The Entrepreneur

After working in the natural foods industry for several years, Pete Truby had an idea for a niche product he hadn’t yet come across: salted chocolate. He thought up the idea on a 2009 camping trip in Utah while snacking on a combination of dark chocolate and trail mix, and returned to his Carroll County, Md.-home to whip up his first batch.

“I thought I had a unique enough idea. It seemed simple, appealable enough to have its own following,” Truby said.

He had a taste of working for a startup in the cutthroat-competitive beverage industry, having spent time working at Bethesda-based Honest Tea, and was able to apply his experience to the also highly competitive chocolate industry.

The Pitch

(Courtesy of Salazon)


“Salazon Chocolate Co. produces and markets a line of four organic dark chocolate bars. Our specialty is salted chocolate, and we considers Salazon (Spanish for ‘salted’) the world’s first salted-chocolate-based brand. Our chocolate bars are now sold in nearly 500 natural and gourmet retail stores from the East Coast out to Texas and Colorado.

“This business is growing 100 percent to 150 percent year over year and the cash flow is having difficulty keeping up with the growth. So far, we’ve haven’t taken on sophisticated investors and I’ve bootstrapped to finance operations, along with help from a handful of friends of family.

“With our sales cycle, we spend a lot of cash upfront to produce the chocolate bars, then sell them to distributors. The cash trickles back in with those sales, making this business a bit cash-flow tricky. In addition to production costs, with a new product and a new brand, it’s important to do some marketing like offering tastings and discounts, but that cuts into the cash flow. That’s OK if you’re growing slow, but if you want to grow fast, it becomes an issue.

“Salazon is in a great place with opportunity to expand across the county. In order to do this, we would likely need to find one or two angel investors and look to raise up to $300,000. However, multiple people in the industry have advised against this and suggest the alternative of bootstrapping for a few more years and grow slowly and organically while not giving up too much control and interest in the company. But I am still concerned about protecting Salazon’s niche. What should we do?

The Feedback

Asher Epstein, managing director, Dingman Center for Entrepreneurship

“It’s great to see how fast you’ve grown. Now you’re hitting one of the biggest challenges for entrepreneurs: Funding the investment years to get to the harvest years. There are the standard options — raise money, self-finance or bank financing. Going the bank route won’t work in your case, because with a food business, you don’t have collateral assets.

“Really what you need is short-term, upfront financing for a product investment cycle. Because of your short-term needs, you could structure an investment with angel investors as a loan rather than an equity raise. The question is how much money do you need? If you just need the production cash, you might be able to do a 90- to 120-day loan cycle and investors might like that.

“For a traditional equity investment, angel investors look to invest in deals where they clearly see an event that will get them a return. Your challenge is how to tell a compelling story people will want to invest in, especially when you’re competing against companies like tech startups for angel investment dollars. The good thing is, a lot of angel investors like to work out deals, so the loan option might be really attractive to them. If it seems relatively low-risk, they will be interested. You’re already doing great on sales and growth, so you have a lot of credibility and you’ve removed the proof-of-concept and execution risk that could make investors leery.

“You’ve been doing all the right things — you need to keep doing them. But in entrepreneurship, no one will ever believe in you and your idea as much as you believe in it. It will be a challenge to convince investors.”

The Reaction


“I do like the idea of the loan — it’s something easy that can help with my cash flow and it’s an option I hadn’t considered. It would be great to get additional funding beyond the production costs, though. If I had an angel who was interested in the brand to put forth some money, that could help pay for the marketing I need. I will work on the loan idea, but also work to tell a more compelling financial story that will bring in some angel financing down the road. Thanks!”