AND 1 Footwear, and my adventures in it
“When you are using your own product, and are a consumer of it, you have all these insights that no one else would ever have.” Jessica Livingston of Y-Combinator talking about AirBnB founders, who were renting out a room in their place to help pay their own rent.
So, at the age of 21 — during my final year of undergraduate business school — I becameone of the co-founders of AND 1, a company that grew to do over $200 MM in annual revenue as a basketball clothing and footwear brand.
I’ve put up some reflections about my thoughts from the time here — https://tomaustinand1.wordpress.com.
I’ll add to it from time to time, but if there’s anything you want to hear about, let me know.
But first off, if you’re gonna ‘start something’, you are gonna fail. And if you are going to be at all successful, you are going to fail a lot.
AND 1 almost failed at least a dozen times. We faced hardships and lost people close to us. But, we survived, because we had each other’s backs. We weren’t always nice to each other, but we were, in the true sense of the word, a family.
I once had a film school professor who always taught that for each project he ever had success on, he had to endure 300 hundred ‘no’s’ or rejections first. So, as long as he was out pitching people who could say yes, he was very happy to be getting ‘no’s’ as it meant he was on his way.
Take a second and re-read the failure timeline. We nearly ran out of money. Our first idea didn’t work and had to be thrown away. We argued.
Our first ‘big accounts’ never paid us. Our first ‘overseas’ apparel item was held in customs and instead of being delivered for the Christmas season didn’t arrive in the US until Spring.
Our next major apparel shipment was four months late due to a civil war in Bangladesh.
We face a half-a-dozen lawsuits.
Our first endorser — someone we had bet the company’s future on — twisted his ankle in the pre-season of his rookie year, and swore he’d never wear our shoes.
Our first shoe failed. Our second had to be recalled for a black lining that was ‘rejected’ in quality control, but which the factor snuck into the shoe anyway — and which then bled through onto the material.
Failure and near-death are facts of life for start-ups.
This is a rule that is definitely true for nearly all entrepreneurs. The best thing to do is to just get out there and keep asking and growing and learning — getting those no’s as quickly and intelligently as possible.
AND 1 faced many more challenges than just the above, but they are just some of the big ones, but we persevered.
So, does nearly every start-up.
Jawbone (a hardware manufacturer for IoT devices) had a very hard time raising any money. No one in the Valley would back any tech start-up. No suppliers wanted to help them build their technology. After three years, they won product of the year in Time, but their product launch bombed and they had no sales. They ran into the tech bubble and had their doors chained by their investors and had to lay everyone off. They had $60k in the bank and $600k in debt. But they took the company back, fought on and made some amazing products (with many more near-deaths later). And they have, I believe since I originally posted this, shut down and spun off another company.
Group-on floundered for over a year trying to launch a company like indiegogo or kickstarter, before those companies existed. No one wanted to join — and couldn’t get to scale. Had raised $5MM, but investors wanted their money back. The founder had the idea for the ‘daily deals’ model, but the team thought it was dumb, so he had to code the site himself in WordPress. Eventually, it took off and they became one of the fastest growing companies in history.
Reid Hoffman pitched Linked in to a bunch of his friends, and about 2/3rds thought it was dumb. They felt the network would have close to zero value until it surpassed 1 MM users and that made no sense. Reid liked that.
AirBnB couldn’t raise money, and their original idea of renting out air mattresses in your home felt like it was going nowhere, so they created Presidential Candidate cereal boxes to keep the lights on.
Ben Silverman at Pinterest failed on several business ideas over many years, before learning that he wasn’t that good at any one thing. Then, decided that he had to be 100% all in and ship any product as soon as there was one thing worth having in it. This is how Pinterest was born.
Cloudflare (over $180 MM raised now) struggled for a year to build the basic product, then invited in 10 friends. The site crashed for all 10. Then, they built round 2, and the same thing happened. In round 3, 8 of the 10 crashed.
Nearly everyone of these founders says that you have to want to work on this idea for at least 8–10 years. Many also say that the idea has to be big, challenging and hard enough to attract top talent.
One the traits that I hear (and respond to the most) is that you have to be trying to do something exciting enough for the best talent (or really top talent) in an area to want to work on it.
Another trait I hear, is that you have to be very, very stubborn in fighting for what you believe in — but also willing to ‘pivot’ if and when there is a better idea — that is a very hard challenge.
It is a very hard decision when to keep pushing forward and when to change your path, and often one of the most critical ones for an entrepreneur.
We did this at AND 1 — at least twice. I can’t take credit for being a visionary, but I was persistent. We all were. Here’s my basic scorecard on myself (in hindsite). Maybe I’m overly generous, maybe I’m not.
AND 1 likely would never have reached more than $20-$30 Million if we had stayed as an apparel only brand. I also believe we would never have reached the level of success we did without me running footwear. I had a unique set of skills, experiences and passion that made me very, very good at this job.
From nearly the time we sold our first T-shirts, we knew we wanted to move into footwear to reach a larger revenue base.
But shoes are expensive to make. A full set of production molds can cost several hundred thousand dollars, and the marketplace is generally less forgiving of ‘new brands’ on higher price items.
That’s why we decided early on to copy the playbook from Nike and others. Nike had originally been a small, running shoe company using Bill Bowerman’s ‘waffle iron’ outsoles (really made on waffle irons) and selling shoes out of the back of Phil Knight’s car.
Their launch corresponded with the ‘running and fitness’ boom in America. Then, they signed Michael Jordan early in his career. Jordan and Nike became a global phenomenon and each made the other more successful. One of the ‘bibles’ around AND 1 in our early days was a book called ‘Swoosh’, detailing Nike’s founding and early years. There was no internet, but we read as widely as we could around our domain specifically, and start-ups generally.
Very early on, we had adopted this strategy in apparel. The first time we wanted to sell an ‘expensive’ T-shirt, we looked to get Larry Johnson on-board as an endorser. Larry Johnson had played on the ‘bad boy’ UNLV ‘Runnin-Rebels championship teams. He had a 250 pound frame, a gold tooth, and a national celebrity status — after his Converse shoe ads as ‘Grandmama.’ They had taken the ‘fear’ white America might feel for a chiseled African-American (a fear that should give our nation pause for deep introspection) and made it work for them, by making Larry Johnson funny, and so — non-threatening.
Only, Converse didn’t have an apparel line, they only had footwear. And Larry Johnson’s contract only forbade him from signing with any other shoe company. We weren’t a shoe company at that point.
And so, Seth, Jay and I had flown down to meet with Larry and his agent. We thought we were smart and slick, but we were still ‘hi-fiving’ in the back of the stretch-limo he sent to pick us up, and our mouths still hung open as we listened to Larry tell stories about his college days.
AND 1’s First Endorser, Larry Johnson.
That first sweat-shirt featuring Larry had done horribly. Guy Harkless, one of the 4 co-founders, had done a wonderful job getting a high-quality sweat-shirt made over in Taiwan. Only, we didn’t know that there was an apparel quota for this class of goods, and we weren’t able to deliver the ‘Holiday sweatshirt’ until Spring. That cost us dearly, but we rebounded.
We still believed that a ‘marquee’ shoe would be nothing without someone to wear it. Someone famous and popular who kids look up to, someone who elevates your brand. Or so we thought.
That’s why when we wanted to move into footwear, we asked a working NBA scout (shout out to Steve Rosenberry) who was instrumental in building out our ‘team division’ (a division selling AND 1 product into colleges), to make some calls and find out who was the best player in the draft. And we started watching game film and comparing notes on who would be the best.
We all thought we were experts. If you had to boil it down, we believed that kids liked smaller players with flashy games because they were more relatable. Most kids couldn’t grow up and be a seven foot tall, three hundred pounder — but a six foot guard with style and panache, that was within reach — at least that was the illusion.
We basically had a short-list of Allen Iverson or Stephon Marbury. Those were the two we wanted. Our scout told us about Kobe Bryant, a local kid who was a six foot six inch center on his local high school team — but was planning to make the jump to the NBA and play guard. We had even seen him play once or twice at the local Jewish Community Center. He was that local.
I watched one or two high school games and immediately announced that Kobe Bryant should go to college for a minimum of two years. I said he wouldn’t be able to guard a single player in the NBA, and it didn’t seem like he had ever even gotten into a defensive stance. Kobe Bryant went on to be one of the top 10 players in NBA history, but he was off our list.
1996 NBA DRAFT
At AND 1, we (all the senior partners and our NBA scouts) all loved two players — Stephon Marbury and Allen Iverson. Iverson was the more courted of the two — heavily sought after by both Nike and Reebok. Reebok was Nike’s number one or two challenger back then and we got word that were going to give Iverson a huge deal.
He would go on to help them sell billions of dollars of shoes, be one of the most famous endorsers after Michael Jordan, and have the perfect AND 1 personality. But, we were priced out.
So, we were left with Marbury. Now, there was a lot to love about ‘Starbury’ as he was known. He had been a New York City playground legend. He had grown up in the Coney Island projects and been ‘anointed’ very early on as one of the best prep players in the country. He had huge credibility in one of the largest urban markets in the world. He was a playground phenom, and he had starred in his one year of college basketball at Georgia Tech.
The deal was expensive. I don’t remember the exact terms, but it likely included millions in guaranteed cash to be paid over 10 years, a percentage of all AND 1 sales, equity in the company and — probably the left kidney’s of all the partners.
None of us had ever made a shoe. The first thing we did was all draw a shoe — what we thought would be a great shoe.
They were all horrible, in fact, they were so bad, that you probably wouldn’t have known they were shoes if we hadn’t told you.
Now, at most companies, the ‘footwear design director’ is a trained industrial designer. Someone who is really good at design. But, we weren’t most companies.
So, we asked Jay to lead the initial efforts. He was also running a $15 Million apparel division at this time.
We also didn’t know any shoe designers, or how or where shoes got made, or what a last or mold was — and we had maybe 5–6 months to get it all done, even though a typical marquee shoe may take 18–24 months to design and develop at a larger company (at least at that time), but we were undaunted.
Footaction had agreed to give us a $1.5MM to $2MM order for this shoe with Marbury.
So, Jay set off and got the shoe designed. And it was my job to get it made. And the fact we both did our jobs is, in and of itself, fairly amazing.
This is what basketball shoes looked like at the time. They were big and bulky and ‘built to protect.’
SLAM MAGAZINE PAGE HIGHLIGHTING NEW TOP SHOES IN !((^
The AND 1 shoe wasn’t awful, but it was ‘me-too.’
LESSON: Start-ups NEVER win with a ‘me-too’ product (at least unless they can flip the distribution channels or radically change the pricing, or some other major element of the business mix.
The first AND 1 shoe was derivative of all the other basketball shoes, and lacked ‘cool’ or ‘personality.’ What’s worse, our logo — which was a huge asset big on clothing — was likely way too prominent — and people didn’t like it.
But, we had to deliver, and so we filmed our second ever television commercial, and we waited.
But then, Stephon Marbury turned his ankle five minutes into the first pre-season game he played in them — and said that he would not wear our product on court, that the shoes were to blame. What’s worse, was the print ads we were running at the time.
And there were more 3 AM calls. And yelling. I had managed the production and sourcing on that first shoe — and Marbury was convinced that there was something wrong with it — and my partners demanded that I fix it.
And Footaction was going to cancel the order if Marbury wasn’t going to wear the shoes. And so, I made a bunch of calls, and then flew out and got molds of Marbury’s feet and met with experts, and made a custom ‘last’ just for Marbury and we got Nike shoes made with our logos on the side just in case, and I tried to find out what was wrong with the shoes.
Only, there was nothing wrong with the shoes. We were just a young brand with a different looking product, and he was a nineteen year old who wanted to play his best.
And the shoe tanked (that’s bad). And it looked like our board may have been correct, and our business was dangling over a precipice.
But our apparel was still selling great, and kids were still tattooing our logo on their bodies, and so Footaction was willing to give us another chance. Just one. And this time we really would be betting the company.
My partners did what anyone would do — they began a search for an experienced head of footwear to lead the next shoe.
And then they did what almost no one else would do, they turned to me. I was a twenty four or twenty five year old kid. I had been designing great trash-talking t-shirts since we started and running all overseas sourcing, but I was still a kid.
A kid who loved and knew basketball culture deep into my bones. A kid who loved the game, who had shopped for sneakers every week and bought a pair at least once a month for nearly 10 years. A kid who knew the market.
And they handed me the keys to the future of the company, and I was nothing but excited.
I had a different vision — and I believed 100% that I would be successful. I had no, with the conviction of youth, no doubts. I wanted to build the lightest, fastest basketball shoes on the market. I wanted to use mesh and reflective materials. I wanted shoes that made a statement.
The first thing I did was craft a set of design principles. These principles were:
- Light-weight and fast. I wanted innovative materials and cool, sleek designs that looked like race cars.
- Simple design. I loved the Asian aesthetic. I wanted every shoe built around one core principle or idea. I wanted understatement. No huge logos. No ‘busy’ designs.
- 360 degree design. Most shoes were still completely symmetrical on the ‘inside and the outside’, and nearly all shoes had the bottoms (the midsole and outsole) separate from the uppers. I wanted the shoe to be designed both inside and outside to be unique. I thought it was a cop-out to only design half a shoe and then mirror it. And I wanted the colors and patterns to wrap all the way around the shoe.
- “God is in the details.” I believed that we wanted to have small, details — what I called “jammies” that finished or polished each shoe.
- “How will it look small?”. Design patterns that allowed for strong, striking color blockings that could be visible when the shoe was 1 inch tall on your TV set. This may seem to compete with number 2 at first, but in actually it didn’t. Not really.
- The next thing I did was to get on a plane and fly out to meet our lead apparel designer — shout out to Lantz Simpson. Lantz was a true hooper, he played in high school and college — and a super talented graphic and apparel designer. He had been the best designer we had worked with in apparel.
But he had never done a shoe. That made us a perfect match, because neither had I. So, I camped in Lantz’s downtown LA loft (he was also a lead designer for, and on his way to being a co-owner in dada at this time).
And I stayed there — living in the loft that served as Lantz and his business partner Lavetta’s home and office for days, and gave Lantz ideas and suggestions and comments and compliments and concerns — and we created a shoe.
Our idea was simple — we would build the lightest weight basketball shoes ever. Running shoes used all kinds of fabrics and colors and were cool and fast — race cars for your feet. Basketball shoes were big, blocky, black and white and navy and all leather.
But we knew there were millions of players out there who wanted something different.
The shoe had to be cool. I got a visa, got on a plane and moved into a factory in Taiwan (shout out to Taichung). And I lived there for four months.
We had a production agent at that time who had been recommended to us by Footlocker. They ‘helped us’ get going.
I toured everything — the factories, all the sub-supplier factories and the material providers — and I learned how to read a blueprint, how shoes were made and what worked and what didn’t.
There was only one big problem, the factory didn’t want to make the shoe we had designed, and neither did the agent, and neither did the second twenty year footwear veteran we brought in. They said basketball shoes were big and bulky for a reason — to protect a player’s feet and be durable enough to last.
So, I talked them into making some samples — I promised them we would wear test them, and I convinced them to try.
LESSON: There are huge advantages in being very naïve and starting from first principles.
My partners would call me nightly, often at 2 or 3AM my time and ask for updates. They insisted that the company’s future was in the balance and I insisted that I knew.
Finally, three or so months later, I was learning Chinese and had a bag full of samples — dozens of color and fabric combinations — and we had a date to see the CEO and head buyers at Footaction.
But, before we did, I took the shoes and flew to show them to Lantz. He mostly loved them. Then, I got on more planes and went to 5 major US cities. In each, I rented a car, drove to all the local malls, found a Footaction, took the shoes out and talked to store managers and customers about them.
And I knew two things — they weren’t done, but we were on to something.
Then I flew to Dallas, the home of Footaction. My partners met me in the hotel. I showed them first to Ray. He loved them. Then I showed Seth and Jay. They were hard to read. Non-committal. The smiles were gone, and we were all tense.
Next, we met with Stephon Marbury. He had flown in for the meeting the next day. I took him through the line — and he was excited.
In the meeting the next day, it was solid. I told them what our plans were and what the reaction had been from hundreds of kids and dozens of store managers. I did my best. Again, no smiles. Afterwards, the CEO of Footaction took Seth aside and told him that he better get an experienced pro — I was too young and inexperienced for this. But Seth had my back.
I flew back to LA. Camped in Lantz’s place again, then flew back to Taiwan. I made the changes. I redrew parts of the shoe on tape to get it exactly how we wanted — and believe me when I tell you I cannot draw. I am in the bottom 5% of the population. But I owned hundreds of shoes and had a fax — and I would copy parts I liked and trace them.
And we got it done.
It may not look like much today, but at the time it was something very, very different. And Footaction kept that word and took our shoes. And they were all set to launch.
The first color way sold amazingly well in Footaction. And then the second sold even better. And we were on our way- with one of the hottest basketball shoes that season. Our bet had paid off. Only, people started returning them two weeks later. The black liner material was bleeding onto the silver mesh.
We had to take all the shoes back and refund Footaction. Once again we were on the financial brink. What had happened was that our quality control team in China had rejected the defective material, but the factory had gone behind their backs and gotten it from the supplier. They thought it wouldn’t matter.
They were wrong. But we survived, like we always had. And I was now the head of footwear. And then we learned that our first ‘agents’ were stealing from us. They had pressured the factory into adding $3 to the cost of the shoe. This may not sound like much, but you need to understand a little bit about the economics of shoes to know why it was.
SAMPLE MARBURY ECONOMICS Retail price $100.00 Factory Cost $19 Shipping and transport $2 Duty $6.29 Landed Cost $26.79 AND 1 Sale Price to Retailer $44 AND 1 Cash after paying factory $17.21 AND 1 Cash after paying factory $17.21 Marketing Costs $4.40 Sales Costs $4.40 Operations Expenses $4.40 AND 1 Profit Per Pair $4.01
Adding three dollars per pair would have wiped out 75% of our profits. This led to a very serious crisis, where we had to both figure out how to deliver the best shoes for the next season while avoiding any quality control issues — and also had to completely reinvent our supply chain.
We were lucky in this regard in that I was able to find Katty and Julie. These two Taiwanese women had several decades working in both shoe factories and running the sourcing office for Converse. They were brave and looking to go out on our own, and we needed a new overseas partner.
I hired them and they built a high-integrity office of honest, hardworking people — an office that matched both my personal values and theirs. They remain close personal friends to this day — and AND 1 wouldn’t have existed without them.
Over the next five years, I moved all our development to Taiwan and worked out a way to ‘prototype’ samples on existing bottoms so that we could speed up the number of samples and iterations we could try each season.
For 5+ years, we were #1 or #2 at the $65 and $75 price points within the basketball category in premium athletic retailers by sticking to our formula.
Nike, Reebok and adidas developed one or two shoes for each style they hoped to sell. We developed over one hundred. Our competitors did minimal market testing. I personally flew the samples to the five largest shoe sale and style-setting markets twice each season — and set up shop in malls and talked to hundreds of kids and store managers. I knew what I didn’t know and sought out to create a process that let us build the best products in the category, harnessing the ‘wisdom of the crowd.’
As a result, we gained market share steadily. Along with the product evolution, our marketing and brand understanding was evolving. We were slowly learning the lessons of Sun Tzu — you can’t take on an 800 pound guerilla without being nimble and adaptive with your tactics.
We began signing not the highest visibility players, but he second and third coolest players on every team — but players who still had our core brand attitude and were cool with the players we wanted.
This was how and why we were able to have the second most NBA players wearing our shoes (behind only Nike) at a fraction of the budget, but still be ‘cool.’ We realized that there were players with attitude, players like Latrell Spreewell — who was dropped by Nike after he tried to choke his white coach for what he claimed was consistent verbal and racial abuse.
Latrell Spreewell was a hard-working, fearless and fierce competitor, who had turned himself into an elite NBA player and 3-time All-star — through his ’10,000 hours’ of working at his craft. We recognized that there were issues potentially in working in a profession where you could be berated by a white coach and controlled by a ‘white owner’, that could explain why he exploded.
We signed him and immediately put him in a nationally televised commercial, featuring lines such as:
“People say I am America’s worst nightmare. I say I am the American dream.”
I didn’t make this ad, but I am very proud that we, as a company did. And we launched a shoe with him.
And I found more design talent — Tuan Le to be specific. He had worked at Reebok — developing the original BB5600 and several other styles that had helped propel them into the largest athletic brand in the US (passing Nike), and had worked at Mizuno and been their head of design, and would go on to lead product innovations at Merrill and Deckers and many, many others. He was (and remains) a design genius, and is also humble, smart, prolific and honest.
He remains one of the ‘most significant’ mentors I have met to this day. He and I made this Spreewell shoe. But countless other people helped. Creativity is not a ‘binary thing.’ Every ‘good’ or ‘great’ idea has dozens of seeds, and it is impossible to trace the evolution of it.
AND 1 had an amazing team of designers — including Michael Schaeffer, Dallas Stokes, Shane Ward, Dave Folkes and Dustin Canalin. And we had an amazing team of ‘marketing types’ who loved the product — like Phin Barnes and Ryan Drew. And from this ‘stew of people’, great ideas evolved.
But, make no mistake I worked hard. Very, very hard. Typically 6 days a week, sometimes seven — for 10–12 hours a day. I flew to major markets and fashion shoes and charted my own trends. I went to the Linea Pelle materials show in Italy every year. I shopped in Tokyo, London, Hong Kong, Bologna, New York, Atlanta and Los Angeles every season. I read trend reports.
I created and kept material books and mood boards. My success wasn’t an accident. Hardwork isn’t sufficient for a break-through company, but it does improve your odds.
And our success, at least in the beginning, was at the price points the big competitors didn’t care about, with endorsers they didn’t want.
Tuan also designed this shoe. It happened in a day. It was inspired by a great looking hat Lantz had designed for a brand named dada. Tuan, Lantz and I got along great. Tuan and Lantz were actually — along with Katty and Julie and a women in Taiwan named Tien — my best friends in the world during this time.
But Tuan was more. He was a life mentor, a ‘wise-uncle.’ He taught me a lot about living a good life, a simple life. He had survived the Vietnam war as a Vietnamese citizen, and had fled to the US at the age of 14, as a war refugee. His father had been a leader in the forces for the South and had, if I remember correctly, vanished for a year or so — during which they didn’t know if he was alive or dead. Tuan appreciated life and never sweat the small stuff. He had lived through far too much.
And he was an extremely devoted father who loved his children and constantly shared his ‘simple’ (not to be confused with simplistic) rules for living.
One of my greatest pains and regrets to this day is that I hurt Tuan, but more on that will come later.
What I want you to know is that I formed deep and powerful friendships during this time. I created a true work family. Start-ups, like perhaps few other things (sports, combat), can bring people together. I don’t equate them in terms of danger or risk or social value — but they are intense experiences that bond people.
AND 1 footwear would likely have failed without me. But it also would have failed without many others — Tuan, Katty and Julie, and the initial buyers and team at Footaction who took a chance on us. It also would have failed without the full team behind it.
Ray was running a network of sales reps (in-house and external). Bart had built an amazing set of systems, customer service and back-office that were reliable, efficient and error free. Seth continued to push the brand forward, seeking out ways to grow. And hundreds of people globally were working to make us a real company.
Originally published at tomaustinand1.wordpress.com on June 27, 2017.