Foundations of New Venture Finance 275A Cliffhanger Ending
Ruminator Books was once the largest and
best-known independent bookstore in the
United States.
David Unowsky started the store in
Minneapolis in 1970 with just $12,000.
Originally called the Hungry Mind, the store
opened in a 1200-square-foot location with
only enough space for one narrow aisle
between stacks of books. Two years later the
store was named the exclusive textbook ven-
dor for Macalester College, and eventually it
moved into a 7800-square-foot space owned
by the college.
For a while business was good. In addition
to the college traffic, customers gravitated
from around the Twin Cities to shop at the
store, and a popular restaurant opened next
door. During the early 1990s sales rose 20
percent each year. The store had 26 employ-
ees, most of them salaried, with benefits
including health insurance, a retirement plan,
paid vacations, and maternity and paternity
leaves. Ruminator Books was proud to per-
sonally introduce Minneapolis readers to big
name national authors like John Updike and
Alice Walker and to host readings of their
work. Like other independent bookstores,
Ruminator began to face increasing competi-
tion from national chains and even large chai
(tea) stores. Ironically, however, the real seed
for Ruminator’s demise came from what ini-
tially sounded like a great opportunity. In
2000 the Open Book opened a center for
book lovers in a different Minneapolis neigh-
borhood and Unowsky opened a satellite
store there. Other tenants, including the Loft
Literary Center and Milkweed Press, did well
despite the Center’s remote location and the
absence of foot traffic. But the new store was
a money pit for Ruminator Books. “It was
beyond my level of competence,” moans
owner Unowsky. “I wasn’t wired to run two
bookstores.” Adding to his problems was a
new computer system that was supposed to
network the two stores but never worked.
Unowsky chalked up losses in excess of
$500,000 before closing the satellite store in
2003.
His creditors included many book publish-
ers who stopped shipping books, damaging
the main store’s inventory. His landlord,
Macalester College, threatened to take pos-
session of his main store if Unowsky didn’t
pay the $600,000 he owed them.
For a while it looked as if the bookstore
might miraculously overcome its financial
problems. Unowsky sold his original Hungry
Mind name to an online learning company for
a big cash infusion. Many famous authors
whose books the store had promoted donat-
ed items for a fundraising auction. And one
loyal customer, a former corporate financial
analyst, offered to personally invest $200,000
and stepped in to help Unowsky in his negoti-
ations with Macalester.
But in July 2004 negotiations broke down,
and Unowsky was forced to close the store.
Because he had emptied his retirement
account, remortgaged his house and taken
$100,000 in cash advances from his credit
cards to save the store, he had to declare
personal bankruptcy too. After a six-month
hiatus writing reviews and other articles,
Unowsky went to work for Magers & Quinn, a
Minneapolis bookstore that specializes in
rare and collectible books.
SOURCE: Adapted from Cynthia Crossen,
“Mismanagement Closes a Bookstore,” The Wall Street
Journal, September 28, 2004: B4; adapted from Marianne
Combs, “Ruminator Bookstore Closing,” Minnesota Public
Radio, June 29, 2004. Retrieved from the Web July 8,- http://news.minnesota.publicradio.org/fea-
tures/2004/06/29_combsm_ruminator.
STREET STORY 7.4