They didn't have flood insurance. "We thought we were pretty much out of business," says Mackey. "By all rights, Whole Foods should have died through that flood. We had to rebuild the store and it was going to cost a lot of money to do that and we just didn't have the money, so I thought, we all thought, we were finished."
The Austin community stepped up to save the business. Customers pitched in to help with the cleanup effort, investors put in more money, banks extended credit lines and team members (employees) worked for free to get the store back open.
"We were really united around that near death experience," Mackey says. When they got the store re-opened, Mackey was determined to expand. "I wanted to open a second store after the flood. It was like, we can't put all of our eggs in a basket that might float down the river."
In 1988, when Mackey approached venture capitalists for the money to expand in a significant way, he was repeatedly rejected. He remembers one VC telling him the market was too niche: "You know, John, I see you have got a pretty good business her, but it looks to me — I looked at all the stores — like you are a just a bunch of hippies and you are just selling food to other hippies and I don't think that is a very big market," he told Mackey. A decade later, that same venture capitalist told Mackey not investing in Whole Foods was the worst decision he'd ever made.
Mackey did raise venture money though: Whole Foods sold 34 percent of the business for an $8.5 million valuation, which at the time was about 15 to 20 percent of sales, says Mackey on "How I Built This." Hungry for cash to grow further but uninterested in handing over more of his company to venture capitalists, Mackey took Whole Foods public in 1992 and raised $28 million valuing the company at $100 million. With the cash, Whole Foods scooped up a slew of other natural food markets around the country.
Whole Foods' growth continued as eating healthy became increasingly mainstream. In 2016, there were more than 460 stores in the United States, the company did $16 billion in sales and had 87,000 employees, according to a recent financial disclosure.
Of course, that growth didn't come without controversy. In 2015, the store was taken to task for systematically over-weighing and overcharging certain food items. Whole Foods denied that these errors were anything other than inadvertent.
"There will be no one that ever loves Whole Foods Market as much as I love it"
Unable to thwart the pressure from investors to sell the struggling chain, Mackey is caught between his ideals and a need to keep afloat the business that he created.
"There is no point in business where you can say, 'At last, I have arrived.' What makes business so amazing is, what makes capitalism so dynamic is that in fact, if you are successful, people copy you. And that's what has happened with Whole Foods. A lot of people have copied us. That helps keep your edge," says Mackey.