Invest Like the Best with Patrick O'Shaughnessy - Trina Spear - Billion Dollar Scrubs - [Invest Like the Best, EP.295]

Starting point is 00:00:00 This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former byside analyst who encountered friction sourcing, building, and updating models. Canalyst is now used by over 400 institutions, including the largest money managers globally and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, canalyst's clients are able to ramp up faster, update models instantly, and incorporate the highest-quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com slash Patrick. That's C-A-N-A-L-Y-S-T-com slash Patrick. Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies.

Starting point is 00:00:51 With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business, learn more at brex.com slash best. That's bR-E-X.com slash best. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management.

Starting point is 00:01:41 All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaunossey Asset Management may maintain positions and the securities discussed in this podcast. My guest today is Trina Spear, a former investor at Blackstone and the co-founder and CEO of Figgs. Figgs is a multi-billion dollar public company that built a category-leading brand selling scrubs to healthcare professionals.

Starting point is 00:02:15 It was a problem hiding in plain sight and Figgs solved it through vertical integration and customer obsession. Trina shares so many interesting, simple lessons that are often ignored in business. Please enjoy my great conversation with Trina Spear. I'd love to begin our conversation with the story around the original insight for this product line, because one of my favorite things in the world is when there's something hiding in plain sight that everyone sees all the time in their lives. And no one ever thinks, wow, that would be a great new $2 billion opportunity. Maybe you could just tell us what the original core insight was for you and your co-founder and why you decided to make a business out of it.

Starting point is 00:02:54 The best ideas, the best businesses at the root of it are obvious and simple. And this is one of the most obvious and simple ideas in the world. Heather Hassan, my co-founder, she was sitting with a friend of hers over coffee over a decade ago. Her friend is a nurse practitioner at Cedar Sinai. She said to Allison, her friend, what are you wearing? Her friend said, these are my scrubs, and they were baggy and boxy, and actually the size was on the back of the neck. And Heather's like, everyone's walking around the hospital with the size on the back of the neck? And her friend's like, yeah. And she's like, wait, everyone? That's crazy. Basically said, I'm the best shopper in the world. I'll find you better scrubs. So our friends sent her to one of these stores where scrubs are sold.

Starting point is 00:03:36 And generally, they're in strip malls and you walk into a medical supply store and there's a rack of black and a rack of navy and a rack of whites. They're selling bedpans and knee braces next to what you would wear as your uniform. What had to realize at the time was not only with the product so awful, not anything that you or I would want to wear to work, but the experience It was really not great. So she said, wow, you're right. There's nothing out there. She took our friend Scrubs.

Starting point is 00:04:02 She really focused just on the fits and the inseam and the rise and tailored them. And everyone started calling Heather, hey, Scrubs girl, can you fix my scrubs? All the healthcare professionals at Cedars. And Heather's like, I don't have time to fix everyone's scrubs. Why are they calling a random girl in L.A.? That's really how it all started. And from there built a first-of-its-kind fabrication, built out our distribution, first company to go online direct to health care professionals.

Starting point is 00:04:26 That's what we're doing. Do you ever think about how an obvious and simple opportunity in a big market can go so long without someone doing something? It sounds so obvious in retrospect. But even now, you don't really have, as far as I can tell, major competitors. And at the time, this was a big market and clearly a lot of dollars were being spent on this thing, but no one had gone to do it. And I'm thinking here about the other obvious simple things that are like lurking out there in plain sight today that no one started to tackle. What are your thoughts on that? Why do you think that happened in your case specifically, that no one tried to do this? There were companies that made medical apparel, companies that made scrubs, and there were companies

Starting point is 00:05:03 that sold it. There was no vertically integrated company that did both. You had companies that manufactured, they would sell to the retailer. The retailer then sold to the health care professional, and this is still true outside of us and a few others, but the healthcare professional goes in the store, and they say, I hate my scrubs. These are awful. I have no pockets. I'm pinning my wedding ring to my bra strap. I'm tying it to my drawstring. Can you fix it. The associate at the store says, we don't make this. We just buy it. We just get it from the manufacturer. All of the problems that we hear about every day in that feedback loop, which is so important in terms of making great product, didn't exist. That store that sold had no

Starting point is 00:05:45 ability to go change and make something better. And then from the manufacturing front, they don't even know the name of their customer. Not even the name. Think about all the thousands of data points we have on every given customer. They don't even know their name. How are they going to think about what the problems are that they were to solve? This is a mandated industry. It's a uniform industry. These companies were doing very, very well.

Starting point is 00:06:06 Replenishment-driven business is a non-discretionary product. People need their uniforms to go to work every single day. So they thought they were doing great. They continued to grow, and it's the fastest growing job segment. The way in which it would structure, the way in which it would evolve left a massive opportunity for us to come in and change it. I especially like the idea of creating a tighter feedback loop. as a key component of one of these opportunities, look for places where there aren't type feedback loops between producer and consumer. There's layers of people in between. When you first

Starting point is 00:06:35 started to tackle the problem, my sense is you had a good intuitive sense of what needed to be improved in the product. I'd be curious what those key dimensions were. There's a manufacturing, inventory, physical product thing happening here. How did you learn how to do all that stuff? I assume you had not done it before, and the scale is quite large. What were the early days of that light? what did you literally do to start building the product? When Heather came up with it, it was, why did these multi-billion dollar companies exist so focused on the athlete, make sure that the grass stains didn't stay in your uniform as an athlete? Why wasn't there anything like that for healthcare professionals?

Starting point is 00:07:10 Why wasn't there any technical apparel for the people actually saving lives? That was the big moment and very much drives our mission today. Whether it was building and features of functionality that didn't exist or working with people that really thought outside the box. We weren't trying to replicate anything. There was no factory, there was no manufacturing partner that we could go to and say, hey, just do this. We were really first principles thinking of,

Starting point is 00:07:36 okay, we need wrinkle resistance. You want to put in the dryer, and you want to take it out and go. You don't want to iron anything, which was a big problem. It would come out as a wrinkly ball, these scrubs before we entered the industry. We wanted to ensure it was both really comfortable

Starting point is 00:07:50 and really technical. Your favorite T-shirt, Like that level of comfort, it's so ridiculously comfortable. And at the same time, had the technical properties of hiking and skiing gear. Over time, we developed our proprietary core fabrication called I&X. But it was all of these initial things of these are the pain points. These are where people are having problems. And then truly finding partners that could help us develop it.

Starting point is 00:08:13 Many partners across Asia. And I would say you don't figure it out right up front. The amount of people that you work with over time is immense. we've moved factories. I can't even tell you how many times. We moved warehouses six times. When you're growing fast, you can't be afraid of that. This got me from here to here.

Starting point is 00:08:32 Now it's on upgrade. There are partners that we worked with for six months. Sometimes you feel like too much invested to quit. Oh, I put all my time, my energy. I was over there with them for weeks on end. And now I got to move again. Yeah, you got to move again. We were always like sunk costs.

Starting point is 00:08:45 Now we got to move again. We outgrew it or maybe there weren't the right partner. We never sacrificed the original intent and vision for the product or the original intent for how we wanted to build the business. We never compromised, which I think is really important. Can you describe the basic, basic financial or economic model of a clothing or apparel retailer, basic things like gross margins and what percent of the retail price is taken by distributors? Just like the basic world that you showed up into, maybe the ones that were selling to that retailer that had no feedback loop with the customer. What does it look like typically for a clothing

Starting point is 00:09:22 retailer? Because I want to then contrast that against fix. That was the big problem is that the financial profile of these companies in many ways were strong because it's a non-seasonal business and all the dynamics I described earlier. But they were giving so much of their profitability away to the retailer and actually the license holder. Many of the companies are licenses of other companies. What's a license? You're literally slapping somebody else's label on a product and then paying for that label or that brand to be put on your product. They were giving about 60% of the total retail away to the retailer. They're about 4,500 of them across the United States, these stores and strip malls that sell

Starting point is 00:10:02 to the healthcare professional. And then they were giving about 8 to 12% away in the form of a royalty fee to the license holder that owned that name. What was left was there was no room to innovate on the product. there's no room to take the margin dollars and actually infuse it into making great product. By selling direct to consumer, which is what we do online, by making all of our own products from the yarn level, literally starting at the yarn level all the way through to then customer to getting that package on your front door step. When you own and control the entire chain of events from making

Starting point is 00:10:37 to selling, you're able to infuse those additional margin dollars in the product and as well as in your marketing and connecting with your community, which are the two things that I think we do really, really well. Both that idea of vertical integration and then the thought of manufacturing and inventory, very simple old school business like you described at the beginning, you're selling a physical product to consumers. To me, like I start seeing dollar signs. Like this all sounds very expensive, especially in the early days. Obviously, it's different now, right? You're a big, scaled up public company. But in the early days, it seems like you would consume a lot of capital, developing everything, manufacturing stuff, having inventory.

Starting point is 00:11:14 There's a lag time between that and people buying. The cash flow cycle of the business, was it hard in the beginning? How did you finance the business? Like, what were the key challenges and lessons you learned there? Early on, we partnered with manufacturers that didn't really charge us up front. They believed in us. And there are so many ways to build a business in a really scrappy way. I mean, we still are super scrappy.

Starting point is 00:11:38 And you see it in the numbers. but I don't think it needs to be so expensive. We have over 70% product margins. Even when you're creating a product, that's incredible. When you sell direct-to-consumer, you just have structurally advantaged margins. That's a huge benefit. To your point, making a product,

Starting point is 00:11:55 bringing inventory into your warehouse to then sell, you have to finance that. We did raise money early on. We raised a $2 million seed round, and that was helpful to getting the business off the ground. But even if you look at over the past 10 years, we've only ever spent $10 million, and we've generated now over $1.2 billion in total, an aggregate. I do think there's this perception that you need to raise all this money and it's going to be so

Starting point is 00:12:21 expensive, but there's so many things you can do yourself. I find more and more entrepreneurs are looking to find a partner to outsource this piece and outsource that piece. They're going to do our whole brand, and they're going to do our whole product. Well, what are you doing? That's when it gets expensive. when you're paying half a million to the branding agency, which we never had ever, we're going to give this group $2 million to create the product. Heather and I created our product.

Starting point is 00:12:46 We want it to do this, and we worked with people around the world. When you fully outsource is when, by the way, you don't understand what you're doing, you don't control it, you have no understanding of actually how it's going to be different.

Starting point is 00:12:59 In order to create something different, you actually have to be in it and do a lot of it yourself. It's your vision. Remarkable stat, burning so little money to generate, that much in revenue and profit now, too, as a public company. The idea of doing all that stuff yourself is really appealing, but it also just sounds incredibly hard. How did you manage that workload

Starting point is 00:13:17 early on? Was it team? What were the strategies? If you're building the product and you're building the distribution and you're building the relationships with the manufacturers, $2 million, not a lot. I guess it was more back then, but still not a lot. What was the division of labor like? What did you learn about scrappiness and prioritization in the early days of a business like this? It's really hard. I mean, I'm not going to sugarcoat it. It's really hard. And myself and Heather and our team have sacrificed a lot to get to where we are. How would you sum up what you've sacrificed most, do you think? Mainly a personal life. A friend of mine who also is an investor, his name is Ryan Neese.

Starting point is 00:13:52 He does a lot of speaking, and he says, who in this room wants to be successful? And usually to younger people in high school and college. And everyone raises their hands. I want to be successful. I want to be successful. And he goes, what are you willing to give up? What are you willing to give up? That's just the truth.

Starting point is 00:14:06 It takes a lot of hard work. It takes digging in and figuring things out, truly doing things differently, and creating something that never existed is really hard. Never existed in the world. It's 2022. I also think having a partner like Heather, she's the ultimate innovator. She's like the true original.

Starting point is 00:14:23 If she were on this talk news, she would say something like, what do you mean? There's just incredible opportunities everywhere you look. There's so much opportunity left in so many different industries. No one's done this and no one's done that. It's that left brain, right brain coming together to actually solve problems.

Starting point is 00:14:39 But more importantly, give people something they didn't even know they want. I really like that you worked on your brand. It didn't pay someone to do it. What was that process like? It does feel distinctive now. I became aware of it through Thomas Tull originally maybe two years ago or something. Now I notice it. It's something I look for when I'm going in a hospital or something. It does feel distinctive. How did you develop that? What advice would you give others that don't want to pay an agency? They want to develop the aspects of the brand themselves, hands on early on. What worked? What didn't? Any advice you could offer? people try to do it all up front. I hear this all the time. Well, I need to make this perfect.

Starting point is 00:15:16 We're still not perfect. There's so many things that we are evolving right now, 10 years in. There's so many things on that original list of all the things that we wanted to accomplish and all the things we wanted to do that we still haven't touched. I think that's the most exciting thing. We've done a fraction of all the things that we want to do. The brand is a good example of this. Our original colors were like yellow and gray. And you don't really see that at all. Our original cross was yellow in the middle and gray on the outer. And now it's black and white. We had a lot of cutesy callouts.

Starting point is 00:15:47 And we still do call outs, but we do it a lot more streamlined and modern. Your brand's going to evolve. As your community evolves, as the people you're serving evolved, we were just never afraid of continuing to change what we're doing. It's because we also get bored of our own stuff. Like, oh, this has been on the site so long.

Starting point is 00:16:03 We've got to change this. And then people will be like, No one's really looking at it that often, except for Yale. We want to up our game. So it's like this level of upping your game and not being afraid of continuously evolving. We did a launch a few weeks ago. And the branding around this launch didn't really look like our brand. How can we incorporate all levels of our brand, but continue to push the envelope?

Starting point is 00:16:25 I just think having more fun with it, not being like, oh, we're going to get this super important agency. Like, they are not going to do anything for you. What they do is they copy paste, all these brands. That's why they all look alike. That's why all the fonts look alike. That's why the colors look alike. Here's your packaging. Here's your e-com assets. And it's really easy for them. Putting together brand guidelines after doing it 60 times, that's pretty straightforward. But if you're actually like, no, no, no, why is the S the shape of our logo, for instance? The G and the S is the exact same shape as the cross. The cross, actually, Heather was on a plane and she was looking at the window. The idea was that she was looking at the wings and our cross is like wings. The whole vision was, I want to make healthcare professionals fly, looking down and seeing that opportunity of we can change the game here. As you think about, let's say the first five years of the business, obviously the biggest risk you probably took was starting the thing, trying to create

Starting point is 00:17:20 something from nothing. But in the first five years of the thing, actually being there and operating, what stands out as the biggest risk that you took, calculated risk that you took? And I'd love to hear about that episode. We were all in. I'd left my job at Blackstone. Nothing felt like a risk, but everything felt very hard. A different point. I would say the first four years were incredibly slow in many ways in foundation building. There were many businesses year one, they're doing 15, 20 million sales. That was not our story. Year one through four was less than five million in sales every year. It was less than one, the first year and second year. Third year one, fourth year four. Those first four years were incredibly hard in terms of trying things.

Starting point is 00:18:05 failing, trying again, failing. So nothing was like, I'm taking a big risk. It's like, let's keep iterating, iterating. One of the biggest things of why we are where we are today is because of those first four years. Sometimes people try to hit it out of the gate. You're not going to build anything great if you don't really invest that time up front and build a real business the right way. Why have we been able to spend so little on marketing? It's because we actually spent that time to understand this community and connect with them organically. We earn our customers, we don't pay for them. When you're just throwing digital marketing dollars, when you're just trying to get to a sales goal year one because your VCs are saying, we need to hit this and then

Starting point is 00:18:43 hit that, you destroy the long-term trajectory of the business. The longer it takes to get to the top, the longer it is for people to come after you, to take you down. For us, it was this trajectory of really leading up to very fast scalable growth, but doing it the right way and intentionally. I've been trying to come up with a name for this style of business building. The best I can come up is a bamboo business because bamboo spent so long laying its roots before it starts growing above ground. And then it grows at like this insane pace once it's out of the dirt. That's all about deep foundation building, root building. I'd love to understand what does that literally mean in those first four years? What do you think of as the key foundations that were built during that time?

Starting point is 00:19:23 Because it's this classic go slow to go fast model of business building that I think is fantastic. I think it's hard to do because there's pressure and you're moving fast, but you're still have one million of sales. It's hard conditions, but it seems like foundation building is so critical. Describe those foundations. What were you literally doing? What feels like the foundations that are so important looking back on it? It took us a while to get the fabric right. No company has been able to replicate it and they keep trying. So I think that was the foundation and we always knew it. If we get the fabric right, you put a garment on your body and you want to look good and you want to feel good and you want to perform at your best, it all starts at the fabric level. Nuance communication and

Starting point is 00:20:02 nuanced connection with people is really hard. We even see it now. Thank you healthcare workers. It's like the cheesiest, inauthentic way to talk to our community. And they're really dynamic, amazing people. We call them awesome humans. They're saving lives. They've dedicated their lives to helping people and caring for patients. This is the best group of people, but they're human beings and you need to talk to them like that and treat them like the best people ever, but not in a patronizing way. That was really nuanced. We figured that foundation out early on.

Starting point is 00:20:35 And then I think arbitrage opportunities. We talk a lot about arbitrage opportunities. How do you do things that nobody else is doing? I get asked all the time, well, how did you do this thing? Well, if you did this thing that I did, it won't be good for you. It won't be successful for you. Go figure something out that I did not do. There are so many things that we did in our business.

Starting point is 00:20:55 Our ambassador program is really important. we created the medical influencer. It didn't exist. These were just popular influential people that are now the most influential voices in healthcare and utilize the fixed platforms to tell their stories and talk about loyalty. I mean, these people will hopefully be with us forever because they built the brand just as much as we built their platforms personally and within their institutions. That was a big, what I would call arbitrage opportunity. Go where nobody is. We talk a lot about Blue Ocean Strategy. Go to the part of the ocean where nobody is. And, take it over. If you're in some really competitive market, it's going to be really hard to

Starting point is 00:21:32 differentiate yourself. It's going to be really hard to make any money. It's just race to the bottom. The whole business has been about finding places and doing things that nobody has done before. That's the only way to win. If you think about the early inflection points, especially I'm thinking about that one to four million dollar inflection point, I'm fascinated by how you build a direct to consumer audience, especially online, because there's so many examples of, I can speak from my own personal experience of like the male exercise category, which was like Rhone and Borey, and there's legends of the four million of these things. It just seems brutally competitive. And the cost to acquire a customer just brutal and getting worse. And you've had a very different

Starting point is 00:22:14 story. I'm curious what the philosophy was or what the story was early on in building this connection with the customer that seems to have allowed you to sidestep that dynamic that seems like very pervasive in apparel direct-to-consumer e-commerce apparel. And I think we never really thought about ourselves as like, we are a digitally native direct-to-consumer brand. You read all the blogs and then it's like, oh, they're direct-to-consumer. We always thought about ourselves as a brand that we really felt like there were no brands in this industry and there was no company. You would ask a healthcare professional walking down the street what they were wearing.

Starting point is 00:22:52 And they didn't know. They didn't know. And then some people were wearing scrubs that said, raise anatomy scrubs. So that would be like if you're a lawyer going to work every day with like a law and order, sure, every day. Like you're wearing a TV show, a TV show based on fake doctors and nurses and you're wearing that on your clothing every day? You're the best person ever. You're literally curing diseases and saving lives. What are you doing?

Starting point is 00:23:16 It was just this concept of there was no. No company that was really doing it right and showing up for this community in the right way, how could we be that? They deserve better. How can we give them amazing products? And it all starts there. How can we give them amazing products that help them look good and feel good and perform? And how can we connect in a way that is authentic and fun?

Starting point is 00:23:40 It's a really serious and sometimes very hard job. How can we infuse that fun in your day? Our brand is really fun. How do we become that as part of their lives and make their lives better? We never thought of ourselves as like, we're a G2C company. We always thought about ourselves as like making amazing products and showing up for this community. The word of mouth dynamic became just so important. Healthcare professionals are in hospitals, they're talking to each other all day.

Starting point is 00:24:06 Every fixed customer is a walking billboard acquiring the next customer for us. The replenishment-driven dynamics, that's the other reason why we've been able to really differentiate ourselves. These are the two reasons why DDC actually work. word of mouth and repeat. Our products are amazing. People come back because they're really good. I don't pay for that customer again. And I'm probably not even paying them the first time because they heard about us from their colleague or their friend.

Starting point is 00:24:30 So that's the real differentiator. Yeah, the replenishment thing is interesting too, where I'm sure they burn through these things because they're using them so constantly, much more than you would burn through a workout short or something like that, which is yet another interesting dynamic. We've got a long way in the conversation without talking about the actual space itself. When you and I first talked, I was really interested by just the scope of this. How many people are doing this? What the kind of market looks like domestically and globally. Maybe you could paint that picture for us because at least I was surprised by the size.

Starting point is 00:25:00 It's a $79 billion market, $12 billion in the United States. That's healthcare apparel, just health care apparel. There's a third-party study that was performed as part of our IPO, that came up with those numbers. And if you look at the categories where it's scrubs and lab coats and a few other things, but really all of the things that we do, all the products that we create, and there's a vast list of products that we create outside of that are all above and beyond that 79 and that 12.

Starting point is 00:25:29 We do really think of ourselves as creating the market. And even within scrubs, to take that 79 and 12, what was that? That was a V-neck top and a drawstring pair of pants. We completely changed the game on what scrubs are. No one thought there would be a sleeveless manner and collar top. That's our Raffailla top or our Zamora jogger pants. We created the scrub jogger. All of that didn't exist.

Starting point is 00:25:51 So we really do feel like everything we do within scrubs or outside of scrubs is all creating the market. We always say lazy companies sell into Tam, innovative companies create Tam. The fact that the market is even without all of that really large and the fastest growing job segment in the world, there's 115, 120 million healthcare workers around. the world, many of which that are waiting for figs, waiting for us to enter that market. It's all really exciting, and I think this market will look very different 10 years from now than it does today. What else do lazy companies do? Outsource too much. They look where everybody is.

Starting point is 00:26:28 They go to the competitive market, not to the place where nobody is. They over hire. They have five times as many people as they need to actually build a business the right way. They look for shortcuts on the product. Funding Facebook and Google all day or meta in Google all day is not the right way to build a brand. If you zoom in on product there, what have you learned about how to decide what's a bridge too far? Did you just use my own experience? Sometimes a company will come out and their goal is to make the absolute best athletic short or something. A year later, there's like 70 skews on the website of everything you could possibly wear. Obviously, you've expanded from the original V-neck and drawstring pants a lot. But you've kept it fairly tight for a long period of time.

Starting point is 00:27:11 What lessons have you learned there about the philosophy of product extension, expansion from the core base that you know works so well? Skew productivity is one of the most important metrics to look at. How do you sell more and more of the same thing? This is the best business in the world. How do you keep it simple? Thirteen styles account for over 80% of our revenue. Beautiful thing. From a production standpoint, our manufacturers love us.

Starting point is 00:27:35 From a fulfillment standpoint, our warehouses love us. Non-seasonality. How do you keep the lines running? all year round. That's a function of us being a non-seasonal business, but it's also the simplicity. We really keep our skews and our styles very simple and streamlined. And it's back to solving a problem. Is that product really solving a problem for somebody or does it just look cool? We won't make something for design sake. Design for design sake is irrelevant. How do you use design? How do you use development, whether it's on the fabric side, whether it's on the design and cut and sew side,

Starting point is 00:28:10 to actually solve a problem for somebody. That keeps you centered. I also think Hero products are really important. I talked to a lot of entrepreneurs about this. And they'll be like, I want to launch these 50 things they want. It's like, get somebody like the one thing. Product market fit. One item.

Starting point is 00:28:25 We had six styles for many years. It was a top and two pants. It was one pocket top, a basic pan and a cargo pant for women. Same for men. It was about just creating an amazing product. You got to get the trust of the customer before you could expand too. At this point, because of the trust and the loyalty that our community has with us, we joke about it. Like, we could sell a napkin or a pen and it will sell out because they trust

Starting point is 00:28:49 us that we're making the best thing for that. And you've got to build that over time. What does skew productivity mean? What's the definition of that for you? I don't know that I've really thought about that term. People define it different ways, but I look at just revenue per skew. how much is any one skew or anyone's style driving in sales, the 80-20 rule, which is really important. It goes to skews. It goes to customers. 20% of your customers drive 80% of your sales. 20% of your skews drive 80% of your sales. Those are the best way to build a business. It shows that you actually have loyalty. You have a business that's really driven by diehard, loyal people. People say, oh, well, that's not diversified enough. You need more diversification across

Starting point is 00:29:33 your customer base or across your skew base. It's actually not how the world works. What do you do with low skew productivity products? Just kill them? It depends. The other thing to look at is to buy. You can have a product that maybe doesn't sell as much, but you're not buying as much, and it's really for brand, and it's there to showcase an important element of your brand. We're known for technical innovation. So some product might be higher price. So we'll buy less of it, and it's really to showcase, if figs can do this over here for me, I trust them with. my catarina top and some more pant. Certain products are, the purpose of them is different, but if you're looking at the overall business, skew productivity is super important. Some products

Starting point is 00:30:11 are not for that. Some products, we're going to buy very little. It's for a very specific part of the healthcare profession. It's to prove that we know how to do this so that you also understand that we could do that. We were talking about books before hitting a record, and one that you pulled out of your bookshelf there was Chip Wilson, the founder of Lulu Lemon's book. What have you learned from Chip? He seems like a very iconoclastic, irreverent, eccentric builder. Very entertaining book for those that haven't read it. Little Black, Stretchy Pants. What have you learned from Chip? Why pick that book out and seek him out and learn from him? Chip has been a great advisor and mentor to myself and Heather over the years. Chip is maniacal about

Starting point is 00:30:50 product and he's maniacal and obsessed with the customer. That's all you need. I think everything else gets in the way. You have too many investors or financial people around the table. That's where businesses go to die. If you can always bring it back, and we always do, putting the healthcare professional, that seat at the table saying, what do they need, what would they want, how do you put them first time and time again, really customer-centric, that is chip, and not deviating. I remember I'm telling me a story about somebody in the company. There was an ambassador and they have global ambassadors as part of what they do. Nike actually was going to take them over to become an ambassador with them. The young woman was saying, okay, well, Nike's offering me this. And the person

Starting point is 00:31:35 within the company was like, we'll match that. And Chip was like, we will not match that. We will never match that. If you want to just go for money, you go for money. If you want to be associated with one of the best brands in the world that's doing something different, then you'll work with us. That level of conviction, believe that you don't have to pay to play, that's how you know you actually believe in what you're doing. What have you learned about a healthy, productive relationship with your CFO? If a company starts getting run by the metrics, I do think that's the number one risk to product trajectory for the obvious reasons that you start looking for ways to improve the numbers versus improve the product. Nonetheless, you're now big public company. You do all the normal

Starting point is 00:32:17 stuff that public companies do. People care about your metrics very deeply. What have you learned about balance and productivity there? First off, we have an incredible CFO and Danielle, Turnshined and she does not run the company from a metric standpoint. She runs the company from her angle from a what's best for the business, what's best for the brand. Let me provide all the information and all the data and all the metrics so that we can be better. It's all with the lens of, hey, just in case you're wondering, this is what's happening over here. We can get some efficiency there and never from the lens of let's make a cheaper product or cut this part of our business. That's really important to continue to build. Having a CFO that really

Starting point is 00:32:56 is on that same page is really important, they can work hand in hand. Our financial profile isn't one of, oh, how do we cut, cut, cut, cut, cut, cut. And so how do we build, build, build, build. The more you build in the most authentic, intentional and strategic way, the numbers are a result of that.

Starting point is 00:33:13 We focus on the inputs. Those are the outputs. If you focus on the inputs and actually build the business in a way that you are the best, you have to have the best product. If you have the best product, the numbers will work.

Starting point is 00:33:26 because of the repeat dynamics and because of all these other things where you're not paying for the customer every time. If you have a creative that's connecting with a group of people, your CPMs are less, your CPAs, and you're not paying as much because that's resonating and people are organically engaging with that content. You have to have financial people within the company that understand that concept.

Starting point is 00:33:50 Because if you're just trying to pull the little levers down here, you miss what's up here, which is so much bigger and better. As you think about your own expansion, this is sort of a spin on that same product expansion question versus market expansion. What is the most interesting blue ocean, green field, whatever analogy you want to use?

Starting point is 00:34:10 Where do you see the most runway to continue to execute on what has been a very focused strategy for fairly long time now? What are the big open areas still to tackle? We have really expanded what is even a uniform to this community. It was just scrubs. And what we did was we said, okay, what are you actually wearing throughout your day? To work, at work, from work, on shift, off shift, but even just on shift. You're wearing an underscruv, which we created. For figs, you're wearing a fleece from Patagonia or North Face, which make great fleece, but really made to be worn hiking outside. Our fleeces in vests and outerwear is meant to be worn indoors.

Starting point is 00:34:49 It's freezing and it has a pocket mirror or cephasope and your alcohol swabs. All the things that you're carrying around is a health care. professionals. It's just a different lens in which we create. Under's and outerwear are massive opportunities that we have maybe a style or two in. These were not in the numbers that I described, but what we see is that everything outside of scrubs is almost 20% of our revenue now. We've proven we're not just the scrub company. Yes, we make scrubs, but it's all of these other things that you need in your day. Please, it's best, under scrubs, sports bras, leggings. They're wearing them under our scrubs. Sports bras are not meant to run a marathon. They're meant to be worn medium impact to run around

Starting point is 00:35:29 a hospital. Compression socks. Our shoe collab with new balance, scrub caps, headbands. We just came out with pips. It's a button that plugs into your scrub cap or your headband. So you put your mask around that. They're wearing masks. They're in hospital. You take all the pressure off your ears. What is the breakdown by gender in this industry? I think is it 120 million healthcare professionals. How does that break down? What are the subcomponents of that? 75% of the industry is women, 25% is men. We're in like the mid-teens in terms of total business is men. So men is a massive opportunity.

Starting point is 00:36:05 We're really excited about continuing to create products and continue to engage our male healthcare professionals. Some of these runways are just obvious and simple, maybe. I keep using that same phrase. One of the things that you mentioned also before hitting record was time that you spent with Meg Whitman as an advisor who ran some businesses that were, I would say a bit more complicated in their structure and some of the most innovative businesses, especially in the late 90s, early 2000s, eBay, et cetera.

Starting point is 00:36:31 What have you learned from her? Why has her perspective, why and how has it affected the figs trajectory? She's so clear on the things that matter. One of her lines is don't major in the minor. Back to simplicity, even the most complex businesses, you can roll up into the five things that matter. And I think Meg proved that over her career, simplifying and actually focusing on what matters. Her other line is run to the fire. And I think we've done this at Figgs over the years is really there are things that happen

Starting point is 00:36:59 every single day and you just got to tackle it straight on. The conversation doesn't get any easier on any front doing it now, having that conversation, breaking that business down, getting rid of this thing that's not working anymore, building this thing over here that is running to the fire. With eBay especially doing a lot of things that no one had done before, our IPO is a good example of this and Meg was alongside us during that process. There's so many things about our IPO that we just did differently. We put healthcare professionals on the podium.

Starting point is 00:37:28 We brought 60 healthcare professionals to the New York Stock Exchange. It was about them. It wasn't about us. Heather and I didn't do press for the first seven years, eight years of this business because it wasn't about us. And we don't care. We don't want to be on conferences magazines. It's about our healthcare community.

Starting point is 00:37:41 Even doing something like this is a little unnatural for me. eBay specifically was all about their community. She was one of the first to even define what that was. Before eBay, it was like the community sent. Why do people love community centers to gather and be together? Because people love human connection. What is your business solving? People want to connect with each other. Be that company that connects people. eBay did that and we're doing that at Fags. There's a lot of learnings from her in terms of really being community customer-centric. The evolution of a willingness to talk openly about

Starting point is 00:38:14 the business. Talk to the press. Talk to me is interesting and it makes me wonder about how you view the evolving role of you as the CEO. As a CEO of a business. It changes over time, of course, from very scrappy early days to public company status. But now, from your current perch, what are the most essential jobs that you think you have? The secondary question is jobs that you don't have, things that you actively shouldn't be doing, even if you're compelled or drawn to do them. Job number one is setting the strategic vision and being really clear about it so that everyone within your organization knows where we're going and how you're going to get there. Maybe not all the how, but some of the how. You don't want to be

Starting point is 00:38:53 overly micromanaging about the how, but these are the things that are important. And this is where we're going to be focused. And this is how we're going to prioritize it. And you got to repeat it over and over and over again. You're blue in the face because new people are joining all the time. And we have short memories. Two is building the best team and inspiring people. I think sometimes people lose sight of what that means to actually believe in people, to believe in people more than they maybe believe in their self and how that can change someone's life. And I remember the first time someone believes in me and what that did for me. Believing in somebody on your team and telling them that, putting the resources and the time and energy behind that is what I think is my second job.

Starting point is 00:39:32 The outcomes are way bigger than you could ever imagine when you do that and you actually invest in people. There's fires that hit your desk every day. If it gets to your desk, it's not the easiest problems, it's the hardest problems. Making definitive decisions, even if you're not Sure. Making that decision, we always say at Figgs, it's more important to actually make a decision and then make it right. Make the decision and then make it the right one, do all the work to ensure that it goes well. And you want to win. No one wants to lose. You want to win. One of the weirdest things I always think about for public companies is that literally the company itself is now a product for investors to consume or not. It must be a weird thing to think about since you've spent all this time focused on your customer. What do you think about that? very often investors will describe what they view as a perfect business, something with pricing

Starting point is 00:40:21 power, something with defensible advantages, all the normal stuff, power, lots of ways of putting it. And then they want their products that they buy to have all these features. Are you thinking about those kinds of things, framing figs in a way that speaks the language of the investor that view your company as a means to an end for them? It's like a very different orientation, but it's a reality now for the business. How do you think about that relationship to investors? messaging to them in their language. I think about it a lot, especially when people talk about our stock.

Starting point is 00:40:52 I'm like, no, no, it's a business. It's just funny to me when people just describe us as stock, because I'm like, oh, my God, when you found a business with basically your hands, you're like, please don't talk about my company that way. I do think it's important to get your narrative right. It shouldn't really be that different for all the stakeholders. Your employees, your investors, your customers, the mission of Figgs is to celebrate and power and serve those who serve others. Whether you're a shareholder in our company or whether

Starting point is 00:41:20 you're on our team or whether you're a healthcare professional, that resonates and means something to people. Maybe it means different things. It maybe it means brand strength and price and power to our investor. And maybe it means, oh, wow, finally there's a brand that shows up for me and it's going to deliver and make sure that I have what I need to do my job. It can mean different things. And sometimes you have to craft the narrative a bit differently, depending on who you're talking to, but we're so purpose-driven. We're so mission-oriented. It's so clear what we're doing. We're making great products and we're connecting with the best people in the world. I don't know who can't get behind that. I think that's why over time we'll continue to prove into the market.

Starting point is 00:41:58 And the market's obviously gone in different directions for different reasons, having nothing to do with the fundamentals of our company. But over time, you'll see what we're doing and how we're doing it. people will figure it out. And it's an education process too. We're not afraid to talk through all the different aspects of what we do. If I could wave a magic wand and tomorrow, you've completely changed careers and now you're a full-time investor, just backing people that looked like you and Heather early on in the business. What would you be most focused on identifying in those founding teams, those founders, if that was your job? Resilience. You get knocked down every single day. The Elon Musk's quote is, you eat glass morning tonight.

Starting point is 00:42:37 No one's patting you in the back. No one's telling you great job. I don't remember the last time that someone said that to me. You really have to love to do it and want to do it and be really resilient when hard things happen and shit hits the fan, which it does, I don't know, I can name three things this week. You've got to just be like, okay, how are we going to pick ourselves up and get better and improve? And that takes time. It took me a while to build that resilience muscle and not care what other people think. Even now, as a public company, we've been a public company for about a year and a half now.

Starting point is 00:43:09 Really to say, okay, you can listen to people and you can learn from people, but at the end of the day, you have to have something within you that really grounds you and why you're doing it, who you're doing it for, so that you rise above and can do what you need to do. What for you most built that resilience muscle? Oh, you go through enough shit? the universe builds it for you. And that's the thing.

Starting point is 00:43:33 When people you hire even, how much shit has this person been through? Can they handle it? It gives you perspective too. People that haven't been through a lot in their life, it's hard for them to have perspective. And you see with junior level people, and it just will take time for them to build that muscle over time.

Starting point is 00:43:48 If you become upset or emotional and every little twist and turn is just exhausting, got to take it in stride and get up the next day and keep it moving. Do you remember the most stressful thing that ever hit your desk related to the business? Every day there's something. The other secret of doing this, I think, is having a really short memory. I don't remember anything. People will be like, remember when this thing happened in 2014?

Starting point is 00:44:13 And it was awful. I have no clue what you're talking about. I think I block out the bad stuff. I really do. That I think is very, very helpful. I remember very few elements of my early childhood. I think that's a part of resilience. It's like you are where you focus, too.

Starting point is 00:44:29 Don't focus on the bad stuff. Focus on the good stuff and be positive and be optimistic. There's no other way to be. Thomas Cole actually talks about this. The whole world is against you. You can't be against yourself. Speaking of what types of things bring the most joy to you in the process of building this thing? Oh, I love a team.

Starting point is 00:44:48 I love working with our team and our healthcare professionals. They spend less time than I used to do with them. The business is so much bigger, but we have a phenomenal team. We only have about 300 people. For a business at our scale, that's nothing. No one's a cognitive will. Everyone's making a massive impact. Everyone's doing 10 times as much as anyone else in any other company.

Starting point is 00:45:08 It's just so much fun. Everyone's in it. Everyone's so passionate. Everyone wants to do the right thing. Everyone wants to win. We say create the world we want to live in. Do things differently. Innovate.

Starting point is 00:45:19 Actually innovate. We never talk about competition, ever. We don't look left. we don't look right. How do we outdo what we did yesterday? You said earlier that one of the things lazy companies do is they hire too much. 300 is not a lot of people for a company of your scale. What then is the philosophy of the marginal hire? How do you know when it's okay to hire someone?

Starting point is 00:45:39 Sounds like there must be some heuristics or something you've established that keep you from hiring too much. How do you manage that process? Because that's a small headcount. There's an important metric revenue for employee. One and a half million to two million is best. class. Actually, this is a Meg line. Every executive will come to you and say, in order to achieve greatness, I need $5 million more dollars and 20 more people. Everyone will always say that.

Starting point is 00:46:03 For us, it's, oh, I need three more graphic designers. I need three more engineer. Well, how do you know what one would do? How do you already know you need three? What if that one is so incredible that you have that big of an impact? It's really need base. What do we need to do to continue to build and grow. And we are maniacal about it. We're crazy people about hiring and how we hire and hiring and not overhiring. There's no reason. And then you know what you're able to do when you do it our way is they're going to pay people really well. That's really important too. You want to reward these people that are the best people in the world. Then we're able to pay at the 90th plus percent of market, higher than market on every single job. When you have thousands of people for a

Starting point is 00:46:48 business of our skill, which I've seen. You can't do that. Talent density, as Vida Sting says. It's a real thing. Do you think that there's a role for non-A players in businesses? Somebody told me that once. They're like, you know, for a company like you, you don't need A-plus engineers because if you want an A-plus engineer, they would go to SpaceX. And I just don't think that's true. I think you always want the best. You always want the best. And if you're really doing something different in the world and you're really serving people, which we are, you're really serving people in a very meaningful way, which I do feel like we're doing, the best will come at every level across the organization because you want to be a part of something like that.

Starting point is 00:47:30 And there's always hard problems to solve. And there's always cool shit to build. What we say is do the things that you want to do. There's so much room to grow in our business. Don't just look for that task list. What do you want to do? Where do you want to create value? Where do you want to spend your time? Do that. And I'm sure it'll add value to the business. Well, Trina, I've so loved learning about this business. It's just like a total fascination since I learned about it. I think it's such a wonderful story. The story itself, as you've told today, contains so many interesting, obvious and simple lessons

Starting point is 00:47:59 that I think nonetheless, people ignore all the time. I ask everyone the same traditional closing question. What is the kindest thing that anyone's ever done for you? I would say, Heather, making me her business partner early on, I think there was a leap of faith on both of our hearts. We're very different and we think differently. I'm grateful every day that we teamed up. over a decade ago. She took a big leap and saying, yeah, I want to do this with you. I mean, it was

Starting point is 00:48:23 really her idea, her vision, and I joined on to that. It changed my life. We're best friends, and it's been one of the most significant relationships of my life. Wonderful closing spot. Trina, thank you so much for your time. Thank you so much, Patrick. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.

Invest Like the Best with Patrick O'Shaughnessy - Trina Spear - Billion Dollar Scrubs - [Invest Like the Best, EP.295]

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