When companies go under, some people are left holding the bag. It’s part of business. This risk (terms) has brought many a business down. It sucks, but it should not be a surprise. Take no risk and make no money.

Lesson, you win some, you lose some.

There’s nothing personal in it. Complaining about it makes as much sense as being embarrassed to make a profit.

There's nothing embarrassing about making a profit, but there is something embarrassing about continuing to rack up debts you know you won't be paying. A restaurant owner is taking a big risk in setting up shop - food businesses are super likely to fail as it is. There's no need to make excuses for well-funded companies operating irresponsibly and actually stealing from the small businesses they market themselves as promoting.

Munchery could have done much better here on at least two counts.

1) Letting their vendors know that they are shutting down (Munchery didn't even send an email to their vendors, but they did to their customers as mentioned in the article).

2) As part of 1), cancelling existing orders with existing vendors.

According to several former employees, Munchery also stiffed vendors in LA and Seattle when they shut down there years ago. Some of them have still not been paid, even though Munchery raised more money and continued to operate in San Francisco. A vendor in LA was owed 150k, Munchery agreed to a payment plan, and then just stopped paying when they still owed 100k. This is a pattern of not paying bills and continuing to rack up debts without the money to pay it off. The companies that delivered their goods to Munchery as promised shouldn't have to pay for Munchery's dishonesty and poor management.

I fail to see how the gender or ethnicity of the company owners is relevant here. Would Munchery's behavior be okay if it was about a bakery owned by three white men?

Direct quote from the article: In a particularly damning missive, one person claiming to be a former employee wrote in to describe the systematic refusal to pay small, women-owned businesses as they had fewer resources to fight back.

So anonymous hear-say is all there is?

And is the company even small? "Some of our bigger customers purchase up to $15,000/week with us" sounds like they make > $100k revenue/week regularly, baking thousands and thousands of cakes every week. I don't know SF standards of small, but that sounds like a solid operation to me - one that definitely has the resources to go after a corporate client that doesn't pay.

I still find it weird to focus on gender/sex and ethnicity, and I have my doubts that Munchery invested a lot of time & money into finding out who is behind the companies they don't pay and what the owners' gender is.

Yes, it's clear that you don't believe the woman whose business was impacted, and choose to side with the VC-funded company that stiffed their vendors. You could just say that, rather than pretend to have a bunch of concerns about discourse, and save us all a lot of time.

I don't know where I hurt your feelings, but I'm sorry.

If you heard someone had illegally chopped down a tree, would you be extra upset if the tree were an endangered species?

Are women endangered of going extinct? I'm sorry, I hadn't realized that before.

Only 5% of American businesses are owned by women of color.

So you're suggesting amending the law that they get preferential treatment in liquidation cases, and their companies are always paid first regardless of company size, resources etc?

Because that's what I understand the article to complain about. It's not a "three women baking pies and trying to make ends meet"-company, it's a "we produce thousands of cakes a week"-company. They are not going to go out of business, but they will probably have learned to be more active about unpaid invoices.

Not everything is about suppressing women or minorities, and crying wolf all the time will lead to people ignoring the cases when it actually is.

more pity points. despite them saying in a differnt part of the article that some of their clients give them 15k a week

The COGS and labor on a 15k wholesale order is likely 10k, so not getting paid is a big deal. Also, it's relevant because employees of munchery reported that the company would systematically choose to not pay small women and minority owned companies because they had fewer resources and were thus less likely to fight back.

Ok, so bad for everyone involved. So what the takeaway here? How do you protect yourself as a small business owner from this type of risk?

Start by naming and shaming. Its not much but there you go:

* CEO James Beriker

* investors Sherpa Capital and Menlo Ventures

It's probably tricky for a business like a bakery because your orders would vary so much in size, so you'd have to have different tiers depending on the risk being borne by the business.

Like, $50 birthday cake? Pay with a credit card when you pick it up. $15,000 in pies next week? Here's a contract that stipulates the due date and what the penalties are, and names the collections agency which will come after you for the outstanding amount and any applicable penalties.

Probably get a lot more aggressive on your accounts receivables demands. Also, is this type of behavior typical of VC's? I have to assume a lot of people would just have written a check to pay vendors so this sort of bad PR wouldn't be coming up as it isn't that much money for a VC. Unfortunately it seems like a few bad apples here are really spoiling it for everyone.

It sounds like Munchery was run by morons who should never get the chance to run a company again

truly, this should be a privilege and not a right.