#56. GREATS is the first digitally-native footwear brand that is hyper-focused on bringing extreme value to the sneaker market. We talk with Founder Ryan Babenzien about how GREATS has prioritized quality and simplicity and flourished into a booming online and now offline sneaker business that he is now seeking to extend to new categories and branch out internationally. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below.

Richie: [00:00:07] Welcome to the 56th episode of the Loose Threads Podcast, a show about the rapidly changing consumer economy. This episode is brought to you by Loose Threads Membership, which gives you actionable analysis, insights and events that drive growth, and Loose Threads Espresso, your energizing and high pressure filter for industry news—in context. We also have a newsletter that features the latest open letters to CEOs, podcasts with industry leaders and news from Loose Threads. Check it all out at LooseThreads.com.

Richie: [00:00:35] Joining me today is Ryan Babenzien, the founder of GREATS, the first digitally-native footwear brand that is hyper-focused on bringing extreme value to the sneaker market. Ryan started the company after seeing the early crop of digitally-native brands take off and realize that sneakers were ripe for the same type of approach.

Ryan: [00:00:50] We weren’t trying to build the company that had the biggest valuation in round one. We trying to build a company that had the biggest valuation at the end. I think we can do that.

Richie: [00:00:59] What followed was a methodical focus on quality and simplicity, which has turned into a booming online—and now offline—business. Here’s my talk with Ryan Babenzien.

Richie: [00:01:12] So why don’t we start. Talk to us a bit about your background and then we can work our way up to GREATS.

Ryan: [00:01:15] How far back should I go?

Richie: [00:01:18] [Give us] a three- to four-minute version.

Ryan: [00:01:19] Okay. Grew up in Long Island, went to Fordham, majored in economics. Thought I was going to work on Wall Street. Two internships later through college [I] realized—I had a boss who was 20-years-old, he had lost all his hair, [was] on heart medication and had a twitching eye. But he was making a million and a half dollars a year. And he asked me—I’ll never forget this—“What kind of car do you drive?” I’m like, “A ’78 Celica.” He’s like, “Celica! I give those fucking things out for Christmas.” And I was like, “I don’t want to do this.” So I moved to L.A. right out of college. I did the intensity of what Wall Street was back then, or what I thought it was.

Ryan: [00:01:56] I went to work at an agency—ICM—became an agent and then a manager. As a manager, I was consulting streetwear brands and I just grew up in an era when all of that was happening. And then I went to become the head of entertainment marketing at Puma. So that was actually my first official job in the sneaker business. And then I got recruited out to go try and save K-Swiss, which was a fun experiment. And at that point I said, I’m starting my own [business] and it’s going to be digitally-native.

Richie: [00:02:28] Quickly, what things were you seeing that were either informing where you want[ed] to go, or what you didn’t want to do?

Ryan: [00:02:33] It was at K-Swiss that, you know—Warby Parker was live, Everlane was about to be live.

Richie: [00:02:38] So it was 2011-2012?

Ryan: [00:02:39] 2012, I think, yeah. It was becoming very clear that it was very early but the behavior of shopping was changing. And this is pre-Instagram, so you were discovering brands digitally and sometimes even buying in that way. And I just thought that was where we were going to go. I never said retail will never exist. Some of the first eComm 1.0 guys said, “We’ll never be in a store!” And now they have more stores than anybody. We always felt retail provided a great value complementing the digital component. In my career I’ve always been probably a little early at seeing things, but I felt like this was actually the right time and I didn’t go too early.

Richie: [00:03:21] So what was the first inkling of what would become GREATS?

Ryan: [00:03:25] So our design think team was like, “Hey, we really think there’s ten-ish great silhouettes in all of the sneaker business. Everybody’s got a vault cap, everybody’s got a Tennessee lace-up, everybody’s got a slip-on. Let’s pick the greatest silhouettes in the space and then reimagine them with better material, better price, more relevant to the season because we’ll be a shorter supply chain.” That is where the name actually came from. So we started like going through these crazy naming exercises and we had… I can’t even remember any of them, but ultimately we said, “Why don’t we just call it GREATS?” That’s a really elastic name, it applies to a lot of stuff. We could build a brand around it, be one of the greats, the greatest of all time. There was that GOAT reference in there, there was some familiarity there. And that all applied to kind of the sneaker culture that we came out of. So surprisingly, we were able to register it. We weren’t able to get the URL—somebody owned it. So we launched as GREATSbrand.com, but then ultimately got the GREATS URL.

Richie: [00:04:31] How much did that cost?

Ryan: [00:04:33] Not going to tell you that.

Richie: [00:04:35] That means “not a little.”

Ryan: [00:04:35] Well, we paid a third of what they originally were asking when we passed the first time. And it’s worth about 100X what we paid for it today.

Richie: [00:04:49] So I assume that’s the endgame—to sell the domain and cut everything down.

Ryan: [00:04:51] Yeah, I was like, if this shit just doesn’t work out, we can always sell the URL. No, but we’ve created a lot of value in the URL.

Richie: [00:04:57] Absolutely.

Ryan: [00:04:57] But yeah, it was a great investment.

Richie: [00:04:59] I want to go back to the ten silhouette piece. I’m curious to talk a bit about the sneaker market in general, from your perspective. How did you come to that thesis? And then, I’m also curious to talk about kind of inspiration/appropriation in the space also because I think that’s a core tenant of it.

Ryan: [00:05:14] I mean, I think it’s been existing in the sneaker market for 25 years. If you look at every luxury fashion brand, they’re taking something from a core sport shoe—mostly vintage—but that’s how they’re doing it, right? So, as an observer, I’ve been watching that for years.

Richie: [00:05:30] And how does something become a core style or how does that process happen?

Ryan: [00:05:33] For GREATS or…?

Richie: [00:05:33] You said there are ten silhouettes that kind of define [the sneaker market].

Ryan: [00:05:36] I’m not sure I know how it happened. It just did, right? And if you went into a sneaker store and you looked on the wall, you’re like, “Oh yeah, this is Adidas’ version, that’s Nike’s version, that’s Puma’s version.” And if you go back to the history of Nike, it’s public knowledge that Nike Cortez was knocking off the Onitsuka Tiger shoe. And if you could look at the book from Japan that’s out, the first Nike Blazer had a rubber cap toe on it, identical to the Adidas shell toe and Nike Wimbledon actually had three stripes—it didn’t have a swoosh on it.

Ryan: [00:06:11] I didn’t know that actually. It wasn’t until many, many years later that they became known as the “brand of innovation,” which is what they built the business on. But similarly, we just looked at the market. We knew the market. And we said, “[We’re] not in the innovation business of silhouette.” Balenciaga has a triple-stack soul, that’s great, they should go for it. And if they can make that last for the next ten years, good for them. I don’t think they will. I think those kind of fashion moments are just that—they’re moments, and they’ll come in and out. If you look at the history of the sneaker business you can see trends sneakers that have come and gone, but the classics, which [are] basically what we’re talking about, is where the market is. Now we felt there were ways to innovate that classic, right. One thing being digitally-native—we can get a color and material into the market that’s based on fashion a bit faster than the incumbents. So that’s a big advantage. And then actually knowing what those colors and materials should be is art and that’s what we do.

Richie: [00:07:13] So you were kind of seeing that the conventional wisdom sneaker businesses were core-based businesses basically, that there were kind of these foundational products that were the revenue, margin, etc. drivers.

Ryan: [00:07:24] Yeah. I mean, the most successful silhouette in the world is a Chuck Taylor, right? And it’s 100-ish-years-old and there’s nothing technical about it. It was technical in 1913. But they just reimagine that thing over, and over, and over. But that’s a great business. That may not be a fashion thing and they do tons of fashion stuff as well with collabs and they follow fashion just like everybody else. But the core business is around a certain group of styles. It’s who can make it better, who can do it for a better price. If you want to be fashion relevant, there is a way to do that, but the core is still going to exist, which is how we define our core. We have core and it never goes away.

Richie: [00:08:07] Very cool. So you had kind of this ten-silhouette framework to work with in.

Ryan: [00:08:10] Yeah, but we launched with two.

Richie: [00:08:11] Okay. So you left one of the previous jobs, you started to work on this. What were the first six months like?

Ryan. [00:08:17] Oh, wow.

Richie: [00:08:18] I’m going to take you back.

Ryan: [00:08:20] Hold on, I need a pillow—I need to lay down—and a therapist. No, like most early-stage startups, it was turbulent. We had raised a little bit of money in a convertible note—that was in April—and by August, we wanted to have the shoes done, which we didn’t have a sample of, the website built, for which we didn’t have a URL yet, and we were going to do that from April to August. And we did. It wasn’t easy, but we launched and within about three-and-a-half months we had sold through every single pair we made without spending any money on marketing. So that’s when our proof-of-concept was proven. And then we went out and raised some money and it’s been growth ever since.

Richie: [00:09:04] Had you made shoes before?

Ryan: [00:09:05] No, not technically. But I had enough knowledge and enough relationships. I had done some collaboration. So I’d spent a lot of time working with designers at every company I worked at and I had a co-founder at the time. John definitely had more production experience that I did, but unfortunately he wasn’t at the company much longer. But in the beginning, he got the production done.

Richie: [00:09:28] Gotcha. So it was just the two of you at this time?

Ryan: [00:09:29] Yeah, it was the two of us for almost—close to a year. And then we parted ways very amicably and I hired my first hire who started in February and he’s still with us. “Employee Number One” we call him.

Richie: [00:09:43] He doesn’t have a name.

Ryan: [00:09:44] He does have a name! But we just call him Employee Number One.

Richie: [00:09:46] How did you decide on the first two to do?

Ryan: [00:09:50] Well, we wanted to have a luxury silhouette, which is the Royal, which is actually one of our best sellers and we wanted to have a cap toe. We we always felt that the Chuck Taylor wasn’t very comfortable, even though it’s a bestseller. So we kind of reimagined that and did it with better material and better sock liner. Chucks tried to do it—the Chuck II, I think they called it. But, you know, oddly, it didn’t resonate. Where with us, a new brand, they’re like, “Yeah, we want that.”

Richie: [00:10:19] Would you agree that sneakers seem to be more iconic than almost any other fashion object out there?

Ryan: [00:10:24] I don’t know if they’re more iconic, but yes. There are iconic sneakers and sneakers have become just a classic. It’s denim, sneakers, white t-shirt, leather jacket. It’s in that category, but it evolves, right? It doesn’t stand still. You know the stuff that Virgil [Abloh] is doing right now at Nike—that’s the best shit I’ve seen in a long time.

Richie: [00:10:45] Why?

Ryan: [00:10:46] Well, it’s clever. First of all, doing collabs is a best practice, but just doing collabs for collabs sake is a mistake. And that one, I think it’s deconstructed not OD—overdesigned. Right? Like there’s a lot of OD in the world, where he kind of did some really simple things that gave it a special, really good point of view on the world. So I thought that’s clever. And it’s those things that drive core, right? These are very strategic reasons of how you reignite relevancy and core that’s suffering [by] doing these really special collaboration. It’s a good strategy.

Richie: [00:11:22] So you launched the company—where did the initial pop come from of demand that led you to sell out that early?

Ryan: [00:11:28] Press and social. Instagram. So we had amassed ten thousand followers before we launched.

Richie: [00:11:34] How’d you do that.

Ryan: [00:11:36] Fucking, I have no idea. Magic.

Richie: [00:11:40] You bought them?

Ryan: [00:11:41] No! They would be worthless! You know, we never understood that. Having more numbers that don’t do anything, that aren’t active, isn’t really a good strategy. I think the industry was really supportive because we had come from it. And I think authenticity and knowledge of the sneaker industry—it’s a closed market, right? You really can’t buy your way in.

Richie: [00:12:00] What does that mean?

Ryan: [00:12:01] If you’re designing sneakers out of business school, you’re going to struggle. It’s just not going to resonate in the sneaker culture. That doesn’t mean you can’t sell them. It means that the sneaker culture is going to give you a fucking pass.

Richie: [00:12:14] Why?

Ryan: [00:12:15] Because that’s what they do. It’s street sneakers—that core and demo group is… You have to be part of their culture to be invited and you can’t just walk in and get an invite. It would take years and years and years to do.

Richie: [00:12:31] You have to earn it.

Ryan: [00:12:31] Yeah. And John and I came from that culture and I think the industry welcomed us and the consumer welcomed us. That’s how it started. That’s how we got traction out of the box. We had a lot of great fans on social media that were posting on our behalf where they just said, “This is amazing, check it out.” And, you know, they had hundreds of thousands of followers, millions, and that’s how we did it.

Richie: [00:12:54] So you got the launch over with. You sold out of stuff. What was the second half of that first year like.

Ryan: [00:13:00] Waiting. We added a third style and we basically came out of beta in June. So it took November to June to really get back at it. By that point we had raised some money, added a few people to the team and off we went. From that point we tested some silhouettes that we still believe are classic—they were competing against another one so we took it away, but we still have it. There are these styles that exist and they’re going to come in and out of style, right? So, at the moment, this is where we are. But we have 30 that are sitting on the bench, ready to come in when styles change.

Richie: [00:13:41] How long is that cycle?

Ryan: [00:13:42] I have no idea. I mean, it’s getting harder and harder to forecast. And I don’t think anybody does. I think you see, you know… We know soles are getting a little bit higher because volume on pants is getting a little bit bigger. How long does that last? I don’t know. I really don’t. I think that’s the most confusing part about the industry today is [that] hype is a motherfucker. I think hype is the enemy of brand. So it’s getting harder and harder to build a great brand because there’s so much hype and you get sucked into this vortex and then that thing is gone and then you’re done as a brand. If that was your brand, you’re toast. So it’s really hard to navigate that.

Richie: [00:14:23] Do you abstain or do you mitigate? What’s your position on that spectrum?

Ryan: [00:14:28] If you think of a cyclone, and in the middle of it is the hype, we want to be right on the edge. We want to be going in the circle and kind of seeing what’s going, but we don’t want to be in that thing because it can just destroy you. But relevancy matters, right? And the hype, if you can manage hype, hype is incredibly powerful. I just think it’s becoming more and more unmanageable and that’s a new phenomenon—literally I’d say in the last two years, but it’s accelerated really fast and like all things digital, that makes sense. I don’t think we know, or I certainly don’t know, what the end result is going to be. So we’d rather kind of play on the fringe than be the hypest brand and then not.

Richie: [00:15:15] So, four years ago, it wasn’t as quick, but things were still speeding up, fast fashion existed and was kind of going strong. How did you decide from kind of a cycle-speed perspective where you wanted to fit in terms of—you started with two silhouettes, you added one after and that was a year in, so you had three.

Ryan: [00:15:30] Yeah.

Richie: [00:15:31] How did that get established?

Ryan: [00:15:33] We just didn’t have the means—we knew there were other ones and then we had the means. So we said, All right, we’re going to go through this process, we’re going to test these, we’re going to see what works, what resonates. We also have a filter of, “Can we do this better than the incumbent?”—and “better” meaning, using a better material and offering it at a better price. And if we can’t, we won’t.

Ryan: [00:15:51] And an example of that is Vans. I can’t do a better vulcanized canvas shoe for less money. I just can’t. I can do it at the same. And I can probably do it a smidgen better and have a better insole, but their scale is so large that you just can’t compete. So we don’t do that. But there’s not a lot of those in the market—most of them we can fucking crush on every level. You know, we use a Vibram sole on a bunch of our shoes and our Rosen is the most accessible priced Vibram soled shoe in the world. And it’s sitting up in their museum in Massachusetts and President of Vibram North America was like, “Hey this is incredible, you’re making this sole—and I know how much this sole costs—at a price that we never thought could happen.” And that’s where the digitally-native brand allows you to do that. If we did that in the old way, we couldn’t price it that way.

Ryan: [00:16:39] But, back to your question…

Richie: [00:16:40] I was just asking about how you established the speed and the cycle that you wanted to move at.

Ryan: [00:16:44] There are seasons and there is fashion. And we are not a fashion brand, but we follow the fashion cycle. There are colors and material every season that come out of fashion that matter and we want to make sure we have some of them. You know, our distribution pyramid is core, seasonal and then kind of limited collabs. That’s where all the super crazy… We just did a thing with F. E. Castleberry that has alligator on it, it came out last week. It’s amazing. One of my favorites. We’ve done shoes with Beastmode, we’ve done shoes with United Arrows, we’ve done a shoe with Josh Peskowitz, we do it with Nick Wooster. We are selective with whom we do it with—we generally work with—or, not generally, but always—best-in-class, whoever that is. But I think that’s a sneaker industry best-practice. It’s how you interpret it and that’s the art as well, there’s an art to that.

Richie: [00:17:36] Was there anyone else doing this?

Ryan: [00:17:37] No, we were the first. GREATS is the first digitally-native sneaker brand in a world. We also happen to be the first sneaker brand from Brooklyn, which is why I moved back from California. I never really thought I would.

Richie: [00:17:47] Did you start it out there?

Ryan: [00:17:48] Yeah it did. We had kind of built the deck and then I went and raised this convertible note. I was still living in California and then I was like, “We’re just going to put this thing in Brooklyn.” You know, Brooklyn became this cultural campus of music and food and style. It’s globally recognized, it’s millennial. And so we’re a millennial-focused brand and being the first sneaker brand from Brooklyn means something to me long term. I think we’re going to look back in 20 years and be like, “There it is.” You think of Nike—you think of Portland; you think of GREATS—you think of Brooklyn. I think we were right, because now we have a neighborhood filled with other big sneaker companies in our neighborhood. But we were there first.

Richie: [00:18:29] Nice.

Ryan: [00:18:29] And we’re from there. We’re not German. I mean, I actually am German, I’m just not from Germany.

Richie: [00:18:36] So what was year two? You raised this money, you started to build relationships, built the team out, what was the next year or so like?

Ryan: [00:18:42] It was proving out the silhouette—which silhouettes were going to be tried and true evergreen—and doing a little bit of marketing. You know, can we go outside of the endemic industry and get people that—the sneakerhead term is so dated to me, but everybody thinks they’re a fucking sneakerhead because they have 80 pairs of sneakers. They’re not, right? And any sneakerhead… Just because he read it yesterday and he bought it four times more.

Richie: [00:19:08] ‘Cause he’s not walking around barefoot?

Ryan: [00:19:10] Right, exactly. It doesn’t make him a sneakerhead. But those types of consumers who were familiar with the industry and did follow the market—can we get that layer and then can we get the layer after that. And that’s what we spent our time building and customer segmentation is really critical for any successful brand. Everything isn’t for everybody and we know that and you know that and great brands know that. So finding that balance is the trick of the brand and it’s an art to balance that. I think our model allows us to do it a little bit more efficiently and better than traditional brands but it’s a fast-moving world, so it gets more challenging for everybody.

Richie: [00:19:52] Talk a bit about the pricing spectrum. There was likely the cuthole sell-out X, Y, Z, but talk more specifically about how you landed where you did.

Ryan: [00:20:01] We just felt that… I want to have a $59 shoe all the way up to whatever that is, whatever the end is.

Richie: [00:20:07] No ceiling, basically.

Ryan: [00:20:09] We’re not price sensitive—we’re value sensitive, right? So the boot I’m wearing is shearling-lined, it’s got waterproof nubuck, it’s also lined with a waterproof vapor barrier, it’s on a Vibram sole, it’s handmade in Italy, Goodyear welted. It’s a $1,000 boot from everybody else and it’s a $450 boot from us. $450 is not inexpensive. It’s not. But in the category, it offers tremendous value. So that was always our…

Richie: [00:20:37] You’re benchmarking the value, basically.

Ryan: [00:20:39] Yeah, we were never thinking about price first, and still don’t. But our Royal, which is made in Italy—it’s the most accessible priced Italian luxury-made sneaker in the world by 30-ish-40 percent, something around there. Fact-check me. But ultimately, we want to give the customer the best deal we can. It doesn’t mean a $179 dollar shoe is for everybody. But in the category, it’s the best price in the world. So that’s what we do.

Richie: [00:21:07] All right. Year three. So, you spent time investing the team, building up more silhouettes. So this was 2015.

Ryan: [00:21:14] Year three was ’15.

Richie: [00:21:16] Yeah. Where was the brand kind of pushing to over that year?

Ryan: [00:21:18] Just bigger, better, faster, really. We weren’t changing anything in strategy. We were just doing more in volume and getting the word out. You start looking at the data and what we found is, once a person becomes a GREATS customer, they’re fucking insanely excited. We measure that in a bunch of ways, but if you can pick—and P.S., you can pick repeat rate, you can pick return rate and we stand up on all of those—so we were like, Okay, great. We need to get the brand in front of more people and that’s where we are in our business. The more people we get in front of, the more customers we get. We’ve maintained the happiness quotient across the range.

Ryan: [00:22:00] We added women’s though this year—that’s the newest. So this is now in 2017. We tested it a little bit late last year and we had never really said we wouldn’t do women’s, but we never thought we would either.

Richie: [00:22:12] Why?

Ryan: [00:22:13] Just didn’t know the space. I knew enough about the space to know I didn’t know it. Like, wow, women’s fashion is a whole different animal—I don’t know how women shop, where with men, I had enough knowledge or comfort to think I had enough knowledge to go into the men’s side. But after a few years, they kept writing, asking to the point where it was like, hate mail. Like, “If you don’t make these, I’m going to kill you.” So we tested it in the holiday of ’16 and it was really successful. Like, whoa.

Ryan: [00:22:44] So in March, we launched women’s and it’s a meaningful part of our business. Really quickly. Women buy more shoes—that’s no surprise. But we’re learning. They do shop differently than men and they’re influenced by different things than men and they’re fit tolerance is different than men. So these are all things that now we’re in the process of just, you know, figuring it out.

Richie: [00:23:07] When did you start thinking about offline?

Ryan: [00:23:10] From the beginning, really. Like eComm 1.0 said we’ll never open stores. We always said we will open stores, from the first time we ever raised money. It was just a matter of when and about capital, really. So we did a series of popups, almost from the beginning. We put a couple of things in different stores at launch as a kind of display. We were in Union in Los Angeles—Chris put a table out, we put the two styles, made a kind of little thing and people were like, “Oh shit, that’s dope.” And he’s like, “Yeah you got to go online.”

Ryan: [00:23:39] Early on we were approached by everybody. Day one, the phone starts ringing. You name it. Name a retailer. They’re on the line. “We’d love to carry you. We want to put you on the wall.” And we said, politely, “No.”

Richie: [00:23:53] Why do you think there was interest from them?

Ryan: [00:23:55] Because retailers in fashion love the new, new, new. They just do. And sometimes it works for them and many times it doesn’t. But we were diligent about our plan and pass. Strategically it wasn’t right. We just weren’t going to be able to handle it. We couldn’t make shit fast enough on our own, opening up that was going to be a whole other problem.

Richie: [00:24:18] Wouldn’t it mess with price point too?

Ryan: [00:24:19] No. Because we’ve done it and we’ve kept the price parity, right?

Richie: [00:24:23] You had that built in to allow in the beginning?

Ryan: [00:24:26] Not really, but you make it work. Because you realize that acquisition cost, this—this is revenue positive acquisition and we’re getting exposure at a level that, you know, if you spent on marketing, would cost a ton of money. But we always knew that. We just didn’t know what the actual numbers would be. We always said, “When we do this, this is how it’s going to work.” I didn’t have a quack at that point, but I knew that it just made logical sense.

Ryan: [00:24:56] So this year we launched our partnership with Nordstrom. It was a massive success out of the gate. It’s only been five weeks, but it’s been incredible. The sell-through rate is beyond, I think, their expectations and we’ll continue that. You know, we get a lot of, “When are you going international?” and “When are you going to open this?” We’re focused on domestic at the moment. We’re opening our own stores. We have our studio in our office which is a shoppable experience. It’s really unique. You get to look over there and there’s a whole company working in our office. But we’ll also open what would be considered more traditional retail in New York and L.A. to start, which we’re working on now. And we’ll go from there.

Richie: [00:25:41] When you look at the business a few years from now, do you have like, “We expect X percent is retail, X percent is online,” or do you think of them as more symbiotic?

Ryan: [00:25:50] I mean, we have a kind of mix of what we think online GREATS stores and wholesale partners will be. We’re a digitally-native brand and really that means forever and ever and ever, that’s going to be number one by a lot. Way beyond 50 percent. And then the rest supports that. And that’s what we think. But, you know, this whole idea—direct-to-consumer as the original term has been around for a really long time.

Richie: [00:26:19] We in our own writing actually only call it digitally-native because Zara’s direct-to-consumer, Gap is direct-to-consumer.

Ryan: [00:26:24] Supreme is direct-to-consumer.

Richie: [00:26:26] Yeah, there are decades [of this].

Ryan: [00:26:27] Twenty-three years ago, James [Jebbia] was like, “I don’t want to deal with fucking wholesale, I’m going to just open a store and sell some t-shirts.” So, the platform has changed; it used to be that that was your only way. You built a store and you sold stuff. Then the internet came out and that was another way. But direct-to-consumers created by the venture industry, digitally-native was created partly by the venture. It’s all of this glossy new marketing zip-whizzbang terms. But if you really just strip out the term, that’s been going on for a long time.

Richie: [00:26:59] Right. “We’re just changing the channel.”

Ryan: [00:27:00] Yep.

Richie: [00:27:01] Given that then, how did you think about, or how do you think about scale in the business and how those two work together, both as you grew it and sitting here now, kind of where you want to go?

Ryan: [00:27:12] Well that’s the difference of the digital part. So unlike 20 years ago, you couldn’t scale it very quickly and it took an enormous amount of capital to build out a bunch of stores. Today you put up the website, you get the brand awareness and you can start to really scale fast. So how do we think about it? You know, we want to build a profitable business and we’re one of the few digitally-native brands that hasn’t raised an ungodly amount of money that makes it challenging to build a profitable business and exit where everybody wins. We weren’t trying to build the company that had the biggest valuation in round one. We’re trying to build the company that had the biggest valuation at the end. And I think we can do that.

Richie: [00:27:56] This, I assume—because you raised the money, it points to something, right? Do you plan to own this for 30 years or…?

Ryan: [00:28:01] I mean, we’re building a great brand. I’d be lying to you if I said, “Yeah, there’s going to be a day when we’re going to sell it.” Yeah, there probably is. But it doesn’t have to, right? If we build a profitable business, the board can make the decision on how we want to continue. Maybe we raise more money, maybe we sell it, maybe we keep on going. In order to have the options, you have to have a great brand in your hand and that’s what we’re focused on building. I think the outcome will develop from that.

RIchie: [00:28:32] So I think it’s unequivocal that the barrier to entry today has never been lower. In past conversations I’ve had, and kind of from our own observations, the idea started to come that actually the barrier to entry is very low, barrier to success to scale is getting harder and harder and harder.

Ryan: [00:28:46] Way hard, yeah.

Richie: [00:28:48] Talk about that.

Ryan: [00:28:48] Well, I’m building a great brand, which is really fucking hard and I think we saw a lot of really smart people throw a ton of money at people that had no idea what that meant. And putting up a website and selling something—that’s the perceived low barrier. It doesn’t work that way.

Ryan: [00:29:07] When you want to create a loyalty around an item that people are spending their money on, it takes more than just being able to build the item. So I think that’s what people have found out and… What are the next great brands going to look like? I think they look like us. I think they are digitally-native because you can’t do this the old-fashioned way. But because information flow is so fast in the digital age—or, it’s not a digital age, it’s just today—it gets really challenging to maintain relevance. You know, if you’re a hype brand, that means your chances of success to me are lower because your lifespan will be really short. But maybe that’s the new model—I don’t know. It’s not our model, but maybe some kids go, “Hey we want to be the coolest brand for the next two years, raise no money, but just make as much money as we can and then be gone, and maybe we’ll try to do it again.” GREATS is different. We want to build a brand that’s going to be around for 20 years and global and have other categories, right? That’s what great brands do. They go into other categories. They go international. And not many people have done that. So it’s not easy, even though it’s easy to raise a couple of million bucks and start.

Richie: [00:30:22] I’m still intrigued by, again, the inspiration appropriation this kind of model of sneakers in general and how that kind of works. There are two questions out of that. The first is, what sort of design protection exists, or does one pursue in a space that is kind of amorphous in that sense? The second one is, what do you think of as the defensible parts of the business then, if there are these common foundations and you can improve on important parts of them, how do you think about X, Y, Z that what we’re doing is what is defensible over a multi-year timeframe?

Ryan: [00:30:54] I hate to keep bringing up the brand, but the brand is what’s defensible. The intrinsic value that goes into a sneaker is generally not—there’s not a lot of trademark around sneaker silhouette from us or anybody else, so that’s just the playing field. But what tribe you belong to and what product you buy and stand for is defensible because you get that customer who then creates an emotion—they become an advocate for your brand. And that’s what we’re doing. That’s what Adidas does and Apple. You know, these are brands where there is almost a rational affinity to a product.

Richie: [00:31:34] It’s entirely rational.

Ryan: [00:31:35] And you’re not really sure why.

Richie: [00:31:37] Yeah.

Ryan: [00:31:37] Because I can definitely argue that Samsung makes a much better phone than Apple, but I have an Apple. And that’s where great design [comes in], even though nothing is original. And this is the genius of Apple, right? They didn’t invent the screen, they didn’t invent the camera part—everything in there is an off-the-shelf thing. And then they packaged it. That’s the design part. And then, they built a community around it. So, that’s a lot like the sneaker business. The community becomes the person, the group of people, that are advocating on your behalf.

Ryan: [00:32:15] But there’s no formula for that. If I had one, I’d be long retired. But I think we have the ideas of what that takes. And it also takes time, and that’s the one common denominator for a great brand: time. Back to when I said that hype is the enemy of brand—hype is really fast and doesn’t last very long. Great brand needs time to grow and that time can be five years or ten years, it doesn’t have to be 50. But if you think about like… Let’s just pick three: Supreme, Hermès and Louis Vuitton. These are the common denominators of these brands: They had modest means when they started—none of them were luxury or even perceived to be anything [like that]. One made bridles for horses, trunks to travel, and Supreme made t-shirts.

Richie: [00:33:07] No venture funding.

Ryan: [00:33:08] No backing. And then over time, they became these things that we know today. Now, time has gotten faster, so you don’t need 20 years anymore, you need ten. Louis Vuitton needed 100.

Richie: [00:33:20] But it’s not two years though. It’s not six months.

Ryan: [00:33:22] No, definitely not. And six months—if you happen to be the coolest brand in six months, there’s a high likelihood that you’re going to be gone in the next. So that’s my formula of what’s the right amount of time. I don’t know yet. I’m still scribbling on the board, figuring this out. But those are the inputs that we think about.

Richie: [00:33:43] On the community note, you talked before about how sneakerhead culture is a little bit insular and you need a bit of an invite to get in—you can’t just walk in the door. Has the Internet changed that? Has it democratized it more or less? How do you look at those changes or effects?

Ryan: [00:33:56] It’s certainly changed it. I don’t know if it’s changed it for the better. I think that you have young kids who are being manipulated by syndicates. Like, if we think about sneakers and the reseller business of sneakers, it’s controlled by a very small group of people and the kid that waits in line, pretty much doesn’t get it. Which is who is supposed to get to. So he has to get it secondhand at a crazy markup. I don’t think that’s good. I don’t think that’s sustainable. So it’s definitely different, but I don’t think it’s good. And I think if you asked anybody in our industry who’s actually in the space, whether they’re an editorial outlet or a designer from another brand, they would probably agree with me. But you’d have to ask.

Richie: [00:34:44] What’s been the cheapest and most expensive lesson you’ve learned building the company?

Ryan: [00:34:48] Cheapest is definitely stick to your gut, which I live my life by, so that was an easy one. Most expensive was, don’t hesitate to change a team member when you know they’re not right for the team. I’ve made that mistake, which I think many founders do. Because you are moving so fast and you’ve got this person in there and you know they’re not right.

Richie: [00:35:11] But you can’t rip them out either.

Ryan: [00:35:12] You should.

Richie: [00:35:13] Right.

Ryan: [00:35:13] That’s my point.

Richie: [00:35:14] Right, but you’re afraid of all of the other problems.

Ryan: [00:35:15] You’re just like, “Fuck, I can’t be searching for that role again, I’ve got to just keep going and maybe it’ll work itself out,” and it never does, or at least in my experience it never did. Once you identify, pull the plug, let them go. When you’re building a startup you need people are equally as close to passionate about it as the founder is because it’s that fucking intense. There’s a reason that the majority of venture backed startups fail. It’s not because they’re not really smart, it’s not because they didn’t raise the right amount of money. It’s because people just don’t have the intensity and focus and passion to drive it through. And that’s a tough lesson to learn but the odds are there.

Richie: [00:35:59] Right, might as well power through.

Ryan: [00:36:01] Yeah. So that was the most expensive lesson for sure.

Richie: [00:36:03] Yeah. Business-wise, what keeps you up at night?

Ryan: [00:36:08] You know, there’s a lot. And it changes. What keeps me up at the moment—it’s holiday. Are we going to make plan. We think we are. We had a singles day event the other day that beat what we planned for. So that was great. But there’s a lot of road ahead of us just to close out the year so that keeps me up and then hiring—as a CEO, you’re always trying to fill roles and we have a couple and you want to find the best people you can and sometimes you kind of [wonder whether you should] sacrifice the role because I haven’t found them in the time that I wanted to find them. These are huge issues. My gut tells me, “No, wait.” But then there’s reality and the board is like, “Did you fill that role yet?” “No.” “Why?” “Haven’t found him.” “What’s going on? You’re not focused enough.” That’s the real dynamic of it and I don’t know which one is right or wrong, but those keep me up at night.

Richie: [00:37:02] If you were to start the company again today, would you do anything differently?

Ryan: [00:37:05] Yes, but 20-20 hindsight isn’t fair. Yeah, I would’ve but…

Richie: [00:37:10] Or anything major, is a better question.

Ryan: [00:37:12] No, not really. But now that I know what happened, yeah, I would have done a few things differently. But directionally, strategically, no. I wouldn’t have. I wouldn’t have launched with women’s. I would have had a store sooner. We knew we should have had a store the day we raised the first dollar and we just fucking didn’t get there fast enough. I’m disappointed in that one a lot.

Richie: [00:37:32] What would that have done do you think?

Ryan: [00:37:34] I think it would have changed our brand awareness and our performance of digital marketing immediately, because I really do think they enhance each other. We fucked that one up. I fucked that one up. Because, again, we were in that cycle of, “Yeah man, let’s just keep doing this because we can get it to work.” And this is kind of an unknown. It feels right, but I don’t know what it’s going to do or acquisition costs. We should have just done it.

Richie: [00:38:02] So if you look at the funding digitally-native landscape as where it sits today, what do you think is coming given where we are today? Not for GREATS specifically, but just…

Ryan: [00:38:11] I’m not sure I’m optimistic. I think there was a lot of capital spent on D2C companies as they call them, and they all lost, whether it was a marketplace or a brand or other. And they were all bunched into the same group. And I think the venture community may have said, We need a 10X exit in this amount of time and maybe it doesn’t scale the way we thought it was going to like a SaaS business. So I’m not sure the venture community is the right audience for this capital. That being said, there are great companies or great brands that should be funded at some level by somebody. And I think that’s where the opportunity is—the idea of everybody building a billion-dollar company is bullshit. I actually think GREATS can be a billion-dollar company, but it’s not going to happen in the five-year window that all the LPs need their return on by the fund. But in 15 years or ten years, yeah. Because when we add categories and we grow globally, sure, it’s possible. So I’m not sure where that next group, that capital, is going to come from but it’s a need and it’s an opportunity.

Richie: [00:39:20] And as you look ahead, what are you most excited about in the next one, two, three years for GREATS.

Ryan: [00:39:26] I’m excited to get our stores open, which we should have open next year. The brand presence is going to change. I think we’re going to start doing things more traditionally—like campaign that is digitally powered. And that’s where the brand starts to find its way and get set. We’ve been running really fast just trying keep up, didn’t have enough inventory, like “agh!” It’s hard to keep that going. So that’s what I’m excited for. I really believe next year will be bigger than any year, in terms of percentage of growth, than we’ve had, which is atypical. Year four, you usually start to slow—I think we’re going to accelerate.

Richie: [00:40:04] Awesome. Thanks for talking.

Ryan: [00:40:05] Thank you.

Richie: [00:40:13] Thanks for listening to the Loose Threads Podcast. Check out all we have to offer at LooseThreads.com and feel free to leave a review on iTunes—we always appreciate it. Thanks to George Drake Jr. for editing this episode. We have a great roster of upcoming guests including Mariah Chase of Elloqui, Luc Lesénécal of Saint James and Joe Ferrara of Resonance. Thanks for listening and talk to you soon.