Over the next year, I watched Jessica build Vitality Collective. They raised a seed round, $2 million from angel investors and a small VC firm. They hired 12 employees. They launched their first products.
The company looked impressive from the outside. Beautiful branding, active social media, press coverage in TechCrunch.
But I saw the numbers. Their customer acquisition cost was $180. Average order value was $95. They were losing money on every customer.
“How’s the company doing?” I asked at dinner one night.
“Amazing. We’re growing fast. Tripled our revenue last quarter.”
“What’s the revenue?”
“$85,000 last quarter, up from $28,000.”
That meant they’d made $85,000 in revenue while spending probably $500,000 plus on payroll, inventory, and marketing.
“What’s your burn rate?”
“We’re well capitalized. Don’t worry about it.”
But I did worry because I understood startups. And Vitality Collective looked like it was burning through cash without a clear path to profitability.
In early 2023, Jessica called me.
“Sarah, I need a favor.”
“What’s up?”
“We need office space. We’ve been working remote, but we need to bring the team together, build culture.”
“Makes sense.”
“The thing is, real estate is expensive. We’re trying to conserve cash. I heard you work in a building in Mountain View. Do you know if there’s any space available?”
My building? She was asking about my building.
“I can check. What are you looking for?”
“Maybe 3,000 square feet. Something we can fit 12 people plus room to grow.”
“That’s pricey. Mountain View office space runs about $4.50 per square foot per month. You’d be looking at $13,500 monthly.”
“Ouch. That’s steep.”
“That’s market rate.”
“Well, see what you can find. Maybe there’s something cheaper. Or maybe the landlord would be flexible for a startup.”
I called my property manager, David Chin at Premier Commercial Management.
“David, I have someone asking about space. My sister, she wants 3,000 square feet for her startup. Unit 3B is available. 3,200 feet. We’re asking $4.50 per square foot.”
“That’s $14,400 monthly. What’s our flexibility on price for a quality tenant with good credit?”
“Not much. Market is strong, but family is family. What do you want to do?”
“Let me think about it.”
I thought about it for 3 days. About whether to reveal that I own the building. About whether to give Jessica a deal. In the end, I decided to stay anonymous. Rent her the space at market rate through the LLC.
“David, let’s rent her unit 3B. Standard lease terms. Market rate. She doesn’t know I own the building. Keep it that way.”
“Understood.”
Jessica signed the lease in March 2023. Vitality Collective moved into unit 3B, $14,400 per month. 3-year lease.
At family dinners, she talked about our new office in Mountain View.
“The landlord is some investment company,” she said. “Very corporate, but the space is perfect for us.”
I smiled. Said nothing.
“You should come visit,” Jessica said to me. “See what a real startup looks like.”
I never visited as her sister, but I visited the building twice a month as the owner. I walked past unit 3B, saw through the glass walls, saw her team working, saw the Vitality Collective logo on the wall. She had no idea she was paying me rent.
By mid 2023, Vitality Collective was in trouble. They’d burned through their seed round. They needed more capital, but VCs weren’t biting.
“The market is tough right now,” Jessica said at dinner. “Investors are being conservative.”
“What’s your runway?” I asked.
“We have about 6 months of cash. We’re looking at a bridge round. Just need to get us to profitability.”
“What’s your path to profitability?”
“We’re increasing prices, launching new products, cutting costs.”
“What costs?”
“Salaries. We’re doing layoffs. Reducing the team from 12 to 7.”
“What about the office?”
“We need the office. Culture is important. We’re keeping it.”
I did the math in my head. $14,400 monthly rent times 12 months. $172,800 annually for a company that was making maybe $400,000 in annual revenue while spending $1.5 million. The office was bleeding them dry.
But Jessica didn’t see it that way. To her, the office was a symbol of legitimacy. Proof that Vitality Collective was real.
By November 2023, things got worse. The bridge round fell through. They had 3 months of runway left.
Jessica called me.
“Sarah, I need help.”
“What kind of help?”
“Financial advice. You’re good with money. I need to cut costs, but I don’t know where.”
“Show me your financials.”
She sent me a spreadsheet. Revenue, expenses, cash balance. It was worse than I thought. They were burning $95,000 per month. Revenue was $32,000. They had $275,000 in the bank.
“You have three months,” I said.
“I know. That’s why I’m talking to you.”
“Your biggest fixed cost is payroll. $58,000 per month for seven people.”
“I can’t cut more people. We’re already skeletal.”
“Your second biggest cost is office space. $14,400 per month.”
“We need the office.”
“Could you go remote? Save $14,400 monthly.”
“No. Culture would die. The team needs to be together.”
“Jessica, you’re going to run out of money. Culture doesn’t matter if the company dies.”
“You don’t understand. This isn’t just about spreadsheets. It’s about building something that matters. It’s about survival.”
“I’ll figure it out. Thanks for the advice.”
She didn’t figure it out. In December 2023, Vitality Collective missed their rent payment.
David called me.
“Sarah, unit 3B didn’t pay rent. First time since they moved in.”
“How late are they?”
“7 days. I sent a reminder notice.”
“No response.”
“Send another notice. If they don’t pay in 10 days, start the formal process.”
“You sure? It’s your sister?”
“Business is business.”
Jessica paid 14 days late with a note.
“Sorry for the delay. Cash flow timing issue.”
January 2024 rent was also late. 17 days. February rent was 23 days late.
I didn’t reach out to her. This was between her company and my LLC. I stayed out of it.
