Beyond Yoga: Michelle Wahler

28:38So in 2006, that was the first year we were shipping, we did$1.1 million. Then the next year we did around 2.2. Then the next year we did, I think we were around 4.5. Then the global financial crisis happened and everything kind of bottomed out. All, you know, at that point we were primarily wholesale. And we dropped in 2009 by almost a million dollars, which was a large percent to go backwards. And, you know, that was a big, that was a big setback. When we come back in just a moment, how a competitor's blunder turns into a major opportunity for Beyond Yoga. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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32:45Welcome back to How I Built This. I'm Guy Raz. So it's around 2011, and Michelle is now officially the CEO of Beyond Yoga. And even though the company has more or less recovered from the financial crisis, its books are still a little messy. At that time, we were actually outsourcing all of the financials to a third party. And I started realizing that things weren't coded properly. You know, there were items that shouldn't have been in cost of goods sold that were put in. And so I just realized that there was a lot that was a little messy and unorganized and we needed to fix that. And this was too important of a piece of the business to outsource.

33:32And so I brought that in-house. I hired an accountant. And that's when I kind of realized, you know, you have to lean into all areas of the business. The finance side of things did not come naturally to me. I definitely needed guidance and to teach myself. But I also, you know, you can't just do the parts that are fun. You have to lean into the ability to just ask a lot of questions and be comfortable not being the smartest person in the room. um tell me a little bit about how did you when you sort of started to make your hires right and certainly your your you know initial hires how did you like what because i read the first hire you made as a production manager so how did you put those pieces together on who to go to first and how to build the team out you know in the beginning i did as much as i could i was originally sketching everything in the collection.

34:34Eventually we brought on designers who did that. But I will say, I think one of the most important hires I made was when I ended up hiring my COO, CFO, who happens to be my husband, Jesse. We started dating in 2009 and he was in and around the business for many years before we actually got married. And I think it was like 2014. And one of the things that, I mean, there's so many things that I want to share with you about how Jesse impacted the business. But one thing that was really helpful was when he joined me and he was really looking at our finances, he's like, you're actually not spending enough.

35:22You're not investing enough in your team and in marketing. And I was so nervous. And I think because of what happened to my dad and seeing him lose his business, I was always very nervous to get out ahead of our skis. And so when Jesse came on board and he's somebody who I trust implicitly, and he said, you really need to lean in and bring on some great talent. That's when I started spending more on the people who are on our team. And I think that was a huge turning point. How did you finance the business? I mean, you got that initial investment. And how are you financing just, you know, the growth of the business?

36:07We were just reinvesting every dollar back into the business. We never took on any additional outside investment. We had a lot of people offer to invest and a lot of people offered to buy us at different points. And we just turned everybody down. And we worked with some great banking partners. The people at Wells Fargo were really helpful. The team at CIT helped us get a line, a line of credit to factor all of our accounts, our wholesale accounts. So that gave us the ability to be able to, you know, finance our inventory. And that was tremendously helpful. I mean, meantime, you're seeing other brands just explode.

36:54Lululemon by 2011, 2012 was massive, probably easily a billion dollar brand by that point. And there were others, Athleta and other brands that were just growing. And I mean, you weren't really even competing with them at that point, right? I mean, you were just so small compared to them. Were you worried? Were you looking at those companies and just thinking, you know, we're always going to be small? I wasn't thinking we were always going to be small, but I wasn't overly focused on them either. I always looked at Lululemon as an inspiration and as the, you know, the company that made it okay for women to buy a$100 pair of leggings.

37:39And I felt like they paved the way. And I'm grateful to them for that. You know, and there were times when Lulu faltered and there were times where Beyond grew. I remember when they had the whole, you know, sheer pant debacle. I don't know if you remember that. But that was a moment because at the time, I think we were the number two brand carried an Equinox. But Lulu was the lion's share of the space. We were a very distant number two. And the minute Lulu had to pull their product, my buyer from Equinox called and said, hey, we've got a situation. What do you have in black leggings? And I was like, we got you.

38:26And I shipped everything we had. And we sold through what we had. And so that was a moment for us to step up and our product got a little bit more floor space and we sold through when we performed. And so that, you know, in turn gave us more floor space in the future. I guess one of the turning points was you kind of came across this fabric in L.A., right? There's a whole district like garment district in L.A. There's New York, too. and you were in a warehouse looking, I think in LA, looking just through potential samples of different fabrics. And you came across this one fabric that would become the core of what you make.

39:11Tell me about that fabric and how you came across it. Yeah, that fabric is called space dye. And I was downtown at the LA Mart. I went to visit one of our fabric vendors. They had a showroom there. And we were just going through all of these fabric samples. And I just went through, you know, just touched, walked around the room touching everything. And I remember when I found Space Dye and I was like, what is this? And I remember my sales rep, she was like, oh, Michelle, you don't want that. That's way too expensive. And I was like, no, I need this. What is this? and I was like, I don't care how expensive it is.

39:54This is what everybody is going to want to put on their body. And I'm really happy that we decided to go with that fabric. I wear that fabric every single day of my life and I absolutely adore it and it was worth it. What makes it different? What made it so unique? And why wasn't it being used in other apparel by the brands? I don't think other people were using it because it was so expensive. And I wanted to make something that was going to feel amazing for people. And I don't think people at the time were willing to spend that type of money to get fabrics made. And it was two different yarns and it was weaved together in a certain way.

40:38And it had a brushed hand. There's just something about the way that those two fabrics came together. And then ultimately, you know, I worked with the mill to really work on how to get it as soft as possible. And there's some trade secrets there, but it's fantastic and it feels really good. It has four-way stretch. It has amazing recovery. It holds color in a fantastic way. You know, initially when I first found it, I thought that it was just going to be a seasonal fabric that we were going to use, you know, once and then we'd move on. And as soon as my team felt it, and as soon as the sales reps got it out and our customers were touching it, they were like, you're going to have this forever, right?

41:23And is it primarily cotton? Like, what is it made out of? It's a poly spandex blend. Okay. And I mean, was it instant? Like, I mean, by the time you started to sell this, which was, I guess, 2014, because you came across the fabric in 2013. Well, like, how much were you guys doing in revenue? Were you at that point over$20 million a year? My years are all jumbled in terms of where we were. I know that we had double digit growth, you know, pretty much from that point on. And so we never had a, I think we ever had a down year from that point on. How were you able to, because I know that you also made some important hires, like somebody came from Under Armour and from Tom's.

42:16How did you afford them? I mean, even then you were still a pretty small business. So how could you afford to bring on those people who had so much experience? So first of all, I wasn't the person who was paying the highest salaries. I definitely know that people took a little bit of a pay cut to come and work with us. But I think that people really believed in what we were doing. And once, you know, one or two people come on board that are really passionate about it, that are great, like, I really believe that A players want to work with A players. And so your team becomes your recruiting tool.

42:54And, you know, when this amazing marketer came over to our team, you know, I didn't just hire her and say, I'm going to give you the biggest salary that I have. I said, look, I can afford to pay you this, but I also know you're going to need some people around you. And we invested in building a team around her. And, you know, the same is true for what we did with, you know, the woman from Under Armour, because you have to give people resources once they come on board. And people also loved the fact that we were primarily all female. It was funny. You know, Jesse was pretty much the only white male in our company for the majority of the time that we were in existence.

43:40When we come back in just a moment, Michelle gets a life-changing LinkedIn message from one of the most venerated clothing brands in the world. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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46:10Individual responses may vary.

46:20Hey, welcome back to How I Built This. I'm Guy Raz. So, by around 2016, Beyond Yoga Apparel has spread to about a thousand stores across the country. And after first holding off on direct-to-consumer, Michelle starts to embrace it. As e-commerce started to grow, we absolutely leaned into it. But as much as e-com would grow, wholesale was just growing quicker. I forget the exact years and where things were, but I would say it was probably around like 25 % of our sales. And, you know, then I think it wasn't until COVID that it really shifted and became the lion's share of what we were doing. How did you pick stores to go into?

47:08I mean, I have to mention, like, if you're in, you know, TJ Maxx and in, you know, Ross, that's different than if you are in Bloomingdale's and in, you know, Neiman Marcus. Exactly. I always looked at our wholesale strategy as our marketing strategy. And we were very particular about where we would sell. And my team used to get frustrated with me because I would actually turn them down for a lot of opportunities. And they were like, but we could get a million dollars if we would just sell QVC or if we could do Kohl's. And I said, no, I don't think that's what's right for the brand. I mean, we could have been larger, faster, for sure.

47:56But I think it's very easy to go quickly downstream. And it's much harder to continue to build a really clean, high-end, profitable business. One of the things that you guys have done is made virtually most of your apparel in the United States in Los Angeles where you're based. And a lot of people, I think, don't realize that there is like still a pretty robust manufacturing base in Los Angeles. Furniture is made there and it's not just like a city of Hollywood. There's still things that are made there, but that's more expensive. Was there ever, I mean, as you saw other brands and apparel brands moving their manufacturing or even starting their manufacturing in Asia, which was a fraction of the price, did you ever look at that option or possibility?

48:50I very much enjoy making product in LA. I like the idea that I know the people, that I can go down and pop in and see what's happening at any moment. And if you, you know, all of a sudden realize that something's selling really fast, you can ramp it up. And if you, on the flip side, realize that you're heavily investing in something and it's a mistake, Like a lot of times you can just pull it from the line. But it's also extremely rewarding to get to know the people and feel like you're supporting your community. One of our contractors, she started off as a sample house and she wanted to do more production for us.

49:33And she did phenomenal samples. And we said, as soon as you get your manufacturing license, we will start you with some small quantities and let's help you build your business. We built our business side by side with so many of these partners. And that woman who was our sample house, she ultimately now has three different manufacturing factories in downtown LA. Her daughter runs one of them. You know, it's very rewarding to get to work with people and see those types of impacts on their lives. So I read that around by 2017, you guys had hit about$20 million in revenue. And apparently around this time, you thought, why don't we take a, why don't we see if we can bring in some investors to sort of supercharge our growth, right?

50:26Because that's a great number. and you spent you decided to spend some time making a pitch going to investors and I'm assuming you went to New York and probably were in L.A. Tell me a little bit about about that process. And am I right? I mean, the idea was let's bring in money. Let's grow this thing. Yes. And we were like, maybe we should be growing a little faster than we are. We did see, you know, everybody else moving at what seemed like a much quicker clip than we were. and so we went out we hired a banker um and we did we did the whole dog and pony show and i think even though ultimately we decided that we didn't want to bring on an investor um i think it was a really invaluable lesson and so the things i learned number one was people were looking at the business very differently than i was you know at the time everybody was focused on d2c only and people are like what are you doing with all this wholesale like you don't have control over that.

51:26So they thought that that was crazy. But then also we were running the business to break even and people were like, where's your profit? And we're like, well, obviously if we did this, this, and this, there would be profit, but we are continuing to grow. And people really just wanted to see the profit. And as a day-to-day operator, like when Jesse and I went around doing this, the two of us were the main day-to-day operators of the business. It was extremely distracting. And I know that it becomes a cycle where it's like, okay, you raise money and then you have to deploy it and then you have to raise more money.

52:05And I wanted to be back in the office with my team. I wanted to be at the photo shoots. I wanted to be making the part of the business happen that I loved. And when we spoke to people, they, you know, we were just too small at that point. People wanted to have majority ownership and that meant that we would give up control. And probably a lot of the things that I really valued would go away, like the ability to manufacture locally and making sure that we were size inclusive. And, you know, I wanted to be able to run a business the way we wanted. Yeah. Was it kind of disheartening to go through that a little bit?

52:47Because, you know, sometimes people will think of that as a validation, like, oh, let's go and sort of test this out and get it validated in the open market. And, you know, at that point, it sounds like you weren't getting that validation. Yeah, I think it was a little frustrating. I remember at the time talking to Jodi and, And she was asking me what I wanted to do. And she was like, I'll defer to you. And I was like, I just want to stop. I want to take us off the market. I want to focus on running the business. And I just really don't want to play this fundraising game. And she was like, OK, let's go.

53:26Yeah. When you guys entered 2020, from what I understand, you had, this is before the pandemic, you just purchased a lot of, material because you had a bunch of orders. And then, you know, March or late February of 2020, yoga studios start to close. And all of a sudden, I think by middle of March, you start to get a cascade of canceled orders. Yes. Over$6 million of cancellations in one week. A lot of our money tied up in raw materials and I had big orders placed with our fabric suppliers. We had to come up with a new game plan. And so I talked to my sales team and I said, we should assume every order is canceled unless you get written consent that they want the order.

54:21And everyone was like, are you kidding? Just go ahead and ship the orders. and I was like, we are not going to ship because can you imagine being that studio in Boston and you can't open your doors and all of a sudden you've got Beyond Yoga product landing on your doorstep and you might not be able to even bring it in, let alone sell it to anybody and then there's gonna be a bill coming and you don't have revenue coming in from your studio classes. Like we cannot do this. But it ended up kind of being a blessing because, A, I feel good about the way we handled things. And we weren't cramming product down people's throats that didn't need it.

55:10And also at that point, everybody is at home and people were working out from home. People were wearing Beyond Yoga around the clock. And our website was in high demand. And then also a lot of industries, as you know, were pulling back on their advertising because there was no reason to advertise. So our customer acquisition fees went rock bottom and we were able to acquire a lot of new customers. And because we hadn't shipped all of that inventory to sit idly in a store that wasn't going to be open, we had it on our website. And we were able to start selling that and turning that back into cash.

55:53And so that was wildly helpful. I guess that year, in the fall of that year, you got like a cold outreach on LinkedIn from someone at Levi's. And this was just to kind of like do what you thought maybe like a brand collaboration or something. Tell me about that message. Yeah. So I got this message and it was from a woman named Lauren. And she said, we feel like there's a lot of brand synergies between Levi's and Beyond Yoga. And we'd love to talk about ways of working together and a possible collaboration. And I thought we were going to do a collaboration. And then she was like, great. Next steps.

56:34I'd love for you to talk to our CFO. And, you know, he said to me, I'm, you know, we're interested in diversifying what we're doing at Levi's. You know, our demographic lens skews more towards men. And I like the fact that Beyond Yoga is primarily female and we may want to acquire a company or we may want to build activewear on our own. And I said, in my opinion, I think you should acquire somebody because everybody thinks that they can build an activewear brand. And I've seen so many people do it and not realize how difficult and nuanced it is and fail. You know, I wasn't really trying to pitch him on me.

57:16I was just giving advice. And ultimately, you know, that conversation went well and we had multiple others. And when they said that they were interested in acquiring us, I was extremely flattered. You know, we absolutely were not looking to sell the business at that point, but it was Levi's. And the fact that they've been around for 170 years, I also was thinking about my team and what it would mean for all of us. I feel like everybody who worked for me was kind of in this like scrappy startup mode, even though we were at 16 years in at that point, we had always, I always felt like people were really taking a chance on us.

58:02And I thought that this would be a really great way to make sure everybody was taken care of into the future. So it was announced in 2021 that they were acquiring you guys for$400 million, which is an amazing deal. I mean, you know, especially for a company that started out so small, what were you able to do like almost immediately that you weren't able to do before? One of the things that Levi's was really excited about when they acquired us was the fact that we had never opened brick and mortar stores. And so that was probably one of the most exciting parts of the acquisition. And yeah, so while I was with them for the last two and a half years, I was able to open six stores.

58:55Wow. I think that your dad passed away a couple years ago, so he was able to see this happen, right? He was. And that was so cathartic to me. I'm really glad. I kind of feel like this acquisition, it was kind of like he got the exit that he always wanted to. And I know he always wanted to provide for, you know, our family and take care of my mom. And I know that when he passed, I knew he felt good knowing that my mom would always be taken care of. I know that you formally stepped down from the company in February of 2024. And also Jesse, your husband, stepped down as well. And so what did it feel like after, you know, 20, almost 20 years of that was your daily job?

59:50I mean, that was what you lived and breathed every day for 19 years to all of a sudden it just ends. It was really hard. somebody gave me some really good advice they said you know your first day that you're not going into the job wake up on vacation and so we Jesse and I we decided we were going to go to Mexico which is Cabo which is like our favorite spot and it was weird that first day though like I wanted you know I'm so used to being in constant communication with my team and there were no emails coming in and I actually spent that entire day just laying at the beach listening to episodes of How I Built This.

1:00:39The thing that was the hardest about this whole time though or this whole step down was just not being able to talk to the team and it wasn't that I couldn't but I think I had this crazy idea that like I was still going to be coming to the office and like bringing people coffee and going out to lunch with everyone And I realized that I just needed to give everybody a little distance in the beginning. And I needed to give myself that distance too. You know, I have two small children that I want to be able to volunteer in their classroom. But I've also gotten this incredible opportunity to just meet so many female founders and get involved in the, you know, the female founding community in LA.

1:01:23And when I was running Beyond Yoga, I was so heads down and so focused on running the business. I barely ever talked to people outside of my family and my team and my immediate friend group. And so I personally just really want to be that person for other people right now because I feel very fortunate for how this all ended. So, you know, a question's coming because you've heard the show before. How much of it do you attribute to luck and how much of it do you think had to do with just the grind and the hard work? You know, it's definitely a mixture, but I do think that luck favors the prepared mind, right?

1:02:08And I think we put a lot of really hard work into this business and set ourselves up to be lucky. But there's definitely an element of luck here. Um, and you have, I mean, the rest of your life and career ahead of you. I mean, you're, you know, you're still young in your 40s. Like, what do you think you want to do with the rest of your life? That's a great question. You know, one of the things that I promised myself was that the first year I wouldn't start another company and I wouldn't join any boards. I would just slow down and really enjoy, you know, this time in my life. And that's what I'm doing.

1:02:58But I would be lying if I didn't tell you that every single day I think about starting another company. That's Michelle Whaler, co-founder of Beyond Yoga. By the way, these days, Beyond Yoga has expanded way past its original mission of women's activewear. It now sells clothes for men and toddlers. And in fact, if you're not into yoga at all, you can even buy yourself a Beyond Yoga pickleball paddle. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack.

1:03:44This episode was produced by Chris Messini with music composed by Ramtin Erablui. It was edited by Neva Grant with research help from Catherine Seifer. Our engineers were James Willits, Patrick Murray, and Robert Rodriguez. Our production staff also includes Alex Chung, JC Howard, Carla Estevez, Sam Paulson, Kerry Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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