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Bonobos Co-Founder Andy Dunn’s Best Tips on Angel Investing

A decade after launching the high-end men’s brand, Dunn sold the company for $310m. Now he is an angel investor in at least 50 companies.

Andy Dunn and Brian Spaly created Bonobos to solve a fundamental problem: men’s pants don’t fit well. Dunn went on to lead Bonobos through its sale in 2017 to Walmart for $310m in cash, and he has since been an angel investor in some 50 companies.

He spoke at Hustle Con 2018, where he told the story of Bonobos’ founding, and described the roadblocks the company has faced.

Below are his lightly edited comments.

So I was walking over here with my parents today. Where’s mom and dad? All right, they’re somewhere here. And they were saying, what’s hustle con? I was saying it’s a conference for people that don’t know how to do anything. So I’m here to be a cheerleader for what do you do with your career if you don’t know how to do anything. And the first step is my belief is you’re going to need four things. Okay. And the first of those four is inspired by my hometown sports hero, Walter Peyton, and I call it tenacity. So I’m a Chicago boy and living in New York right now, but basically have got this belief that pretty much everything you need to know in life, you can learn from being a Chicago sports fan. So I grew up the son of a Hindu mother and a Christian father. So I didn’t really have a religion I could attach to growing up, but I wanted to believe in something.

So what I believe in is the Cubs, right? There’s really no reason for hope. But every year we still believe that this is going to be our year. And we have a Mecca that we go to, which is called Wrigley field. We commune, we have a spiritual gathering. Nothing really goes that well, but we come together anyway, which is sort of kind of like an organized religion way to think about. So why I love Walter Peyton is that he had an unbelievable career. Every touchdown he scored with about two exceptions, he handed the ball to the ref. And he’s my role model for the first of four traits that you’re going to need, which is tenacity, which is a relentless desire to win, a tremendous resilience in the face of uncertainty. And then when you do succeed, you hand the ball to the ref. And after the game you could give credit to your teammates. I learned that from Walter.

The second thing that you’re going to need comes from our namesake, the bonobo, and I call it the ability to evolve. So can you guys name the five grade apes? Bonobos, orangutans, gorillas. I think I heard chimps. And what’s the fifth? Humans. That was really good. Okay. It takes a long time to get to humans usually. But yes, we are great apes with opposable thumbs, language fire, and the ability to gossip. Bonobos I would argue are the most evolved in some ways. They’ve developed matriarchal societies with no violent conflict. And if you look around the world today, we could learn a lot from their willingness to get along with each other. And how do they do it? They put their women in charge. They tolerate and celebrate gay and bisexual behavior. They have adult males who play with their children all the way late through adulthood. They can be a bit of pedophiles, so don’t pay attention to that part, ignore that. But this basically is the future of the human species and minus that one part.

And so when you think about the history of great apes, if you look at the Congo river, it separates bonobos from chimps. And In chimps, you have a typical male patriarchy played out a little bit like Hamlet or Macbeth. The number three Chimp teams up with the number two, they toppled the number one, really ugly things happen in the night and everyone wakes up screaming because the number one male chimp has been killed or been dropped down to a lower status. And so I think this is slowly what we’re doing as human beings, which is we’re evolving our society to a gender parity, a true partnership between the genders. And we’re treating minorities very differently than we have. It’s happening slowly, but 2015 was a big year in the US if you’re gay or bisexual. And so when I think about evolutionary ability, I think that this is the core to which you’re going to need as a human being in life. It’s going to be core to how you build a great company is the ability to evolve, to learn, to grow, to change your mind. And I think it’s the second key ingredient after tenacity and becoming a great entrepreneur.

The third thing that you’re going to need, I call authenticity. And so this is me and Brian Spaly, my co-founder, in 2007 on the Inca trail. And I like to say sometimes that I think Brian is the better entrepreneur of the two of us. Not only did he create better fitting men’s pants, but he then went and created a second company after we had a co-founder divorce in 2009 called Trunk Club and did an amazing job with a Trunk Club and he definitely fits into the hustle con mode. And what we brought to the party were two things, Brian brought these amazing, better-fitting pants. His basic observation was that pants don’t really fit right. If they’re American cut, they’re too boxy. If they’re the European cut, they’re too tight. And so he developed a pant that has a contoured waistband. And so if you ever take off your belt and you see the way that your belt curves as you wear it, our pants is built with that curvature in mind. In fact, this denim that I’m wearing, if you’re looking to do some shopping today, it’s called jet center denim. It’s got that curvature in the waist. It’s got a more tailored fit through the thigh and we offer it across four different fit silhouettes and then 40 sizes for each of those.

And that’s only made possible with the digitally native model, which was what I brought to the party. This idea that brands would be built digitally native and if you’re a dork like me and you like to read Medium late at night when you’re trying to learn from other great entrepreneurs, I recently wrote a note called digitally native vertical brands from Bonobos in men’s wear, Warby Parker in eyewear, Casper and Tuft and Needle in mattresses, Chubbies in amazing men’s shorts, Everlane, Monica and Andy interior defined in furniture, Ayr, Dollar Shave Club, Harry’s. My opinion is these brands are the future of how brands get built and we’re really proud that Bonobos was the first in 2007. We spent four years pioneering that model and then we discovered, wait a second, oh shit, this model isn’t that profitable. How do we actually make money? And we decided that there was going to be a way to make great stores and the stores are called guide shops. Raise your hand if you’ve been to a Bonobos guide shop.

Okay, so we’ve got a lot of work to do. You come in, you get fitted, you get styled, we offer you more fit and size choice than would ever be possible in a traditional retail environment. We offer you great customer service, one-to-one. Think of it like a mini Apple genius bar on a day where Apple isn’t that crowded and we then ship you the product. So we remove from the equation the idea that you need to walk out and do your own fulfillment. And what we put in is a lot more fit, a lot more choice, a lot more color, a lot more print, and a heck of a lot better customer service. And so our authenticity for that is what’s driven this company. And so don’t think about a company that’s going to make you money. Think about a company that you would do in a world where there was no money and you may be on the right track.

The last thing that you’re going to need is magnetism and the magnetism to attract talent and capital and anything that company needs at all times. And this is easy to do at the beginning when it’s a bright eyed dream, it’s hard to do later when you actually discover that things don’t go exactly as you planned and you go through difficult times and you go through moments where you don’t think you’re going to make it. And you have to somehow summon enough self belief that you’re going to make it at the same time as you reconcile the doubt of the issues that you’re facing and in the midst of that, attract more people, retain the people that you have and if need be the capital to your venture. And so these four things together, I call no I in team. And so this is a picture of me and my dad, who’s the most selfless person that I know. He led our family as a great dad and never really felt like he had to take credit, never felt like he was going to do anything but take out the garbage, clean the kitchen after my mom cooked dinner. And this selflessness is fundamental to the humility that people really want to follow. And I learned it from my dad, so please give it up for him. He’s in the audience here today.

What my dad’s not good at is raising money. He’s a history teacher. So let’s talk about how do you raise money. So I have learned a lot about this because I’m the founding CEO of Bonobos. I’m a board member at four other brands including Interior Define, which is a digitally native furniture brand out of Chicago, Monica and Andy, which I’m building with my sister, a digitally native vertical baby brand. Binge, which is a dating company and didn’t even have time to update the slide, but a brand called Ayr, which is a women’s brand that we incubated inside Bonobos and spun out. And then I have invested both personally and through a fund called Red Swan in a bunch of other companies. About this point, about 50 other companies where I get to be an angel investor. And it’s a privilege.

By the way, I don’t recommend doing this. It’s not that focused. There’s a lot going on. And so I talk about getting one thing right. If you want to get something off the ground, which you want to do is get one product right. And so one of the things that I’ve written about, if you want to raise money, build a great product. And here’s where I tip my cap to my co founder, Brian Spaly. So this is a product called the Turks and it was one of our first products. It was a pinwheel, lightweight corduroy. It had great contrast pocketing liner. It had the curved waistband, and we basically launched Bonobos behind eight styles, eight different colors, of this pinwheel corduroy product. That was all we had. And on just that product, this is what we did. So we got to about 50,000 run rate selling corduroy pants to our friends at Stanford. And when you have a few thousand dollars from selling stuff to your friends, you have nice friends. But when you have $50,000 and you’re not selling drugs, you might have a business.

And so what you want to see is can you get to $50,000 of trailing revenue in about six months? And if you’re doing that, then maybe you’re onto something. And obviously if you’re building an enterprise software company or a SAS company, this doesn’t apply, but we’re at hustle con where a lot of us are trying to build physical products, we’re trying to build things that exist in the real world. It’s not a conference aimed at people who are doing technical software driven products. See if you can get to $50,000 and at that point go try to raise money. Don’t necessarily try to raise money beforehand. And if the question is, well, how do I do this? You’ve got to find enough money somewhere for inventory. But if you can’t shake down, you know, $20,000 out of your rich aunt, or if you can’t find a way to get that first little slug of capital from somewhere, you’re probably unlikely to get to that second step when you’re talking to people who maybe aren’t related to you.

And so what you’re going to discover is a concept that one of my friends, who’s an entrepreneur, his grandmother used to call supply is infinite. You know, there is an infinite supply of capital in this world. The number of rich people in this world is staggering. It’s one of the smallest problems we have with society. We don’t have too many rich people. We have plenty. It’s a good thing because rich people can do things like make investment and investment from a macro economic perspective is what drives our economy. And so when you take the perspective that just because someone said no doesn’t mean that everyone’s going to say no. It probably just means that like 53 more people are going to say no before someone says yes. And so you have to have that resilience and tenacity to power through that and the magnetism, self-belief to keep going. But just keep going. Don’t worry. I think literally a thousand people who’ve said no to me on the way at Bonobos. We raised our first $8 million from 104 people because we had zero institutional capital support.

And then one day in 2010 for whatever reason the universe changed. We were three years into it. I saw two venture capital firms that were making investments in eCommerce, one called Xcel who invested in ModCloth, another one called Lightspeed who invested in ShoeDazzle and later Honest company and those became our venture capital firms. But that was after three years of taking the perspective that supply is infinite and virtually every venture capital round we’ve raised at Bonobos has required this tremendous sense that we’re going to find it somewhere in this face of significant amount of rejection.

Okay, so now you’ve got a product that works, you’ve got the four qualities that are required and you’ve got money. How do you build a great culture? I think building a great culture is a little bit like making a Mexican mole. And so somewhere in here, just pretend like you saw a slide about mole. It’s got all these ingredients that are really hard to figure out. You know, it’s like if you ever had a good mole, it takes like 20 to 25 ingredients. And so if it tastes bad, you don’t know why. And so most companies don’t have a good culture. Mostly they’re bad, but no one knows why. But everyone talks about why culture matters and why they want a great culture. And frequently they lie to themselves about having a great culture. And so one of the only ways to figure it out is you’ve got to look at employee engagement scores and you’ve got to be willing to talk to people who are at the ground level in your organization. And you’ve got to look at turnover and you’ve got to look at your ratings on Glass Door. And you have to internalize all these problems as your own, which I call, it’s all your fault.

You know, founding CEO is a beautiful job because everything is your fault. It’s not even like being a US president where you can just blame it on the last person. A founding CEO, you started the company, so it’s all your fault. So how do you make a great culture? In my opinion, it starts with having a mission and a vision that people understand. And so at our company we have this brand story and purpose that we talk about the evolution of mankind, starting with pants. And saying, you know what? We have great fit and we have great customer service, but how do we actually have a story about what we’re doing that matters more? We reinvented the fit of a men’s pant. We’ve now brought that to great shirts and suits with products like our daily grind dress shirt, which we’re about to release with an amazing foolproof elbow and it’s got the same kind of concept of fit. Or the jet setter suit. And then by the way, we don’t think traditional retail stores work. So we’re going to reinvent that. What might we reinvent next? And bringing that sense of passion for a mission as the number one hiring criteria and making sure people care about this.

So how do you test it? The way that you test it, in my opinion is you make someone two offers. You offer them one cash offer with more stock, and then you offer them higher cash with lower stock. And if they go for higher cash and lower stock, you try to talk them out of taking the job. The second thing that you need to do is figure out if they’re aligned with your core virtues or core values. So we at Bonobos talk about these five core virtues or human values that we look for. Are you positive? Do you put more goodwill than you take out? Doesn’t have to mean you’re gregarious or sociable. You can be a positive introvert. You can feel it in someone’s spirit. Usually I can tell right at the beginning of meeting someone, do they have positive energy? The second is intellectual honesty. I like to ask people in interviews, when’s the last time you changed your mind? Or what’s the thing that you most passionately believed at one point in your life that you no longer believe? If someone sits there and goes, I don’t know, probably not someone you want to hire.

You need people who can look at data and change their minds. Judgment. The best way to evaluate judgment is all the decisions someone has made in their life up until the moment that you’ve met them. You can usually tell if someone has good judgment just from looking at LinkedIn. Does their career make sense? Are they making good decisions about where they go? Judgment is about do you make good decisions in the face of uncertainty. You don’t even need to meet someone to figure out if they have good judgment. Empathy. Do they think about the world from the perspective of other people? You know, most of us spend our lives inside our own heads. It’s remarkable how little other people actually care about us and yet we assume they do. Most of us are spending 99% of our energy thinking about ourselves. And so just the ability to carve off maybe 20% of your energy and imagine it from the world of the perspective of others. This is what bonobos teach us, although they have less language capabilities, supposedly they’re more empathetic and they’re more likely to be imagining that world, which is incredible thing to think about.

And then lastly, self-awareness. You know, it’s sad, but the research shows that other than being tall, white and male and named John, the highest criteria of fortune 500 CEOs are two things. The ability to make good analogies and being self aware. And Daniel Goleman has written an amazing article about this called self-awareness, what makes a leader, which is if you want to cultivate the one thing that you can control that is likely to make you a great leader. It’s self awareness. It’s the ability to be non-defensive about the things about you that suck, to understand your weaknesses and to be able to talk about them with other people in the room. And then to own your power, own your strengths, to be unafraid of it. These are the five ingredients that we look for at Bonobos and most importantly, we fire on these five core values.

So you try to hire on them, but you’re frequently going to get it wrong. Or I should say you’re not infrequently going to get it wrong. Hopefully you get it right most of the time. But when you don’t, as they say at Netflix, adequate performance has to get generous severance and performance has to be cultural performance as well. And ultimately you want to hire people that know what they’re doing. You can’t hire someone to be lead violin who’s not a violinist, but my belief is you hire for passion for the mission and fit with your core human values above experience. Usually you’re hiring someone who’s about to do it rather than someone who’s just done it. And I think ultimately this is the most elegant challenge in business, which is can you build a company that is loved by your employees? Because if your company is loved by your employees, shareholders are going to be happy and customers are going to be happy too. No one likes to work at a company where the customers don’t like the product or the service or the bundle thereof. And no company ever thrives that has got a great culture and it’s not serving customers well.

So I think that what wall street would like to teach us is shareholders come first, customers second, employees come third. And I would suggest that we should invert that. Put employees at the top, do a phenomenal job with that. Of course they will serve customers well and then shareholders will be taken care of. And by the way, your employees are the only people who are thinking about what you do every day. They’re investing their entire livelihoods outside of their families. Whereas a customer might think about you once a day if you’re lucky and your shareholder thinks about you a lot when the quarterly earnings come out. And so when it comes to leadership, I would suggest taking the opposite perspective of Charles de Gaulle, which is when I want to know what France thinks I ask myself. And instead take the perspective of an Eastern philosophy Lao-Tzu you who says a leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say we did it ourselves.

And so if you’ve had some success, now what to do? Don’t become annoying. Don’t let success get to your head. And I take this next section as advice for myself, right, which is that there’s this pernicious force in human nature, which is hubris and it comes with success. Don’t let your feet leave the ground, keep it firmly planted. Remember that everything that you’ve done, the further along you get has less and less to do with you and more and more to the people that you’re attracting to your venture and who are doing incredible work. You are doing less and less and less and less and less over time. So you have less and less to your credit as time goes on. And be wary of the stories in human history and in human mythology about what happens when your feet do leave the ground. This is a picture of Kendrick Lamar who wrote a great song on his Emmy winning album that talks about beggar and how that beggar might actually be God. And I love that song because it’s a mental trick, which is just because you are quote unquote powerful and someone else is powerless. doesn’t mean that it should change anything about your kindness toward them.

And if you want to hear a great song that will make you think and really kind of trip you out, consider that other people who are successful and powerful are precisely the people that you need be the least concerned about and the people who have not had the privilege that you’ve had, you must think of in the inverse way. Be forgiving to yourself. This is a tough clicker, but I’m going to get it. Be forgiving to yourself by being forgiving to others. You’re going to make huge mistakes, so you have to learn to forgive yourself and you’ll learn to do the same thing to others. This becomes particularly important as a boss. You’re the shepherd of the way that other people feel about their performance. And then lastly, attributed to my mom, practice good judgment without being judgmental. And I learned that from you, mom. So please, one more round of applause for the leader who I most admire.

The final thing I have to say before just maybe some brief questions is my favorite poem on resilience. And it’s called Never Give Up. It’s by the Dalai Lama. Never give up no matter what is going on. Never give up. Develop the heart. Too much energy in your country is spent developing the mind instead of the heart. I think he means America. Be compassionate, not just to your friends, but to everyone. Be compassionate. Work for peace in your heart and in the world. Work for peace. And I say again, never give up. No matter what is happening, no matter what is happening around you, never give up. And I was on the phone with my sister this morning. She’s working through a fundraise for her company, Monica and Andy. It’s every bit as tough as all the fundraisers that I’ve ever been through and I’ve been through eight and I said it’s like a Journey song. Don’t stop believing. And as long as you believe in yourself you’ll get it done. Thank you very much.


MC: Yeah, we have time for like two to three questions if people want to come down. I actually have a question myself. Huge Bonobo’s customer, I think I have like 16 pairs of pants. It’s kind of weird. But one thing you kind of touched on, didn’t really talk about it a lot, is I think you guys have fantastic customer service. I know that’s becoming kind of a thing where people are starting to realize that it’s really important. There’s a lot of tools out there that help you, you know, be really efficient when it comes to customer service. But what’s your kind of stance on the importance of that and from a brand perspective?

Andy Dunn: I think it’s, if you look at just our … so our net promoter score now is running around 80 and if you look at just our clothing products, we’re going to be between 50 and 65 depending on the product. So we’re adding somewhere between 15 and 30 points just from customer service and it’s the ninjas in the guideshops. So part of the reason why I’m so bullish on digitally native vertical brands like Bonobos and like Warby and like this whole ecosystem is that you can fundamentally bundle service together with assortment. And we found that it comes in three ways. It’s about the right technology enablement of service. So fewer contacts. You actually want to drive down your contacts per order through great web and mobile experience. It’s about having great online service, which in our case is the ninjas who if you look at the ninjas, they have an NPS of 90 and then now it’s about the offline and having the offline have less inventory management and more customer service. So I think it’s a huge part of the whole experience. Thanks for the question.

Question: You mentioned earlier, once you hit the $50,000 run rate, maybe time to start raising some money. What are your thoughts on bootstrapping versus raising?

Andy Dunn: I think they both are extremely viable paths. I think that if you have an ambition to control your own destiny more fully and your instincts are you want to kind of keep it and maybe have it for longer and have higher percent ownership, I think that bootstrapping can be a phenomenal path. I think that raising capital is if you start to get wider eyes about the opportunity and you want to accelerate. But I think both are unbelievably viable ways to build something. And I think where you get into trouble is where you end up doing something that’s inauthentic. So I’ve seen a friend of mine who started a business raise capital for it, even though he’s really a bootstrapper by heart, and he was miserable, right, because of that pressure and that expectation. And I’ve seen the flip of it, which is someone that really wanted to go for it and they couldn’t raise capital and they were miserable by that. So I think you’ve got to look for that authenticity. It all comes back to authenticity.

George: Hi, my name is George.

Andy Dunn: Hi George. What’s up man?

George: My company Cotton Brew, we make men’s wear and we’re in the process of starting the fundraising and you know, we want to reach out to angels. And you know, you mentioned you guys raised from over a hundred angels in this way. What would you recommend as far as finding a relevant angel so we would reach out to them scalably?

Andy Dunn: It’s two things. So 99.9% of angels don’t want to invest in your company. It’s just kind of a way to think about any company. So you’ve got to find that 0.1% and I think the number one way to find the 0.1% is people who’ve invested in similar kinds of companies. Because then you don’t have to filter for will they do a consumer retail investment, will they do a consumer retail men’s wear investment. That’s number one. And then number two, I think the best source of angel investor recommendations is other entrepreneurs who say those angels are good. So whenever you meet an entrepreneur, say, “Hey, do you have any angel investors that you really like?” Write down those names and then ask them, “Would you be open to making an intro? Let me send you my presentation or let me share with you what I’m doing. Would you be open to seeing if that angel investor wants to meet me?”

George: Okay, thank you.

Andy Dunn: Good luck.

Question: Hi, I am the founder of the shopping service. It’s an iOS app. We are just before we have reached on product market fit, then we’re about to grow. What is your key advice when it comes to growing and scaling in terms of customer base?

Andy Dunn: You know I, I had a moment at Bonobos where we had product market fit and I thought I was done and then I realized that there was this other part which is customers and growing customers in this whole challenge of customer acquisition. And I think that one of the mistakes that I made was assuming that doing more marketing would help me grow product market fit to equaling more revenue. And what I’ve learned is sometimes if you’re not seeing the business take off in a more organic way, it means that your product market fit is not a 10 X the next product. And so Bonobos spent four years growing the business quite nicely, but really by spending money on marketing through venture capital in a way that wasn’t actually great from a longterm perspective. And it wasn’t until we invented the guideshop model and did the partnership with our phenomenal partners at Nordstrom and started developing a print catalog and doing some kind of contrarian things for a digital brand that we really took off. And so sometimes you have to think about your product experience as being something that you want to extend into new categories and new channels rather than just marketing the existing bundle of product and market that you have.

Question: Thank you. I think we found the same way. We did some Facebook and Instagram marketing in the beginning, and when we didn’t have more funding for that, we had to kind of be more smart about it gets expensive.

Andy Dunn: It gets expensive, right?

Question: Exactly.

Andy Dunn: Thank you very much.