WEBVTT - Why Investors Poured $110 Million Into a Sock Maker

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<v Speaker 1>When Jeff Carl decided to start a new business, he

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<v Speaker 1>went the classic route of hitting up a few friends

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<v Speaker 1>and family members for cash to get his idea off

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<v Speaker 1>the ground. Here's Jeff telling the story of one pitch

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<v Speaker 1>he made to an old college buddy. One of my

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<v Speaker 1>first meetings was with a college um, my college neighbor

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<v Speaker 1>I named Josh James, who's a very successful entrepreneur. Then

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<v Speaker 1>we were in a basketball game. He said, I hear

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<v Speaker 1>you're doing a new deal. What is it? Can I invest?

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<v Speaker 1>Tell me about it? And I think he was expecting, Um,

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<v Speaker 1>we had done a lot of web analytics in the past,

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<v Speaker 1>and I think he was expecting something pretty technical. Said

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<v Speaker 1>I'm gonna sell socks, and he really liked took a

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<v Speaker 1>pause and he's like, are you serious. I'm like, actually,

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<v Speaker 1>I said I'm gonna sell men's hosiery. That sounded better,

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<v Speaker 1>and and then he said, Okay, I'm in because one

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<v Speaker 1>of two things is gonna happen. You're either gonna make

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<v Speaker 1>a lot of money or I'm going to tease you

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<v Speaker 1>for the rest of your life about the time you

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<v Speaker 1>made me give you a hundred thousand bucks for a

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<v Speaker 1>sock idea and that's totally worth it to me. I'm in.

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<v Speaker 1>Josh James, who's the CEO of a big software company

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<v Speaker 1>called Domo, recalls it pretty much the same way, except

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<v Speaker 1>Josh said he ponied up two hundred grand, not one,

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<v Speaker 1>and that's the least of it. That money Jeff raised

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<v Speaker 1>was back in stances earliest days in two thousand nine.

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<v Speaker 1>A couple of years later he raised another seven million,

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<v Speaker 1>mostly from venture capital backers, and three years after that

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<v Speaker 1>he raised twenty six million dollars. Two years ago he

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<v Speaker 1>got another fifty million, and then last year another twenty

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<v Speaker 1>seven million dollars. All in all, Jeff talked investors into

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<v Speaker 1>giving him about a hundred and ten million dollars. That's

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<v Speaker 1>on par with Airwear, a big drone start up, and

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<v Speaker 1>way more than stitch Fix, a hot subscription clothing company.

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<v Speaker 1>So we're talking a hundred ten million dollars four socks.

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<v Speaker 1>I had the same reaction myself. I had to run

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<v Speaker 1>it by Jeff Carl and then I was like, oh

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<v Speaker 1>my god, company has wised so much money. Weird. Hi.

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<v Speaker 1>I'm Brad Stone and I'm Sarah mcgrad and this week

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<v Speaker 1>on Decrypted, we're taking you on a tour of the

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<v Speaker 1>very unusual world of VC backed non tech startups. Let

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<v Speaker 1>me break that down. Silicon Valley venture capitalists are known

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<v Speaker 1>for backing tech companies, but for years they've also quietly

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<v Speaker 1>backed plenty of companies they think will grow fast that

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<v Speaker 1>have nothing to do with tech. This is the same

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<v Speaker 1>set of investors that helped launch companies like Facebook, Airbnb,

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<v Speaker 1>and Uber. The differences this other breed of company doesn't

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<v Speaker 1>sell software or build apps. They make products that we've

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<v Speaker 1>been buying and using for decades, like Razors, mattresses, and

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<v Speaker 1>Mannet's Stance. The sock company started by Jeff Curl is

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<v Speaker 1>just the latest of these consumer companies that VC investors

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<v Speaker 1>are pouring money into. Last year, non tech companies raised

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<v Speaker 1>four point nine billion dollars from vcs, about a tent

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<v Speaker 1>of all money vcs invested, according to CB Insights. So

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<v Speaker 1>we'll be asking why why invest in sucks not software

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<v Speaker 1>and how how do these investors decide which companies are

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<v Speaker 1>worth backing. Sound tech companies are notoriously hard to scale up,

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<v Speaker 1>and there are many examples of companies that didn't make

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<v Speaker 1>it stay with us. So um, Sarah, it seems a

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<v Speaker 1>little counterintuitive hearing that nearly five billion dollars of VC

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<v Speaker 1>money went the companies outside of tech. Right, companies that

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<v Speaker 1>do well in the venture world usually have a little

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<v Speaker 1>technical razzle dazzle something truly transformative. I think machine learning

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<v Speaker 1>or cloud computing, or the Internet, or even the semiconductor

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<v Speaker 1>chips that the value got its name from. So what

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<v Speaker 1>inspires venture investors to put their money into these other categories. Well,

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<v Speaker 1>the founders of these benee typically have persuaded their investors

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<v Speaker 1>that even though the business looks ordinary, if you rethink it,

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<v Speaker 1>you can expand that business many times, maybe even transform it.

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<v Speaker 1>I talk to Mood rogani, an investor at Kleiner Perkins,

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<v Speaker 1>co Field and Buyers, which is a huge venture firm,

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<v Speaker 1>about how far to take that IDEA keyback stance. I

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<v Speaker 1>think any category um. I mean, you're seeing it now

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<v Speaker 1>in agriculture, architec. You hear it in food, food tech. UM,

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<v Speaker 1>you're hearing in an industrial, industrial tech companies, industrial IoT.

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<v Speaker 1>So the notion that disruption is only in segments of

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<v Speaker 1>the Internet or other areas of deep technology, I just

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<v Speaker 1>think is um is incorrect. But sometimes those bets don't

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<v Speaker 1>work out. Take too sero that's a company that persuaded

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<v Speaker 1>investors that have drinking juice became easy, people would drink

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<v Speaker 1>a lot more of it. That's as long as they

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<v Speaker 1>didn't have to clean up blenders or drag home lots

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<v Speaker 1>of fruit from the market. Right. They convinced backers that

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<v Speaker 1>juice Ero could sell four hundred dollar juice machines along

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<v Speaker 1>with eight dollar a piece juice packs to put in them,

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<v Speaker 1>and VC Backers gave them a hundred and eighteen million dollars.

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<v Speaker 1>But as their colleagues Ellen Hewitt and Olivia Zeleski reported,

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<v Speaker 1>it was perfectly possible to just squeeze the juice out

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<v Speaker 1>of the package with your mare hands. No four hundred

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<v Speaker 1>dollar fancy juice machine required. In September, juice Ero said

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<v Speaker 1>it was closing down. So how do you tell the difference?

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<v Speaker 1>How do you know if the startup really does have

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<v Speaker 1>a great idea that will give a shot of rocket

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<v Speaker 1>fuel to a boring, old industry that has been around

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<v Speaker 1>for decades. That is exactly the predicament of Jeff curl

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<v Speaker 1>Our sock hero. When I met him, he was wearing

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<v Speaker 1>shorts and a tank top because he'd just come from

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<v Speaker 1>a game on the in house basketball court, and he

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<v Speaker 1>truly thinks he's found some ways to dress up the

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<v Speaker 1>staid world of socks. You can see the potential. The

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<v Speaker 1>US market for adult sos is nearly five billion dollars

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<v Speaker 1>a year according to m p D. Now, Jeff has

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<v Speaker 1>to convince the wider world he's the real deal. But

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<v Speaker 1>that doesn't mean he's trying to pass his business off

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<v Speaker 1>as something it's not. Do you think of yourself as

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<v Speaker 1>a technology not particularly. I think of us as a

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<v Speaker 1>brand first and foremost. So to build his brand, Jeff

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<v Speaker 1>needed to start with the right product. He methodically looked

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<v Speaker 1>for a staple that could use better branding along with

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<v Speaker 1>a little more innovation. Once he settled on socks, he

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<v Speaker 1>had to hire people with and I can't believe I'm

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<v Speaker 1>about to say this, some serious sock chops. One of

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<v Speaker 1>those people is Taylor shoot Stance as co founder and

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<v Speaker 1>chief product officer. He's a wiry and wisecracking guy who's

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<v Speaker 1>about ten years younger than Jeff. They had the same

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<v Speaker 1>marketing professor at Brigham Young University in Utah who introduced them,

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<v Speaker 1>and at the end of a long afternoon, it stands

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<v Speaker 1>Taylor stood outside their research building and made a little

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<v Speaker 1>bit of a confession. I was always a sock guy

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<v Speaker 1>or a product guy. I always had a certain location

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<v Speaker 1>at the Orange County Swat Meat that I went to

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<v Speaker 1>buy my socks. And so when Jeff came into me

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<v Speaker 1>like nine ten years ago, and what what was special abouts?

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<v Speaker 1>They had the best in elastic but left no They

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<v Speaker 1>were just three by one, you know, like old athletic

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<v Speaker 1>crew socks. You'd see all white, and they left no

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<v Speaker 1>impression on my legs. So it had a really good,

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<v Speaker 1>you know, sort of atlastic power. The product didn't kill.

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<v Speaker 1>They lasted a lot longer than anything else I had.

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<v Speaker 1>I can tell that's a guy who is way into

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<v Speaker 1>a socks and as he learned, a little technology can

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<v Speaker 1>go pretty far to improve a sock. Now he oversees

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<v Speaker 1>a kind of Aladdin's Cave of sock machinery. It stands

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<v Speaker 1>its headquarters in San Clementi. The department goes by Shred

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<v Speaker 1>for Sock Hosiery Research, Education and Development, and so here

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<v Speaker 1>we test things like durability. There's pilling that right there

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<v Speaker 1>is a rub test for durability. We test fit, we

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<v Speaker 1>test color fastness, we test thermoregulation. That's a camera that

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<v Speaker 1>shows heat signatures or infrared um crocking lateral stretch. What's

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<v Speaker 1>that one do? It's a tear test for fabric for

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<v Speaker 1>our underwear. That was Taylor talking with Stance Is CTO

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<v Speaker 1>Randy Sheckler, who happens to be a rocket scientist for real.

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<v Speaker 1>When I was there, they showed me socks stretched almost

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<v Speaker 1>three times their normal size and socks batted around on

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<v Speaker 1>PVC pipes to make sure they could take a beating.

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<v Speaker 1>The machinery looked so elaborate. I ended up asking Mood

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<v Speaker 1>the VC investor, if they really needed it. Whether it's absorption,

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<v Speaker 1>whether it's wicking, whether it's ability to grip, whether it's

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<v Speaker 1>ability to you know, survive through a thousand times through

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<v Speaker 1>the wash, whatever those attributes are. They measure UM and

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<v Speaker 1>there's customization around areas of the sock where that matters

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<v Speaker 1>relative to what you're using it for. You'd be surprised.

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<v Speaker 1>You spin all of these knobs, you get permutations that

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<v Speaker 1>are in the thousands, and so that's part of the

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<v Speaker 1>scientific side of kind of what they're testing UM, as

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<v Speaker 1>well as like produce ability. How much is it going

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<v Speaker 1>to cost if we produce here? How much of a

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<v Speaker 1>market is there, and so left brain, right brain, scientific fun,

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<v Speaker 1>all of those things that come together. It's a lot

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<v Speaker 1>more complicated than you what you would think. Bottom line,

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<v Speaker 1>they need all that testing and oh absolutely, yeah, yeah, yeah, okay,

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<v Speaker 1>those are some fancy socks and it seems to be

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<v Speaker 1>paying off. Stance has a pretty ardent customer base, including

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<v Speaker 1>everyone from teen skaters to superstar athletes like the basketball

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<v Speaker 1>player Kobe Bryant. One time, after a game last year, Kobe,

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<v Speaker 1>who was hired by Stance to create a sock line,

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<v Speaker 1>talked about our socks helped his team, the Lakers, score

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<v Speaker 1>a big basketball upset against the feared Golden State Warriors.

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<v Speaker 1>The power of the socks. It's gotta be the socks, right,

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<v Speaker 1>I mean it's uh, I think it's I think it's

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<v Speaker 1>cool man. Stance also has licensing deals with the big

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<v Speaker 1>sports leagues, including the NFL and Major League Baseball. Everyone

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<v Speaker 1>from Rihanna to Jay Z is wearing these socks, and

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<v Speaker 1>many of stances celebrity boosters are also Stance investors, so

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<v Speaker 1>they talk up the socks for free. But before Stance

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<v Speaker 1>started tapping its network of celebrities, it made sure it

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<v Speaker 1>got traction somewhere grittier in skate shops and with surfers.

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<v Speaker 1>I learned while reporting this story that a lot of

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<v Speaker 1>fashions start in those communities. Surfers have a kind of

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<v Speaker 1>low profile way of of dressing. This is Natalie Gamet

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<v Speaker 1>from Hobie Surf Shop in San clement A, California, which

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<v Speaker 1>sometimes ends up being uh more trend setting. Um. They

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<v Speaker 1>could wear roll up Levi jeans, um uh uh retro,

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<v Speaker 1>a low hush shirt and then stamp socks and then

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<v Speaker 1>and then that be, that be the trend. Stance is

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<v Speaker 1>constantly working to stay ahead of what's cool. It hired

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<v Speaker 1>a team to come up with four thousand designs a year.

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<v Speaker 1>They tried to make sure the patterns grabbed the eye.

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<v Speaker 1>For example, Taylor, he's the sock guy who took me

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<v Speaker 1>on the tour of Stances Research Lab, showed me a

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<v Speaker 1>pair of holiday socks. One foot has the letters S

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<v Speaker 1>L A Y across it and the other R I

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<v Speaker 1>D E. I thought at first it was a type

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<v Speaker 1>of about socks is that it's just such a great

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<v Speaker 1>canvas for expression, and you know it's so novelty that

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<v Speaker 1>you can do it like this. One sleigh ride that's

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<v Speaker 1>what it's called, right, Like, yeah, so in missile so

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<v Speaker 1>with the team. Yeah, that one was confident to two words,

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<v Speaker 1>one on each sock, spelling out the weapon and the

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<v Speaker 1>part of your foot, not the seasonal plant. Stance has

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<v Speaker 1>endless clever designs. Recently, the internet lit up because Justin Judeau,

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<v Speaker 1>the Canadian Prime Minister, wore a pair those showed Chewbacca

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<v Speaker 1>from Star Wars. So Stance seems to be doing well

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<v Speaker 1>so far, but it's a tall order having to think

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<v Speaker 1>of four thousand catchy sock designs a year. How do

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<v Speaker 1>we know it has staying power? Stance is checking all

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<v Speaker 1>the right boxes. But a lot of the biggest flame

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<v Speaker 1>outs could say that, at least for a time. Drew Serro,

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<v Speaker 1>the juice startup we mentioned, said it had special technology

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<v Speaker 1>and shut down anyway. And retailers like One King's Lane

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<v Speaker 1>and shoot Azzle had big time celebrity ties and they

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<v Speaker 1>ended up selling for fire sale prices. Jeff Carl says

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<v Speaker 1>he's avoiding their problems, and he partly blames those failures

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<v Speaker 1>on the investors. He says a lot of vcs just

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<v Speaker 1>didn't understand how to size up a retail business, especially

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<v Speaker 1>a few years ago when he started talking to them

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<v Speaker 1>about raising money. Jeff actually makes an interesting point about

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<v Speaker 1>e commerce, one that deserves a deeper discussion, maybe for

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<v Speaker 1>another time. So he decided to go old school. He

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<v Speaker 1>didn't start Stance by focusing online. He went for traditional

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<v Speaker 1>retailers like Natalie at Hobie Surf Shop. Other online retailers

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<v Speaker 1>have leaned heavily and selling consumers monthly subscription plans like

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<v Speaker 1>Dollar Shave Club for raisors or Birch Box for cosmetics.

0:13:34.240 --> 0:13:38.080
<v Speaker 1>Only now seven years in is Jeff gearing up subscription

0:13:38.200 --> 0:13:41.800
<v Speaker 1>socks and seriously beefing up his online sales. That's in

0:13:41.840 --> 0:13:44.880
<v Speaker 1>part because so many brick and mortar retailers are struggling,

0:13:45.160 --> 0:13:48.400
<v Speaker 1>including some of the retailers that sell socks, and those

0:13:48.400 --> 0:13:51.440
<v Speaker 1>troubles in retail are partly why Jeff raised so much

0:13:51.480 --> 0:13:53.840
<v Speaker 1>a venture capital money in case he ever got the

0:13:53.840 --> 0:13:57.199
<v Speaker 1>opportunity to buy some struggling brands that could help Stance.

0:13:57.600 --> 0:14:01.360
<v Speaker 1>So far that hasn't panned out, and opportunistically, maybe we

0:14:01.360 --> 0:14:04.640
<v Speaker 1>could find some great teams, some great entrepreneurs, some interesting

0:14:04.640 --> 0:14:08.840
<v Speaker 1>product categories to acquisition. So I wanted to have a

0:14:08.880 --> 0:14:11.720
<v Speaker 1>big balance sheet if that ever happened, and it just

0:14:11.760 --> 0:14:16.000
<v Speaker 1>really hasn't. And I think it's been more cost effective

0:14:16.640 --> 0:14:19.120
<v Speaker 1>and more innovative for us to work on our work

0:14:19.160 --> 0:14:24.080
<v Speaker 1>on those products ourselves. So a lot of that venture

0:14:24.120 --> 0:14:26.880
<v Speaker 1>money is still in the bank and Stances revenues are

0:14:26.920 --> 0:14:30.160
<v Speaker 1>over one million dollars. They expect to turn a profit

0:14:30.240 --> 0:14:34.480
<v Speaker 1>starting next year. Sarah, does anybody have anything bad to

0:14:34.480 --> 0:14:38.720
<v Speaker 1>say about Stance? I found one person Sucharita Cadali, a

0:14:38.800 --> 0:14:43.120
<v Speaker 1>retail analyst, raised a red flag or two. That's always

0:14:43.200 --> 0:14:47.760
<v Speaker 1>a risk that that a company likes Stance has to faces,

0:14:48.200 --> 0:14:51.920
<v Speaker 1>is you know, kind of everything from knockoffs to companies

0:14:52.000 --> 0:14:55.960
<v Speaker 1>like Target, you know, kind of basically doing their version

0:14:56.000 --> 0:14:59.040
<v Speaker 1>of a lower price point UM, a lower price point

0:14:59.160 --> 0:15:01.920
<v Speaker 1>version of the same thing ing. She also had some

0:15:02.000 --> 0:15:06.840
<v Speaker 1>sobering comments about a core group of Stance customers Stances,

0:15:06.920 --> 0:15:10.360
<v Speaker 1>I think for the most part of millennial brand and UM.

0:15:10.760 --> 0:15:15.080
<v Speaker 1>Millennials are really fickle and they're constantly trying new things

0:15:15.680 --> 0:15:19.800
<v Speaker 1>and UM. The challenge with that is that, you know,

0:15:19.880 --> 0:15:23.720
<v Speaker 1>kind of some of these new brands experience success really

0:15:23.800 --> 0:15:28.400
<v Speaker 1>quickly because everybody learns about them on social networks. In

0:15:28.440 --> 0:15:32.480
<v Speaker 1>other words, easy come, easygo, and one more thing. A

0:15:32.520 --> 0:15:35.080
<v Speaker 1>former employee who didn't want to be named told me

0:15:35.120 --> 0:15:37.440
<v Speaker 1>a lot of people just don't work very hard at

0:15:37.480 --> 0:15:40.960
<v Speaker 1>the company. I guess I understand that they're in southern California,

0:15:41.080 --> 0:15:43.440
<v Speaker 1>just a few minutes from the beach. Sarah, you told

0:15:43.440 --> 0:15:45.440
<v Speaker 1>me that even right at the office, they've got a

0:15:45.440 --> 0:15:48.000
<v Speaker 1>pretty distracting setup, right with the putting green and a

0:15:48.040 --> 0:15:51.720
<v Speaker 1>basketball court and on site massages, right, and even a

0:15:51.760 --> 0:15:54.560
<v Speaker 1>skate ramp. But some of their vcs are more worried

0:15:54.560 --> 0:15:58.080
<v Speaker 1>about other stuff. For example, once that they shouldn't depend

0:15:58.160 --> 0:16:00.000
<v Speaker 1>so much on word of mouth to build the brand

0:16:00.040 --> 0:16:03.400
<v Speaker 1>and and they should advertise more. But Jeff and his

0:16:03.560 --> 0:16:07.080
<v Speaker 1>marketing VP Noel Bates both think word of mouth is

0:16:07.120 --> 0:16:11.160
<v Speaker 1>working great. Rihanna came out with soft line two days

0:16:11.320 --> 0:16:13.680
<v Speaker 1>or last week that has her on them in her

0:16:13.760 --> 0:16:17.680
<v Speaker 1>like met gall address and her video. Drake wore them

0:16:17.880 --> 0:16:21.280
<v Speaker 1>and posted on Instagram two days ago of him hanging out.

0:16:21.280 --> 0:16:24.680
<v Speaker 1>Do you know this in the Rihanna just f y

0:16:24.720 --> 0:16:28.120
<v Speaker 1>I Drake, the singer is Rihanna's ex boyfriend. I actually

0:16:28.160 --> 0:16:32.920
<v Speaker 1>did not know that. That's being Mashable, E News, people,

0:16:33.480 --> 0:16:37.600
<v Speaker 1>in Style, Vogue, l cos everyone covered her collection. But

0:16:37.720 --> 0:16:40.160
<v Speaker 1>now they're all covering it again because it's all the

0:16:40.200 --> 0:16:44.520
<v Speaker 1>page six all about how Drake. You know, it's like this,

0:16:45.440 --> 0:16:47.400
<v Speaker 1>this is as close as Drake and you can get

0:16:47.440 --> 0:16:49.560
<v Speaker 1>to Rihanna right now, you know. And he looks all

0:16:49.560 --> 0:16:51.920
<v Speaker 1>sad and video he looks all sad and be true.

0:16:52.440 --> 0:16:55.720
<v Speaker 1>So it's running a report on like everywhere that this

0:16:55.760 --> 0:16:59.200
<v Speaker 1>has appeared, and it was like six million dollars worth

0:16:59.240 --> 0:17:03.600
<v Speaker 1>of advertising. Good rebuttal to the debate on ad spending. Still,

0:17:03.680 --> 0:17:07.680
<v Speaker 1>this is a fundamentally pretty traditional business. Does venture capital

0:17:07.760 --> 0:17:11.000
<v Speaker 1>have any business investing in it? Isn't venture money supposed

0:17:11.000 --> 0:17:14.840
<v Speaker 1>to get crazy world changing ideas off the ground? Well,

0:17:15.000 --> 0:17:18.080
<v Speaker 1>that's how people think of venture capital, and lately it

0:17:18.160 --> 0:17:20.560
<v Speaker 1>does seem like venture capital has backed a lot of

0:17:20.600 --> 0:17:24.960
<v Speaker 1>fundamentally non tech businesses, although statistics from CB in sight

0:17:24.960 --> 0:17:27.200
<v Speaker 1>It's say it's no more or less than in the past.

0:17:27.600 --> 0:17:31.520
<v Speaker 1>But in the past few years. Examples include Casper Mattresses

0:17:32.040 --> 0:17:35.200
<v Speaker 1>and the Melt, a grilled cheese shop, All Birds a

0:17:35.240 --> 0:17:39.440
<v Speaker 1>shoe company is another, and those types of traditional consumer

0:17:39.480 --> 0:17:43.800
<v Speaker 1>businesses can deliver great returns. Starbucks coffee was venture back

0:17:43.840 --> 0:17:46.480
<v Speaker 1>in the early nineties and today it's worth seventy nine

0:17:46.480 --> 0:17:50.080
<v Speaker 1>billion dollars. More recently, Blue Bottle Coffee raised about a

0:17:50.160 --> 0:17:52.560
<v Speaker 1>hundred and twenty million and got acquired by Nestley for

0:17:52.680 --> 0:17:55.960
<v Speaker 1>hundreds of millions. And that's Jeff's point. He says, a

0:17:56.000 --> 0:17:58.640
<v Speaker 1>well built brand can deliver the same kind of returns

0:17:58.680 --> 0:18:02.280
<v Speaker 1>to investors as a traditional internet or software company. The

0:18:02.400 --> 0:18:05.000
<v Speaker 1>problem is that not all entrepreneurs know how to build

0:18:05.040 --> 0:18:08.080
<v Speaker 1>great brands. One reason we see so many venture back

0:18:08.240 --> 0:18:10.720
<v Speaker 1>bus has less to do with how traditional or not

0:18:10.800 --> 0:18:13.119
<v Speaker 1>the company that is getting funded is and more to

0:18:13.200 --> 0:18:16.240
<v Speaker 1>do with how their founders play the game well. First

0:18:16.280 --> 0:18:21.160
<v Speaker 1>of all, UM, raising money is sort of its own

0:18:21.320 --> 0:18:26.800
<v Speaker 1>skill set. There's definitely a way to position companies to investors,

0:18:28.040 --> 0:18:31.760
<v Speaker 1>and I think that actually creates, you know, an adverse

0:18:31.760 --> 0:18:35.479
<v Speaker 1>bias and deal selection, because a great presenter can actually

0:18:35.520 --> 0:18:40.360
<v Speaker 1>get an average or below average business funded. UM and

0:18:40.520 --> 0:18:44.040
<v Speaker 1>a bad and a bad present you know, so a

0:18:44.160 --> 0:18:47.439
<v Speaker 1>great the positioning of a business. There are many great

0:18:47.960 --> 0:18:52.119
<v Speaker 1>businesses that go unfunded because no one was able to

0:18:52.560 --> 0:18:56.600
<v Speaker 1>translate it into a language that a VC could find investable.

0:18:57.040 --> 0:18:59.359
<v Speaker 1>On the other end of the spectrum, there were a

0:18:59.359 --> 0:19:03.360
<v Speaker 1>lot that did get funded because fast talking entrepreneurs convinced

0:19:03.440 --> 0:19:06.840
<v Speaker 1>vcs that simply adding an app to a traditional industry

0:19:06.840 --> 0:19:09.359
<v Speaker 1>would take it to new heights. A lot of the time,

0:19:09.480 --> 0:19:14.840
<v Speaker 1>the founders and entrepreneurs underestimated the underlying logistics and complexity

0:19:15.000 --> 0:19:18.520
<v Speaker 1>an app does little to solve those. Food delivery is

0:19:18.560 --> 0:19:21.920
<v Speaker 1>a classic case study. Good Eggs and Sprig are two

0:19:21.960 --> 0:19:25.080
<v Speaker 1>examples of companies that raised about sixty million dollars each,

0:19:25.359 --> 0:19:27.600
<v Speaker 1>but a couple of years ago, good Eggs had to

0:19:27.640 --> 0:19:30.760
<v Speaker 1>close three of its four locations, and Sprigue shut down.

0:19:30.840 --> 0:19:34.959
<v Speaker 1>Earlier this year, Monterrey, which raised a hundred million dollars,

0:19:35.080 --> 0:19:40.000
<v Speaker 1>had to switch out at CEO, recapitalizing fire employees. This

0:19:40.160 --> 0:19:43.440
<v Speaker 1>feeds right into the idea that Silicon Valley caters too

0:19:43.520 --> 0:19:46.040
<v Speaker 1>much to millennials with a lot of money to spend

0:19:46.160 --> 0:19:50.200
<v Speaker 1>on frills, including food delivery juice and I have to

0:19:50.280 --> 0:19:53.720
<v Speaker 1>say it socks, even if it does make money for them,

0:19:53.840 --> 0:19:57.080
<v Speaker 1>Our socks the best use of VC cash. Are they

0:19:57.119 --> 0:20:00.280
<v Speaker 1>the best use of Jeff Carl's time for up A

0:20:00.359 --> 0:20:06.200
<v Speaker 1>really good question, which is and it's hard. I think,

0:20:07.480 --> 0:20:10.480
<v Speaker 1>how impactful can an apparel brand really be in the world?

0:20:12.080 --> 0:20:15.000
<v Speaker 1>And you know, when we first started it, maybe I

0:20:15.119 --> 0:20:18.000
<v Speaker 1>was it a less mature, you know, phase in my

0:20:18.080 --> 0:20:22.720
<v Speaker 1>life and thought less about legacy. And at the time

0:20:22.920 --> 0:20:26.720
<v Speaker 1>it was really quite a selfish notion of what I

0:20:26.840 --> 0:20:29.359
<v Speaker 1>missed doing is going into the office with a small

0:20:29.400 --> 0:20:33.960
<v Speaker 1>group of really talented, hungry, ambitious people and I don't

0:20:34.000 --> 0:20:37.800
<v Speaker 1>really care if it's software consumer products, or maybe the

0:20:37.840 --> 0:20:40.800
<v Speaker 1>passion for the product can be completely secondary, because what

0:20:40.840 --> 0:20:45.400
<v Speaker 1>I care about is the group of people. And with

0:20:45.480 --> 0:20:48.920
<v Speaker 1>stands we've absolutely created that. It's it's a very special

0:20:49.000 --> 0:20:55.359
<v Speaker 1>leadership team. It's an incredible culture. People love to work here. Okay,

0:20:55.359 --> 0:20:57.399
<v Speaker 1>but Brad, don't you think that when you meet some

0:20:57.480 --> 0:21:01.600
<v Speaker 1>of these entrepreneurs who are clearly like brilliant, super capable people,

0:21:02.640 --> 0:21:05.119
<v Speaker 1>and you feel like, yeah, they could be curing cancer,

0:21:05.160 --> 0:21:08.479
<v Speaker 1>you know, and instead they're helping us get around faster

0:21:08.960 --> 0:21:12.040
<v Speaker 1>or making more comfortable socks. I can say though, I mean,

0:21:12.040 --> 0:21:14.280
<v Speaker 1>I'm sort of impressed by what Jeff has built. I mean,

0:21:14.359 --> 0:21:17.119
<v Speaker 1>clearly these socks are a little bit of a fad.

0:21:17.359 --> 0:21:20.480
<v Speaker 1>You see them all over the place. Um, maybe they've

0:21:20.480 --> 0:21:24.680
<v Speaker 1>identified something. We've kind of taken this garment for granted

0:21:24.800 --> 0:21:26.679
<v Speaker 1>for so long, but we can have a little bit

0:21:26.680 --> 0:21:30.440
<v Speaker 1>of fun with He says that the product goes well

0:21:30.480 --> 0:21:32.880
<v Speaker 1>beyond the sock. He has all these ideas about how

0:21:32.880 --> 0:21:36.320
<v Speaker 1>it stands for individuality and so on, and buy that.

0:21:36.440 --> 0:21:37.960
<v Speaker 1>What is the future for them? Are they going to

0:21:38.040 --> 0:21:40.320
<v Speaker 1>do other kinds of clothing? So you can already buy

0:21:40.320 --> 0:21:44.800
<v Speaker 1>men's underwear, women's underwear about to lunch? So what is

0:21:44.880 --> 0:21:50.280
<v Speaker 1>next beyond undergarments? Can you see stands shirts? Or they

0:21:50.280 --> 0:21:53.119
<v Speaker 1>wouldn't really go into details, but yeah, that would be

0:21:53.160 --> 0:21:56.399
<v Speaker 1>a natural for them, also taking on under armo or

0:21:56.400 --> 0:22:00.760
<v Speaker 1>maybe getting or um Lulu Lemon, getting into yoga pants

0:22:00.800 --> 0:22:03.800
<v Speaker 1>and other fitness apparel more broadly, as long as they're

0:22:03.800 --> 0:22:06.359
<v Speaker 1>not see through, as long as they're nuts. So it's

0:22:06.440 --> 0:22:09.400
<v Speaker 1>Jeff comfortable just running like an apparel company or does

0:22:09.480 --> 0:22:13.679
<v Speaker 1>he have ambitions that go beyond just creating clothes? I

0:22:13.720 --> 0:22:17.439
<v Speaker 1>asked him about that, and actually recently somebody in his

0:22:17.560 --> 0:22:23.280
<v Speaker 1>family went through cancer and he started thinking way differently.

0:22:24.800 --> 0:22:27.960
<v Speaker 1>And I will admit that when I look at that,

0:22:28.320 --> 0:22:33.160
<v Speaker 1>I find deep motivation of cheese. I've got to get

0:22:33.160 --> 0:22:38.000
<v Speaker 1>myself in life sciences. These are real problems that are solvable. Um.

0:22:38.119 --> 0:22:41.480
<v Speaker 1>None of them are easy problems, but they are solvable. UM.

0:22:41.560 --> 0:22:45.080
<v Speaker 1>And I feel like I could make a difference doing

0:22:45.119 --> 0:22:47.960
<v Speaker 1>some of that, But I have employees here, and I

0:22:47.960 --> 0:22:50.280
<v Speaker 1>have shareholders here. We've built a good business, and we

0:22:50.280 --> 0:22:53.160
<v Speaker 1>have oil fans, and so look, I think it's probably

0:22:53.200 --> 0:22:57.600
<v Speaker 1>the kind of thing where and all you know, Candor, Look,

0:22:57.920 --> 0:23:02.040
<v Speaker 1>maybe stance is something I operate till till I'm old.

0:23:02.840 --> 0:23:06.200
<v Speaker 1>But if there was a transition, I think I would

0:23:06.240 --> 0:23:11.000
<v Speaker 1>find myself thinking about a venture that had the potential

0:23:11.560 --> 0:23:30.200
<v Speaker 1>for more purpose. And that's it for this week's episode

0:23:30.200 --> 0:23:34.160
<v Speaker 1>of Decrypted. Thanks for listening. We always like to hear

0:23:34.200 --> 0:23:36.359
<v Speaker 1>what you think of the show, so get in touch

0:23:36.920 --> 0:23:41.439
<v Speaker 1>at Decrypted at Bloomberg dot net or I'm on Twitter

0:23:41.640 --> 0:23:45.560
<v Speaker 1>at McBride s G and I'm at brad Stone. If

0:23:45.600 --> 0:23:48.120
<v Speaker 1>you haven't already, subscribe to our show wherever you get

0:23:48.160 --> 0:23:50.800
<v Speaker 1>your podcast, and while you're there, please leave us a

0:23:50.880 --> 0:23:53.240
<v Speaker 1>rating and a review. This goes a long way to

0:23:53.280 --> 0:23:56.840
<v Speaker 1>get the show in front of more listeners. This episode

0:23:56.880 --> 0:24:02.240
<v Speaker 1>was produced by Pia gud Caryo, Liz Smith, and Magnus Hendrickson.

0:24:02.760 --> 0:24:20.320
<v Speaker 1>We'll talk to you next week. M