Sophia Amoruso on Bootstrapping Nasty Gal to $120M Revenue, Turning Down $400M, Declaring Bankruptcy, Public Failure, Starting Trust Fund to Back Other Founders

20:40And music has always kind of influenced, I don't know what I do in the names of things. Like I always borrow them from disparate and often obscure sources like Girlboss that we'll talk about. But Nasty Gal is the name of an album and a song by a woman named Buddy Davis, who's this incredible funk singer who was married to Miles Davis and who was allegedly like too wild for him. And her lyrics are like crazy. She was just like such a punk. And I almost named it I Heart Vintage, but I decided to name it Nasty Gal Vintage. And it just kind of cut through the noise because I brought this irreverent and edgy style and styling and voice to it.

21:26And while I was just an eBay seller, I made sure everything was coherent, like a brand is. And the voice was always we, always made it sound much bigger than it was. Not, hi, I'm shipping the package to you, or I measured it and it was we. and it always looked much much bigger than it was because you know everything was really consistent the photography was consistent the consistent the copywriting was and I didn't know I was like a good writer or a copywriter but everything was imbued with like a sense of humor or it was a it was punny or it was like a funny portmanteau or there was like you know a way of describing something that was you know memorable and the name was memorable and everything was very cohesive and I never got like a lesson in branding, but it was kind of like, what would I want?

22:19You know, and what do I see out there in the zeitgeist? And how can I borrow from that without ripping from it?

22:25Turner Novak:Yeah, it's basically just understand what people want. And then maybe it's not like any single thing you did was that unique or like you didn't really come up with anything specifically that was new, but it was just the ability to borrow from different things and kind of tie them together. like that's I mean it's what's that one phrase it's like good artists create great artists steal or something like that like you just bought you just took a bunch of stuff and combined into this new experience for people yeah like a new an entirely new channel I mean it was shopping that hadn't happened with with online shopping on in e-commerce it was like totally pioneering and ultimately it created a, you know, something that people were obsessed with.

23:11It was, I'm a nasty gal. I am a nasty gal. And, you know, the peak branding is when someone says, I am a, and then puts your brand in the sentence and identifies as the name of the brand. And that's what nasty gal did. And it was much, much bigger than buying clothes. It was an emotional experience and a big part of the customer's identity at the time. And it was really, really, really cool what it became.

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25:03Turner Novak:Learn more at merge.dev slash gateway. That's merge.dev slash gateway. And now let's jump back in. And it got like really big, right? What was the peak of success for? How big were you at that point? Yeah, we did over 100 million in revenue. I don't know, it might've been 110, 120. 20. I have like financials hanging around. I found the original deck that I raised 50 million from index on. Like it's, it's crazy. I mean, I've never shared it. I thought the growth went from one to six and a half to 12 to 28, but it went from, from one to six and a half to 28. I'm like something like that, or to 30.

25:49Like I thought there was like a stop somewhere along the way in every podcast, like I've ever been on. I'm like, and everyone's like, wow. When there's like a 12 in there but it was like six and a half to 28 and that was just purely bootstrap that was before i fundraised um but yeah it was it was it was explosive year one was 75k and it was just like me in like my step-aunt's pool house with a hot plate and like you know you know like what were you cooking on the hot plate like or something i had i had like a i had like a toaster oven and I would get like Trader Joe's cornmeal pizzas that were so good.

26:26Okay. And you just cook them in a toaster oven. I just go to like Boston market or, you know, it was like in a suburb. I moved out of San Francisco. I started in San Francisco, but then I was like, I need to be able to have a car, put stuff in a car, take it to the post office. Like who didn't walk out of the post office in San Francisco? Yeah.

26:41Turner Novak:That'd be rough. Those hills too. Yeah. So I went like, you know, an hour outside of San Francisco and lived like really far from all my friends when I was 22 because I was like, this is fun. You know, I can flip clothes. I made$2 ,000 this week. Like that is actually insane. So yeah, first year was 75K. Second was 250. And then left eBay about halfway through the second year, brought on my first employee. And then it was 1.1, then it was six and a half and then 30, something like that. I need to get my story straight because, but it's like, because I know it's like matters and it's lore and it's like, you know, I fucking talk about this, but it's also like, it's my story.

27:22Okay.

27:23Turner Novak:So you said you, you said you found the deck. Do you have it? Like, can you pull it up? Will you like share the screen? Is that, is that possible right now? No one has ever seen this. No one's ever seen this. This is amazing. I started in 06. Yeah. Then, you know, we hit a, it looks like we hit a million in 2010. And by the end of 20 November, 2011, 5 million. in and then here we are.

27:53You know, I had done like a survey of customers. I felt like I had stumbled upon all of the cool girls from NYC and LA's little online shopping set crazy. I've been addicted ever since.

28:05Turner Novak:You know, was it a lot of this almost feels like you see a lot of people talking about UGC today of like people posting content of the product. it kind of seems like you tapped into that just based on like just are the were these customers that were posting pictures about it or was that all the models that you brought in it was it was word of mouth I mean that wasn't social media I mean Instagram was emerging in 2012 but this is all happening before 2012 I mean I had like 60 ,000 friends on MySpace but like you can't really attribute that either. But I mean, like what? 25 % of our users came back over 26 times per month.

28:50Turner Novak:Oh, this is per month. So you had people, half of people came at least once a week and almost 75 % came back more than once. Yeah. Wow. Yeah. you know, competition. So then it was like,

29:13this is visits, revenue.

29:17Turner Novak:This was, this is the nasty gal numbers. 7 million, 25 million. And this was Feb through April of 2012 when we raised 50. So you did, you basically like did half of last year's revenue in one quarter. Yeah. Yeah. That's crazy. yeah and then we raised 50 million and rounded up by 100 million and we were like let's go from 28 to 128 and it was just kind of like waving a finger in the air and hiring 100 people and signing a 40 000 square foot office lease and 100 000 square foot fulfillment center lease in Louisville, Kentucky. And yeah, so all this kind of stuff, but that like really happened. And I know there, I mean, there's been like a lot that happened after that.

30:16Turner Novak:How would you describe like, so you closed the round, did you, and you said you're going to hire hundreds of people open this facility. Did you end up like signing a lease, moving in. It looked like I saw 40 % international revenue in the next year or something. I saw one of those charts. It was like, we're going to expand to Europe and Asia. I mean, we, the business was international by nature of me having shipped like worldwide when I was on eBay. And so that's how the customer base grew. We never really had to open like a UK store or like we just shipped from the US. So there was no like, I mean, yeah, we would, you I guess at a certain point we were running like programmatic ads internationally or, but it was just, it scaled with the like original, original customer base.

31:01You know, we hired a hundred people across like buying design, production, planning, project management, a CTO, a whole team of engineers, you know, UX design, a chief people officer chief financial officer a controller a whole finance team performance marketing

31:26Turner Novak:a creative director you know like a full company like you had everything yeah and it was like if you know some companies are able to inject that many people into an organization in a year and integrate them and everybody understands what to do and they're not stepping on each other's toes or duplicating efforts or, you know, I wasn't really very good at that. I don't think I even knew I was supposed to do that. I just thought all these people with more experience than me would like show up and work together and like solve the problems and like, you know, I don't know, have fun or something. And the company would just, I don't know, just keep growing.

32:07I just, I didn't, you know, I didn't, you know, the job of CEO is kind of like drive all of that through an organization, drive it through the leadership team and for the leadership team to drive it through the people that report to them all the way to the bottom. And in a lot of companies that gets lost somewhere at the top or somewhere in the middle. And depending on what team you're on, you know, there's an entirely different company culture over in finance than there is on the creative team where those guys are having a blast, you know, but some boss over here is like awful. So, and it became very expensive, you know, like we, we just, it was like, okay, who cares?

32:43You know, it's extremely profitable. before i raised money and that just became you know as soon as investors came on board they were like who cares whatever let's just plow all this money into growth and build a billion dollar business and it wasn't a company that was set up to scale it was like a mom and pop business that they injected 50 million into with like an ebay seller at the helm so it was like kind of naive on my behalf it was i think kind of irresponsible on their behalf And there was no number of executives around me that could, like, I don't know, solve the problem of me not knowing how to lead them.

33:26But also, there's a lot of other people who could have done a better job along the way with NASDAQ, including my investors. So it sounds like maybe the mistake was like you shouldn't have raised money.

33:40Turner Novak:Like you just didn't. Did you did you not have to? Because it looked like you were making three and a half million a year. in EBITDA. It's just sitting in the bank, right? You were printing money. I can own 80 % of a company that's worth$350 million. I control it. What's the downside? In your head, it seemed like a great idea. It changed the business in ways I never could have anticipated and got really complex really fast. Financial statements went from a few tabs to 50 tabs. I still can't build a pivot table. um maybe that's something you don't want to say publicly no just kidding it just happens so fast um you know there's things that i can do that no one else can't and for everything else you know you can rent as long as you're right yeah so so i guess like couldn't you have just decided like okay, we did raise money, the valuation's really high, but I don't have to spend it all.

34:47Turner Novak:Or like, why was it such a big deal that the valuation of the company was so big from someone who is just kind of hearing this for the first time? It's like, man, this sounds awesome. Like, it sounds like things would have, like, this sounds like a great outcome. I mean, I didn't really negotiate that. I didn't really negotiate the valuation. I wasn't, I didn't, you know, I met Jeff Jordan from Andreessen who flew down, Jeremy Liu from Lightspeed flew down in 2012 i met with kleiner i met with like a ton of firms alfred lynn from sequoia and like some of these guys are lps two of those are jeremy and jeff are lps in the fund now but i didn't have like i actually found a term sheet from benchmark which is crazy because i don't even remember talking to benchmark but i found one recently but i didn't have like i wasn't like i didn't know how to like play one another.

35:38I wasn't trying to be like, Oh, I want to, you know, you know, I didn't, I don't think I cared that much. The valuation was just crazy. And I was like, okay. I mean, they were just like, please let us invest. That was it. It was just like, will you let us please? So yeah, that wasn't why I did it. But in terms of how we deployed the capital, I was really deferring to the people I brought on. You know, I had an investor, I had a chief operating officer, these people, you know, she had built startups, he had, you know, taken, you know, been alongside founders and, you know, taken them public and invested in incredible companies and amazing founders.

36:17And so I hired people that were smarter than me and I listened to them. And I don't think that's a mistake. But I also, I didn't, I don't think I completely grasped what it meant and how fast we were going through capital.

36:36Turner Novak:Do you think if you could go back, would you have maybe sought out more mentors to just spend a little more time talking through things with you? Yeah, I didn't have any advisors. I didn't really know any founders. There were no glossiers and away luggages. And I didn't have peers. It was like Net-A-Porter and Tony Hsieh and like Beachman. So like Diego Berdakin in LA. who does, you know, has now done Cloud Kitchens and, you know, is an awesome, awesome guy and a really good poker player. But I did not have, I had one advisor who had been the CTO at Tumblr. And my board was me and my empty seat and Danny from Index.

37:20And I kept my empty seat empty. You know, I kept my second board seat empty the whole time. I didn't build out a board because I had heard their nightmare. We never voted on anything until we had to vote to send the company into chapter 11. So it never really came down to that. It was mostly me probably not disagreeing enough and trusting the people around me who had so much more experience and were telling me like, no, no, no, turn down the 400 plus million dollar offer from Urban Outfitters. Like, that's child's play. We're going to build a billion dollar business. I would have made, I don't know,$300 million,$280 million on that sale.

38:05Turner Novak:So Urban Outfitters said, we love what you're doing. We want to acquire the company. Did they actually give you a term sheet or did you go through any process? I have it. Yes, I have it. You don't have to bring that one up because that one might be a little bit confidential. Yeah, yeah, yeah. I think the whole thing is confidential, but no one cares. Well, so you turned down an offer to acquire the company. So why'd you turn it down? It's just that you thought this could be worth billions. Like you thought you could build something like 10x bigger. Yeah, because I had signed up to build a billion dollar business and, you know, 400 something million was not much of a markup to what index it invested in.

38:47They'd underwritten, you know, a minimum billion dollar exit. and I bought into the fact that we were building a billion dollar business and wouldn't take that long to get there. And yeah, because I took advice, it wasn't because I was greedy. It was just more like, oh no, we can keep going. Like it wasn't really ever about money. It was about, I was having fun and also trying to do my best on behalf of the company and the team and my investors.

39:23Turner Novak:Yeah, I feel like there's that one saying where Zuck turned down a billion dollar offer for Facebook from Yahoo in the early days. And someone asked, like, why'd you turn it down? Like, that's a lot of money. And he's just like, well, if I sold it, I would just start a new social network. Like, I just start Facebook again. Like, this is what I want to do. So, you know, like maybe money went into the equation, but he's also just like, Like, why would I sell if I'm just going to restart it? Like, this is what I want to do. I want to keep working on this. So it's like, if you're having fun. It was so fun.

39:58It was like the best ride. It was the most fun.

40:02Turner Novak:So what was the biggest thrill for you? Like, what was the most exciting about doing this? Because some people might think that it sounds miserable running a company, like being CEO. Some people might think, oh, being CEO, building my own company sounds awesome. What made it so fun for you? I mean, it wasn't miserable until like growth stalled. And then I was like, what? We have to lay people off? What? Yeah, that's hard. But it was exploding for a long time. I think it was getting to work with really great people, especially creatives, and execute on like amazing marketing campaigns, work with great photographers, make fashion that I really loved, um just work with like some of the most talented creatives and marketers in the world and to be able to like see that out in the world see it on you know a billboard or you know we ran a couple magazine ads but not much and then like see see people like obsessed with nasty gal like run into a girl who was like oh yeah i'm wearing nasty gal oh my god you know it's just like you know what nasty gal did for someone's confidence and i'm not making this up and it's like you know you can be like oh like clothes shouldn't make you feel like it should be like a you know you should intrinsically feel good about yourself but it's like you know we like you know feel different putting on i don't know what earrings versus not or it's just it's it's human nature to like decorate ourselves and you know how we do that and how we imbue our taste and you know our hope for our future and you know how confident we look and feel and what we're wearing like really does make a difference in how we move throughout our days and Nasty Gal did that for women in a really big way.

42:02So it was just kind of the thrill of seeing the level of obsession that our customers had with the brand and that it really did make them feel good. It's like you just made something that people loved and people used and identified with

42:16Turner Novak:your product. Yeah, it was just like, okay, what do people want? it was less much less about what I thought was cool what do people want okay give them that you know show it to them in like a different way you know we were yeah we were following trends but it wasn't like you know everything nasty gal did was it done in its own way until everyone started coughing us and forever 21 was like hiring the same models and sacks was going to showrooms asking like what did nasty girl order you know from a brand really oh yeah yeah yeah all that happened so you mentioned that you said we we we only made one decision as a board and it was to declare bankruptcy basically so you mentioned that growth stalled is did everyone just kind of copy you and and it was just harder to stand out or something or like well what happened it's such a good question you know it's like i it's like how to how in retrospect with all of the things that happened in the business attribute what led to that i mean ultimately we ran out of money and couldn't pay vendors that's kind of how it works but the valuation was really high i think even at a hundred million in revenue, 350 for a private equity to come in and invest or buy the company.

43:52They would have valued the company at maybe 2X revenue, which, you know, it's like not the worst. For, you know, in the world of venture capital, that's not the kind of, you know, you don't want to lose, they would be, index would have lost money on the deal. you know, venture can be fickle. So what someone's investing in now may not be what VCs think is, you know, is interesting a year from now. And if you go to fundraise a year from now and the thing that everyone thought was the next big thing, your Chrome extension or your whatever live streaming, I don't know what, is no longer seen as like the future, then it can be really hard to raise money and it was ultimately a like a fashion e-commerce business it wasn't a technology business it i shouldn't have you know i could have raised capital but i raised capital at a very high stake and yeah so there were opportunities to sell the business there are opportunities to you know have someone come in like a strategic and invest and help us get to the next level.

45:01But those were things that kind of quietly, they were opportunities that kind of quietly disappeared. Even though I was getting, you know, those, those guys like excited and on board. And it seemed like they were like going to do like be my partner for the next phase of Nasty Gal, even at like a 200 or$250 million valuation. there were kind of side conversations happening that I found out about later where yeah my investor was like if you can't pay 350 like don't bother showing up but like that decision was really up to me I just never got to make it because they didn't because they ultimately didn't show up I was talking to someone yesterday founder yesterday who was like yeah I've heard that so many times.

45:52He sold his company for like a billion dollars, but he's like, yeah. But yeah, so I guess I didn't connect the PE thing and the venture thing, but like when venture is no longer interested, there might be a different kind of, you know, allocator who would invest, but it's not a venture profile that they're gonna, you know, it's not a venture valuation. Yeah.

46:19Turner Novak:So it sounds like what happened was you can either confirm or not confirm but it sounds like you there was still like a pretty good business that was there it was just the valuation to be lower than what you raised at and you were at a point where you were burning capital because you're trying to grow and you hit a point where a deal was not going to close because the investors that you had disagreed with the decision and so you had to shut the company down even though it was still a business that was working. It just kicked the candle on the road. Then it became Hail Mary after Hail Mary, you know, fire sale.

46:54You know, at one point, you know, someone did come in and invest after those much better strategic apparel retail opportunities had dried up. And I think they invested at like a hundred post, but the only way I could get them to invest was if index invested. I mean, index must hate this. I mean, I've said this on like a bunch of podcasts, but this is my story. And this is a story that I want to pass on to other founders. And when I invest, you know, I want to make sure that they don't make the same mistake or raise it too high of a valuation or don't raise enough money or blow through capital too quickly.

47:32So the impact of, you know, bumming out a firm, you know, it's like the impact of telling

47:41Turner Novak:the story i think is much much bigger than the fallout i could i don't even know so the only way i could get those guys to invest was if my investor my existing investors put in some capital um it just looks really bad if your investors don't want to keep investing like even a dollar just like okay yeah we're like you know we're invested in the company's future and they were like we own 20 we're good and i was like you have to put like a dollar in or something these guys are just not going to because it's just such a bad look. And what my investors said was, we will put, we will double what of your own money you put back into the, you put into the company.

48:28And so the only way I could get the new investors on board at the much worse valuation, the ones that had come prior to that was to dump my own money back into the business. And this was after I had hired a CEO. Like I was on the board. I wasn't operating the business. I did not like being a CEO, you know, at a certain, you know, phase and, you know, by 2015, I had hired a CEO. And now, you know, I think it's like early 2016. But so I think the idea was that it was going to incentivize me to like turn things around and like double down on the business. But I didn't even, I wouldn't have known what to do.

49:08Like I'm not a, I'm not like a turnaround CEO. I'm like an eBay seller. I'm like a great marketer and a great brand person and like a great merchant and like a great amplifier and a writer and like a whole bunch of other things, a great recruiter and a really good investor, but.

49:28Turner Novak:But not a turnaround. The idea was that I was like showing conviction, but it's like, I, I didn't know, you know, so I did and they did and it just kicked the can further down the road. And then there was like a seal seal, you know, series of Hail Marys and, you know, exclusivity periods where we couldn't shop the business because someone was in diligence and then time was passing. And then it became like, you know, people kind of circle and they're like, okay, like we see what's happening here. we'll do some diligence but like we'll just wait and i hate to say it's what like smart people do because it's so fucked up but well because they're trying to get leverage and they're trying to get a good deal yeah i mean there was you know the company that owns nasty gal now had you know we'd spend a bunch of time with them before we filed for chapter 11 and they were interested in buying the company and they just waited they just waited it out and then they bought it in bankruptcy for 20 million.

50:35Man.

50:38Turner Novak:How do you feel reflecting on it all today? I mean, I just like talked about it so many times. I, you know, I think like I'll always have a bit of a. You know, it's like it sucks, like it sucked and And the headlines were like awful. I mean, it was like, does the failure of Nasty Gal mean millennials aren't ready to lead? Like, what? I'm responsible. I'm the example of a whole generation because like I couldn't pull it off. Like I built a hundred million dollar business. Yeah, the level of scrutiny really sucked. And then all the while I had written this book called Girl Boss and I was the girl boss.

51:22And I was supposed to be the, you know, example of female millennial leadership. and there was a Netflix series being made about my life that was due to drop four months after we announced that we had filed for bankruptcy. And then it came out. And then it was like, it was really bad timing. Jeez. So it like almost got worse. Like it was exciting. Like a TV show was made about my life, but it was telling a story of who I was when I was 22, starting an eBay store four months after I, for the first time really in my adult life, was no longer involved with that thing. And like trying to like figure out what my next move was or my next identity was and not have everything hinging on this thing called Nasty Gal, which I was incredibly proud of, but also was like, so then there's Sophia, the CEO, there's Sophia, the girl boss, who's like, you know, on the cover of a book, like she knows what's up.

52:20And then there's this relatively abrasive kind of bratty character playing me on a Netflix series that I thought was like really cute. But people were like, is she really like that? Like, you know, it was just this conflation of who I was and chatter and headlines, you know, like the worst thing about Netflix's girl boss is its source material. That's me. Like, yeah, it's the book, but like, that's me. so i think it was like the netflix series that was the hardest part because it was like this crescendo and then you know there are people whose jobs are literally titled critic in entertainment you know there's like reporters in business which i you know i'd experienced that but then there's like tv critics and that's a whole nother thing and that's being amplified into a, you know, this show is amplified into a, at the time it was 130 million homes in 195 countries and like almost every language.

53:21Like that's, that was loud. That was really, really loud, but also like so entertaining to talk about, you know, it's like, it's like, yeah, it was really serious, but it's also, I don't take it that seriously. And it's like so funny to think that that happened in my life.

53:38Turner Novak:It's still like very surreal and like, you know, it's all just, it's like it was it was all very real but it was also really fun and just really weird in retrospect yeah were you like involved in the netflix series and i'm assuming involved in writing the book oh i mean i wrote the book yeah yeah okay what's this is that a hair oh it's yeah that's a hair that's a hair you don't have to notice this what the fuck is that it's okay i noticed that ever had a guy do this on your podcast please leave that everybody knows that like it wasn't intentional this is real this is authentic i actually do notice sometimes like part of my beard i'll have like like i think this side is like just a little longer than this side right now and it just throws me off i'm like it's like is my face do people think my face is shaped like this yeah we know it is yeah i'm kidding um but yeah the book i mean i kind of left out the book part which is what led to the netflix series but the book came out in 2014 so two years two and a half years before nasty gal ended and you know it's it published at number two on the new york times bestseller list it spent 18 weeks on the new york times bestseller list sold half a million copies and it became like a bigger girl boss became noisier than nasty gal was like it was yeah it was insane so what what was the girl boss movement like i sort of remember this but i don't really remember like what was it i mean it was just it was a year after lean in and i didn't intend for it to be a counterpoint to Sheryl Sandberg's, you know, book that was, you know, it was, it was kind of the first story at scale that anyone, you know, that women had seen of, you know, someone who didn't go to school, someone who was like kind of cool, someone who didn't have a pedigree, wasn't like a square who, you know, had all the tools that they have at their, at an internet login, a digital camera, access to thrift stores and built something of consequence.

56:02And this was a time, you know, when like the freelance economies, like the gig economy was like kind of happening and creative economy and people were leaving companies and freelancing more. And, you know, we used to describe our customer as ambitious and nasty gal. It's like, I knew, like, I knew this, I knew this generation, like I knew them. And it just really struck a chord because it was kind of a mirror for what could be possible for a generation who had, just like I had thought that people who ran businesses were like, had to have a pedigree and had to like carry a briefcase or something.

56:45and it was like no like it can actually be fun and cool and you can like learn things about yourself and be creative and like be yourself and be weird and look at me like I have choppy bangs you know I've got like a weird you know spiky necklace and like I still pulled it off and like I made it cool and you can too you can work for yourself and like that was like really that That was really like, that was really different at the time. It just, it struck a chord and a lot of women quit their jobs and started businesses and they still walk up to me in coffee shops like at least once a month and are like, hey, I read your book a really long time ago and I started a business.

57:26I quit my job. I got laid off. And, you know, the next thing I read your book and like, blah, blah, blah. I was so lost and read your book and blah, blah, blah. Like, you know, 10 years ago or I was in high school and blah, blah, blah. like you know I was like oh my gosh like it's been so long you know so long so well I mean

57:44Turner Novak:talking about starting a movement like not even just with nasty gal like people buying and identifying with the product and the clothing but just the idea of even starting a company like you you can own your own destiny like you can control it and you can make things happen you almost like spurred like a whole, the millennial generation to do it. Yeah, I mean, I was definitely part of it. I mean, I think we need examples of people who can show the rest of us what's possible because it's, you know, when the whole world feels gatekept, like why bother, you know? And, you know, with social media now, and of course, like everybody's a finance expert and everybody's an expert, but it's like access to information is a lot more democratized.

58:32Robinhood didn't exist at one point. Retail investing was hard. Logging into Fidelity was really different.

58:46Turner Novak:You had to call your broker to place an order. Yeah, yeah. We have access to so many tools now and so much information to educate ourselves. And that's not saying it's all correct, But we're able to make decisions and have agency over our lives and careers in ways that we weren't able to before, you know, 15 years ago. Yeah. And how would you think about if you were starting a brand or a movement of some kind today? Like, what do you think is most important to sort of tap into or unlock? Or are there things you feel like people maybe skip on or don't put enough emphasis on? like the under underrated aspects of it.

59:28I think like, I think the whole, every touch point of your brand, like from the moment somebody hears about it to the time they open a package to the time they make a return should be cohesive and should all feel like the same thing and what people are murmuring about the brand or talking about over breakfast and what you see in a press release and what you see you know or in the news and what you see in a in an ad on instagram should all map to exactly what it is that you want it to and you have to be really clear on what that is and then yeah like visually materially everything needs to feel like the same thing.

1:00:18And ultimately, you know, you want people want to buy into a world like Red Bull's a world. Liquid Death is a world. Glossier made a world. Nasty Gal was a world. You know, for someone to have like affinity for a brand that's greater than the product itself, you need to create that feeling. And I think that really like comes down to two things, which is a feeling of belonging and I guess, for lack of a better word, community and aspiration. So how can I Red Bull like, oh, it gives me wings. Like Glossier, I can like do minimal makeup and still feel good about myself. Or Nasty Gal, like I can put on a leather jacket for the first time in my life and feel like I can take on the world.

1:01:13Like this motorcycle jacket is transforms like who I, you know, how I move through my life. And that's not an easy thing to do, but it's, that should be the North star. Like liquid death is like murder your thirst, you know, but I don't, I invested in liquid death, but you know, they've done a really good job. I don't know if anyone said, you know, it's like there's, I'm sure there's liquid death tattoos. Like there's Nasty Gal tattoos, there's Girlboss tattoos. I don't know if there's Glossy tattoos, but... And then, yeah, I mean, it's noisy. I mean, it feels like every brand has a Nepo baby celebuton attached to it now.

1:02:01Turner Novak:What is a celebuton? I've never heard that word before. I've seen a debuton who's like a celebrity. I don't know. I haven't heard it in a long time. It's probably actually a dated word. the creator economy is real like distribution is important right so there's all of the brand stuff and then there's you talking about it people talking about you and then people talking about the product right and that goes back to like and then people want to admire you they have to see you as an expert whether you're an expert in style or an expert in venture capital or it's like people are looking for, for proof or, you know, the science behind a skincare brand, like who's the doctor behind it?

1:02:42Do they have an Instagram following? Like, you know, it's like, there's all these points of proof that people look for to triangulate influence and trust that now spans like so many channels. Um, and it's much more challenging to, I mean, there were less places to market a brand when I started Nasty Gal. So it's easier than ever to start, but there's more noise than ever. Yeah.

1:03:12Turner Novak:And I think one thing you've done pretty well just over your life is getting press and getting this institutional kind of stamp of approval as well. How do you go about getting press? And maybe press is also like podcasters or creators. Like, how do you actually get them to care? I don't know. I think I'll be like riding on the coattails of Nasty Gal for a long time. And I have been for a long time, you know, in Girlboss. It's like, I did something of consequence. And like, there's all this lore that was built around me. When that happened, I had the best publicist in the world. and was on the cover of Forbes and, you know, Inc.

1:03:54and Entrepreneur and, you know, whatever features in Fast Company, like that stuff, like that stuff, like, you know, built me over time. But it's been a long time. It's been a long time since I've had, like, frequent press. And I haven't had a publicist in as long as I can remember. but I'll get invited. You know, I get invited to guest on stuff because people think of me and they're like, oh, wow, that's a, you know, Stephen Bartlett, just, you know, Diary of a CEO. They just reached out, you know, Phoebe Gates and her co-founders, Sophia, who do the burnouts, which has like gotten to be a pretty big podcast.

1:04:34Like they DM'd me and I'm an angel investor now, which is cool. Too expensive for the fund.

1:04:43Turner Novak:Yeah, that's fair. One thing I love is that you did have all this press and I just met you at a hackathon. The one hackathon that we went to a couple of years ago when we first met. I didn't even know. Launch house. Yeah, launch house. Yep. What a time. I thought that was where we met. Yeah. And I didn't know that this was all a thing. And I think when I looked you up at some point, I was like, oh yeah, I remember hearing about this. Like, girl boss. Yeah, I think I remember this. Yeah. Yeah. You never know how you're going to meet people. And one thing you mentioned before is that you like being a founder.

1:05:24Turner Novak:You thought you were good at that zero to one founding stage. You're not that good at the turnaround, really mature company type CEO, but you feel like you're really good at investing. And then you're doing that full time now. How did that transition happen? Well, I did a bunch of angel investing. first angel investment was in 2013 i invested in first dibs and i invested in eight sleep and liquid death and public you know eight sleep was i think 200 posts liquid death was 50 the public.com i think was like 100 and i'm an advisor there as well um invested in kind body invested in Chill House that sold and Passport, which has done extremely well, Passport shipping.

1:06:18And I just really loved working with founders, realized that I had a lot of relationships that could benefit them. I have a platform that I can use to amplify what it is that they're doing, often to an audience who are interested in the kinds of things that I'm investing in, would be users of those products that, you know, yeah, I can get into deals. Founders want to work with me. I can make a material impact both through making introductions that are relevant through, you know, amplifying and evangelizing them. Even if it's on like a podcast like that, like I can list out my portfolio if you'd like me to, but, and then, you know, what, even though I invest in B2B software with Trust Fund, my fund, I bring a consumer lens to the way they present their products and their brand and their marketing, because they're often highly technical founders that I'm investing in now, who are so in the weeds with what they're doing, that being able to articulate that in a way that even a business user who's choosing between between Squarespace and Wix or Shopify versus, you know, an alternative, they're still looking at the products as consumers.

1:07:38And the psychology of like a business user is much more similar to a consumer than it was 15 years ago when we were putting out an RFP for an email service provider, right?

1:07:52Turner Novak:Oh my God, that sounds brutal. Yeah, you push a button, you know, but it was like someone who would come and do like sales and they were like, you know, okay, it was called Bronto, the email service provider that we like upgraded from constant contact from. So this is the ability to email your email list. Yeah, yeah, yeah. Just MailChimp before MailChimp, but like some guy came in, you know, or like Gusto, like we had to choose benefits. Like some insurance broker came to the office with like Xeroxes. Xerox is he's got like a binder. He's like opening it up. It was like they had been Xeroxed so many times.

1:08:27They basically had like black and white acne. Like it was like really bad. And now you've Gusto and JustWorks and Deal. And you push buttons and you can run a business, but you're going to choose JustWorks or Gusto based on the kind of stuff that made Nasty Y 'all successful. And that's, you know, copywriting, it's design, it's brand. It's how you articulate what it is that your product is, how simple it is to understand for users and selling the aspiration. If I use Gusto, it's going to make it so much easier to build a team. If I use QuickBooks over zero, like, oh my gosh, I'm going to have this whole suite of whatever it is.

1:09:14you know, that, you know, that like login should be an unlock in the same way that wearing motorcycle jacket at nasty gal, you know, buying motorcycle jacket made someone feel. And that's like, again, I think, and I think software can do that. And I'll like log into Airtable and be like, oh my God. And then I'll churn. And then I'll be like, Airtable, it's Airtable again. Fuck. And I'll churn. Like, I don't want to pay all these subscribers, but still like there is that, that software can give a user that kind of exhilarating feeling. And so after angel investing and realizing I couldn't just eternally deploy my personal capital into startups and that I had good taste and access and all this stuff I just talked about, that I could do it for a job and knew a lot of GPs, knew a lot of investors at big firms and began to learn about what running fund entailed and listened to a lot of podcasts and read books and, you know, studied and talked to a lot of people who helped me along the way.

1:10:23You know, it's just like so many, you know, that's, I think one thing about venture is that, and I think more than, VCs do this more than founders, which is like, okay, how did you structure your blah blah blah or you know who you know what's your minimum check size or you know it's like you know you and i have talked about the mechanics of fundraising and deploying capital and i don't think founders get into like the weeds as much with that stuff but there's you know it's such a virtuous ecosystem of people sharing like how they've done things and then also like companies that they're investing in not as much lps anybody wants to share LPs with me, like, you know, refine me, but, but, and then decided, you know, launched trust fund in, announced at the beginning of 2023, raised a$5 million fund and have made 15 investments into some amazing companies and just like love working with founders, love the zero to one, one-ish.

1:11:33I know I want to play there over and over and over again. I have ADD. So I get to use my taste and my access and my platform and my chops and look at a lot of interesting things, talk to interesting people, see where the future is going, place bets and make an impact and do it over and over again so that when these companies are, they get to be successful, they get to do the really hard work and they get to inherit the growth stage that I really don't like. So I feel like it very much plays to all of my strengths and the stack of things that I didn't know I had accumulated until I started doing this job.

1:12:20Turner Novak:And then the name Trust Fund is like probably, talking about like branding and marketing, like one of the greatest venture firm names ever. Thank you. So how'd you come up with the name? I don't know. I don't know. I think, I think I was talking to Abe Burns. Do you know Abe? Yes. He was at Sound Ventures. He was at Sound. Yeah. He's a funny guy. But I think at some point I was like, ha ha ha. If I ever started fun, I'm going to call it Trust Fund. I don't know. We just used to stupid stuff around over text. And I think I did that. Yeah. Yeah, it was just like, that's such a great, I don't know.

1:13:00I like naming things.

1:13:02Turner Novak:And then you've got, I think you have something on your desk right there. The trust fund bucket hats that you made. Yeah. So rich kids think they're funny and ironic. And people who didn't grow up with trust funds think they're funny and ironic. Right? So whether you're an Amagansett or, I don't know, I'm not going to give an example, but like, you know, Silver Lake, whatever. Like, this is funny. This is going to be the thumbnail for the episode on YouTube, by the way. Just you with a bunch of trust fund bucket hats. Here it is. Yeah.

1:13:44Turner Novak:And so you mentioned you had to go raise money from LPs. What is that like for someone who's never done that before? Like, was it, is that easy? Is it hard? Like, what are the things that you feel like you got to nail to get that done? I mean, I, I talked to a lot of different people, you know, I was able, you know, I got like a fair amount of introductions to like institutional piece, went to some of the GPLP matching events and conferences that are supposed to like help you fundraise as an emerging manager. and you know it's like i'm talking to b of a ventures and it's like they're not going to invest in my five million dollar fund but i'm like trying to get meetings with them you know and eventually it was like okay i'm just going to raise a five million dollar fund from people because it's too small of a fund for anybody who's trying to write checks out of a multi-billion dollar fund because they're not going to write a million dollar checks they don't want that many You know, they don't want to invest in that many venture firms.

1:14:53I don't want to deal with all of the whatever year-long diligence that an endowment fund is going to put me through. I wanted, you know, work with stakeholders that I like and enjoy and sometimes know who are like real people who are investing because they believe in me and have conviction and aren't necessarily running me through like a spreadsheet to decide if I'm a good idea.

1:15:23and so raised ended up raising from you know a lot of like a lot of gps at bigger firms and founders so i mean like ev williams from twitter and medium and then anthony noto who's the ceo at sofi but then it's like you know mark andreason and chris dixon and jeff jordan and Andrew Chen, Jason Calacanis, and David Sachs, and Rob Hayes, and Jeremy Liu are all, you know, it's like all these like Midas listers came in, which was really cool and like super validating. Jesse Draper, Paris Hilton. So it just ended up people that, you know, and I met like a lot of these guys, like I said, like in 2012, what was that, 14 years ago.

1:16:14so people were like how'd you do that and it's like i've been around for a long time

1:16:18Turner Novak:well it wasn't like you showed up and said hey just like give me some money it's like you knew these people for a decade yeah and they you know and that's you know one thing about venture is like you know even if you don't get it right like people if someone's seen you try to build something and watched you build and like even if it didn't work out like people still have respect and will, you know, often continue, you know, possibly finding your startup or invest in a fund like, and it's like, nasty gal story is like an age old, you know, venture capital, like, you know, story. You raised a bunch of money playing poker.

1:16:58Turner Novak:I think that was like a trick that you used. I mean, it wasn't, it wasn't a trick, but I mean, I played poker with Jason at CES like 10 years prior or something. But definitely like, you know, I met, you know, Jason hosted and Brooke Hammerling hosted a poker game after the code conference every year for a very long time. And I would play in that every year and it would be like Jeffrey Katzenberg and I don't know, like big, you know, executives and founders and stuff at the big boy table. and I'd play at like the baby stakes table, but there were always like interesting people around and that's where I met Anthony Noto from SoFi who became an LP, but like a friend, really kind of a friend and mentor first.

1:17:50And then, yeah, like, you know, playing with Jason, Sonny Madra, who founded Grok, sold to NVIDIA, is an LP, met him playing poker. But it's like Jason stands up and he's like, who's going to invest in Sophia's fund? And like somebody raises their hand. And that was pretty cool.

1:18:15Turner Novak:Yeah, well, because I feel like everyone you need to figure out some kind of advantage when it comes to raising capital and whether it's like you're really good at a certain thing and you lean into it or you find like a channel, like a certain type of investor that you vibe with, whether you're a fund or you're a founder, like you need to figure out there's like there's more than just like here's a pitch deck and here's a spreadsheet and we'll give you money there's like always some reason like some kind of emotional connection a thesis something like that there's always something else that you got to kind of kind of like figure out i don't know if it's like a trick or like a hack is the best word for it but you need to figure out like how to almost like crack something more than just you know people just give you money for no reason what's your shtick i think i'm still trying to figure that out.

1:18:59Turner Novak:But it's usually people that are familiar with my body of work. I mean, maybe it's the same with you where they followed along for a while. My pitch is usually I just have a pretty big platform I can use to help founders. It's pretty similar to yours. I've leaned a lot into the podcast where I've had multiple portfolio companies that have hired over 10 people from their podcast episodes, which is pretty crazy when you just think about there's all these funds that they have these big teams that are adding all this value and like, oh, we'll help you recruit, we'll help you do all this stuff. And meanwhile, I just put out a podcast episode.

1:19:37Turner Novak:I'm sleeping and like people are getting jobs. Like it's kind of, I don't know, it's kind of insane. Like I've had founders just tell me how impactful it is. So I think I don't even appreciate it as much as at times because I don't know, for me, it's just kind of fun. Like it's just fun to talk about this stuff and put it out there and like thousands of people listen. I mean, I've had some podcast episodes get hundreds of her. If you got the shorter clips, like some of them have cleared like a million views on the episode. So it's just it's like kind of crazy just to think that, you know, you help someone get whatever word out that they were trying to get out.

1:20:14Turner Novak:And I create all the content just as I would want to see it. Like I just kind of try to put stuff out there that I'd want anyway. So yeah, it's kind of this like flywheel that just kind of kept building to the point where, you know, you need to think about what's your advantage as an investor. For me, it's just founders want to meet. They want me to help them. They think that they can get value from tapping into kind of the distribution. They feel like they can maybe trust you. Like they followed you for a long time. And for me, I do a lot of like humorous, funny stuff. The podcast is the most serious thing I do, but a lot of founders are like, I feel like I just kind of know you.

1:20:53Turner Novak:I just kind of feel like it'd be fun to hang out with. Maybe brainstorm some stuff. We'll work on, I'm trying to do the launch, like help me plan this out or I'm trying to get some press coverage for the series A or we're thinking about our series B. Who do you think would be worth talking to? You're just brainstorming things that you've seen that have maybe worked in the past. Yeah, I don't know. there's just so many different things to go into it. But similar to you, I have ADD, like there's no way I could actually build a company. Like there's no way I could spend 80 hours a week for 10 years on the same thing.

1:21:29So yeah, yeah, I did that. And that's what you tell LPs, that's what's in your deck? Or is it like I have special access because of this and I can choose good founders because of this because that's the value prop to founders but like what what do lp see that differentiates you is it like access obviously impact like that's one slide but you know pick pick you can pick you get in earlier like what do you think it is

1:22:01Turner Novak:yeah i think there's a couple different reasons like you want deal flow for later stage stuff so So I'm usually investing in the first or second round, usually a pretty attractive entry prices. I think the average cost basis on my fund two that I finished investing a little over a year ago was 14.8 million. So there's some companies that are 8 million post money, some are 20 million post money, but they're usually kind of right around that mid-teens. and that's just you can with someone you can go to someone with a straight face and say i'm going to deploy this capital into 2025 companies and there's a chance that this fund is going to be a 10x returning fund and there's also like a chance we need to get really lucky but like this could be a 20 30 40 50 x like that's kind of the point of venture capital i don't think the point of it is like hey we're going to get a 3x or a 5x return that's actually not that good in venture in my opinion.

1:22:56Turner Novak:So my pitch is generally like, you know, you need to get lucky with some of this stuff, but I've kind of set up the constraints where the fund could get 10x return on the fund. If you like following on to the breakout portfolio companies, and I will have some, I've had some in the past and there'll be more in the future. And you're looking for companies that you want to follow on to either doing SPVs or leading the rounds of, we can do that. I think a lot of the pitch to, I think a lot about how can I expand the fund over time. So I think a lot of people, the pitch is all getting into super hot rounds and like, we'll get the logos on the deck.

1:23:35We'll get like a hundred K check into this company, 250 K maybe, maybe it's in a later

1:23:40Turner Novak:round too. My pitch is I'm trying to invest as early as possible and I'm trying to be one of the first investors so that then over time, instead of writing a 250 K check, I could have given them a million. I could have given them five. I could buy 30 % of the company over the course of those first couple rounds falling on over time. I honestly don't know how it'll all evolve over the next couple of decades. But I just think about it as, am I investing as early as possible, giving them money? Could I have invested more? Do the founders trust me? Would they have me invest again in their next company?

1:24:15And that's usually a stamp of like, hey, he did something.

1:24:21Turner Novak:He didn't fuck it up. He was responsive at the very least. Maybe he helped in a couple of ways. So yeah, that's generally the pitch. And then generally you think you buy into the media driven strategy. You buy that the internet matters. You buy that that can move the needle for founders. My pitch is usually not, hey, AI is the thing. I'm trying to invest in AI. I'm an AI investor or deep tech or web three is the thing. I'm like an expert. Like, I feel like one of the one of the things I personally do not want to do is, you know, you kind of saw the swing to like American dynamism where everyone's like, oh, we're experts on defense and like American manufacturing.

1:25:03Turner Novak:And meanwhile, two years ago, you were like talking about how every purchase was going to be on the blockchain and like you'd get an NFT every time you ordered a coffee. and then now you're talking about how like self-defending missile drone things or like I just think there's a little bit of a disconnect there when you think about these like people try to kind of brand themselves as being these experts in all these different categories it's really intimidating it's intimidating honestly because overnight everyone else became an expert and I still know I'm can do a very good job at this but it's not going to be because I know everything about foundational models and like security.

1:25:43Like that's not to be it, but I have a good feel for what's defensible and why one of the LLMs would not touch a certain area because it's like too hairy or too specific or the general knowledge is not gonna benefit. It's just not gonna work pulling from data or just having a customer's data in a silo. Like there are a lot of things that I do know enough about to know, like to a certain extent, what's defensible in AI, durable or whatever D word you want to use. But like it's an intimidating time because it seems like everybody else has like a spiel for it. And I don't have that spiel. And maybe that's the kind of honesty that people want or, because I am investing in AI.

1:26:33It's not the only thing I'm investing in. but I obviously also don't want to invest in something that can be vibe coded in five minutes now.

1:26:41Turner Novak:And then it goes back to speed and distribution and ability to, you know, it's like, anyway, we can have that conversation offline, but it sounds like we relate. And then what are you looking for then in the founders that you back? It sounds like, are there certain traits you feel like you really gravitate more to? And do you think lead to building a company of consequence, I guess, if we're using the same language? um i think it's a founder who's gonna use like that i can see using every resource at their disposal to build to build their product build a company and it isn't just looking at the obvious channels for doing it or the obvious channels for recruiting who are going to ask me for things like i want people who are there's a there's a healthy kind of entitlement that founders have to have and honestly i think everybody has to have to say even if it's just like they're entitled enough to they feel entitled enough to ask for advice or an introduction even if i say no you're not ready for that like i'll introduce you when you know you've got another logo on board because it's too early to talk to delta and i made that introduction and then founders i think can build with real product velocity so the founders that like have gone on to raise subsequent rounds and, you know, build, you know, began to build critical mass and get buy-in from their customers and build sophisticated products and done it quickly.

1:28:14You know, so speed I think is important because, you know, Nectar Social, for example, it's like I invested in their pre-seed when they had a deck and a year later, Ms. Book came over my house, co-founder and showed me their product and i was like how did you do this like this is like witchcraft like it's a fully this is like a very mature product i have no idea how you agree.com is another example of that like founders who are just like i'm gonna go build this and then they

1:28:42Turner Novak:just go build it they're like the docu sign with 10 employees instead of 10 000. yeah yeah it's like it's free e-signatures. Like I use it every day. Really? Yeah. Yeah. Yeah. So unless you're, unless you're running payments through it, because what they are is like the, the contract is the invoice. And so you can connect your Stripe and do one-off payments and recurring payments. So it's great for SAS companies. Um, that's something you, you pay for, but it's, you get paid immediately because when your customer signs the contract, it takes them through a payment flow and does dunning and like payment recovery and all kinds of stuff for you but if you do free e-signatures like it's unlimited like docu-sign gives you like one or two a month i think it's insane i do do some contracts because usually we're sponsors in the podcast we just sign a contract because i got burned once someone didn't pay me so i always always sign them well this has been a lot of fun thanks for thanks for taking the time to do it yeah thanks for having me it's like always i mean it's like, cool, I just got to talk to you for an hour and a half.

1:29:50That's great. If anybody else benefits, like that's just, you know, icing on the cake. So yeah.

1:29:56Turner Novak:Where can people find you if they did benefit? If they're like, oh, this is, I love this. Sophia, I want to send you a message, reach out. Instagram.com slash Sophia Amoruso, LinkedIn.com slash I in slash Sophia Amoruso, trustfund.vc, trustfund.vc slash pitches. And then if you want to see my website, it just has everything you already know if you've listened to this podcast about me, sophiaamaruso.com. And thank you for listening. Thanks again to this episode's sponsors. Flex, upgrade to Flex Elite and get$1 ,000 in the description. Numeral, put your sales tax on autopilot at numeral.com. Merge, check out their new Gateway L on product and Amplitude.

1:30:41Turner Novak:For AI analytics, just ask Amplitude. If you enjoy this conversation, please like, comment, subscribe, and share this episode with your friend who's bootstrapping and thinking about raising their first round of venture capital. Make sure to check out the back catalog of over 100 episodes with founders of companies like Robinhood, Sweetgreen, and Mercury. Tune in over the next few weeks for guests like Nikel Krishnan from out of pocket on how the US healthcare system actually works, Now it's Israel and Metropolis, who's quietly pulled off the most successful version of the AI growth bio model strategy that everyone has been talking about for the past year.

1:31:17Turner Novak:If you want to miss any of these, subscribe to my newsletter, The Split, linked in the description to get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next time.

1:31:37you