A TOYMAKER’S TALE
Brad Pedersen currently serves as chair at Pela, a Kelowna-based compostable phone case company that Jay-z backed with $5 million. He’s also the co-founder of Lomi, a smart kitchen waste composter recommended by Khloé Kardashian. But his entrepreneurial journey began in 1996, when he launched a toy distribution company out of his basement in Red Deer, Alberta. Pedersen reports growing Dynatech into the “largest toy distributor in Canada” by 2006; until, that is, his
CFO hit him after a record year with “we got a problem.” Overnight, successful entrepreneur Pedersen was forced to turn to special loans, and eventually, bankruptcy.
We restructured the company, we refreshed it with new capital, I got new investor partners and, surprisingly, I’m still the majority shareholder through all of this. That’s what we negotiated. And we’re trying to stay the course with our growth plan with this new capital, but there’s blood in the water. My culture was caustic with people—they were jettisoning, I was losing my staff. Once there’s bad news, that thread pulls pretty fast.
In January 2008, I head out on trade shows to sell the next year’s business, and I find out that our largest customer, Walmart, has decided not to support us in the year ahead because, they claim, of “uncertainty in the business.” I know it’s the final nail in the coffin—they’re 40 percent of our business. So I meet with my chairman and shareholders, and I give the bad news: “Guys, I’ve done everything I can, and it’s not going to work. Unfortunately, your investment’s lost.”
They were not happy with that response. They said, “You need to think about how to recover our investment.”
So I spent 90 days working on the future business and what it could look like.
I’m a big believer in anti-goals; it’s often hard to get clear on what you want, but it’s easier to get clear on what you don’t want. I started writing out what I didn’t want to ever do again. For example, I didn’t want to stay focused on Canada;
I wanted to be global. I didn’t want to be a distributor anymore; I wanted to control my own destiny and make my own things. That formed this new opportunity of a toy manufacturing business that, literally, would focus on those things.
The thesis was in place. I went back to the group of investors with this new business plan. I said, “Here’s the way forward. I can’t promise you that I’ll return your investment, but this is what I think I can do, and, by the way, I need another $1 million to make this work.”
Miraculously, they agreed. The deal closed and the money was funded in the very first week of September 2008. Two weeks later, the entire world imploded: the Great Recession kicked in. If I’d taken two more weeks to make that request, I would never have received the money. And that loan was very expensive—$1 million dollars at 24-percent interest, and I had one year to repay it.
That kept me awake at night. My wife [Kelly Pedersen] and I worked our tails off; it made our pillow talk very interesting. When your back is against the wall, isn’t it amazing how resourceful you can become?
A year later, we paid back the money with interest, and that was the launch of this new opportunity called Tech for Kids in 2009. Ultimately, Tech for Kids was an infinitely better business across the board. More satisfying, more growth, the culture, the team... it eventually led to an M&A rollup opportunity in 2017 [and also became iconic toy brand Basic Fun!]. That was the predecessor of my exit and gave me the option to work on Pela and Lomi.
If I hadn’t been disrupted, I’d probably still be a toy distributor living a very ordinary, less-than-possible life. This is what I’ve come to learn: the best gifts often come wrapped in ugly paper. It sucked in the moment, but it became the forcing function of picking a better path forward. It’s the great paradox of life: for every joy and hope that we have to look forward to, we have to accept the pain and suffering on the other end of it.