#136. Richer Poorer is a men’s and women’s elevated basics brand. We talk with co-founder Iva Pawling about her journey selling her company, buying it back and taking control of the brand’s future. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below. 

Iva: [00:00:01] Everything about the brand and the values of the brand is us, and I think that’s hard to replicate. I think it’s an easy belief to go, “Okay, we could just go do this again. Like, let’s just go start another brand and start from scratch.” And I think plenty of entrepreneurs have been able to do that. For us, it still just felt like we had so much to do.

Richie: [00:00:18] That’s Iva Pawling, co-founder of Richer Poorer, a men’s and women’s elevated basics brand that Iva started with co-founder Tim Morse in 2010. Over the last decade, the brand has gone through an acquisition and then two buybacks as the founders took back control of their venture and put it on stronger footing.

Richie: [00:00:34] I’m Richie Siegel, the founder of Loose Threads, which analyzes and advises next-generation consumer companies, and FaceLift by Loose Threads, a retail incubator and accelerator for leading brands and retailers. For our latest analysis and insights, check out our free weekly newsletter at LooseThreads.com.

Richie: [00:00:53] I started the Loose Threads Podcast to spark engaging discussions with leaders across the consumer economy. That’s why I was excited to talk with Iva about the journey of selling her company to a dot-com ecommerce startup, and how and why she decided to buyback her brand to control its future. Here’s how it all began.

Iva: [00:01:15] My business partner Tim and I became friends. He had a bunch of random business ideas that he would throw my way. And he had the idea for a men’s soccer company. And this is in 2010. So, proceeding like, the pants getting rolled up and socks becoming a thing of the last decade. And when I looked at the market, I realized that it was actually a really good idea, from the perspective that there wasn’t a ton of people in the space—which, I think, you could look at it as it’s a good idea or a bad idea and that’s why nobody’s doing it. But we looked at it from a profit-margin perspective and kind of the unit economics of it made sense to me. I came from the jewelry space, which is a high-margin business model, and it’s pretty hard to find in the fashion industry.

Iva: [00:01:51] So, when we started looking at manufacturers and talking to them, I realized that there was something there to it and it was a fairly low barrier to entry from a cost perspective; I would say a high barrier of entry from a knowledge perspective. It’s really hard to learn about sock manufacturing.

Richie: [00:02:06] Why is that?

Iva: [00:02:06] Because the industry left the US, essentially, 60 years ago. Everything went overseas. There’s a handful of factories left in North Carolina. I think, I wanna say one in Alabama. When we had the idea, my assumption was, “Oh, we’ll find something local in LA.” That we can find a factory that will be able to produce for us, that we can kind of be hands-on and learn this specific making process, which just did not happen. So, my business partner, Tim, is the like, quintessential salesperson that can get on the phone and just badger people until he gets the answer he needs.

Iva: [00:02:35] And so, we actually found a contact at the Hosiery Institute of America, which is a thing in North Carolina, at a community college. And they were generous enough with their time to actually walk us through the whole process, so that we could speak to manufacturing partners who were overseas. ‘Cause it just didn’t pencil to do it domestically. Sock manufacturing is very specific. You have to have a specific needle count machine per kind of sock you want to make. So it’s not like you can just go to any sock manufacturer and say, “I want my socks made,” and they can do it. You have to find specific ones with the right needle count. So that was really our jumping off point.

Iva: [00:03:08] And so we had the idea in the beginning of May, and we moved fairly quickly on it, and actually were in stores by end of November. So we hired a showroom right out the gates, and they got us into about 30 accounts to start, like, for launch, which was pretty strong. I mean, I think that I had completely unrealistic expectations and wanted them to get us in 100 doors like, out the gates, which I’m glad they didn’t at the time. But we had a really strong showing to start. We started with retailers like American Rag and got into Nordstrom’s right away. So we were kind of off to the races pretty quickly.

Richie: [00:03:39] Is it hard to sell a sock into retail?

Iva: [00:03:40] It, at the time, was very hard. The sock industry at the time—or I should say, the sock market—is something that retailers were not familiar with. They just didn’t sell socks. It wasn’t something that they had really been paying attention to. We were of the belief—now it’s very commonplace—that every single vertical and every single product that you have, whether it’s in your bathroom or your closet, is like, a branded good. But at the time, it still wasn’t that way yet, you know, in 2010. So the retailers didn’t really think that customers would come in and buy a brand of socks in their store, specifically contemporary retailers that weren’t used to selling that. And if they did sell it, they were very much of the belief that, “We have one sock brand. Why do we need more?” And our push-back on that has always been, “Well, you know, if you only had one brand of denim, you’re not going to give it enough attention. It’s not going to be something that the customer pays attention to.”

Iva: [00:04:30] So if it’s a category—and from a retail perspective, it’s a great, like, quick purchase. It’s a great add-on from whatever else they’re buying in-store. So if they were spending $200 on a pair of denim, it’s easy for them to snatch three pairs of socks and just get that kind of average order value up from a store environment.

Iva: [00:04:46] So it was definitely a little bit of a learning curve for the retailers to understand this was actually category they can sell but, to our benefit, other sock brands entered the space at the exact same time. So it was kind of a rising tide lifts all boats, where everyone started to understand that this was actually a fairly strong revenue driver in-store.

Richie: [00:05:07] After you get into a few dozen accounts and so forth, how does a business, I guess, start to grow? You going deeper into wholesale, where are you starting to spend your time and what have you seen evolve?

Iva: [00:05:16] Yeah. The first few years we just tried to stay really focused on what we’re doing, because at the time we were selling a five dollar wholesale item. You have to sell a lot of five dollar wholesale items to grow a business. So we were very much focused on expansion from a retailer level. Our belief at the time was that, you know, if we start with kind of the top-tier retailers on the contemporary side and then start trickling down into B retailers and kind of larger retailers and more mainstream. So, over the course of [the] first few years, our goal was simply just pound the pavement and get into as many accounts as possible.

Richie: [00:05:48] And is that all through showrooms? Are you starting to do some of that internally?

Iva: [00:05:51] We actually ended up bringing our sales in-house, I think halfway through year two. We are very demanding people and we want a lot from showrooms. And I think outside resources are [a] really, really hard thing to manage if you have high expectations. There’s plenty of great showrooms and plenty of great salespeople, and the people that we worked with were great. Most of those companies in showrooms are multi-brand showrooms. So their focus is on not just you, right? They have four other brands and, as the sock brand and the accessories brand, you’re usually not getting a ton of attention because your order value is going to be the lowest amongst all the other brands that they’re carrying. And it doesn’t necessarily take them any less time to sell in a $500 sock order as it does for them to sell in a $5,000 apparel order.

Iva: [00:06:32] So it’s not great business for showrooms and kind of outside reps, unless it’s just a volume driver, it’s just moving and they have to do a ton. And in the first year, that’s just not the case, for most brands at least. And for us it wasn’t. Like, it was a lot of hard work to get into these accounts, and we were willing to do that work for the $500 order. And it was a lot harder to convince other people on the outside to do that for, you know, a 12% commission.

Richie: [00:06:54] In terms of price point, you sold to retail for five [dollars]. Did they retail for, what, ten [dollars], $12…?

Iva: [00:06:58] $12 dollars, yeah. We were wholesale $5, $12 retail. We believe that that was just kind of a great sweet spot. It’s funny to think back what our sales pitch was at the time, because even the language now is so not even relevant at the time we used it. As, you know, women have lipstick and men have socks. This is kind of that thing that like, is recession-proof, they will continue to buy no matter what. That men do care about fashion. Like, this was a foreign concept nine years ago, which is so insane to think about now, but that like we use the language of like, it’s for the metrosexual guy. Like that is an insane concept now. Like, of course, men care about fashion, of course men care about what they look like and what they’re putting on their bodies. But it was just still new for some reason, which is insane.

Richie: [00:07:40] And, ’cause we’re on a podcast, I guess, visually describe them. How would you?

Iva: [00:07:44] They were contemporary socks. So, our belief was that we created one body of sock, which we literally had one body of sock for the first four years we were in business.

Richie: [00:07:54] And that just means one style, basically.

Iva: [00:07:55] One style, and we had multiple patterns. So every single season we probably delivered 30 to 50 new colors patterns. It wasn’t a super thin sock, it was a little bit thicker, but it was still a combed cotton sock that was meant to be worn with your Converse or your dress shoes. You’re not going to wear it as an athletic sock and you’re not going to wear with like, your dressing sort of clothes and your shoes, but it was kind of that everyday sock.

Richie: [00:08:18] Having to do these $500 orders, did you wish you were selling dresses or t-shirts or…?

Iva: [00:08:23] Yes, most certainly. I think that we pretty quickly realized that if we were going to scale this business and be able to grow like we wanted to, that we were gonna have to either get some mass retailers involved, which wasn’t necessarily where we wanted to take the brand, or bring in other product categories that were of a higher value that could start to beef up those orders. But at the same time, we really wanted for that to be an organic process. Our belief was that if we could get the right distribution in place and partner with the right retailers and have great sell through that then we could start to layer on other product categories. So we were really careful with how we did that, because it’s one thing to say “Yes, we want to,” but there’s a difference between a push and pull market. You can only push in so much. Like, you have to be pulled into some degree. The product has to check at the register. It has to have good sales sell-through in-store for the retailers to even consider bringing other categories from you.

Richie: [00:09:15] So when did you start to think about that? And, I guess, when did you have the confidence to go, “Okay, we actually can do that?”

Iva: [00:09:19] I would say at the end of 2012. So, two years in, we brought in investors, we did a small seed round of half a million dollars. We brought in two people that were just silent investors, and they were great partners for us. And that’s when we looked at, what’s the category that makes the most sense? When we started, our belief was that we wanted to deliver really high quality products with a really great branding and a brand-feel to it at an attainable price point. So, what was kind of the next category that we could take that same belief and ethos to?

Iva: [00:09:45] And so we went to men’s underwear next. We kind of saw the same thing that it was like your plain underwear packs you were buying either at Target or the department store, they were really boring. There wasn’t a whole lot of personality to them. We could fit them better, make them a little bit cooler and put some patterns on them. And so that was the next step. And so we did that in 2012, and that was the only product expansion that we actually had for the next three years, really. We stepped into the women’s space, I would say around 2013. We had a lot of retailers asking us to do the same thing we were doing for the men’s sock, but can you make it in smaller sizes and in more female-like feminine colors?

Iva: [00:10:20] And so that was the ask from the retailer, which we quickly figured out that women don’t buy socks in the same capacity that men do. It’s a much different relationship women have with socks that men do. It was kind of like a shrink-it-and-pink-it mentality of how the retailers were asking for it. And it was also our first learning lesson of not to necessarily listen to the retailers of what they’re asking for, because learning to say “no” on the wholesale side is really hard. And that lesson took us years to learn, because the retailers will ask you for quite a bit of, “Hey, this seems to be working. I have an idea. Do something else.” And I don’t want to say that they don’t know what they’re talking about, but they’re retailers for a reason, and you’re the brand for a reason. And you have to really be diligent and clear as to what will work for you and what won’t, and what you’re willing to say yes to what you’re not. Because when you’re trying to grow a wholesale business it’s hard to say “no.”

Iva: [00:11:11] When there’s retailers asking you for things or asking you for special makeup items like SMU programs and private-label, and all of these things that, you see the dollar signs attached to it, so it’s easy to say “yes.” And we certainly did so many times. But the amount of effort it takes your team—and it’s usually a small team. I mean, I think at the time we were under ten people. That takes a lot of your resources that you don’t really consider from a time place, and of how much that takes away from the core business of what you’re trying to grow, what you’re trying to do. That was a tough one. It took us a few years to really figure out that, yes, women will buy socks, but they will buy a different kind of sock. And it takes a whole other design element and production capabilities and all of these things to kind of figure out what that sweet spot was.

Richie: [00:11:54] Were you selling online at this point? Was it just through wholesale? How did the ecomm piece play in?

Iva: [00:11:58] So we launched wholesale out the gates. We didn’t even have an ecommerce website for the first year. Our friends and family, had to log in to, like, our back-end wholesale system to place any kind of personal orders at the time. So it took us about a year and a half, I think, to get an ecomm site up. We definitely didn’t pay attention to it. It was kind of just this thing that remained pretty much 10% of the business for the first six, seven years that we were in business.

Richie: [00:12:18] Is that all just like, organic?

Iva: [00:12:20] Yeah, it was totally organic. We put no paid dollars to it. It was simply just there and a great added revenue stream. And that was it. We knew that we wanted to focus on digital, but we were really wholesale-brand people and we knew that that kind of required a team, which is really what took us to the acquisition in 2015 and how that happened. Because, five years in, we were trying to figure out, “Okay, what are our next steps?” We wanted to expand to some apparel items. We started with a t-shirt, literally a single t-shirt, but we perfected the fit of that t-shirt. And we knew that, okay, so if we want to sell t-shirts and underwear and socks, there’s a larger market opportunity here. We believe that these product categories are great to be sold digitally. We have some good wholesale partners. We have some great kind of momentum in the market, but we needed capital.

Iva: [00:13:04] So when we started to do a fundraising round, we quickly got introduced to a group that had that expertise on the digital side. And that’s really what we were looking for. We wanted a strategic partner. We’d brought in silent investors, you know, in the beginning, and they were great as capital injection into the business, but they didn’t have those expertise of what we needed to really kind of go from where we were—which I think at the time we were doing two and half million dollars in sales—and wanting to really scale from there.

Iva: [00:13:31] So when we got approached by—it was a group that owns shoes.com at the time—they were digitally native people. They had come from the beginning of ecomm, you know, ten years previous.

Richie: [00:13:40] Yeah. The single word domains.

Iva: [00:13:40] Yeah, exactly. Their previous business was a contact business, and I think that they had owned like contacts.com and glasses.com. And that was the belief, right, that the URL like, meant everything, and then from there you could build a strong business. Which…

Richie: [00:13:52] Yeah. That’s such a funny—

Iva: [00:13:54] It’s so foreign to us now, right? Like, it’s not even a consideration.

Richie: [00:13:57] Right. ‘Cause pets.com is gone.

Iva: [00:13:58] There is not a single retailer or place that I shop that is, “that-dot-com.”

Richie: [00:14:03] Yeah.

Iva: [00:14:03] And I don’t know anybody that does anymore. Like, it’s just not a thing. But it was very Web 1.0 and it worked at the time, you know? And I think that, to think back that that was 15 years ago and how quickly the market has moved and it’s still the wild west online, and how quickly and rapidly all of that is changing. You know, even five years ago, it was, “Have the shortest URL possible so people can remember as they can type it in.” And when nobody’s really typing in URLs anymore. Like, that doesn’t even happen. That you want brand recognition and name recognition now, and that’s how people find you.

Richie: [00:14:34] When you say “group,” was it a holding company? Was it a private equity backed thing? Like…

Iva: [00:14:37] It was a group that had come from ecommerce background. They were a Canadian group out of Vancouver. They were acquiring multiple shoe online entities.

Richie: [00:14:47] And rolling them up.

Iva: [00:14:47] Yeah, exactly. And rolling them up. So their belief was, let’s roll up three or four of these guys because they were competing against Zappos, and there was a massive disparity between Zappos and then everyone else. So they thought, “Hey, we can roll some of these up together, build a larger business. Let’s buy some brands in the meantime that partner well, with shoes.” Obviously socks is—it’s like cheeseburger[s] and french fries. It’s an easy thing to pair together. So we were the only brand that they ended up acquiring because the business ended up kind of going south after that. But that was the thesis and the belief.

Richie: [00:15:16] Did it feel right, going through it?

Iva: [00:15:18] Completely. And after it, it was such a gut check, because I think that you like to believe that there are like, these red flags of things that should show you like, “Oh, I did know I instinctually kind of had some things.” And there were certainly things that, through the acquisition process, it seemed easier than it should have been.

Richie: [00:15:33] What does that mean, I guess, more specifically?

Iva: [00:15:36] So, my belief, at least, when we were going through the process, that when you’re buying a company that like, you are literally going to lift every single thing to make sure that you understand that business that you’re buying as well as possible, and there’s gonna be no stone left unturned.

Richie: [00:15:51] Right. This is like the buyer diligence.

Iva: [00:15:52] The buyer diligence. Exactly. That wasn’t the case. Like it was a very kind of simple like, let’s just look at top-level you know, balance sheets P&Ls. Like, understanding kind of the basics and that was it, which was really surprising to me. But again, this was our first time doing it. So I was like, “Okay. Like, this is maybe just easier than everyone says it’s gonna be.”

Iva: [00:16:11] They had the best of intentions, obviously. No one starts a business and raises a ton of money and doesn’t believe that they’re gonna be able to accomplish what they’re setting out to do. There’s just the reality of, operationally, if you don’t know how to operate the thing that you are trying to execute, it’s just not gonna work. And I think people say that a lot now of, you know, in relation to like, if you have a good idea, like, you don’t need to hold it hostage and not tell anybody because ideas are really hard to execute. So the execution is where everything lies. And so they just weren’t able to execute. That’s all I came down to. It ended up taking way more money than they had expected.

Richie: [00:16:47] Why do you think that was?

Iva: [00:16:49] The reality of merging businesses that are existing together. In theory, sure, you can take three businesses that are each doing $200 million in revenue and put them together, and it should equal more than $600 million in revenue, ’cause you should have efficiencies in all of these things. That’s usually not the reality, because now you have three different organizations that are trying to operate under one. Cultures are different across different places.

Iva: [00:17:11] You’re talking about three businesses that are based in three different states, three different customer bases that you’re now trying to talk to through, you know, one point of view, from emails and your customer retention programs are now merging into one, and you’re gonna have a lot of attrition because of that. So what should have been a one-plus-one-equals-two ended up a one-plus-one-equals-actually-like-one-point-two. So you’re gonna need more money than you think, in order to be able to figure out who you are and what is your core business now that you have these three businesses that are now operating as one.

Richie: [00:17:44] What was your assessment, I guess, going through the process of their own business plan, financial state, runway, etc.?

Iva: [00:17:51] Well, we had very little visibility into all of it. So we were being told everything was fine. The business was great. It was growing. All of these things. They were supposed to take over all of our back office things, that was part of the acquisition. They had this great digital team. They had these great data scientists. They were gonna take on our digital side of the business, all ecomm and help us grow that and figure out how to take Richer Poorer, introduce that to their ten million customers, all of these things. And they just didn’t. Nothing happened. Like, we we’re still running every single thing. Like, they didn’t even end up taking over payroll. There was literally nothing that had ended up getting moved over to the parent company—which, in hindsight, was a blessing in disguise, but at the time was tricky ’cause we had not intended to keep all of that on. And we had big plans for growth on the digital side because we assumed that they would be able to, you know, really help us grow.

Iva: [00:18:37] And so, once we really figured out what was going on at the parent company once new leadership came in, we had approach[ed] two of their board members to ask them to buy us out. Because we were still growing at the time. We obviously saw that there was a lot of turmoil happening at the parent company and we didn’t want to be impacted by it. So we asked them to buy us out and we ended up getting that done.

Richie: [00:18:57] That’s crazy.

Iva: [00:18:58] Yeah. There [were] two big learning lessons. One was that, always have a plan B, like what is that backup plan and how are you gonna execute that? And the second piece was that we sold the business simply because they made us a great offer. And as an entrepreneur and as grinding it out for five years, it’s really hard to say “no” to that. But we had no intention of leaving. And I think when you intend to still stay on, and you want to stay on for the long haul, and you want to still run the business, and you want to still have complete authority over the business, you shouldn’t sell the business. Like, until you’re ready to actually walk away from that thing…

Richie: [00:19:34] Even if you’re gonna stay.

Iva: [00:19:35] Exactly. Even if you’re gonna stay and you intend to stay for maybe like a few years—and that’s great, and I think a lot of entrepreneurs had a great experience doing that—there’s very few that end up staying for the long haul post-acquisition, because you’re not in control anymore.

Richie: [00:19:47] Right. You think of Instagram. Plenty of stories.

Iva: [00:19:50] Exactly. Like, there’s, and you see it all the time, right? And it turns into something that’s no longer in your control and no longer may be what you set out to do. And there’s other factors at play that are pushing to maybe develop categories that you weren’t intending to. Like, specifically, in our case, and those items where now you’re spending a lot of your time trying to rationalize and explain why you shouldn’t do those things and you kind of start spinning your wheels. So that was a big learning lesson to both of us, that was, “We’re not gonna let go of this thing again until we’re really ready to let go of it and let it kind of live on past us and be okay with whatever those decisions are.”

Richie: [00:20:23] In terms of the signals you mentioned, were you, I guess, looking for what was going wrong? Did stuff start to happen that you’re like, “This doesn’t add up?” What was the detective process on your side? Because you realized it relatively quickly, it seems.

Iva: [00:20:36] Yeah. So we were set to need capital for a significant amount of time, for the next like, few years, in order to grow the business and scale like we wanted to. So with that came, you know, injections of capital on a monthly basis, and then that capital started coming in biweekly, and then it started having to be weekly. So you kind of start to figure out like, “Okay, there’s some cash flow issues that are happening. This is supposed to be a massively capitalized business. This isn’t penciling to what we’re being told is happening.” And then they started doing some layoffs and it was like, “Oh, we’re just trying to get more efficient.” And you can figure it out. Like, you can sense what’s happening. And they did a mass round of layoffs, which was really kind of the signal for us to go, “Okay. We need kind of a plan B here so that we don’t get stuck into some sort of bad situation we can’t get out of.”

Richie: [00:21:17] Yeah. From your knowledge, I guess, looking up to this point, how did Zappos do what it did and not fall into that trap?

Iva: [00:21:25] Zappos grew. It was one model and intended to grow and it kept growing. And its point of differentiation was the Amazon way, right? We’re gonna ship this to you really quickly and it’s gonna be a transactional offer that you can get in and out of this website with whatever you need very quickly. Zappos is not a place for discovery. Nobody—or, at least, I don’t believe they do—people don’t go to Zappos to go, “You know what? I feel like looking for just a pair of black shoes and I don’t know what I’m going to find.” You go there specifically for a white pair of Birkenstocks, and you know that you can get them, get them in your size, have them to you within two days. That was the promise from a customer perspective.

Iva: [00:22:01] And I think this goes back to any brand and company, you have to be very clear with what is it that you’re selling, what is it that you’re providing to the consumer and do that consistently. And if you can do that, you will have a really strong customer repeat rate. And then those acquisition costs start to make sense, right? But if you can’t quite figure out what is it that you’re promising the customer—is it a styling and a discovery process? Is it quick shipping? What are those things that you are trying to commit to the customer? It’s really difficult. On top of it, shoes is a really difficult category. I mean, return rates on shoes is like, north of 30%. Which, when you’re paying for shipping, both directions, free shipping and free returns, like your margin is gone when that happens.

Richie: [00:22:45] It’s interesting to think what it takes to live outside of this digital marketing ecosystem. You can’t build a Zappos today.

Iva: [00:22:52] No.

Richie: [00:22:52] Off of the same value proposition. But the question is, could you build something today like that?

Iva: [00:22:57] I mean, I think everyone’s trying to figure that out right now, right? You see on a daily basis that there [are] hundreds of new brands popping up. And it’s never been easier, and the barrier to entry has never been lower to start a brand, a retailer, any of those things, right? You can set up a Shopify site in a day. It has never been harder to actually scale those things. The customer now expects two-day shipping. They are no longer accepting of, “Hey, it might take ten business days to get there. We may ship your order in the next three days.” They want it shipped same-day or next-day and it better be there in two days. And that’s a really expensive game to play. So when you start looking at costs of what that takes, and doing that with, let’s say that you do have a third-party logistics in place.

Iva: [00:23:39] Getting them to ship within 24 hours is actually really hard. That’s usually not how they operate. They’ll promise you that they’ll ship in 48 hours. And, you know, shipping is a place where they actually make money. That’s a revenue center for them. So they’re not gonna give you the same discounts as you get on your own. But doing that on your own and setting up your own fulfillment center is really complicated and really difficult. We did it two years ago. You know, we run our own fulfillment now, and it was so costly to get set up, but it was the single best decision that we made for our wholesalers, for our retailers. We can ship most things same-day now, and we guarantee our customers that it will get there in two days. And on our wholesale side, you know, if somebody orders on a Monday, they’re pretty much guarantee they’re gonna have it by Friday. And so, that’s the model now, and that’s hard to do. Like, it took us a ton of capital to do that. And we had investors and it was the only reason we were able to.

Richie: [00:24:30] So you talked about kind of the signals. Talk a bit more about the process of starting to be like, “Oh, we want to buy this thing back,” and how that happens mechanically.

Iva: [00:24:38] So we’ve gone through two buybacks essentially since then. So, we bought the company out with two of the board members from shoes.com we had become friendly with through the process of being acquired, going the board meetings. They had a great group involved, and they were having to keep the business afloat on a monthly basis, and so they were putting capital back in. So we asked them to buy us out in one of those processes. It was actually fairly simple. I think from the time that we approached them to the time we ended up closing, it was maybe five weeks. So it was a pretty easy process to get Richer Poorer out of shoes.com. They ended up filing for bankruptcy less than 30 days later after we had been pulled out, which was a crazy experience to go through to see how closely we came to that. We could have gotten sucked down with that whole process had we not approached them and kind of gone through the process that we had.

Iva: [00:25:29] And we ran the business with those two investors who, you know, own the majority of the company for about 18 months. And neither of them came from the apparel space. One is in the alcohol business, another one was in the software business. Those are very high margin businesses that make money and they print money pretty quickly. So when you’re coming from those industries and into apparel, your first question is usually like, “How are you going to make money and how—why is it taking so long to get there?” Right? ‘Cause this business is, you don’t have a ton of margin in it, and it is a costly game to play, especially as it comes to ecommerce, as we were talking about with shipping and having to fulfill the way that you do. So they were just starting to get a little bit uncertain of if this was an industry that they wanted to be in. And so, we approached them then, and bought the business back entirely, which was also a crazy process to go through. I was, I think, 37 weeks pregnant with my second child?

Iva: [00:26:26] So, the hardest thing about all of those things was keeping our team stable through that. While we can talk about it now and give them insight to how turbulent those times were and how uncertain that they were, we did not show it. Like, they didn’t know what was going on. I did everything in my power at least to keep that all kind of under wraps, and just, given the certainty that we were figuring it out, it was gonna take us, you know, maybe a few months, but everything was gonna get sorted through and this is gonna be the result. Even though, like, deep down I was like, “I hope to God we figure this out.” But knowing that there was a chance that we weren’t going to.

Iva: [00:27:01] That’s the hardest thing, I think, about generally entrepreneurship and in this industry and owning a brand, is that what it is that you feel and what you’re going through on a daily basis, and what your team sees and what they should be privy to are two different worlds. And so, like, there’s such an isolation to all of that for my co-founder and I, it was such a stressful time. And I think our team obviously knows that, they can see it on your face, they can see that you’re stressed out, but you have to do your best to kind of like, keep a united front, keep the confidence of the team and just show them that, like, we will get through this. Everything will be fine.

Richie: [00:27:34] Going through an acquisition, going through initial buyback, what gave you the confidence to be like, “No, we should keep this?” Like, did you think of just getting rid of it at any point or shutting it down?

Iva: [00:27:45] Logically, yes. Like, logically, of course. You’re like, “Okay, we sold this thing. We made money off of this. We’ve been running this again. Maybe we shouldn’t like, bet at all a second time, because, just statistically speaking, the chances are not that this is gonna go well for you again,” right? But, at the same time, you know, when you spend seven years creating something that you are so passionate about and love…Like, Richer Poorer is such a labor of love for us. Like, there was blood, sweat and tears put into this thing from the get [go].

Iva: [00:28:13] We’re not VC-backed. This wasn’t just kind of a widget that we thought could work, and if it doesn’t, no big deal, we’ll move on. You know, this brand and everything about the brand and the values of the brand is us. And I think that’s hard to replicate. I think it’s an easy belief to go, “Okay, we could just go do this again. Like, let’s just go start another brand and start from scratch.” And I think plenty of entrepreneurs have been able to do that. For us, it still just felt like we had so much to do. I think because we had just started stepping into apparel, because we had just like, really kind of caught fire in the women’s space, starting as a men’s brand, really being able to balance that out, seeing the market opportunity in front of us.

Iva: [00:28:48] At one point, I remember sitting down to go, “Okay, we can either walk away from this, or we can start over.” And walking away from something that you’ve spent seven years building that has great momentum that’s growing—like, all of the signals were in the right place. It was just this like, back-end dealing with the equity structure and all of these things, the capital structure that was really complicated. It didn’t feel like a good enough reason to walk away. I think if the brand had not been growing and if we didn’t see all of this opportunity for all of this hard work, we probably would have been able to walk away. But I think we were just too insane to just go, like, “No, we’re just gonna dive back in.”

Richie: [00:29:23] And so, what was, I guess, the business plan of where you would take it post-second-buyback?

Iva: [00:29:26] From 2015 to 2018—so, essentially, almost three years, it was two and a half years—we were really running with somebody else in charge. Like, we were executing to the best of our abilities, the belief that we had to grow ecommerce, you know, 5x every year. And those were the attempts and those were the goals, and we were gonna spend the money to do these things. So when we bought the business back last May, we really had to sit down and go, “Okay, what is it that we want this business to do and what do we think that we can execute, and where are we placing our bets?” Because, while we haven’t discussed it in detail, over from 2010 to 2017, we ended up in so many different channels of this industry. We were in the outdoor space. We were in the action sports space. We were in women’s contemporary, we were in men’s contemporary. We were in gift shops. Like, we were everywhere.

Richie: [00:30:13] And did that just happen, or that was somewhat intentional?

Iva: [00:30:16] A little bit of both. Again, going back to socks being five dollar items, and socks being essentially able to be sold by a lot of retailers in a lot of different places, it made it really easy for us to be sold in all of these different channels. And, with that, then it required, you know, an action sports channel. We at one point had a surf team and a skate team, and we’re investing dollars in marketing and advertisements in those kinds of plug-ins.

Richie: [00:30:42] Like sponsoring athletes?

Iva: [00:30:42] Yeah, exactly. Which is insane to think about now, but that’s what that market needed. And then in the outdoor space, it was, we’re not sponsoring athletes, but we need content that makes sense for that space. So the team had to go into the mountains and go do photo shoots out there so that, like, that content actually resonated with that consumer. So we essentially “grew all of these tumors as a brand,” is what we said. We started as a contemporary brand, and then, because we were able to sit in all these markets, we did, and then we had to start marketing to all of those places, and then we kind of lost our identity to a certain degree, because we started kind of molding the brand in that market to what that market wanted, rather than saying, “This is who Richer Poorer is, this is what we are about. And if that works in your market, that’s great. And we can sell into it. But we’re not gonna change who we are to, you know, really appease that customer.”

Iva: [00:31:30] So when we bought it back, we really had to dial back and go, “Okay, who are we and what is it that we’re gonna look at for the next five years?” And apparel was working really well. We felt really, really strongly that we had kind of found this sweet spot in the market on the basic side, specifically, with women’s and men’s, that if we can deliver the softest, most comfortable products and really focus on fitting these clothes that people—like, tees and sweats, people don’t need to be told how to wear those at home, and how to be comfortable in them, and lounge on their couch and bum around on the weekends.

Iva: [00:31:59] What people don’t know necessarily how to do is, how do they wear these on a daily basis to work with a collared shirt, maybe with dress pants, and still be their most comfortable self, but now be able to take that out into the world on a daily basis and not feel like they’re looking like a slob because they’re in sweat pants or a sweatshirt? And doing that at a great price point with the best materials. So we saw that and go, “Okay. We’ve found this kind of new lane for ourselves that really makes sense. This is the most core to who we are as individuals. This is how we dress. We’re a California-based company.”

Iva: [00:32:30] It’s very much based on that California lifestyle of casual dressing, attainable price point. So once we saw that and that was working for us well, that’s when we really kind of went, “Okay, we need to restructure this entire business to be able to just service that. Like, we’re speaking to one customer only, we are creating one product line that is for that customer. We are that customer so now, like, we are our own customer and we are testing these products on a daily basis and became completely maniacal about the product. We went a long way on decent product, like the product was always good. It was not the best in the market. And once we figured out that, that it was, you know, the product is going to come first. We’re gonna become obsessed with this product. We’re going to speak to one customer. We’re focusing on the women’s market first and foremost, because we have the most growth opportunity there and we’re gonna stay really core to where we started in the men’s market, and really zeroed in on that. That’s when it really allowed us to start running faster.

Iva: [00:33:25] The last year and a half we’ve been able to make such progress because we had one simple direction, one goal, and every single department in our organization was like, oriented to that.

Richie: [00:33:37] What does all that, I guess, tell you, somewhat in hindsight, about what a brand needs, in a sense? Or demands or requires and what is all superfluous, but people think a brand needs?

Iva: [00:33:49] The biggest learning lesson to me over the course of the last nine years as it relates to a brand is that you have to have one point of view. It is so easy to get distracted, and to start playing in different markets, and to think that because you see other people able to kind of cross markets, that you should be able to as well. If it doesn’t feel right and if it doesn’t feel core to the business and the brand, and if you can’t go back, and if those decisions in those markets and those places you want to sit in don’t actually check back to the original purpose of creating a really great brand with really great products and attainable price point and that customers love and will keep coming back to. If that’s not checking, then you have to say “no.” Like, simply. And we just weren’t disciplined enough to say no because we wanted to grow faster. That’s all it came down to.

Iva: [00:34:36] And I think the other piece of it is that it’s really easy to get distracted by where other brands are spending money from a marketing standpoint, and on brand activation. So we—one summer, I think was three years ago—we spent $120,000 on a ball pit that went across the country, because we believed that like, “Okay, all of these brands are doing these community activations, and it’s something that you have to do in order to grow.” In a long-winded stretch perspective, like, our belief was, “When you feel good, you are good,” so let’s make people feel good by jumping into a ball pit. Sure. That kind of makes sense. But that does not reinforce our brand message of wearing the most comfortable clothes, right? And being your best self when you’re most comfortable and what you do in those clothes.

Iva: [00:35:18] So it was a definite miss for us, that we kind of started looking at what other people were doing, thinking, okay, we need to do these things as well. So I think that spending dollars on things that you see other people doing and then trying to kind of reverse-engineer that to make it make sense for your brand and how can we do it doesn’t make sense. And that was a huge learning lesson for us. We now focus our efforts from a community standpoint on events we call “Dirty Hands Club,” because the most important thing that we believe we can do is make people comfortable and get them back to doing things that they love, and get them off their phones. Like, the digital addiction we all have is making all of us miserable.

Iva: [00:35:55] So we started doing these activations last year, just kind of organically. We did some tie-dying workshops, some ceramics classes, and seeing how much people loved and enjoy just those like, few hours of being able to do something tangible with their hands. Learn a new technique, learn how to do something new. Talk to the person across from them that they’ve never spoken to, ’cause they don’t actually have their phone to distract them. It was such an a-ha moment for us, that was this belief to go, “Okay, this is how we’re gonna build our community. We’re gonna start doing these events, like, across the country.” It’s a great way for us to partner with our wholesalers, to do activations in places, to build community and for people to walk away, to go, “Richer Poorer is awesome because they taught me how to do something and it connected back to the fact that I’m doing that in my t-shirt, in my sweatshirt, in my most comfortable clothes.”

Richie: [00:36:41] How do you think now about growth and speed and scale?

Iva: [00:36:44] We have gone through like every single version of, “Throw a ton of money on it. Will it work and will it take? Have no capital and be a scrappy as possible.” I think that there is kind of a sweet spot in between, is where we’ve really landed. We’re raising money right now and we’re doing a really small round. Our goal is to get to profitability as quickly as possible and do it responsibly. We’re growing our ecommerce and the digital side faster than anything else. That’s certainly where we have our sights set. We’ve brought in new team members to actually start really like, having channel managers for ecommerce. Our ecomm team was literally two people up until this year. So that’s where we’re definitely focused. But doing it responsibly and making sure that we are profitable on that first order, that it pencils.

Iva: [00:37:27] We are not trying to grow, you know, 200% on a yearly basis. Our sights are set on, you know, “Let’s grow responsibly. Let’s grow 40% on a yearly basis moving forward,” and do that so that the team isn’t stretched as much as possible, that everyone is so stressed out and, you know, frying people out. That, let’s do this in a way that we feel good about, that we’re excited about. It feels responsible. We’re slowly—which is funny to say now, like, that, 40% growth is slow growth in comparison, where it’s really not, but it’s rather conservative in this space where everyone is trying to, you know, grow 5x on a yearly basis. I think we’ve seen all the ups and downs of this industry over the last nine years. And wholesale is changing at such a rapid rate right now, that really figuring out how to go, “Okay. Let’s truly build an omnichannel approach. That we have our ecommerce and that’s the basis of the business, and we’ll be over 50% next year.” And we want that relationship with our customer, of course. Like, everybody wants that to be the core of their business. Getting into there takes a lot of time.

Iva: [00:38:29] I mean, it’s taken us, from the time that we started focusing on ecommerce in 2016, it will take us four years for that to actually become the bulk of the business. Opening up our own physical retail so that we can, you know, have control over our own community events and what that looks like. And starting to learn how people interact with the product in real life on, you know, a touching-and-feeling basis and what is it that they’re gravitating towards. And then also narrowing our wholesalers to a really core group of wholesalers that are great partners for us. We’ve had years where we’ve had 900 retailers and we’re trying to trim that down. And we have trimmed that down quite significantly on the men’s side while also growing the women’s, to kind of end up at a core group of retailers that are just really strong partners. ‘Cause if you can still, as a retailer, focus on curation, community and experience, and if you know how to do those three things, especially in towns that need that, and that they like, really look for somebody to kind of help guide them through that process of shopping and buying and what are the cool brands in a discovery place? They’ll continue to thrive, and we’re seeing that. But you have to be able to do those things.

Iva: [00:39:32] You know, the world of wholesale and just setting product out, hoping that people just come in and sell, like, it doesn’t work that way anymore. That there has to be a purpose for people to come in store because it’s so easy to get everything online. Really kind of figuring out who those partners are for us and narrowing that over the course of the next few years, and making sure that our end user is getting that same experience with us, whether they are in an in-store environment in our own retail stores or online is really the most important.

Richie: [00:39:58] What is this whole journey taught you about the permanence of decisions? ‘Cause for a lot of people, you can’t really undo an acquisition, often, or buy a company back twice. Like, do you think people have more optionality after, call it major decisions, than they actually think? Or do you think this was a bit of a lucky scenario where you got more of it as things happened?

Iva: [00:40:19] It’s a little bit of both. I think that people definitely have more options and they think they do. I think, I am like annoyingly like dog-on-a-bone. Like, if I want something to happen, I will literally look at it 17 different ways and keep pounding on it until I can kind of figure out how to unlock that thing. That being said, sometimes you just can’t undo it and there’s no way around it. But a trait of entrepreneurship has to be just this resilience piece, right? Like, if you want to continue moving forward and if you want to figure out how to get from A to B, there are a lot of different ways to figure that out. And if you just keep at it, like, eventually you can figure that out. And that’s not to say that you should never give up, because I don’t necessarily believe that. I think that there are signals that are telling you in every which way, like just stop moving forward. You should probably stop moving forward at a certain point. I just have not found those yet. So that’s why we continue to kind of make those decisions. But there’s very few things that you can’t go back and change.

Iva: [00:41:17] And I think that even from a customer point of view, we started as a men’s sock company nine years ago, we were heavily weighted in the action sports space three years ago. The last two years, we’ve been known as like the internet’s favorite bra-led brand. All of those things are different stories of the brand, and I think the biggest learning lesson I have had is that no decision and no single way that the brand is viewed today is the final way it’s gonna be viewed. That you can always change what’s happening. And consumers are no longer looking at a brand and going, “Okay, I no longer think that that brand’s cooler. It’s not something that I want.” If you continue to develop good product or good things and you do have a group of customers that is buying it and loving it, like, that can always grow. You can always change direction and you can always create something new and people will continue to take a look at it.

Richie: [00:42:15] Do you think you would ever sell the business again?

Iva: [00:42:18] Not soon. In one of our investor meetings recently, they asked if we would be open to an acquisition at this point. And I was like, “Absolutely not.” I didn’t go through everything that we have the last few years to offload it again right now. When I talk to other entrepreneurs, specifically in the world of VC-backed businesses, others that have been lucky enough to be able to have the resources to not be profitable, I think everyone really wants to get there, and everyone, as the CEO, as the founder, wants to be able to run a profitable business. And I think that that’s kind of that gold star that we’re all chasing. So I think until we can get ourselves to that place, be able to be totally self-sufficient from a cash flow perspective and be able to really run a strong business, I think we have such big goals right now. I know that Richer Poorer will turn into a hundred-million-dollar business. Whether or not we’re there when it gets to that point, we will see. But I firmly believe at this point that we will be the ones to set this massive foundation for what can be a heritage brand that can exist for a long time.

Richie: [00:43:25] Where’s the name from?

Iva: [00:43:26] Originally, the idea was actually to have reversible socks, which is so disgusting now to talk about. But we believe[d] that we could create a sock that could be one pattern on the outside, a different pattern on the inside. And so, like, if you had two sides to it, that you could switch about halfway through the day or like, at night. It was seriously, like, one of the dumbest ideas we’ve ever had. But that was the original idea. And with that, we were kind of looking at something with balance. And I was reading an article and it said “for richer or poorer,” it was talking about wedding vows. And it just kind of like, got me. I was like “Richer Poorer. Like, that’s such a great name. And somebody has to use that for something, right? Like, it’s such a common phrase.” And at the time, we were looking for something that felt familiar for people. Nobody had used it for anything. And so, originally it was “richer or poorer,” and our first creative director was, you know, doing the logo. And he was adamant that we had to drop the “or,” because he was like, “It’s too mumbly in your mouth. It screws up the weight of the two words from a branding perspective. It’s not something we need.”

Iva: [00:44:23] And it very much spoke to the ethos of this, “Let’s give like, this high-brand identity at an attainable price point, and let’s kind of merge those two things.” And I think from a 30,000-foot perspective, the terms “Richer Poorer” are so subjective. Like, the richest people in the world, financially speaking, are some of like, the poorest inside from a happiness perspective. And, conversely, some of the poorest people in the world are the happiest. And it’s such a subjective thing.

Richie: [00:44:50] What are you most excited about that’s on the horizon, looking six-to-twelve months in the future?

Iva: [00:44:54] So we actually are completely rebranding in January, that we’ve been working on all this year, and launching an entirely new collection, which is so exciting for us. You know, we’ve spent the last nine years, like, working very closely to like, what’s happening in three months and not having enough time to plan out. And when we did buy the business back last year, like, we knew we wanted to trim all of those tumors off, like, get back to our very core brand space and what it is that our product will look like, what our brand will look like, what it will feel like. Kind of elevate everything back up to where it was when we started. And so that’s all launching in January with a brand new collection. So we have brand new manufacturing partners. We brought in a new creative director that kind of led this whole initiative. Being able to do that and maintain our price points and still be like, a super-attainable product, but, you know, I think customers will get to our website and really be like, surprised at how much we’re elevating everything. So, new website, new logo, new manufacturing partners, new products, all of those things are coming come January, which, it kind of feels like the 2.0, which is really like 7.0, but the next iteration.

Richie: [00:46:05] Would you go through that acquisition again? And/or, if not, how do you think it would change the trajectory of the business?

Iva: [00:46:13] It’s so hard to say, ’cause I think, personally speaking, being able to go through that acquisition and get that kind of security financially does feel a little bit priceless, like, to be able to have that. On the flip side, though, I think it took us off course for so long, it really kind of let us down these weird rabbit holes and weird directions that I really do believe, had we just stayed really consistent with what we were doing, that we probably would be twice the size and further along. I don’t know that that’s also necessarily where we have to be right now, either. I’m so happy with where we are right now with the team that we have in place, with what we’re doing. And I don’t know that all of that would have happened without the learnings of the last few years, and that I certainly know I would not be the leader that I am now without those things, and without really having, like, my decision making and my resilience and all of these things so challenged over the last four years that I think has made me so much better at what I do now, and be able to make decisions so much clearer.

Iva: [00:47:14] I’m such a believer in “everything happens for a reason,” so it’s hard to go, “I wish we could unwind, you know, anything that had happened.” And I think even along that way, you know, people that we met through shoes.com and the board members that we ended up buying the business back, all of those people have been so impactful to where we are today and how we got there. And the learnings are just too big to be able to say I wish I didn’t know any of that or had experienced that.

Richie: [00:47:39] Awesome. Thanks so much for talking.

Iva: [00:47:40] Thank you.

Richie: [00:47:46] 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 leave 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 and we hope you tune in next week.