How Sophia Amoruso Turned a Side Hustle Into a $350M Brand (Nasty Gal)

0:00We are in a world where really anybody can start a business. Our guest today is Sophia Maruso, the powerhouse who built Nasty Gal from a thrift store side hustle into a$100 million global sensation and kicked off the hashtag girlboss movement. She's a bestselling author, a Netflix inspiration, and now she's empowering and investing in the next wave of founders with her platform business class. I'm Sophia Maruso. Welcome to The Vernotes. I want to dive right into you being an eBay seller. How did that start and how did that transition into becoming, you know, the hundreds of millions of dollars brand that you built with Nasty Gal?

0:33Well, it took 10 years. I was 22 and I was like working in the lobby of an art school. You know, I wasn't in college. I wanted to go to art school and I got into the San Francisco Art Institute in North Beach, which was an incredible art school. And then CCA in Oakland, which is an awesome art school. But it was like 50 grand a year. And I was like, I didn't have any credit. Parents didn't have like 50 grand a year. So I ended up not going and I worked in the lobby of an art school not because I wanted to work in the lobby of an art school But because I needed health insurance and I worked there for three months and during that time I had all this time to kill on ebay and myspace really And I was like getting friend requests on myspace from ebay sellers who were selling vintage and trying to like promote their business Just like an instagram account might try to follow, you know You and be like hey pay attention to me or whatever And I clicked through and I saw what their auctions were going for because they were starting the bids at like$9.99.

1:26And it could very well have sold for$9.99. But these girls like auctions were going for like hundreds of dollars. And to me, it was like, I know where to find this stuff for like eight bucks. I spent enough time in thrift stores like I loved vintage. So I was like, quit my lobby job. And I launched an eBay store called Nasty Gal Vintage. Not everything worked at first. You know, I wasn't like, I'm going to be an entrepreneur. I was like 22 and just like, oh, I like don't want to work for anyone else. I'm actually not capable of it. Maybe I can like not work. And then, you know, fast forward, I'm like a CEO and like the cover of magazines and stuff, which like, you know, is still just kind of wild to me.

2:07But, you know, bootstrapped it because I mean, I didn't know what venture capital was. And I wasn't like, I'm going to build a company that does 100 million dollars in revenue. Like I would never even had goals like that. cool maybe I can like work for myself and I was like you know I remember like checking auctions on my Blackberry Pearl holy shit these auctions are like going so high so after a little while I like figured out what worked built my own brand reverse engineered what had worked for other people but didn't do the same thing was really resourceful about like sourcing vintage and somehow really good at like copywriting and good enough at photography and good enough at a lot of things just kept going and year one I think it was like 75k in revenue which I was like I just kept the money in the company.

2:49I didn't like want things. I was like 22 and too busy like having fun with my head down being like oh my god this is crazy something's working and then year two was like 250k. Wow. And then it was 1.1 and then 1.1 still through eBay fully? No I left eBay like mid-2008 so I started it in late 2006. Left eBay mid-2008 and then launched my own website and it sold out day one. And were you still selling vintage or did you start selling something else when I launched it it was just vintage and then I was like oh shit I need to buy depth and went to my first trade show in Vegas called magic and at that point had spent so much time understanding what my customer wanted which was like MVP you know you could call it like oh wow I just sold I did something that didn't scale I took photos of one thing and I measured it and I wrote a description and I you know and to be able to buy six and smalls and mediums and enlarges and have things that like I could take a photo and sell you know multiple items of I was able to really scale the business being able to curate other brands and eventually we had a design team and we had our own brand and then venture capital came in I think in 2012 when we were doing about 30 million in revenue and I had like bootstrapped it and owned 100 % of it and the first money in was out of a growth fund and they said the company was worth 350 million dollars so five years in it's so interesting because two percent of vc capital goes towards solely female founded businesses it's ridiculous and it's about 12 that goes to businesses that have like a male and female co-founder which i think is just a huge crime but then also a huge opportunity within the market to build different things and to try different things that actually serve this customer in a lot of ways our target consumer that we're looking at is very similar for fia we're looking at a girl who's obsessed with shopping she wants to get the best deal she wants to have the hottest dress for summer.

4:37I think it's really interesting because talking about really getting to know your customer, people talk a lot about product market fit, but not founder market fit. And you had that because you knew, okay, what's hot, what's cool. I wanna go back to the beginning of the business when you transition off of eBay and you start doing your own sales. Who's your first hire and how do you pick that person? My first hire I found on Craigslist. Stop, you found your first hire on Craigslist? I don't even remember LinkedIn being a thing. And I was just looking for a girl who like worked at a shop, you know, someone to ship stuff.

5:08Yeah, what did you want them to do? I was like the things that I don't have to do. Yeah, yeah. And I still had to buy. I still had to style and, you know, photograph everything, like all the creative stuff. But like steam clothes, write product descriptions. But even then it was like I was very specific about how I wanted things done. I didn't know what a standard operating procedure was, but I like trained her, like call it glitter, not sparkles. so yeah customer service shipping you know ordering any kind of supplies we needed steaming stuff so and her name was Christina and she had worked on a store on hate street um and she actually knew about the trade show that I went to and she was the person who told me about it and I remember I was like I committed to a full-time job for someone and I I wasn't even paying I was paying her more than I had made and I think it was like 16 an hour like I was paying her more than I was paying myself and I was like oh my god this is so scary like what if it doesn't work out like somebody's livelihood is on the line and like little did I know that that was like you know the first of hundreds of people that I would end up employing and livelihoods that I would be somehow responsible for.

6:14And how much money did you start making before you made the decision of it's the right time to bring on someone? It was like probably 250k that year or something it was just basically when things were breaking, when I couldn't keep up with customers. It was like, you know, I think, you know, the company was just exploding and I couldn't keep up with the demand. And that was, that's like, I think the best time to hire people rather than like hope it works out and hire people ahead of it working out because, you know, it's like, that can be very expensive. I think it's so important to stay as lean and scrappy as possible in the beginning, because you need to learn everything yourself.

6:51I feel like if we were in a position where we had extra resources then a lot of stuff that we ended up doing we would have delegated and i think it's such a valuable skill to really know your business in and out so that if people are taking things on and they're floundering or they're confused you can step in and actually coach them building up your own skill set makes you more valuable as a founder as an employee whatever it might be being scrappy prevents you from getting into situations where you have a bunch of money and you end up deploying it in ways that are inefficient just because you have a true understanding of like what is it that the business needs obviously it's unfortunate and stressful when things start to break but it's better than things not working and then being stuck with a bunch of people who have no idea what to do with their time i also think you guys are building software there's a speed there's speed's really important you have engineers you're never going to know what the engineers know so building ahead of that or having people i mean it's just what i was hiring for it was like a bootstrap business it was someone to do really basic stuff so if there were things that from day one had to happen that I didn't know how to do.

7:54I wouldn't have had the capital to do. But if you do and you're building, I think, a technology company, it can be like very different. I mean, there's a reason why a lot of software companies are started by engineers, you know? I mean, I find it so interesting because I love what you said about you had these very specific inclinations where you really understood your customer to say, call it like glitter, not sparkles, et cetera, because you actually knew it was resonating. And something I wanted to walk back to that I'm curious about that when I was reading about you, I thought was really interesting is that you worked a series of like different odd jobs and you were doing a lot of things before you ended up starting Nasty Gal.

8:27And correct me if I'm wrong, I thought I saw like a viral Instagram reel where you said I used to be a stripper, which I was like, that is so cool. I mean, I'd love to just better understand you as a person and the things you did before you started Nasty Gal. Do you think there were specific jobs or specific things that you did early in your career that kind of helped you become an entrepreneur and taught you things? I think so. I think I tried to cut corners and I think that just doesn't work. Like long-term, it just doesn't work. For me, you know, my idea of like a perfect job was how little can I do for as much money as possible?

9:01Can I just sit here and do, why would I work harder if they're not going to pay me more? There is like a theme of that. There's like the lazy girl, whatever, which is cute when you're 20, good luck when you're 30 kind of a thing or like that just is not going to scale at some point unless you become like a trad wife or whatever just doing things that didn't work there were things like I worked in a bookstore and they taught me you know take someone over to the whatever non-fiction section instead of point basic customer service stuff that I think I ended up applying to the business even though it was a digital business that really helped me yeah I was a stripper for a few months in Portland and honestly like nobody fucked with me it was just fun.

9:39I got to like dance to music that I liked. And I was the person like a few years prior who was like, Oh my God, don't look at me. Like if I was like making out with somebody, I was like, Oh, I'm going to like get up in the dark and go to the bathroom or something. I was just like not comfortable with my body. And it was kind of like exposure therapy in a way where I was like, also again, I was like doing, it wasn't as little as possible because it was actually work, but it was just like fun. I didn't like really engage with anybody there. It was just like danced and like went and had a white Russian in the back room and then did it again or whatever it made me really comfortable with my body in a way that I'm super grateful for because I think that's something that can take a long time for people I saw this viral tweet yesterday I spent like or x or whatever I spend way too much time on it but it was basically saying this stripper taught me more about sales than anyone I've ever met in my entire life and it was talking about like building an emotional connection with someone and understanding like the levers to pull to really make someone trust you and he was saying how he learned it all from a stripper and he learned more than any sales coach he had ever talked to in his life and I just thought it was so funny but also really interesting because I think it's so unexpected the things you end up doing in your life that end up teaching you so much and I feel like especially for you you had such an untraditional trajectory that I'm kind of curious like if you were to peel back the layers and especially give people advice like what kind of things you would say are important to do when you're young to set you up with a good foundation if you want to be like a founder or go into entrepreneurship?

11:07I probably there was no that's fine. Yeah, I never connected with anybody. I don't think I learned that. I think I learned that way later. For the record, I wasn't like building, which is again, it's fine. But I didn't know for sure. It was just so funny. It was like a pretty ambitious stripper, I guess. There is a lot of people get really excited hearing stories like mine where it's like, oh, just get started with no experience and like no, like no education. Like my story is such an outlier and people were so attracted to it because it inspired a girl with like a login to Shopify or eBay or whatever to start a business, you know, which was not possible before a marketplace.

11:46Like it was just digitally. It was just like not, you couldn't just stand up a business. You had to like go get a physical retail space to sell vintage, which was like, I would never have done that. And so we are in a world where really anybody can start a business. I don't think education is overrated. And I especially think that if you can, when you're young, learn some chops on somebody else's dime, work in a company, even if it's for a bad boss, experience what leadership looks like or shouldn't look like just by exposure that when you go become a leader, when you start a company or you need to manage somebody or there's a certain kind of domain expertise that you want to have cultivated before you move into your career or starting a business.

12:28like you've done that and you've gotten paid to do it rather than putting like all the risk up front and doing it for the first time after you start your business um you know that works differently for different people it ended up working for me like to a point but I think you know the whole like serendipitous founder story of just like you know you know dropped out of school whatever thing is like a little over glamorized yeah it's like I really wish I had that foundation because it would have given me a lot more empathy for the people that I was employing and a lot more chops to be able to kind of run that team when the job became about more than like shipping stuff or things that I had already done myself right do you feel like there's mistakes you made as a boss that you're looking back like wow I wish I had done this differently yeah I really wish I'd coached people more didn't know how I didn't know what that meant I hired people that were you know three times older than me, whatever, twice as old as me.

13:29And I was like, you're going to diagnose the business and do what it needs to happen. And you're going to work with the other people like a grownup and call it like coordinate and it's all going to happen. Right. I just thought that's what like grownups with like, like lengthy careers did. And nobody had to tell me what to do. So I just like didn't understand that even executives had to be held accountable and that they actually want that. I was like, Oh, they're going to be so insulted if I'm telling them what to do. Like Like they've got their like shit together, right? Well, you know, when people even like really, really great talent doesn't fulfill on what it is that they set out to do and you haven't like led them to it or coach them or checked in and talked about milestones and just been like, oh, cool, you're going to go do that.

14:14It doesn't set them up for success. I think it's easy to be like, well, you fucked up. But actually, that's just like people need more than that. I could have given people more chances kind of in the same vein where I'd be like, this is absurd how did this happen if you're I just kind of whacked people and it puts a business at risk when you just like remove someone from the company it's like a game of like Jenga it's like you know sometimes the best thing for the company is to keep the person that's not working out in that role until you find someone to fill that role because you can remove someone from the company and then the people under them are like I got all this responsibility like what the hell and then they're like I want to raise and you're like you're not qualified and you're like now you're going to get a new boss and they're like we don't they don't know what we know it's like but what got us here is not going to get us there

15:15I want to continue to kind of hone in on your journey with Nasty Gal was there a specific milestone that you hit especially when you were initially bootstrapping where you thought oh my god like this is actually working this could actually be the thing that I do full-time as my business the moment where I was like oh wow I can do this full-time was when I launched the website it was when I left ebay and I was doing a full-time where I was like oh shit and why did you leave ebay I had a customer base that was coming to ebay for me selling at a place like etsy or ebay or poshmark or any of these reseller sites is great because people there's a sense of discovery and if somebody's looking for X item, they can find it.

15:52But my customers were coming for like what I was curating. And so I think eBay was good in the beginning to get awareness about the brand and to find customers. But ultimately, I was like, why are people coming here for me? And then I'm giving my business away to like, you know, suggested sellers, suggested other shops, suggested retailers. And I was like, I just got kind of selfish about it. As you should, though. It's your business, right? I was like, I'm doing more for eBay than they're doing for at this point. Also, I was like, I wasn't planning on leaving eBay. I was going to like launch the website and still sell on eBay.

16:23But I was like, I'm going to market the shit out of this website. And so I was leaving feedback for customers that was like, check out Nasty Gal Vintage coming soon. And eBay basically suspended me for doing that at the same time that the website launched. So I didn't really have a chance, a choice to go back. So that was really why I like left, left eBay. I didn't really have a choice but also when I launched the website everything sold out within hours so Who What Wear and Daily Candy were really huge at the time Who What Wear is called Click Media Group now and they own like Birdie and all these other platforms Catherine Power went on to you know found Merit and Aveline Wines with Cameron Diaz but at the time like Cartier would pay them I don't know how much money for a dedicated email okay here's today's trends it was really mostly a newsletter business.

17:12What year is this? 2008. And so she was a customer, like Anne Hathaway was a customer, like on eBay, you know, who later came and shadowed me for the intern, which is, it was kind of like interesting and surreal. Anne Hathaway? Yeah. That's hilarious. Yeah, yeah, yeah. She came to our offices and like followed me around for a day for the role. And Nancy Meyers came to the office. How did all these people find out about you? She found me on eBay. It was just, it was organic. Like people talked about it. People thought it was cool or it stood out on eBay to them or they were looking for something, you know, similar.

17:45But Who What Wear sent out a dedicated email about Nasty Gal's launch to I don't know how many people. It was one of the biggest fashion newsletters out there because the co-founders were customers. And that was just like Kelly Ripa's stylist was calling. She was like, do you have that motorcycle jacket in an extra small? And I'm like, it's one of a kind. didn't know but like what the fuck how did you like get my number you know and it's like Hollywood that's crazy so it was just like sitting in this you know little warehouse up in Benicia and butt fuck Bay Area and um yeah that was when I was new I was new I was that that was when I knew I was onto something so it was really that you were intentionally curating and then these celebrities like organically found you and then it led to more people finding out through referrals or what do you think was kind of that critical unlock that made more people discover the brand?

18:36Yeah, I think like, I mean, when we raised money, it was something like 60 % or some crazy number was organic traffic. We weren't really running any paid media. So at the time it was just, you know, people didn't, MySpace wasn't even around at the time. So people were really just finding us through word of mouth. It just became like a cult, like obsession. Yeah. And eventually maybe social media, but it really was word of mouth, you know, people wearing Nasty Gal, somebody asking, you know, where did you get that? And the name of the company itself, I think, lended itself to a certain amount of virality.

19:13You know, girls would get a package and people would be like, what's that? Or their parents would see something on their credit card and be like, what are you doing? And so I think that really ended up standing out because at the time, I mean, everything was just really generic. It wasn't as hard to stand out. And is there a reason you named it Nasty Gal? How did you land on that? The other name I almost called it was I Heart Vintage. No, no, no. I like Mastigal way better. I mean, so there I worked in a record store in San Francisco for a little while and there was an album I discovered there by a woman named Betty Davis who had been married to Miles Davis for a short period of time.

19:50And she was like reportedly too wild for him, but was this incredible front woman funk singer, super duper stylish. Like if you look at photos of her, she is like so fucking cool. And her lyrics are like, I don't want you back. They're all just like, you know, it's like your mama wants you back. I'm the best thing you've ever had. I don't just like really kind of ballsy lyrics. And the spirit of that was just what I wanted to infuse into Nasty Gal. The brand was very, and I hate the word edgy now, you know, but there was an edge to it that didn't really exist anywhere else. And the name very much inspired that.

20:35Walk us through, you were talking about all these different revenue milestones that you were hitting. And then so when did you make the decision to raise venture capital and do you regret it at all? You know, I owned 100 % of the company when they valued at$350 million. dollars had I sold all of the company when it was worth even if it was worth 200 million dollars to private equity or had like even a hundred million dollars like that would have been a ton of money when I raised money you know I had already built something so I wasn't really pitching I was just like yeah this is what I did you know that was when Jeff Jordan from Andreessen and Jeremy Liu from Lightspeed like everybody flew down to LA to be like who is this freak what is this phenomenon on how did she build this thing?

21:19Where'd this come from? It should be venture backed, but it's not index. A bunch of them leaned in. I found a term sheet from benchmark and I don't even remember getting one. I was digging through my Dropbox recently. Um, and it was like, okay, wait, I can raise a bunch of money. I still own 80 % of the company and I raised 50 million and I owned 80 % of the company. And I was like, I control the board. So what's the downside here? So I sat down with my new investor, which was Index Ventures, and my COO and my CFO at the time. And it was like, okay, let's project next year. Let's just round up by$100 million.

21:57So let's go from like 28 to 128. And then we hired into it and we spent money on paid into it. And then the company became less profitable and you hire a hundred people in a year. It is like, you know, you better have really good chops to do that and have like new teams and new leadership and, you know, first, you know, early employees getting bosses for the first time and no systems and like no processes. And it was just very much kind of like a homegrown business. You know, when you get started, it's like create processes as early as possible so that when it scales, people can take that and run with it.

22:32If you're trying to retrofit them into a business, it's really hard because there's already so much complexity and getting people to like buy into that and do something a new way is a lot more challenging. So that just became this like really loud people being like, I'm doing the same thing that that person's doing. And like, I thought that was my job and all kinds of things that happen when you hire a lot of people at the same time and things that happen just when you have people, period. The expectation was that I build a billion dollar business next. And that was never my aspiration. Like I would, I was fine with the business I had built.

23:11I wasn't like, oh my God, if I don't build a hundred million dollar revenue business, I'm going to be a failure. I was like, dude, this is amazing already. And, you know, I was told I could and I would, and it was basically inevitable. And it's just not as simple as maybe it, it was made out to be. And so by the time you're 32, you guys are doing over like$100 million in revenue. You also have to guide the business through bankruptcy. Was there a point where you're like, okay, this is going the wrong direction or we're being pushed too fast to scale? What did that look like? I mean, you don't go bankrupt overnight.

23:47There were opportunities to raise money at a lower valuation that we had raised$200 million even, which is like not a failure, right? But that would have meant my investors, what they invested in was worth less than what they paid, which they don't want. And so even though I had control of the company, the advice I got was like, don't do that. Some conversations I think that were had when I wasn't in the room, even though I controlled the company where my investor was like, you know, to a potential new investor who would have been like a strategic apparel, like veteran type of like person, company, whatever, was like, if you can't invest at 350 million, don't bother showing up kind of a thing.

24:30And I learned that like later on. And so there was a certain amount of like cock blocking that happened that I don't think I knew about because I would ask that potential investor later on like what happened and they were like this is what happened. Because they didn't want to raise on a down round because their reputation didn't matter. Because they would rather, venture capitalists would rather just show their investors that what they invested in is still doing fine than mark it down and say, oh shit, like the fund that you invested in is worth less or this company is worth less. It's a high risk business, venture capital.

25:06So they expect a number of them to flame out. So I think some venture capitalists would rather like hold their investment at cost than mark it down and give the company an opportunity to like get back to where they were. And then at the end, there was like a series of Hail Marys that were like, this person's ready to buy the company. You know, here are different opportunities. Someone did invest. Ron Johnson, who had been in Apple and was like a retail veteran, came in and invested with his like cronies. and they were like we're gonna turn it around the company had taken on some debt and he's like we're gonna sell it I remember one of his guys came in and I was like what's the chance we're gonna sell the company to these people he was like 100 % and I was like nothing's 100 % like oh god you've been a long longer you've been alive longer than I've had a career yeah and I know that most deals fall apart.

26:00So that was when I was like, oh shit, like what's happening? I had taken myself out of the CEO role two years before the company fell apart. I didn't want that job. I didn't enjoy it. I was in over my head. I was very aware of that. Nobody pushed me out. And I hired a CEO who had been our chief product officer, who was incredible merchant, incredible eye, incredible taste. we were making really beautiful things maybe wasn't the right CEO think you know that's a huge risk to put somebody else in that position would I have pulled it off had I not done that would the fate of the company been different I don't know but I knew that I hit a wall and I just straight up didn't want that job I mean after eight years I was like 32 when I left nasty gal after 10 years I mean 10 years is crazy it's a long time you're like oh this isn't the vision I had for the company.

26:52And now you're forced into what is a grueling job of taking this to, okay, let's make this a billion dollar brand. Yeah. I was like, I didn't know what I was signing up for. I didn't know that that job was going to be as gnarly as it was. And as a founder, by default, you're the CEO. Yeah. And it's like a founder and a CEO aren't necessarily the same thing. And you don't have to be in that position. I think when you have a co-founder, it's amazing. You know, I wish I had a co-founder, especially someone who had more experience than I did. But I was very much a founder, very much a creative, but I wasn't a CEO.

27:27And now, you know, I have a venture fund called Trust Fund. And I invest at the early stage because that's just where I like to play. Yeah. And I get to do it over and over because things I do tend to be successful, which is awesome. But then you inherit this. I inherit the things that I don't like, which is the next phase, which is the growth phase, which is exciting the first time, but not something I want to do again. Of your portfolio, what's an investment you've made that you're really excited about? Yeah, there's two. One's called Agree.com, and I think they're going to replace DocuSign.

27:58It's like you load a PDF in, everything becomes editable, and you can collaborate, and it has version control, so you can see anytime something's edited, whereas right now, if you go into Word, you can't see. And it's also connected to payments, so you can sign a contract, And as part of the flow, your customer, say it's like a SaaS customer or, you know, you're a consultant even, when they sign the contract, basically they have to pay when the contract is the invoice. And you can set up recurring payments. And so instead of signing a contract and then sending them an invoice and then chasing them down for payment, you're able to do that all in the same flow.

28:42And so I invested when these guys just had a deck and they just raised a big seed round. And so that's really exciting. They did that in a year. And then there's a company called Nectar Social. And it's these sisters based in Seattle who worked at Meta, who worked on the Instagram messaging product. And they saw a huge opportunity in selling via DM, not like customer service or, you know, hey, how can we help you? But they found out how to connect Shopify data at the user level on Instagram. And you can look up a customer's entire shopping history and do like, you know, specific targeting to them and sell via DMs.

29:23And they just raised a seed round actually from Google Ventures and True Ventures. And I made those introductions. and that makes me very proud to send a company that I invested in that no one's heard of with a deck to like the big shots who aren't going to invest because like we're friends but are like oh wow you picked a winner as an investor that makes me very happy as it should you're bringing them into the forefront that's amazing but as a venture capitalist I don't operate the same way that that my investors did so I'm like a lot of them say they're founder friendly but I think I actually am.