Everlane: Michael Preysman

Hey, it's Guy here, and before we start the show, I want to share something I heard recently from Steven Colbert. It's about learning from failure. He told me an incredible story from way back when he was doing improv in Chicago, and how he Broke on stage one night. which he initially thought was the worst thing ever, but it actually changed his life. In his approach to comedy. Forever. To hear my conversation with Stephen Colbert and other incredible creative people, listen to my other podcast, The Great Creators. Just search for the Great Creators with Guy Raz, wherever you listen to podcasts.

And now. On to today's show. So The strangest thing you would never expect if you were to build a brand today, and you start with a t-shirt, your next product wouldn't might be denim. Our next product was literally ties and bow ties.

Ties and bow ties. Ties and bow ties. It just seems like a like a kind of a just throwing a dart at a dartboard. Let's do bow ties. It is weird. Yeah. We didn't have a lot of connections and it was We would have to wait.

six to twelve months to be able to launch A sweatshirt. And our alternative was we had a Guy that could make ties and bow ties in two months. And how did those do?

We never made ties and bow ties again. Let's just put it that way. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built.

I'm Guy Roz and on the show today, how Michael Praisman set out to start an online retail platform. fell into the apparel industry. built the multi million dollar brand Everlane. In early 2023, KPMG, the global consulting firm, did some research around consumer behavior.

And they found that about a third of people think about a company's social mission when they decide what to buy. So, for example, about a third of consumers might choose Ben and Jerry's over, say, the supermarket brand, because Ben and Jerry's is perceived to care about things like the environment. Over the past 20 years, this kind of research has led to an explosion of consumer-focused brand and companies that emphasize their commitment to social responsibility. There's even a name for it, social enterprise. And for the most part, that's a good thing, right? We want our companies and brands to do less harm. But the problem is that being celebrated as a so-called social enterprise can also make you vulnerable when you can't always live up to your ideals. And that is part of why Everlane hit a bumpy patch in the past few years.

If you don't know the brand, they sell clothing. Mainly basics like T-shirts, jeans, sweaters, sort of like the Gap from the 90s. Everlane was one of the first direct-to-consumer brands that really leaned in on the concept of radical transparency. The company laid out the actual costs of making clothing. So, for example, a t shirt can cost between$4 and$6 to make. What we're all paying for?

is the brand name. You know that, and so do I. Everlane wanted to double down and not just show you the true cost of making clothing. But everything about it, the factory, the shipping process, where raw materials were sourced. And the idea was to educate consumers, to show them that They could basically buy the same product from Everlane and

But for a fraction of the price and They could do it ethically. When Michael Prazman co founded the brand in two thousand eleven, He wondered whether he could sell a simple t-shirt on the internet and turn that into a brand. His concept tell people the true cost of a shirt.

And then sell it for less than anyone else. was a big hit. And for many years, the company grew at an eye-popping rate. But as you will find out, The pandemic had other plans for Everlane, and its business took a pretty significant hit.

Today, the company is back on a path towards profitability, in large part because it has also narrowed some of its ambitions. Michael Praisman didn't set out to have a career in fashion. He's the child of Russian immigrants and grew up in the eighties and nineties in the Silicon Valley. As a kid, perhaps not surprisingly he was into computers. And after Michael graduated from college at Carnegie Mellon,

He landed at a private equity firm in New York. And I'm just feeling A lot of angst. And the kind of angst that just feels like something's not right. And I didn't know what it was.

But I remember I don't think this can Be my life. And I had this

period of two to three months where I was trying to figure out why am I feeling this way. What can I do about it? And I had I did this one exercise and I remember I d I was I said, Okay, I'm gonna write down Everybody I admire. Mm. And I wrote my down my father, he had actually started a couple of businesses.

I wrote down big names. Uh it w Michael Eisner at the time or uh Steve Jobs, Steve Wozniak, and they were kind of big names, but When I wrote down every single name. I realize not a single one worked in finance and all of them had operated or built something from scratch.

And I said, Oh. And that was the moment for me was as simple as that that I realized I've got to go and start something. So you thought All right. I've got to figure something out.

And presumably you had a few years where you were watching You know. startups and people pitch ideas and and and maybe some of those ideas you thought, Well, this doesn't seem so complicated. Or or or maybe not. Oh, it definitely seemed complicated, and I will tell you I

Having had the chance to work in the finance side. It's a Pretty It's a hard job. But it's a financially

oriented low risk job. And so you look at your life and you say, Hey, I if I stick here and stay here, I'm made. I'm Fine. By all measure. And so to be in New York at that time.

I started hanging out with entrepreneurs, but I had the fortune of having grown up in the Bay Area, so I've been exposed to what you could call the best of the best. And I started hanging out with entrepreneurs and I just didn't feel the energy in New York. So it was the summer of two thousand ten and I actually packed up my bags and moved back to California and moved to San Francisco. With the intention to start something.

Or work for a very select few companies that I had on my list. Yeah. Alright, so you move back. to the Bay Area in two thousand ten. Yeah. And did you have any ideas at all?

I had a little bit of an idea. You know, what I was really inspired by at the time was this company that still exists in some shape or form called Guilt Group, which had really changed how people bought luxury online. No one had really bought luxury items online and all of a sudden guilt group came around during the recession and exploded because people could get

Prada, Gucci. All these companies that Say fifty percent off. And while it was a discount business, which isn't What I love it was a eye opening experience that

people were willing to buy these brands online. Yeah. And I had the idea for me was really critical was I wasn't technical. Um Even though I studied computer engineering

I didn't code. Uh, which is strange. I don't know. It just never really saying to me. And so I was really set on finding A co founder and I you know happen to link up with a really great guy, Jesse Farmer. And he was a com he he was a coder, he was a technical guy. He's more than just yeah, he's a technical product leader, but very technical and able to write

uh code and you know Good development and And to end. And you knew that whatever it is that you're gonna start, you I mean you had the sort of the You could handle the finance or maybe the the business side, but you needed somebody who could handle the technical side because obviously this is gonna be a digital based business.

Yeah. It was gonna be digital based and in the early days it wasn't Yeah. retail necessarily. Jesse and I were in explore mode. Um to be honest. We Ended up at a place called Dog Patch Labs, which has a really storied history to it, but we we ended up working there.

For a number of months just Iterating through ideas. Yeah. And And what do you do? You start

Talking about w like what do you remember about ideas you talked about? Yeah, I can tell you there were a whole ton. So the question for us was How can we rethink online shopping? Okay. And what can it look like.

Yeah. And we each put down Open up a bank account. And each committed and said, Let's just put down ten thousand dollars. And the money being spent was to decide. what this business was going to be, but you knew it was gonna be an online retail.

Yeah. And by the way, this is two thousand ten. Yep, end of two thousand ten, might be early two thousand eleven. And we are trying different things. So I'll give you an example. One of Jesse's big beliefs was building on top of audiences.

And In the early days, we said, Okay, let's Let's see how we can rethink shopping. And we were looking at all kinds of different platforms. Etsy is an example. Yep. And we built a tool on top of Etsy. That basically turned your Etsy shopping into feeds and you could follow different shops.

And then you would get updates on their newest items. And it worked and it was very cool and a lot of people loved it. And then we realized very quickly But Building a business on top of Etsy was a losing proposition.

Hm. And so then we went from At C The Tumblr. Which was a big platform at the time, and we said, Why don't we see can we build shopping on top of Tumblr?

Yep. So we start building Tools on top of Tumblr. So one of the thoughts for us was can we build curation? And can we create so much buzz around products that we can drive people to find the products they love, buy them, and then

We would get an affiliate fee. Of some sort. And the concept was an iPhone case store. We would design iPhone cases based on the number of likes they got on Tumblr. we would actually put them into production and sell them.

Where did you get the iPhone cases from? We went online and there was a place where you could upload graphics and then they would make iPhone cases on demand. Who was designing the cases? The cases were designed by a group of five or six different graphic freelancers we found. We would have people design very cool

Graphics of different sorts. Some culturally related, some beautiful, whatever. And we would post them on Tumblr and say, if this gets X number of likes, we'll make it and sell it. And then based on that it would link to a store. that we had where people could buy things. And

Indeed. People would like certain things, would put them up and they would sell. And it was sort of the beginning of creating this buzz and wait lists. Bye. We were buying all of these iPhone cases from some site, I don't know, call it uh Custom iPhone cases dot com.

And we would pay twenty bucks and sell them for thirty. So the margin wasn't very good. We were making ten dollars. And then we realized, huh. These twenty dollar iPhone cases I don't know how

why we made this assumption, but we made the assumption that they probably cost two or three dollars to make. And now. we're only making ten dollars but generating all the demand. And this custom iPhone case company is making a ton of money off of us. Right. And that was this aha moment that said wait, the markups in retail are actually pretty massive.

And why don't we just become the manufacturer and sell direct to the consumer? Hm. And in at the time that we were building this iPhone case store, I do want to say That we had gone out and raised a small amount of money. A million dollars.

I guess it's not that small. No, and and and it was you raise that money In two thousand eleven based on building an iPhone case store, or or was the pitch about doing other things? A new retail platform on top of Tumblr. Okay. And you would sell you'd start with iPhone cases, but you could go into all kinds of accessories over time. Okay. Yep, exactly. And uh and and who who gave you the money? Was it was it professional investors, venture capitalists, was it friends and family?

It was, you know, we had We just had a good network. Yeah and we were surrounded by people doing other interesting work. And so quickly people introduced us to the right people. And it was the the you know famous S V angel Ron Conway.

It was Kleiner Perkins put in a little bit of money. It was a whole host of different people that just said, Hey, this sounds cool. Tumblr shopping. These guys seem smart, we'll give them a shot. Yeah. And and when I go back to thinking about why I moved to California versus New York, that was the reason. The belief in California has always been give it a shot. Let's see what happens.

W one of the things that I I I read that you while you were kind of Searching around for ideas and and what might work and what might not work is You reached out to a bunch of different entrepreneurs, um And I know one of them was Dave Gilboa who started Warby Parker because you

probably loved that brand and they were a hot brand. Tell me what You just reach out to him called? I did. Dave was particularly helpful because indeed he had launched in Two thousand and

ten, I believe, or oh February two thousand ten. So they were about a year and a half in. And I had You know, we had just launched our iPhone cases and we said, Wait a second. Were be selling direct.

Why can't we sell direct and build a brand around that. And Dave was just immensely helpful and just help helping us think through the early days of what we were building.

Yeah. I was learning what mattered from Dave. And then I remember In the early days also. Just learning how to manufacture because we decided we were gonna be the manufacturer. Yeah, I mean I mean obviously w what what Warby Parker did was they realized that glasses were being marked up.

extraordinarily high and that most glasses most people wore Were controlled by one company, most brands. And and so That model Of like

producing or owning sort of the the the means of production and then lowering costs that was their model. And so clearly that That hadn't you know, that I I imagine that inspired you to some extent. It inspired me and us in an an immense amount. And what what it was when we I remember these iPhone cases. We realized the markups were so high and we said, Okay, well, we're not gonna start a company around iPhone cases, but what if we start a brand?

And for what whatever reason it was, we realized that the basic T shirt You know, I remember loving a a brand called James Purse that sold t-shirts at the time forty-five dollars. Now they're probably eighty. And I found out those T shirts cost Seven dollars, six dollars to make.

Hm. And That seemed Borderline Unethical.

Got. A seven dollar T shirt was marked up to forty five dollars and the consumer had no idea. Is it unethical or is it just capitalism? I mean, And that's the idealism I had in the in the early twenties. Yeah, now you could say in the thirties that's capitalism, good for you. And then you could say our version of capitalism was great, we're gonna sell it for less and tell our story.

Yeah. But in the early days it felt more than that. And it felt like there was an opportunity to reshape the industry. And we said if the basic t shirt can be marked up. Seven times. Let's build a brand around that concept because the T shirt is the most Basic part of a wardrobe.

And these were plain T shirts, just No no design, it's just a no pockets, just a plain t shirt. We did eventually have a pocket for sure, but yeah, in the early days it was plain t shirts. Good old plain high quality Suprema cotton t shirts. So when you when you and Jesse were thinking about T shirts, did you think about a full apparel company right away, or did you s did you think let's start with T shirts?

We thought about it as a platform. To launch product. Not as much as a fashion brand. That That came later. And

This was a big point. Um One of those. Critical moments in the evolution of the company because we had raised Our million dollars maybe spent at this point a hundred thousand of it.

And We had signed up. all these investors on the idea that we're gonna build a retailer on top of Tumblr. Yeah. And uh The belief was let's

Ditch. The retail platform, let's ditch all this technology. and let's go launch a brand. And in my head.

I had this. Immense фір. That our investors were gonna say this is not what I signed up for. Mm. And so I remember this moment where I draft up this long email.

about what the new plan is. We're gonna shut all this stuff down and we're gonna launch a brand and it's launching on this date. And I sat on this email and sat on this email and finally Send it to all of our investors expecting uh a bunch of people to say, What the hell are you doing?

And for the first hour or two crickets. And then three emails come in of the thirty so investors we have that say Great. Sounds good. Yep. And they there again was that

entrepreneurial spirit of Whatever you need, just go do it. And you you mentioned that when you found out that your forty five dollar t shirt costs seven dollars, right? Did you think that okay. We're just gonna source those T shirts from the same factories and sell them for less? Was that the

Idea. It Should have been the idea. But the idea was We're gonna source all the material and control the entire supply chain.

And then sell directly. To the consumer. And what I mean by that is the difference is in one care case you go to a manufacturer and you say, Can you make me t shirts and what are you going to charge me? And I'll get the final product. And then the other one we You know, Matt

A number of people down in Los Angeles and We bought the fabric. We learned how to do the patterns. For the fabric, we had those patterns, what we call grading, so it can go from small to extra large. I mean we learned

Every step of the process because there was this theory. that If you're going to become a great Chef. what you need to do is go to cooking school. And so we kinda

We believed we got had to go through Call it apparel school one oh one. How did by the way, how did you come up with the name Everlane? Jesse and I were sitting in a room one day on instant domain search.com. And we were just

for three hours typing in names, names, names, and I had a whole bunch of scratch and I always You know, we like the n names that were simple and clear and all of a sudden Uh typed in Everlane. dot com and it was available for seventeen dollars. And we bought it.

That was it. That was it. 'Cause it doesn't mean anything. I mean it it it doesn't mean anything specific. There's no connection to Could be a street, it could be a It was the idea that it was everlasting and at the same time rooted to a physical place because we are digital.

But Uh people get really worked up about names. I think brands and people live into their names, the name becomes them. I I'm less I'm usually not that concerned. I don't think names matter that much. And a big part of what we were trying to do was to

do right where others do wrong and that's where the storytelling really came. Full front. Okay, let's talk about this right where others do wrong. What you you said in your view what others were doing wrong was they were overcharging for what it cost them, which, you know, again, I mean that's For better or worse, that's business, right? That's how businesses work. They in the movie theater you go to the pot get some popcorn and they're overcharging you for that popcorn, like a thousand percent.

But that's right, that's how they make money. I I understand you wanted to you w basically wanted to produce clothing and and make it as you know, become an online retailer, but What was it what else were you gonna do that was different? from other brands. When I say that do right where others do wrong, all of that came out over a period of time. In a way that we really became students of the industry and tried to

Say if we were to build this from the ground up. In a way that put the customer first, what would that look like? So pricing transparency was one. Касомер эксперє The customer experience we really focused on the communication, the community.

really having an open Dialogue with the consumer. Which felt the opposite of what you actually experienced oftentimes in retail. where you would go in and somebody might talk to you, somebody might not, getting help was challenging, knowing how to return things was challenging. So customer experience and customer service was always a big, big part of what we Hung our hat on.

Okay, I get the idea of customer service, but that wasn't new. I mean th you could go into a Nordstrom or an Eimon Marcus and get great customer service in 2011, you still can. Um what was gonna be different about this primitive these were it was it was gonna be cheaper for one. But what else? really started out with pricing transparency and being honest about that.

And when you say pricing transparency, what did that mean? You were gonna tell the customer What it costs. to make this product and and why you're selling it for this price. We first started by selling a T shirt for fifteen dollars. That was the quality of a

James purse for forty five fifty dollars at the time. And how did you get those t shirts made? Where did you get them made? In Los Angeles. End to end, we made them. By sourcing the fabric. We used out of the gate Supima, which is the highest quality American cotton.

Yeah. than finding people I remember driving an hour with fabric and taking it to a greater who would grade it from extra small to large and then getting a cut. And then we would actually take it from the cutter. to the sower.

to the direction to the finisher. And then package it all up. And how much did it cost you to make each shirt? I think in the early days it was something like five sixty.

How were you able to make the shirt so m for so One part of the production process to the next. To me that was the secret it. Of the whole industry. You know, you're

You're making the fabric might have been a I think call it a buck fifty to two dollars. Uh the cutting. Forty five cents. The James Pursty cost six, seven dollars to make two.

And They were selling that for a four to six X markup. And the basic principle of Everlane in the early days was two to two and a half X markup. That's it. And so yeah, ours was a little bit cheaper out of the gate because we managed all the different steps ourselves, but eventually A few months in, we contract manufactured with one vendor who actually managed all the processes.

And this was and and they can make it all in Los Angeles. Correct. And to end. Yep. And the first run was gonna be like what, a thousand T shirts? Oh boy, yeah. The first the first run was fifteen hundred T shirts. That's it. Okay. Uh and we're probably

We're in October now with a plan to launch November first. of twenty eleven. Yep. So all right, so the idea was let's get these shirts made and then we're gonna figure out how to sell them. You hadn't you hadn't launched the company yet, right? There was nothing

Everlane dot com was just a a placeholder at that point. Yep, just a placeholder. Everlane uh Jesse was building a lot of their technology in the back end. And we had had A community, a small community that we had built through the different channels on Tumblr and so you could call it we had five to ten thousand people on an email list.

that we knew we could reach out to when ready. And did you have an office by that point? We had moved from Dog Patch Labs because we overdid our stay there. to a place in the financial district in San Francisco.

Yeah, so it was about. fourteen hundred square feet. Yeah. So The idea was let's sell the shirts.

at uh will basically launch Everlane dot com with this Teach yourself, Oh what were you gonna sell the shirts for? Fifteen dollars. Got it. We said let's

create a viral campaign if we can. Wouldn't that be great? We sign up. I mean, it's sort of a dream, but how many people can we sign up before launch? So we built a little landing page and the landing page had a series of awards rewards you could get based on the number of people you invite. And it was at Everlane dot com. That was and and and if you invite people

You offered re like what kind of rewards? Uh. Free shipping for life was if you invited fifty people, if you invited five people, you got early acts of the wait list. If you invited ten people Uh, you got free shipping on your first order. So it was like different tiers and you could track where you were.

And It became a bit of a staple of Everlane over time, which is building wait lists, but that was our first one. And it was a really simple concept. It said your luxury goods sell for eight times what they cost to make.

Not at Everlane. Mm. Launching. November first. At midnight.

Sign up. But how did you get any attention for that page? That's where that first five to ten thousand email list came in. So we emailed those five to ten thousand people with a really nice email and said, Here it is. And you can sign up.

And then we posted it on Twitter at the time and a couple other places. And next thing you know. I kid you not, this thing blows up. And we have Eighty.

thousand people. Sign up. Well. Eighty thousand people. Did you say specifically how much less it was gonna be?

We didn't even tell people we were offering t shirts. So I was freaked out. I mean we were all freaked out because we said they think we're selling luxury goods. For eight times what they cost to make. Let's see what happens. Yep. And so we had these eighty thousand people.

And it felt really exciting. But it also felt very overwhelming. And we go, Uh oh. We have way more demand. Then we have supply.

And We don't even know if these people are gonna be pissed off because actually what we're just selling is a t shirt. When we come back in just a moment. Everlane causes a big stir in the fashion industry. By telling people.

just how much their clothing actually costs. Stay with us. I'm Guy Roz, and you're listening to How I Built This. Did you know that over eighty percent of people have subscriptions they've forgotten about? It's too easy to subscribe to a free trial of something and then completely forget about it once you stop using it.

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And thanks so much. We love you guys. You're the best. And now Back to the show. Hey, welcome back to How I Built This. I'm Guy Roz. So it's 2011 and Everlane is hours away from launch with fifteen hundred t-shirts, a wait list of 80,000 people. and a clear strategy for how to generate buzz.

So we sent an email. That says we have eighty thousand People But Can't let you all in.

So you're now on a wait list to be let into Everlane.com. And we put Everlane.com behind a Well. And so we launch with 1500 t-shirts and let five or 10,000 people in. But fortunately we knew we could

create another five thousand t shirts and then Let the next tranche of people Yeah. And so that really became the way we built A bit of the business and the momentum.

for the first year. Did you'cause you had another run of T shirts, did you sell all of them out fair relatively quickly? The first one sold out. I mean it was fifteen hundred T shirts fifteen dollars, it it sold out in a day or two. I mean quickly. Yeah. And

We did everything we did. with cotton. And For a certain group of people. That's just

Supima cotton. All what we call garment died. It was a higher quality product. Without a doubt. Yeah, I I get that, but how did you c how did you communicate that to people?'Cause most of the people on that email list were

you know, are c I would imagine like most consumers are just looking for the best deal initially. Well, this is where, you know, I don't know. I I believe that people are different than that for two reasons. One, it was the time and place. There were so few brands being launched on online. Now it's A dime a dozen.

All over the place. I I think Instagram and TikTok have become Uh the shopping malls of America. Yeah. Discovering small brands all the time. Instagram. had just launched in fact

We actually sat next to Mikey and Kevin when they launched Instagram because they were in Doc Patch Labs. But no one thought it was for shopping at the time. Yeah. Today we're so saturated with discovery that it

It it feels a bit, but now that okay, I discovered something new. Oh, I already heard about that. Back then it was a bit even ten years ago, very different pre the rise of TikTok and Instagram. And so there was one element of it that was, Oh, there's something new online.

And then another that was This company's promising this quality and I'm interested in that. It's not just price. It's There's a story behind the price.

But of course, I do think you're right. We we did struggle with saying how do people understand that our fifteen dollar t shirt is really different when we're online. Yeah. And so a month in at the end of November, we actually launched what are what started transparent pricing, which is we said We've got nothing to lose. Why don't we tell people exactly what our costs are?

And to end. And how did you do that? How did you communicate that? We built a Infographic. That showed all the costs and we put it up on our product page and we put it up on Tumblr and we said, Let it go.

And it got Picked up. Yeah, this was called the making of a designer tee. I'm looking at it now. It was it's a Wonderful infographic. It basically Shows you

The price. That it it costs to make a shirt. Cotton two seventy five, cutting at thirty five cents, sewing a dollar thirty five, dying. fifty cents, finishing a dollar twenty five, transport fifty cents. Castly. Brand six seventy.

Sells to retailers for fifteen, sells to you for fifty bucks, so you put this infographic out there. And Lots of people see this. I mean Like This this

Definitely goes viral. Yeah. It was a series of numbers, but it was very human in its own way that people felt Like, oh, that's interesting. I never knew this information, and now this company is sharing it. And in a lot of ways, that's also what the internet's about, is exposing things that you didn't know before. So you put this infographic out and um

N not surprisingly, it it also irritated some people because they f you know, you the the the accusation was, hey, this is a total oversimplification, like this is not Actually accurate. And uh you know Yep. I mean, one of the things uh to to be fair that the infographic doesn't explain is Th the cost of manufacturing the shirt six seventy and then the wholesaler, the factory sells it to retailer.

For fifteen dollars. Um but then there's that The$15 to$50 gap involves a lot of marketing costs. I mean you could you could make the case about like a a pair of Gucci slippers, like uh there are factories in Italy that can make the same slippers for

Now,$60, why are they$900? Because you're paying for the brand, so That's the I mean the the cost the associated costs these companies were building a brand and they had to pay for it. Yeah, and they had wholesalers.

And they had Uh Profit margins if you're Gucci of thirty percent. Yeah. We had the fortune of being small.

And at that time being very, very simple. Um just Sold. direct and shared our model. And yeah, they didn't like it, but That's

To your point. Perhaps capitalism. Yeah, there there was a uh the blog Well Spent wrote this is a a I guess a Fashion block. Or you know. Consumer freshman. They wrote um

My issue with the the graphic is it's d a dangerous oversimplification. Essentially Everlane is attempting to demonize any clothing company charging greater than two point two pi five percent in manufacturing costs. And that's ludicrous. So you're you know, you kinda create a stir. But you guys it seems like that was part of that was kinda the hope. That that would happen.

Without a doubt. That was fun. Yeah. So you do the second run and you keep selling out shirts. And and by the way, I mean your response to Attacks from

From people who represent a you know retail groups is like Listen, we're an online business. And so we don't have to there's no middleman. So at what point, you know, in in this is two now you're getting into two thousand twelve and

You're getting a lot of attention from obviously As you know. people bu are buying these shirts you get immediate attention. At what point did you say, all right, we've gotta make other things besides T shirts? That actually came I think December first, two thousand eleven.

Okay. We had found And again, the idea of Everlane was really a platform for Going direct to consumer. And so

the strangest thing you would never expect if you were to build a brand today. And you start with a T shirt, your next product would might be denim. And then you might do sweaters, and then you might do Button downs and build it. merchandise a line appropriately.

Our next product because we had no contacts in the industry. was literally ties and bow ties. Ties and bow ties. Ties and bow ties made in a factory in the Bronx that manufactured everything for Brooks Brothers. Well.

And we sold them for thirty five dollars and We bought twelve hundred. Ties and faux ties. It's a very unusual, um, you know, I'm I'm given how s obviously how thoughtful You guys were about T shirts and about direct to consumer and talking to all these people in the apparel industry and talking to Warby Parker. Like it just seems again w like a kind of a just throwing a dart at a dartboard. Let's do bow ties.

You are correct. It is weird. Yeah. I don't have a great explanation for you other than I was We didn't have a lot of connections and it was We would have to wait. six to twelve months to be able to launch A sweatshirt.

And a sweater and a button down because that's how long it would take us to find the factory, source the fabric. And our alternative was we had a Guy that could make ties and bow ties in two months. And we just said, let's do that. It was always let's try it. If it doesn't work, move on.

And how did those do? We never made ties and bow ties again. Let's just put it that way. Yeah. I think we ended up.

Potentially giving some away. Yeah, I mean the the the bow tie like the Venn diagram of like Hipsters. And I guess um cheap apparel and Brooklyn, w I guess the middle of that is a bow tie.

But it's not a big enough like there were you know, right, there's a bowtie thing. You had like People with the you know, handlebar mustaches and leather aprons and bow ties walking around. urban areas for a while, but that wasn't a very long lasting thing. So I can't imagine like No bowtie.

I think it was just We wanted to get things out the door. And we had a factory, and we said go. And indeed. Other than us talking about this today.

Nobody who shops in Everlane dot com knows this story. Yeah. Um you I think your co founder Jesse left.

Um One month then. One month then. Not in twenty twelve. He left in twenty eleven. Yeah, he left in December of two thousand eleven. Why?

I'm sure you've had many of these conversations. The co founder journey is it's a Challenging one because In some ways you're getting married to somebody, but then you're spending all this time and building a business with them. At the end of the day for Jesse What he wanted was to build a technology business. And what we moved away from was being a technology business, and we moved into building a brand.

And that wasn't the journey he wanted to be on. And I commend him a lot for making that decision because I don't think a lot of people would be able to do that. This was even before we launched, he said, Hey, I'm gonna bow out, I'm gonna help you launch, and then you need to find another tech person. And I remember that being so stressful and and

was fortunately able to find somebody, um, an individual named Nan U, who was Both an engineer And incredibly Well versed in Fashion and style.

That became our head of engineering and was at the company for six, seven years building Um the team. So it was it was a very stressful period though. But what's amazing to me is that you clearly already a year in, you did not like what Everlane became known to for and what it became Known as

was not what you were at the time. You didn't like bake this into the beginning of like we are going to be an apparel brand that does basics. Like that was w or you know, the transparent pricing was part of it. But that was not it was almost like I to overuse this metaphor, you were flying a plane and building it and you were also selling things In uh had p had passengers in the plane. And we're selling them anything we could, you know. Bring it to the point. Basically.

So ever so this was this was really it was not clear. Like it w you you weren't really sure what you were even at that point. The business model was clear, which was Direct to consumer. But

Are we a fashion brand? Are we a basics brand? Are we a platform for products? Um that's just a retailer. We didn't go into it. with that idea. We went into it with

How do we sell directly to the consumer. high quality product and tell a story around it. Okay. Did did you just out of curiosity, did you have and I th no the no judgment if you didn't, because I've uh plenty of great companies who didn't do this.

But did you f do you feel like you had baked mission? The mission into the into the company from the beginning or d would that come later? Spiritually, yes. Written down.

No. But You know, there was a external line the luxury essentials under$100. Your luxury goods sell for eight times what it costs to make. There was this spirit of

Let's build a brand that's honest with the consumer. But but that would imply and again I'm pushing back only because Uh as part of my job. But I mean that would imply that. Other the other retailers were dishonest with the consumer.

Is that is that true that we were implying? So you have a interesting distinction there because what started as honesty became transparency. Yeah. And that was the evolution. Because it it to us felt dishonest and then I think there was a point where we realized actually

They're not dishonest, they're just doing what they're doing, but the vehicle that we can have that's different is transparency. And that's how that transparency graphic got born and that's how We started to tell people here's what we're making next. Do you want to vote on it? Tell us what you think of this product, give us feedback. Everything was out in the open.

Yeah. uh kind of on on the subject of of what you're making next, I I guess As you're kind of looking for the next product, you land. Um Backpacks next, which is

Interesting we did a Herschel supply company on the show. Not too long ago is a fascinating story about, you know, backpacks and and why they went into that. So it was around this time, really, um You go into backpacks thinking, okay, this could be our next thing and just out of curiously, why backpacks? I think exactly to what you said, there was the moment of Herschel.

There was a trend happening. Um and Mm we've Had a connection to a factory. And your business model enabled

This kind of quick Pivoting. You could basically identify something that was hot. Make it quickly. Um, make a limited number, sell them out, then move on to the next thing. Yeah.

And not only that, but we could pre sell things, which you know, wasn't a thing people could do back then. And and I have to assume I mean that million dollars that you raised was not gonna be enough. I mean

W how were you able to Raise more money. It was in March two thousand and twelve, I believe, when we raised our next amount of money.

We had been doing about a hundred to two hundred thousand dollars a month, but selling out every month. Mm, it's pretty good. Yeah, it was nice. It was a good It was a good run.

And Then we went out to raise I think we raised two and a half million dollars at that point. Just because the business was working and we were in the early days of the D to C. Oh.

Yeah. And that allowed us to take the business to the next stage. Um and allowed us to buy backpacks. I mean, one of the biggest costs for us at the time was inventory, just buying new product. 'Cause we didn't have great

What you call terms with factories. It took a while. to get us to a place where we could actually have a relationship with factories and pay them you know, sixty days after delivery, a lot of times we were paying upfront on and that was very expensive. Yeah. Yeah.

You know, fast forwarding a bit to november first. Two thousand twelve. We had launched backpacks, we were building a merchandising strategy. We launch button down, silk shirts, and a cashmere. And so we built all this hype.

And we stayed up till two AM on November first, two thousand and twelve, our one year anniversary. And at two AM we launched the products on the site. And All of a sudden sales spike. And we did

And at two in the morning, an entire day's worth of sales in twenty minutes, and we thought That the site was broken and something had glitched. And we then we verified every order by hand, and indeed, people had stayed up till two in the morning. Waiting. For Oxfords and

you know, silk and cashmere to launch and that was one of the One of those moments that we said, Well, we we might have something here. When we come back in just a moment. Michael rethinks Everlane's growth strategy. And its approach

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Head over to Sonos dot com and enjoy up to twenty five percent of select products right now through November twenty seventh. Or while supplies last. Hey, welcome back to How I Built This. I'm Guy Raz. So it's twenty twelve, a year after launch, and Everlane has done about four million dollars in revenue.

A year later, they're up to twelve million, and the year after that? They basically double it to twenty-four million dollars in sales. Was that growth I mean Were you spending any money on marketing? Was it just It's hard for me to believe that it was entirely organic.

It was almost all Organic. It was people were talking about the brand, telling the story. Commerce is one of the oldest forms of communication and It's the you know, it's a form of trade and it's such a backbone of culture.

And particularly in America, people love to buy things and tell you what they bought. Yeah. And so if you made things that were interesting and people wanted to talk about them. Listen, we're not building iPhones, but talk about someone who did that well.

Or Nike, you know, it's like people line up. For days. And in that way we were building things and had limited quantities and people were talking about it. So as you were growing, I mean uh I have to imagine it became fairly easy for you to raise money. You probably had

uh investors who were really desperately trying to Get into this business. We definitely had the opportunities. And so we raised twenty five million in total.

And we were profitable and that was the year two thousand seventeen, which was a hugely pivotal year for Everly. When we went from the Fifty three million dollars to a hundred million. In one year.

Tell me about but I mean before that time. I mean I h have to imagine,'cause this is uh a natural progression for certain types of companies, especially when they're doing well very early, is Grow, grow, grow, grow, grow. And I have to imagine that was your View that we let's just

Let's just go crazy. Let's grow this thing massively. Definitely. And It was the right decision.

Bye. The decision I would have made now and I think everybody's making even today is that when we hit a hundred and we were profitable. that it was the time to transition from growing

what we call the top line, which is the revenue to growing the Bottom line. So when we did, you know, call it three, four million a profit, the the focus should have been how do we build and discipline and get this to 10 million next year and then twenty million the year after, et cetera, et cetera, et cetera. Versus how do we grow the top line.

At the expense of the bottom line. I mean you you start this thing in twenty eleven. By the end of twenty thirteen You've got thirteen, twelve million dollars in sales, so You're running a s you know, uh n not a s insignificant business now with, you know, twenty five

thirty, forty employees. Um, and you know, you were still a young guy. How were you learning about how to be a leader? I mean I I have to assume that at times you did it badly. Absolutely. And I I was

twenty seven, twenty eight. At the time. What we did really well and I guess what I did well was we built A very entrepreneurial culture. Blair, who was a creative at the team, said

She her one of her favorite lines was we have one founder and sixty CEOs. And there was this mentality that everybody Contributed. And everybody did. Every job no matter how small.

When we opened up. Many years later our first store People were at the store for th four days in a row, engineers. You know. Helping set up.

um a physical store and these were engineers who were really technical. um and mostly spent their time in a digital world. The part that was just the total mess was there were certain areas like marketing and creative that uh honestly I we were trying to reinvent and I didn't

And it was hard to find the talent and I didn't know what great look like. So I didn't know what a great Head of design are a great head of marketing. look like and so I'll tell the story we hired

At one point in two thousand and fifteen. We go from T shirts. To backpacks. Two

Let's literally go hire one of the greatest designers in the in the world. And we hired this one Rebecca Bay, who Um came from a company called Cos, and then was actually the creative director of Gap for a year and a half and We build an office for her in New York.

And I was just such a micro manager at the time. That I think I drove her so nuts she made it she made it about a year and a half and she really created a new foundation of design. and we're good friends today.

But it was uh Definitely a Tough period of over micromanaging. Hey, why are we doing this? Why aren't we doing that? Just constant questions. It's It's managing the process versus managing the outcome.

And not letting Someone as great as her do her job. So I wanna ask you about the the other side of the brand because you're you're

Big I mean the c at your core it was radical transparency around pricing. But that would be That would evolve. That would grow to radical transparency about Other things too, not just pricing. It it grew into transparency around

where the clothing is made, how it's made. This is became this became much more Important to consumers in the two thousand tens. as people were learning about, you know where their clothes were made, what the environmental costs were, et cetera. Tell me about how you came to this

view about let's hate let's tell a Everybody everything about how we make our stuff and what the condition are like in the factories. Mm. Two thousand and thirteen. There were a couple of key events that happened for us. One is we had started to manufacture in China, and we really wanted to understand.

are the factories we working we're working with in China. High quality. And Myself and A few of us went to

China and we basically live Blogged. The entire week. Talking about the factory, sharing the stories. Inside so people could see what was going on. Also on every label, we would name the city where things were made, not just the country. We wouldn't say imported.

Um and Then of course in two thousand thirteen there's the unfortunate collapse in Bangladesh of Rana Plaza. And people realize that perhaps some of the clothes they're wearing was made there. And that connected the dots for us of let's not just live blog this, let's connect. every product we make with every factory we work with.

And also the cost. And it was essentially like We're giving away our secret sauce. Because Normally, if you're another brand and you want to know where someone makes things, it's almost impossible. You can't find out where a luxury brand makes its products.

But here we were. for the industry and for the consumer saying This T shirt or this bag was made exactly in this factory and it costs us exactly this much. But at the same time, that means you are Uh you gotta you're gonna be held to a different standard.

And any slip up. You're in trouble. Like your factories better be ethical. Your pricing better be ethical. Your environmental record better be You know. I mean if you're if you're gonna put yourself out there

You you also are gonna make yourself vulnerable to charges of hypocrisy if that if you're not hitting those standards all the time. Yeah, in two tausen sevent Um

Something happened which is we We've launched Denim. And by all measures, you should have launched Denim like we should have launched Denim in 2012. Yeah. It took us a while and part of that while was that Um

Denim just as hard to fit, and then we didn't know how we were gonna do it differently. And what ended up being the difference was that we found this incredible factory called Cytex run by a wonderful human Uh on Jeeves. Where

They take the denim. And denim is a product that you actually die and then you undie to get that faded look as if you've been working through the denim over a period of time. And

They Take the die stuff and Uh detoxify it and turn it into Um actually Bricks that you can use.

Um And that really opened up. A whole new path of What is our impact on this world?

And We're gonna start moving towards sustainability. or environmental consciousness. Did that actually did that matter to consumers? I mean, I know people say it does, but I mean what is there evidence that consumers care? I believe

We have some data to support That it creates resonance with the brand. But when it comes to the individual buying decision, of do I buy this coat versus that coat? The answer is usually

Not so much, especially today. But They do want to participate with brands. That do better for this world. And that that is true. Mm-hmm.

But how much and Michael, I'm not and and I'm asking this question not to sort of accuse you of uh or of Everlane of like doing good just because of it's good for PR. But I'm I am curious about about certain things and and not just Everly and other companies do it too. Yeah.

say you know our value proposition is We're gonna make a great high quality product at a fair price. And that's it. I i isn't that enough?

Or do you think that it has to be more than that? That it's gotta be Ethically made, ethically sourced. I used to. I think now what I would say is it's whatever's right for you. I have a lot more admiration and respect than I used to for people that For these luxury businesses that create incredible beautiful product, tell beautiful stories, and make their thirty percent profit, and that's totally fine. It was also

this respect for Others that perhaps changes as you grow. up and face your own set of challenges and realize maybe there's a reason they do things the way they do. Because as long as there

Doing to your point, capitalism. But as long as they're content and it's working for them. And they're not inflicting harm and other people are Into it. Power to you.

Up until that point. You mentioned twenty seventeen you hit. profitability you're doing a hundred million dollars. And so the at that point it was like, okay, let's just grow And and looking back on that time today, you would have made different decisions. You would have focused on increasing the the bottom line rather than than just focusing on the top line.

Um as more competitors started to jump into direct to consumer or or m you know online let's say retail Um D w did you start to see the business slow down? I think that's hard to say. I think it's whenever you grow a hundred percent, you can't grow like that forever. But I mean the next year we grew, you know, fifty to seventy percent, and the next year after that we grew another, you know

thirty to fifty percent. Yeah. It was Wow, this is an incredible run. Um I mean we we had these opportunities where we launched

Everything from an entire collection. of outer wear made from recycled materials. Uh called it renew. Um we launched stores in San Francisco, New York.

Like, you launch bri you launch brick and mortar stores. Yep. We didn't think we would need stores and And this is one thing I would say we did do well is we listened to the consumer and we had these pop ups and showrooms and People were showing up. And they were asking us to open up a store, and so we listened.

Um and it worked tremendously well. But but as you focused on growth. Um The the returns you also had to compete against Uniclo and and you know even Amazon was getting into apparel.

So did you start to see you you gone from profitability, presumably, to Break even break even and then losing a bit of money in 2019. Nothing, you know, when you think about it, it was nothing extraordinary because it was the days of venture that says, Oh, there's the business to be had here, and so a lot of people fund and then, you know. People are willing to Lose money. And drive growth.

And so we we started to manage against that and started running paid ads and the business continued to grow, but The profit Didn't grow up. As fast. because we were investing more in marketing to drive the business.

So one of the uh I mentioned this earlier, which is when you You know, when you are focused on doing the right thing, which I think is important and and something that What?

businesses to do, but it also makes you target. Right. And so In twenty nineteen there was a a rating Company. called Good On You and they gave you two out a two out of five rating for your

You know, they because they they said that you weren't tracking greenhouse gases and that that you weren't guaranteeing living wages or reducing water use. Um And um There were people like, Yeah, I'll see that company they're the do gooders and now they're, you know, they've been exposed or you know, something like that. Oh, and there were people who said that.

Yeah. In some ways I remember. The first reaction around that being like Frustrated. And

Upset. And then the next reaction was great, let's do something about it. So what'd you do? We started tracking our greenhouse gases. We started working with our factories on how do we reduce

our emissions, we made a commitment to remove all virgin plastic from our supply chain. We're ninety five percent of the way there. We've replaced Some seventy, eighty percent of our wool to be Recycled. Same thing on Cashmere.

So the amount of product we're using that's now recycled and the way we're Doing Everything to lead across all metrics. And I think doing a very good job of it now.

Yeah. All right. Plug in along. And then Bam.

Covid happens. And Um, you're a little bit different than other retailers because you you weren't selling office clothing necessarily. But this th this proved to be Um I think um I'm this is gonna be an understatement. A an extremely challenging time for Everlane. First I would say thanks, guy, for reminding me about this wonderful time in my life.

Um, I really appreciate it. And and then I would say walking into two thousand twenty, we had this great plan. We're gonna start investing in being a brand instead of just a price transparency retailer. And then We had we're in the midst of fundraising, by the way,'cause we needed Money for inventory and for

retail, which was working really well. And then Covid hits. And it is just To every retailer, I mean it was a brick. Yeah.

We start to look at the Well actually we were in the midst of fundraising and we don't have enough cash. You know, never walk into a crisis slow on cash. We need the cash. And so we start to have to cut costs. And

You know, some companies did it later. um we did it pretty early on, and that started to set a pretty fast tone of How do you manage? A community that was so tight knit at that time. Uh through crisis.

Um let's talk about a couple of In many crises that happen in the midst of this. Right. One was A group of employees. Or let go.

they claimed because they had intended to unionize And that they wanted to discuss their salaries with each other. in the spirit of radical transparency which Uh they were discouraged from doing it everly. Let me just caveat this by saying Me personally

I think I think radical transparency can be hugely problematic, I don't necessarily think it's good for everybody to know about everybody else at all times. I think there's value. In

Some discretion. But that happened at Everlane and all of a sudden people were saying, Hey, this is the radical transparency company. They're not allowing transparency. Yeah, and I I You are completely right and I had always said transparency is great.

And then it also has downsides. I mean I don't even It's hard to trust the government, but at the same time I don't want to know every decision that the government's making all of the time. I don't want to know the sausage is always made'cause sometimes it takes It has to. Yep. And also it takes time to make decisions, and if you're informed about every decision every time, all you're gonna do is induce anxiety. Yeah.

But For us it was Everlane to your point was on a pedestal. We are far from perfect in a lot of areas where we

uh chief HR officer for a company with a few hundred people. And so the processes weren't there. And without processes you create a place where things aren't always Seemingly as equitable or fair.

And that came to bear for a lot of other sort of companies of our time because we had all ushered in this Hey, we can build a company, do good, be transparent.

And treat. Everyone well. our customers, our employees, our factories. And then I Covid happens and it's sort of like how do you

How do you do right anywhere when everything goes wrong? I I've been thinking a lot about what's what happened. with a lot of companies and and still is happening to some extent. They started with this premise that you're part of a mission and the mission is transparency and openness, whatever it might be, it's it's making the world a better place.

And employees believe that that was their role. And I wonder whether some of that tension'cause you had employees who were really mad and You know, and lots of companies did.

And I wonder whether some of that comes from that idea that that all of a sudden they're like, Wait, my mission is to make money for the company? I I don't know is that D does any of that resonate with you? It completely resonates. We We're in a

massively funded environment where profit didn't matter. To an environment where all of a sudden profit did matter and top line sales are getting challenged for a lot of people, especially the first three to six months of COVID. Yeah. So people are making tough decisions. And it was the first time going from Infinite. opportunity to

Wait a second. We have to make some tough decisions. And by the way, those tough decisions are about employees and they go, Well, I was already might have been a little frustrated about this and that. That happened in the past and now I'm just pissed. Yeah.

I don't necessarily blame. employees, especially younger employees are feeling that way because They were promised a mission. Completely agree. I don't blame them at all, and I uh listen, I think that's The opportunity is to be clearer on expectations, but in a lot of ways also employees have made it clearer on what

What they expect. Both ways that expectation is very, very valuable and very helpful. You um Came out of Covid and you Step down as CEO to become executive chairman.

Yep. Um and Um I'd imagine that was a A relief, a little bit of a relief too. Those probably the t t toughest two years of your career. Everlane.

Yeah. It was a time where Brian. who was on our board and Betsy had spent a lot of time with me saying, Is this really what you want to do for the next five, ten years? Um

And I think that's an important question because You've probably spoken to so I mean you have spoken to so many founders here. And some Are lifers. And some are not.

For there was a moment in time where I imagined my life being a lifer. And the more I thought about it, I was like, Wait, I don't I'm not The best person to run. A

fashion brand that's sustainable. So for us continuing to double down. On The environmental side of what we do. while building a growing and profitable business is

really critical and it's That's where I go back to I still am involved in the company quite closely and it's a fun And self reflective experience to be able to exit something. But still involved in it.

And watch that. Almost separation. I imagine one day it's like having kids and letting them go to college. Yeah, but but I wonder um just uh but just from a personal side. It's your whole identity. Right. And so

Did you struggle with that? I mean I mean all of a sudden you're going from like Every you're the guy everyone's calling. You're the person that you're making the final decisions to, all of a sudden your phone's not ringing as much. rang in a different way. But yeah, I struggled with it, but

Also And this is I'm sure you say this of many founders, but it's also true of anyone that works at any company for a period of time, that you can never take away that period of someone's life, you know. you're still the founder or you're still the creative director of a company or you're still the

You help build something. And so now it's just a part of my identity. It's not my identity. When you think back on on the journey that that you've been on. You you did w very well and still own a considerable amount of this company and so it's made you wealthy and successful. Um

How much of of of where you are now do you attribute to luck? And how much of it do you think is to do with with your skill and your intelligence and your work, hard work. It's hard to know. I you know, I Somebody once said.

You're goal is to do as many things as possible to get yourself in a place of Luck happening to you. And so when you asked that question, it was so weird that we launched ties and bow ties, but at the same time, it was this unfettered attitude of just go try things. So that luck could happen to us.

So I think part of it is being quick. And thoughtful and moving. And understanding the world around you. To put yourself In the pathway of luck as often as possible.

That's Michael Praisman, founder of Everlane. By the way, if you search the brand's Tumblr archive, you can actually see an example of one of their ill-fated bow ties. There's a picture of one of them. It's kind of a nice looking navy blue one with Daisies on it. And it's kind of a shame that they're no longer selling them because they're Pretty cool. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always, it's free. This episode was produced by JC Howard with music composed by Ramteen Aroui. It was edited by Neva Grant,

with research help from Sam Paulson. Our audio engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes Casey Herman, Carrie Thomson, Alex Chung, Malia Agadello, John Isabella, Chris Massini, Carla Esteves, and Catherine Cypher. I'm Guy Raz, and you've been listening to how I built this.

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