How Getting Back to Basics Turned 437 Into an 8-Figure Brand

0:00If you, as a business, believe you can create strong content and then amplify that, and then when you pair it with validity from influencers, I think that's a beautiful combination. Welcome to Shopify Masters, your companion for starting and scaling a business. I'm your host, Adam Levinter. Some of the most iconic brands in the world started as a simple idea between two friends, and 437 is yet another example of that. Bootstrap from day one, Hyla Nayeri and her co-founder Adrienne Bettio launched 437 from their business school campus in 2017. I refuse to have a brand that doesn't have a community.

0:37Fast forward to today and the brand has gone from a swimwear startup to a global women's activewear label that's growing 300 % year over year. The company hits a figure mark. All of a sudden, the pieces of the puzzle started fitting. Co-founder and co-CEO Hila Nieri joins me now to talk about building from zero, the ever-changing landscape of influencer marketing, and why protecting your energy is just as important as growing your business. Hyla, thanks for being here. Welcome to the show. Hi, Adam. Two Toronto people talking today, although you're in Vancouver. I'm currently in Vancouver, yes, but born and raised in Toronto.

1:15Nice. Is Toronto still home for you? Toronto is still my home base, but lately I've been spending quite a bit of time in Miami. I found that it's been really good for 437 just being in different markets. We typically see that when I'm based in different cities, we see almost like this halo effect of the business growing even further. Somehow, even though it's not always very clear as to the why, it's not like I'm specifically out here promoting 437 on the ground every single day when I'm in a new city. But we do see a correlation. And so it's been a strategic move. Rewinding back to the origin story of 437, you start this in university, correct?

1:58With your, is it your roommate and best friend? Exactly. Yes, we were at Queens University and I met Adrienne, who's my co-founder. She is and was my best friend. And when we were in first year of university, that's when her and I met and we became best friends right away. And we always were like coming up with conference ideas and just always brainstorming. And we were doing internships. She was at Hugo Boss in their corporate office. And I was doing a business incubator at Queens where we had to start a business and learn about funding, investors and growth. And we were just both unhappy with what we were doing and the business that I was building, I was not passionate about, but I was learning a lot.

2:45And so was she. And so we decided to kind of bring together, you know, my love for, you know, startups and tech, and then her love for the creative side of things, fashion. But then with this underlying thing that we were in business school, but we weren't really drawn to the investment banking, consulting, you know, finance, accounting world. And so we said, you know, let's start this side project. Like that's really, It was never like, we're going to create a business plan and become a multimillion dollar business. Like it was never like that. It was two girls saying, can we make some money to go on a trip?

3:21And so we read the four hour work week. The Tim Ferriss book. The Tim Ferriss book. Yes. And he's talking about e-commerce a little bit and just that you can work from anywhere in the world. You just have to have a virtual assistant. And we actually, we were like, you know what, let's try this out. And we started selling some cheaper bathing suits in our fourth year of university. So in between classes, we would get up early, book breakout rooms at university. You know, it was actually the perfect time to take such a big risk. We had the Wi-Fi, the breakout rooms, just like we were already in that business mindset being at school with less risk, right?

4:00We already had our school and accommodations. And we're like, let's just take a risk. We don't have these bills that were, you know, we haven't graduated yet and have like more risk in our lives yet. And so we started selling cheap bathing suits. And maybe in our first year we made, I want to say$10 ,000 or$15 ,000. So you're selling them online? Online. Okay. Yeah. Was it under the 437 moniker? Was it via Instagram? Like what was the setup back then? Yeah, we were 437 Swimwear. We went to a McDonald's and made a logo on Canva. like just this purple logo. And we had some bathing suits that we just sourced overseas.

4:41It wasn't like a full design process. It was very cheap. Like this was just probably a six month duration of finding cheap bathing suits online, grabbing them, getting content, Instagram. And it was like, we were DMing potential customers or, you know, popular girls and saying, Hey, do you want 50 % off your order? Like we were chasing any sale that we could make. We were like, as long as we break even or like. It sounds like very scrappy, right? It was very scrappy. Every morning in the line at Starbucks in our business campus, we would tell ourselves we had to DM, I think it was 20 girls or 30 girls each when we were in line at this, it was apparently one of the longest Starbucks lines that actually exists in Canada is at Queens.

5:29And it was just every morning, like we had these like, we were just grinding and we were like, let's sell this inventory that we have. And we were selling bathing suits for like$50 a set. And the branding wasn't strong and the quality wasn't like all that because it was a test. It wasn't like we're starting this big brand. There was like this distinct point, probably halfway through fourth year where we said, we just had this Black Friday where we made probably a thousand dollars that day. And we were like, wow, this is incredible. If we can do this every single day, this is going to make$365 ,000 a year.

6:13This would be an established business. And we were like, screw recruiting. We don't need to go to the recruiting events happening on campus. We're taking this full time when we graduate. We were so naive. So you knew that. I mean, you had some conviction leading up to graduation that you would take an entrepreneurial path, that you wouldn't go to your point into banking or into consulting. You had full conviction. Very naive conviction. Yes. I mean, you sort of need that as a founder, right? You do have to have some naivete built into the business model because the statistics work like, frankly, they are what they are, right?

6:52Like only 1 % of startups ever get north of a million dollars in top line revenue. So the failure rate in terms of entrepreneurship is quite high. So you have to have that naivete. So in a way, it benefits you. Yeah, absolutely. Looking back now, it's like$1 ,000 on Black Friday. Like, you know, of course, that's something to be proud of when you're like three, four months in, but it was like so naive. And that's like on your day where you have the most inflated numbers that do not tell a full story of your business whatsoever. But like, we're just going to take this and run because we were so desperate to not do the alternatives where we were like, we want to be our own bosses.

7:33And so, like I said, I actually think it was maybe$10 ,000 in that year that we made through selling these cheaper bathing suits. We then decided for our graduation trip when all of our peers were doing like their really fun overseas trips, we said we're going to go on a manufacturing trip. So the 10 grand that we made, we put towards obviously some flights overseas. We did China, Hong Kong and Bali. and in China and Hong Kong, we were essentially meeting with different manufacturers. And at the time we were a swimwear brand. So the, for the first five years of 437, we were an only a swimwear brand and we, so yeah, we wanted to sell like$150 one piece.

8:14Like we wanted to be on celebrities. We wanted to have a brand that we were proud of, but that comes with a really high quality product. And so we went on this beautiful sourcing trip and we did not know a thing about design, the thing about tech packs, a thing about any of that. But we found ways to make it work. I was just putting on the bathing suit and it we were just like telling the manufacturer, hey, like bring this tighter here. And we just tried to explain it with normal people words. And somehow it worked out. and I think bathing suits are a lot less fussy than like a dress with a specific zipper and you know certain sizes like you know a lot of women in a certain range of size could probably fit into one size right like it's stretchy it's it's moldable to the body so it's an easier category probably.

9:06So when you come back from that trip do you have your manufacturer picked out? Yes, yes. We actually had it already pretty lined up. We just had to go to like confirm and to get everything going quickly. And I think there is a part of, you know, when you're starting a business and you're like, we get to go to China, how cool and meet manufacturers. And like, this is what everyone says you need to do. And it's just funny because maybe in the first four years of the business, we went twice to China and ever since I haven't had to go back. It's just one of those things. So over time, does that relationship evolve?

9:40Do you change manufacturing partners at a certain point? How did this work as the business grew? We kept the same manufacturer for our entire swimwear days. We did test other manufacturers all at the same time. So our core collection, core fabrics was with the one manufacturer. It was a female owned. It was a beautiful story. We really built a beautiful relationship with her, her family. They were very hospitable. every time we went to visit them. But it's interesting, actually, we're so in our heads about it. We're like, we should produce in the US. So we actually started talking to a manufacturer in New York and we actually went out and visit them.

10:18Again, we're talking with the finite amount of dollars that we had that we're not even paying ourselves for the first two years of this business. We were taking like this little bit of money and we're staying at this like borderline hostel in New York with no windows. We walk by it now and we're like, You know, we've come a long way, but we were those scrappy founders still to this date. It is just wild scrappiness. And we went to this manufacturer. We saw a couple big brands that they were working on. Like you see their racks and you're like, oh, this is an established manufacturer. So we're like, amazing.

10:50We're going to do a swimwear line here. And so we put a$30 ,000 deposit down. Again, this is about one year into the business now. Very slow beginnings, like 437. once we rebranded and we launched as a premium swimwear brand, all of that$10 ,000 we made from the handful of customers gone. Like it was actually a difficult time when now our price points are like two or three X and it made us question if we were doing the right thing. But we had that conviction of, listen, we're not going to make$10 ,000. The previous$10 ,000 dictate what the business we truly want. Which is what more more premium, more upmarket?

11:31Yeah, like, okay, we do want to build this like real business, premium business, multimillion dollar business. So there was some learning from that. We understood a little bit about the market, but we weren't going to let that dictate the conviction we had of the type of business owners we wanted to be in the business we wanted to be proud of for ourselves. And so we had a very, very, very slow start. We had two orders on launch day when we relaunched the premium swimwear brand. And it was like one order a month. It was like pulling teeth. It was very difficult to grow. And so we put$30 ,000 in this manufacturer.

12:06And then all of a sudden their response times start going from fast within hours to like two days to a week. And just we're feeling like we're getting bread crumbed here a little bit. And all of a sudden they stop responding. They're not answering their phone. And I remember calling up one of my friends in New York and I said, do you mind going to this location? Like this is where their manufacturing is and see what's going on. And he goes and he calls me and he says, Hila, like there is no one here. It's like in the movies where you have like an abandoned space where the windows are open and there's wind flying and paper flying on the ground.

12:47It seemed like they fleed overnight and they were bankrupt. And we never got that order. We never got our$30 ,000 back. In that moment, I remember that we had two choices. And it's such a vivid memory of we looked at each other and we just started laughing. We were like, what? We are constantly getting all of these challenges, all of these fires every single day. Like it just feels like it's like just punch after punch. And we looked at the inventory that we currently had with our Chinese manufacturer and which wasn't selling. And we looked at each other and we said, okay, well, we don't have this new collection anymore.

13:29This crazy thing happened. We're not going to get a lawyer for this U.S. manufacturer as a Canadian company. God knows what that looks Like we're going to spend more money there. I think a lot of business owners get really caught up in those things. Like let's lawyer up and whatever. We're like, this is the cost of being an entrepreneur. I mean, it would cost you$30 ,000 to pursue them, right? Then you go back to Toronto. At some point, the PO gets formalized and no response. And then they disappear from the site you visited? Yeah, like we actually confirmed the samples with them. There was a back and forth.

14:06And then it just got slower and slower as it was time to start getting into production. Then we just didn't get any responses. Okay. So what gives you the conviction to keep going? And what, you go back to the original manufacturer in China and you tell them, look, we're going to work with you now? We were still working with them on our core line. This was just a unique, like ribbed swimsuit, unique look that we started promoting too, by the way. And we had all these, you know, a couple influencers excited about, but we just had the conviction of, listen, you know, we've been one year into business.

14:41Now we saw a little bit of a glimpse of that. This could be wrong to something. We don't want to give up. We love what we're doing. And we just said, this is probably part of it. Like, let's just laugh. Like, we're going to be okay. We always had this belief of every hardship we had. We were just like, we're going to make it out. like a year from now, we're going to look back and say, this was just supposed to be part of the journey. And we looked at what the bathing suits we currently had in inventory. We took one of our top, it was called the Kenzie top. And it was like a bow tie in the front.

15:14Like you tie it up as a bow in the front. And we said, well, because we won't have a new collection this year, what do we do? So we took the top and we're like, can we wear it backwards? And we realized that, oh, you can wear it backwards. And then we're like, can you tie the bow in the back instead of the front? Can you crisscross it? We found that you can wear this top 12 different ways. And so we just promoted that. We just became the 12 in one Kenzie top. And that top ended up bringing in millions of dollars over the next few years because of that moment. That's a key breakthrough for you guys, right?

15:52Do you feel like that's the biggest turning point in those early days? I've never thought about that. But now that I now that you bring it up, it probably it probably could have been it could have been one of them. Absolutely. Because the yeah, the functionality that came with that, the uniqueness that came with that. There's another big growth moment that comes from an Instagram post by Tammy Hembro. Yeah, exactly. Is it Tammy that promotes the multiway bikini top or does she gravitate to another product you guys have? This was a few months prior. I sold my Jeep Wrangler and I just had this belief that I had to move to LA to grow this brand.

16:33And I lived in an attic for three months and there was a meet and greet that I saw that she posted on Instagram that she was doing North LA and getting Ubers was just very uncomfortable for me at the time. It was just like, it's like, it was a reach. and um I was like do I take this uber 40 to north la to to meet her and I was like you know what let's do it and I wasn't there like fangirling like a lot of girls in line were like can I just take a selfie with you Tammy for me it wasn't like that it was genuinely as soon as I got to her I said hey like I started this swimmer brand I really think you'd love it but no expectations whatsoever I just want to give you this gift so nice to meet you then I see her handed to an assistant and I had no expectation.

17:18I was like, Oh, it's probably getting lost. It is what it is. And to our surprise, the next day she wears it by the pool and she tags us. And I think it's a very common misconception in influencer marketing that, you know, all of a sudden someone tags your brand and like you, you sell out and you know, whatever. Um, especially today, it's just so saturated back then even then it wasn't like this all of a sudden we're swimming in orders kind of moment it wasn't at all like I think maybe there was like five ten orders that came from it which was for sure great at the time but it was more about some of the people the influencers we dm'd at the time responded now like all of a sudden people oh my god that's amazing you guys are killing like it was finally some people took us more seriously it was almost like a like a nudge from maybe the universe to keep going or that's how we looked at the situation we needed that we just weren't doing well we were crying when I was in LA I would FaceTime Adrian crying like is this gonna work like what are we doing should we get full-time jobs like what's we literally were like getting our alcohol liquor license so that we could become like servers or work at a club so that we can make money to fund this business like we had no money no funding and so to be able to post that on your Instagram and leverage the fact that this really popular influencer is wearing your brand, other people then want to wear your brand.

18:42Now, customers, there's validity. People trust your business now. How do you think that that sector of the market has evolved? So, you know, there's the Tammy Hambro post. Fast forward to today, you've had celebrities wear this product. Kendall Jenner, Bella Hadid, Alex Earle, they've all had a relationship with 437. You've watched this industry grow over the last decade. How do you think influencer marketing has changed over the years? Oh, drastically. Because back in the day, I remember like we had an influencer eight years ago post a story of us. There was a moment where we had like 2 ,000 followers of growth from a girl with 60 ,000 followers.

19:22And she posted a story of us like that. That doesn't exist today that I've, that I've witnessed with the amount of influencer marketing that we do. It's a lot more saturated. Like right now for a brand to succeed in influencer marketing, I find that you have to have a lot of repetition. Like you just have to constantly be on a lot of influencers and multiple times on the same influencer, right? Because when they just wear it one time and they tag, it could look paid. It could look like they got a free product and they're wearing it and consumers are just a little bit over it. Well, they're skeptical because they don't know what's authentic and what isn't, right?

20:00Did you pay this influencer? Did you not? Is this authentic and organic? Is it not? Right? That's why. Exactly. And so I think nowadays, I would rather have five really high converting influencers with a lovely community that I am their go-to activewear brand. Like they, anyone that follows them knows that when it comes to activewear, this is her favorite brand. She wears them all the time. Like a genuine ambassadorship that It doesn't look like paid. And for us, we never want it to be paid. Like we want it to be real. Like I would never want to work with someone that doesn't genuinely love our product.

20:37I think it costs a lot more now to have larger influencers. So I think that the micro and nano strategy is an actually incredible strategy is to work with smaller creators that they are organic. It feels more organic or, you know, they, like a lot of, everyone's an influencer. Everyone has influence. And, you know, if it was a guy with 2 ,000 followers, but his group of friends think that he's really well-dressed and, you know, they trust him, I think that that's an incredible person to send a product to, because if they get three people to shop and you sent them one t-shirt, like that is a huge return in my eyes, right?

21:15And that's exactly how to grow the brand, especially in the earlier stages, right? Unbelievably impressive. You hit the 1 million, you know, top line revenue marker within two years, but you're still describing those early years as a real struggle. So when do you and Adrian feel like this is a real business that you could, I don't know, pay yourselves or you could build a career from? We first started paying ourselves$1 ,000 a month. But I think it was around the time where the business was doing about half a million dollars a year. We were like, okay, we're on to something here. And we saw that it was quickly growing.

21:48I think when you look at the month over month analysis and you're like, okay, like things are, things are pacing up. But when you hit that million dollar mark, I think that there's a level of confidence that it brings that, you know, it's not, it's very difficult. I think it's, to get from zero to a million dollars. It's almost the hardest phase, right? Actually, now that I think about it, zero to a hundred thousand probably is even harder. Just that initial validity that we're onto something and that people want to pay for our product or our service. and we were very clear that we don't count the friends and family orders, which we didn't have many, by the way.

22:28Sometimes I've worked one-on-one with a lot of business owners throughout the years now. And one thing I've always heard was, well, on launch day, I had like 30 orders and then you ask a little bit more and it's their friends and family. And I think that's beautiful. And I think that says so much about the people in their life, but I think that it doesn't say a lot about their business and their product. I mean, a million dollars in top line revenue, there's lots of definitions around finding product market fit. But I would say, you know, if you're a D2C commerce business and you've sold a million dollars in one year worth of your product, you've got product market fit.

23:05Now it becomes a real business, right? Right now it becomes a different game, which is more of an optimization scale supply chain sort of game versus, you know, can we find some sort of supply demand fit here? As you've grown on the marketing customer acquisition side, what channels have worked for you? We've talked a little bit about influencers, organic versus paid. How has paid social played a role? How has community played a role? which channels have been most profitable? For us, 100%, I would say organic influencer marketing, which we talked about, because even like from an influencer marketing perspective, 99 % of what we do is organic and not paid.

23:50And then when it comes to social media, organic social media has been a huge part of the business. I think there's been different phases, right? Like when TikTok first came out, we got to it pretty early because my sister is 14 years younger than me. So she was like, you need to be on here. So, you know, there's been different phases. When we first started the business, Instagram was a different beast, right? So we were doing really well and growing very quickly there. But then we've had some lull periods where it was more difficult to stand out on social media. And so today, today's growth, I think organic social media is a big part of it.

24:27We did start running ads probably two years into the business. I think that that is an incredible play. I think if you as a business believe you can create strong content and then amplify that, and then when you pair it with validity from influencers, I think that's a beautiful combination. And oftentimes that's part of the creative if you have those usage rights. And events and community has been a big part of the business. It's hard to know if it's a part of the growth. It's really hard to track. But for me, I refuse to have a brand that doesn't have a community. What does that look like? Like, are there pillars of your community that you think about methodically?

25:09There's never been like a conversation where like, let's talk about community and what are the pillars and what do we want to build for each pillar? It's been more just this ingrained ethos at 437, where this business has been built by two best friends. We've run this business with an incredible group of women. Community has been just such a big part of our lives. early on, it was always like in Toronto, we always had these events for our anniversary and we'd have like, we'd invite our community. And then we'd, when we turn into an activewear brand, we're constantly doing Pilates tours where we invite our community to workout classes.

25:43We did a lot of pop-ups throughout the years. We, and the community to me is very much like when I'm out and about and I'm grabbing a coffee and I see a woman wearing 437, I love to go speak to her and get to know her. And I, I think that those small things builds a huge part of community. It's, it's the conversations. Isn't that the coolest feeling in the world, seeing your consumers and, you know, out there in the ether, just wearing your stuff. It's so cool. Yesterday I was in Vancouver and seeing a girl wearing one of our tote bags that was part of an order from five years ago. it was pretty cool to see.

26:22I was like, wow, she still has her toe bag. And, you know, and also another part that I would say if we did have pillars, this would be one of them is a lot of the community stuff that we do is from doing the podcasts and the panels. And, you know, I love just posting a story and saying, hey, like I am putting together this event if anyone wants to come and hear about our journey, whether you're starting a business or you want to work at a, you know, business like this. I'm very passionate about that because when I even look at 437's COO, Monique, I love her story because she also went to business school.