What happened to Wingtip?

In March of 2022, Wingtip poured its last dram. Judging by most of the social media sentiment, it was a sad occasion for members and employees. It certainly was sad for me. I spent 15 years of my life —from November 2002 until March 2018— bootstrapping Wingtip, and did everything (and I mean everything) I could to keep it going until I couldn’t do it any longer. A lot of people have strong opinions about what went wrong, and who is to blame, and other than a couple communications to investors years ago, I have remained silent on the subject so as to give the business the best chance to survive. As I saw it, the last thing Wingtip needed was for even more drama to distract from its recovery. But now that it’s gone, if you’re interested in what really happened, it’s actually a really easy story to understand.

In the fall of 2014, I was up in the Club doing my thing when I was told I had to meet with some folks that were visiting from LA. They were working on a huge redevelopment project in downtown LA with a large retail component, and they were told they had to check out Wingtip. They were blown away. At this point, mind you, the Club is not even “done” — the Wine Cave is still old offices, the roof deck is years away, the company is almost break-even but not yet profitable. Still, they could tell it was special, and they wanted to bring it to their project. In fact, they wanted Wingtip to be a corner anchor of the project.

The expansion to LA could be a whole chapter of a book, but I’ll try to keep it brief: I was very reluctant initially, but the developer made an offer we couldn’t refuse. The Board was reluctant, but after visiting the site and meeting with the developer, they were supportive. Shareholders approved a capital raise for it (our Series C); our attorney recommended a convertible note. The main employees drove down to LA with me to see the site, and they were excited. Enough existing members were excited that we quickly raised around $1M at a $20M pre-money valuation. At the time, I owned around 35% of the company.

The Letter of Intent (LOI) between us and the developer was signed in March 2015, and they wanted us —and other retailers in the project— open in time for holiday 2015, which would mean November-ish. Eight months to sign a lease, design a space, and build it out is an EXTREMELY aggressive timeline, but given the terms we were offered, we wanted to be a good partner. We/I hired a full-time architect who was previously the Director of Architecture for Diane von Furstenberg since we not only had the LA project, but we still had plenty to do in San Francisco. We hired our first ever full-time CFO. We brought on a General Manager for San Francisco so that I could focus on fundraising, designing the LA space, and the opening. We upgraded our eCommerce and POS infrastructure, quadrupling our yearly spend to prepare for two locations and growth. We also hired a couple extra folks to ramp up our eCommerce presence. And we engaged with our agency on a number of design and branding projects that were long overdue. In all, between April of 2015 and December 2015, the company spent about $1M preparing for the LA expansion.

And then LA fell apart. The developer had badly mismanaged the project which involved renovating a hotel, a 30+ floor office tower, and a whole bunch of retail space. Worse, our lease had not been signed. After the LOI, we received lease documents relatively quickly, and we had gone through three rounds of revisions between our lawyers and theirs. Things started to slow down a bit in late May, and my wife and I went on a “babymoon” to Portugal in June 2015. It was there that I received an email from the head of Retail for the project, our main champion, letting me know that he had been let go and that I needed to sign a lease ASAP. The developer brought his son in to run the project (in retrospect, a bigger red flag than I realized at the time), and he assured me —in multiple emails!— that everything was still on track. So we stayed the course. Finally, by September, with zero progress on the lease since May, I literally drove down to LA from SF to meet with the developer in person and was basically told the project was in trouble, they no longer wanted to give us the corner space we had spent the last 5 months designing, but maybe we could take this other spot that they had a hard time finding when we walked there. I cried most of the drive home.

They brought in a consultant to see if there was a way to make it work, but at the same time, they were questioning our viability that was only in question because of investments we had made to open in their project!!! By January, it became clear that it wasn’t gonna happen, and the CFO and I prepared a presentation to the Board explaining the dire situation we were in. We lost a couple months exploring a long-term debt offering from a big investor, and ended up having to raise some emergency equity just to keep the doors open. Since the Series C was a convertible note, we converted it at a $4M valuation (down from $20M) to attract just $400K in equity which was my red line for the minimum we would need to try to make a go of it. My 30% stake was crammed down to 16%, but more importantly, it was basically worthless, and it was going to be a LONG time before it would be worth anything again. Had I spent 15 years paying myself handsomely, perhaps it wouldn’t have stung so much, but I had done the opposite; I paid myself the bare minimum I needed to survive believing that my equity would someday be my big payday.

We laid some employees off that was really hard. The CFO voluntarily resigned to help us preserve cash. We pivoted the entire company’s business model, as member dues were no longer converted to credit in the store. We sold off most of whatever retail inventory we had and converted almost the entire store to shop-in-shops. We had to lay off a few more employees to finally approach break-even in 2017, but we still had a $1M+ hole in the balance sheet, primarily made up of back rent to our SF landlord, but also included vendor payables, legal fees, and taxes.

Everything that happened after early 2016 was in the service of trying to keep the business going, and buying time for a miracle. I had a couple members who specialized in investing in distressed companies, and their crystal clear advice was to bankrupt it. For me, that was not an option. We had the luxury of a really patient and understanding landlord, and vendors that wanted to see us succeed. Every single day from January 2016 until I left in March 2018 was a knife fight, trying to keep the doors open. People be like, “I can’t believe you didn’t pay all your taxes,” or “I can’t believe you let back rent pile up like that.” There. Literally. Was. Not. Enough. Money. To. Pay. All. The. Bills. It was whack-a-mole: the landlord would demand a sum to try to catch up, and the only way to do it was to not pay sales tax for a couple months. Get three months behind with the State Board of Equalization and they will revoke your liquor license, so the only way to catch up on the back taxes is to not pay something else (sometimes rent). Some form of this dilemma was every single day for over 2 years. Three of us would take turns going into our bank branch on Fridays to beg them not to return paychecks since Monday’s deposits would always cover them. At one point, I broke down to one of my former Board members about thoughts of suicide.

The toll on my mental health was such that in the fall of 2017, I sent a long email (and most of you know my penchant for long emails) to the Board at the time begging for help. Help me raise equity, help me raise debt, but the status quo was not sustainable for me. The Board member that did respond told me I should sell the business to him and some friends for pennies on the dollar, and we needed to do it ASAP so that they could start with a strong holiday season. So I had that going for me.

Six months later, I resigned as CEO voluntarily after behavior by one of my Board members that caused our attorney to recommend I remove him from the Board. I wish I had listened. Within a week, he was demanding I resign from the Board as well, something I did not expect, but reluctantly did so I could move on. The corporate attorney also recommended I appoint two of the Board members, as was my right per the governing documents, but I didn’t want to add to the drama so I chose not to. I wish I had listened. I left the company I had spent 15 years of my life building with no goodbyes. Not to employees, not to members, not to investors. Some reached out, most didn’t. I thought it best to leave as quietly as possible in the hopes that Wingtip could be salvaged.

Did I make plenty of mistakes? Of course! This menswear store/social club concept was brand new; we were charting a new course. I started the company when I was 24, and I had certainly never run a company before. I received lots of praise for “bootstrapping” and bought into its nobility when, in reality, it would have been much better to raise more money and have a cash cushion rather than spending every day hand-to-mouth. At its best, bootstrapping enforced some discipline, but it also forced some corner-cutting and a lot of stress that just wasn’t helpful. But I had been building the company for 14 years by the time LA came along, and had managed to grow the company to $10M in revenue and 60+ employees by 2015, mostly through grit, good luck, and good people (employees, members, and investors). As I wrote to all of the investors a couple years ago, I take full responsibility for driving the company into the ditch. It was not a decision I made unilaterally, but ultimately it was mine. I should not have invested a cent into the LA project until we had a lease signed. I was trying to be a good partner to a much larger firm that was making a huge investment in our business, and unfortunately my good faith was not reciprocated. LA was the mortal wound, and anyone that would imply otherwise just doesn’t know what they’re talking about.

I’ve left out a lot of details here because I assume most people don’t care that much about every little thing that happened. Maybe I’ll write about it all someday, but not today.