Xero Shoes: Steven Sashen and Lena Phoenix

We started shipping our first brand new outsoles, and I got an email from a very sweet woman. So she had put her kit together and gone out for a run and the the laces had torn through that little hole on the side and we discovered that it good chunk of the production run, they hadn't packed enough rubber into that part. of the mould and

They were too thin and they just ripped. And I I literally sank onto the floor like I thought I was gonna throw up. I was I was like We're going bankrupt.

Welcome to How I Built This. A show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built. Guy Roz and on the show today how a five Kilometer run in bare feet led Steven Sashin and Lana Phoenix to build zero shoes.

A minimalist shoe brand that's grown into a multi-million dollar business. I used to hate running. It always hurt my knees. And then, sometime in my early thirties, I tried running in minimalist shoes, specifically those five fingered toe shoes that kinda make you look like a character from Avatar?

But the effect on me was incredible. And from that moment on I became an avid runner. And I never went back to running shoes with cushioning. Now before I go on, let me add some caveats here, because there is a lot of noise around whether barefoot running is better for you or worse for you. And I have neither the scientific nor physiological background, but

to weigh in on any of this with authority. But for some people Running with just a thin layer of rubber between your feet and the ground. Just works. Now before I go on, a bit of clarity around terminology. You will hear me describe these shoes as barefoot.

and minimalist, and for simplicity, I use them interchangeably. But what I'm talking about are shoes with little or no cushioning and just a thin layer of rubber between your foot and the ground. Now to be clear, barefoot or minimalist shoes make up a small fraction of the nearly a hundred and ten billion dollar global athletic footwear market.

Barefoot shoes account for less than one half of 1% of that market. Still, minimalist running shoes are growing in popularity every year. And even though many of the big brands like Nike, On, and New Balance do make minimalist shoes, There are only a handful of brands dedicated entirely to them. And one of the best known is Zero.

The brand was actually started in 2009. The founders, husband and wife team Steven Sashin and Lana Phoenix, scaled it up. Very slowly. But by twenty twenty two Zero sold nearly fifty million dollars worth of shoes.

Anyway, before they founded Zero, Steven and Lena started a bunch of different small businesses. They did internet marketing, Steven created software for screenwriters, they had mortgage businesses. And by the time they reached middle age, they had the resources to live a modest, no frills life in Boulder, Colorado. And neither Steven nor Lana had any ambitions to get rich.

They just didn't want to work in an office or have a boss. Anyway, around age 45, Steven started to get back into sprinting, which is something he hadn't done since high school. And after reading the book Born to Run, He was inspired to make his own rubber running sandals. The kind of sandals worn by indigenous tribes in the mountains of Mexico.

Soon enough, Steven's running buddi started asking him to make them shoes, and within a few months A business was born. Now along the way, Steven and Lena encountered every imaginable rate of passage for a business. manufacturing meltdowns, difficulty managing inventory,

The trade war with China, which drove up tariffs on their shoes. Debt, anxious investors. Even an appearance on Shark Tank, which ended with an insulting offer. which we will get to a little bit later on. For the first part of this interview you'll hear from Steve and Lena will come in a bit later. Steven Sashin grew up in the sixties and seventies in Bethesda, Maryland.

He was a top gymnast in high school and did track and field, and he also had a pretty solid business performing magic shows at birthday parties. But by the time he went to college, at Duke, he realized he was pretty good at something else. Stand up comedy. They had a comedy competition.

And they brought three comics down from New York, and we did our little competition, and then the three comics did their show, and I won the competition, and the three comics came up to me and said, You could be doing this for real. And so be a stand up comic. Yeah. And right around that time, um, that was when the comedy boom had just started. So this is nineteen eighty three, eighty four. Yeah. And a club opened in Raleigh, North Carolina, and I went down there and auditioned and they made me the house MC. So I opened for hundreds of acts. And then by the time I graduated, or the guy who booked that club said to me, Call me when you're ready to graduate,'cause then I'll give you ten weeks on the road. Well. And that ten weeks turned into ten months.

This is why you were a student at Duke. You were you were MCing this thing. Yeah, yeah. So um student by day, M C at night. Yeah. Basically December of Mm. Four? Eighty three, eighty four. I moved to New York and started uh working the scene there.

And so you basically moved to New York as a Stand up comic. Yeah. And that was uh what you did for and and and and Was that your plan for for for the time being? Oh yeah.

Yeah, yeah. Um once I started m doing stand up, it was just way too much fun. Cause you know, you hang out with the funniest people in the world for a few hours, you get on stage for thirty to forty five minutes and have a blast, except for when it doesn't go very well, which is very entertaining too. D by the way, when you were performing as a comic, did you did you ever perform with pe people who became famous, who really made it big?

Oh, um One of the reasons that I adorn my wife is she puts up with the fact that when we're watching TV on any given evening, I'm going, Hey, I worked with that guy. Hey, that was my roommate. Hey, we hung out. So I opened for Jay Leno a couple times. I opened for Jerry Seinfeld. Brian Regan. I could literally go down the list. If there's a comic who's been doing it for more than thirty five years, we work together. And and what happened?

What happened to your career? Clearly you had promise and but but you're you know That didn't happen with you. Well, um oh boy. So the comedy boom started busting in ninety Yeah. And you were still you were still doing stand up pretty much. Weekly or every couple of times a week. Oh oh like six nights a week. In fact, when I f started doing stand up, for the first couple years I worked seven nights a week, multiple shows per night often. And finally, um I kinda burned out and someone said, You need to take a break. But I mean, from what I understand, you you weren't Really?

taking a break because I think around this time you were also uh attending Columbia in New in New York and and getting a master's degree in screenwriting. Yep And I guess What that that sort of gave you an idea for a business which was Like uh making software for writing screenplays, is i is that right?

Right. So I realized that there was an interesting way In terms of the different elements, a scene heading, the action that you see on the screen, a character's name, what the character says, various things. And if you think about typing on a typewriter,

There's cues that your motions are giving you, the tab and enter key, that if the elements were smart and knew what they were and how they related to other elements and how they related to the page, then you could do all the formatting. All the pagination, all this really complex stuff, it was very arcane, automatically on the fly in a way that no one had ever done it. And it was call and this this this software that you create was called scriptware. How did you do it? I mean you did how did it come about? Um, well, I met a programmer um who worked at PC magazine at a comedy so show one night and we got together and I talked about my idea. And he had just gotten a new piece of software for creating programs that could do what I was talking about. And so we partnered up and started developing this program, which took about three years.

Wow. So the two of you built this program called Scriptware. Yeah. And and you were based out of New York? Well, once I realized I was gonna be in the software business and not the stand up business, I said, Hm, I don't need to still be in New York and two months later I was in Bulgar, Colorado. So you moved to Boulder and that's where you based ScriptWare. And how a I mean, how did you finance it? Um I had about 17 credit cards with zero percent balance transfer fees, and that also gave you either frequent flyer points or some other bonus. even for a balance transfer. So about for six years I was just shuffling balances from one card to another, racking up frequent flyer points and not paying any interest. Well.

And b and so I mean give me a sense of this. I mean this was as again, like I can't imagine this is a massive market because it's a limited number of people who are screenwriters, but I mean Was this a a successful business from a from a financial standpoint? Was it profitable or w were you barely kinda trading water? No no we were well we were doing okay. Um I think at our peak we were not a big business, it was a million dollar business.

But unfortunately, um I discovered something about business that I didn't know, which is when you threaten other people's livelihoods, they don't go, Congratulations, you have the better mouse trap, and walk away. They will most likely went back into a corner try to uh screw with you before they try to improve what they're doing. And so um after about 10 years one of my competitors did something d devilishly brilliant to kind of lock me out of the market. Which was to make a better product? Uh no. Talk to the biggest dealer at that time and say, how much margin do we need to give you to not sell scriptware? And they had an answer. Okay.

But frankly, in the last mm, two or three years before my competitor uh pulled the rug out from underneath me, I was just kinda bored. And so I was kinda looking for the next thing and I had gotten into internet marketing at that time. This was again ninety two, ninety three, uh, is when that all began. And so I was spending more time on doing internet marketing, which was much more interesting to me than Running a software company. What was your

What was your objective, Steven? Were you I mean I mean I from what I understand, like you were You know, Boulder's a great place to live, obviously but it It sounds like you were

doing a bunch of different things to I don't know, to to to build something bigger. to make a bunch of money and retire? Like what was your strategy. Yeah, you're y you're giving me way too much credit. So I would say that uh because I was too old to have gotten riddling, I just kept doing things that I found interesting, which had me bouncing around from one thing to another pretty often. Yeah. Um but

When I was in high school, I think it was in high school, there was a book that came out called Your Money or Your Life, written by Joe Dominguez and Vicky Robin. The premise being that you want to track your expenses and track your income, reduce your expenses as much as you can, take the difference between what you're making and what you're spending, and invest that uh at that time in T bills and once you're making enough money. From your investments to cover your expenses, then you have financial freedom. You can retire and live off the Yeah. Yeah, and that basically was my

I don't know, sixteen, seventeen. I really I I used to say to my dad, I'd like to be retired by the time I'm thirty five. All right. And uh so I guess you are uh around this time you're doing B in Boulder. Um and and and you were also doing a T V show.

Right? Like a like a on a very Obscure Uh cable channel called Knowledge TV and the show I guess was called Disc Toctors, where you were like what, it's like car talk for computers? Yeah, that's exactly what it was. Um and and while it was uh Knowledge TV was from the Jones Entertainment Network, which had a bunch of different channels, um, a lot of people Didn't really know it. It was on basic cable, very niche thing, but um very entertaining.

This was a show you did with um somebody else uh co host and you would just Get get calls in. I I watched some of it and most of the calls at the time were like, I've got a v this virus and how do I deal with this and that virus like Well, uh we will get to this, but if it weren't for that show and I've got this virus, I would not be married to my wife. Okay, which which which uh I guess is the perfect segue into bringing uh your wife, Lana, into the conversation who's been sitting here quietly. Um and Lane, I guess before long before you met Steven Um in your twenties you actually had started

and then sold a small business which was uh like a mortgage Brokeridge in Eugene, Oregon, and And and eventually you end up And Boulder.

Um to study dance at Naropa University, which is I think is a a Tibetan Buddhist um affiliated university, and I guess this was like what, like ninety five, ninety six? Right. And and this and I guess this is when you first

met Steven and I guess the two of you met in in Boulder like through through friends? How how did how did the two of you meet? Yeah, so actually a woman that I had met uh I ended up becoming housemates with because she was also a student at Naroba. And she was friends with Steven So she had organized a brunch for some mutual friends we had.

And Stephen came with his fiance and And that was the first time we met and I could tell he was interested in me, but His fiance was there and

So That was a do not pass go. Yeah. And she His fiance also turned out to be a student at Naropa and I had two classes with her. So um they broke up shortly thereafter, but

She and she was spending a lot of time. processing the relationship and saying all kinds of horrible things about him, so I didn't really didn't have a very good impression of him. And and I I I guess At some point you

Lena, you start to ask Steven for computer help? So I hadn't had uh television in ten years and my roommate and I were living in a uh mobile home park. that required all of the residents to get satellite. And so I was flipping through the channels of the TV with sort of this anthropological fascination because While I watch a ton of TV as a kid.

It had been a really long time. And all of a sudden I Um I'm looking at the show and I I said Alex is that Steven? And she said, Oh yeah, he's got this this show about computers. And

If you weeks or months later, I'm not sure, I I did get a computer virus and I didn't know what to do. And I called Steven and I felt pretty guilty about it because I was definitely uh I knew I'd been keeping him at a distance. Yeah. And I moved down to New Mexico. I I really loved New Mexico, so I moved to Albuquerque. And I was waiting tables and writing And

Uh During that time. Uh Steven Well well, after the computer virus I was like, okay

He helped me, and so now we can be friends. And so uh for a couple of years we We're friends, and so he started coming down and visiting me and then in Albuquerque. In Albuquerque, yeah. Yeah. So clearly you guys were at this point uh uh uh uh A couple on it. No. No. No. No. You were just going down there to visit so cute. But clearly you were pursuing her. I mean

Uh Yeah, clearly would be an understatement. Um, so but Lana was on the other side of that equation. So the first time I came down, she says, You know, you can crash on the floor on the futon, but you know, keep your hands away from me. Well, I just did yeah, I felt like I needed to protect myself and protect you and the friendship from from what I thought was a bad idea. And so I think part of the reason why it took four years before we got together is that I needed to mm become emotionally stronger and more self confident and Steven needed to become a little more humble. And and Lena, what did you I mean, this is a very personal question here, but I mean, you know, and this is like couple therapy a little bit, what did you like about Stephen? I mean

Yeah, there's lots I like and and you know, Steven is but he's he's a lot he's a Big personality. He is that part of what you liked? No. Um I he's really funny.

And Um he's really smart. So yeah but there's a cultural difference. Um I am from midwestern

generally soft spoken people. The first time we went back to DC to meet his parents. I was like, Why are you guys yelling at each other all the time? He's like, What are you talking about? We're not yelling, this is how we talk. And I I was just so freaked out. They're they're they're they're Jews from uh the anywhere. You can just stop at their Jews. But yes, the North East, definitely. And basically for the next nine months. Every time we talked.

Um, if it occurred to me to ask her to marry me, I would ask her, which means every time we talked. And um Eventually, Lena decided to move back to Ballroom, move in with me and One night I said, So seriously will you marry me? And she goes, No, you're serious. I went Yeah. She goes Oh well then

Yes. I wasn't a hundred percent sure, but I finally said yes because I knew if I until I said yes, he wasn't gonna shut up. So we did actually get officially engaged fairly quickly then you know the next time I saw him he brought he gave me a Heart shaped tie dye plastic ring he bought for a quarter from a gumball machine? Uh no no. It was fifty cents. Fifty cents. Nice.

And um and I wore it, which uh apparently told all his friends that I was in fact the right one for him. Um But uh We were engaged for over three years. I'm I'm curious, Steven, um I from from what I understand, you were you considered yourself

quote unquote retired when you were thirty eight. Correct. Um how what did that mean? Were you worth millions and millions of dollars? No, again, you know, my whole goal was always how can I just get enough cash to live comfortably? What can I do without a whole lot of effort? So Soon after we got together is when we went to this workshop and learned about ways of generating passive income. Uh, one was real estate based, and for the sake of getting specific, we were buying VA repo notes. Yeah, w a what happened is when the VA repossed a home Um

They would sell it at auction and they would allow the The VA wh why why do they Yeah, I don't know I don't know about this. They repossess homes. So you know, you could get um mortgages that were Um, I don't know if they were issued or just backed by the veterans administration. So military personnel could could do this. And if someone um defaulted on the mortgage and the VA took the home back, they would sell those houses at auction and they would allow the purchaser to assume the existing VA mortgage, which generally had pretty favorable terms. Right. And so And you learned about this from a workshop. From a workshop, yeah. And there was a guy who had set up an investment company to do this, and so we became limited partners and he would buy these properties and then he would s and you have to keep in mind this is in the the mid two thousands, so it's before Anybody who could fog a mirror could get a mortgage. It it was when

you know, uh there a lot of people were really shut out of the housing market, and so he would sell these properties to people who couldn't qualify for a conventional mortgage with a lowdown payment, allow them to make payments for a couple of years, get their credit in shape, and then refinance him out. Um, that would be the You know, the goal. So how did that work? I mean how did if you guys were not wealthy at the time, how did you how were you able to get hand over the money to finance these purchases? They weren't that expensive, for one. I mean you could basically assume one of these mortgages for four to six thousand dollars now.

Oh wow. Okay. Yeah. So you you would basically Assume the mortgage as a partner. And then he would he would buy you. Then he would find a buyer. So then they have a mortgage with us.

And uh the idea was that it was gonna be cash flow for the rest of our life. Yeah. And the interest rates we were giving people were actually really good. So, you know, nothing they would have been able to get on their own and very competitive. So we weren't fleecing anybody. In fact people were you know, people were getting We're we're thanking us for giving the opportunity to buy a house. But it's risky because these are people who would not have qualified for loans otherwise. Yes. That's also correct.

Got it. Okay. But but so how many a at at at sort of the peak of doing this, how many homes did you guys Twenty? I think about twenty, yeah. Yeah. realize at the time was that if

Uh if required. We would need to make the mortgage payments uh to the VA mortgage. If if that ever became necessary. Oh, so essentially if you're if the person that you're renting it to is defaulting. doesn't matter. You still have to pay the VA the money. They weren't renting. They bought it. They were owners. But they were buying by the buyer. For the buyer. Yeah. And if they default, like it's hard because you're not a bank. You're just two people in Boulder, Colorado. And if they trash the place, we're responsible for fixing it up. And what he realized was that The

prices of these houses had gone up so much. that The best investment play was to rather than um continue to do this

Was to to when he repossessed a house to fix it up and sell it. It made more sense to flip it. Yeah. And so what happened? Like he started to He he the your partner basically said you guys have to start paying these mortgages'cause I'm gonna be flipping these houses, but in the meantime you've got to pay the m the monthly mortgage. Yeah.

And you didn't have the cash. Yeah, so it wasn't as bad as it sounded. I mean, you remember those credit cards that Steven mentioned about how he financed his first company. So it was still pretty easy. Yeah, but these were not. But not all of them were were being some of them were fun. And and To be clear During that time We no longer had the steady monthly income, but we would occasionally get Um

bursts of you know large large deposits from what was left over from a sale, twenty thousand dollars or something. So our income uh revenue stream based, but it was choppy and unpredictable. So so you weren't wiped out from the fun from the real estate collapse. This it did not wipe you out. You guys managed to evade it, but you didn't walk away from it. Correct with a whole lot of correct. Yeah, that's exactly right. Um our our partner had the foresight to Change the model in a way that was

uh uncomfortable for us, but also ultimately probably protected us. In the long run. And'cause if you kept that model, you g those all those loans, all those sellers or those buyers sort of default to Probably. Um and the values of the properties. You know, he sold most of them while the market was still running up. Still hot. Yeah. So It was

A profitable venture for us. So really, I mean And I say this Because I know what what you eventually build, which is what we're gonna talk about now. But

B basically at at age forty five, Steven. And you were getting closer to forty, Lena. I mean you guys were not You need to kinda start again. It was scary for me, but

Yeah, I mean I I've spent a lot of my life feeling financially insecure. Um, and so I didn't like it. You know, I really did not like it.

Yeah. And contrary to Lena's experience, Mine was always that No matter what I was doing, something would show up at the last minute. So like one of the reasons that I adorn my wife is early on in our relationship, she would ask me these hypotheticals about things that she was worried about in our future in our relationship, and I would say, I I don't know. I mean I'll figure it out when I get there. I mean I was I was I I used to joke about this, um, but it was only a half joke at this time, it's like I was ready to go apply for a job at Quisnos. I mean I was gonna do whatever we needed to do to be able to pay the rent, but I was hoping that we would find something else that would be interesting rather than just making sandwiches.

When we come back in just a moment. Steven discovers a new business opportunity after going for a 5K run. Bare feet.

Stay with us, I'm Guy Raz, and you're listening. to how I built this. Welcome back to how I built this. I'm Guy Roz. So it's around 2007 and after getting out of the mortgage business, Steven and Lena are living in Boulder trying to get another business off the ground, and this one in search engine optimization. Meanwhile, Steven decides to return to a passion from his high school track and field days, sprinting.

A friend of mine came to brunch, he was a runner. Yeah. And he says, Do you know there's like an entire masters track and field circuit where they do all the events, including the sprints? I was like, Oh blah, blah, blah, what? So I had no idea. Wait, uh a master's so sorry, wrong Well the the USA track and field in the masters division, they do all of the track and field events. So marathons, half marathons, uh 1500 meters, eight hundred meters, I mean you name it. So it just so happens they also happily do the sprints. Uh but that got me back into it. And you know, the problem with getting back into something in your mid-40s is your brain still thinks you're in your mid-20s. And so it literally took me years to learn things like when my brain says let's just do one more that's the time to walk away. And I spent the next two years um

pretty much going from injury to injury to injury. And what are you getting and and you were just running in regular running shoes. Uh yeah. In fact I didn't know what to run in. So I asked the coach and the other runners, you know, what do I train in? What do I compete in? And they said, Well train in this shoe, big thick, stiff motion control padded shoe, normal shoe. And then we're these spring spikes. And by the way, buy them a size and a half too small. So it's sort of like Chinese foot binding, but that's what you need to hold it on your foot well. And I didn't know any better and did what they said. And you kept getting injuries. Yeah. Literally anything from my navel down at some point was injured.

All right, so you're struggling with these injuries, then I guess what? You have a f s I mean, this is around the time anyone Coop Is in a running will remember this around the time.

When Chris. Christopher McDougall's book, Born to Run, comes out came out in two thousand seven. Um and it it was uh a huge best seller. I don't think initially, but eventually. No. Uh it took a couple of years'til it kicked in, actually.

But but you somebody handed you that book. Right. D did Yeah. Did they say, Hey, you know, you might want to look into this if you're getting a lot of injuries. Like what what do you remember? So my friend Simon s hands me Born to Run and says, Maybe there's something in here, maybe you should try running barefoot just to see what you learn. And so, um, to be clear I'm not gonna suggest that people run barefoot even though It changed my life. But um the gist of it is everything we're gonna talk about when it has to do with our business

It's not about footwear. It's about natural form. It's letting your body do what bodies are made to do naturally without getting in the way. And so this idea of running barefoot, it's like all right, well, it seemed interesting. And it just so happened, coincidentally, there was a guy in town who was doing a barefoot running workshop that next weekend. And so I thought, All right, well, I'll Give it a shot. So we go out for this barefoot run, and we're running on grass and we're running on trails and we're running on roads and we're running over wooden bridges, and I was just so enthralled, so entranced With the experience of feeling my feet on the ground and experimenting to see what would happen if I ran faster, but still had the same. Uh cadence, the stay number of steps per minute. Or if I landed on that part of my foot or the other part of my foot, I was just

really, really fascinated by the whole thing. Yeah. I I I wanna just interject for a sec because in in the event that p someone listening does not know about Born to Run, I'm just gonna briefly Written by Chris McDougall, massive bestseller. basically looked at this tribe in in Mexico that Runs like seventy mile distances.

you know, regularly. These just just to back and forth. Uh and they run uh barefoot. Or they use these very thin rubber soled sandals. And and so the argument in this book is that actually humans are made to run without cushioning. That cushioning which was started in the Sixties and seventies.

Um that actually is not a natural way to run. But just to say that this is this this book came out and it really had a massive Influence on the way certain type of people run. That essentially lots of people migrated this idea of running with Just a thin piece of rubber under their foot.

Yes, so if you're running in bare feet or something truly minimalist, doing it wrong hurts, doing it right feels great. I mean what we have to do is Get people into a state of cognitive dissonance where their own experience undermines something they believe just enough to make them curious and ask questions like, Why am I putting my foot in a shoe? It squeezes my toes together and could cause bunions. Why am I putting all that foam underneath my foot? So I can't feel anything. Why am I elevating my heel? which messes with my posture. You know, if we took a baby when it's learning how to walk

you would never put something on its foot where it couldn't feel, couldn't move, and changed its posture. So if you wouldn't do that to a baby Why are you doing it to you? Yeah. So you Basically. Start to run.

Barefoot. Just to just to kinda see what it's like. Yeah. So I did that first run and I was just at the end of the run, I turned to someone who had a GPS watch on. I said, how far was that? And she looks at her watch and says, That was a little over five K This is on a track. No, no, no, just running around Boulder.

You know, shoes. Yeah. But on a surface presumably you're not running over like crushed glass. No, we're running on all sorts of surfaces. And you ran five kilometers, which for you was a very long run, because you're not a marathon. Yeah. Right. Because you're not a distance runner. No. But it was it was fascinating. And effortless and fun. And so over the next few weeks my injuries went away, I became faster, uh, and I was hooked on this whole idea.

Of not even so much barefoot, but just what was going on with the shoes that I was wearing. And was that part of the problem? So so you you couldn't presumably compete barefoot. So what did you? Do what was your solution? Because

You knew that the barefoot Running. Work with your body. Right. Well, There's nothing preventing you from running barefoot. There are a couple of barefoot sprinters around the world. Um, but it's not optimal because a modern track surface is very abrasive. And on that track surface, it would have just ripped the hell out of my feet. Yeah. So I was spending as much time barefoot or

In the sandals that I started making inspired by the Tatar Mara who you mentioned from Born to Run. Oh, you s so you started making your own rubber sandals? Right away. Right away. You didn't try you'cause you b'cause what happened with the uh You you the the the there were I mean there are V Brums, that was what the five finger shoes, and th those did not work for you. Right. Yeah. They just didn't fit the shape of my foot and I kept going like every six months. to try them sort of like when you go to the fridge late at night and you don't find what you want and you come back a few minutes later as if it's a replicator. So I kept doing that and they never fit.

And um and so had they, you know, this wouldn't have happened had those things fit my feet. We would have never started Zero Shoes. Well, and he was happy to be barefoot all the time. We had whitish carpet and I was not happy to have him barefoot all the time. Right. And so he started looking around for materials he could use. to make sandals inspired by what the Tau Maura were wearing. And he found some outsole material that was actually designed for shoe repair made by Vibram. And

bought some cord from home depot bright neon colours and he could because this material was only sold to shoe repair shops He had to buy a fairly sizable quantity of it. So you would go to A shoe repair shop and buy the rubber soles at Vibram? the f company that made the five finger shoes and also they make the souls of many other shoe brands. Correct. They uh they you would buy this rubber material

And you would stitch or like make your own Sandals? Yeah. So it's just a sandal, it's a rubber Sold sandal with like a cord for your toes and a Wrapped around your ankle.

That's about it. I mean if you look at the oldest footwear ever found in archaeological digs, I was making something that looked like those. It's basically something to protect your foot and something to hold it on your foot. That's really all you need. And so the other barefoot runners in town asked me to make shoes for them. And so people would stand on this piece of rubber, I'd trace their foot, I'd cut it out with a pair of tin snips, I'd punch a couple holes, I'd lace them up with uh some tying style that I put together, and away we went, and that was just a But that was just a f a favor you do for them. It was a goofy little hobby. I was charging just enough money to pay for the material and buy some more to make some more. Like he had to buy more material than he needed. for just himself and so he got some people to go in with him and then after other people saw that the shoes were kinda cool, then

There was another round and another round and then they weren't shoes, they were sandals. Sandals, correct. Yeah. It was literally a piece of rubber and then your foot would you had the Yeah, the Mm. It wrapped around the the back of your foot. It would stay on your foot while you ran. Yeah, but it was it that

strap around the back is actually really important because um Flip flops actually take a lot of effort to keep on your feet. Yeah. But when you just have that uh strap around the back Then your toes can relax and your foot can move as intended.

Got it. I mean that was it. That was done. The end of story. Yeah. But it wasn't the end of the story, obviously. What I mean

Did you have any thought in your mind? to turn this into a business or did somebody else suggest it? Or what happened? How did it How did you Decided to vote. mm a lot of your time to actually

Seeing if you can make this into a product. So the local Barefoot Running Coach, a guy named Michael Sandler Said to me, Hey, I've got a contract to write a book. uh about bear for running called bear for running. And if you treated this sandal making hobby of yours like a business and had a website, I could put you in the book. So uh I've built hundreds and hundreds of websites at that point, so I rush home to pitch this unbelievable opportunity to Lena, who had a slightly different response uh to mine. Yeah, I

uh had noticed over the years that uh my husband was easily distracted. Yeah. And we were trying to get this SEO business off the ground. And I was like, absolutely not. It's like we need to We gotta focus. So no, we c we can't do this. Yeah. And so I agreed with her and I said I wouldn't do it. And then Lana goes to bed before I do, so once she went to bed I w built a website. And And The idea was

I'll build a website and yeah, let's do this. And and Lana, you're you're not interested in pursuing this because you've gotta focus on this other business that is starting to you know, that is gonna be your source of income.

Yeah, and so I got up in the morning and he sh he shows me this website all proud of himself. And what did you call it, by the way? Well, I needed a name and I just it's two in the morning and I thought Um Uh and f somehow Invisible Shoes popped into my head, but Invisible Shoesplural.com was taken. So I just grabbed invisible shoe.com. Got it. And and you saw the website.

The next. Day later. Yes, and I was annoyed. And um This is in November of two thousand nine, I think. Yeah. Mm-hmm. Okay. And he said Hey, look, I know

You know, we need to focus on the SEO thing, but we can use this as a case study. Um, and I grumbled and I was like, Okay, well Um and at that point in time, Google was prioritizing video content for SEO, and so Steven made a bunch of videos showing people how they could make their own sandals. Um, and he wasn't necessarily pushing the material that we were selling, but it was like, Oh, by the way, you know, if you want material I we have it for sale. And so he was able to get those videos to rank very quickly um because there really wasn't any competition um for barefoot terms at that time. And so within Very short period of time we started seeing

Uh quite a bit of traffic and that there you know, we made our one of our first sales was in November to a guy in Minnesota for a sandal kit, and I'm like, Well that's interesting. Correct. Did you like it? Incorporate.

Form an LLC right away? So we had a structure already in place for our previous businesses, and so we We just kinda threw it into into that. But after In our first year we made a hundred and fourteen thousand dollars. Wow. And um

We're like Okay. This is this is way more profitable than how you made one hundred fourteen thousand dollars, let me let me try to understand what What what you did. So you you put a couple of videos out there showing people how they could make their own barefoot running sandals. First of all. Even better. I basically showed them how to rip off our entire business model.

So it's like, you know, here's where I got material, here's how you do this. I mean, I just gave away the entire farm. And and did you and and you were not selling like ready to wear. She's these were kits, right? It was a piece of rubber And cord and it was like you'd send it to somebody and then they would cut out Based on their shoe, their fo their foot shape. Yeah, they we would

Teach them how to trace their foot. And then cut out their own shoes. And you have to understand, you know So we're not thinking it's two thousand nine, it's the middle of the great recession, this is a terrible time to start a business. We're like this is just happening But when people read McDougall's book and

they're like, well, I can spend a hundred dollars on a pair of five fingers Or I can spend twenty bcks. On a kit I have to make myself. You know We were a pretty good bet, and so

It was actually really empowering for people. First they'd be intimidated, but then they'd be like, Oh my gosh, I just made my own shoes. Yeah. And so it was it was really fun. So we we did have a service where you could send us a tracing of your foot and we would custom make the shoes for you, but we we liked the do it yourselfers. Uh they were Uh a lot more fun to deal with. Mm-hmm. And and you got and so because of the search engine optimization that you always

You know Being the top. forty, whatever, people who are reading that book would find out about you. You You

I mean I it's I I'm I'm estimating based on a hundred thousand dollars of revenue that first year, you're selling like Over seven thousand, seven thousand five hundred. Kids. In that first year. Sounds about right. Lane Lane's good while Lana's doing the math, um, I'll say the other the other piece of the puzzle is so Chris McDougall's going out and doing book signings for his book. Yeah. And whenever he did a book signing, we would see a lift in sales and we joke that he was our unofficial marketing department. But then I did a really fun bit of gorilla marketing. I would uh I printed up

a few thousand business cards and I would go to bookstores and find his book and then insert our business card in the book. Wow. Uh and then eventually I I made like fifty thousand of those and sent those to customers and asked them to do the same thing. Did he did you ever uh connect with him at that time? Uh we met a few times at various events and had a fine time chatting, and to cut to the end of the story, we're now working together uh with Chris and his running coach and co-author Eric Orton. Wow. Alright, so you uh Uh Sa you sell about s more than seven thousand of these kids in in each. Yeah, hundred and fourteen thousand, so we sold just under six thousand kids in our first full year. Six thousand kids. And and how did you do that? Was it the two of you

Mm putting them, packaging them up, putting them in envelopes. You know going to the post office uh going to UPS Yeah. So we we well, the other thing we were doing is wrestling the laces away from our two cats. Uh that was that was Yeah, that was really I they were hazardous conditions. Uh, we had so we started out in the on the floor of a corner of a spare bedroom, and we literally had a not Uh short discussion about whether we should spend thirty five dollars to get a table. Sixty bucks. It was sixty dollar table. Yeah. Wow. And then we ha and then we an even bigger discussion about buying a second table. Yeah.

So, but by within Not very long. We had our customer we hired someone to do customer service who was living at our dining room table. Um we hired someone to do all the shipping and fulfillment who was living in our living room. Phone line coming into your house that was a customer service line. Uh yes. Yes, back when there were phone lines. And and so and

W I mean we should also say th this point This is a Tiny market. Mm.

what you think. So the first thing that we would see is whomever was the barefoot runner in the family would buy one of our kits. Okay. And then within a week, we'd see an order for like five more, clearly for other people in the family who just thought these were really cool shoes. Yeah. And so Um, the barefoot running world, definitely small. The world for m you know, a very simple piece of footwear that's lightweight, that's flexible, that lets your foot do its natural, that you can pack, you can stick in your pocket. That was a whole different game. And we started to realize that. pretty quickly. In fact we're walking on the Pearl Street Mall, which is an outdoor shopping thing in Boulder. And a pack of teenage girls run up to us and point at our sandals and go, Oh, those are sick. Where do you get those? And we talked for a few minutes and when they left, I turned to Lane and I went, We're billionaires and um, you know, oh we just have to capture this. So it it's

People often like to think of what we're doing as very niche, but of course the joke is if you look at footwear since the dawn of human history, The first ninety nine point nine six percent of human history, it looked like those sandals. Yeah. The modern athletic shoe is about fifty years old. How were you how were you financing the business in that first year in two thousand ten?

You remember those credit cards? I still had them. Yeah. Did you get any loans? Not at first. So our first year we did a hundred and fourteen thousand in revenue and Um

The That was our first twelve so late. Twenty oh nine to twenty ten. Twenty ten. And at that point we We thought, okay, this this is gonna be its own thing. It has potential to be a real business. So we incorporated Feel the World. at the in late twenty ten. Feel the world is the sort of the the parent company or the company. Correct. Yeah. And so we

our second year in business and we're not getting paid, you know, everything is Going back into the business, going to buying inventory. So we went from one hundred and fourteen thousand to two hundred and forty seven thousand to five hundred thousand in the only selling Rubber sandals. D I kits. Yeah, do rubber sandal kits. Yeah. Exactly. And and somewhere yeah, like in the second year I said to Lena, wouldn't it be nice to have a little internet based business, took a couple hours of data, run, made a couple hundred grand a year, and she looked at me kind of confused and said, That's what we have. I went, Yeah, but we can't stay that way. Yeah. I mean early on Even even after our built the website, Lana was still a little reluctant, reticent, you know, not quite sure about this. And we met with some guys, we or we were introduced to some guys who'd been in the footwear business for thirty five years at that time.

You met them in Boulder. Yeah, they were actually in town to try to sell a license to a product they developed to an another f we're brand and uh and so they said you know We met with them and they said, we believe in you and we believe in what you guys are doing. Natural movement is the most important thing and no one's doing it. Uh but we've been a footwear so long that we're not dumb enough to try to start a shoe company. And Lena and I both said, Yeah, we're hyper optimistic and naive, but that's how things get done. So after that meeting, Lena walks into the kitchen and with the appropriate hand gesture says, I'm all in. And you know

She's a brilliant finance operations person and I'm a product market person. And so it's been uh i if it weren't for us being together, and it's the luckiest thing ever, uh this couldn't have happened. How did you I mean, so as you got more and more sales, right? And and it's Yeah, you got more and more. people ordering these things. Were you still just buying this Vibram rubber from local suppliers? I mean where were you getting your some your material from? Yeah. We were we were basically um so VRM had a bunch of regional distributors. So we'd buy out all of the material in the the mountain region. And then, you know, I'd be making calls to distributors on the east coast. And so we

came to the conclusion that we were gonna have to create our own supply. And so these gentlemen Steven referred to put us in touch with a manufacturing agent in Korea. Um they help these guys helped us with the initial design for what was actually the first out so specifically designed for barefoot style running. And then we uh naively dove into the exciting world of international sourcing and manufacturing. So you so so these consultants help you connect to a factory in Korea, which would start to make the rubber sheets for you and then presumably already cut and ready to go and ready to ship out to the customer.

So they made sheets there, they made uh we designed a mold. For a foot shaped sole. So it's already pre-made to handle most foot shapes. And all you would have to do is trim it a little bit. Got it. Um little did we know that the problem with outshole manufacturers, in a regular shoe there's a lot of layers and they all get glued together. And it really doesn't matter how accurate you are with quality control and and quality assurance. So you can you can hide a lot of mistakes with glue. And uh and the other thing is

that the product having this outsole is It was our entire product. Right. The outsole is the product, the whole thing. So

When we fur got the first batch in and Um the inconsistency was really high. So the there was times where larger soles weighed less than smaller ones, so they hadn't packed the mold properly, where the left and the right didn't match in the same weight or flexibility. Uh just a lot of problems. And We had someone who'd been in the footwear biz for a long time say to us, You know, this happens to everybody, but we're really sorry to hear that happened to you on your first try out. I I'm trying to understand why it's so complicated to make a consistent l little piece of rubber. One of the things people don't realize is You know, shoes take a lot of

force. They have to absorb a lot of force. And the more complicated the shoe the more places there are to hide your sins effectively. So because our shoe was so simple a slight deviation from the specifications that we had set and could have, you know, a uh significant impact. So we had put about a hundred thousand dollars on those credit cards to pay for the cost of the molds, and we had to pay in advance of selling the material. So we had a lot invested in this. And so

when I got, you know, we started shipping our first brand new outsoles and I got an email from a very sweet woman who was like, Hey, so one of the things that we had done is we had put little um Side flaps with pre-punched holes. So she had m put her kit together and gone out for a run and the the laces had torn through that little hole on the side and we discovered that a

good chunk of the production run, they hadn't packed enough rubber into that part. So the holes were really Flamy too thin. Yeah. And they just ripped. And they just ripped it. Just I literally sank onto the floor like

I thought I was gonna throw up. I was I was like We're going bankrupt.

When we come back. Just a moment. Helena and Steven pivot to a new manufacturer. And a new brand name. And how they wind up on Shark Tank.

After having to ask you. What's shark tank? Stay with us, I'm Guy Raz, and you're listening to how I built this. Hey, welcome back to how I built this. So it's around 2011, and Steven and Lena are facing a major meltdown with their Korean manufacturer.

It shipped out thousands of rubber outsoles. But many of them are too flimsy and way too easy to rip. W was that entire um shipment useless or did w was it okay in the end? I think salvaged a bunch. Yeah. I mean I I don't know the exact percentages But

Uh, we were able to do some Q C to pull out the ones that were definitely going to break and then when Other ones did break. We came up with a protocol for fixing the the problem. Um, and we learned, you know, I mean, it's very difficult to become a new manufacturing client because the factory's losing money on you. They're they're really they're taking a bet. You're a pain. You're a tiny, tiny They're making outsoles for big shoe companies.

Oh, it's worse. We're tiny and we didn't know that we were tiny and didn't know that you know they didn't really care about us. And you're being a pain in the b in the ass. You're saying, Hey, we need you to change your processes and they're like they're they're like you're a tiny Climate. Again, we were hyper optimistic and naive. Yeah, and so we got fired. Kicked us out of the factory. Oh, even better, they kicked us out of Korea. So when we I swear, so we started reaching out to other other outsole factories in Korea and they'd say, Oh no, we heard about you already. And you're a pain, we don't want to deal with you. Right. Yeah.

Yeah. And so where did you go? Where where did you find a new manufacturer? We lucked out. Um, there's a footwear industry magazine that we got, and the cover was a story about a group out of New York that were manufacturing agents. And so uh Lena reached out to them and they said, We're happy to talk. I flew out to New York

And met with them. And for reasons that to this day I barely understand, they decided to work with us. In fact, even more, what I found out years later is that they vetted us, they called around and asked about us, and a whole and a whole bunch of people like vouched for us. And I could not be more grateful, but I mean we were this tiny little goofy sandal kit company and people were saying, Oh no, you these guys are good, you got to work with them and they did. They connected you to a a Chinese manufacturer.

Yes. their whole job is to work with you to find uh various factories to make whatever you're making. Hm. And meanwhile, I think this is now around two thousand eleven. Um

You guys get your first Lone it's it's a significant loan like two hundred thousand dollars. And you got it from a private lender, not from a a bank I think is a private family office. Um

Also, I think around this time. Like tw twenty twelve or or thirteen. um you change the name of the brand from invisible shoes to zero shoes with an X, right? X E R O, which I think is a great name, Zero Shoes. Um but tell me why you changed the name. Well

I was introduced to someone who had been the VP of marketing for a multi billion dollar fitness company. And we got together for lunch. And the first thing he said, he looks at my feet and he goes, I can see them. I said, Yeah, but it's you know, it feels like there's nothing on your foot, so it's kind of invisible. He goes, I can see them. It's like all right. And he goes, Besides, invisible is not something you can protect very easily. So we Uh had been a

referred to a small marketing agency. They'd all left a big agency and started their own thing. And they came up with a bunch of names that were let's say unspellable and unsayable, but they had one that started with an X. Uh here I'll give it to you as X O I C S. Any clues? Zik's.

I don't know. So um I said, uh, yeah, that's not gonna work. They said, well, you can own it. I said, we don't have that kind of money. We're an internet based company. We need to be nimble and we need people to be able to spell our domain name. So the next day, I'm it's right after track practice and I'm sitting in my car and I'm thinking, I like the thing starting with X Where could I go with that? And then zero popped into my head and then I came back and presented that and said, That's what we're gonna do.

That was it? And that was it. Hm. You Uh there was something the I think a pretty piv pivotal moment which was in twenty twelve you guys applied. to go on Shark Tank and

Um You know, that's obviously a huge opportunity because it's a huge publicity opportunity. Um Tell me about that decision. I mean I'm I'm assuming you did that because i it was a a marketing opportunity to get this in front of more eyeballs. Well the first part was that people kept saying you guys should be on Shark Tank and we kept saying what Shark Tank?

So that's how it began and we actually applied originally at the end of 2011. I sent in an email. with an app as an application, and then I made a video and I sent that as well. And we got a call from the show. They had 36,000 email applications. And again, crazy amount of luck, the person who saw ours, her boyfriend had read Born to Run, and was a huge fan of that idea. And she says, yeah, we definitely want you to apply. And there's an application that you have to send in that for reasons that I don't really understand has to be handwritten.

and you can't read either Lana's or my handwriting. So we typed out our answers and then paid someone from Craigslist to handwrite the answers. And we sent that in, and then they sent us a contract which is incredibly onerous. You can't change anything about it. You either sign it or you don't. And they said, you know, this is not a guarantee of anything, it's just the next step. And the moment they received a contract via FedEx, they called and said, All right, we want you on the show. Wow. Okay. You get on the show.

uh and then I've seen it and anybody can watch it. Um And you uh get out there and by this point, by the time you you were ta you taped it, which is July of twenty twelve, you had sold in two and a half years, uh over six hundred fifty thousand dollars worth of these Sandal Kits. Yeah.

Um and you you go on there with a valuation of I think five million dollars. That's what you value the company at. Right. And um Uh and and n in suffice it to say the Sharks are not. Um

particularly generous and and you know Not really Super interest in this brand. You did get one offer. from Kevin O'Leary for uh he he asked for half of the company, fifty percent of the company for four hundred thousand dollars.

And obviously you turn that down. I'm just curious, w was it I mean Did you w walk out of there disappointed or did you walk out of there thinking, Oh well, well that's fun, at least we'll get some publicity out of this? That's an interesting question. Well look it's really a performance. It's not Right. Yeah, it's

It's a um and I think uh Robert said this in his book. People think that it's a business conversation that happens to be on television. But it's actually a television show that happens to be about business. So you asked how we felt coming out of there. And I think. Yeah. The answer is sort of in shock.

Because it's such a surreal experience. And Um honestly the most nervous I was During the entire process was

Uh we had a Uh Shark Tank viewing party, and we were listed as the first. uh segment. But they actually aired us last.

So When when we finally they finally aired our segment, it was like, Oh, thank goodness. But you're also wondering how are they gonna make us look? Are we gonna, you know, um, because you haven't seen the edit, you don't know what's gonna happen. And so we get through it, we feel like, okay, they gave us a nice edit, you know. Uh we looked like delusional entrepreneurs, but that's Accurate, so okay. But the phone didn't ring right away and No, no, no. On the phones nothing happened. But immediately

what was happening with our internet traffic is it blew up. We had two internet traffic. Yeah, we had two hundred and seventy thousand visitors at the same a at one time for about twelve minutes. Well. Yeah, and then about forty five minutes. uh after the air, then the phones started blowing up as well and the orders just started pouring in and we did ten percent of of our lifetime sales volume in that week.

In that That week. Wow. In that time after Shark Tank. what did you start work I mean, did you start working on

Sort of ready to wear sandals. I mean you were still doing kits at the time, but Did you start to think about, okay, now we've got to go to the next thing? Yeah. So through a coincidence, um we met Dennis Driscoll, who had been uh the former head of global design and development for Crocs and

It was a kind of a handshake agreement. So you know, we paid him more than uh anybody else at the time, but still, you know, a tenth of what he'd been making. Yeah. So what he so it started out the Steven had plenty of ideas. Dennis really brought the knowledge of how to uh translate those ideas into actual shoes. So we wanted to do ready to wear and Dennis was able to Ready to wear sandals. Right. And same factory in China could make those? Well when we came out with the Z trail which

had a multi part soul and um trail running sandal, yep. Yeah. We did m uh need to move at that point in time to a more competent factory and we had some interesting lessons. We learned that our first factory had actually patented our saddle design in China. So uh that Oh, they patented it in China. Which you had they took your design and Well.

Yes. It cost us some money, but luckily we had already shown it publicly in advance of them doing that, so that allowed us to get the patent back. Yeah. So anyway, uh adventures in in manufacturing. So these are things that you know when you're naively thinking, how hard could this be? Uh you you never imagine the kind of stuff that you're gonna run into and the amount of money that's gonna cost to deal with some of this stuff. Yeah. You definitely don't imagine how much money you're gonna spend on legal bills. Right. Alright, so you are still focused on sandals at this point, twenty fourteen, but but you're starting to obviously at this point and and I guess was it maybe it was Dennis Driscoll's

influence or his experience you you decide that you are going to make a closed toe running shoe. A zero Drop. the the heel and the toes are the same level.

Um Running shoes. So basically a A closed shoe with a Uh a rubber Soul and that's it. No cushioning, nothing. Why did you decide I mean was that just I mean it seems obvious, but was that

Was that the r the direction you were headed in any way, or was there somebody or some reason Why you decided to pursue that. We have a very interactive relationship with our customers online. And they are just constantly telling us what they want next. And again, we will think of ideas on our own, but a lot of what has driven the growth of our product line and it's now what do we have, thirty four different styles, something Something like that. Um you know, they would just tell us again.

after we're making sandals. What are we gonna do when it's winter? What am I gonna do at the office? What am I gonna do if I'm road running or trail running? Or fill in the blank. And and so you started to design clothes toe shoes and um But how did you I mean how did you design them. Did you

Who who designed them? Well let's start with our our sandals where we were doing the custom made sandals and people were sending a tracing of their foot. So we had about five thousand foot tracings and we mapped those out to come up with the right shape for a shoe. So most shoes have pointy toe boxes that squeeze your toes together, and we were seeing what human feet actually looked like. So we were literally like taking these tracings, putting them on a piece of uh

foam core, tracing around them, marking dots where people's toes were, and just doing the closest thing to a big data play, just to figure out the shape, to make something that actually works with a human foot. Dennis was designing the shoe. And so Dennis and I would just go back and forth between um either ideas of his or ideas of mine until we ended up with something that we liked. And We had to Educate the factories.

in the development offices about how Our customers wanted shoes to be because There is a standard way of doing things and we'd say, We want this, and then they would be like, Oh, well They would just put in Uh stiff heel counter, for example, because

That's what's traditionally done, but that would be abrasive and uncomfortable. And so we had to go back and say, No, no, no, you need to take this out. And they're like, but that's not how it's done. So so there was a just a a a very a lot of heavy lifting. And so that that was a big um it it took a lot of time. You were still a pretty small business when those shoes came out. I think that year you did about three million in revenue, obviously impressive growth, but still a small shoe brand. How are you getting the word out about these new clothes toe shoes. I mean, obviously you had a customer base who'd bought the sandals, but

You know, there are other at this point there are other brands that are making quote unquote minimalist shoes, some of the big players. were doing versions of it. So how did you get the word out? The biggest thing was simply word of mouth. And whenever I can find any opportunity, to create some sort of content or to engage with some audience or to find someone who has leverage over their own audience, that's what I'm gonna do. And as the business has grown, our ability to do that has grown. So our our email list is you know just shy of a million people. And we have we have a a list that we call our inner circle list for people who raise their hand and say,

they really want to help and it's like 70,000 people who we reach out and ask them to do something like vote on a new color. or go to some website and comment on a post, like tens of thousands will go and do it. Uh so people just They wanna be helpful. And and really

You know, you you were s this is entirely direct to consumer. I mean this is a a purely d uh up until you know a few years ago, but but you know, into twenty sixteen, seventeen, eighteen. This was a you were not in brick and mortar stores. Right.

We were in a few small independent running shops, but yeah, we wanted to be wholesale. That was the model. But um Uh Stephen. had the internet marketing background, it was so valuable because it allowed us to have the conversation with our customers.

And um We expected that you know, the goal was always that that we would transition to wholesale. Um however. Just add that to the mix. Add that to the mix, but that that would be how the business would really take off. Yeah.

one of the things that that I think is um I'm curious about is as you you know, got more and more attention. Um Did you find that some of the big competitors were making life hard for you or trying to compete with you? I mean a especially as you were getting into retail shops? Well, there are a couple things that uh we've seen. We go to trade shows and I walk around and see the big companies go, Hey, that's an idea that I came up with three years ago. So there's a lot of that that goes on in the footwear world in general. I took it as a good sign when I started seeing big companies take ideas, design ideas that we came up with. Um

When we were first trying to get into retail, we had a significant order. That was supposed to get placed one day by a major, major retailer. And at the end of the day, the order didn't come through. And we called and said, what happened?

And from investigating what we were told is that one of our um multi billion dollar company, coincidentally had reached out. And said uh we don't want that product in your store. Because they had been tracking. sort of a iconic store in Boulder that they used to see, you know, what's happening, where we started outselling them. And uh that was a

Very interesting thing. And again, we were what, like a two, three million dollar company at that point. I'm thinking if they're afraid of us now, that's a really good sign. And and I guess you guys profitable, not hugely profitable, but profitable in in twenty fifteen and And a few years after that you're you're you're going to take on your first outside investment from a a company called or investment group called T Z P. Yeah. But before we get to that, I w I wanna ask you about the the period sort of leading up to it because

Yeah, not only were you were you gonna have to deal with a pandemic, but there was also like a trade war. happening with China. Which essentially means that the tariffs on imports are gonna go way up, right? Yeah. Yeah, so we actually uh The trade war was a really big

Challenge for us. Because it starts the There were no supplemental tariffs applied to footwear at first, but But by the time they announced them in September of twenty nineteen. We had already placed a multi million dollar order, and suddenly we were going to have to face Yeah.

Massive terrorists like uh half a million dollars in unexpected Wow. Um, and so because they were, you know, first it was uh one amount announced and then another amount threatened and so we're scrambling to to work with our factories, can you accelerate this order to get it in before um this second round of tariffs come in. So I just just should interject to this point, because you were really on the line here, right? Because you also owed

a lot of money to different lenders. Like people and banks who've been loaning you money over the years and they were I think some of them were starting to get antsy, right? Right. By twenty twenty. We had personally guaranteed Five million dollars in debt financing.

combination of SBA loans the this uh Family office As well as short term lines of credit. And so You know, my investors at the end of

They they're all Um Upset about how much inventory I have on my books at the end of twenty nineteen. And then twenty twenty rolls around, China factories start shutting down. And all the great positions. Exactly. I'm a genius. Yeah. You know.

And so We You know, Steven has an amazing ability to turn inventory into cash, so I am never afraid of having too much inventory, but I am terrified of not having enough because if you don't have inventory, you have nothing to sell and you have no income. So you know, we survived the trade war, we were in good position for the pandemic, but I you know Five million dollars in debt.

It's a lot. That's scary. That's har right, you g you lose sleep over that. I mean after half a million dollars it's like Well Whatever. Yeah Yeah, what are they gonna do to me? If we didn't own a house we we Right um But I you know, at that point we had thirty or forty employees and you feel incredibly responsible for these people's lives and their families and their health and well being and

I just felt like We got lucky twice. Both of these things could have put us out of business. But I I just can't risk that happening again. you needed you you were looking for some kind of stability and and presumably right between the Demand that

from cut from, you know, consumer demand and then also just the debt. Right. Um you it made sense to bring in an outside investor. Yeah, I mean I I when we got the offer from TZP, I am so glad we took it because

Um then the supply chain crisis hit and so All of our best sellers were out of stock and we needed a million dollars on air to spend on air freight so we would have something to sell. And we would not have done that if we had not taken that investment. And so essentially, I mean it's it's one of these these paradoxes, right? Because the business is doing great. You're doing gangbusters, but at the same time, like if you don't have the line of credit and and and you can't finance the inventory and It can even w with great sales, it can collapse. e even more. I mean, the greater it is, the higher the probability of collapse because you're always going to end up over leveraged in some way or subject to some weird change. I mean, I think of companies that

have one major wholesale account. If that one account, if anything changes for that account, they're dead in the water. Yeah. So it's you know, there's so many things that can impact a business, especially when it's growing quickly. Yeah. So now so now with an outside investor Um Does that enable you I mean, has that enabled you now in the in the

You know we're two and a half years, three almost three years since you took that investment. Um has that enabled you to to do things that you couldn't have done before, like in terms of i ex obviously you've expanded your line and you know you're growing, I think you're gonna hit Forty.

But almost fifty million dollars in In sales, right? You're on target for that this year. Well, we did forty eight million in net uh revenue well net sales um In twenty twenty two. And uh so the answer is absolutely yes. So the first thing is it allowed us to buy

More inventory. We actually didn't know. how much we needed because we kept selling out. So you can't figure out how popular a product is if you sell out before you know, the demand starts to to peter down. And so so first it allowed us um to just really stock up and start to figure out what the demand was.

And so um we now, you know, for a long time it was just Dennis designing shoes. Now we have uh three designers and three developers And um we were able to bring in much more skilled financial help It's I I I wonder to myself, how did we even survive? Like the whole thing was held together with spit and swizzle sticks and it was incredibly difficult and stressful. And so w uh having the

a private equity investor has allowed us to really create a solid infrastructure underneath what we're doing and so we have a platform for even more growth. Okay. The the The global athletic footwear market is enormous, over, you know, a hundred and sixty billion dollars by the end of this decade.

Um, but barefoot shoes is a fraction of that market. And you know, a lot of t a lot of times when you're starting a business, people say, Well, that's a tiny market, you know. It's only worth it's only gonna be worth Three, t four hundred million dollars, there's gonna be tons of people trying to eat it that You know, at that You know, try to

So What's your response when people say, you know, this is still a tiny market and Are you Essentially trying to position yourself to be the dominant player in that market. Yes.

We're very close to actually being the dominant player in this space. And We don't want to pigeonhole ourselves in this whole idea of the barefoot market. Because again, the customers that we have, the number who know nothing about this idea of barefoot or minimalist or whatever, they just experience the comfort and benefits of our product. And we hear about people

For 20 different reasons. And so we have a number of professional athletes who are living in our shoes. We have a number of music celebrities who are wearing our shoes when they uh are not being seen on stage because they're being paid by a big shoe company to wear those shoes. We have parents of kids with ADD and ADHD who swear by what we're doing. Yeah. You know, you can call us delusional entrepreneurs, um because We genuinely believe that this footwear is better for you and Mm-hmm.

While we may be pushing the boulder uphill a little bit, we don't think we're gonna be doing that forever. We we're doing you know, there are so many easier ways to make a living than being in the footwear industry. Like if you're thinking about starting a shoe company, I would just say run as fast as you can in the other direction. But Which is what everybody told you when you started it. Right, exactly. And it's good advice. But um but we're still here because we believe so passionately in what we're doing. Our customers are so evangelical about, you know, they are You know, our frontline marketing army, the number of I've seen it. I've I've looked at the

I don't think it's any secret. I I'm a wearer of your shoes. And and and and started wearing them three years ago and uh several pairs and w every time I go On a trail run or something, I see somebody there. Wearing them. Or often people say where the where those she's.

You know pe and and I have I have talked people have asked me about them. Well and you're not even paying me. No. Look, your goal was Stephen, your goal was to to Retire. at you know thirty five and at passive income and things have changed. Do your hobbies. I mean you could

Do W you could, you know, sell the rest of the business and and truly um actually be retired and totally financially set and indulge your you know various

You know, interests and and you could do that now. I'll tell ya, I'm I'm sort of wrestling with this, to be honest. Um, I'm sixty years old and on the one hand I want to be part of turning this into a multi billion dollar company. As long as we have all the people in place so that I'm only doing the parts that I like doing and that I enjoy doing, that I do well. On the other hand, I'm sixty years old. And I don't want to work for the rest of my life. And frankly, um I had a Pardon me.

Yeah. It's the first time this has happened. Mm-hmm. Hm.

Um Yeah, the health scare. Yeah. The last Jesus.

It's the first time this has happened. I'm not sad. It's just hitting me.

Mm. So um yeah, I had a Health scare. And um And

I could not be more grateful for it because it really brought into focus Um A how precious Life is and I Just Find myself um

Just Owmed with how beautiful and wonderful and lucky and Greatful and Every positive word you can think of.

Uh that's been my experience for the last six weeks. But uh it also made it very clear why would I spend a whole lot of time making my life difficult instead of enjoying it with my wife and my dog and being helpful and ironically I might be more helpful for this movement when I'm not the CEO of a company where people think I have a conflict of interest. Maybe it's maybe like the brand ambassador. Something.

Um, you know, there's gotta be a way of doing it where where Lane and I can participate in a way that's maximally using what we're good at without taking over our entire lives, which is what it's done for the last thirteen years. And That would be nice. Yeah.

Well and I Oh. I think um The I think silver lining of this health scare is that.

Steven. Had to Not open his computer for A week. Which during the entire

Twenty three years that we've been together has never happened. Yeah. And so It was awesome, by the way. Yeah. I mean it's a It's an um it's such an important perspective. You know, and and remarkable that in I mean, we're here we are in twenty twenty three and

you've got this brand that has really m made a huge impact. In the world of Uh Fitness and running and you know, even lifestyle. Yeah. Um

Yeah. Do you um First to first to you, uh Lena. Um How much of of of what's happened? with this brand, do you do you attribute to the hard work and and the skill and and effort that you put in? How much do you think has to do with luck? Uh

That is an excellent question. So I would say Uh I can't really break it down that way because it's sort of a hundred percent luck. And

A hundred percent hard work. And um but it's really a hundred percent luck. Yeah there's so many things, you know, if Chris McDougall had never written that book, Um, if Steven wasn't an internet marketer, if he and I didn't have complimentary skill sets I I would never have been able to create this business without him. He would never have been able to create this business without me. So without luck.

You know, there there are just so many ways this Could never have happened or Um Uh had a premature demise.

Yeah. What do you think? Steven. First of all. When I listen to your show, this is my favorite part.

Because this is something that I think people mm, overval well, look, we know for psychological research people over value their own role in things that go well and undervalue it in things that go Badly. When I was in film school, one of our teachers was the now late director Milo Schwarman.

Uh, one day. How do you make a good movie? And pardon my Bad Czech accent, Mueller s Mueller said. Well making good movies, uh he's ninety percent casting. And uh the other ten percent is uh

Also casting. Yeah. And so that's how I think of business. It's ninety percent luck and the other ten percent is also luck. And then just like Lana said, there's a whole separate hundred percent. where it's ninety percent working your butt off, and the other ten percent hopefully being smart enough or finding someone smart enough to know how to put out the fires that started overnight, despite the fact that nothing changed since yesterday. Yeah. So, you know, hopefully with a little Gratitude, humility, and um not trying to reinvent a wheel that put itself together in ways that I can't imagine.

That's Steven Sashin and Lana Phoenix. Co-founders of Zero Shoes. By the way, we have a happy update for you on Steven's health.

Since we spoke, Steven heard back from his doctors and were happy to report that After minimal treatment? It looks like Steven is now in the clear. Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is hibt at id.wondery.com. If you want to follow us on Twitter, our account is at how I built this and mine is at guy. And on Instagram, we're at howIbuiltThis and I'm at guy.Roz.

This episode was produced by Kiro Wakim with music composed by Ramteen Arablui. It was edited by Neva Grant with research help from Catherine Cypher. Our production staff also includes Elaine Coates, John Isabella, Casey Herman, Carrie Thompson, Alex Chung, Chris Massini, Carla Estevez, and Sam Paulson. I'm Guy Raz, and you've been listening. to how I built this.

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