704: How One Pivot Turned My FAILING Startup Into a $300M Brand

Nathan Chan (0:01)

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So when things started to take off, that was before Lehman Brothers and the global economy downturn or after?

Mariam Naficy (1:11)

After, right after.

Nathan Chan (1:13)

So businesses booming online even during a global financial crisis.

Mariam Naficy (1:18)

Okay, so we're about to fail. There was no track and it was failing and I myself was doubting myself. I was about to shut the company down and I was really despondent. I have to tell you, it was a really depressing feeling. And every single day, I'd have to like pick myself up and keep going. It just looked so bad.

It just just turned the corner and then it started ramping really hard.

SPEAKER_3 (1:38)

That's Mariam Naficy. Her first company sold for 100 million in cash two weeks before the NASDAQ crashed. The one she nearly shut down now does 300 million a year.

Mariam Naficy (1:49)

So I found an agency that sold remnants and I told them that I was going to be the buyer of last resort and then things just took off like a rocket ship. So badly that we had to sort of start suppressing demand. You always have to act like you have half the financing you have.

Nathan Chan (2:03)

And top line, 400 million per year?

Mariam Naficy (2:06)

We've publicly said 300 million.

Nathan Chan (2:08)

What was the specific technological breakthrough that convinced you on demand AI manufacturing was finally viable for mass commerce?

Mariam Naficy (2:17)

Well, to be honest.

SPEAKER_4 (2:22)

Here are the stories. Learn the proven methods and accelerate your growth and future through entrepreneurship.

Welcome to The Foundr Podcast with Nathan Chan.

Nathan Chan (2:36)

Hey, I have a quick ask. If you're loving these episodes, leaving a quick review is honestly the best way to support us. It helps the show grow and means we can keep bringing you the Foundr stories and insights you tuned in for. Please share it with a friend. Thank you so much. Now let's get into it. Mariam, welcome to the show.

In 1998, You co-founded a company, eve.com. You had 120 employees. You scaled that business, and in six months, you sold it to Idea Lab for over $100 million in cash, and the NASDAQ crashed two weeks later. So that was a crazy run, looking back, 24 months. What was the operational breaking point? We made an early exit, like the only viable path.

Mariam Naficy (3:22)

There wasn't really anything wrong going wrong. Our revenue was scaling very nicely. The first year of operation, and this is in 1999, we generated $10 million in sales, which made us one of the biggest e-commerce companies on the web at the time. Because this is a time when before clothes were being sold online, before shoes were being sold online. In fact, my partner Varsha and I, we went to see SoftBank, and SoftBank said to us, but guys, women don't buy things online.

Really? This is how early it was. Yeah, it was mostly things like software was being sold online.

We said, well, the reason why women aren't shopping online as much as that, what women want to shop for is not necessarily available yet online, but they predominantly like to buy is not online. And so it was super early, and we thought that we were going to be selling replenishable skincare products like creams and lotions, things that you had already tried once and you were replenishing.

But when we opened our doors in 1989, what was surprising was that color cosmetics, blushes, eye shadows, eyeliners, things of color that you would think you would need to try it before you buy, those things just started flying off the shelves. And so we quickly, we realized that basically there were women all over the US that were reading about small independent beauty brands and they didn't have access to them in their cities all over the US. So these little brands were forming, they were being covered by magazines like Allure and other beauty magazines. There was demand building, but nobody could actually buy these brands. And so we got a little lucky, honestly. There's always a little luck in entrepreneurship, right? We thought one thing, which is that this is going to be a skin care replenishment business, and instead it became a color cosmetics business mostly. We also got lucky, something we didn't perceive was that we did this whole Michael Porter five forces analysis of the market, like good MBAs that we were, which is this framework that helps you understand the competitive attractiveness of entering a business. When you looked at it, there was a lot of consolidation on the supply side, which is a big no-no, a big red flag. Estee Lauder companies owned more than 50 percent of the beauty business and we could not get them to sign on as a supplier.