Business Insider
Neil Blumenthal and Dave Gilboa are cofoudners of Warby Parker, an eyeglasses retailer worth $1+ billion.
Neil Blumenthal and Dave Gilboa met as MBA students at the University of Pennsylvania and cooked up the idea for Warby Parker, an eyeglasses retailer that would undercut the sale of glasses by hundreds of dollars and sell them online rather than in physical stores.
Seven years later, they're the co-CEOs of a $1 billion-plus brand and they've sold millions of pairs of glasses in the US.
Business Insider caught up with Blumenthal and Gilboa for an episode of "Success! How I Did It," a podcast highlighting the career paths of the world's most accomplished people.
Gilboa and Blumenthal explain:
- How they launched and immediately sold out of everything, with a 20,000-person wait list
- How they operate with two CEOs and what each one does
- Why they try to take 90 minutes a day to do nothing
- How they scaled a company to millions of pairs sold and 1,000+ employees as first-time founders
- Their future IPO plans (2018?)
You can listen to the interview with Warby's co-CEOs below, for the 4th episode of "Success! How I Did It," a Business Insider podcast that follows the career paths of some of today's most accomplished people.
Check out earlier podcast episodes with:
- The founder of Tinder, Sean Rad
- Bleacher Report and Bustle's founder Bryan Goldberg
- Early Uber and Pinterest investor, Scott Belsky
Subscribe to "Success! How I Did It" on iTunes to hear the latest episodes.
The following is the podcast transcript, which has been edited for clarity and length.
Losing a pair of $700 glasses in Thailand and refusing to buy another pair turned into a big business idea
Sarah Jacobs
David Gilboa (right) and Neil Blumenthal (left)
Alyson Shontell: Today with us we have Dave Gilboa and Neil Blumenthal, who are co-founders and co-CEOs of Warby Parker, a glasses company that's been valued at what, more than a billion dollars these days?David Gilboa: There are rumors out there.
Shontell: The unicorn status has been achieved, we can just say that. I want to go back to where you two first met, at Wharton.
Neil Blumenthal: We were full-time students getting our MBAs in Philadelphia. We had become close friends in a way that business school often does, and Dave had lost a pair of very expensive glasses. How much did you pay for them?
Gilboa: $700. I'd been working in consulting and finance, then took a few months off to backpack around the world. I was in Northern Thailand and happened to leave my glasses on a plane. They were my only pair of glasses. It didn't make sense to me that I was going to have to pay $700 for a new pair. So I got to campus, was a full-time student, and didn't have glasses my whole first semester. I was complaining to anyone that would listen, wondering why glasses were so expensive.
Shontell: You didn't have glasses for the whole first semester? How did you see and do any work? That seems like a terrible plan.
Gilboa: I did a lot of squinting and I wore contacts sometimes ... Then I started chatting with Neil, who'd spent a bunch of time in the eyeglass world and light bulbs went off when we started learning more about some of his experiences.
Shontell: I didn't realize you had been in the glasses world before, Neil. Dave, didn't you have a bioengineering background? You had history, Neil?
Blumenthal: I focused on international relations and history. Not exactly what you'd expect to start a tech company or a fashion label. But after school I thought I wanted to work at the State Department. I ended up working for this amazing nonprofit social enterprise that would train low-income women to start their own businesses, giving eye exams, and selling glasses in their communities throughout the developing world. So I spent five years proving out this model, because I don't think most people realize that there are close to a billion people on the planet who don't have access to glasses. If you think about a tool that improves productivity, that enables somebody to learn and then enables somebody to work, it's one of the most effective poverty-alleviation devices out there.
Shontell: So you guys put your heads together, you have this background experience. You're not able see, and this aha moment happens. There were four of you, right?
Warby Parker
The four Warby Parker founders. Neil Blumenthal (top left), Andy Hunt (top right), Jeff Raider (bottom left), Dave Gilboa (bottom right).
Gilboa: Yes, the other two cofounders in addition to me and Neil are Jeff and Andy. We spent about a year and a half really formulating the idea that eventually turned into Warby Parker… I'd been wearing glasses since I was 12. I'd never heard of a company called Luxottica, but they own brands like Ray-Ban, Oakley, Persol, Arnette, and dozens of others. They have the exclusive eyewear licenses to most major fashion labels like Chanel, Prada, Dolce & Gabbana, Ralph Lauren, and DKNY.Most consumers don't realize that when you walk into a Sunglass Hut or a Lens Crafters, you see 50 different brands of glasses, but all those brands are owned and produced by the same company that also owns the store that you're standing in, that also owns the vision-insurance plan that you're using to pay for those glasses. It just didn't make sense to us that that was the only way that you could design, manufacture, and sell glasses to consumers.
Before e-commerce was available as a distribution channel, it was really hard to create a vertically-integrated brand.
Shontell: Explain what "vertically integrated" means.
Gilboa: For us that means that we're designing the products, we're doing all the design in-house, we're producing them under our own brand and selling them directly to consumers without any wholesale or any kind of middlemen along the way … As a result we'd be able to cut out all the unnecessary licensing fees, all the unnecessary markups, and offer a product that normally cost several hundred dollars and offer it for less than $100 to consumers.
Shontell: So you all got to work and the first money you raised was actually from Wharton. You won a business competition there - it was $2,500 or something?
Blumenthal: We got a few awards from the school, which was super helpful.
Shontell: They must be really, really glad they made that investment now. They're going to get a nice return, if they haven't already.
Blumenthal: Well, they were really kind, and it was actually a gift...
Gilboa: It was a grant.
Shontell: Oh no! Poor guys. Missed opportunity.
Blumenthal: We try paying them back in internships.
But what we did was, the four of us - Jeff, Andy, Dave and I - got together and said, "How do we want to do this?" We decided that we all wanted to be equal partners. We each committed to putting in our life savings, which at the time was about $25,000 and if the company really demanded it, we would each put in an additional $5,000. Of course it did need that, so we started the business with $120,000. That enabled us, on a shoestring, to design our first collection and produce an initial inventory of frames. We designed a website because we needed some place to sell our glasses. Then we hire a PR firm to help us get some attention. When I say do this on a shoestring, we used to go to TD Bank, steal pens, and steal office supplies from other people.
We were able to get meetings with Vogue and GQ. We were building this fashion brand and we wanted to be in the best men's book, which was GQ, and the best women's fashion book, which was Vogue. We launched and the company just took off like a rocket ship.
Shontell: It's pretty hard to get Vogue interested in a startup no one's ever heard of.
Blumenthal: We were really fortunate for a couple of reasons. One is I think founders and CEOs often take credit for being the smartest people in the world, but so much is serendipity and timing. We were one of the first of these vertically-integrated brands, so the story was novel.
We have this Home Try-On program where people select five frames, then we ship it to you free of cost. That was a completely novel idea that writers could write about. I think we have a very specific design aesthetic and our frames were beautiful. They were made from and continue to be made from some of the most premium materials like cellulose acetate, that we work with a 150-year-old family-owned Italian company. So we had all the building blocks there. Of course we had our social mission.
Shontell: That was in place from the beginning? That's where you give a pair of glasses away for every one that's sold, right?
Blumenthal: From day one. Dave and I and Jeff and Andy ... It's one of our first conversations: "What kind of business do we want to build?" We wanted to build a business that was going to have a positive impact on the world where we were going to be excited to come to work every day. As we were thinking about what does that actually mean in practice, we thought it's an inherent public good to bring down the price of a pair of glasses from $500 to $95 here in the US, but we knew that even at $95 there were lots of people who still needed glasses who didn't have them. So we decided, "Let's commit to distribute a pair of glasses for every pair that we sell, because that would actually be impact."
Shontell: So that's expensive, especially for a shoestring budget like you were saying. How important do you think to getting traction is a social component like that? It's a strategy that Tom's has famously used, a couple different brands have famously used it.
Gilboa: There's no question that we'd be more profitable if we didn't have a social mission built entirely ...
Shontell: When you say profitable, are you profitable?
Gilboa: As a private company we don't really talk about that. We've had periods of profitability. We're investing in a lot of growth right now. There's no question that a bottom line would look better in the near term if we didn't have these additional expenses. But we really do it as the best long-term return we can get on those dollars, understanding that we're having an impact. We've distributed millions of pairs of glasses to people in need around the globe and so seven years in, have already had a pretty significant impact.
How to get featured in Vogue and GQ when you launch - and then sell out of everything with a 20,000 person waitlist
Collin Hughes
Warby Parker has started to dabble with brick and mortar stores. Here's one in NYC's Soho.
Shontell: I just wanted to go back a little bit to how you all started getting traction in the first place. I'm sure the magazines helped, but as we often find, you can get a bump in press and then you have to maintain that. So what did your traction look like? When did you actually have a lot of sales rolling in and know that this was going to stick?Blumenthal: When we got those features in Vogue and GQ, it was literally that moment that the business took off. We had actually ... Our website wasn't ready to launch and the fashion director at GQ calls us up and is like, "Guys the magazine's going to hit newsstands any day now, where is the website?" Because we were going to be in the March issues of GQ and it was February. We thought, "Oh, we have a whole month." Just to show you our naivete, it was like, "No, the March issues comes out in February." We literally scrambled, got the website up. We ended up hitting our first-year sales targets in three weeks - sold out of our top 15 styles. Had a wait list of over 20,000 people. It was mayhem and the question is, "How do we maintain that momentum?" That was all about customer experience, so how do we make every single person have an exceptional experience, even when it's a crappy one?
To this day, you call Warby Parker and a human being answers the phone within six seconds. We have a net promoter score, since inception, in the 80s. I think right now it's 84. For those who don't know, net promoter scores is a measure of satisfaction to give you a sense. Cable companies have negative net promoter scores and most other optical retailers are in the single digits. So when we make people happy, they're more likely to tell other people about us. Word of mouth since inception has been the No. 1 driver of sales for us.
Shontell: If you all are this successful right out of the gate, I'm sure Luxottica, when they hear about you, is not very pleased. What was your first interaction with them like? I'm assuming they tried to either crush or bite you.
Gilboa: Their former CEO flew up from Milan to meet with us pretty early on in the business, I think a couple of years in. Neil and I went to meet him at their corporate offices. We kind of told the team half-jokingly, "Here's the address we're going to, if you don't hear from us in two hours, send the cops in." They're certainly aware of what we're doing. It's a massive company and it's an even bigger industry. Even though we're growing quickly and taking share, they have their established business that's still doing well and I think there's plenty of room for more than one player in the space.
How to run a billion-dollar business with 2 CEOs
Courtesy Warby Parker
Shontell: An interesting thing that you all did when you were setting up your business is, you're both here, you're both still co-CEOs. Sometimes people do that for a little bit, sometimes not at all, usually it's just one. So how does this work? I think I saw you joke on Quora that you flip a coin when you disagree?Gilboa: There are four of us who started the business together. We were friends first. We got a lot of advice from people, really smart people who told us never start a business with friends, you guys are going to end you up hating each other, maybe suing each other. Four founders is way too many, especially you guys have overlapping skillsets. There's not like there's a technical person and a designer. We said, "Yeah, but we really trust and value everyone's contributions here. Let's just figure out how we can be thoughtful about it."
That started, even thinking about future repercussions, so we said, "OK, we're all going to be equal partners here, but let's set up a vesting schedule so that if ... There are so many opportunities at business school, or as we get into this maybe one person decides they want to pursue something else. They should get credit for time served." So we had a structure that got all four of us vesting through graduation and also set up some formal structures around feedback. We had 360 reviews even when there were four of us. We'd go to our favorite bar and ...
Shontell: How does that work?
Blumenthal: It was a little awkward at first.
Gilboa: We'd have one person in the hot seat talking about how they think things are going. Then the other three people would chime in.
Blumenthal: If you were going last, that's when you really got it.
Shontell: Yes, because everyone's been building on what you've been saying against them for the last half hour.
Gilboa: And a number of us had worked at places like Bain & Company where they have really formalized feedback processes. So we tried to bring in what we thought was effective from some organizations that we'd been a part of and build that into the foundation of the team when it was just the four of us.
So we launched the business in February 2010. We graduated that May and at that point, Jeff and Andy left day-to-day roles. There are still all four of us are on the board. Neil and I, we're going to stay on to run the company and we had been friends first, then had been operating as four equal partners. We discussed a bunch of different structures that could make sense. Does it make sense for one person to be CEO, the other chairman of the board? One person CEO, the other president? Do we even need titles at all?
We realized that the most effective way to work together is to just continue how things had been going and just think of ourselves as partners. But we wanted to make sure it wasn't confusing to the team as we hired people and wanted to avoid a situation where, "If mom says no, go ask dad." We tried to be really thoughtful and make sure that every department, everyone in the organization only has a line of reporting into one of us. So we each have six or seven departments that role up into each of us. Effectively it works more like a Venn diagram where if there's a major decision about strategy, or brand, or e-commerce, or where we're putting retail stores, we're both involved.
Shontell: It sounds like no investors were scared away by this either. I mean, you've raised hundreds of millions of dollars at this point. I guess all they really care about is, are you selling stuff? Are the numbers there?
Dimitrios Kambouris/Getty
Fun fact: Neil Blumenthal (right) doesn't actually need glasses. His are for fashion only.
Blumenthal: Frankly, the proof was in the pudding. We didn't raise capital until about a year and a half after launch, when we completed our first round. We had all this success - "success" I have air quotes up because it was only a year and a half. It was clear that the business model was working, we had a brand that resonated, so I think one of the things investors always look at is the team.Shontell: What do you think is the most critical thing you all did in that first year to really cement yourselves? Was it that press? Was it going to GQ and Vogue? What was the thing that you think made it that you were going to work as a startup?
Blumenthal: I think our success does start with the fact that this was a solution to a very real problem. If you asked people, "How much did you pay?" for their glasses, they lower their shoulders, they get a little sad and embarrassed by how much they've spent on eyeglasses. This was a real consumer issue.
The timing worked when e-commerce was on the upswing. We were one of the first digitally native or vertically integrated brands. This was also a time where, before Facebook had fully monetized ... I don't know if people remember, but there used to be these fan pages and you would try and get people to like your page. With our Home Try-On program in particular, we saw so many customers would get their Home Try-On, get their five pairs of frames at home, try them on, take pictures of them and then post it to Facebook and say, "Hey, which frame do I look best in?" So there was this viral nature to our business that we didn't have to pay for early on. Again, there was some luck there from a timing perspective.
Shontell: You all at this point have sold over a million pairs. That's dated information I believe. So what's the latest that you can share?
Gilboa: Again, we don't share much about our financials. What we announced was that we've distributed over 2 million pairs of glasses through our "Buy a Pair, Give a Pair" program.
Shontell: A million for you and then a million that you give away would be the implied.
Gilboa: No, multiple millions that we've sold and multiple millions that we've distributed to people in need.
How to scale a company to 1,000+ employees and build good corporate culture when you've never been a CEO before
Warby Parker employees.
Shontell: What have you learned scaling a company to a thousand-plus employees? Hundreds of millions raised. That can't be easy to do the first time around. How have you figured it out?Blumenthal: One of the things that we decided early on was that, we're building a brand and a brand is not just a logo. It's not just a visual identity. A brand is a point of view and that point of view needs to be lived. It really comes down to the culture of the company right?
When somebody joins Warby Parker they get a copy of Kerouac's "Dharma Bums" because the name Warby Parker comes from two early Jack Kerouac characters, Warby Pepper and Zagg Parker. They get pretzels from Martin's handmade-pretzel company, which sells pretzels out of the Union Square farmers' market because that was within a block of our very first office and we used to get pretzels from there all the time. I could go on and on, but we've established a bunch of rituals that we think reflect the values and the culture of the company we're trying to build.
Gilboa: We realized when we were 20 or 25 people, that we'd been hiring a certain type of person that reminded us of ourselves on the founding team a bit, but we hadn't really articulated the criteria or the values that were most important to us as an organization. We went through an exercise with the entire company, asked people to write down what are individual values that are important to you, in people that you want to associate with in your life, completely outside of a work context. We got over 200 different values and lead a bunch of discussions about which values were the same, which ones were different, which ones were critically important, which ones were nice to haves.
Then Neil and I took those and created our core values at Warby Parker.
Why Warby Parker's founder tries to spend 90 minutes a day doing nothing
Michael Buckner/Getty
Shontell: Do you still do this 90 minutes a day just for you - no one can interrupt, no one can have meetings with you? What happens in that time? How's this good for business?Gilboa: I take an hour-and-a-half nap every day - no. Neil and I realized a couple years ago that we got to the office and we were just in back-to-back, to back-to-back to back meetings, often 16 meetings in a row with no breaks. It didn't really leave us time to think or prepare for the meetings and sometimes we were forced to email while we're in the meetings, trying to multi-task. It wasn't good for anyone.
We met Jeff Weiner, the CEO of LinkedIn, and he mentioned that he schedules 90 minutes of unstructured time in his day. So I went back and grabbed our assistant and said, "OK, we need to do this." I'd say it worked for a while. More and more those 90 minutes tend to get scheduled over as things pop up, but we still try to leave some time in the day where we can think and not get bogged down, kind of the hamster wheel where there are always things that we could be doing, always meetings that we can be in. We try to ask ourselves, "Am I the only person in the company that needs to be in this meeting?" If not, maybe somebody will just send me notes afterward, or I'll catch up with someone in a one-on-one and try to spend more and more time thinking about what we want this company to look like in 2020 and beyond and focus on bigger strategic initiatives.
Shontell: There are a few trends within the startup and tech world happening. One fun thing, as glasses pros, what do you think of Snap Spectacles?
Blumenthal: We think they did a very good job at positioning spectacles as a toy and limiting expectation. Which was in stark contrast with Google Glass that was marketed as, "This is something you're going to wear 100% of the time, it's going to radically change the world." Those are hard expectations to live up to.
Why Amazon won't crush Warby Parker
Kevork Djansezian/Getty
Amazon founder and CEO Jeff Bezos
Shontell: Another question is Amazon. Amazon keeps touting, "We're the No. 1 store for millennials. Everyone's buying everything from us. We're the everything store." Why can't they just crush you?Gilboa: I think Amazon's a company that we have a tremendous respect for and it's pretty incredible what they continue to achieve as they extend their products and services. I think where they haven't competed yet effectively is in building branded products and experiences. While they certainly have private label offerings, in terms of a holistic authentic brand that resonates with consumers, I don't think that's part of their DNA, at least not at this time. I think the other aspect that is a bit more complicated about our business is that for prescription glasses, we have to custom manufacture the product after you order and that's historically not something that Amazon has done either. They're really good at delivering products that are prepackaged and getting them to you as quickly as possible, but mass customization supply chain is not something that I think they've successfully done in the past.
Shontell: Warby Parker is a "unicorn" company. That's a buzzy word people use when a company's reached a valuation of $1 billion. There are a lot of unicorns in tech. What do you think is going to happen to all these companies that have raised so much money?
Blumenthal: There are cycles in business, whether they're consumer cycles, whether they're investing cycles - there's no question that over a fairly decent amount of time it's been a pretty entrepreneurial-friendly fundraising environment. There were some companies that were using equity capital to just sort of put on the marketing spigot and doing things that were not sustainable. I think that we've always tried to build our business in a sustainable way. An example of that is from a marketing perspective. We're pretty disciplined in that we will only spend the amount of money that will enable us to have positive contribution margin on somebody's first purchase because we don't know necessarily how much it's going to cost for them to buy additional glasses from us or what have you. Whereas there were some other businesses that would be around for six months and were projecting that their customers over the next five years were going to spend X amount, so you can spend Y amount on marketing to acquire them.
So, when it is an entrepreneurial-friendly investing environment, sometimes there tends to be, reckless is maybe too strong a word, but you know, not disciplined spending. I think we'll see. We've already seen some businesses that were high flyers come down to earth. Then there are some really good companies out there that are delivering great value and great experiences and they'll continue to grow and their valuations will continue to grow.
How to build a billion-dollar brand in record time
Colin Hughes/Courtesy Warby Parker
Shontell: What advice would you give to someone who's trying to build an established brand?Blumenthal: From a brand perspective, it takes time to build a brand and you need to be super thoughtful of what it is that you're trying to build, what you're trying to solve, what are the attributes of that brand that are in line with that mission. Really thinking through the brand architecture.
From an operational standpoint, Dave and I think a lot about these moments where you feel like you have to take these giant leaps of faith and there's this belief that entrepreneurs are these crazy risk takers that are willing to jump out of an airplane without a parachute. It's simply untrue, but when we're looking down the cliff and looking into the abyss, we take a step back and try to break down that decision into a lot smaller ones. Effectively we de-risk it. The better analogy than jumping out of an airplane without a parachute would probably be, we actually build, double-check the parachute before jumping out of the airplane and we jump out of the airplane while the airplane's on the ground.
Gilboa: The other piece of advice that we often give and try to practice is staying focused. We see a bunch of companies that tend to get distracted. For us we're asked all the time, "Have you thought about selling products other than eyewear? Why aren't you international yet?"
Shontell: You sell everything in the US?
Gilboa: Just US and Canada. We think there's a huge global opportunity and we will tackle that at some point, but we've really just tried to stay maniacally focused on service our existing customer base before moving on into adjacent opportunities … I can't think of many businesses that have failed because they were too focused.
An IPO in 2018?
Shontell: There's one more question that you guys get all the time. The IPO market: Is it beckoning? Is it calling to you now, especially since Snapchat went out and it wasn't so bad?
Gilboa: Certainly a lot of people are asking us about it. We've raised quite a bit of capital, $215 million. We have a good chunk of that still on our balance sheet, so we view an IPO as a financing event. We don't need capital at the moment, so we can be patient and our investors are very happy with the way the business is going, we're not getting pressure there. It's probably a path that we'll go down at some point, but not something that we're rushing into.
Shontell: But what about liquidity for some of your employees? Or for even for you two? That's also a liquidity event. Is that something you think about? Seven years tends to be about the time when people get antsy.
Blumenthal: It's been seven years since our launch, but since we've taken equity investment it's been six, if that. So a little bit less.
Shontell: So you've got one more year, you're saying?
Gilboa: Part of the deal when you take venture financing is that you're committing to have a liquid exit opportunity. We will have that opportunity for our investors, we also think about how we can provide liquidity for our employees. So it is a path that we'll likely go down, but again want to make sure we're doing it for the right reasons and with timing that makes sense for us.