital equipment we will need to purchase for the business, depreciated over multiple years.  And since LLCs have to pay quarterly taxes, it means we plan to do some shopping this quarter!  What will we do with the extra?  We’re likely to upgrade our trailer to make the height adjustable and more ergonomic so that we don’t have to bend over/crouch down to look into the oven and watch to ensure the pies don’t  burn.

A percentage geek and out of just plain old curiosity for potentially future Kickstarter planning, I did a percentage calculation to see where our funding came from (in dollars) broken down into three tiers:  Close friends and family, friends/acquaintances, complete strangers.

Family/Close Friends 57.90%
Friends/Acquaintances 28.72%
Complete Strangers 13.39%

In terms of funding came from (just source wise, not dollars), we had the following stats:

Family/Close Friends 21.15%
Friends/Acquaintances 43.27%
Complete Strangers  35.58%

While this our first Kickstarter, and we’re a very local concept (really, not much point in someone from LA or NY investing unless they like our concept and want to support us, since they won’t be able to eat pies unless they’re visiting!), we were just happy to hit our goal!  Since the beginning of pushing out the Kickstarter, I’ve always looked at the stats with some mixed feelings… the idea of crowd source funding is not only to help get funds to start the business, but also to get the word out to strangers and folks you don’t normally have access to and build a fanbase around the business as well.  Since a good chunk of the funding came from close friends and family, the mixed emotions comes from the 10% cut that KS and Amazon takes from their pledges… I’m a firm believer in cutting out the middle man whenever possible, especially with family.  The question we always received from close friends/family was whether we would prefer to get the support outside of Kickstarter or in it, since KS/Amazon payments takes up to 10% of funds.  While we continued to be low, I consistently told everyone to contribute through KS, for two reasons:

1. It will help us reach our goal and get access to the funds overall.

2.  It legitimizes the process of us pursuing the business, and looks far better than us going to our family and friends holding out our money and just asking for monetary support.

The key is the 2nd reason really… Even in family/friends situations, it’s typically far better to legitimize the fact we’re pursuing a business through KS and demonstrates that we’ve taken the time to set up a KS, plan our business, etc. rather than asking for money and having them doubt whether you’ll actually use the money for intended purposes.  KS was definitely the way to go… a 10% loss, but a small price to pay to maintain trust and sanity with those relationships.

I’d by lying to you if I told you that things have been crazy hectic since then… ever since we were within $1500 of the kickstarter, things were starting to get crazy as I started to sign up for food manager safety training classes, putting in the order for the oven and trailer, and finding food liability insurance.  To be honest, we had discussed the “what if you’re close” situation around Kickstarter funds and at what level we’d want to fund the rest just to have access to the capital.  After all, with the pledges that came in, a good percentage of them we would likely not be able to access again if the Kickstarter failed and we decided to do this without the process.  I firmly believe a lot of KS projects have this approach, based especially on how so many projects end with just over 100% funding (the overage is likely backers who waited for the last minute to pledge).  In fact, I wondered sometimes if KS would end up funding some of the projects just to improve their own financial situation… take our project as an example: if we were at $8600 with one hour to go, I would imagine the owners of KS would think about chipping in the $200.  From an economic standpoint, the success of our project would allow KS to earn $440 (5% of $8800), so what’s $200 when you get make $240 of net profit?  Interesting right?

Finally, after our successful funding, I had received a few messages from folks who just kicked off their own KS asking about tips on being successful.  Here’s my thoughts:  there are two types of projects on KS, those that are “feel good” charity style projects that people want to fund out of the kindness of their hearts, and “product” style projects where people want to fund for various reason – to be one of the first to have the item being produced or to have access to a great discount (think Groupon) through the KS.  Our project, while focused on using local ingredients and focused on sustainability, fell more squarely in the 2nd category for most people.  This meant that we needed to provide a good value for those folks that weren’t going to fund us just out of the kindness of their hearts.  Perhaps one of the first lessons I learned from researching hundreds of successful vs. unsuccessful kickstarters is that while the KS community is great, just like any person, they want to get a deal on whatever you’re offering since their reward is delayed compared to a typical consumer and the risk is far higher.  (What if you never succeed with your KS?  You technically have no obligation to fulfill rewards… but could face individual lawsuits from pledges).  Unless you’re a charity/feel good project that just tugs on the heart strings of everyone, you’ll need to create a tier of rewards that appropriately gives your pledges a deal that appeals to their sense of value.  At it’s simplest, if I plan to charge $7 for a margherita pie at market, no one from the value perspective is going to want to pledge $8 to help us start our business… they can just wait for the success (or failure) of the market and buy the pie for $7!  This impacts the decision of all the “complete strangers” category above, and likely around 50% of the “friends/acquaintances” category as well.  Moral of the story:  If you want your KS to succeed, plan your reward tiers carefully.

So while our KS success isn’t a flagship for success, here’s the few lessons I’d suggest you consider if you decide to go the KS route:

1.  Figure out your minimum that you need for your goal/operations, and plan in a 10% take from Amazon/KS.

2.  Unless your project is impactful on a nationwide perspective (a product that can be shipped and has mass appeal), expect a large percentage of the funding to come from your close friends/family.

3.  Be okay with funding coming from close friends/family through KS.  It shows that you’re really pursuing the project, as opposed to just asking for a handout.

4.  Plan your “what if” situations in advance, especially around at what point you may just want to ask your spouse or partner(s) to pony up the rest and cover the gap for the close of KS.  Assuming you made the decision from a financially sound standpoint, stick to the decision and don’t waiver, and be sure to wait until the last day to close the gap if appropriate.

5.  Really think out your project and decide which category it may fall into… and then plan your reward tiers appropriately.  Bad tier rewards = no support from your average joe on KS, and can easily be the cause of your failed project on KS.

Alright, time to go plant some grass in our front yard, get a workout in to stay sane, and make some pies for lunch.  And in other exciting news, the oven is scheduled to arrive in separate pieces on Tuesday!  It’s like Xmas in spring!  (Except it was literally snowing in the Midwest last Friday still!)  I can’t wait to start curing this bad boy… pics to follow!



Setting up an LLC in Illinois… and Tandoori Chicken Pie tests.

One of the biggest challenges that you learn early on is that in order to venture into your own business, there’s a lot of paperwork to fill out.  If you’re flush with money already, you always have the option of hiring someone to figure out all the paperwork, and just sign off on where you signature needs to be.  For the rest of us just starting out with our first business and not wanting to be wasteful with our funding, you’ll have to learn just what paperwork needs to be filled out.  While there’s something enjoyable about the success of being able to complete the work, there tends to be hours of frustration trying to figure out which form you need, where it needs to go, etc.  This post will help you get started with the LLC work you’ll need to be familiar with in starting your journey of opening your own business.

Why set up a business?  Because it offers you a level of protection.  While the option to set up as a sole proprietorship is tempting, especially with the low cost and low amount of paperwork, by doing so, you have not separated your personal assets from your business assets.  Sounds simple, but it has high repercussions when you run into trouble, namely if you’re sued or go bankrupt or default on loans, this which are somewhat uncontrollable in the business climate.  By setting up an LLC or S-Corp, you basically have added a layer to your personal assets so that others cannot get at them as easily.  It’s still possible, unfortunately, but it’s definitely more difficult.  And from the horror stories I’ve heard about from small business owners, you want to set up as much protection for your personal assets as possible… You never know what may happen and who may want to sue, so do yourself a favor and do the paperwork.

First and foremost, you’ll want to figure out whether you want to be an LLC or S-corp.  While there are many modifications of this (LLC partnership, S-Corp, C-Corp, etc.), these two are the most commonly used for start ups.  I won’t go into the details here, but Mashables has a fairly decent explanation of consideration here.  After a week of reviewing with lawyers, accountants, and with each other, we decided that an LLC made the most sense for us right now.  From here, it’s time to begin setting up the business… now’s a good time to note that every state has slightly different rules/policies/costs associated with opening your own business, so I”ll be focusing on the Illinois LLC process from here on out.  If you’re looking for info around another state, Google is your best friend and your worst enemy at the same time, as usual.  Just make sure you look up multiple links and articles so that you get a full picture in whatever state you’re in.

Step 1:  Pick a name!  The first rule is that the name of your new business must have “limited liability company” or “LLC” or “L.L.C” in it.  Also, the name of your LLC needs to already not be taken.  Check this website to do a corporation/LLC name search around name ideas, and see what companies may sound similar to what you have in mind as well.  If you find a name you like, you can reserve the name for up to 30 days for $300.  This cost can be completely avoided if you don’t need to reserve the name, and just go to the next step and file incorporation papers.

Step 2:  File Articles of Incorporation!  This is where you fill in the information of the names of the business, who are the owners/managers, name of the LLC (note, you’ll be rejected if you didn’t check the existence of the name as suggested in the first step!)  The form you need is form LLC 5.5 at the time I’m writing this.  Since we didn’t hire anyone to do paperwork for us, the registering agent is you, as well as the owner.  Perhaps the only part that’s not completely clear in terms of what you should fill in is the free text field for “purpose of the LLC”.  You could definitely write the purpose of your company along the lines of “to serve great food in Chicago” or “to raise money for 3rd world countries” etc.  In actuality, the standard language is: “The purpose for which the company is organized is for the transaction of any and all lawful business for which limited liability companies may be organized.”  You may add a little specificity if you’d like but don’t really want to get so specific that you’ll lock yourself out from doing certain business either.  You’ll also need to state if you’re filing for a series LLC or not.  A series LLC basically allows you to form multiple LLCs that have separate assets protected in separate areas.  For instance, if you open three restaurants and set them up as a series LLC, a customer who is bent on suing can only go after the one restaurant they were at, and not all three.  The pain is that you’ll have to keep separate assets for each restaurant as well (revenue, expenses, payroll, etc.) but think of it as minimizing your risk by diversifying.  Each part of your LLC is insulated and protected from the other portions.

Articles of incorporation cost $500 to file via paper (which can take a LONG time) or $600 via online (24 hour approval stated, 2 hr turn around was my experience).  It’s $750 for a series with $50 for each additional series LLC, and prolly $100 more for the online convenience.  You can file on line here.

And you’re done!  Mostly anyways… at this point, you just have to wait for the response from Illinois to appoint your LLC.  A key thing to remember is that as an LLC, you need to file a annual report each year ($250) which is due on the first day of the month your LLC was formed.  I haven’t done it yet, but next year, I’ll be visiting this page to better understand what needs to be done.    If you’re late, it’s a $300 penalty to file (unsure if that’s in addition to the $250 or not).  If you don’t file, they can shut down your LLC.

Congratulations on your LLC!  It’s the first step of many that we’ll go through in order to get your business up and running in Illinois.  Next time, we’ll talk about how to set up your FEIN and notify the state that you’re planning to business.  (Yes, I know, confusing… one would think the LLC would’ve done that!)

Before we go, a new test pie that I worked on just this morning based on some suggestions of Za Pi fans:

Tandoori Chicken Pie Test

Tandoori Chicken Pie Test

On the whole pie: Tandoori chicken (soaked overnight in yogurt/masala seasoning, cooked in oven briefly), sliced red onions, and diced orange peppers

On left side of pie: Mango chutney base
On right side of pie: Tandoori paste base
On top of pie: Fresh mozz
On bottom of pie: Cubed paneer (to test for melting and flavor)

Overall impressions – Mango chutney base is sweet and tasty! Tandoori paste is overly salty, I may have added too much. I made a cilantro yogurt to finish on top of the tandoori paste side, and it definitely helps. Mozz melds the food together well, while the paneer doesn’t even begin to melt at 550 degree oven under broiler. Will have to test on a WFO at 900+ degrees to see if it melts any better.

What do YOU think Za Pi fans? Any thoughts on what would be great on an Indian based pie? Looking to hear your thoughts!

Partnership – Is it for you? And Chinese Sausage Pie…

Even though this blog’s primary focus is making great pies, part of the blog is also focused on the challenges of starting your own business in the Chicagoland market.  So today, I’d like talk a bit on the idea of business partnerships.

The idea of pursuing your own dream is not only exciting, but can also be a scary thing.  Not only is there the monetary aspect of investment, but also the idea you’ll be fully responsible for the success or failure of your dream in many ways.  While your gung-ho entrepreneur may never admit to the fear aspect, I firmly believe there’s always some nagging gnawing feeling in the pit of your stomach that gives you pause/doubt. (I personally imagine it to be kind of like that implanted Alien egg that pops out of the guy’s stomach in Space Balls and starts singing “Helly My Baby”).

One of the ways we help ease our fears in starting the venture is to seek partners who will share not only in the risk, but also the work associated with making the venture successful. But as everyone in the world will tell you, mixing business and friendship (or family for that matter) can result in the destruction of those relationships.  So how does one go about pursuing the business without losing those relationships?  I’ve always firmly believed that it’s the same as any relationship you have: clear expectations.

Whenever you begin a partnership, it’s rare that your partners will commit to the same amount of work as you will whether it’s logistical reasons, interest in the process, or personal drive.  At extreme levels, they may work far faster and harder than you and spend 80+ hours a week on the business or they may do the bare minimum to get by with 1 hour a week.  Ultimately, there is no such thing as a perfectly equal partnership, and if you attempt to provide each individual within your new business equal stake, someone will likely start to develop feelings of discord and resentment.  This is why it’s important to establish those expectation as soon as possible from all partners, along with an identified list of roles, responsibilities, and duties that each partner will be responsible for so that you can hold each other accountable (that includes yourself!)

When Za Pi first started, we believed erroneously that it could be an even split of 33.33% ownership across Gambit, Aku, and myself, which definitely caused some feelings of discontent on my part as we progressed in the project.  It’s a feeling that I’m not comfortable with, as I never like internalizing feelings of unhappiness/disappointment with friends.  How does one separate business and friendship?  You really can’t… as much as you’d like, your interactions aren’t fully separable, and I would argue that they shouldn’t be.  You’ve selected some of your friends to join you because in your mind, you firmly believe that there will be a joy in working together on something to move towards success.  Something that will benefit the friendship and each of you individually.

Luckily, in our most recent conversation, we’ve clarified the work in terms of delegating responsibilities in our pre-kickstarter process as well as when we go live at the farmers markets, which has also helped define how our ownership shares should be distributed amongst the team.  While each of us has committed the same amount of money for investment, anyone that’s started a business can tell that the work required to succeed in business isn’t just about the money (unless you have one individual who is looking to serve as the primary investor and fund the majority of all needs).  The challenge is finding the right balance of ownership for those who are investing more and/or doing more work so that everyone is happy with their roles and ownership.  One would think that this is trivial at the start of any business, but it’s an important detail to be worked out earlier rather than later.  After all, what if the business succeed beyond your wildest dreams and there’s big money at stake?  I’m guessing the conversation gets much more heated when significant money is at stake (think Facebook fallout).  Similarly, if the project crashes and burns, it’s important to know who bears the risk.  Ultimately, I’m just glad that we’ve been able to negotiate amongst ourselves and come to a comfortable consensus  along with clear lines of responsibility.  Don’t forget, if you’re creating a multi-partner LLC, your bank will want a similar description that defines roles and responsibilities for each of your partners.

My advice to you: it’s never too early to start identifying roles/responsibilities in your business venture, and it’s important to revisit them whenever the situation changes.  The honesty between partnerships is paramount in keeping your relationships clear of resentment, and making the partnership work.

And now, a new pie in testing:  Chinese sausage pie!  For those of you who never have had Chinese sausage before, it’s a tasty/fatty cured meat, very similar to salami in concept, but much smaller and sweeter in taste.  I’m not entirely sure what the curing process entails (something to look up later), but there is a definite sweetness that brings back great childhood memories for me.


You’ll see that it has a familiar curl from the oven that pepperoni gives, and the shimmer of delicious flavorful fat that has been rendered out at a high temperature bake which melds nicely with the tomato sauce.  Unfortunately, we need some additional ingredients to help round out the flavor more, as while the sausage is good, the sweetness is a bit much.

Any one with ideas on what may help balance out this favorite ingredient of mine?