Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. A lot of the entrepreneurs that I interview here are frankly, first-time entrepreneurs, often early out of school, sometimes even have built their businesses in dorm rooms, but today’s guest is not.
Andrew: Steven, how old are you? Are you comfortable saying that?
Steven: I am. I am 55 and change.
Andrew: And how old were you when you started your company?
Steven: This company? It was eight years ago, like 7 years and 11 months ago. What kind of got me into this was something that happened 10 years ago, which is that I got back into sprinting after a 30-year break at the age of 45. We’ll get into the details later.
Andrew: So you guys get the picture here. Here’s why I have him on. First of all, he built a company that I’m fascinated by, and I like good entrepreneurial stories. Second, I am a runner and have been for years. My knees hurt. My back hurts as a runner. Here’s what happens. This is years ago, by the way, Steven. By the way, the guy who you’re listening to is Steven Sashen. Did I . . . yeah, I got it right, Steven Sashen.
Steven: Yeah, that was perfect. That’s exactly what my name is.
Andrew: So my knee and back hurt. What they tell you, your friends will tell you—
Steven: They’re wrong.
Andrew: Even doctors have told me—
Steven: They’re wrong.
Andrew: Of course it hurts because you’re a runner.
Steven: They’re wrong.
Andrew: You’re pounding on your body, don’t do it. They’re absolutely wrong. Here’s who else was wrong — me. My wife went to something called Chi Running, which basically teaches the barefoot-style running. I said, “Baby, I don’t need anyone to teach me how to run. I think this whole thing is a fad and I’m freaking tired of it, but I like the book ‘Born to Run’ and I’m curious about their lifestyle, but I’m not going to live it.”
Then she bought me these thin-soled shoes, because she knows I like to travel a lot, and when I’m in a new city, I want to run through it. Man, that suddenly started to affect my life. I went on this long trip. I tried the thin-style shoes for running, and no more back pain, no more knee pain. I did have like I think it was my calves or my shins. My shins hurt. She said, “Be used to that at first and then it will get better.”
Andrew: The difference was I was now no longer running the way you do when you have thick padding on your feet. I was running in a better way naturally. She didn’t even have to teach me. She just said, “Here’s what you do,” which is basically lean forward a little bit and tolerate a little bit of pain in your shins, but she said, “I promise, it’s going to go away.” Steven is here. Steven I know I’m interrupting you because I’ve talked so long in this intro.
Steven: No, that’s great. You just told the story of a vast majority of our customers and a story that more and more people need to hear because, frankly, the running shoe industry, in my humble opinion — and that is a lie, I don’t have a humble opinion — is a scam. It’s been 45 years of selling stories to people for which there is no proof. Ironically, what we’re doing now is based on what people have been doing literally for thousands of years prior to us starting this company, and it’s the thing that has allowed people to run enjoyably pain free with a smile on their face up until the time they’re 70 and 80 and fall over.
Andrew: Here’s the thing. Maybe it’s a scam, maybe not, maybe they’re selling style more than they’re —
Steven: Seriously, not maybe not. The research is unequivocal.
Andrew: Here’s the other thing that’s unequivocal. They’re killers, dude. They kill. They have taken small guys and killed them. There’s a reason why we have more clothing companies than shoe companies in the country because these guys are strong. They’ll get into any market, they’ll crush you. Still, you are not crushed. Your hair is long. Your attitude is exuberant, and your business is growing. That is, frankly, why I want to have you here on Mixergy.
What I noticed about you, the company that Steven runs is called Xero Shoes. They create these minimalist shoes and sandals that will help you run and walk with the style that you were meant to run and walk with. I’m going to let you describe it later. What’s interesting to me is you’re making it work because, dude, I’ve been on your site. Every freaking marketing technique that works for info marketers, you have taken, you’ve made look better and more elegant, and you’re using it to sell shoes and compete with Nike. That’s why I wanted to have you on here.
We’re going to talk about how you’re doing it, specifically the marketing techniques. I can see you’re excited about it. I am too. But I have to say that this is all thanks to two great sponsors. The first will help you host your website right. It is called HostGator. The second will help you close more sales if you’re doing it in a one-on-one way. It’s called Pipedrive. I’ll tell you guys more about them later.
Steven, bottom line it. How much revenue are you up to today?
Steven: All I’m allowed to talk about . . . we did an equity crowdfunding raise recently. So we’re essentially an SEC-regulated company at this point, so all I can talk about is things we have published. So I’ll give you some numbers. 2014, we did only $772,000 in sales. 2015, we almost doubled that to $1.44 million. 2016, we almost doubled that again to $2.74 million, and I’m not getting this number exact, so you can look on the SEC website to find the exact number, but for the first six months of this year, we did about $2.3 million, $2.4 million. So that was about 80% of what we did for the entirety of last year and projecting about $5.2 million for this year and about $12 million for next year.
Andrew: Wow. All right. That’s significant.
Andrew: Talk about online marketing. We’ll get into a little bit of your background as a marketer. But what’s one marketing technique that’s on your website that’s helping you close sales that most product people wouldn’t know about?
Steven: Just one? As you said, there’s so many.
Andrew: Any one that’s especially effective.
Steven: I’ll tell you the one that I resisted for a while, and after I implemented it, I wanted to shoot myself in the face for not having done it years earlier, because I knew about it and thought about it and wanted to test it. That is we’re using a giant, full screen, exit pop-up when people try to leave the site. The thing that I’m doing that’s a little unusual is I’m not doing something like, “Hey, give me your email address and I’ll give you a discount on our shoes.” I think premature discounting is the cause of the end of civilization as we know it.
All I’m doing is saying, “Hey, would you like to win a $100 gift certificate for Xero Shoes?” And if people click yes, it asks for an email address then, and after they put in their email address, it shows them how they can get more entries into the sweepstakes by sharing with their friends. That’s built my list by 40,000 people in the last six months.
Andrew: I’ve seen that exit intent. How could I not? If I just move it up, it looks beautiful. You even have that limited offer, expires with the countdown clock on it. Here’s what’s different about you than other marketers. You make it look good. It’s really polished.
Steven: Thank you.
Andrew: Most people will just have an info marketing type of tool on their site, but they don’t put the care and design into it that makes it feel good.
Steven: Well, a) thank you and b) I wish I had a bigger team at my disposal to make think things look even better because my to-do list for stuff that I want to do to improve the site is vast and gets bigger every day, because I tend to wake up going, “Here’s another one,” and I don’t yet have the manpower to implement everything that I would like to do, but soon I hope.
Andrew: Your stuff looks good. Your product looks really good. As a guy who cares about running shoes, I love the design. I’m going to ask you about your shoes for myself later on. But the marketing part is what intrigues me. I didn’t know this about you. You have an online marketing background. You told me before we started to go back to what year?
Andrew: 1992, what’s an example of one thing that you sold back years ago?
Steven: I invented the industry standard word processing software for film and television writers, a program called Scriptware. So, in ’92, I started selling that online.
Andrew: How did you sell it online?
Steven: That was an interesting thing, because back then, you could not do real-time credit card processing. So I was just collecting credit card data and typing it in somewhere and then shipping big boxes of software out the door. It was a physical product company in the software biz.
Andrew: Is this the same Scriptware that I see when I go to Scriptware.com?
Steven: I’ll say yes. Sadly, it is. I literally haven’t touched that website since 1998. There’s a long story behind that we’re not going to get into right now.
Andrew: You still own it?
Steven: I do. I’ll give you the short version of the story.
Steven: The program is not quite defunct. There’s still thousands of people who use it. The site is, again, from 1985. I’m in the middle to trying to find a way to update it appropriately in part because the Academy of Motion Picture Arts and Sciences, the guys who give out Oscars told me that if I can relaunch the program, get a little market share, they want to give me an Academy Award for technical achievement. There’s nothing that I would like better in my bathroom than an Academy Award.
Andrew: How much money did you make with this?
Steven: I literally don’t know, a few million.
Andrew: A few million dollars over the course of how many years?
Andrew: In addition to this, you were selling other stuff. By the way, the gifs on this site with like the sail that moves over—
Steven: Yeah, isn’t that a riot? I’ll tell you, man, that site I probably build in 1994. It barely changed after that. In fact, that site was the first — no, that was the last site that I had someone else build for me based on designs that I had thought of. Then I started doing my own stuff after that. I was a nutritional supplement geek. So I sold colon cleansing products and acai products and nutritional supplements, things that I believed in at the time. By the way, I no longer believe in any of those and would never sell any of those, just FYI.
But the only thing I’ve ever sold are things that I truly believe in, that made an impact in my life or that I thought might be impactful because I believed in them philosophically. The whole acai thing, it’s an antioxidant. If you believe in antioxidants, here’s one, tastes good, go for it. I actually have mixed feelings about antioxidants right now.
But the reason that I bring that up is I’ve never written a sales letter that was trying to convince someone of something. All I was ever doing was sharing my honest experience and often saying things like, “Is this going to work for you?” I have no idea. It’s got a money back guarantee. If you believe in it, give it a shot, if not, send it back. it’s not my concern. I’m not going to try and hype you with stories of how you’re going to magically change your life and your kids will get into the college of their choosing and you’ll get that car you always wanted.
Andrew: You also did SEO back in AltaVista days.
Andrew: For what?
Steven: Oh, the days. Well, first of all, these were the days when all you had to do for SEO was a bunch of on-page tricks and then write an article somewhere. Those were heady days. But one of the things that I was doing early on to experiment was anyone who had an infomercial on TV, I was making pages to outrank them for their own name. So I outranked Tony Robbins for Tony Robbins for a while.
Andrew: So if I searched on AltaVista for Tony Robbins, I’d come up with one of your sites as a top result?
Andrew: If I clicked it, what was I led to buy?
Steven: I don’t even remember, man. Again, this was back in the early ’90s, so I literally don’t remember what I was doing with that other thing going, “Hey, check it out, I rank for Tony Robbins.”
Andrew: There was some MLM stuff, multi-level marketing in there?
Steven: I don’t think I was doing that then. I didn’t start—the first MLM thing that I built, it was just because someone gave me a product, I liked it, it happened to be from an MLM company, that company didn’t have a website that was worth mentioning. That started in ’93 when I moved to Colorado. So I don’t think I’d done that before then.
Andrew: Were you able to get rich from all this? You were doing a lot of the direct marketing stuff, a lot of the online SEO then that people hadn’t even known about back then. Did you get rich from that?
Steven: That’s a great question. The answer I’m going to give is no. The reason is that my goal in life from the time I was a kid was to not have to work for a living. So I was always very attentive to how much money — what enough means —how much money do I need to live an enjoyable life without having to stress about how much money it takes to live an enjoyable life? So, in ’98, I started doing some real estate investing with someone, a partner that I met. The money that I made doing all these various things, which was over time, a couple million bucks, let’s say.
My wife and I, or the person who became my wife, we invested in some real estate things and in 2001, we had a conversation that went like this. If we sell the condominium that we’re in right now and invest that money in real estate stuff that we’re doing, we pretty much never have to work again, or we can buy a house and still have a $3,000 a month mortgage. Which do you prefer? That was how long that entire discussion lasted.
So, from roughly 2000 to 2009, Lena and I were retired on what was a modest amount of cash. It was enough to be really comfortable, but not rich. I wasn’t buying Lamborghinis. We weren’t flying first class. We didn’t have to work. People would call and say, “In two hours a day, you can make an extra $10,000 a month.” And I would go, “I don’t care. I don’t need that.”
Andrew: Instead, what would you do with this extra time you had?
Steven: We vacationed. We hung out with friends. Someone asked me what it was that I figured out about money and success and marketing and reality and whatever you want to call it. I call it applied behavioral economics. I ended up teaching a class that got us around the world. People asked me to teach that in wonderful places all around the world. I had been a meditator since I was a kid, since I was about eight years old and discovered some interesting things about meditation.
I created a meditation course that I was selling online during that time. Again, took no time. It was just something I was interested in. I didn’t need the cash from it. In fact, when I was teaching classes, the payment structure was taking the class and then pay me what you think it was worth to you. I didn’t ask for money.
Andrew: Here’s the thing that I’m getting at. Growing up, my dad manufactured women’s clothing. That was his main business.
Steven: Hold on, you have to say it right. My dad was in women’s clothing.
Andrew: My dad was in women’s clothing. Then he said, “These stores are doing so well. How about I started opening up some stores?” He opened up a few stores and if you’re opening up stores in the part of the country in the ghetto, which is where he was selling, you need sneakers. So he’d get into sneakers.
I remember my dad at that point when things weren’t going well with those stores saying, “The thing about all of us, me and my friends and the way we think is we can get a business up and running faster than those bigger guys that have to create those business plans and all that and we can bring in a dollar in the door so much faster than they can and they just take too long, but in reality, we’re after the fast buck and that’s why — and we’re scared to invest in the long term and even though we think we’re doing better, if I look over time at some of these businesses that took longer to start but were more established afterwards, they did better than us.”
I kind of feel like when I think about this online — there’s something that’s resonating with you about that. What is that?
Steven: Well, there are a number of things. One is there’s no one way to run a business. Everyone’s got their own personality, and that’s going to show up in the way they choose to run a business. That’s one. The other is some of what he’s describing. There’s a couple thoughts. One is I’ve got a dear friend who’s been an internet marketer a little longer than I have. In fact, we became friends because he sold one of the first internet marketing courses and I bought it from him.
He happened to live here in Boulder where I was. He noticed that his assistant had to walk past my office to drop off the course at FedEx to then send it to my office. I noticed the same thing and called him the next day and we had lunch and away it went. He says to me every time that we speak recently, “I’m so amazed by what you’ve done because quite a long period of time, you were into these little things that were fun projects but they weren’t real businesses, and now you’ve created a real business.”
So there’s a lot of people who get into whatever the shiny object is that may create a fast buck and will disappear the next day because — oh my gosh, I was at Yanik Silver’s Underground marketing seminar the day that Google crushed all the AdSense sites that people were making millions of dollars a month with. Literally, there were guys in the room who were making multiple millions of dollars every month, and their income went from that to zero overnight. I’m sitting with these guys who are shaking that didn’t know what to do. There’s lots of ways of making money online that are flash in the pan that are loophole-related.
Andrew: But they were faster to build those businesses.
Steven: They are. They absolutely are. And you have to just do it over and over and over and over. It’s a continual cat and mouse game. The other thing I’m thinking is there are companies now that I know of who, in a way, are doing the same thing that your dad was describing in a whole different world called tech companies. It’s not just tech companies. It’s companies that are financed on the tech model, which is we’re going to spend a boatload of cash to try and acquire customers and cross our fingers that we can find a way to actually make money before we run out of cash.
Andrew: You know what? I can think of multiple companies that are doing that. I was actually going to use them as the example in this story, in this interview as the better way to do things, but there is somewhere in between. Here’s what I’m seeing with you. You’re not saying, “I’m sacrificing today and the next five years for a possibility somebody’s going to buy me, maybe Nike, and integrate us in and that’s when we’ll make money,” but you’re also not saying, “This is a fly-by-night business and a business where I can make money tomorrow and over the next year.” You’re really grinding it out with Xero Shoes from what I can see.
Steven: Dude, we’re trying to change the world. And I’m not being glib when I say that. We’re trying to build a brand. In the same way that people now after 40 years equate natural and food as a good combination, we’re trying to do the same thing with natural and movement. That is a multi-generational play, frankly. That’s our big vision. Our interim vision is we just want to get these shoes on as many people as possible so they can have the experience of natural movement and shoes that are made to fit human feet, not shoes that are made for easy production.
My line is if you’d be more comfortable out of the shoes that you’re currently in, you’re wearing the wrong shoes and that’s what almost everybody is wearing. So there’s a long-term play, but the reason that we’re not doing that VC-backed idea in part is because we didn’t have VC money, we bootstrapped this whole thing and in part because philosophically I don’t agree with it. I don’t like the idea of making money because you’ve taken it off the table when someone gives a wad of investment cash. I believe in building a real business. That’s more valuable over time.
Andrew: I feel like that’s the shift. The Steven of today versus Steven of 20 years ago is trying to invest in a longer-term business. Am I right or am I reading too much into it?
Steven: Well, when I was — I think that’s pretty good.
Andrew: With one exception, Scriptware was more of a longer-term software?
Steven: Scriptware was a long-term play, and what happened is we got outfoxed. I’m an optimistic, often naively optimistic person and it never occurred to me that somebody would basically make a deal with the only dealer in the world and cut us out of the equation even though we had the better product. If we rereleased the product—
Andrew: What do you mean? Be more specific. What happened?
Steven: I’ll say this as a prelude. What we invented was radical. It has never been beaten. Since 1992, if you look at every script writing program that’s out now, it’s a copy of what I invented and it’s a bad copy of what I invited. I could show you the DOS version of our program, and it’s more powerful than what anyone is doing currently.
So one of our competitors, who will remain nameless, made a deal with what was at the time the only place you can buy screenwriting and said to them how much margin do we need to give you so you only sell our product and you don’t sell Scriptware? And that store had an answer. They cut us out. So we lost our biggest retail outlet as a result of that, and then what happened afterwards was there was a company that made an offer to buy us out and they were taking over operations while the transition was going to happen and in the middle of that, we found out that one of the partners of that company was embezzling from the company and the whole thing just kind of fell apart.
Andrew: Who was the retailer that you were pushed out of?
Steven: I would rather not mention their name.
Andrew: There was a retailer that was like the one place that you could go and buy software? Really?
Andrew: All right. Let me take a moment here to talk about my sponsor and then we’re going to come back in and talk about once you had this idea how you went about starting the business and it was kind of basic. It started with Home Depot. But first I also want to ask you how long did it take you until you made a profit with Xero because you’re still — let me hold off on that answer.
Steven: I’m going to answer that question first as a teaser.
Andrew: No, let’s hold it. Let’s use it as a teaser.
Steven: One day.
Andrew: One day? Ah, you just revealed it. Now people are going to have to listen to the ad for no reason.
Steven: No, no. They have to hear how that’s possible.
Andrew: Okay. My sponsor is a company called HostGator. You’re a guy with a bunch of ideas. If I were to go back in time and say, “Hey, listen, Steven . . .” Today, Steven of today, no money, all you have is a free hosting package. What business would you launch today if you needed to make money fast?
Steven: Well, first thing’s first, I built out first site thanks to HostGator. They were our host. They were for a while. I still have sites that HostGator hosts. I like them very much.
Andrew: Why do you like them?
Steven: Give me the question again?
Andrew: Why do you like HostGator? What is it about them that makes you go with HostGator?
Steven: It was affordable and it was reliable and it was robust enough to do the things that I needed.
Andrew: Yeah. That really is basically why people sign up. It’s affordable. It’s reliable. It’s robust enough to do the things that you need. Today, unlike before, it scales up. So, as you get more and more traffic, they have more and more options going all the way up to like managed WordPress even if that’s what you’re looking for. They just scale up. If you could start today with nothing but a hosting package, what business would you launch?
Steven: That is a really interesting question. I can’t give you a specific answer. What I would say is find something that you’re interested in. Find out where the people are who are already talking about this topic. Figure out what they’re bitching and moaning about and then find a way to solve whatever their problem is.
Andrew: Let me give you a suggestion. You tell me what you think of this as a way of implementing that idea.
Andrew: Most physical product resellers suck at marketing. They spend a long time finding the people who are going to make the product for them, a long time building the site, much more than they should and then they try to figure out marketing. You’re really good at it.
Steven: Well, what you just described is upside down. They have the idea the product is good and they need to do something and get the product out there because the idea is so good and they haven’t proven that. My response is if you haven’t gotten someone to hand you money for the idea before the idea exists, you don’t know if it’s a real thing. So the number of people that I meet who think they have this wonderful idea that’s going to make bajillions of dollars because it will be in every store in the universe or they’ll sell a million of them online, I just ask them, “Have you tried to go somewhere and sell this? Have you gone to a street fair?”
Andrew: I feel like it’s more than that. Look at how your business took off when you had that exit intent page takeover that we talked about. Look at how on your site, you have something that’s very similar to the Proof plugin that tells people, “Hey, check it out, someone just . . .” So there are a bunch of little tools like that that ecommerce sites don’t have time to implement.
Imagine if someone’s listening to us and says, “You know what? These are all freaking plugins.” I could go to GetMoreProof.com and get that little overlay. I could go to the same tool that Steven’s using, whatever that is, to take over the page and just go collect all this. I’ll create a website on HostGator, my sponsor, let me promote them, on HostGator that’s basically a growth agency.
You come to me as growth agency for ecommerce stores. In fact, maybe even growth agency for Shopify stores, where you come to me, if I were starting this, if I were listening to Mixergy, my team and I are going to implement the growth tools on your site. You’re shaking your head no. Why don’t you like that?
Steven: Because yeah, you could do that, but if the product is a piece of shit, who cares?
Andrew: We don’t take clients that have products that are pieces of shit, but if there’s a good product. . .
Steven: First of all, I think it’s a very cool idea, actually. So how are you determining that a product is not a piece of shit?
Andrew: I’m saying that whoever is listening to us who goes to HostGator and creates their website, very easy to create a landing page, here’s what they do. They don’t have to a press button to sign up. They have to apply to work with us.
Now, the apply to work with us is a small form where people give you a little information. That way you can weed out the people who don’t have real stores or don’t have a budget. Anyone who doesn’t have a budget is not really going to be a good fit. Then you schedule a phone call with the people who are a good fit, people who are store owners who don’t have the time and don’t know what these different plugins are.
You get on a call with them and say, “Here’s what I can do for you. You implement the tools that you know, help them by watching their numbers grow, and if it grows, terrific. If it doesn’t, it doesn’t.” You know who does this now? Sumo. I went for a ride with one of the guys at Sumo, the guys who make the software that helps you collect more email addresses and tweets and all that. They now have basically a service like that that just implements the Sumo tools.
Steven: It’s actually a really good idea. I think the problem that you’ll run into is there’s two potential problems. One is, again, a lot of bad product ideas. Boy, there’s a bunch of potential problems. One is a bunch of bad product ideas. The other is some people who won’t really appreciate the value of what you’re offering, and a third is if you build it, that doesn’t mean they’re going to come. You’ve got to remember, all the things you’re commenting about, that you like about our site, they didn’t exist for the first few years.
They didn’t exist as we were growing this thing, sometimes because they literally didn’t exist. Sometimes because I didn’t have the cash to implement them, sometimes because I didn’t have the time to implement them. I don’t know one internet marketer, one successful internet marketer who doesn’t bemoan the millions of dollars they left on the table because they didn’t do something smart earlier on. There’s always social much to do.
But the bigger thing is this. You can have the greatest site in the world, but if you’re not going to get people to it who want what you’re doing, it’s just . . .
Andrew: No question. This question that I’m theorizing that somebody’s going to create with my sponsor is going to have to be here’s one way they can get attention — blog posts about the people who you want, like here’s a great product but what they could be doing better.
Steven: I disagree.
Andrew: Number two, outbound calls. Number three, I’m going to end this commercial right now and tell people if you like this idea, you can copy it and go take it to HostGator. If you do not like this idea, come up with a better idea. Go to HostGator and host. There are so many entrepreneurs who I’ve interviewed who have their first sites hosted on HostGator. It’s inexpensive. It’s reliable. It will grow with you. Go check them out at HostGator.com/Mixergy, where they’re going to give you up to 50%-60% off their already low prices. Don’t forget, this will scale as your business scales, so you can keep growing.
For now, they’re going to give you unmetered disk space, unmetered bandwidth, unlimited email addressees, 24/7/365 tech support, which I’m going to be honest with you guys, they’re not picking up the phone as fast as they used to. You’re nodding yes, they used to pick the phones a lot faster, but their hosting is still reliable, and if you’re not happy with it, if you think I’m full of it, they give a 45-day money-back guarantee, HostGator.com/Mixergy. All right. Let’s get off—
Steven: I’m going to tell you a HostGator story. There was a time where I had like 40 domains hosted on my account and they all got hacked and I spent time on the phone with these guys and actually figuring out how to fix it and they helped fix it. For the price, it’s ridiculous what they give you. It’s amazing.
Andrew: There was a period there where I was doing case studies. I called up a woman who worked with HostGator. I recorded it like a short ad, which was an interview with her. We talked about HostGator. She had a similar experience. Editing those into the interviews just took too long, so I stopped and said, no, I’ve got to keep the conversation going.
Steven: I want to back up to your idea. Part of what you said, it really depends on what kind of product, what kind of business you’re trying to run. When you said do outbound calls to sell shoes, that’s never going to happen.
Andrew: I’m not saying you should. I’m saying this agency that I was pretending to create. I was suggesting my audience would.
Steven: Actually, I’ll tell you what you’re on to is something I bitch about on a daily basis. People will call me and say, “Hey, I’ve got this cool tool that’s going to make you a bunch of money.” And I say, “I don’t believe you.” They say, “I feel confident it will.” I say, “I don’t really care how you feel.” They say, “We can’t guarantee it.” I go, “Of course you could.”
If you knew your numbers well enough, you could. If you knew how much money you made when you were right for your client and how much money you lost when you were wrong and didn’t make money for your client and knew the number of times you were right and number of times you were wrong, you could do the math, and if you end up being right more often than your wrong and the amount you’re right is bigger than the amount you lose when you’re wrong, then you’ll know what your stats are on your business.
And you could know if you have a viable business regardless of the results and then you could offer a money-back guarantee and find as many people — you could be hunting for people who are perfect for you instead of hunting for everyone and basically lying by telling them that you bat a thousand because you don’t bat a thousand.
Andrew: All right. Fair point. I agree with you. I think that’s especially true in agencies where you can do a little bit of work with guarantees. Let me come back to your story.
Andrew: You said day one. You had this idea. The idea was you came to the same realization I did.
Andrew: How did you come to the realization about barefoot running being superior?
Steven: It was similar to yours. I got back into sprinting after a 30-year break. I was getting injured pretty much constantly. After two years of this, a friend of mine who’s a world champion cross-country runner said, “Why don’t you take off your shoes and run barefoot and see if you learn anything from doing that?” So I did. Again, I’m a sprinter. I run the 100 meters. I don’t even take the turns on a track. I don’t know what the other side of a track looks like. I don’t run distance. It’s not my thing.
So I take off my shoes. I go for a run. I’m so fascinated by the experience and the experimenting of what happens if I change my gait in all these different ways, if I land in different ways on my foot, if I pick up my speed, if I pick up my cadence without picking up my speed, all these things were so interesting. We’re running on grass. We’re running on roads. We’re running on trails.
Then at the end of this run, I turn to someone that had a GPS watch on and I said, “How far was that?” She goes, “That was about four miles.” I went, “I’m sorry, what?” I had literally never run more than maybe a mile in my life and that was begrudgingly I was into it. The only reason we stopped is we ran out of time. I ended up with a big giant blister on the ball of my left foot. Most people in that situation say, “This is nonsense. I got a blister.” I for whatever reason thought, “Hey, how come my right foot is fine?” I was clearly doing something good on the right side, bad on the left side. By the way, the left side of my body is the one that gets injured more often.
So the next week, I went out for my second barefoot run, thinking that if I could find a way to not be in pain while I’ve got this gaping wound on my foot, then I’m probably not doing the thing that caused the gaping wound to begin with. Let’s just see if it works. I’ll give myself 10 minutes. If it doesn’t work, I’ll try again later, who knows?
Nine minutes and 30 seconds of agony later, in one step, everything changed. It went from literally searing pain to suddenly not only did my foot feel fine, but my running got faster, easier, lighter. My breathing got easier. I wasn’t straining so much. I know what I was doing now. I didn’t know it at that time. But having that experience, I wanted to just keep playing with that and have that barefoot feeling as often as I could.
So, like you said. I went to Home Depot and I got some string basically, some nylon cord. I called a company that sold sheets of rubber, and I cut them into smaller sheets of rubber and did a bunch of tweaking and came up with my version of a 5,000-year old sandal design. I made a pair for myself. I made a pair for my wife, who sort of patted me on the head like, “Thanks honey,” like if you’re giving your mom a baseball glove when you’re a kid for her birthday.
And then some other local runners said, “Hey, I’d like some of these.” Out of that first bunch of rubber, I think I made 5 or 10 pairs of shoes. I can’t remember that number. I took the modest of money they paid me, just enough to cover my expenses, and I brought twice as much material because more and more people kept asking. I did that four or five times and then someone said, “I’m writing a book on barefoot running, and if you treated this little hobby of yours like a business, I would put you in the book.
So I rush home and I pitch this to my wife, who tells me it is a horrible idea and won’t make any money and is a distraction from other things and I said, “You are probably right.” She went to bed around 9:00 and by 10:00, I head a website up on HostGator, swear to god.
Andrew: Look at that. So the first sandals that you made, they were nothing but rope and rubber?
Andrew: And you weren’t embarrassed to sell that?
Steven: No. Are you kidding? I was selling a revolution. I was selling the idea that you could develop the superpower of knowing how to make your own footwear for a couple of dollars instead of buying something you don’t need, that’s probably hurting you, for 10 times the price. This is awesome. I was thrilled.
You know what else I did? I gave it away. I made videos showing exactly what I was doing. I said, “Go out and get materials like these and do the following thing to make your sandals. It just so happens I have better materials for a better price, but you don’t need me.” That was the big marketing move was putting out the information for free and letting people copy our business, which they’ve since done.
Andrew: This was before the book “Born to Run?”
Steven: Right around the same time. “Born to Run” came out in early 2009, late 2008, I can’t remember. It didn’t get popular until 2010, but we launched the end of November 2009.
Andrew: Okay. It wasn’t that they said, “I heard about the Tarahumara?”
Steven: If you want to say it like an American, you say Tarahumara. If you want to say it like someone who speaks Spanish, you say Tarahumara.
Andrew: So they famously did it in the book, and they were running really fast. This is before people saw them and heard about them and said, “I want to be like them.”
Steven: It was right in that same time. The book became popular as we built the site. Lena and I used to joke that for the first year, “Born to Run” and Chris McDougall, the guy who wrote it, were our marketing department. In fact, I used to take business cards and go into bookstores and place them in copies of “Born to Run.”
Steven: That was guerilla marketing, baby.
Andrew: Yeah. So the website came up as you were creating, cutting out the first shoes, you were also creating a website for this.
Steven: I literally didn’t make the website. I started doing this, and maybe four months in is when this idea called put a website and turn this into something. Lena and I thought maybe it would be a car payment. It was not a big deal. Within months, it was obviously this was our full-time job. It just really took off. Partly, I’m being a bit glib. The day after I built the website, she kind of growled at me. I said, “This will be a good SEO experiment.”
We were actually in the process of starting an SEO/SEM consulting business. I said, “It will be a good experiment. I can apply the things that we’re doing. I think I can own this market in about three months.” And about a month and half later, for any keyword that I cared about, I owned 40 of the top 50 search results. And it stayed that way for about a year until competition came in, algorithms changed, things like that.
Andrew: Was the company called Invisible Shoe for a while there?
Steven: Yes, it was.
Andrew: Was that the first name?
Steven: Yes, it was.
Andrew: Why did you switch from Invisible Shoe to — by the way, I’m looking at the first version of the site. This looks like direct marketing, long-form copy. Today it’s a lot of photos and stylish images.
Steven: Then all I was selling was a single product. I didn’t think of it as building a brand. We didn’t have shoes and sandals. We were selling one thing, a do-it-yourself sandal making kit. The only choice you could make was how big of a sheet of rubber you need and what color laces do you want? I think there were five choices.
So Invisible Shoe literally came from when I built the site that night, because I knew how to use WordPress and I just knocked it out, I thought, “Crap, I’ve got to come up with a name for this,” and I came up with Invisible. Then a year and a half later, I’m talking to a guy who is a very big deal marketer. He had heard about me. We had never met. We sit down at a coffee shop. He says, “Let me see the shoes.” I lift up my foot and he goes, “Those are not invisible.” I go, “Yeah, but it feels like you’re wearing nothing.” He goes, “They’re not invisible.”
Around that time is when we thought about building this as a lifestyle, aspirational brand, not just an ugly home business selling a kit. We realized we needed to rebrand with something that was more ours, more something that we could claim, more something that was unusual and put all that together and we became zero.
Andrew: Okay. You then had to start building this company beyond what you were able to do yourself. You met this woman at brunch who was a manufacturer and distributor for Teva, for Uggs. Tell me about what happened with her.
Steven: Let me back up and give a bigger context of this. When people ask about why we’re in the situation we’re in, I think back. I have a Master’s in film. One of my teachers was Milos Forman, the director. Somebody said to Milos one day, “How do you make a good movie?” He said, “Oh, it’s simple, 90% of making movie is casting and the other 10% is casting.” So I feel that way with business, 90% is luck and the other 10% is luck.
That does doesn’t mean we are not working our asses off, which we are, we are not creative and smart people, but when I look at the number of lucky things that happened from the beginning of meeting the woman who became my wife, who is my cofounder and partner, and were it not for her, this would have never happened, because we have very complementary skill sets. I’m a visionary product marketing guy. She’s someone who’s a great operations finance person. She crosses I’s and dots T’s. I don’t even know what those things are. I can do them but reluctantly and not nearly as well as she can by a long shot.
But about a month into this, literally a month into this, we’re at brunch with a bunch of friends having a New Year’s/Christmas celebratory brunch. As we’re leaving, one of the people says, “Steven, Lena, have you met Melissa?” We said, “No.” This guy says, “Melissa, Steven and Lena are in the footwear business.” Melissa gets very excited. She says, “You’re making footwear?” “Sandals, really.” “But you’re making footwear.” “Frankly, we’re selling rubber and string and instructions on how to make your own footwear.”
“But you’re in the footwear business.” “Fine, we’re in the footwear business.” She says, “Do you know what my family does?” “We just met you 30 seconds ago, no.” She says, “We’ve owned the manufacturing and distribution rights in North America for Teva, KEEN, Simple, Ugg,” and she lists like nine other iconic brands. We went, “We should probably chat.”
So she was — there was nothing she could do for us specifically at the time, but we remained friends. Seven years later, which is now ten months ago today, she became our COO. It was finally the right time and she came on board. It’s just sort of miraculous what she’s able to bring to the equation. But we have stories, like our product developer, the way we met this guy who has been designing bestselling footwear for 40 years, one day he’s out walking his dog, which he normally doesn’t do.
A friend of ours is out walking his dog. Normally, he doesn’t do that, his wife does. So the dogs knew each other, the guys started chatting. Our friend says, “What do you do?” Oh, I just retired from being the Head of Product Design at Crocs.” Our friend says, “You should meet my friends Steve and Lena.” I called Dennis. I sat on his phone number for a couple months thinking, “Why would this guy want to talk to me? We’re making this do-it-yourself sandal kit, and he was designing multimillion-selling pairs of shoes.”
We sat down for lunch and three hours later, I said, “It would be great to work with someone like you some day.” He said, “How about me?” I said, “You were making a mid six-figure salary at your last job. We’re a goofy little startup” He goes, “Yeah, I’m retired. I love what you’re doing.” I said, “You’re hired.”
Andrew: So what’s he doing with you guys now?
Steven: He’s our head of product design. He’s the guy who helped us go from making a do-it-yourself sandal kit to making ready-to-wear sandals in the same thong style originally, then a ready-to-wear sports sandal, then our first actual closed-toed shoe, and then the rest of our closed-toed shoes and our new sandals. Right now, we have about 13 products. We’ve got about 15 more in the works.
Andrew: That’s him designing all of it?
Steven: It’s him and our customers telling us what they want and me with my ideas. But he’s in charge of all of that.
Andrew: I’m glad that you guys do closed-toed shoes. I’m not wearing those . . . I feel so embarrassed. Suddenly I looked up. I’m not wearing the sandals. I don’t want my toes out when I run.
Steven: That’s why we make them.
Andrew: I think it’s the Prio. That’s the one I think I need to get.
Steven: Yeah. They’re pretty sweet. I’m actually wearing the Hana right now.
Andrew: What’s the Hana?
Steven: That’s so funny. I literally didn’t wear a pair of shoes for eight years, and now I walk around the office and there’s people who never knew me wearing shoes, and they see me wearing shoes and they’re sort of freaked out. Everything we do, we want to give you that experience of natural movement. Your feet are made to bend and move and flex and feel. We want to give you that as often as we can with whatever you’re doing.
If you like sandals and you’re at the beach, great. If you don’t like sandals and you’re not at the beach, great. We’ve got things for that too. Our goal is to have people have an option with a product that fits human feet, instead of being pointy and squishy and stiff, for anything you’re doing from the moment you wake up until the moment you go to bed.
Andrew: All right. I’m going to talk about my second sponsor and then jump right back into this interview. The second sponsor is a company that I bet you haven’t even heard of. It’s called Pipedrive. Do you know them?
Steven: No. You’re correct. I did not know them.
Andrew: Pipedrive is phenomenal. They totally revolutionized our booking process. It used to be so crazy that I would try to get you on as a guest and the pre-interviewer wouldn’t know why I got you on as a guest and then nobody else could go in and figure out why we’re editing. Or worse, sometimes we would have someone do a pre-interview, but we wouldn’t know they needed to do a freaking interview because no one was telling anyone else. It all made sense when it was just me. Once I started getting help collaborating, we’d lose people by accident.
So I did an interview with this guy who told me about Pipedrive, how it changed his whole sales process, the founder of What Runs Where. He said, “The whole thing, you lay out the steps for closing a sale. Each step gets its own column. Each person who you want to sell to gets a card. First they go in column number one, then when you do the next thing, you go to column number two, all the way to close.” He said, “It helps our whole team collaborate around sales.” I thought, “Maybe this thing could help me collaborate around interviewing guests.”
So when someone suggests a guest, including me with you, I was the one who suggested we have you on. You might have noticed I cc’d Andrea because I don’t want to go into any piece of software. She automatically added you to Pipedrive. Actually, I will be going into Pipedrive right after this interview is done. Immediately with you, because I suggested it, it goes to column number three. We do not need column number one with suggested guest, column number two, which is screen out the guest to see if they’re a good guest or not. If Andrew says it, it goes straight to column three, baby.
Then the rest of the team knew to collaborate to get you all the way to close. Then as soon as the interview is done, I’m going to move you one column over so the editor knows it’s his turn to edit. So post people who are listening are not doing interviews. They don’t care about that. But here’s what they are doing, they’re selling.
If you’re selling one-on-one over the phone, it’s really hard to keep track of how many people did you contact today, how many yesterday to really make sure that you’re progressing and calling as many people who are contacting them via email as you should.
Steven: I can also just imagine using certain things for — when I think about the development things I’m trying to do, that’s a perfect system for that too.
Andrew: For development, I would actually even recommend you use a free tool like Trello.
Steven: Well, the thing I like about what you’re describing compared to something like Trello is the rules-based component.
Andrew: Trello, you can add that to it. Here’s where this is better than Trello. It’s the contact information stuff. So I actually can have your email address appear in an email field, your name appear in email field, your name appear in a name field and name field and phone number, etc. If I email somebody, as soon as I click their email address, I get a blank email. I can send—using in my Gmail because I prefer to use Gmail—blank email in my Gmail, I write an email to them. Then when I hit send, it also gets stored in Pipedrive because there’s a bcc email in there. It’s like CRM in that way.
Steven: It’s CRM light. I think that’s great.
Andrew: That is the power of Pipedrive. If you’re out there and you’re trying to close more sales, whether it’s just you and especially if it’s just you in the beginning or a team of people, you need a way to keep track of how many people you’re reaching out to, what stage in their sales process they are, what their feedback is, start it off with one person and then as you hire more and more people, you start giving them a column. So, in my team, there’s one person, the pre-interviewer who has the column that’s responsible for pre-interview. There’s another person who’s responsible for the final step, which is editing.
Steven: If you have a sales team, will it allow you to manage that by seeing what they’re doing in those columns as well, because that’s the part where I’m getting excited. Literally, we had a conversation today about one of our sales reps, and we just have no transparency into what he’s doing.
Andrew: Yes. Totally. Here’s the beauty. I had this one woman, she was so good at suggesting people. We were following up with them. But I said to myself one day she’s really an active person and we’re getting contact information and we’re emailing. Let’s see how many people she’s actually closing. I looked and saw she’s closing two out of hundreds that she’s putting through the process. So she’s doing a lot of work, but she’s not damn good at it. Just get rid of her from this process, put someone else in there.
Here’s the other thing I could do. How long does it take the editor to edit? I get that data. I get full data and what I care about is the reports. How long does it take us to get somebody who’s interested to be in interview with me? How long does it take the pre-interview? Same thing for sales. How long does it take your people to sell? If you’re out there and you’re selling, I will never do a great job of explaining this to you, because it’s so visual, it’s like me telling you what the Mona Lisa looks like. You have to go and see it yourself.
Better yet, it’s like me telling what it’s like to kiss somebody. You have to touch it. You have to experience it. It’s not enough to look their website. I’m suggesting that if you try out their free version. Go to Pipedrive.com/Mixergy. They’re going to give you 14 days for free, just screw around with it, try it. Frankly, if you’re selling anything for 14 days, force yourself to use it to close sales. If you like it, they’re going to give you 25% off for three months after. If you don’t like it, walk away, you don’t have to pay anything. But you at least have learned about how sakes is really done using Pipedrive. Check them out at Pipedrive.com/Mixergy.
All right. Let’s continue with your story. What I’m curious about is I see how you’re starting to build this product. Where did you get your customers? How did you get all these people to come and discover you on your site?
Steven: So this backs up to our previous conversation about what would you do if you were starting from scratch, and my answer is find out where people are and just get in the way of what they’re already doing. Right around that time, late 2009, there was some interest building in this whole idea of natural movement and barefoot running.
So, as I said, I took the plans that I had figured out for how to make these sandals. I made videos. I put them on YouTube. There were some news groups and some Google groups and Facebook wasn’t even a thing at that time, really. I don’t know if I had a Myspace page or not. Wherever people were already talking about it, I just got in the conversation. I want to be clear. I was getting in on the conversation because this is something I was interested in.
It just so happened though in my sig file, I would reference the fact I got these videos, free info on how you can make your own barefoot running sandals or where you can buy a do-it-yourself kit. That was the extent of it. YouTube was a big part of it. When I mentioned that I owned 40 of the top 50 search results for almost any keyword I cared about, YouTube was a huge component of that because that was a time where Google was giving unnecessarily large importance to what was happening on YouTube.
The first page was nothing but my videos as the search results. Those got popular. The simplest thing, again, the luck factor is huge on this one. I wasn’t doing with the idea I’m going to build a business. This was just like let’s do this funny thing. This guy says he’s going to put me in a book, maybe it will make a car payment. YouTube is huge. I wrote a bunch of articles. I participated in a bunch of conversations. I sent out reviews. I found every blogger I could think of or I could find and I sent out kits for them so they could make their own.
Again, it was a really exciting experience to discover that you could literally make footwear with just a piece of rubber or leather or whatever you had and some rope. It was the best footwear you ever wore because it let your feet move naturally and that felt good. You could feel the ground and that felt good. I just got in the way of every conversation I could think of.
Andrew: I’m looking at your old YouTube channel. The user is Invisible Shoes.
Steven: You are just mean.
Andrew: I’ve seen your foot more than I’ve seen my foot.
Steven: In the early days, I deliberately didn’t want to be in the videos. I didn’t want it to be about me. The only time it was me was when I’d say hello. People reacted to that. It became clear to me when I realized we weren’t going to sell this business in six months that to have a person linked to the business was a valuable thing so that people knew they were dealing with humans not just a mailbox was an important thing.
Andrew: Plus, you’ve got a whole thing to you. You’ve got that look with the hair and the personality. I can see how that works. How you do you pronounce the Mexican name?
Andrew: Tarahumara, they were written about in the book “Born to Run” as like the ideal runners who just run using nothing but like rubber from the spare tire and they beat people who run with big shoes. I’m looking at your most popular videos. They’re about how to make the shoes that these guys wear, how to lace the shoes that these guys wear, how to cut out of rubber the bottom of the shoes that these guys wear. So you were clearly capitalizing on the fact that for runners, they were a curiosity and how to do it was a fascination.
Steven: No question about it. Still, it doesn’t have the buzz that it did then, but that’s the gift that keeps on giving. We’re expanding now way beyond that, but that’s how it all began. We never pivoted, but in the almost eight years we’ve been doing this, there were tides that changed and we had to change the direction of the boat somewhat or opportunities presented themselves or it became obvious that what we thought we were doing was less than what was possible and we wanted to go for the bigger possibility.
Andrew: What’s a bigger possibility that you realized? I’m still curious about that for myself, where I’m not looking at big enough opportunities. What was it for you?
Steven: I’ll tell you the transitional moment. I said to Lena probably about two years in, “Wouldn’t it be nice to have a little internet business that took a couple hours a day to run, made a couple hundred thousand dollars a year?” She goes, “That’s what we have. Too bad we can’t keep it that way.”
Steven: We knew that we were vulnerable as a mom-and-pop shop. I gave away the secrets to running this business. Other people could do it. We’d be competing against people we trained. We were getting feedback from customers about what they wanted that there was more to offer. We knew this idea of natural movement that was in our periphery when we started this was a big and important and real thing. We had met a lot of people in the footwear industry who when literally we were just selling sheets of rubber and string were saying, “How can I help? You’re doing the most important thing in footwear. You’re allowing people to discover natural movement.”
We saw there was something much bigger than what we had originally envisioned, and that’s when it became clear that when I half-hoked before we’re trying to change the world, I’m not joking. The idea of natural movement is real. What happens when you get out of big, overly protective, thick, stiff footwear and let your feet move naturally, the benefits are legit. What we want to do, like I said, is create a revolution.
Andrew: So you’re saying, “I want to do something bigger than just selling rubber online and teaching people how to turn it into sandals and people were demanding not to buy rubber, but they were demanding the next step, which was give me a shoe and you had to jump in and create it. I’m wondering how you’re able to actually do it.
Steven: No idea. Seriously, I have no idea.
Andrew: How did you even find a manufacturer who would make the original sandals?
Steven: Did I mention 90% luck and the other 10% is luck?
Andrew: What’s the lucky story that led you to creating it.
Steven: Melissa calls us one day. Melissa worked for a guy who worked for her dad. She was number three in line. The guy who was in between her and her dad was in town. We got together and we also hit it off and he also loved what we were doing.
One day, these four guys who all met at Reebok 40 years ago, they had invented a new product and they didn’t want to start their own shoe company, because they had been in footwear long enough that they thought starting a shoe company was really stupid. They wanted to license the technology to someone.
They were in town and this guy Joe, Melissa’s boss, said, “You’ve got to meet these guys. Maybe they’ll be helpful.” Now they’ve got a consulting business to help footwear companies get off the ground. But be warned, they don’t work with anyone they don’t really love because they don’t need to. They’ve all made a lot of money in this business, and they’re not going to deal with the hassle factor of someone they don’t truly believe in.
I walk up to say hello, to shake the hand of this guy named Steve Liggett. He says, “Natural movement is the most important thing in footwear. I love what you’re doing.” A couple months later, they were all sitting around our dining room table or, if you’re from the IRS, our conference room table. They were just plotting out how we would build this business based on custom made minimalist sandals. It was a great idea.
We mapped out how it could be a multi-million dollar thing. People would step on a little kiosk and we’d 3D measure their foot and then figure out how to make a sandal for them that we would FedEx then so they’d have it the next day and then we discovered that each kiosk would cost us $10,000, so that didn’t work. I don’t even remember your question now.
Andrew: The manufacturing process. It sounds like their experience led you to a way to manufacture these shoes.
Steven: So they introduced us to a rubber manufacturer in Asia and a lace manufacturer. Actually, we found the lace manufacturer through a friend of mine who has a business selling elastic shoelaces, that you didn’t have to tie them, as a fundraising for schools. He introduced us to his lace manufacturer and we met that way. So it was just random things where we got introduce to people who were doing manufacturing.
This is another lucky thing., The original rubber manufacturer fired us because we were asking for a level of quality control they weren’t willing to deliver. We were talking to people who made outsoles for shoes, and those people don’t care about whether the product is made well or how it looks on both sides or if the weight of the bigger product is more than the smaller product, even though it should be because there should be more rubber in it. They just didn’t care because what they were making was getting glued on to a shoe and no one gave a shit.
So when we said, “No, this is our whole product. We need to pay attention to the whole thing.” They went, “And you’re fired.” So, at that time, we lucked out and there was a magazine article in a footwear industry magazine about some other guys who were footwear agents. They’d been manufacturing in Asia for 30 years. They had a company based out of New York. I called them up. I introduced myself. I told them what we were doing. Somehow, when they did their due diligence and called around to all the industry people they could think of, these industry people knew who we were, liked what we were doing, said good things about us and they have been our agent now for six and a half years. I didn’t have to fly over to — we’ve met people who have flown over to China and met factories and had stuff made and the stuff they’re getting made is horrible and 10 times the price of what it should be.
Andrew: And it’s your agent that led to the manufacturing. You don’t even have to go to China, they do it for you?
Steven: We go to China. Dennis goes four times a year. I was going two or three times a year. Now we have a team in China. They’ve been living there. One of them is Chinese. We still go over there to oversee things, but in terms of managing the factories and managing some aspects of production, the agent’s responsible for some of that. We’re responsible for other parts of that.
Andrew: All right. Cash flow has been a problem. You told our producer, “2014, we did $700,000 in sales, 2015, $1.4 million. We’re doubling sales. Think about how I have to buy the inventory and have it ready, and it’s just sitting there until we make out money back.” That’s a really tough cash flow crunch. How’d you deal with that?
Steven: Well, we ran out of inventory every year for the last four years, because at the end of the year, we had more people who wanted stuff than we had stuff. I have a couple of personal credit cards that don’t look like they’re personal credit cards. My credit score has gone to crap because of —
Steven: Oh my god, yeah.
Andrew: At your height, how much did you take out?
Steven: A few hundred thousand dollars.
Andrew: On your credit cards?
Steven: Yeah. I had a lot of credit cards.
Steven: But early on, we did a lot of credit card financing. We met some guys at a party. A friend of mine is a crazy doctor. It was his 70th birthday party. As we’re leaving, he said, “How’s it going?” We said, “Great, but we’re trying to raise some money. We’re growing so fast we can’t buy inventory quickly enough.” He says, “You should meet my neighbors,” who happened to be standing right next to me.
The neighbor was a guy who was helping manage a family fund that was at that time they were investing in real estate-backed cash flow businesses, so parking lots, laundromats, car washes, things like that. We’re having a chat with them and they’re saying, “We’d like to take 10% of our money and use that for a high flyer.” I said, “Oh, you’re a Nassim Taleb school of investor” He said, “How do you know Nassim Taleb?” I said, “Lena and I were involved in the day trading world in general for a while. I was doing stock system analysis in our retired mode.”
So that started the conversation. We became the first company that they took this whacky risk on, and they gave us a line of credit for $100,000. They had to beat people up in their organization to get that approved.
Andrew: A line of credit. Not even like an investment.
Steven: No. It was all debt financing. Not cheap, but we needed the $100,000. That’s what we took. Then $100,000 turned into $150,000 turned into $200,000. The better we did and the more they saw we were managing their money well, the bigger the credit line got. It’s now a $1.5 million credit line, but that’s as far as they can go. I don’t know how many years ago, four years ago, we miraculously proved that hell has frozen over by getting an SBA loan.
We debt financed the whole thing up until now. If we can debt finance for the next year, that’s really our preference, but we’re also talking to people who might come in who are private equity groups and some venture groups who like what we’re doing. We’ve kind of proven the concept well enough now that they’re interested enough.
Andrew: Meanwhile, doesn’t it burn your ass that Allbirds, the San Francisco — they raised $27.5 million for nothing — not nothing, they just launched later than you.
Steven: Yes and no. You can tell by my reaction that on one hand, it does.
Andrew: For anyone who’s listening, he shot back in his seat.
Steven: Look, more power to them. I’m really happy for them. I’m hoping that some day we can demonstrate our decision was a better decision from a personal finance standpoint, which I think it will be. They’re doing what we described before. They’re running the company with a burn rate. Every pair of shoes they sell is costing them more than it costs to run the company. They just spent a lot of money to open up a physical store in SoHo. They’ve got another one in the Bay Area. These were expensive projects, and they’re not making that much money. They got $30 million in venture funding well in advance of making that amount of cash.
Andrew: The only benefit I can see they have — and anyone who loves them, I get it — first of all, they’re really good at getting their shoes on someone like Marissa Mayer, who’s a fashion forward person in the tech world.
Steven: You just nailed it. Let’s talk about the closed chain loop of this or closed loop chain of this. Because they started out with VC funding — I don’t know if this is true — they started by running a Kickstarter campaign with the idea that they were going to do custom made wool shoes, and I think what happens is some Valley guy said, “This thing is really comfortable, but this custom made thing is not how you run a business,” and brought in a lot of money and did all the Valley things to get it working. Because they came in with Valley money, the Valley people were interested. So they got a lot of attention from that very insular group.
Andrew: I see. Yes.
Steven: I don’t know any company that’s in our space that can offer free shipping, free unconditional returns without losing money. That’s one of the things that they’re doing — free shipping, free unconditional returns.
Andrew: It does seem like they’re doing that. You for funding did something else. You went on “Shark Tank.”
Steven: Well, we did two things. We went on “Shark Tank,” where the short version of the story is we turned down a $400,000 offer from Kevin. The second thing is we just closed an equity crowdfunding raise. We went to our rabid fan base.
Andrew: Before you go to that, can you give me a little bit of the “Shark Tank” thing? Just because “Shark Tank” fans will discover this interview. If you give me like one minute on that, that would —
Steven: It’s all about you.
Andrew: Yes, give me a behind the scenes or something interesting, an interesting anecdote.
Steven: Well, when you watch the show, it looks like a conversation. That’s what we thought it was.
Andrew: I feel like a confrontation more.
Steven: It’s different than that even. Sometimes it looks like a confrontation. But it basically looks like a back and forth between you and the Sharks. Lena and I were thinking, “We can do that. That’s a piece of cake.” What actually happens when you’re on the show is something very, very different. First of all, the Sharks are unusually far away from you. So it’s a weird interaction distance. So you kind of want to yell, but you know you don’t want to yell. It’s odd to begin with.
It’s also weird seeing people you’ve seen on television in front of your face. I’ve been on the other side of that. I’ve been on television and I know what people are like when that happens. But you walk out, it’s like, “Hey, there’s Cuban, there’s Daymond.” It breeds a false sense of a familiarity that you have to combat, because they don’t know you, they are not your friends. If you act too familiar, you will no doubt say something incredibly stupid, something you would say to your friends that you would never say to any potential investor.
The biggest thing is they’re trying to make good television. This is a television show kind of about business, not a business show on television. So they’re kind of fighting with each other on who’s going to have the best line and making notes about what they’re going to do to be the coolest person on the panel. At one point, the producers really wanted me to tell this one story because it’s a funny story, and I’ll tell you what it is.
Well, here, I’ll tell you. They wanted to tell this phenomenon that after I took off my big thick running shoes and went basically barefoot, I became an All-American sprinter. I’m one of the fastest guys over the age of 55. In fact, for men over the age of 55, you may be talking to the fastest Jew in the world. I tell that, and it doesn’t get any response at all because nobody was paying attention, and then Cuban looks up from his notes and says, “What did you just say?” I said it again, and then he laughed, but nobody else was paying attention.
I instantly realized the last thing I want to do is say something funny but have them be able to cut away to the Sharks looking at me like, “What?” You have to really rein it in a very peculiar way. What you see on the show is a bunch of objections. Daymond says, “It’s just rubber and string,” not with that accent obviously. I don’t do a Daymond John impression. My response was, “Daymond, you of all people know a brand is more than the components of the product,” and sinks in his chair and Cuban goes, “Perfect.” Robert says, “What do you think about the competition?” I say, “They’re just making a big wave and we’re surfing on the wave they created.” And he literally jumps out of his chair and yells, “Why do you have a perfect answer to every question?”
Lena and I looked at him incredulously and said, “This is our business.” But you don’t see those things. You see Daymond saying it’s rubber and string. Kevin said what are your earnings and revenue, “You expect me to wait 20 years to get my money back,” and I said, “Kevin, you know for a rapidly growing company, earnings and revenue grow asymmetrically.” He goes, “That’s true, but the point is. . .”
Andrew: So they made you an offer. You rejected $400,000 for what percent of the business?
Steven: We were asking for 8%, he wanted 50%.
Andrew: They always go for half of the business. I don’t know what that is, but that’s not the way investments work outside of the “Shark Tank.”
Steven: Remember, it’s called “Shark Tank.” It’s not called Steven and Lena Tank. It’s not called Andrew Tank. I don’t know if he was making a serious offer, or if he was just throwing out a pitch to see if we were dumb enough to hit it. Either way, I’m okay with it because it made great television and it was really helpful for us. The week following the show, we did the kind of sales we would normally do in three months. We’re forever grateful.
Andrew: Do you know roughly what kind of numbers?
Steven: We did about $150,000 in the week following the show.
Andrew: Finally, I know we’ve gone over time here.
Steven: Sorry about that.
Andrew: If I’m going on, I want to spend time with you, and I’ve got a list of questions, but the only reason I’ve got to cut it off I’ve got to see Shep and Rip, my two kids. I’ve got to pick them up from school. This is the end of the day, and I want to spend time with them.
You didn’t go that way. You didn’t go the VC route. You did this thing where I saw you do a YouTube video showing your revenue. Why’d you raise money online?
Steven: The idea of equity crowdfunding is amazing. Normally, if you wanted to invest in an early-stage company, you had to be already rich. You had to have at least $250,000 in income or $1 million net worth, not including your home. That’s an accredited investor. What equity crowdfunding, thanks to the Jobs Act of 2015, what that allows you to do is be a normal person that can invest directly in a company the way previously only rich people could do. We loved that. We loved what’s referred to as the democratization of capital.
We also thought of it as a marketing play to find out which of our customers were such rabid fans that they wanted to support our growth by investing in our company. Now, we have literally a veritable army of people who are literally invested in the success of our business, over 1,100 people. And, of course, we needed the cash for all those reasons we talked about.
Andrew: Did you raise $1 million?
Steven: We raised what looks just shy of $1.1 million by just going to our customers. I feel so grateful and so responsible. It’s an amazing thing. We’re just ridiculously thankful.
Andrew: I’m going to close it out with this. I want to try your shoe is — here’s my problem with running. I’ve got to go in a couple minutes here. I should have gone half an hour ago and I can’t. My recent problem with barefoot-style running is the soles of my feet hurt. Now, I’ve watched your videos endlessly in preparation for this interview. This one video where you say, “Our shoes you could do barefoot style or a little bit of something on the bottom.” I thought, “Maybe this is my answer.” Do you think that is my answer? What shoes did I see in that video? I can’t remember.
Steven: I don’t know because I made a lot of videos. I don’t know which one it is. Your feet hurt where and how?
Andrew: The bottom of my feet hurt from — I’ll do 12, 14 miles, everything is good upper body, but now the soles of my feet are killing me the next day. I can’t even step on them.
Steven: So what’s going on is a case — there’s a couple of things. One thing is a case of too much too soon. Because what happens is as you get tired—
Andrew: Half-marathon is nothing for me, baby.
Steven: Barefoot is a different story.
Andrew: No, I’ve been doing this for 10 years now, 5 years.
Steven: But it hurts anyway.
Andrew: More recently it started to hurt. Here’s what I think happened. I was doing barefoot style. I think there’s too much direct contact with the ground. I switched to old-fashioned running shoes, they felt a little bit better, but the rest of my body didn’t work.
Steven: Bad idea. What we’ve seen in the research, it’s pretty clear that for most people when they try on different footwear, it changes their gait not insignificantly. Every different thing you wear will change your gait. The only people for whom that’s not true are sprinters and middle distance runners. You can put bricks on our feet and nothing changes because we’re just in this groove.
So I still need to get a little more info. But it’s never going to be from just your feet hitting the ground because you have these amazing things called your legs and hips that are the natural springs and shocks absorbers that absorb that shock. If you go barefoot-barefoot and I’m not suggesting anybody do this, what you learn to do, if you give yourself some time, is how to use those springs and shock absorbers again. We’ve usually forgotten how to do that.
That’s what allows people, like the Tarahumara or barefoot runners that I know and myself included, to run and walk and hike or whatever as long as you want without foot pain because you’re absorbing the shock in the rest of your body. Your feet become more flexible and responsive, and they start letting you know earlier when you need to change your gait because something is going on.
What’s not uncommon is that in the course of even a half-marathon or whatever distance you’re running, as you get tired, you lose some of that proprioceptive information and it’s harder to make those adjustments because you’re not getting the feedback and able to adapt to that. Part of it was going to be — it could be one other thing. If you haven’t been barefoot-barefoot, you might not have gotten enough training, if you will, from your feet to be running as optimally as you could.
There’s a lot of interesting research that shows most minimalist shoes are minimalist in name only and are worse for you than regular shoes. The one who did that study, Irene Davis at Harvard, she’s using our shoes in her clinical lab in her performance lab because we can give you the closest thing to a barefoot experience with a layer of protection.
Andrew: I guess what you’re saying is it’s not about having more padding on the bottom. You’re saying it’s go less to fix your stride or fix your gait or the form, and that will solve it.
Steven: We sell footwear, and when people are in your situation, the first thing I say is barefoot is best. Whenever you can do it, that’s always going to be best for teaching you what to do. Once you’ve got that locked into your body, then you’re okay as long as you’re wearing something that’s still low to the ground, still flat, still wide enough for your toes to spread, still flexible enough for your feet to bend and relax, and again be wary of stuff sold as minimalist and it still looks basically like a shoe.
Andrew: If I or anyone else am curious about the better shoe, can we call up this 800-number on your website for advice, or is it just for buying?
Steven: No, that’s why we’re here. We’ve got our customer happiness team. They’re very smart and skilled.
Andrew: Someone can call up and say, “My back hurts. What shoe do you think I should wear?” They’ll give us advice.
Steven: They will.
Andrew: The website, for anyone who wants to check it out, is XeroShoes.com. Go check them out. There are a lot of videos of Steven. I think you do good videos.
Steven: Thank you.
Andrew: You’re not afraid to let your personality out. You’re trying to be you. The two sponsors who I mentioned, remember, if you’re selling directly to anyone, whether it’s on email, phone, Twitter, Facebook Messenger, Twitter, whatever, if you want to keep track of the people you’re selling to you owe it to yourself to check out Pipedrive.com/Mixergy. And if you want to be like Steven and you need a quick website to run and be dependable, go check out HostGator.com/Mixergy.
Finally, we’re trying out a new editing process here. So if you have any feedback on it, my team wants to know how they’re doing, contact them at Contact@Mixergy.com. Steven, thanks for being on here.
Steven: Thank you so much, Andrew. It was a pleasure.
Andrew: You bet. Bye, everyone.