The Definitive Guide to Business

How a $200,000 bottle of wine pulled this tech start-up out of a nosedive

Joel Montaniel, co-founder and CEO of SevenRooms.
Source: SevenRooms

Shortly after launching tech start-up SevenRooms a client relationship management platform that makes better service easier for restaurants, nightclubs and hotels co-founder and CEO Joel Montaniel had his back up against the wall.

"We made all of the mistakes that first-time founders make," Montaniel, who co-founded the company in May 2011, tells CNBC. "One big mistake was not raising enough money out of the gate. Embarrassingly enough, we also didn't account for payroll taxes, which adds an additional 10 percent on top of what you pay people."

By month 12, the start-up was out of money, and the three co-founders cut their salaries to zero in order to pay their one employee at the time, who was a developer.

On the brink of failure, Montaniel landed a sales meeting with a top club owner in New York City. It was his dream client, who Montaniel had spent a year and a half trying to track down.

"I literally sent him an email every week ... no response. And then for some reason, out of the blue, on a random Monday night, he decides to email me," Montaniel says.

The owner told Montaniel to meet him at his club at 1 a.m.

"He comes up to me and my buddy at the bar and he's carrying a decanter of wine in his hand," Montaniel recalls of his first encounter with the owner.

"He looks over at the two of us and asks, 'Do you guys want to try a $200,000 bottle of wine?' Of course we do, so he snaps his fingers, three wine glasses appear on the bar, and he pours us each a glass of wine. ... Quite frankly, the wine was just OK."

The meeting ended up going nowhere. But two nights later, Montaniel was out for dinner and overheard a man at the neighboring table talking about a $200,000 bottle of wine. Montaniel interrupted him and mentioned his own experience from two nights ago — it turns out, it was the same 1950 French wine, and the man happened to be a childhood friend of the club owner.

Moreover, Montaniel came to learn that this man had a friend who did marketing for one of the largest liquor companies in the world. At the time, the liquor company was looking for the type of technology that SevenRooms offers for an upcoming, six-month VIP program.

"Two weeks later, he actively pushed us as the partner that the liquor company should use," Montaniel says. "They end up taking us on and getting us into the top 10 nightclubs in New York City."

The six months worth of pay allowed the co-founders to pay their employee and get their product on an even bigger stage, which enabled them to raise their next round of funding.

"It was because of that bottle of wine that we're still around today," Montaniel says.

Today, SevenRooms has more than 50 employees and has raised about $6.5 million in funding. It now serves clients such as The Cosmopolitan resort in Las Vegas, Morgans Hotel Group, and Live Nation.

As shown in the SevenRooms example profile below, guest profiles provide things like reservation history and can track everything from allergies to client preferences.

A key takeaway from the wine experience was that "work happens during the day and business happens at night," Montaniel says.

"When you take out the work stuffiness — when you take out the distance of a conference table sitting in between two people — and you replace that with sitting at a bar or restaurant, that's where the real connections and relationships really start to blossom. That's where the real business is happening."

Additionally, Montaniel learned the importance of paying it forward, since the man at the restaurant had no reason to put in a good word at the liquor company that took them on.

"There was very little personal gain for him because we were unknown at that point, but he went out of his way to help us out," Montaniel says. "Our philosophy is to always try to help whenever we can without asking for anything in return. What we've found again and again is that by doing so, you never know what will happen."