Xero Shoes: Steven Sashen and Lena Phoenix - Transcripts

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That's code WONDERY to get your impression kit for just $14.95. We started shipping our first brand new outsoles, and I got an email from a very sweet woman. So she had put her kit together and gone out for a run, and the laces had torn through that little hole on the side. And we discovered that a good chunk of the production run, they hadn't packed enough rubber into that part of the mold, and they were too thin, and they just ripped. And I literally sank onto the floor like I thought I was going to throw up.

I was like, we're going bankrupt. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Roz, and on the show today, how a five-kilometer run in bare feet led Stephen Sashin and Lena Phoenix to build Zero Shoes, a minimalist shoe brand that's grown into a multi-million-dollar business. I used to hate running. It always hurt my knees. And then, sometime in my early 30s, I tried running in minimalist shoes, specifically those five-fingered toe shoes that kind of make you look like a character from Avatar. But the effect on me was incredible. And from that moment on, I became an avid runner, and I never went back to running shoes with cushioning. Now, before I go on, let me add some caveats here, because there is a lot of noise around whether barefoot running is better for you or worse for you. And I have neither the scientific nor physiological background to weigh in on any of this with authority. But for some people, running with just a thin layer of rubber between your feet and ground just works. Now, before I go on, a bit of clarity around terminology.

They had a comedy competition, and they brought three comics down from New York, and we did our little competition, and then the three comics did their show, and I won the competition, and the three comics came up to me and said, you could be doing this for real. And so – You could be a stand-up comic. Yeah. Wow. And right around that time, that was when the comedy boom had just started. So this is 1983, 1984. And a club opened in Raleigh, North Carolina, and I went down there and auditioned, and they made me the House MC. So I opened for hundreds of acts, and then by the time I graduated, the guy who booked that club said to me, call me when you're ready to graduate, because then I'll give you 10 weeks on the road. Wow.

And that 10 weeks turned into 10 months. Be a stick. This is why you were a student at Duke. You were MCing this thing.

Yeah, yeah. Yeah, yeah. So student by day, MC at night, basically December of 1984, I moved to New York and

started working the scene there. And so you basically moved to New York as a stand-up comic. Yeah. And that was what you did for – and was that your plan for the time being?

Oh, yeah. Yeah, yeah. Once I started doing stand-up, it was just way too much fun, because you hang out with the funniest people in the world for a few hours. You get on stage for 30 to 45 minutes and have a blast, except for when it doesn't

go very well, which is very entertaining too. By the way, when you were performing as a comic, did you ever perform with people who

became famous, who really made it big? Oh, one of the reasons that I adored my wife is she puts up with the fact that when we're watching TV on any given evening, I'm going, hey, I worked with that guy. Hey, that was my roommate. Hey, we hung out. So I opened for Jay Leno a couple times. I opened for Cherry Seinfeld, Brian Regan. I could literally go down the list.

If there's a comic who's been doing it for more than 35 years, we work together. And what happened? I mean, what happened to your career?

Clearly, you had promise, but that didn't happen with you. You had promise. Well, oh, boy. So the comedy boom started busting in 92-ish. Yeah, and you were still doing stand-up pretty much weekly or every couple times a week, pretty much. Oh, like six nights a week. In fact, when I started doing stand-up, for the first couple years, I worked seven nights a week, multiple shows per night often. And finally, I kind of burned out and someone said, you need to take a break.

But I mean, from what I understand, you weren't really taking a break because I think around this time, you were also attending Columbia in New York and getting a master's degree in screenwriting. And I guess that sort of gave you an idea for a business, which was like making software for writing screenplays, is that right?

Right. Business? So I realized that there was an interesting way of thinking about a screenplay in terms of the different elements, scene heading, the action that you see on the screen, a character's name, what the character says, various things. And if you think about typing on a typewriter, there's cues that your motions are giving you the tab and enter key, that if the elements were smart, and knew what they were and how they related to other elements and how they related to the page, then you could do all the formatting, all the pagination, all this really complex stuff, it was very arcane,

automatically on the fly in a way that no one had ever done it. this software that you created was called Scriptware. How did you do it? How did it come about?

Well, I met a programmer who worked at PC Magazine at a comedy show one night, and we got together and I talked about my idea. And he had just gotten a new piece of software for creating programs that could do what I was talking about. And so we partnered up and started developing this program,

which took about three years. Wow. So the two of you built this program called Scriptware.

Yeah. And you were based out of New York? Well, once I realized I was going to be in the software business, not the standup business, I said, Hmm, I don't need to still be in New York. And two

months later, I was in Boulder, Colorado. So you moved to Boulder. And that's where you based

Scriptware. And how I mean, how did you finance it? I had about 17 credit cards with 0% balanced transfer fees. And that also gave you either frequent flyer points or some other bonus, even for a balanced transfer. So about for six years, I was just shuffling balances from one card

to another, racking up frequent flyer points not paying any interest. Wow. And, and so I mean, give me a sense of this. I mean, this was as again, like, I can't imagine this is a massive market, because it's a limited number of people or screenwriters. But I mean, was this a successful business from a from a financial standpoint? Was it profitable? Or were you barely kind of

treading water? No, no, no, no, we were well, we were doing okay. I think at our peak, we're not a big business, it was a million dollar business. But unfortunately, I discovered something about business that I didn't know, which is when you threaten other people's livelihoods, they don't go congratulations, you have the better mousetrap and walk away, they will most likely went back into a corner try to screw with you before they try to improve what they're doing. And so after about 10 years, one of my competitors did something devilishly brilliant to kind of lock me out of the market. Which was to make a better product? No, talk to the biggest dealer at that time and say, how much margin do we need to give you to not sell scriptware? And they had an answer. But frankly, in the last two or three years before my competitor pulled the rug out from underneath me, I was just kind of bored. And so I was looking for the next thing. And I had gotten into internet marketing at that time, this is again, 92 93 is when that all began. And so I was spending more time on doing internet marketing, which was much more interesting to me than running a software

company. What was your what was your objective, Stephen? Were you I mean, I mean, I from what I understand, like you were, you know, bolder is a great place to live, obviously, but it sounds like you were doing a bunch of different things to, I don't know, to build something bigger, to make a bunch of money and retire. Like, what was your strategy?

Yeah, you're giving me way too much credit. So I would say that because I was too old to have gotten Ritalin, I just kept doing things that I found interesting, which had me bouncing around from one thing to another pretty often. Yeah. But when I was in high school, I think it was in high school, there was a book that came out called your money or your life written by Joe Dominguez and Vicki Robin. The premise being that you want to track your expenses and track your income, reduce your expenses as much as you can, take the difference between what you're making and what you're spending and invest that at that time in T-bills. And once you're making enough money from your investments to cover your expenses, then you have financial freedom.

You can retire and live off the interest or whatever.

Yeah. And that basically was my goal from the time I was about, I don't know, 16, 17. I really, I used to say to my dad, I'd like to be retired by the time I'm 35.

All right. And so I guess you are around this time, you're doing a bunch of different things in Boulder. And you were also doing a TV show, right? Like on a very obscure cable channel called Knowledge TV. And then the show, I guess, was called Disc Talkers, where you were like, what,

it's like car talk for computers? Yeah, that's exactly what it was. And while it was, Knowledge TV was from the Jones Entertainment Network, which had a bunch of different channels. A lot

of people didn't really know it. It was on basic cable, very niche thing, but very entertaining. This was a show you did with somebody else, co-host, and you would just get calls in. I watched some of it, and most of the calls at the time were like, I've got this virus,

and how do I deal with this and that virus? Well, we will get to this, but if it weren't for that show, and I've got this virus, I would not be married to my wife.

Okay, which I guess is the perfect segue into bringing your wife, Lena, into the conversation, who's been sitting here quietly. And, Lena, I guess before, long before you met Stephen, in your 20s, you actually had started and then sold a small business, which was like a mortgage brokerage in Eugene, Oregon. And eventually, you end up in Boulder to study dance at Naropa University, which I think is a Tibetan Buddhist affiliated university. And I guess this was like what, like 95, 96? Right. And I guess this is when you first met Stephen, and I guess the two of you met in Boulder,

like through friends? How did the two of you meet? Yeah, so actually a woman that I had met, I ended up becoming housemates with because she was also a student at Naropa. And she was friends with Stephen, so she had organized a brunch for some mutual friends we had. And Stephen came with his fiance, and that was the first time we met. And I could tell he was interested in me, but his fiance was there. And so that was a do not pass go kind of moment. And his fiance also turned out to be a student at Naropa, and I had two classes with her. So they broke up shortly thereafter, and she was spending a lot of time processing the relationship and saying all kinds of horrible things about him. So I really didn't have a very

good impression of him. And I guess at some point, Laina, you start to ask Stephen for a computer

help, because he was a disc doctor. So I hadn't had television in 10 years, and my roommate and I were living in a mobile home park that required all of the residents to get satellite. And so I was flipping through the channels of the TV with sort of this anthropological fascination, because while I watched a ton of TV as a kid, it had been a really long time. And all of a sudden, I am I'm looking at the show. And I said, Alex, is that Stephen? And she said, Oh, yeah, he's got this this show about computers. And a few weeks or months later, I'm not sure I did get a computer virus, and I didn't know what to do. And I called Stephen, and I felt pretty guilty about it, because I was definitely I knew I had been keeping him at a distance. Yeah. And I moved down to New Mexico. I really loved New Mexico. So I moved to Albuquerque, and I was waiting tables and writing.

In Albuquerque. Yeah. Yeah. Yeah. Yeah. But so clearly, you guys were at this point, a couple no? No, you were just going down there to visit. But you were clear so cute clearly, you were

pursuing her I mean, no, no, no. They were just going down there to visit Oh, God, you're so cute. Yeah, clearly would be an understatement. So but Lena was on the other side of that equation. So the first time I came down, she says, you know, you can crash on the floor on the futon, but you

know, keep your hands away from me. Well, I just did. Yeah, I felt like I needed to protect myself and protect you and the friendship from, from what I thought was a bad idea. And so I think part of the reason why it took four years before we got together is that I needed to become emotionally stronger and more self-confident. And Steven needed to become a little more humble.

And, and Laina, what did you, I mean, this is a very personal question here, but I mean, you know, and this is like couple therapy a little bit. What did you like about Steven? I mean, yeah, there's lots of like, and, and, you know, Steven is, he's, he's a lot, he's a big personality.

He is. Was that part of what you liked? No, no. Um, I, he's really funny and, um, he's really smart. So yeah, but there's a cultural difference. I am from Midwestern generally soft spoken people. The first time we went back to DC to meet his parents, I was like, why are you guys yelling at each other all the time? He's like, what are you talking about? We're not yelling. This is how we talk. And I, I was just so freaked out. They're, they're, they're, they're Jews from, uh, you can just stop at their Jews.

But yes, the Northeast definitely. And basically for the next nine months, every time we talked, if it occurred to me to ask her to marry me, I would ask her, which means every time we talked and, um, eventually Laina decided to move back to baller and move in with me. And one night I said, so seriously, will you marry me? And she goes, no, you're serious. I went, yeah. She goes, oh,

well then yes. Yes. I wasn't a hundred percent sure, but I finally said yes because I knew if I, until I said yes, he wasn't going to shut up. So we did actually get officially engaged fairly quickly. Then, you know, the next time I saw him, he brought, he gave me a heart shaped tie dye

plastic ring. He bought for a quarter from a gumball machine. No, no, it was 50 cents. 50 cents.

Nice. Nice. And, um, and I wore it, which, uh, apparently told all his friends that I was in

fact the right one for him. Um, but, uh, we were engaged for over three years. I'm curious, Steven, um, I from, from what I understand you were, you considered yourself quote unquote retired when you were 38. Correct. Um, how, what did that mean? Were you worth millions and millions of

dollars? No, again, you know, my whole goal was always how can I just get enough cash to live comfortably? What can I do without a whole lot of effort? So soon after we got together is when we went to this workshop and learned about ways of generating passive income. Uh, one was real

estate based and for the sake of getting specific, we were buying VA repo notes. Yeah. What happened

is when the VA repossessed a home. Um, they would sell it at auction and they would allow the, the

VA, why did they, I don't know, I don't know about this. They repossessed homes. So, you know, you could get, um, mortgages that were, um, I don't know if they were issued or just backed by the veterans administration. So military personnel could, could do this. And if someone, um, defaulted on the mortgage and the VA took the home back, they would sell those houses at auction and they would allow the purchaser to assume the existing VA mortgage, which generally

had pretty favorable terms. You learned about this from a workshop. From a workshop, yeah.

Correct. From a workshop, yeah. Correct. There was a guy who had set up an investment company to do this, and so we became limited partners and he would buy these properties and then he would... You have to keep in mind this is in the mid-2000s. So it's before anybody who could fog a mirror could get a mortgage, it was when a lot of people were really shut out of the housing market and so he would sell these properties to people who couldn't qualify for a conventional mortgage with a low-down payment, allow them to make payments for a couple of years, get their credit in shape, and then refinance him out.

That would be the goal. So how did that work? If you guys were not wealthy at the time, how were you able to hand over the money to

finance these purchases of these homes? They weren't that expensive for one. You could basically assume one of these mortgages for $4,000 to $6,000. Wow. Oh, wow.

Okay. Yeah. Oh, wow. Okay. Yeah. So you would basically assume the mortgage as a partner and then he would buy you out

of... No, then he would find a buyer, so then they have a mortgage with us and the idea was that it was going to be cash flow for the rest of our life. And the interest rates we were getting people were actually really good, so nothing they would have been able to get on their own and very competitive. So we weren't fleecing anybody.

In fact, people were thanking us for giving the opportunity to buy a house. But it's risky because these are people who would not qualify for loans otherwise. Yes. That's also correct. Got it. Okay. But at the peak of doing this, how many homes did you guys...

20? I think about 20, yeah. Yeah. But what we didn't realize at the time was that if required, we would need to make the mortgage payments to the VA mortgage if that ever became necessary.

And it's one of those things you gloss over like... Oh, so essentially, if the person that you're renting it to is defaulting, doesn't matter. You still have to pay the VA the money. They were renting. They actually bought the product. They bought it. Yeah, they were owners. They were buying, right, by the buyer, the buyer. And if they default, it's hard because you're not a bank, you're just two people in...

They were renting.

They actually... Yeah. At a bank, you're just Boulder, Colorado.

And if they trash the place, we're responsible for fixing it up. And what he realized was that the prices of these houses had gone up so much that the best investment play was to, rather than continue to do this, was when he repossessed a house

to fix it up and sell it. It made more sense to flip it. Yeah. And so what happened? He started to... Your partner basically said, you guys have to start paying these mortgages because I'm going to be flipping these houses, but in the meantime, you've got to pay the monthly mortgage? Yeah. Yep.

And you didn't have the cash. Yeah. Yep. And you didn't have the cash. Yeah. So it wasn't as bad as it sounded. I mean, you remember those credit cards that Steven mentioned about how he financed his first company? Yeah. So it was still pretty easy.

But you had 20 properties you were involved with. Yeah.

But not all of them were being... Correct. Yeah. But these were not... Some of them were fine. And to be clear, during that time, we no longer had the steady monthly income, but we would occasionally get bursts of large deposits from what was left over from a sale, $20,000 or something.

So our income was still revenue stream-based, but it was choppy and unpredictable. So you weren't wiped out from the real estate collapse. This did not wipe you out. You guys managed to evade it, but you didn't walk away from it. Correct.

With a whole lot of money. Correct. Yeah. That's exactly right. Our partner had the foresight to change the model in a way that was uncomfortable for

us, but also ultimately probably protected us in the long run. Right. Because if you kept that model, all those sellers or those buyers were defaulted. Yeah.

Probably correct. Yeah. Yeah. Probably correct. And the values of the properties, he sold most of them while the market was still running up. Still hot. Yeah.

So it was a profitable venture for us. Still hot. Yeah. Yeah. And I say this because I know what you eventually built, which is what we're going to talk about now. But basically at age 45, Stephen, and you were getting closer to 40, Laina, I mean,

you guys were not... You had to kind of start again. It was scary for me. Yeah. I mean, I've spent a lot of my life feeling financially insecure, and so I didn't like it.

I really did not like it. Yeah. And contrary to Laina's experience, mine was always that no matter what I was doing, something would show up at the last minute. So one of the reasons that I adorn my wife is early on in our relationship, she would ask me these hypotheticals about things that she was worried about in our future and our relationship. And I would say, I don't know. I mean, I'll figure it out when I get there. I mean, I used to joke about this, but it was only a half joke at this time. It's like I was ready to go apply for a job at Quiznos. I mean, I was going to do whatever we needed to do to be able to pay the rent, but I was hoping that we would find something else that would be interesting rather than just making

sandwiches. Just a moment. Stephen discovers a new business opportunity after going for a 5K run in his bare feet. Stay with us. I'm Guy Roz, and you're listening to How I Built This. One of the biggest hiring challenges for 2023 is standing out to top talent. Job seekers are looking for everything remote working flexibility, easy application processes, and better snapshots of what your company culture is like. Fortunately, ZipRecruiter has the tools you need to catch candidates' attention. ZipRecruiter shows you candidates who would be a great match for your job, and you can send a personal invite to your top choices. And ZipRecruiter makes it easy for candidates to apply. Instead of filling out a lengthy application, they can apply with just one click. To help your job catch the eyes of great candidates, ZipRecruiter also offers attention-grabbing labels like urgent, training-provided, remote, and more.

A friend of mine came to brunch. He was a runner. Yeah. And he says, do you know there's like an entire master's track and field circuit where they do all the events, including the sprints? I was like, oh, blah, blah, blah, what? So I had no idea. Wait, a master's? Sorry. Well, the USA track and field in the master's division, they do all of the track and field events. They have marathons, half marathons, 1,500 meters, 800 meters, I mean, you name it. So it just so happens they also happily do the sprints. But that got me back into it.

And I spent the next two years pretty much going from injury to injury to injury. And you were just running on regular running shoes?

Yeah. In fact, I didn't know what to run in. So I asked the coach and the other runners, what do I train in, what do I compete in? And they said, well, train in this shoe, big, thick, stiff, motion controlled, padded shoe, normal shoe. And then we're these sprinting spikes. And by the way, buy them a size and a half too small. So it's sort of like Chinese foot binding, but that's what you need to hold it on your foot well. And I didn't know any better and did what they said. And you kept getting injuries? Yeah.

Literally anything from my navel down at some point was injured. All right. So you're struggling with these injuries and I guess what you have a, I mean, this is around the time anyone who is in a running will remember this around the time when Christopher McDougall's book, Born to Run comes out and came out in 2007. And it was a huge bestseller. I don't think initially, but eventually. No. It took a couple of years till it kicked in actually. But somebody handed you that book, right? Yeah. Did they say, hey, you know, you might want to look into this if you're getting a lot of injuries.

Like what do you remember? So my friend Simon hands me Born to Run and says, maybe there's something in here. Maybe you should try running barefoot just to see what you learn. And so to be clear, I'm not going to suggest that people run barefoot, even though it changed my life. But the gist of it is everything we're going to talk about when it has to do with our business, it's not about footwear. It's about natural form. It's letting your body do what bodies are made to do naturally without getting in the way. And so this idea of running barefoot, it's like, all right, well that seemed interesting. And it just happened, coincidentally. There was a guy in town who was doing a barefoot running workshop that next weekend. And so I thought, all right, well, I'll give it a shot. So we go out for this barefoot run and we're running on grass and we're running on trails and we're running on roads, and we're running over wooden bridges, and I was just so enthralled, so entranced with the experience of feeling my feet on the ground and experimenting to see what would happen if I ran faster but still had the same cadence, the same number of steps per minute, or if I landed on that part of my foot or the other part of my foot,

I was just really, really fascinated by the whole thing. Yeah, I wanna just interject for a sec because in the event that someone listening does not know about Born to Run, I'm just gonna briefly summarize it, which is it's a book written by Christopher McDougall, massive bestseller, basically looked at this tribe in Mexico that runs like 70 mile distances regularly, just to back and forth, and they run barefoot, or they use these very thin rubber-soled sandals, and so the argument in this book is that actually humans are made to run without cushioning, that cushioning, which was started in the 60s and 70s, that actually is not a natural way to run, but just to say that this book came out and it really had a massive influence on the way certain type of people run, that essentially lots of people migrated this idea

of running with just a thin piece of rubber under their foot. Yes, so if you're running in bare feet or something truly minimalist, doing it wrong hurts, doing it right feels great. I mean, what we have to do is get people into a state of cognitive dissonance where their own experience undermines something they believe just enough to make them curious and ask questions like, why am I putting my foot in a shoe that squeezes my toes together and could cause bunions? Why am I putting all that foam underneath my foot so I can't feel anything? Why am I elevating my heel, which messes with my posture? If we took a baby when it's learning how to walk, you would never put something on his foot where it couldn't feel, couldn't move and change his posture. So if you wouldn't do that to a baby, why are you doing it to you?

Yeah, so you basically start to run barefoot

just to kind of see what it's like, to kind of see what it's like. Yeah, so I did that first run and I was at the end of the run and I turned to someone who had a GPS watch on. I said, how far was that? And she looks at her watch and says, that was a little over 5K. This is on a track. No, no, no, just running around Boulder. No shoes.

But on a surface, no shoes. But on a surface,

presumably you're not running over like crushed glass. No, we were running on all sorts of surfaces.

And you ran five kilometers, which for you was a very long run because you're not a distance.

It may as well have been an ultra marathon. Because you're not a distance runner. No, but it was fascinating and effortless and fun. And so over the next few weeks, my injuries went away, I became faster and I was hooked on this whole idea of not even so much barefoot, but just what was going on with the shoes that I was wearing

and was that part of the problem. You had to figure out, so you couldn't presumably compete barefoot. So what did you do? What was your solution? Because you knew that the barefoot running

worked with your body. Right, well, there's nothing preventing you from running barefoot. There are a couple of barefoot sprinters around the world, but it's not optimal because a modern track surface is very abrasive. And on that track surface, it would have just ripped the hell out of my feet. So I was spending as much time barefoot or in the sandals that I started making inspired by the Tataramara who you mentioned

from Born to Run. Oh, so you started making your own rubber sandals? Right away, right away. You didn't try, because what happened with the, there were, I mean, there are Vibrams, that was what- Didn't fit. The five finger shoes, and those did not work for you.

Right, right away, right. They just didn't fit the shape of my foot. And I kept going like every six months to try them, sort of like when you go to the fridge late at night and you don't find what you want, and you come back a few minutes later as if it's a replicator. So I kept doing that and they never fit. And so had they, this wouldn't have happened. Had those things fit my feet,

we would have never started zero shoes. Well, and he was happy to be barefoot all the time. We had whitish carpet, and I was not happy to have him barefoot all the time. And so he started looking around for materials he could use to make sandals inspired by what the Tataramara were wearing. And he found some outsole material that was actually designed for shoe repair made by Vibram and bought some cord from Home Depot, bright neon colors. And he could, because this material was only sold to shoe repair shops,

he had to buy a fairly sizable quantity of it

barefoot all the time. Right. So you would go to a shoe repair shop and buy the rubber soles that Vibram, the company that made the five finger shoes, and also they make the soles of many other shoe brands. Correct. You would buy this rubber material and you would stitch your own or make your own sandals. Yeah. So it's just a sandals, a rubber sold sandal

with a cord for your toes and it wrapped around your ankle. That's about it. I mean, if you look at the oldest footwear ever found in archaeological digs, I was making something that looked like those. It's basically something to protect your foot and something to hold it on your foot. That's really all you need. And so the other barefoot runners in town asked me to make shoes for them. And so people would stand on this piece of rubber. I'd trace their foot. I'd cut it out with a pair of tin snips. I'd punch a couple of holes. I'd lace them up with some tying style that I put together and away we went and that was just a- But that was just a favor you need for that. It was a goofy little hobby.

He was trying to, yeah. File some more, to make some more. Like, he had to buy more material than he needed for just himself and so he got some people to go in with them. And then after other people saw that the shoes were kind of cool, then there was another round, and another round, and then,

Sandals, correct. Then. Sandals, correct. It was literally a piece of rubber, and then your foot would, you had the cord between your big toe and your next toe, and then it wrapped around the back of your foot. Very, very simple.

It would stay on your foot while you ran. Yeah, but it was, that strap around the back is actually really important because flip-flops actually take a lot of effort to keep on your feet, but when you just have that strap around

the back, then your toes can relax and your foot can move as intended. Keep them, yeah. Got it. I mean, that was it. That was done. End of story. Yeah. That's the end of the story obviously. Did you have any thought in your mind to turn this into a business or did somebody else suggest it or what happened? How did you decide to devote a lot of your time to actually seeing if you can make this

into a product? So the local barefoot running coach, a guy named Michael Sandler said to me, hey, I've got a contract to write a book about barefoot running called Barefoot Running. And if you treated this sandal making hobby of yours like a business and had a website, I could put you in the book. So I've built hundreds and hundreds of websites at that point. So I rush home to pitch this unbelievable opportunity to Lena who had a slightly different

response to mine. Yeah. I had noticed over the years that my husband was easily distracted and we were trying to get this SEO business off the ground and I was like, absolutely not. It's like we need to, we gotta focus.

So no, we can't do this.

It's like we need to. Yeah. And so I agreed with her. I said I wouldn't do it. And then Lena goes to bed before I do.

So once she went to bed, I would have built a website. And the idea was I'll build a website and yeah, let's do this. And Lena, you're not interested in pursuing this because you've got to focus on this other

business that is starting to, you know, that is going to be your source of income. Yeah. And so I got up in the morning and he shows me this website all proud of himself.

And what did you call it, by the way? Well, I needed a name and I just, it's two in the morning and I thought, hmm. And somehow invisible shoes popped into my head, but invisibleshoesplural.com was taken.

So I just grabbed invisibleshoe.com. Got it. And you saw the website the next day, Lena?

Yes. Yes. And I was annoyed.

This is in, this is in November of 2009. Yeah. Yeah.

Okay. Yeah. Okay. And he said, hey, look, I know, you know, we need to focus on the SEO thing, but we can use this as a case study. And I grumbled and I was like, okay, well. And at that point in time, Google was prioritizing video content for SEO. And so Steven made a bunch of videos showing people how they could make their own sandals. And he wasn't necessarily pushing the material that we were selling, but it was like, oh, by the way, you know, if you want material, we have it for sale. And so he was able to get those videos to rank very quickly because there really wasn't any competition for barefoot terms at that time. And so within a very short period of time, we started seeing that quite a bit of traffic and that there, you know, we made our, one of our first sales was in November to a guy in Minnesota for a sandal kit.

And I'm like, well, that's interesting. Because this came up on when he did a search for barefoot running and did you like it incorporate?

Did you like form an LLC right away for running? So we had a structure already in place for our previous businesses. And so we, we just kind of threw it into, into that, into that, but after, in our first year we made $114,000 and we're like, okay, this is, this is way more profitable than

into that. All right. Before we get to how you made $114,000, let me, let me try to understand what, what, what you did. We did a couple of videos out there showing people how they could make their own barefoot

running sandals, first of all. Even better. I basically showed them how to rip off our entire business model. So it's like, you know, here's where I got material. Here's how you do this.

I mean, I just gave away the entire farm. And did you, and you were not selling like ready to wear shoes. These were kits, right? It was a piece of rubber and cord and it was like, you'd send it to somebody and then they

would cut out based on their shoe, their foot shape based on their foot.

Yeah. They, we would teach them how to trace their foot and then cut out their own shoes. And you have to understand, you know, so we're not thinking it's 2009. It's the middle of the great recession. This is a terrible time to start a business where like, this is just happening. But when people read McDougal's book and they're like, well, I can spend a hundred dollars on a pair of five fingers or I can spend 20 bucks on a kit. I have to make myself, you know, we were a pretty good bet. And so it was actually really empowering for people. First they'd be intimidated, but then they'd be like, oh my gosh, I just made my own shoes. And so it was, it was really fun. So we, we did have a service where you could send us a tracing of your foot and we would custom make the shoes for you. But we liked the do it yourselfers.

They were a lot more fun to deal with.

Yeah. And, and you got, and so because of the search engine optimization that you would always, you know, be in the top 40, whatever, people who were reading that book would find out about you. You, you, I mean, it's, I'm, I'm estimating based on a hundred thousand dollars of revenue that first year, you're selling like over 7,000, 7,500 kits in that first year.

Yeah. So. Sounds about right. Lane is good. While Lane is doing the math, I'll say the other, the other piece of the puzzle is so Chris McDougal is going out and doing book signings for his book. And whenever he did a book signing, we would see a lift in sales and we joked that he was our unofficial marketing department. But then I did a really fun bit of guerrilla marketing. I would, I printed up a few thousand business cards and I would go to bookstores and find his book and then insert our business card in the book. Wow. And then eventually I made like 50,000 of those and sent those to customers and asked them to do the same thing. Did he, did you ever connect with him at that time? We met a few times at various events and had a fine time chatting.

At that time. All right.

So you are, you sell about more than 7,000 of these kits and you, yeah, well, these kits and yeah, 114,000.

So we sold just under 6,000 kits in our first full year, 6,000 kits. And how did you do that? Was it the two of you putting them, packaging them up, putting them in envelopes, you know,

going to the post office, going to UPS? Yeah. So we, we, well, the other thing we were doing is wrestling the laces away from our two cats.

That was, yeah, that was, yeah, that was really, they were hazardous conditions.

Yeah. We had, so we started out in the, on the floor of a corner of a spare bedroom and we literally had a not a short discussion about whether we should spend $35 to get a table to get things off the floor.

It was 60 bucks. It was 60 bucks. It was $60 a table.

Holy crap. Yeah. Wow. We just had a discussion about a second table. Yeah. So, but by within not very long, we had our customer, we hired to help someone to do customer service who was living at our dining room table.

We hired someone to do all the shipping fulfillment who was living in our living room. Phone line coming into your house that was customer service line.

Yeah. Oh, yeah. Yeah. Yes.

Back when there were phone lines. And, and, and so, and I mean, we should also say this point, this is a tiny market.

Barefoot running was not what you think. So the first thing that we would see is whomever was the barefoot runner in the family would buy one of our kits and then within a week we'd see an order for like five more clearly for other people in the family who just thought these were really cool shoes. And so the barefoot running world, definitely small, the world for a very simple piece of footwear that's lightweight, that's flexible, that lets your foot do its natural, that you can pack, you can stick in your pocket. That was a whole different game. And we started to realize that pretty quickly. In fact, we're walking on the Pearl Street mall, which is an outdoor shopping thing in Boulder and a pack of teenage girls run up to us and pointed our sandals and go, Oh, those are sick. Where do you get those? And we talked for a few minutes. And when they left, I turned the lane and went, we're billionaires. And you know, we just have to capture this. So it's people often like to think of what we're doing is very niche. But of course, the joke is, if you look at footwear, since the dawn of human history, the first 99.96% of human history, it looked like those sandals.

shoe is about 50 years old. How were you financing the business in that first year in 2010? You remember those credit cards? I still had them. Yeah. Did you get any loans? Not at first.

So our first year, we did 114,000 in revenue. And that was our first 12 months, so late 2009. Late 2010. 2010. And at that point, we thought, okay, this is going to be its own thing. It has potential to be a real business. So we incorporated Feel the World in late 2010.

Feel the World is the sort of the parent company.

The parent company, the parent company. Yeah. And so our second year in business, and we're not getting paid. You know, everything is going back into the business, going to buying inventory. So we went from 114,000 to 247,000 to 500,000.

Only selling rubber sandals. DIY kits. Yeah. And somewhere, yeah, like in the second year, I said to Laina, wouldn't it be nice to have a little internet based business, took a couple hours a day to run, made a couple hundred grand a year. And she looked at me kind of confused and said, that's what we have. I went, yeah, but we can't stay that way. I mean, early on, even after I built the website, Laina was still a little reluctant, reticent, you know, not quite sure about this. And we met with some guys, we are we were introduced to the

guys who'd been in the footwear business for 35 years at that time. Yeah, you met them

in Boulder. Yeah, they were actually in town to try to sell a license to a product they developed to a another footwear brand. And, and so they said, you know, we met with them and they said, we believe in you and we believe in what you guys are doing. natural movement is the most important thing. And no one's doing it. But we've been a footwear so long that we're not dumb enough to try to start a shoe company. And Laina and I both said, yeah, we're hyper optimistic and naive, but that's how things get done. So after that meeting, Laina walks into the kitchen and with the appropriate hand gesture says, I'm all in. And she's a brilliant finance operations person and I'm a product market person. And so it's been, if it weren't for us being together and it's the luckiest thing ever,

this couldn't have happened in person.

How did you, I mean, so as you got more and more sales, right? And it's, you know, you got more and more people ordering these things. Were you still just buying this Vibram rubber from local suppliers? I mean, where were you getting your material from?

Yeah, yeah. Yeah, so we were basically, so Vibram had a bunch of regional distributors. So we'd buy out all of the material in the mountain region and then, you know, I'd be making calls to distributors on the East coast. And so we came to the conclusion that we were going to have to create our own supply. And so these gentlemen, Steven referred to, put us in touch with a manufacturing agent in Korea. These guys helped us with the initial design for what was actually the first outsole specifically designed for barefoot style running. And then we naively dove into the exciting world of international sourcing and manufacturing.

So these consultants help you connect to a factory in Korea, which would start to make the rubber sheets for you and then presumably already cut and ready to go

and ready to ship out to the customer. So they made sheets there. They made, we designed a mold for a foot shaped sole. So it's already pre-made to handle most foot shapes. And all you would have to do is trim it a little bit. Got it. Little did we know that the problem with outsole manufacturers, in a regular shoe, there's a lot of layers and they all get glued together. And it really doesn't matter how accurate you are with quality control and quality assurance. So you can hide a lot of mistakes with glue. And the other thing is that the product,

having this outsole, it was our entire product. Right. The outsole is the product. The whole thing. Is the whole thing? It had to be perfect. Yeah well it would have been nice.

It had to be perfect. Well it would have been nice. So when we got the first batch in, the inconsistency was really high. So there was times where larger soles weighed less than smaller ones so they hadn't packed the mold properly where the left and the right didn't match in the same weight or flexibility. Just a lot of problems. And we had someone who'd been in the footwear biz for a long time say to us, you know,

this happens to everybody, but we're really sorry to hear that it happened to you on your first tryout. I'm trying to understand why is it so complicated to make a consistent little piece of rubber?

One of the things people don't realize is, you know, shoes take a lot of force. They have to absorb a lot of force. And the more complicated the shoe, the more places there are to hide your sins effectively. So because our shoe was so simple, a slight deviation from the specifications that we had set could have, you know, a significant impact. So we had put about $100,000 on those credit cards to pay for the cost of the molds. And we had to pay in advance of selling the material. So we had a lot invested in this. And so when I got, you know, we started shipping our first brand new outsoles and I got an email from a very sweet woman who was like, Hey, so one of the things that we had done is we had put little, um, side flaps with pre-punched holes. So she had put her kit together and gone out for a run and the laces had torn through that little hole on the side. And we discovered that a good chunk of the production run, they hadn't packed enough rubber into that part of the mold. So the holes were really flimsy. They were too thin.

to throw up. I was, I was like, we're going back roped. When we come back in just a moment, Helena and Steven pivot to a new manufacturer and a new brand name, and how they wind up on Shark Tank after having to ask, what's Shark

Tank? Stay with us. I'm Guy Roz, and you're listening to How I Built This. In 1804, Vice President Aaron Burr killed his rival Alexander Hamilton in a duel, making him a pariah and a fugitive. Desperate to return to power, Burr began to plot a daring insurrection. Hi, I'm Lindsey Graham, the host of Wondery's podcast American History Tellers. We take you to the events, times, and people that shaped America and Americans, our values, our struggles, and our dreams. In our latest series, A Disgraced Aaron Burr conspires to break off America's Western frontier and found a new, independent nation with himself as Emperor. When President Thomas Jefferson discovers this scheme, Burr becomes the highest ranking official in U.S. history ever to be charged with treason. Follow American History Tellers wherever you get your podcasts, and you can listen ad-free on the Amazon Music

or Wondery app. Hey, welcome back to How I Built This. So, it's around 2011, and Steven and Lena are facing a major meltdown with their Korean manufacturer. It's shipped out thousands of rubber outsoles, but many of them are too flimsy and way too easy to rip. Was that entire shipment useless, or was it okay in the end? I think...

You salvaged a bunch. Yeah, I mean, I don't know the exact percentages, but we were able to do some QC to pull out the ones that were definitely going to break. And then when other ones did break, we came up with a protocol for fixing the problem. And we learned, you know, I mean, it's very difficult to become a new manufacturing client because the factory is losing money on you. They're really...

Sure.

They're taking a bet.

Sure, sure. They're really... You're a pain. You're a tiny, tiny customer for them. Right. They're making... They're a pain.

Oh, it's worse. We're tiny, and we didn't know that we were tiny and didn't know that

they didn't really care about us. They didn't really care about us. And you're being a pain in the ass. You're saying, Hey, we need you to change your processes. And they're like, they're like, you're like, you're a tiny client.

Again, we are hyperoptimistic and naive. Yeah, and so we got fired by our first... They kicked you out of the factory.

Kicked us out of the factory, by our first... They kicked you out of the factory. better. They kicked us out of Korea. I swear. So we started reaching out to other outsole factories

in Korea and they'd say, oh no, we heard about you already. And you're in your pain. We don't want to deal with you. Right. Yeah. Yeah. And so where did you go? Where did you find a new

manufacturer? Right. We lucked out. There was a footwear industry magazine that we got. And the cover was a story about a group out of New York that were manufacturing agents. And so Laina reached out to them and they said, we're happy to talk. I flew out to New York and met with them. And for reasons that to this day, I barely understand, they decided to work with us. In fact, even more, what I found out years later is that they vetted us. They called around and asked about us and a whole bunch of people like vouch for us. And I could not be more grateful that I mean, we were this tiny little goofy sandal kit company and people were saying,

oh no, these guys are good. You got to work with them. And they did. They connected you to a

Chinese manufacturer. Yes. Their whole job is to work with you to find various factories to make

whatever you're making. And meanwhile, I think this is now around 2011. You guys get your first loan. It's a significant loan, like $200,000. And you got it from a private lender, not from a bank. I think it's a private family office. Also, I think around this time, like 2012 or 13, you changed the name of the brand from invisible shoes to zero shoes with an X, right? X-E-R-O, which I think is a great name, zero shoes. But tell me why you changed the name.

Well, I was introduced to someone who had been the VP of marketing for a multi-billion dollar fitness company. And we got together for lunch. And the first thing he said, he looks at my feet and he goes, I can see them. I said, yeah, but it feels like there's nothing on your foot. So it's kind of invisible. He goes, I can see them. It's like, all right. And he goes, besides, invisible is not something you can protect very easily. So we had been referred to a small marketing agency. They had all left a big agency and started their own thing. And they came up with a bunch of names that were, let's say, unspeakable and unsayable. But they had one that started with an X.

That was it. And that was it. And that was it.

And that was it.

There was something, I think, a pretty pivotal moment, which was in 2012, you guys applied to go on Shark Tank. And that's obviously a huge opportunity because it's a huge publicity opportunity. Tell me about that decision. I mean, I'm assuming you did that because it was a marketing opportunity to get this in front of more eyeballs.

Well, the first part was the people kept saying, you guys should be on Shark Tank. And we kept saying, what's Shark Tank? So that's how it began. And we actually applied originally at the end of 2011. I sent in an email with an app as an application. And then I made a video and I sent that as well. And we got a call from the show. They had 36,000 email applications. And again, crazy amount of luck. The person who saw ours, her boyfriend had read Board and Run and was a huge fan of that idea. And she says, yeah, we definitely want you to apply. And there's an application that you have to send in that for reasons that I don't really understand has to be handwritten.

Wow. Okay. You get on the show and then I've seen it and anybody can watch it. And you get out there by this point, by the time you taped it, which is July of 2012, you had sold in two and a half years over $650,000 worth of these sandal kits. And you go on there with a valuation of I think $5 million. That's what you value the company at. And suffice it to say, the sharks are not particularly generous and not really super interested in this brand. You did get one offer from Kevin O'Leary. He asked for half of the company, 50% of the company, for $400,000. And obviously, you turned that down. I'm just curious. Did you walk out of there disappointed or did you walk out of there thinking, oh, well, well, that's fun.

Right. Yeah. And I think Robert said this in his book. People think that it's a business conversation that happens to be on television, but it's actually a television show that happens to be about business. So you asked how we felt coming out of there. And I think the answer is sort of in shock because it's such a surreal experience. And honestly, the most nervous during the entire process was we had a Shark Tank viewing party and we were listed as the first segment, but they actually aired us last. So when they finally aired our segment, it was like, oh, thank goodness. But you're also wondering how are they going to make us look? Are we going to, because you haven't seen it, you don't know what's going to happen. And so we get through it. We feel like, okay, they gave us a nice edit.

No, no, no, no, no. On the phones, nothing happened. But immediately, what was happening with our internet traffic is it blew up. The internet traffic. Yeah, we had 270,000 visitors at one time for about 12 minutes.

Wow. The internet traffic. Yeah, we had 200.

Yeah. And then about 45 minutes after the airing, then the phone started blowing up as well. And the orders just started pouring in and we did 10% of our lifetime sales volume in that week.

In that week. Wow. And so in that time after Shark Tank, what did you start, I mean, did you start working on sort of ready to wear sandals? I mean, you were still doing kits at the time, but did you start to think about, okay, now we've got to go to the next thing? Yeah.

So through a coincidence, we met Dennis Driscoll, who had been the former head of global design and development for Crocs. And it was kind of a handshake agreement. So we paid him more than anybody else at the time, but still a 10th of what he'd been making. So it started out, Stephen had plenty of ideas. Dennis really brought the knowledge of how to translate those ideas into actual shoes. So we wanted to do ready to wear, and Dennis was able to- Ready wear sandals.

Right.

Yeah. Ready wear sandals. Right. And same factory in China could make those?

Well, when we came out with the Z-Trail, which had a multi-part sole and- That's the sports handle? Trail running sandal, yep. Yeah. We did need to move at that point in time to a more competent factory. And we had some interesting lessons. We learned that our first factory had actually patented our sandal design in China. So that was something we had to deal with.

That's the sports handle? Trail running sandal, yep. Yeah. Oh, they patented it in China, which you had, they took your design of- Yes.

Oh, would you design them? Yes. Wow. Yes. It cost us some money, but luckily we had already shown it publicly in advance of them doing that, so that allowed us to get the patent back.

Yeah.

Yeah. So anyway, adventures in manufacturing. So these are things that when you're naively thinking, how hard could this be? You never imagine the kind of stuff that you're going to run into and the amount of money that's going to cost to deal with some of this stuff? Yeah. Yeah.

Yeah. Yeah. You definitely don't imagine how much money you're going to spend on legal bills. Right.

All right. So you are still focused on sandals at this point, 2014, but you're starting to, obviously, at this point, and I guess maybe it was Dennis Driscoll's influence or his experience, you decide that you are going to make a closed toe running shoe, a zero drop, and that means that the heel and the toes are the same level running shoe. So basically, a closed shoe with a rubber sole, and that's it. No cushioning, nothing. Correct. Why did you decide? I mean, it seems obvious, but was that the direction you were headed in anyway, or was there somebody or some reason why you decided to pursue that?

Correct. We have a very interactive relationship with our customers online, and they are just constantly telling us what they want next. And again, we will think of ideas on our own, but a lot of what has driven the growth of our product line, and it's now, what do we have, 34 different styles? Something like that. They would just tell us, again, after we're making sandals, what are we going to do when it's winter? What am I going to do with the office? What am I going to do if I'm road running

or trail running or fill in the blank? Something like that. What can I wear with a duress?

Yeah. And so you started to design closed-toe shoes, and how did you design them? Who designed

them? Well, let's start with our sandals where we were doing the custom-made sandals, and people were sending a tracing of their foot. So we had about 5,000 foot tracings, and we mapped those out to come up with the right shape for a shoe. So most shoes have pointy toe boxes that squeeze your toes together, and we were seeing what human feet actually looked like. So we were literally taking these tracings, putting them on a piece of foam core, tracing around them, marking dots where people's toes were, and just doing the closest thing to a big data play just to figure out the shape, to make something that actually works with a human foot. Dennis was designing the shoe, and so Dennis and I would just go back and forth between either ideas of his or

ideas of mine until we ended up with something that we liked. And we had to educate the factories and the development offices about how our customers wanted shoes to be, because there is a standard way of doing things. And we'd say, we want this. And then they would be like, oh, well, they would just put in a stiff heel counter, for example, because that's what's traditionally done, but that would be abrasive and uncomfortable. And so we had to go back and say, no, no, no, you need to take this out. And they're like, but that's not how it's done. So there was just a lot of heavy lifting. And so that was a big... It took a lot of time.

You were still a pretty small business when those shoes came out. I think that year you did about 3 million in revenue, obviously, impressive growth, but still a small shoe brand. How were you getting the word out about these new closed-toe shoes? I mean, obviously, you had a customer base who had bought the sandals, but at this point, there are other brands that are making, quote unquote, minimalist shoes. Some of the big players

were doing versions of it. So how did you get the word out? The biggest thing was simply word of mouth. And whenever I can find any opportunity to create some sort of content or to engage with some audience or to find someone who has leverage over their own audience, that's what I'm going to do. And as the business has grown, our ability to do that has grown. So our email list is just shy of a million people. And we have a list that we call our inner circle list for people who raise their hand and say, they really want to help. And it's like 70,000 people. We reach out and ask them to do something like vote on a new color or go to some website and comment on a post. Tens of thousands will

go and do it. So people just want to be helpful. And really, this is entirely direct to consumer. Up until a few years ago, but into 2016, 17, 18, you were not in brick and mortar stores.

Right. We were in a few small independent running shops, but yeah, we wanted to be wholesale. That was the model. But, um, uh, Steven had the internet marketing background. It was so valuable because it allowed us to have the conversation with our customers. And, um, we expected that, um, you know, the goal was always that, that we would transition to wholesale. Um, however, entirely just add that to the mix, add that to the mix, but that, that would be how the business

would really take off entirely. Just add that to the mix. Yeah. One of the things that, that I think is, I'm curious about is as you, you know, got more and more attention. Um, did you find that some of the big competitors were making life hard for you or trying to compete with you? I mean,

especially as you were getting into retail shops, you know? Well, there are a couple of things that we've seen. We go to trade shows and I walk around and see the big companies go, Hey, that's an idea that I came up with three years ago. So there's a lot of that that goes on in the footwear world. In general, I took it as a good sign. When I started seeing big companies take ideas, design ideas that we came up with, um, when we were first trying to to get into retail. We had a significant order that was supposed to get placed one day by a major, major retailer. And at the end of the day, the order didn't come through. And we called and said, what happened? And from investigating what we were told is that one of our multi-billion dollar company coincidentally had reached out and said, we don't want that product in your store because they had been tracking sort of a iconic store in Boulder that they used to see what's happening where we started outselling them. And that was a very interesting thing. And again, we were what, like a two, $3 million company at that point.

now, that's a really good sign. And I guess you guys become profitable, not hugely profitable, but profitable in 2015. And a few years after that, you're going to take on your first outside investment from a company called, an investment group called TZP. But before we get to that, I want to ask you about the periods of leading up to it, because not only were you going to have to deal with a pandemic, but there was also like a trade war happening with China, which essentially

means that the tariffs on imports are going to go way up, right? Yeah. Yeah. Yeah. So we actually, the trade war was a really big challenge for us because it started, there were no supplemental tariffs applied to footwear at first, but by the time they announced them in September of 2019, we had already placed a multimillion dollar order and suddenly we were going to have to face massive tariffs, like half a million dollars in unexpected. Wow. And so because they were, you know, first it was one amount announced and then another amount threatened. And so we're scrambling to work with our factories. Can you accelerate this order to get it in before

this second round of tariffs come in? So massive tariffs. And just should interject to this point, because you were really on the line here, right? Because you also owed a lot of money to different lenders. Like people in banks who'd been loaning you money over the years, and they were, I think

some of them were starting to get antsy, right? Right. By 2020, we had personally guaranteed $5 million in debt financing, a combination of SBA loans, this family office, as well as short term lines of credit. And so, you know, my investors at the end of, they're all all upset about how much inventory I have on my books at the end of 2019. And then 2020 rolls

around, China factories start shutting down. And you're in a great position. You're in a great

position. All of a sudden, you're in all this inventory. Exactly. I'm a genius, you know. And so we, you know, Steven has an amazing ability to turn inventory into cash. So I am never afraid of having too much inventory. But I am terrified of not having enough. Because if you don't have inventory, you have nothing to sell and you have no income. So you know, we survived the trade war, we were in good position for the pandemic. But I, you know, $5 million in debt. It's a lot.

It's a lot. That's, that's scary. That's hard, right? You lose sleep over that.

Well, you become numb to it. I mean, after a half a million dollars, it's like, yeah, well, whatever. Yeah. Yeah. What are they gonna do to me? Yeah, exactly. We didn't own a house. We, we, right. But I, you know, at that point, we had 30 or 40 employees. And you feel incredibly responsible for these people's lives and their families and their health and well being. And I just felt like we got lucky twice. Both of these things could have put us out of business.

But I just can't risk that happening again. Whatever. Yeah. Yeah. What are they gonna do

to me? Yeah, exactly. We didn't own a house. Sure. You needed, you were looking for some kind of stability and presumably right between the demand that from, from, you know, consumer

demand, and then also just the debt, right? You, it made sense to bring in an outside investor. Yeah. I mean, I, when we got the offer from TZP, I am so glad we took it because then the supply chain crisis hit. Yeah. And so all of our best sellers were out of stock and we needed a million dollars to spend on air freight so we would have something to sell. And we would not have done that

if we had not taken that investment. Yeah. If you didn't bring in. Yeah. And so essentially, I mean, it's, it's one of these, these paradoxes, right? Because the business is doing great. You're doing gangbusters, but at the same time, like if you don't have the line of credit and you can't

finance the inventory and it can even with great sales, it can collapse. Yeah. Even more. I mean, the greater it is, the higher the probability of collapse because you're always gonna end up over leveraged in some way or subject to some weird change. I mean, I think of companies that have one major wholesale account. If that one account, if anything changes for that account, they're dead in the water. Yeah. So it's, you know, there's so many things

that can impact a business especially when it's growing quickly. Yeah. So now, so now with an outside investor involved, does that enable you, I mean, has that enabled you now in the, you know, now we're two and a half years, three, almost three years since you took that investment. Has that enabled you to do things that you couldn't have done before? Like in terms of, obviously, you've expanded your line and you're growing. I think you're going to hit almost $50 million in sales, right? You're on target for that this year?

Yeah. Well, we did $48 million in net revenue, well, net sales in 2022. And so the answer is absolutely yes. So the first thing is it allowed us to buy more inventory. We actually didn't know how much we needed because we kept selling out. So you can't figure out how popular a product is if you sell out before the demand starts to peter down. And so first it allowed us to just really stock up and start to figure out what the demand was. For a long time, it was just Dennis designing shoes. Now we have three designers and three developers, and we were able to bring in much more skilled financial help. I wonder to myself, how did we even survive? The whole thing was held together with spit and swizzle sticks, and it was incredibly difficult and stressful. And so having the private equity investor has allowed us to really create a solid infrastructure underneath what we're doing.

platform for even more growth in 2022. The global athletic footwear market is enormous, over $160 billion by the end of this decade. But Barefoot Shoes is a fraction of that market. And a lot of times when you're starting a business, people say, well, it's a tiny market. It's only going to be worth $300 to $400 million. There's going to be tons of people trying to eat at that, trying to slice that pie. So what's your response when people say, this is still a tiny market. And are you essentially trying to position yourself to be the dominant player

in that market? Yes, we're very close to actually being the dominant player in this space. And we don't want to pigeonhole ourselves in this whole idea of the Barefoot market. Because again, the customers that we have, the number who know nothing about this idea of Barefoot or minimalist or whatever, they just experienced the comfort and benefits of our product. And we hear about people who are wearing our shoes for 20 different reasons. And so we have a number of professional athletes who are living in our shoes. We have a number of music celebrities who are wearing our shoes when they are not being seen on stage because they're being paid by a big shoe company to wear those shoes. We have parents of kids with ADD and ADHD

who swear by what we're doing. Yeah, you know, you can call us delusional entrepreneurs, um, because we genuinely believe that this footwear is better for you. And while we may be pushing the boulder uphill a little bit, we don't think we're going to be doing that forever. We were doing, you know, there are so many easier ways to make a living than being in the footwear industry. Like if you're thinking about starting a shoe company, I would just say run as fast as you can in the other direction. But which is what everybody told you when you started it. Right, exactly. Yeah, it's good advice. But, um, but we're still here because we believe so passionately in what we're doing. Our customers are so evangelical about, you know, they are, you know, our frontline, marketing army. The number of

I've seen that and just what we told you when you started it. Right? Exactly. The number of I've seen it. I look, I don't think it's any secret. I I'm a wearer of your shoes and started wearing them three years ago and I have several pairs and every time I go on a trail run or something, I see somebody there wearing them, it's like you're in a secret society or often people say, where are those shoes? And I have talked, people have asked me about them and you aren't even paying me. No. Look, your goal was, Stephen, your goal was to retire at 35 and have passive income and things have changed to your hobbies. I mean, you could sell the rest of the business and truly actually be retired and totally financially set and indulge your various interests

and you could do that now or paying me. I'll tell you, I'm sort of wrestling with this to be honest. I'm 60 years old and on the one hand, I want to be part of turning this into a multi-billion dollar company as long as we have all the people in place so that I'm only doing the parts that I like doing and that I enjoy doing, that I do well. On the other hand, I'm 60 years old and I don't want to work for the rest of my life. And frankly, I had a, pardon me, it's the

first time this has happened.

You had a health scare. Yeah. The last, Jesus, it's the first time this has happened and I'm not sad, it's just hitting me. So yeah, I had a health scare and I could not be more grateful for it because it really brought into focus, A, how precious life is and I just find myself just overwhelmed with how beautiful and wonderful and lucky and grateful and every positive word you can think of. That's been my experience for the last six weeks but it also made it very clear why would I spend a whole lot of time making my life difficult instead of enjoying it with my wife and my dog and being helpful. And ironically, I might be more helpful for this

movement when I'm not the CEO of a company where people think I have a conflict of interest.

Maybe like the brand ambassador. Something. There's got to be a way of doing it where Lane and I can participate in a way that's maximally using what we're good at without taking over our entire lives, which

is what it's done for the last 13 years. And that would be nice.

Yeah. Well, and I think the silver lining of this health scare is that Steven had to not open his computer for a week, which during the entire 23 years that we've been together has never happened. Yeah.

And so... It was awesome, by the way. Yeah. I mean, it's such an important perspective, you know? And remarkable that in... I mean, here we are in 2023 and you've got this brand that has really made a huge impact in the world of fitness and running and, you know, even lifestyle. Yeah. Do you... First to you, Elena, how much of what's happened with this brand, do you attribute to the hard work and the skill and effort that you put in? How much do you think has

to do with luck? You, Jim? Yeah. That is an excellent question. So I would say I can't really break it down that way because it's sort of 100% luck and 100% hard work. But it's really 100% luck. There's so many things. You know, if Chris McDougal had never written that book, if Steven wasn't an internet marketer, if he and I didn't have complimentary skill sets, I would never have been able to create this business without him. He would never have been able to create this business without me. So without luck, you know, there are just so many ways this could never have happened or had a premature demise.

Yeah. What do you think, Steven? First of all, when I listen to your show, this is my favorite part because this is something that I think people over... Well, look, we know from psychological research, people over value their own role in things that go well and undervalue it in things that go badly. When I was in film school, one of our teachers was the now late director, Milos Forman, and someone said to him one day, how do you make a good movie? And pardon my bad Czech accent, Milos said, well, making good movies, he's 90% casting and the other 10% is also casting. And so that's how I think of business. It's 90% luck and the other 10% is also luck. And then just like Lena said, there's a whole separate 100% where it's 90% working your butt off and the other 10% hopefully being smart enough or finding someone smart enough to know how to put out the fires that started overnight despite the fact that nothing changed since yesterday. So, you know, hopefully with a little gratitude, humility, and not trying to reinvent a wheel that put itself together in ways that I can't imagine, it's going to

be interesting to see what happens next. This is Steven Sashin and Lena Phoenix, co-founders of Zero Shoes. By the way, we have a happy update for you on Steven's health. Since we spoke, Steven heard back from his doctors and we're happy to report that after minimal treatment, it looks like Steven is now in the clear. Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is hibt at id.wonderie.com. If you want to follow us on Twitter, our account is at How I Built This and mine is at Guy Raz. And on Instagram, we're at How I Built This and I'm at Guy.Raz. This episode was produced by Kira Joaquin with music composed by Ramtin Arablui. It was edited by Niba Grant with research help from Catherine Seifer. Our production staff also includes Elaine Coates, John Isabella, Casey Herman, Kerry Thompson, Alex Chung, Chris Messini, Carla Estevez, and Sam Paulson. I'm Guy Raz and you've been listening to How I Built This.