An Open Letter to Munchery’s Investors:

By Lenore Estrada

The VC model incentivizes risky behavior at the expense of employees, vendors and the community.

January 28, 2019

Earlier today I went down to Menlo Park and left the letter below on the windshield of every car in the parking lot at 2884 Sand Hill Road (the headquarters of Menlo Ventures, among other venture capital firms). The building’s managers called the police and ran me off the property, and I’m pretty sure they removed all of my flyers before the partners came outside, but just in case anybody wants to read what I wrote to them, here it is!

Hello there,

My name is Lenore Estrada — I’m the owner of Three Babes Bakeshop in San Francisco. I’m leaving this note on your car in an attempt to reach the employees of Menlo Ventures. If you don’t work for Menlo Ventures, I’m sorry for bothering you. Feel free to stop reading now. Also, we deliver baked goods all over the Bay Area! Consider us, a local women and minority owned business, the next time you’d like to send a gift to your clients or business associates — you can find us online or at the Saturday Ferry Plaza Farmers Market in San Francisco. We ship our famous nut pies nationwide!

If you do work for Menlo Ventures, I’d love to speak with you about the nearly $50,000 your portfolio company Munchery owes to a number of small local businesses, including mine, and the irresponsible and unprofessional manner in which they handled their abrupt closure last week.

As you must already be aware, Munchery closed last week. As a previous customer of Munchery, I received the announcement at 4:55pm last Monday afternoon. I was a bit alarmed — we had a large order that was in the process of being made for delivery to them the following day. What’s more, they owed us $20,000.00, most of which was for an order we had delivered prior to Thanksgiving that remained unpaid. (By the way, I want you to know that I was a new mom and personally pulIed two all-nighters to bake, package, load up and deliver the pies from that order.) I was very surprised that we’d gotten no contact of any kind from Munchery by the next day — not to let us know they were closing, not to cancel their standing orders, and certainly not to give us a timeline on getting paid. Companies close down every day, but there’s a responsible way to do it. For example, when Sprig shut down, we received a thoughtful email from its founder and a check within a few days for the final balance we were owed. I want you to know that we still, a week later, have not gotten any kind of email from Munchery regarding their closure. I personally heard from CEO James Beriker but to my knowledge I’m the only vendor who received that courtesy, and I’m pretty sure it’s only because I was blasting him on Twitter every 20 minutes.

Last Tuesday I went down to Munchery to try and speak with someone to get any information at all about the company’s closure or when we (at that point I’d been contacted by four other vendors who hadn’t been paid, a list that’s continued to grow) could expect to be paid. I documented the visit on social media, which kicked off an Instagram story that has now become viral. As a result of my vocal admonition on Instagram I’ve heard from dozens of former customers, vendors, and employees in cities across the country who have been hurt financially by Munchery’s poor management and dishonest payment practices following their recapitalization a few years ago.

The question I keep returning to is: why didn’t Munchery shut down sooner? At one point the company did have enough money to pay their debts, and the money owed to us is months past due. (One vendor is owed invoices from last April.) Why didn’t Munchery close last year, when they still had enough money to pay their outstanding invoices, and why did they continue to rack up debts right up until the company ran of a cliff? To me, the reason seems clear — they and you were incentivized by a system that rewards you for waiting until the last possible moment to close. You get nothing if a portfolio company shuts down early, but if they grasp at straws, you have an infinitesimal chance of getting something. To you, that tiny hope is worth all the collateral damage to other people. But why should WE, hardworking small business people who delivered on our promises, have to absorb the cost of YOUR risk, when we don’t benefit from the upside if it miraculously works? We did not agree to your gamble — we agreed to a specific payment for honest work.

I am here today to ask the employees of Menlo Ventures whether you can in, good conscience, allow this behavior to continue uncorrected. I reached out to everyone at Menlo Ventures who is on LinkedIn last week asking if they could tell me which partner at the firm was responsible for overseeing Munchery, and in response received an incomplete sentence from Director of Communications and Marketing Tiffany Spencer, informing me that the partner who had led the deal had moved on. I assume that, as per standard practice, the deal stays with the firm and that there must be someone who filled the board seat. My follow up messages were not returned with any answers so who knows? I suppose it’s possible that the board seat your firm has at Munchery was completely abandoned and you are providing no oversight at all. If that is the case it is also shameful — your job is to provide oversight and guidance to your portfolio companies. You took management fees from the fund you raised to invest in Munchery. You took a board seat. Why aren’t you responsible for being good stewards of the business? We are asking that you write a check to cover the money Munchery owes to its vendors. It’s not a lot of money to you, but to us it’s missed rent payments, layoffs, and waiting another year to expand to offer benefits.

All of the foodmakers affected by Munchery’s closure are hardworking small business owners who really don’t have time to be chasing money like this. I myself have 19 employees to manage and am a new mom to a 4 month-old baby. I am missing my team meeting today to come here and flyer your parking lot. The time I’m taking to continue to ask for payment in person, on the phone, and on social media, continues to cost my business money. Still, it needs to be done, as we deserve to be paid for the product your portfolio company purchased, sold and used the money from but did not pay for.

If you’d like to discuss this further, you can reach me on my business line at 415.617.9774. Thanks so much and have a great Monday!

If you haven’t already seen it, I invite you to take a look at our chronicle of the ongoing saga on Instagram — check out the saved highlights entitled “Pay Up Munchery”, “Pay Up Munchery 2”, and “Pay Up Munchery 3", in that order at @threebabes.

Lenore Estrada

Co-founder and CEO, Three Babes Bakeshop