First Time Founders with Ed Elson – This Founder Hit $100M in Revenue Without Raising a Dollar

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1:12Scott, you often talk about how you never want to raise venture capital again. And you've talked about that with this company. You don't want to raise a penny of outside funding. Why is that? Being a fiduciary means that I'm going to think about your money as much or more than mine. Two nights ago, I decided that you're all going to Ibiza on me. And when I say all of you, I mean everyone at Prof. G. If I take an outside capital, I'd have to think, well, is really that the best use of capital? So it gives you a level of freedom. If Prof G works or doesn't work, it's not going to have a big impact on my life.

1:48But when you take other people's money, you have a responsibility to have sleepless nights thinking about, you know, is there investment going up or down? The biggest sources of stress in my life, and granted I've led a charm life so far, have usually been, at least professionally, concerns around losing other people's money. And so control is an addictive substance. It's really nice to have total control when you don't have any outside investors. And B, I just don't want to be responsible for other people's capital anymore.

2:22Welcome to First Time Founders. In 1972, Congress passed a piece of legislation that banned schools from discriminating on the basis of sex That bill, known as Title IX, had many impacts Before Title IX, only 1 in 27 girls played sports Today, that number is 2 in 5 As a college athlete in the 80s, my next guest was one of the first to benefit from Title IX But she also benefited as an entrepreneur Female athletes represented a new market. She recognized that early. And in 1989, she sent out 13 ,000 mail-order catalogs for a new clothing category known as women's activewear. Since then, the category which she defined has exploded with thousands of new entrants from Lululemon to Aloe to Athleta.

3:11But despite all that competition, she's protected her company and grown it into a$100 million per year business with over 300 employees. Plus, she did it all without ever raising a penny of outside funding. Yes, you heard that right. This founder owns 100 % of her company. She bootstrapped it the whole way. This is my conversation with Missy Park, founder and CEO of Title IX. How are you doing? No complaints. What about yourself? I'm doing very well. It's nice and sunny here in New York. You're in Berkeley? Yep. When did you move to Berkeley, by the way? I was just thinking about that. Let's see.

3:51I think I moved here in 1987. So that was before you started the company then? Yeah, yeah, yeah. I worked for a couple of years on the East Coast after college and then it was too cold. But you went to college on the East Coast, right? You went to Yale, I believe. How'd you like that? Well, it's like most things, it was hard but good. You know, I think coming from a small town in Greenville, South Carolina, to a really, quite frankly, ugly city, New Haven, Connecticut, and really all that that entailed, that was a big culture shock. um that you know not just sort of the physical environment but but the people um everything it was a big culture shock but I wouldn't have had it any other way and you were an athlete in college right uh yeah I was you know I came up all the way I was a first actually in the first class of women who came up all the way um through high school and college with title nine being in effect Give us a little explanation what Title IX is.

5:04I think most people probably know now, but some might not. Most people do not know. Is that right? Actually, that's awesome. They feel entitled. They think it's been this way all along. So I'm good that most people don't know. It meant a lot to me in my generation, probably women on probably 15 years on either side. Basically, it was a piece of legislation that was passed in 1972. It said that girls and women must have an equal opportunity to compete in all interscholastic activities, athletic activities. And people thought it was about the sports, but that's kind of where they were mistaken because we were talking about the whole shooting match.

5:49So, yes, it was about girls getting equal opportunity to compete, similar practice times, similar practice facilities. That was a long time in the making. But what it was really about was equal opportunity to an education. And so that means, you know, in the 1970s, probably one in every 50 professional school attendees was a female. Now it's 50 percent. So it wasn't just about athletics. It was about law school, med school, business school, all of the advanced degrees. And that's where Title IX really made the difference. Let's dive into the company a little bit. I mean, you started the company in 1989.

6:32It was one of the very first American sportswear brands that was made exclusively for women. I think today that sounds pretty normal to us. I mean, there are a lot of female-focused brands in all sorts of consumer products. But at that time, 30 years ago, I assume it wasn't. So why did you decide to start this company? I graduated from college and really could not find it. You know, when you're in college, you basically get all your gear given to you for free. I mean, it's bad gear. It's men's gear. But at least we had stuff. And then when I graduated from college, I realized like, wow, there is no one out here.

7:10Literally no one. We were before Nike or Nike woman or Dix or Dix for her. certainly before Athleta, Lululemon. I mean, we were really the only one doing it. And when I told my dad my idea, I said, you know, the great thing is, Dad, we're going to be the only ones doing this. My dad's like, well, there might be a good reason for that. Ever the encouraging one.

7:39So yeah, it was a very different time. And really, as I said before, I was in that first cohort of women that could have gone all the way through high school and all the way through college playing sports. And then in that first cohort of women who wanted to make the thing they love part of their vocation and not just have it be an avocation. And was the idea that you wanted to sell clothes to female athletes in college or just? Oh, what it was for was for 27-year-old former collegiate basketball players. For you. You got it. Exactly. You know, I mean, obviously for good and ill, I didn't have a business plan.

8:24I basically bootstrapped the whole way. There are good and bad things about that. One of the bad things, and maybe the good thing too, is my ideas did not go through the rock tumbler of vetting that happens when you raise money and build a business plan. So no one pointed out some of the very obvious problems with targeting a company to a very, very small subset of women. But the good news is, you know, we didn't spend much money. When I say we, that would be the royal we, that would be just me. You know, I had, I don't know, 25 ,000 bucks. I talked our suppliers into shipping us stuff and and invoicing us after we sold it which turned out to be optimistic even that was optimistic but the good news was I could get the stuff out there and start to learn very very quickly you know so I had like a little catalog and at the very last minute I um put in a black and white section sports bras and I mean you know we said I don't know I can't remember like maybe 20 ,000 catalogs.

9:34We probably got like 13 orders. And of the 13 orders, I think 11 of them had a sports bra on it. So I don't know that pitching what was typically the investment community at that point would have helped me figure out that sports bras were the thing because it'd be a lot of people that don't look like me. So in the end, it would have been Nice to have the rock tumbler of the vetting that goes on with a capital raise. But on the other hand, you're only as good as the people you're sitting in front of. And I'm not sure anybody really knows. So to be able to do it relatively cheaply, realize like, wow, sports bras, running shoes, running shorts.

10:13Those were the things that came across. Yeah, that's what I was going to ask. I mean, a third of sales include a sports bra on the order. My next question was going to be, could you just not get a sports bra anywhere else? It sounds like the answer is yes. Correct. I mean, women are problem solvers, right? And so people come up with ways to do it. They wear three regular bras. They use ace bandages. The original sports bra was actually two jockstraps, which you don't even know what a jockstrap is, right? But you could probably imagine. But, you know, it's like, oh, well, men need support and women need support.

10:50So why don't we just take the thing that men need support for and apply it to women? And it didn't really work that way, but that was the initial. I mean, women got pretty inventive about how we solve those problems. But now, I mean, that is old news. Had you had any professional experience in retail or in apparel or sportswear? What was your background before deciding to do this? Well, you know, I probably worked a little bit of retail. You know, I played tennis in high school, a little bit in college. I worked at the local tennis shop, but no, no. I mean, probably the most relevant experience I had is obviously the experience of a participant and the passion of a participant.

11:34And you can say that cuts both ways. And then after that was really, I had two jobs when I moved out to California. I worked for Fisher Mountain Bikes, worked for them for a year. So I got sort of a firsthand look at what a small company, how it runs. And this was a small family-run business and getting to see what that looks like. And then the other great experience I had was working at the North Face when they are much smaller than Title IX is now. It was, I did their first ever point-of-sale print catalog. And by doing it, it meant that I just ran around and worked with all the people who knew what they were doing and was responsible for, you know, hiring photographers and models, writing the copy, being at the photo shoots.

12:23And that probably was the main marketing channel at the time, right? Exactly. That was the marketing channel. And then the other piece that I had of the North Face is I ran their, what they call the warranty department, which was the department that was responsible for making good on their lifetime guarantee. So it was really a customer service department. Well, it sounds like you always kind of knew you wanted to be involved in some way in athletics, but did you always know you wanted to be an entrepreneur? You know, I've always knew. No, I don't know that I always, like hindsight, you know, you start to mix up hindsight and memory a little bit, I think.

13:00You know, my father was an entrepreneur, although they didn't call it that at the time. He was just a bootstrapper. Yeah. He's just a scrappy guy, you know. A guy with a business, yeah. Yes. Yes, he was just a scrappy guy. My sister's in business for herself. Both my brothers are in business for themselves. I think a lot like, I don't think it's a requirement, but certainly like if your parents are lawyers or doctors, you're more likely perhaps to be a lawyer or a doctor. I think just living in a household where business and running a business and the problems of small businesses, conversation around the dinner table.

13:37So I don't know if I always knew, Ed, but I think what I would say is there was a lot in the water and in the jeans. So you're working at the North Face and then you decide enough of this. You want to start your own company, but you didn't raise any money, which I feel like most of the people I've had on this podcast and most of my friends who are entrepreneurs, that's the first thing they do. Like, OK, pitch deck. Now I'm going to go out and raise money. You didn't do that. What was the first thing that you did to start building this company, the first piece of action you took? Well, and I think this may be relevant to people who want to bootstrap.

14:16The thing about bootstrapping, I mean, the most important thing is to take the first step and make a commitment. So for me, there was a psychological hurdle I had to cause. I was like, okay, am I really doing this? And for me, it was, you know, printing up business cards. you know, asking a buddy of mine, I paid her 50 bucks and she designed a logo and put together a corporate package with things that we don't use anymore, but letterhead and, you know, shipping labels and all these things, um, and, and a t-shirt and I paid her 50 bucks. That felt like a little bit of crossing the Rubicon, I suppose, you know, it's like, okay, I'm committed.

14:57I've, I've paid money. And that was really the first step. And then it was just a matter of scrapping, you know. I had some, I was playing on a bunch of different sports teams. I met some people who were involved in the publishing industry. They agreed to help me out on the side with design and copy editing. My teammates were models, so they were free. I mean, everything just had to be cheap, you know. I mean, because like there was no cash flow, really. I mean, it wasn't like I had a pot of money in the bank that I could just work my way through. I mean, everything, you know, I had$30 ,000 I needed for that to last until I got my first sale.

15:36So that is one of the things I think that I don't like about the investment. You take so long to get to the first good information you really need. And that is, what does the customer think about this idea? I mean, and people are so good with those pitches, man. I'm just like, okay, you got your elevator speech, but I don't know if you can sell a damn thing. I mean, it's just two different things. Like a bunch of guys, usually, who all look alike, think alike, bank at the same damn bank, are deciding what customers want. You know, I guess there is something to the fact that they have money, and that is legitimizing.

16:19But the most important thing is what does the customer want? And for me, that is the thing you have to get to the most quickly is to figure out if the customer wants what you're selling and if they don't, then how are you going to change? And how long did it take you to get your first sale? I left the North Face in April of 1989 and we had our first sale in October of 1989. So pretty quickly. What did that mean to you psychologically was that like yep this is gonna work or uh it meant i was really ready to quit because of course you know i mean because again i didn't go through the rock tumbler of vetting that would normally happen so i didn't have all of the hard knocks right um and when you get 13 orders that's i mean that you know everybody has a plan until they get punched in face.

17:13And I didn't even have a plan. I just got punched in the face. So for me, really, that first one, I was like, wow, I have no idea what I'm doing. It almost sounds like a better vetting process to me. It's like, that's probably the best vetting process you could have is you went through the struggle and you had to go find out if there was demand, which you just did as quickly as possible, it sounds like. Now, from my understanding, the first four years for you were a struggle, just some of those struggles that I know about. You were$200 ,000 in debt. There was a flood that basically destroyed your entire inventory.

17:52What were those first few years like? And was there ever a point where you truly thought, yeah, I actually do want to quit? Yes. And still, Ed. And still. I mean, and anybody that tells you differently, it's just, you know, I sit on these calls. We have this pitch fest that we do that has young women who are building outdoor brands come and pitch us. And I sit on a Zoom call every so often with them talking about sort of whatever challenges they're facing. And one of them, we were talking about money and they're like, when do you stop stressing about money? And I was like, never, literally never.

18:30I know specifically back in those early days, there would be times when it was a question of could I hold off paying the printer and all the other marketing things that we were doing before I got my first sales? That's the one I said, I got my first sales. Could I hold off the people that actually owned the inventory until I got enough sales to be able to pay them? And there was a specific time really twice a year, and that still happens about twice a year. Cash gets really, really tight. And so I would say, you know, anybody that is constantly paranoid about, is this the misstep that's going to do me in, is not being vigilant enough.

19:10Or they have too much money. I don't know which. And then in 1993, you became profitable for the first time. Would you say that was sort of the turning point for Title IX from a financial perspective? And you're nodding yes. If so, what started going right? What did you start doing that allows you to reach that point? You know, I always say just like fail faster to succeed sooner. I mean, we didn't have enough failure. It took us four years of screwing things up to find the things that worked. You know, we found the right customers. It wasn't all the people, but we narrowed in onto places where we could advertise and market that really worked with us.

19:53I figured out how to manage inventory, managing cash flow, marketing, and those tricks. You learn those, but you have to keep relearning them, right? I mean, like at the beginning, you have to learn all the things all at once. Once you get started, it's more like conducting a symphony, I think. It's like you get the woodwinds right, and then you got to go over and work at the strings. And then by the time you get back around, the woodwinds are screwing up again. I mean, I think once you get it going, usually not everything screws up at once. So that's helpful. We'll be right back.

20:46We'll be right back.

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22:48We're back with First Time Founders. When we last spoke, one of the things you were talking about in terms of your business strategy was this idea of base hits versus home runs. And you basically said to me and elsewhere that Title IX actually doesn't go for home runs. You try to optimize for base hits. Could you take us through your thinking there and what that means to you? Well, it's really hard, right? Because everybody wants the unicorn. Everybody wants the home run, right? Those are the people that are most highly compensated as the home run hitters. We just want to stay in the game. You know, you show me anybody that's hitting a lot of home runs, I'm going to show you somebody that struck out an awful lot.

23:27And when you strike out, you're sitting in the dugout. You're not playing. You're not learning. You're not learning how to run the bases. You're not, you're learning nothing. I don't want huge failures. I want people's failures to scale with their expertise. I should be making bigger mistakes today than I did 25 years ago, but I don't want to make any game-owned for mistakes. So that's what I would say. I mean, those guys like we're just going to make one heap of all our winnings and risk it on one turn of pitch and toss. That is just not what we're doing. We're going to stay in the game, get lots of learnings, experiment a lot, fail quickly, give more resources to the things that work and let the other stuff down the fine.

24:09Yeah, which is exactly what you've done. I mean, in business for 30 years,$100 million in sales per year, 300 employees. It's incredible. Was that the game plan from the very beginning? Because it's just a very mature approach. And you were, you know, young founder at the time. And the most young founders I know are just obsessed with the home run. Is that something that you knew from the get go? Or did you kind of slowly learn that over time? Well, you know, it's funny. I mean, I remember, I can remember even conversations I had like, you know, I went down to the office depot and bought like a landline, two-line phone.

24:51And a buddy of mine who was starting a business at the same time, also an apparel business, he put in a whole phone system. You know, I mean, we were doing basically the same thing, but he was just so much more confident. He's like, you know, hiring people. And his first foray into it was no more successful than mine, but he was done, you know, because he'd spent all this money. And so I'd say for me, I've always been fairly pragmatic, very optimistic. I always think it's going to work. But I think there's part of me that also knows, and if it doesn't work, here's my plan B, plan C, plan D. A buddy of mine, the founder of Clif Bar, we talk every once in a while, Gary Erickson.

25:39You know, everybody's always trying to tell you the three sort of characteristics of a successful entrepreneur. Everybody's got their opinions about that. So we do every week on this podcast. Well, and you know. This is what you have to be. I know. And you know what? Gary's is actually, he's the only one who I think got it right. His thing is, there are three characteristics. Never give up, never give up, never give up. And I think that's just it. And so you have to put yourself in a position that someone doesn't give up for you. successful entrepreneurs. They can be extroverts. They can be introverts.

26:15They can be highly quantitative. They can be great salespeople. They can be terrible salespeople. But boy, they have got to be able to stick through it, even when they feel like quitting. Just going back to base hits versus home runs, one of the things you've also said is that by taking that strategy, you're recognizing that you're never going to win a grand slam. In other words, you recognize you're not going to be the next Nike or the next Adidas, and you're okay with that, which I love. It sort of takes the stakes down a little bit in a way, but describe why you think that is a good strategy for you.

26:55Why does that make sense for you to say, okay, we're not going to be the Nike, and why do you think that would make sense for other entrepreneurs who are starting their own businesses? The first thing is I think we're fairly limited when we think about the financial statements, a P &L, a cash flow, a balance sheet. Not all things that count can be counted. So I am very ambitious, but it's not counted the way venture capitalists might count that. I am very ambitious about the change I want to see in the world, the way business is done, the way women interact with business. I mean, you talk to anybody in our business, it's like, if we're doing something and we've achieved it, then I'm like, here's the next thing.