How I Built This with Guy Raz - Warby Parker: Dave Gilboa & Neil Blumenthal

Episode Date: December 26, 2016

In 2008, it was nearly impossible to buy a fashionable, affordable pair of glasses online. That simple frustration inspired the idea behind Warby Parker – and disrupted the eyewear industry. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with a place with a all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com We hadn't told anyone that the site was live. We didn't want to drive any traffic to it because we weren't sure it would work.

So I get an order and then 10 minutes later we get another order and then another order and then another order and then another order. and we kind of go from this feeling of elatement to, oh, crap, we don't have this much inventory. From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, two of the founders of Warby Parker tell the story of how they birthed an idea, an idea that disrupted the entire eyeglass industry in America. and grew into a billion-dollar company. So back in 2008, Neal Blumenthal and Dave Gilboa

both arrived on the campus of the Wharton School at the University of Pennsylvania. They were there to start business school. And they met each other and two other students, Andy Hunt and Jeff Rader. And the four of them would go on to co-found Warby Parker. But in 2008, at that time, they didn't know that yet. What they did know, and something that they all had in common was

they were really frustrated with how eyeglasses worked. And it stemmed from this thing that, well, most people have probably experienced at some point. They kept losing their glasses. And Dave, in fact, right before he started business school, had accidentally left his glasses on an airplane. And they'd cost me $700. And I just couldn't justify as a full-time student paying that much for a new pair of glasses. Yeah. The new iPhone 3G had come out.

I waited in line at the Apple store, paid $200 for, and it did all these magical things. and meanwhile the technology behind a pair of glasses is 800 years old and it just didn't make sense and what you're like okay I've got this this amazing iPhone this magical portal to all of human knowledge and it's it cost me 200 bucks and yet these eyeglasses made out of plastic are like super expensive yeah I was complaining to anyone that would listen about why glasses were so expensive and then Andy kept losing his glasses and he was buying everything online, but couldn't figure out why he couldn't buy new classes online and why no one was effectively selling classes online.

Right, because, I mean, this is like 2008. And I mean, by that point, it wasn't like, you know, like selling things online was this brand new idea. Yeah. And so we kind of started this conversation where we were kind of frustrated by different pieces of the eyewear industry. And we knew that Neil had spent a number of years working for an IWR nonprofit and probably knew a lot more about this than we did.

And so we were on the computer lab one day, and we started asking Neil a bunch of questions. And no pun intended, but I think all our eyes were open that there was this massive opportunity. What do you remember about that meeting in the computer lab, Neil? What, like, what were they asking you? It was sort of like, why are glasses so expensive? And when I was working at that nonprofit vision spring, I'd actually designed eyewear, and I would go to the factories to produce these glasses. And so I knew a little bit about the optical industry.

and it's dominated by a few very large companies, one of which is Luxottica. Luxottica has a market cap of about $30 billion. They own Oakley, Rayban, Oliver People's, Persol and Arnett. They license almost every major fashion brand under the sun like Ralph Lauren and Chanel and Prada and Dolcein-Gabana. They also own a lot of the major retail chains like LensCrafters and Pearl Vision and Sondglass Hut. One company owns all those things. It's crazy. Sears optical, Target optical. Wow. So when you go to like a glasses store and all those brands, Persol and Raban, it's all owned by the same company?

All owned by the same company. And they own the second largest vision insurance plan in the country. I med. So you walk into a lens crafters. You don't realize that most of their selection are frames that they've made. And the vision insurance that you're using is also the same company. So you knew this. Right. Exactly. So we just thought like, oh, well, now it's a lot clearer why glasses are so expensive. So we thought, oh, why not sell glasses? And the light bulbs went off in all of our minds.

And then later that night, like, you know when you have a feeling or just an idea you're so excited about it, you actually have trouble sleeping. You can't get it out of your head. Exactly. It was that feeling. And I think it was like two in the morning and shot off in. email and then at like 201, Dave responded and 2002, Jeff responded and Andy responded. And like, we were all up thinking about this. So the next day, we decided, hey, after class, let's all get together. We actually sat down at a bar right on 23rd in Walnut. And over a beer, we're discussing

this more. And we said, hey, like, should we do this? Like, should we really go after this? And we also said, yeah. Okay, so you guys are at business school. And you're thinking, okay, let's do this. So, I mean, at that point, what did you do? Like, did you, like, write a business plan? Did you start looking for money? Yeah, so, you know, I think all of us, we talked about how excited we were about this idea. And we said, well, we're at business school to learn how to run a business, what better way than to actually build one ourselves.

So we all decided to take the same class, an entrepreneurship class, where the output of that class is a full business plan. And so we spent the next several weeks really researching. every element of our idea, getting a bunch of great insights from professors, running a bunch of surveys, standing for hours in different optical shops. And then that culminated in essentially a 40-page business plan. We entered the Wharton Business Plan competition, and we got eliminated in the semi-final round. I think just kind of put a chip on our shoulder where we said, okay, well, now we got something to prove. And at that point, we felt really passionate that this was going to work. And at that point, you're, I mean, you guys were still working off paper. I mean, you still did not

have any money, I'm assuming. You didn't have a product. You didn't have a manufacturer. So why were you guys so confident? Like, how were you even able to test the idea? You know, we talked to everyone that would give us five minutes just about the idea. Initially, we got a bunch of pushback that said, Well, the idea of buying glasses online is kind of strange to me. Who was saying that to you? Basically, all our friends and classmates. And a lot of people told us that creating a brand is hard enough. So is creating an e-commerce site.

You should pick one of those. But for us, the magic was in creating a vertically integrated brand. So we honed in on this issue that we had to figure out a way people could try on glasses. Because people were saying nobody's going to buy glasses online because you've got to touch them. You have to feel them. Exactly. And that was a real moment of self-doubt. These journeys are always these moments where you feel like a complete idiot. And this was like one of those challenges that really made us question, should we continue to spend time on this versus the million other things that we could be doing at school? So how did you think you could get over this problem of people, you know, thinking they needed to touch them to try them on? So we just thought a lot about how do we remove every obstacle to purchasing?

And the thought was, well, if we offer free shipping, that will encourage people to buy. If we offer free returns, that will also make it less risky for our customers. And that's sort of led us to this other idea to do a home try-on program. So you guys decide, let's send these frames to people, let them try them on at home. And if they like them, they just send them back and we'll put the lenses in and that's it. Did you guys have, I mean, were there any other problems that you had anticipated as you were thinking through this idea? Yeah, I think the other element was that we were trying to sell a product that normally cost several hundred dollars. And we were selling it for less than $100.

And so there was inherent skepticism about the quality. Right. And so we said, well, how do we just get as many of our glasses on people's faces as possible? Yeah. And that's when kind of this light bulb went off for the home try-on program, which really no, no, no company was offering until that time. And we said, we just want to get our product on people's faces. And we think people will buy afterwards. So you guys wanted your glasses, obviously, to be much cheaper than the competitions, like even less than $100. How did you decide on the exact price?

Our initial thought was to sell glasses for $45. And we remember going into the head of the marketing department's office at Wharton, and we sit next to him, slide the deck on his desk and say, hey, we're going to transform the optical industry. We're going to charge $45 for a $500 pair of glasses. And he kind of just laughed at us and said, no way, it won't work. And we're like, wait, you didn't even like read our deck. Like every graph goes up and to the right. And he said, I'm sorry, guys. First of all, price is the biggest indicator of quality. And it's just outside of the realm of believability that you can sell a product for a tenth of this price. So we walked out of this meeting, pretty deflated, but it led us to investigate pricing a little further. And it showed us

that, yes, price is indicator of quality. There's a psychological barrier around $100. So one thought was, should we charge $99? And we felt that was too discounty and cheap, and we were building an aspirational brand. So we actually settled on $95 using just our instillard. thinking that this doesn't sound cheap and that it looks deliberate and visually looks decent. How did you guys come up with a name? Because it sounds like an aristocrat from like, you know, Northumberland in England or something like Warby Parker. Yeah, we often joke that the hardest thing that we did in those early days was set on a name that all four of us liked. I think we still have our spreadsheet of over 2,000 names that we tested on our very patient friends. Yeah.

two early Jack Carrawak characters that Dave actually discovered when he went to the New York Public Library exhibit on Carowack and two of the characters were Warby Pepper and Zag Parker. And that's how you got the name. And now everybody that joins Warby Parker on their first day, on their desk,

they get a copy of Dharma Bums, along with a few other goodies. That's Neil Blumenthal of Warby Parker after the break. Neil and co-founder Dave Gilboa But we'll talk about moving that well-thought-out business plan off of paper and into the real world. I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz.

And today on the show, we've got Neil Blumenthal and Dave Gilboa, two of the founders of Warby Parker. So when we left off, they had come up with this idea and they had thought it through. And now, the only thing left was to execute. How much money did you guys raise initially to launch this company? And how did you do it? So the nice thing about business school is that most people work for a few years before going back to school. And so collectively, the four of us took our life savings from when we were working before school and invested into the business. We invested $120,000 between the four of us to get the business off the ground. And we worked for a year and a half with outpaying ourselves a salary.

We didn't have an office. we did win a couple of grants from Wharton, so that helped as well. But we were very scrappy and very much bootstrapped for quite a while. And we ended up launching the business and then went another 15 months before we raised our first round of funding. And so then how did you guys actually find the manufacturer to make the glasses for you? I mean, did you, Neil, did you have contacts from when you worked at that nonprofit? Yeah. We leveraged a lot of the relationships that I had.

and we went over to visit the factories. We actually prepared a PowerPoint because even though this was going to be a vendor that we were buying from, right, we had to sell them on our vision and that we were indeed serious and would be able to afford to pay them. Of course, they took most of the payment up front, so they didn't assume much risk. Okay, so you pay for these frames. The manufacturer makes them. And then what did you even do with all those glasses? I do remember getting boxes and boxes of these frames shipped to our apartment. And it was a doorman building.

The doorman had no idea what to do. It literally took us a couple hours to load, do all these runs in the elevator into our apartment, then stack all these boxes and then unpack them. And we ourselves inspected every single frame. Yeah. And this was all the while we were working to figure out how. are we going to launch this thing? We basically, to start the business, only invested in three things, our initial inventory, our website, and some PR, knowing that you only have one shot to sort of launch a brand. So even before you launched the company, you had a publicist going out

trying to drum up publicity for it? Yeah, so we had meetings with almost 50 PR firms, and part of it was us evaluating them, but at the same time, we had to sell ourselves. to those PR firms. And there's nothing less sexy in the fashion world than for MBAs from Wharton. We knew we were going to launch sometime in the spring of 2010. And we really wanted to be in these premier magazines as a stamp of approval. So what we were targeting was GQ and Vogue. And so we had some production samples.

We didn't have a website up. But we were really pitching these magazines as exclusive launch partners. and we were thrilled to hear that GQ and Vogue were going to run stories. We had no idea what those stories were going to look like, what the content was going to look like. But you guys were totally hustled like this. I mean, why would these huge magazines, like, trust a bunch of business school students who didn't even have a company? Like, if you went to the website at that point, there was nothing up there. Like, it's crazy to think that they would have done that, right?

Yeah, I think there were a few things that worked in our favor, right? One was identifying the right PR person to help represent us, but we often say that PR is, I think, 30% the messenger, 70% the message. And for us, the message, this was a pretty novel at the time, right? There was nobody selling glasses online. So the idea of selling glasses online was novel. The $95 price point for $500 glasses was pretty novel. The home try-on program was novel. So, in fact, GQ actually called us the Netflix of Iware in the article they put.

So I think there were like these hooks that writers and editors could get excited about. So how much of an impact did that have on the launch of the company? Yeah, we were just blown away by the impact that it had in terms of traffic and sales. So we got a call from our publicist the day before GQ was going to hit newsstands and we still had a landing page up. If you went to Warbyparker.com, it said, coming soon, please enter your email address. Oh, wow. I said, guys, what's going on here?

GQ's hitting tomorrow. And our website still had a bunch of bugs in it. We were working with one developer, and we were on the phone with him kind of frantically working out some of the most critical bugs on the site. And we finally, at 4 a.m., said, okay, guys, this is stable enough. We all need a couple hours of sleep before we have class tomorrow. let's make the site live. And we were sitting in class the next day.

We hadn't told anyone that the site was live. Our parents didn't know the site was live. Our best friends didn't know the site was live. But we didn't want to drive any traffic to it because we weren't sure it would work. And I had my phone set up to be notified anytime we got an order through the site. And so it was around 10 a.m. And so I get an order. And then 10 minutes later, we get another order.

and then another order and then another order. And we kind of go from this feeling of elatement to, oh, crap, we don't have this much inventory. And we hadn't contemplated building in any sold-out functionality or waitlist functionality in the site. So you were literally selling out of glasses, but people were still ordering them because the website didn't know when you would run out of it. Yeah, we had no inventory tracking at all because we were assuming one to two orders a day and kind of joke that, you know, if nothing else, my mom would buy 100 pairs of glasses from us. But we really had tempered expectations because we also recognized that what we were trying to do was build a brand. And that takes a really long time. So we called an emergency meeting after that first hour and a half class.

And we were debating, okay, what do we do here? Do we just keep taking orders and then figure out what to tell people later? Do we take down the website? And while we're having this two-minute discussion, I'm looking at my phone and we have 10 more orders. And I'm like, guys, we've got to do something here. And so we place an emergency call to our developer and miraculously was able to build in this waitlist functionality on the fly. And within a four-week period, we'd sold out of our best-selling styles. We had a wait list of 20,000 customers.

How many frames did you guys sell? Yeah, tens of thousands. It was, yeah. And you just did not. you had not ordered enough glasses from the manufacturer. Like you literally, you couldn't, and they couldn't make them fast enough for you? You know, I think we were ambitious in terms of the number of frames that we purchased, but also not overly risk-tolerant.

And I think we've approached this business in a way that, yeah, let's not bankrupt ourselves on inventory. Well, we were also constrained. I mean, we hadn't raised any money from investors. It was our life savings that we poured in. So there was really a limited number. of frames that we had the ability to purchase. So, I mean, it sounds like a good problem to have, that you have a waitlist of 20,000 people. You're like out of the gate, you're just killing it.

Am I right? Or was it actually a bad problem? Yeah, I think we learned a lot of important lessons in those early days where we were terrified that we had all these early adopters that were excited to place in order from us, and we didn't have anything to sell them. And for a lot of those customers, it took us upwards of nine months to get. get through the wait list. So we were terrified, you know, are these people going to leave with a bad taste in their mouth that, you know, really only have one opportunity and launch a brand?

Yeah, I mean, they were waiting. I mean, a lot of companies would not survive that. Yeah, you know, I think it did have some positive effects that it created this aura, that, wow, this is in really high demand. And nothing creates cool, like scarcity. But I think we, you know, we also learned a lot of important lessons in terms of, you know, being empathetic to customers. All four of us founders, we reached out to everyone. on that wait list for people that were had bad experiences or were really disappointed. We would give them free glasses. We gave people discounts. I think from the get-go, we wanted to create a business to have a positive impact on the world.

And part of that is treating customers fairly. It's treating them fairly when it comes to price. It's treating them fairly when they call up and complain and to apologize and explain when we make mistakes, and that was something that we did from the very beginning. You know, we were primarily, you know, we're still trying to figure out how to run this business. We were working out of our apartments as full-time students. Our customer service line was a Google Voice number that we set up when someone would call. It would simultaneously ring all four founder's cell phones and whoever answered first. You were the customer service rep. Right. And so we looked at our class schedules and there were 12 hours per week when all four

of us were in class at the same time. And we said, well, we should hire someone who, can answer the phone when none of us are available. And so we hired this woman named Mara and said, you're going to be working 12 hours a week and trained her on what we're doing. And I think that first week she ended up working 100 hours. And now she's running our customer experience team, which is about 150 people. And so it was kind of up to the races from day one. So did you guys, I mean, how quickly did you guys kind of get together and just say, holy hell, we can This is real. We're going to make it.

We were too busy staying up all night responding to customer emails. I remember one of the first couple days, we actually decided to go to one of the classes that we were all in, and we were all typing feverishly on our computers because we weren't really paying attention, and we were just responding to customer emails and helping to process orders, and everything in the classroom got really quiet.

And then the four of us sort of looked up, and everybody was staring at us, including the professor, and here we were typing away when clearly there were no notes to be had. It was obvious you were not listening. Yeah, so we just stopped going to that class after that. I mean, I remember waking up every morning with a laptop on my chest because I'd fallen asleep responding to customer emails, and there was just an overwhelming amount of work in those early days.

And so we didn't have even a minute to breathe and take a step back and think about what was happening. So after this launch and after the company obviously starts to gain traction, when did you guys decide, you know, like we better start to raise some money? We went and tried to get debt because we figured like why give up equity and if we could just get some loans to help us fund this inventory that we needed. We went to 18 different banks and only one would talk to us. And again, this was 2010. So soon after the financial crisis. And what all these loan officers said is, hey, we've never seen such a beautiful business plan. We've never seen a company that has such great early results.

But we can't give you a loan because you don't have two years of tax returns. So what did you guys do? We ended up getting a $200,000 SBA loan. We had to sign probably 400 documents, including one that said we weren't going to use the money to open a zoo. And we really tried to think of other creative forms of financing the business. And so we were working with a third-party logistics company that managed some of our inventory. And a CEO loved our brand, our business. And he was asking, what can he do to help drive growth in our business so that they can have more business? And we said, well, we're really constrained by our ability

to purchase inventory at this point. He said, well, you guys seem like you're really good at PR. Our company needs some help with PR? What if you do some PR consulting for us and we'll pay you a few hundred thousand dollars for that? And we said, yep, that's, that sounds great. So, okay, so you launch in 2010. Today, you have close to 800 employees. You've sold, I'm sure, millions of pairs of glasses. How much do you think your success was because of, you know, you guys are like super smart and you're really hard workers or how much of it was luck? We like to say that there's a lot of deliberate serendipity. For example, we were really lucky to be exposed to our marketing professor that helped us think

through pricing, but we had created goodwill by being friendly and doing well in his class that he was willing to dedicate time to us. So I think there's a million examples of that or our friends calling in favors on our behalf. One of the things that we were just straight up lucky on is timing, right? Timing is everything, you know, coming off the financial crisis. The public was looking for ways to save money. And I think a brand like ours even resonated even more. So last year, I read that you guys raised like something like $100 million from investors. So what's the company valued at now? Our last valuation was over a billion dollars. When you hear that, a billion dollars? Do you think that's crazy? It is pretty crazy. Yeah.

You know, it's exciting, but not nearly as exciting as, like, coming to work every day and being in an office that we've actually designed ourselves, seeing people in the subway wearing our glasses like that will never get old. Can you recognize your glasses? Oh, yeah. In fact, like the first time that we saw the glasses in the wild, I remember seeing this person at a corner of my eye, it's on the subway platform. Union Square, and I just started following the person. And, you know, being in New York, like, if someone's following you on the platform, like, freak. So got a dirty look.

But I had this big, like, year-to-year smile on my face. That's Neil Blumenthal of Warby Parker. Neil and Dave Gilboa co-founded Warby Parker with two other friends from business school, Jeff Rader and Andy Hunt. The company actually partners with the nonprofit where Neil used to work, VisionSpring, to bring eyeglasses to people around. the world who don't have access to them. Hey, thanks for listening to the show this week.

If you want to find out more or listen to previous episodes, you can go to how I Built This.npr.org. You can also write to us at hibt at npr.org. And if you want to send a tweet, it's at How I Built This. Our show is produced this week by Casey Herman with music composed by Rumtine Arablewe. Thanks also to Neva Grant, Sanaz Mashkampur, and Jeff Rogers. I'm Guy Raz, and you're listening to How I Built this from NPR.

Hey, thanks for sticking around because we are now at the very end of the show, the part of the show where we hear about the things you are building. And this week, the story of two sisters who are trying to change the way people snack. Hi, my name is Melissa Lee. I'm from Somerville, Massachusetts, and my sister, Linda and I are co-founders of cruise snacks. Melissa and Linda are into two things you wouldn't necessarily think need to be fixed. skiing and trail mix. Both seem like they're kind of great,

except when you put them together, because then, then you have a problem. It's this trade-off of I'm really hungry, but I have to figure out how to get this snack and not have my fingers go numb. So you have to, you know, take one glove off, use your teeth. You've been there, right? Fumbling to grab a glove full of pretzels or M&Ms

in the pocket of your winter coat. It doesn't work. So to solve this problem, Melissa and her sister came up with a trail mix that comes in a tube with a hinged lid attached to it. We wanted it to be able to be opened with one hand, to be able to be opened with a glove on, and sort of to be able to fit in your pocket. No matter how bulky your gloves, just a flick of your thumb opens the tube. You just tip it back, you chug some dried fruits and nuts, and you hit the slopes. So I think spreading the idea that it's drinkable or that you would use it like you would use it,

like you would use a water bottle, that's where like people really start to understand the concept of, wow, this is like something different than just my regular tromics in a Ziploc bag. It actually took Melissa and Linda several months to find the right kind of tube. They went to a bunch of different science labs. And eventually they landed on what they thought was the perfect fit, an incubation tube. We were testing those on people. They were like, they looked kind of like urine samples. And I was like, I don't want to package it in something that reminds people of urine. That's the last thing I want. So the two sisters kept searching until they found the right match, which of course they did. Cruise snacks are now being sold at a few ski resorts in New Hampshire and Vermont.

The company is only six months old and it's not yet profitable. So for now, Melissa and Linda are keeping their part-time jobs as baristas in Somerville. But the best part for Melissa, she gets to work with her sister. I wouldn't be able to do this if I had to do it alone. There's just so much doubt that goes into the process. And I think it was really, really helpful to have someone by your side and someone going through all the same ups and downs as you are. That's Melissa Lee. She co-founded crew snacks.

That's CROO. If you want to tell us about the company or idea you are building, go to build.npr. org. That's build with a d.npr.org. And thanks. As the end of the year approaches, a lot of you have been asking about, the best way to support how I built this. So first of all, thank you for asking. And it is pretty easy to do. You go to stations.npr.org. You find your local station and you make a

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