For the last 18 months, the RN&R has been gracious to allow me to write about unheralded business leaders, cutting-edge startups and “bleeding-edge” tech in Northern Nevada and Northern California. I’ve had the pleasure of sharing cool stories about businesses and their founders, including University of Nevada, Reno alumni, who contribute incredible talent, research and tech innovation to this incredible community.
This month’s column has none of that—well, almost none of that. It’s about the sweetest company I’ve ever profiled, founded by a really awesome (and sweet!) local husband/wife team whom I’ve gotten to know over the last several months. The company has a great story—and is on a journey that can offer other founders some valuable lessons.
Danielle and Andrew Fitzgerald are on their second entrepreneurial venture after many years of making custom jewelry for customers in Nevada and Washington. Tahoe Treats, founded in the basement of their Sparks home in 2021, makes freeze-dried cheesecake, ice cream and candies—including many flavors you grew up with, except exploded and crunchy from the 24-hour freeze-drying process, which extracts all of the moisture.
The production facility is in the Sparks industrial neighborhood near Greg Street. The lights are on late most nights, due to the unprecedented growth this team has experienced over the last 12 months. Their freeze-dried confections are flying off shelves in Scheels, Jacksons Food Stores (ExtraMile) and other stores around the West.
My favorite Tahoe Treats product takes me back to the original Lucky Charms, which had those awesome, crunchy marshmallows that floated to the top of my cereal bowl, where I could pick them out and eat them. Well, my friends, Tahoe Treats’ “Fruity Marshmallows,” in big silver and clear bags, will save you from having to feed the cereal to the dog when Mom leaves the breakfast nook.
Lest I digress, there is much more to this sweet story about the sweet couple, who built the sweet company, with sweet growth, sweet margins, sweet customers and a sweet team.
The Tahoe Treats crew is working their respective asses off trying to keep up with 100% growth over the last year and is maxing out on capacity. But the purchase orders keep flying in unabated, because customers love the mouthwatering snacks. Retailers can’t line up fast enough to get Tahoe Treats’ various confections. It sounds like a great problem to have, doesn’t it? I challenge my students at UNR’s College of Business every semester to tell me: “How can a growing business be profitable and struggle at the same time? Sounds crazy or impossible, doesn’t it?”
Actually, it happens all the time. Why? Well, partly because you are so busy feeding the beast that work seems endless—but the bigger stress and challenge is cash flow. Cash flow is the king when you have it, and the killer when you don’t. As the company experiences double-digit growth, especially in manufacturing, management is taking every dollar that comes in and putting it back into ops to keep the product flowing out for distribution and subsequent payment, thereby completing the sales cycle. However, distributors’ 30-day payments actually take 45 days—dohhh! Orders come in requiring rush status, but your production line is maxed. It can be maddening to founders, and a very tough predicament when you are still a small, risky startup.
In today’s environment, the complexities of launching a startup are compounded by the fact that the cost of money has been climbing significantly for two years or more now. Money has dried up for many sectors or has gotten too expensive, squeezing business margins to unsustainable levels. What can a founder do in this current era to raise money for a (non-AI) biz? It depends.
From a founder’s perspective, it’s all about “value.” Tahoe Treats has great momentum but can’t keep up, as they need to raise their capacity to at least 125% more output.
My buddy Chris Yount and I are mentoring Tahoe Treats to help them get on track for calculated and sustainable growth, without giving away the company to investors. Maybe we start by upping their capacity by 50% to incrementally increase production and keep the cash flowing through.
One of the financing areas we are exploring with them is “receivable financing.” They have gold in the overwhelming number of orders that won’t stop coming in. In this situation, if the distributors have great credit, the small startup can get funding, even if they don’t have great credit of their own. Companies will finance it, as purchase orders are legal contracts. “Factoring” is similar to receivable financing in that there are companies that will buy the PO and finance the purchase orders. The difference between the two is that in receivable financing, you service the PO and pay back the lender. In factoring, a lender actually purchases the PO at a discount and is then responsible to collect—so the cash-strapped business gets quick money and can flip the production to keep the cash flowing.
If a company is going to consider either receivable financing or factoring of the incoming POs, founders need to understand their gross margins. If they’re at 50% or better, the company should be able to absorb the short-term cost of capital, which may now cost 15-20% of the order, depending on which method you choose for funding the PO. You’ll likely pay more for the factoring entity to buy the note, as they then take the risk.
Another type of funding for average startup founders who don’t want to take equity partners (and don’t have wealthy in-laws) is to consider crowdfunding, but it’s important to understand all of the inherent nuances associated with the two-decade old practice. It’s much slower and has a bunch of rules to follow regarding the raising of funds and the commitment to all of the folks in the crowd who funded you. Some platforms require you raise all of the goal to receive the funds; others allow partial raises. The big secret to crowdfunding is that you need to bring your crowd to invest. The site won’t help unless the general crowd sees a ton of activity and decides to jump in. Read the rules, and get some legal advice regarding all of this—as I’m a serial founder and investor speaking from personal experience, not from a legal standpoint.
Tahoe Treats has been so focused on the operations that it’s been hard to get a handle on a strategy for the future. But now that’s changed. Stay tuned for the company’s explosive growth—because it’s coming now, and it’s going to be really sweet!
Great article! Hope you keep writing for them