#81. Dagne Dover creates bags and accessories that stand the test of morning commutes, happy hours and overseas flights. We talk with co-founder and CEO Melissa Mash about building a brand—and a mentality—that doesn’t compromise on performance or design. 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 81st 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 and insights that drive growth, and Loose Threads Espresso, your energizing and high-pressure filter for consumer 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 LooseThreads.com.

Richie: [00:00:35] Joining me today is Melissa Mash, a co-founder of Dagne Dover. She started the brand after working at Coach and seeing how women were sacrificing function for fashion, which led her to wonder if these two attributes were actually mutually exclusive.

Melissa: [00:00:49] It’s about the thoughtfulness of the pockets. It’s about the marketing imagery that goes with it. It’s about the messaging that we stand for. It’s about how it makes you feel.

Richie: [00:01:02] She quickly realized a better solution was possible and, ever since, the brand has created a range of bags and accessories that give its customers the tools they need to get through the day with everything in tow. Here’s my talk with Melissa Mash.

Richie: [00:01:14] So why don’t we start. Just talk a bit about your background and then we can work our way up to this company existing.

Melissa: [00:01:21] I went to NYU for undergrad and, while I was there, I had a bunch of internships in fashion. In one of my last internship roles, I was with Coach and, there, I was interning in the wholesale sales division. I had a great experience there, started my career after undergrad there and I was managing the brick-and-mortar wholesale accounts. So that was our businesses at Bloomingdale’s, Macy’s and so on. And then, this was 2008 and ecommerce was starting, and so I wanted to be part of the team that helped launch the wholesale ecommerce channel. So I was given that promotion and so we were launching the Coach brand on Macy’s.com, Nordstrom.com, and Dillards.com. And then, after that, I was pretty bored and I thought, “Okay, that’s really interesting. This customer is really different than who’s been shopping in stores in department stores. But I really want international experience. I really want to manage a full team. I don’t want to just manage one or two people. I really want to continue to develop myself.” And so I told Coach that I was leaving. I was moving to London at the time with my boyfriend, now husband. He had a new job.

Melissa: [00:02:21] He was getting set up there and I was hitting the ground running, looking for a job and Coach called me up and they were like, “Hey, actually you’d be perfect to turn around our first European store, which has a lot of issues. We want you to fix everything. So that means manage a nine person team”—which is all international speakers because it was based at Heathrow Terminal 5″—travel retail which is also a different type of experience. And they were like, “We need you to improve the operations. The operations are a disaster. The buy is a disaster. The visual merchandising looks terrible. Getting past security. All of these things that you have to know in travel retail. We just need you to do it and to fix it.” And so, there I was, 25-years-old, and I was given this monumental task of representing the Coach brand to Europe and it was very successful.

Melissa: [00:03:00] I was able to work with this team and work in a store everyday. This was the first time that I wasn’t working with buyers directly, but I was working with the customers directly. People would come in every day and they would say, “Oh my gosh, my water bottle just exploded all over my thousand dollar laptop. Do you have anything so that I can store and protect my laptop so this doesn’t ever happen again?” Or they’d say, “Oh, my keys are constantly scratching my laptop in my bag because they’re all just rolling around in there. Do you have anything to keep it organized?” or “I can’t find my wallet. I’m trying to pay for this bag and I can’t find my wallet. I can’t find my boarding pass.” And so it was just an unending list of problems that people had with their bags.

Melissa: [00:03:36] Since the store was at Heathrow Terminal 5, it was a British Airways-exclusive terminal, super posh. There was Prada, Dior, Gucci, and then there was, of course, Longchamp available everywhere, Tumi available everywhere and people weren’t happy with the options. They wanted something, ideally, that was under $300, that was fashionable, but also had awesome pockets. Not just a lot of pockets, but the right types of pockets. They also wanted something that didn’t have crazy logos all over it. This was 2009. This was the beginning of logo-fatigue in the world. So that’s where I started to see, “Okay, this is the age of BaubleBar. This is the age of Bonobos. Direct-to-consumer is a thing. This is part of the future. It’s only a matter of time before someone does it really well for bags and hits the sweet spot and I want to be that person.” So that’s where I first came up with the idea.

Melissa: [00:04:22] I suddenly realized I need to go back to business school. I didn’t ever think I’d go back to grad school. I’m really all about doing things through experience versus sitting in a classroom. That’s why I had so many internships in college. So I was sort of like, “Oh gross. I’m going to be back taking tests again.” But I needed to. I really needed formal business training. I needed the network to help launch this.

Richie: [00:04:43] Before you keep going, what would happen when you would report these things back to Coach?

Melissa: [00:04:47] So I would tell them, but it’s a big machine and, not only that, but that’s not their thing. That is not part of their brand identity. Part of their brand identity is heritage. It’s butter-soft leather. It’s not rooted in functionality. So to say that you need to do all these things for this one market, for this one store, is just not super practical. But I do remember, prior, when I was working in corporate, all the time during market buyers would tell us, “So many of our customers use your guys’ baby bags because they have so many pockets. They love it. Whether they’re a business woman, whether [they’re an] everyday person, [a] fashionable person, people love the pockets.” So that was always something that, at Coach, we knew, but it just wasn’t the focus.

Richie: [00:05:22] And you had seen that, even though you were in one market at Heathrow, that you started to feel this had a more global possibility.

Melissa: [00:05:28] Absolutely because this was my own problem too. Throughout my life, I had had many handbag problems. I’ll spare you the long list of them. One of them was my phone, while I was studying abroad, getting soaked in my bag because a water bottle had exploded all over my bag because it was just laying sideways and the phone costing 300 Euros to replace, which was super painful for a college student. And then, also, when I had left Coach corporate, they had gifted me this thousand-dollar bag that had been made for the ultimate executive. The point was that, even though it was supposed to be the ultimate business bag, it didn’t actually fit a laptop. The laptop poked out at the top so you looked ridiculous carrying it and it was six pounds too. So it was all sorts of impractical.

Melissa: [00:06:06] So, through my own experiences, through everyone in my peer group—but especially when I went back to business school and I saw literally every single girl was struggling with their bag. They didn’t want to carry a Longchamp because it looked a little too juvenile or a little too casual. They wanted to be taken seriously. People were typically in their late 20s. They wanted to look sort of middle level. A flashy bag like a Louis Vuitton or a Gucci was too flashy to be professional. So when they would go to recruiting events, it was just sort of like, “Oh my god, what am I going to carry? There’s nothing appropriate.” And also trying to pull out your resume and then charging cords and everything flying out at the same time. I actually went in with another business idea, but when I saw that there were so many people who were like, “Yes, I need a brand like this,” I was like, “Yes, I’m definitely pursuing this.” And I hit the ground running.

Richie: [00:06:52] And so where were you, coming in, with the idea? And where are you when you’re done with business school?

Melissa: [00:06:56] So I came in with the idea, but I actually had another one that I was pursuing more. But then, after one semester, I was like, “Yes. I’m definitely pursuing what has now become Dagne Dover.” And I was like, “Okay, I definitely don’t want to be sole founder because there’s just so much going on. There’s no way you’re going be good at everything.” I knew my strengths and I knew areas where there was just far better talent. So I wanted two particular types of co-founders. One—a creative who could be the face, who people could emote and understand this was coming from this person’s heart and mind and artistic ability. And then I wanted someone who was far more technical and analytical than me because I was not, certainly, a traditional business person. So I wanted someone who would obsess about the details and, frankly, be really good at math.

Melissa: [00:07:35] So there were several women who were really interested in joining my independent study with this famous professor named Professor Bell. He’s known as the ecommerce academia expert. He is an investor and adviser to many brands. Anyway, so I started this independent study with him and they joined and then I also invited Jessy, who I had been working with on a freelance basis, to come down from New York to also participate in the independent study and we would see how it went. At the end of the semester, we would see where we shook out and what made sense in terms of the founding team.

Melissa: [00:08:03] So then we started working on it basically from the beginning of 2012. It took a long time for all of this to get done. And then we started to win some awards. We won the Wharton Venture Award which is a $10,000 grant that had previously been won by Warby Parker and some other brands. We were the first MBA company funded by Dorm Room Fund which is powered by First Round Capital. That was another investment to help us. It was just a slow grind of trying to get friends and family investments, basically raise about $200k to test out the concept and build it enough where we could get traction to attract a prolific angel investor who ended up leading our seed round.

Richie: [00:08:37] So you have this idea, you have a team now. What do you need to get to the point where you’re derisking the concept? Is it “We need to launch a single thing?” Is it “We need 15 different products?” How does that process unfold?

Melissa: [00:08:48] Well, for us, we felt that we really needed to see unit velocity—and I say that in a way that’s only relative to where we were at that time which is not just sell 10 units but sell a hundred units—behind two particular products that we felt were going to be staples to our collection and they’re still on our site today. One is what is known now as the Legend Tote. It fits up to a 15-inch laptop and it’s the bag that you rely on Monday through Friday. People often can carry it on the weekends as well, but it’s just that bag that has everything that you need when you need it. For your metro card when you’re getting on the subway to your keys when you’re getting home at 2:00am after Thursday happy hour or whatever it is to, of course, your laptop, your notebook everything in its place, your shake in the morning or whatever, your water. But that bag, definitely, sold immediately and we saw that we had product-market fit.

Melissa: [00:09:35] The second item that we had launched, at the same time, was a day-to-evening solution and that was called The Clutch Wallet. Today it’s called The Essentials Clutch Wallet. It’s a clutch, but it’s also a wallet. So you have card slots, you have a place for your lipgloss so it stays in place, you have a little key hook so that those are there, but it looks like a chic clutch. So you don’t have to rearrange your whole life if you’re going out at night and, if you need to put stuff into another clutch to take out, everything is already in your bag. You take that out. You can either keep your bag your big tote at work or you can coat-check it or whatever, but you have everything you need right there.

Melissa: [00:10:07] We felt very strongly that those were going to be two needs of our demographic and the fact that we were able to sell out of all the capacity that we could make for that year, 2013, within, basically, the first six months of going live in that March was very successful to us and we could show enough traction to get the right types of investors involved.

Richie: [00:10:26] How long did it take to develop those products to the point that you launched them?

Melissa: [00:10:30] Oh my gosh. I think we went through nine samples of The Tote. And for The Essentials Clutch Wallet, we went through many samples, but then we also revamped it about a year and a half ago. So it’s an evolving thing. But in terms of just getting to launch, it took a lot of iterations, way more than I think is normal or has been normal in the industry. But we weren’t going after something that’s only going to live one season. These are silhouettes—when we invest in a silhouette, it needs to live for years. It needs to be a multi-million dollar silhouette. We believe in the silhouettes and the function and the aesthetic they provide. So it took a long time but we were able to find really awesome partners from our sample makers to, eventually, full-scale production who [were] willing to spend that time to perfect it with us. And the supply chain as well.

Richie: [00:11:13] And were you doing that domestically or internationally?

Melissa: [00:11:16] It started domestically. We were working with a sample room/small factory here in New York City, but we very quickly maxed out their capacity. So it was time to move abroad which was great because we were able to close our seed round and get the funds in order to do that.

Richie: [00:11:27] In that first round of sellouts, who’s buying at that point?

Melissa: [00:11:30] It was mostly people from our network or two or three degrees beyond that. When we were engineering the product and making sure that we were hitting on all the right attributes, from the length of the key strap to the length of what you call the drop length—which is how high the handles go and how easily you can get it over your shoulder—we had surveyed and focus grouped about a thousand women and men, mostly stemming from the work community, but then they sent it on to other friends and family. So we got a really nice group of information. And so when we actually were ready to launch our product, then we let them know, “Hey, thanks so much for participating in focus groups last year. This is actually what it looks like. If you would purchase it, then here’s the link.” And people did and they sent it to their friends and family and so on. So it was really incredible. This was not done on a Kickstarter or any other type of site. It was our own site. We always kept the branding and the experience to be owned by us. But it was incredible that people came and that they bought.

Richie: [00:12:21] And so, at this point, often with these sorts of companies, I ask, “Why did this not exist before?” Because there were clearly no shortage of bags out there. Did you have an opinion on that, at this point, and then do you have a different one now?

Melissa: [00:12:35] Yeah. I think it’s just more reinforced at this point. But, at that point, imagine it being 2009 when I came up with the idea. I was at a loss for what to carry. I was always carrying Coach because that’s what was free, frankly, or what I had a 50% off discount for. But it wasn’t something I’d ever carried prior. And it’s because there’s something about feeling connected to brands and that’s why we have such brand affinity today. When people see a company that is led by three female millennials who look different, who came from different backgrounds… Sure, we all came from the retail industry, but very different parts of the retail industry. Deepa’s the analytical one, I’m sales and management and Jessy’s design. And we all came together around the need for this company and the need for this brand. The imagery and the content is so positive. It is so uplifting. It’s all about possibility. And also a two-way dialogue on our Instagram, on customer service. We take feedback because we’re not trying to be a push-marketing company. We’ve never been that way. We can only be great if we listen to our fanbase. That is very different from most of fashion.

Melissa: [00:13:36] And, for the older generation of traditional brands that we grew up loving and knowing, those people who are making decisions, those people who are the faces of those brand are not us. They’re not female, often, and they’re also not our generation. They don’t live our lifestyle. They don’t know our needs from day to evening. They don’t know that we’re out from 7:00am to 10:00pm and what we’re doing because they have a different life now. So I think that people really love the fact that they were seeing people just like them.

Richie: [00:14:02] I had Eleanor from Argent on here too and it was a similar idea of—their whole thing is super functional power suiting for women—all of the function was just entirely available for guys. And it took an immensely long amount of time to even give women pockets.

Melissa: [00:14:15] Absolutely.

Richie: [00:14:15] In a similar vein, there are endless gym bags I could go get at any given moment but it seems that the function curve is very skewed towards men.

Melissa: [00:14:22] But the truth is that it’s not about it being a bag with pockets. A lot of people can produce a bag of pockets even though not at this quality. But it’s about the aesthetic too. It’s about the thoughtfulness of the pockets. It’s about the marketing imagery that goes with it. It’s about the messaging that we stand for. It’s about how it makes you feel. That’s ultimately why someone likes your product—is because of how good it makes you feel. Yes, there are copycats out there. Yes, there are other brands that do something, maybe kind of somewhat similar to us, but not the way that we do it.

Richie: [00:14:56] Right. And it would seem that often function comes at the expense of the aesthetics and all those things as well.

Melissa: [00:15:00] Right, and it does not have to.

Richie: [00:15:03] Okay. So you sell these things out. You have the start. Is the next step [that] you go out and raise the first round, or where do you go from there?

Melissa: [00:15:09] So we raised our first round in 2014. It was small. We’ve always taken very, very small amounts of money.

Richie: [00:15:14] Why?

Melissa: [00:15:15] Because we want to maintain control of the company and we also come from retail. The three of us knew what we were doing. We were able to run the company for the first two and a half years by ourselves. Three people. You don’t really see that. So we just felt we didn’t need to spend a lot of money on talent to begin with. And, also, we are people who believe in, if we take in a dollar, we have to make three with it.

Richie: [00:15:36] That’s a very rare opinion in this industry right now.

Melissa: [00:15:38] It is but we feel that that’s the most responsible way. And, even though it’s a lot harder—Oh my gosh, those first three years were really, really, really hard—it’s so worth it. Now we totally control our destiny and we were able to get so far on so little and gained so much respect from investors, from people in the industry. World’s our oyster because of those sacrifices.

Richie: [00:15:57] And so you got out and raised a round.

Melissa: [00:15:59] Yep.

Richie: [00:15:59] What are you going into that with the goal of? “We’re gonna go use the money to do X” and then what happens after that?

Melissa: [00:16:04] Sell. So it was all about we’re not putting a bunch of money into marketing per se. It’s really about the product. We know that, once we get the product in front of people, people are walking showrooms for it. So people would say, “Oh my gosh, I really love that color.” They’d be like, “Oh my gosh, let me tell you, this is Dagne Dover. You have to go get this bag.” And they show them all the features. So we didn’t need to pump a lot of money into marketing. In fact, we only started digital marketing in a very small way at the beginning of 2015. So, keep in mind, we went to presale 2013. We went back in stock with a lot more inventory once we had scaled production abroad towards the end of 2014.

Richie: [00:16:37] Still two SKUs?

Melissa: [00:16:37] Four or five SKUs by holiday of that time. And then 2015 is when we just started to market in a very small way. So it was really relying on just pumping inventory. We just didn’t have enough units that we could sell. We were constantly out of stock. Now we’re in a much better place. But, at the very beginning, we were just constantly out of stock because we couldn’t get working capital loans. Our hands were tied in so many ways. We really just had to, again, continue to push sales and prove that there was even stronger product-market fit before we could even think about investing in marketing or anything beyond that.

Richie: [00:17:07] When did you raise the first real round?

Melissa: [00:17:07] 2014.

Richie: [00:17:08] 2014. And you said you ended that year with a few more SKUs.

Melissa: [00:17:12] Yes.

Richie: [00:17:12] So talk about what was working with the two and then where you decide to go from there.

Melissa: [00:17:17] Those two were really just the baseline of what we needed to just start something. But we knew that people wanted other options. So, for example, they wanted a cross-body bag and they wanted one that also had handles that folded down so that it could be a little bit more compact. So we launched what is now called The Midi Tote and then we also launched a really small bag that’s also known as The Petite Tote Today, which was just a really fun brunch bag. Something that you could wear out during the day, out during the evening and it always looked great. Super cute, a great price point and, again, still had the functionality. Even though it’s small, you can still clip your keys everywhere. You know where stuff is. And then additionally to that, we also had just a small card case where people could—[with] card cases, typically, you’re giving a business card, you’re getting a business card. But, typically, card cases have one pocket. It’s like, no, you need at least two. So this one had three pockets for that functionality. So that was rounding out the signature collection and that’s, basically, what it is today.

Richie: [00:18:08] Talk a bit more about aesthetics in terms of where you wanted to aim and then I’m also curious to talk about price point.

Melissa: [00:18:14] So, with that signature collection, it was really important for us to keep it under $300. It was really important.

Richie: [00:18:19] For everything?

Melissa: [00:18:19] For everything. The bigger bags are—I think the most expensive one is $265. We really wanted to hit that $250 price point across that whole collection for the bigger bags because we knew that that’s where we would win and, also, that it signaled quality. And it is incredibly high quality materials, but it also was attainable for people who were switching maybe from a Kors, a Coach, a Marc Jacobs, a Tory. Typically, they’re buying those brands 25% off in a department store and so on or, at least at the time, they were. So it was still more compelling given that discount. And, of course, all the functionality, which is very expensive to produce and very expensive to work in there.

Richie: [00:18:55] Talk more about that.

Melissa: [00:18:57] Our bags require two times the amount of material and one and a half times the amount of labor. If you’re thinking about like a pricing standpoint, our bags are really expensive to make. But us being smarter about what distribution channels that we always sell through and commit to and those terms makes it possible so that we can provide that to our customer as long as most of our business is direct-to-consumer. So that was always a part of our strategy. We were never planning to be a strong wholesale business. Having come from wholesale myself, I saw the benefits and I also saw the areas of caution. It’s direct-to-consumer. This is the era where people are more knowledgeable and smarter and they understand materials better than ever before. I think that, prior to five years ago, everyone thought that a Louis Vuitton was made out of leather and, now, I think a lot of people know it’s coated canvas, which is the same material that we use for our signature collection. But, at the same time, it still is durable. It still looks luxurious.

Melissa: [00:19:47] Coated canvas was really important to us because our girl is someone who is in the rain, who is out trekking at all hours. She needs to make sure that she’s not going to ruin her bag if she gets stuck in a downpour or if she gets a bottle of wine spilled all over her at happy hour, which happens. Life happens. Life is not perfect and it’s okay that it’s messy because we’re prepared for it and that’s really what we stand for with all the materials that we choose. Our neoprene collection called 365 can be hand-washed, which is amazing, but it also keeps its really nice structure, almost like leather, but still is sporty and practical too.

Richie: [00:20:18] Do you find yourself pulling customers away from luxury [who] would normally buy it?

Melissa: [00:20:21] So what’s interesting is that our customer is, typically, being pulled away from other affordable luxury. So she’s being pulled away from Kate Spade, from Coach, from Tory, from Marc Jacobs. But she is not replacing Hermes, Chanel, Louis. We’re sitting next to those brands in her closet because they serve a different purpose to her. These are not the everyday bags that you’re using. You’re wearing Chanel for a special occasion. You’re wearing Hermes when you want to make a statement. So it’s a very different purpose. But, in terms of being the go-to everyday bag, yes. We are that.

Richie: [00:20:51] Do you think you’d ever go up-market?

Melissa: [00:20:53] Well, we do have a collection, our leather collection, that’s priced up to $500. I’d say the sweet spot is really around $350. And that collection does really well. $350 for a leather bag that is beautiful and functional. It’s exceptional value.

Richie: [00:21:06] Okay. So where are you at the end of 2014 then?

Melissa: [00:21:08] At the end of 2014, we have just gone back live because we were offline for eight and a half months of the year while we were moving production abroad, finishing our capital raise, blah blah blah.

Richie: [00:21:18] Was that hard?

Melissa: [00:21:19] Yes. Everything was hard. 2014 was really hard. We were building our teams so we started to hire the first two people. That was very exciting. And then 2015 was off to the races. People are buying. Our first day back in stock, in August of 2014, was amazing because we were like, “Okay, we’ve been offline for eight and a half months. Are people actually going to remember us?” Even though we had all these thousands of people on a waitlist, it’s another thing to actually put your money down and say, “Okay, I’m actually doing this.” But we had an amazing first day back in stock, blew away any expectations that we had and the rest of the year was amazing as well. 2015 was really like, “Okay, we’re going to start pumping this. We’re going to start dabbling into digital.” Digital was incredible.

Melissa: [00:21:59] [In] 2016, actually, we were recognized for how successful we were performing on digital. Instagram actually reached out to us for their one year anniversary of advertising and they were like, “Hey, you guys are actually our number one performing advertiser on all of Instagram out of 1.5 million brands. Your ROI is higher than anyone else.” And we were like, “What? What is going on?” And they were pinpointing the exact images that we had used and the exact copy and who we had segmented and everything. And it was really that top-down image of the bag or the side image where you can see inside all the pockets. And, of course, it being a bag that’s pink or something that’s a fashionable color and a lifestyle type of shot where people just feel, emotionally, like, “Oh my gosh, I need to have the bag right now. It’s going to solve all my problems and everyone I know needs to have that bag too.” That’s really what captures people and that really is what what hits them over the head and says what makes us so different. It’s not just arm candy. This is something that helps you perform better on a daily basis. So it was really cool that we got such early validation from them. We also got some early validation from some other partners as well where we were case studies for them. Like for Spring, the shopping app, a few years ago. It was really cool to get validation on all parts, from logistics and how we run our business to design and people being interested in that way to a slew of retailers started reaching out to us about 18 months ago as well.

Richie: [00:23:18] Was that downtime—would you have done it differently if you could do it again or it was unavoidable?

Melissa: [00:23:22] No. It was so necessary. That’s just the amount of time it takes to get up and running with a factory and we didn’t have money to pay the factory unless we raised capital. First time raise is the hardest thing I’ve ever done.

Richie: [00:23:32] We’re I guess, now, into 2016-ish.

Melissa: [00:23:35] Yeah.

Richie: [00:23:35] As you start to turn on digitals. Up until this point, your selling entirely direct-to-consumer.

Melissa: [00:23:39] We are. 2016 was all direct-to-consumer.

Richie: [00:23:42] So we know a little bit now about the results of that from Instagram and so forth, but how do you approach where you start to spend money and what do you look for from the different channel options you have?

Melissa: [00:23:51] Yeah. We were really just still focused on digital. We only recently have gone offline and looked at other channels or started dabbling in other channels. But it really was just between Facebook, Instagram and Google and it was highly effective and we did not see a plateau. So we were just continuing to work with it. That being said, we also were not a company since we, again, how we use our funds, we weren’t a company that was just pumping our marketing at all. We were doing it in a very cadenced way so that we could adjust quickly before wasting any money. We were much more willing to put more money in inventory and production and just being able to test with more different types of styles than to waste any money unnecessarily in advertising when we knew 50% of our traffic was coming from people directly going to DagneDover.com. We just didn’t need to spend money in that way.

Richie: [00:24:39] So any other highlights throughout 2016?

Melissa: [00:24:45] 2016. It sounds really terrible that I can’t think of any but I know that we had some amazing—2015 we were in Oprah magazine. That happened organically on Gayle’s editor-in-chief page. We started to get a lot of press around business, around lifestyle, around fashion. We were in Forbes a bajillion times. That’s really when, I think, it started to look a little bit larger than life—2016. And then, 2017, in particular with the retailers, I think it’s when, especially when we went live on Nordstrom.com at the end of last year, that’s when we really started to have a bit more of a halo effect around our brand.

Richie: [00:25:15] So how did you approach diversifying back into wholesale, which is, obviously, what you knew well.

Melissa: [00:25:21] So we were never looking to get with any particular partner at that point in time. Opportunities presented themselves and, basically, we had a lot of inbound inquiries and, from there, we decided, “Okay, which are the ones that make sense for our business?” Equinox is fantastic from a brand alignment perspective as well as [a] number-of-doors perspective in covering across the country. Right now, we’re in 15 doors. By this fall, we’ll be in 50. That’s awesome. We know that our customer is going there and she’s looking at them for recommendations for what to buy. So that, we knew, was fantastic. Bandier—we grew up with them. They are an awesome brand. They have a great eye and we’ve always very supportive of each other’s businesses so we were really happy to go live with them and, in particular, this year, our business with them has just been phenomenally strong. And then we went live with Nordstrom.com this past fall/winter and immediately, I mean immediately, shot up to being a top performing brand on Nordstrom.com which is incredible.

Richie: [00:26:15] What does the growing success of the wholesale tell you about both that channel and, also, how do you look at just the mix going forward?

Melissa: [00:26:25] We like to keep it tight. We chose each of those members for a very distinct reason. Nordstrom—they’re fantastic for customer experience as well as for curation. My team and I, we all shop on Nordstrom. It’s something that you trust, that you know is reliable. We looked at them as sort of the reliable, fashionable mass retailer that we’re going with. We’re not interested in going with a bunch of department stores. We’re not interested in going with a bunch of retailers that fit in that category. That’s the one. In the same way that Equinox is the one for lifestyle gym. In the way that Bandier is the one for millennial, more New York-centric type of activewear person. And then, in terms of the other retailers that we are working with and going forward in the future, they’re going to be ones that fall outside of those categories but still the same sort of mindset.

Melissa: [00:27:10] The way that we think about our customer base is really not based on demographic. At this point, our customers are everywhere in the world. But it really is about psychographic. Is this someone who maybe reads TheSkimm every day? Someone who’s reading Forbes? Someone who cares about their career? Is this someone who is using Amazon Prime or some other site or retailer where they know what the shipping is going to be, they know what the turnaround’s gonna be? Someone who is comfortable online shopping actively? Someone who goes to SoulCycle or goes someplace where it’s more than just a workout, it’s an experience? Is this someone who is basically forward-thinking and trying to optimize their life? Someone who uses services and products that multitask, that are data-driven and that are better than the status quo? Because that’s what we do for everything. It’s really retailers that have audiences like that.

Richie: [00:27:52] So I remember when Kit and Ace came out, if you went and looked at their “About” page, there was a section on “Our Customer” and it literally read something like, “Our customer is a person [who] gets up at 6:00 in the morning, goes for a run, goes to work for an hour, goes kayaking, plays basketball at lunch, goes to happy hour, gets on a dinner party and takes a red-eye home.” And they had built this segmentation that, effectively, was nobody.

Melissa: [00:28:14] Right.

Richie: [00:28:15] I don’t know why but they had seemed to do that. And it was interesting from a perspective of, if you know who founded it and so forth, that it somewhat assumes private jet travel is part of the life and you can kind of go and do anything you want at any time and there are no rules. That often happens, I think, with companies where people create something for themselves. How did you or continually do you avoid doing something where it’s like, “Yes, it solves my problem but I don’t know if that solves everyone’s problem”?

Melissa: [00:28:40] Yeah.

Richie: [00:28:41] And balance what could be a very valid intuition versus actual wider resonance?

Melissa: [00:28:46] That can be one of the differences between what makes a partnership between multiple founders really strong and valuable versus when it’s a solo founder or maybe even just two people who are who are similar. Me, Deepa and Jessy are very much litmus checks for each other where, if someone’s feeling like, “Oh, everyone’s going to love this” and we’re like, “What are you talking about? That is like 5% of people out there.” That’s helpful. Not only that, but we really, really rely heavily on data. From the get go, we have been tracking our data because that is gold. Getting feedback from customers actively and consistently is really important and that plays into design decisions and it becomes very clear when a million people are saying, “Hey, we want a gym bag,” we know, exactly, that this is going to have product-market fit. We just need to make sure that we build it in the way that they told us to build it, add our own things to it that make it special and that make it Dagne. But we know that people have been wanting it and asking for it.

Richie: [00:29:39] Right. But at the same time, also, knowing or taking the opportunity to put things out that they haven’t yet asked for.

Melissa: [00:29:46] Totally.

Richie: [00:29:46] Because no one, necessarily, asked for the brand.

Melissa: [00:29:48] I think just, from that initial inception, it’s because I had just seen it so much. Of course, I looked at lots of spreadsheets. Of course, I looked at lots of information when I was at corporate and I saw that people wanted something like this. It’s also talking to people. It’s also living your life. It’s also talking to friends. This is not just one type of person. It’s not just one age of a person. It’s not just one educational group of a person. It doesn’t matter if you are a 15-year old still in high school. You want Dagne. We’ve had many customers, actually, who are starting young, starting in high school because they want to feel on top of their A-game. Who doesn’t want to feel confident and prepared every day? That spans across every generation.

Richie: [00:30:23] Bring us up to 2018 in terms of highs or lows of 2017.

Melissa: [00:30:29] 2017 was an awesome year. We are a very, very, very small team. I’m so proud of what we’re able to accomplish together. We, right now, are 13 people executing this business and feeling so confident and good and proud of it all. I think what I’m most proud is how well everyone works together because everything can look glossy and perfect on the outside to anyone. Anyone can fake that. But when it’s a joy to go to work everyday and people are friends that you just happen to work with, that’s what makes life actually meaningful. It’s not work anymore. It becomes so much more than that. So that’s what I’m most proud about, that we’re really in an amazing cadence in terms of a team.

Melissa: [00:31:12] And then 2018, this is the year where we just explode. There’s so much going on. None of it can be revealed now. But, oh my gosh, this is our year. Coming off of last week with Dagne Summer Games, it was everything we had always wanted it to be.

Richie: [00:31:24] So talk more about that.

Melissa: [00:31:25] Sure. So it’s our five year birthday. The idea behind it was that on Instagram, you see all these amazing events that happen. For example, the Revolve House or whatever. And it’s only for bloggers. It’s only for people who live a certain lifestyle, who have certain status and it’s just so not our brand. Our brand is so inclusive and “you can sit with us” that we wanted to have an event where people felt really comfortable to come hang out, come as you are, enjoy games, have fun, get a manicure, maybe look at the bags, but come and hang out. And so we wanted to have a Soho block party so we called it Dagne Summer Games. We had cornhole, we had ping pong, we had a beach that we made, people could just hang out in. We had a reading nook for people who just didn’t want to socialize, but wanted to check it out, who wanted to check some of our favourite reads out as well. People who wanted to get portraits done or headshots done—they could with a fashion photographer. They could write on our “Love is a superpower” wall where they filled in what their superpower is. “Love is a superpower” was the name of our spring/summer campaign so it’s all about equality and unity and friendship and togetherness and positive vibes.

Melissa: [00:32:26] And then, for any activity that people did, whether it was Checkers, Connect 4 or whatever, then you got a ticket. And, when you got tickets, if you got five tickets, you could redeem for a manicure. If you got three tickets, you could redeem to get your hair done. You could get a headshot done for one ticket. You could get career tarot card reading for two tickets. But this idea of it’s just fun. And we had a lot of people who came and hung out, honestly, for two or three days. Once they came the first day, they were like, “I will just bring all my friends here and this will be my weekend.” And you could also redeem for beverages at the bar so they were having La Colombe coffee or LaCroix or whatever it was. And it was just fun and chill and there weren’t any expectations. You didn’t have to buy anything. Everything was appropriate. Everyone just had some good, clean, happy fun and that’s what we wanted. We just wanted people to get to know our brand for the first time but no pressure of anything.

Richie: [00:33:14] It sounds like you’ve done other events before, but was this the first real offline thing?

Melissa: [00:33:18] This is the first major one we did. We did a pop-up two years ago in Soho as well. It was a very small footprint and it really was just a store. There was not space to create a whole experience around this. This, you saw every facet of who we are I think.

Richie: [00:33:30] Do you think you’re gonna do more of those?

Melissa: [00:33:31] That was a pretty big activation for us, a big five-year birthday. I think that the next one we’ll look at is definitely the ten year. But there might be something in between. This was hugely successful so we’re gonna have to hindsight and see what we want to do in future.

Richie: [00:33:44] What has been the cheapest and most expensive lesson you’ve learned building the company so far?

Melissa: [00:33:48] So, when we went back in stock—so this was in fall of 2014—we rushed a product launch of the Midi Tote. And, basically, it missed a step in the quality control process and bags were falling apart. Disaster. Disaster. This is the third product that we’re launching. People have been waiting all this time for us to be back in stock with the other two products. We launch this product and something’s not going right. We don’t have tens of thousands of dollars to burn. First of all, it was a PR nightmare too because so many editors and everyone had been gifted this bag. Terrible. We were able to message everyone who had gotten a bag, apologize profusely, let them know that, please, destroy the bag or give it back to us and we will send you a new one and it will not happen again and people were really nice about it.

Melissa: [00:34:32] It ended up being a very small cost to us in the end in terms of how many bags we needed to destroy and how big the problem was. But it was a costly error to make at that point in the business where we were still trying to show that we were a real brand and that we were a quality brand. So it was tough and it hurt but it was so good that we learned it then instead of having to learn it later on. We were at the beginning of our production experience life. Luckily, we were able to hire somewhere shortly thereafter who is now our VP of sourcing and production. This will never happen. It has never happened after that and will never happen because she is a veteran of the industry but that’s what happens when you don’t have 20 years under your belt and you’re doing something. Even if you’re working with the most amazing factories, if you’re rushing something because you want to hit a certain timeline of getting to launch to prove yourself. Almost never is that a good idea. So that was very helpful to learn.

Richie: [00:35:22] And what about cheapest?

Melissa: [00:35:24] Basically, when the world was falling apart or, rather, the handbag world was falling apart, and a lot of these other brands, these big brands, these big affordable luxury brands were cutting their orders 50% because people weren’t buying their bags, the factory that we were working with at the time was hemorrhaging. And they had a huge issue on their hands because, of course, they had facilities and workers that they needed to pay and needed to figure out a way to survive. And since we were the smallest brand by far on their list, we were the first ones to go. They said, “We can’t even deal with you right now. We’re just trying to survive. We need to figure out how to replace millions of orders ASAP. You need to give us $300,000 before we ship your last shipment.” First of all, we need a new factory which is crazy because that does not happen over just a few months. And second of all, we don’t have $300,000 to pay for our last shipment to be able to pay them.

Melissa: [00:36:14] But one of the most valuable lessons is really maintaining relationships. Our investors—we’ve always been very, very, very careful as to [whom] we brought on board. Really good people who were understanding of us and who knew us personally, that we were going to do whatever it took when times got rough. We called up one of our investors who did not put in a lot of money into our business. It’s not like he had $300,000 lying around. But we told him the situation and we asked him for a loan and he gave us a loan and, within two weeks, the situation was resolved and we were able to pay off the loan two years later. So that was extreme trust. This guy was not friends and family. This guy is who we refer to as our number one rando. He was the number one random person who invested in our business just based off of trusting us. It was very, very, very early on and the fact that he felt that confidence in us was so invaluable. You really just can’t replace good people.

Richie: [00:37:06] Right and relationships and so forth.

Melissa: [00:37:08] Yep. And maintaining them. It’s not like we called him up out of the blue. This is someone who we were constantly in contact with because he just was a good person.

Richie: [00:37:15] So you’re at five years now. What have you learned about time? For everything we’ve ever learned, it basically takes ten years to establish a brand. No amount of money, generally, will shortcut that process. And so, given you’re almost at that halfway point, in terms of expectations you had about where you would be five years ago to now, what have some of the lessons or insights been around just time?

Melissa: [00:37:36] When we launched the brand, it was 2013 which was a very different point in time for people who are building brands. Today, it’s a very different landscape. At the time, with Jessy being a founding member, we could get by because she had a design aesthetic. She made the logo. She did the coloring. She did the aesthetics. We never looked like we didn’t know what we were doing. It’s more refined today but we could get away with it. Today, in 2018, you can’t really get away with it in the same way that maybe we did. But now people do spend a couple hundred thousand dollars on the branding up front. That’s the norm. That is just never a decision that we made. We were always a product-first company and we were able to do that and raise very little money doing that and maintain control and all of that because of where we were in the life cycle of direct-to-consumer brands. Today, I think you have to raise more money, give way more control and that’s a little unfortunate. But also you have the opportunity to grow faster because of it. It’s easier than ever to get in front of customers.

Melissa: [00:38:35] So, in terms of time, the first three years in particular were brutal in that it’s all about survival. It’s are we going to make it? It’s begging someone for a $25k check. It’s really, really, really tough. You’re still establishing the fact that you deserve to be in business and that you will be in business, getting people to trust you. At this point, yes, it’s still stressful but it is so much of a joy because it’s all upside. We’ve gotten past the point of, “Are we going to survive? Are we going to thrive?” It’s about, “Okay, how do we want to do this? What is the way that feels the most organic and authentic to us?” We never had to compromise in any real ways or take on investment from people that we didn’t want to survive or whatever it is. We did it our way and we’ve got this. We weathered so many things that we know that whatever comes up in the future, we’ve totally got this. So this is a really fun period for us where, of course, it’s all new. Of course, it’s new, different challenges with people, with doing bigger things and putting a lot more money behind these things then they have to pay off for us in some way. But there’s a lot more certainty because we have a lot more data to support it too. So it’s really just an exciting time for our brand.

Richie: [00:39:46] And so, on that note, how big do you think this can get and how big do you actually want it to get?

Melissa: [00:39:52] We think that this brand can be one of the biggest in the accessory space and beyond. Even though we are an accessories brand, we don’t even like calling ourselves just that because it’s so much more than that. It really is a mindset. We’re definitely going to move beyond bags at some point. It’s just that this is where we’re playing in right now. This is where we’re owning right now and we’re all about slow and steady. We’re all about mastering something before spreading ourselves too thin. In terms of how big this can get, I don’t really want to throw out numbers, but we see ourselves as the next generation of traditional bag brands and beyond that, beyond traditional lifestyle brands as well.

Melissa: [00:40:23] And in terms of how big we want it to get, for us, it’s not so much about a size. It’s about a feel. There are companies out there that can still feel really intimate and really fulfilling even though there are a couple hundred employees or whatever. We’re at 13 right now. I don’t know what it’s going to feel like at 50. We have an idea of what it’s going to feel like at 50, but that itself is going to be challenging. We’re just so not built like any other company. Honestly, it’s really hard to look at other companies and say, “Oh, I think we can be like them or whatever.” We’re going to be our own entity. I think we have the potential to have a huge business but, again, the team might end up being quite small that actually ends up executing it.

Richie: [00:40:58] What do you think is misunderstood about the brand that you want to correct?

Melissa: [00:41:02] I think, at the beginning, we were known to be a working woman’s bag brand and that was because of the first product that we had was the tote, The Legend Tote, which very much looks like a Monday through Friday type of bag. That being said, we very quickly, in 2016 and 2017, came out with new collections that rounded out our lifestyle. So it’s much more diversified at this point and certainly not just for women. Our 365 collection—a lot of men buy it and it is made to be unisex collection. So I think something that is misunderstood is when people think of us as a women’s working bag brand when, really, we’re all about a mindset.

Richie: [00:41:37] What are you most excited about that’s on the horizon in the next year or two that you’re looking forward to?

Melissa: [00:41:42] There are some amazing things in the works, not only with the retail partners and the type of exposure and visibility that we’re going to get, but also just helping redefine us as a brand and about who this product and this brand is made for in a very, very strong way. So that is super exciting. And then, also, just in terms of brand partners or other types of alignments, so many people are reaching out to us right now. Organizations, conferences, etc, that are amazing and incredible and us being associated with them in any way is going to be game changing. So to be part of that in the next 12 months is something that we’re really looking forward to as well.

Richie: [00:42:21] Very cool. And where’s the name from?

Melissa: [00:42:22] Dagne is a Nordic word for “new day” and Dover is Jessy’s last name. So what we say is, “We’re really a new day for design, for bags, for living your life where you really just don’t need to compromise on aesthetics or how something works for you. We’re really rooted in performance.” So it’s all about today is the day. Go get it.

Richie: [00:42:39] Awesome. Thanks so much for talking.

Melissa: [00:42:41] Sure. Thanks for having me.

Richie: [00:42:46] Thanks for listening to the Loose Threads Podcast. You can read full transcripts of the podcast and join the newsletter at LooseThreads.com. Feel free to also leave a review on iTunes—we always appreciate it. And thanks to George Drake Jr. for editing this episode. We have a great roster of upcoming guests including Miki Berardelli Of Kidbox, Barry Beck of Bluemercury and Bouchra Ezzahraoui of AUrate. Thanks for listening and talk to you soon.