CHAPTER 2: April 2016 • The Multi-Million Dollar Deal Destroyed
It was just another Sunday Funday in LA as I woke up to the glorious view out the glass wall of my waterfront apartment overlooking Marina Del Rey and the Santa Monica Mountains. The sea lions were barking and a pair of dolphins swam peacefully down the channel while the boaters get ready to set sail. Our neighbors were all walking their dogs down on the promenade and we'd go up to our rooftop patio to snap a quick panoramic photo of the gorgeous view to post on Facebook. Life couldn't get any better than this and I wasn't about to take it for granted.
Scott and I headed down to the lobby to get a cup of coffee, riding the elevator with a famous Lakers Player who lived on our floor. We ran into a half dozen friends on the walk, stoping to chat with two people about the crazy night before. We started our usual talks at the fire pit, mine with Ideal Oats entrepreneur, Chris Chiarella, while Scott and Dillon mapped out the afternoon for the trip out on Alec's yacht. After getting through thirty minutes of neighborly chat, we headed out for our mile long walk down to Venice Beach and grabbed breakfast at The Terrace Cafe, our local hang out with Mauro and his famous Bloody Mary special. On our walk back to The Seaside, we stopped by the Farmer's Market to grab some chips for the BBQ party at the pool. It was Jimmy Lopez's Birthday and we all needed to bring something besides liquor to the community table.
I’m riding high on glory. A week earlier my business partner, James Lindon, and I received a fashion merchandising deal for 12 Midnight but the terms in the contract started to concern me. We were liable for $1 Million if we failed to deliver, but the deal with the venture capitalist was that we needed to prove the concept first. They needed to know that a fashion line for Michael Lauren could sell, so we had to test the market with a pre-order. If it sold they would invest about $3 Million for an equity stake in Modern Material. James and I were really excited. We had been inseparable after months of hard work. We did it!
12 Midnight has 40 Million Fans but the investors and our business team didn't know if we can sell the Minimum Order Quantity of 500 units per style. It was too risky for them to invest money into our business until we had a sales record. I was getting increasingly annoyed by their ignorance and lack of confidence in what James and I created. It wasn't his job to do the numbers but my retail merchant didn't know what to work with.
Our advisor, Jackie, told us to estimate 3,000 units of a $50 item. That's only $150,000 in gross sales so after cost of goods and a profit split, we were looking at paying $37,000 to a band with 40 Million fans. A company would likely pay an influential celebrity like Michael Lauren at least $500,000 for a brand endorsement deal and they would expect to generate no less than $5,000,000. The numbers just weren't adding up and I was getting angry.
James and I had worked so hard to get there. We had so much fun building the concept around the lyrics that define our lives, but the fashion business is brutal. 12 Midnight's business and legal team wanted to have a call with us to discuss our economics, so I began preparing for the call. Jackie refused to help me with the vendor pricing and Profit & Loss projections so we could answer the questions presented to us in our contract. She told me not to worry about it because a band like 12 Midnight didn't need more money, they were just doing this as a favor to James and I should be proud that I impressed a band of that caliber.
I was insulted. I was there to do business, not get a gold star on my art project. We were there to make millions and my business advisors had no interest in working on numbers. What kind of business was I getting myself into?
That night I sent James an email letting him know how upset I was that nobody on our team was helping us with numbers. He and I were creative people and we were often arguing about money and business responsibilities. I couldn't go into this deal without some money but our team was telling us we hadn't proven ourselves yet. Are you kidding me? With his connections and my experience, we could have ruled the world. I was in awe of him and I just kept pushing for bigger things that I wasn't capable of doing without him.
I have a tendency to be very sarcastic. It comes across as passive aggressive, especially in email when my tone can't be interpreted. I felt like nobody believed in us. That he and I were just in our own little dream world where money didn't matter to anyone else involved. Maybe James and I cared more about the music and the meaning of Modern Material but venture capitalists and multi-million dollar recording artists care about the bottom line. I felt like our team was getting out of line.
I woke up excited for our phone call and began my 30 minute commute through Santa Monica to Jame's house when my phone wrang.
"I'm not sure why you think everything is falling apart and nobody believes in you," James said.
"Because nobody is helping us get money. I don't understand all of this financial stuff and I don't want to miss out on this deal because we don't have money to deliver. I know you believe in me but we can't build this by ourselves. " I said clearly upset and hung up the phone.
I walked into Jame's house and could tell he was clearly upset but didn't want to keep talking about it. Jackie arrived a few minutes later.
"I will handle all negotiations. Just follow my lead," she said as she made the call.
"We would like to know how you see your business economics working. How many units do you project selling? What are the cost of goods and profit margin?" The band's lawyer asked.
"Can you provide us with some statistics? What are your sales numbers like for your online business compared to your tour business?" I asked.
Jackie glared at me, putting her finger to her lips. "Shhhh," and shook her head. Opps, I spoke up in negotiations on my own fashion company.
"We don't know what to expect. This is just a test. Since it's a pre-order we will just see what sells and manufacture to the order. We'll split the profit 50/50," she replied to them.
The call wrapped up pretty quickly. The team seemed excited about our concept and we all understood it was a test without high expectations of profit.
"We'll work on a contract on our end and get back to you," The lawyer said.
After the call James and Jackie were really happy about how it went. Me, not so much.
"Where’s the money coming from to order the fabric and trim from China and ship it on a boat, which can take 90 days? We need that here before the LA manufacturer can produce to the orders," I said.
"Aimee, you're getting ahead of yourself. We don't even have a deal yet," Jackie said.
"It sounds like they all are in agreement that they will make a deal with us. It might be on their terms, and they might take a larger cut, but that's fine," I replied.
"So you should be happy. We can all celebrate and get started next week," Jackie said. I knew she and James were leaving town for the weekend but I still had things to do to keep the business moving.
"I still need to know what I'm supposed to do next. Who’s paying for our web store and marketing assets? We need that built in addition to all the product sampling and materials before we can even think of launching a pre-order," I was getting overwhelmed thinking about what was coming around the corner.
“Sometimes I only have three weeks to deliver to a client. You need to breathe,” she said as she stuck her finger on my forehead and told me to relax. I wanted to take her arm and twist it away from me.
“Are you kidding me? Do you know what we are responsible for? What happens if we only prepare for 3,000 units, like you advise, and we sell 20,000 units? “ I explained.
“That’s a good problem to have. Likely we will sell more units. Your work is great. You should be happy,” Jackie tried to encourage me, her tone sounding a little condescending. My blood was starting to boil and my body was beginning to shake.
“No, that's not a good problem to have. We need to plan with the vendors. Get proper pricing and timelines established. If we run out of materials it's at least another 90 days to reorder and ship from China, then 30 days to manufacture in the LA garment district. We can’t take money from the customer until we are ready to press GO in the United States. What if there is a strike, or god forbid a trade war and we can't get our supplies into the country to be manufactured? It could take 6 months to deliver when the customers already paid us,” I said highly irritated and out of breath, my anxiety level going through the roof.
“Stop being a cry baby. You’re being melodramatic,” Jackie said.
I wanted to scream. James just sat there watching it go down. I’d told him a week earlier that I didn’t think she was qualified to run a fashion company. She seemed to have no knowledge in overseas manufacturing or retail fashion merchandising sales. She only knew how to buy a crappy t-shirt and mark it up to an outrageous price on tour.
No Material Girl would ever be caught dead wearing a junky t-shirt with Madonna’s photo. They want to look like Madonna just like I did when I wore my fashion line to her concert in Cleveland. I had on a tutu, bustier, fingerless gloves, and layers of necklaces and bracelets. I charged hundreds of dollars for my handmade merchandise and barely have an audience, but 20,000 people were walking into the Quicken Loans arena and are only being offered expensive crap? I wanted something to Cherish but I left Like A Virgin. If 4 girls can leave a Madonna concert empty handed and angry there is nothing worthy of spending their money on, that is a multi-million dollar problem. Then I asked myself when the last time was that I bought a tour t-shirt. I'd seen more than 200 concerts and hadn't bought a t-shirt since I followed the Smashing Pumpkins around in the 90's.
The Limited Brands Girl in me saw a multi-billion dollar market gap and I was salivating when I saw how much influence James had in the music industry. I was ready to build a fashion empire and he seemed to care less about the money if we weren’t selling something authentic, pure and from the heart. I just couldn't understand why nobody saw the potential.
If Jackie thought we should only project 3,000 units for a band with 40 million fans, what were we supposed to project for a band with 40,000? 4 units? Why was I wasting my time trying to teach Kindergarten kids how to do math?
“Do you want an Oscar for all your hard work?” Jackie fires back with a sly little smile as she stood up to leave. “I’m done with this melodrama.”
Ohhhhh no you didn't! I wanted to jump across the table and tackle her to the ground, pull her hair and slap her in the face. That's how angry I was about my business being treated like a Yoga retreat.
She reported to me, but I gave James 50% of the company so I needed his approval before I could fire her. The deal was I could make decisions pertaining to the fashion business and he the music business, but who got to settle the debate if both sides of the business were equally concerned? I bit my tongue and glared, waiting to have a conversation with him and handle it professionally. It took every ounce of my energy to remain calm.
The day before James and I had a volatile conversation. I wanted to start doing costume design for pop star Kasey Parker after we had a stellar meeting with her management team. The more press we could drum up for Modern Material, and make me a legitimate fashion designer instead of a corporate drone, the better. He wanted nothing to do with it. Jackie and our other business advisors, Logan and Mary, said no investor would give us money until we had signed deals with major artists and have a proof of concept to show revenue. It made no sense. Anything these artists touch made millions, why were we being asked to prove they could sell a small run of high end fashion?
James stood up and said, "Aimee, I'm done with this drama. This isn't fun anymore. If Jackie's out, I'm out."
My jaw just dropped. "But wait, how is this my fault? We have work to do and we need money to get it done," I said as I was shaking at the idea he was being dead serious.
He said he needed to leave and we all walked out of his house unsure of what just happened. I got on the phone as soon as I got in my car. He wouldn't answer so I drove home. I was angry, scared and confused. What did I do wrong? I tried calling Scott but there was no answer. He was on his way to Cleveland for work.
When I got home Scott started texting me, asking what was going on. James was texting him, asking for advice. He wanted to know how to keep me from alienating the team, saying I was in a negative swirl and he was afraid Modern Material was about to collapse.
Scott responds, "Please don't back out. Aimee's passion is strong and comes across a certain way to those who truly don't know her. I'm not sure if it is related, but she talked to me last night, while crying, that she feels nobody but her believes in what you all of you are doing. She has been working on this for a decade and you were the missing piece. I know she doesn't like being talked to in an undermining way."
"Honestly, Jackie's comments were taken out of context. Did Aimee say that Jackie started with massive praise and adulation? I'm thinking this isn't going to work," James replied.
"Yes, she said it started out good. I didn't have a lengthy conversation. I think it can work between you and Aimee. Jackie and Aimee would need to have a sit down. Mutual respect would be needed. Aimee needs to respect Jackie as well," Scott replied.
"Well then I will let them figure it out and they can let me know when the coast is clear ;)" James replied.
"But you are 100% out if Jackie is not involved?" Scott replied.
"I already let Aimee know I've got a very busy week and honestly don't have the energy for the kind of interpersonal drama we've had this week. Yes, I'm out if that's the case," James replied.
"Understood. Why can't women be like men...just punch each other once and move on. Do you think Jackie would acknowledge she said some things she shouldn't have?" Scott replied.
"Well I was sitting there. I think Jackie was trying to startle Aimee into snapping out of this negative swirl. It didn't seem unwarranted or shocking to me in the context of the conversation. The bottom line is Aimee left her two key players completely unmotivated to lift another finger for MM, " James closed out his final statement.
While James was chatting with Scott, I was chatting with his cousin Alexis. What was going on? How did he just turn on me over night? Why did he shift his loyalty to Jackie instead of me? It's not her business and this kind of behavior would never be acceptable in corporate. We worked so hard to get there. Our only fights were over where the money was coming from and the investor was willing to give us $3 Million if we signed the deals and made it happen.
One week later the deal arrived on letterhead. 15 pages under their terms and a $1 Million liability if we failed to meet the deliverables. Most notably we had 60 days to make sure the pre-orders were delivered to customers. There went that crowdfunded business model Jackie assured everyone we could handle.
Meanwhile back at The Seaside life was a party. Everything was great. We were starting to get tipsy, 50 of our closest neighbors laughing and having fun in the sun in Sunday. I stepped out to take a call from my dad. He was extremely upset about his current work situation in Texas and began accusing me of changing. I was too "LA" now. My life was just about posting pictures of my Mercedes and parties on boats on Instagram. He said he was disappointed in me.