Building a Lifestyle Apparel Brand Through Crowdfunding

Roy Morejon: Welcome to Art of the Kickstart, your source for crowdfunding campaign success, I’m your host Roy Morejon president of Inventis Partners the top full service turnkey product development and crowd funding marketing agency in the world. We have helped startups raise over a hundred million dollars for our clients since 2010. Each week I’ll interview a crowdfunding success story, an inspirational entrepreneur or a business expert, in order to help you take your startup to the next level with crowdfunding. Art of the Kickstart is honored to be sponsored by BackerKit and The Gadget Flow.
BackerKit makes software that crowdfunding creators use to survey backers, organize data and manage orders for fulfillment by automating your operations and helping you print and ship faster. The Gadget Flow is a product discovery platform that helps you discover, save and buy awesome products. It is the ultimate buyers guide for luxury gadgets and creative gifts. Now let’s get on with the show.
Welcome to another edition of Art of the Kickstart, today I am joined with Miguel Madrid founder and chief of everything officer at Perks, excuse me. Miguel, thank you so much for joining us today.
Miguel Madrid: Thank you for having me, man.
Roy Morejon: So your campaign just launched today, I’m really excited about the launch of it. I love the tagline of, you don’t need another pair of pants, you need a better one. So, I really like the idea and the innovation of this lifestyle apparel brand that you’ve built. So I’m really interested to hear for our audience of where this idea started, and what inspired you to create Perks.
Miguel Madrid: Thank you for having me, again, and yeah happy to go into this. What you see right now on the campaign is the culmination of two years of work. It’s been agonizing, it’s been stressful, I might’ve cried a couple of times, but things are different now. Now we’re live, everything is running and everything is operational, I can breather easy now. It’s sort of like getting engaged, you pop the question and it’s over, right? Anyways so the idea behind Perk came after my previous brand, I used to own an underwear brand called Bensly and it was about three years worth of e-commerce work and three Kickstarters behind it and as any good other business would tell you, we took feedback quite well.
We took feedback as aggressively as possible and as honestly as possible, and of course some of that feedback was negative but we took it as a learning lesson to improve on our products. And this brought about an idea that popped up in my head when I met my new partner, and my new partner by the way is an apparel developer for some really huge multinationals, we’re going to keep him private for now. He is a secret, trade secret, but we figured okay, why don’t we treat the development process for apparel differently. Why don’t we prototype our very own idea of what we want our product to be, we make it, we sample it and then we give some to our customers and say, “Hey here, try them out. What do you think? It’s not free product, it’s not a giveaway, you’re a beta tester, what do you think about this?”
So we started with the line of chinos with the process, and I had rating through each revision of it, through numbers. So version 0.1 and version 0.2 each time we got a sample back from the development office that was a new iteration. So we kept a log of all this and once we started getting feedback, that’s when things started getting really interesting, it was like okay we thought this was awesome, apparently isn’t, but they’re really interested in this other side of things. So with this in mind about a year passed worth of development, and what you see right now is the public release of the Perk chinos, they’ve been through a lot, we’ve been through a lot and it’s finally live.
Roy Morejon: Yeah it’s great. So I’m really interested to hear obviously running previous crowdfunding campaigns you have a wealth of advice and knowledge there, but talking about a new product innovation that you’re creating here with Perk. What was that process like, and how did you go about deciding what features to include in the designs, and then how are you solving the issue with this product that you’ve created?
Miguel Madrid: Right so usually when a brand goes through a product release, they’re usually launching to a very large customer base and they commit to a manufacturing order, a rather big one. They stock up, they launch and then they hope for the best. Sometimes what ends up happening, actually most of the time what ends up happening is, and I want to quote, “A midsummer clearance sale.” Right? So the product wasn’t interesting enough, people might have liked it, but they didn’t love it and they overstocked. So, this is a cycle in the apparel industry that just won’t break, and here comes startups that are trying to break it, and what they’re doing is they’re doing made to order, so you get an order and you produce it based on the specifications of the customer. So, that’s another business model, that is one extreme of the other.
So what you end up getting is an $80 T-shirt that was custom tailored to you but it took three weeks and it cost $80.
Roy Morejon: Right.
Miguel Madrid: Right? So it works, the model works, okay reduced waste but nobody’s going to buy that, it’s too expensive. So why don’t we do it differently? Why don’t we combine the prediction algorithms of all the historical data we have with a new manufacturing arrangements that allow for extremely low order quantities? By the way this is where my apparel developer comes in, that’s the magic, that’s the opportunity I saw. If I combine this perk of the manufacturing side of things with a new way to develop products and launch them, then we can have a middle point where we don’t have to make to order, but we can stock up on what’s going to sell.
So that’s one side of things, right? That’s keeping inventory optimized, but as for the product itself it has to be an interesting product, right?
Roy Morejon: Absolutely.
Miguel Madrid: So we begin with a very simple tour of the factory and we pass our hands through all the fabric swatches that they have there, 1,000s of them, we land on a couple that we like, we touch them and then we close our eyes and we think, okay this would go really well on X, right? That’s when we landed on the chinos fabric, it was the very first iteration of the fabric, it was a twill, the cotton twill, but we improved on it but that’s how it starts. It’s like, okay this feels like it could go really well on a pair of pants, so this is what we want a pair of pants to feel like, additional to this what do we want people to feel when they put it on?
So yeah that’s our thought process, there’s so much more to talk about on top of this, but I think our brand ethos with the idea of iteration and improvement, and feedback it really explains everything that it is human centered design, is is customer-centric. I think that differs from anything else on the market.
Roy Morejon: So is that where the company name came into play, with Perk?
Miguel Madrid: Perk was a quick vote, actually, from this other bar that was next door called Perch, and I was always just a fan of the P and the K behind it. I landed on Perk, it’s simple, it’s short and it means you’re getting something additional.
Roy Morejon: Indeed. So one of the things we were talking about before the interview was how you went about creating this company, in terms of structure, set-up, as well as software stacks and given that you’ve successfully started another company, and now this one I know our audience will definitely be interested in terms of how you’ve set up and structure this company.
Miguel Madrid: Oh, absolutely. I’m a strong believer that if you start a company in a fashion that doesn’t immediately mean order and clean information, then those little, small, manual process are going to exponentially convert into a nightmare down the road, and that nightmare might be a month away or it could be five years away. Usually it just ends up being a nightmare before year and then you just end up paying yourself into a job that you’re a slave for. So you might be stuck doing accounting all day, you might be stuck organizing orders on your system, right? Or working on Excel.
With this in mind what we do is we start off with the very best platforms that are used by the top companies, but we used simplified versions of them that are suitable for e-commerce. Of course we have an online store, Shopify is the best practice on that end. We have a pre-order platform like Kickstarter, but then making them talk to each other, that’s where some of the magic comes. I do have ERP experience that I carry over from my days back in purchasing, and that taught me how to organize a company properly, and then how to do accounting properly, what does moving inventory mean for accounting? And what does software do to facilitate that?
It turns out there’s just so many tools out there, you just have to find them and make them work and actually work on top of them. You can’t just hope that one magic button is going to do everything for you, of course. But with that in mind I ran my other companies as a one man operation for about three years, ended up selling over five million dollars in total revenue before I decided to move on and sell it. And the transfer process was easy, it’s like here are the login information for all the software stack, and this is how you do this. I had little process manuals in place, and it was a really smooth transition.
Roy Morejon: Nice.
Miguel Madrid: Yeah. So I’m building this company with the same principle, automation, clean info and oh by the way this also plays really, really deep into customer service. If you get an email from a customer and you’re having a hard time finding the information behind that customer then one, your reaction times are really slow, and two, you might not be completely aware of what’s happening with this guy, right?
Roy Morejon: Yeah.
Miguel Madrid: So I’ll probably write up a Reddit post on all these platforms I’m using, and I’m sure it could help somebody.
Roy Morejon: Absolutely. Or an AMA certainly can help a lot of these customers for sure, as we’ve seen in the past.
Miguel Madrid: Well I don’t know what I could say on the AMA. Like all right, I am Miguel, I make underwear, I used to make underwear, ask me anything? I don’t think I’d appreciate the questions I would get there.
Roy Morejon: I’m sure it won’t be a brief conversation.
Miguel Madrid: Yeah.
Roy Morejon: So, what’s been the biggest challenge that you’ve encountered while designing and developing this product now?
Miguel Madrid: Time, time, it’s the hardest thing to manage. Development takes time and it takes resources, and also the time it takes from you is time that you’re not spending gathering capital or in a job, or saving money right? So you completely have to abandon the idea of a salary because you’re so committed to this, and then you have to invest your time that is not going to be paid until the company’s profitable.
Roy Morejon: Right.
Miguel Madrid: That is a huge sacrifice that requires you to make decisions that could be as drastic as moving out of a city, like I just moved out of Los Angeles. My cashflow there was negative in the thousands, and I had to cut that, right? So I’m using those savings instead to pour into this company. That’s probably been the biggest is the time commitment, but of course, that’s what it takes, right?
Roy Morejon: Yeah. Exactly. So talk to me now about the innovative development process that you’re using to design and create this product.
Miguel Madrid: All right, we actually call this process engineered menswear and we’re in the process of making this a bit more clear for our customers on what it means. The entire development process is hidden from the customer’s view, not because they’re not interested, but because nobody’s ever bothered to shine a light on it. It’s always been lifestyle focused and this is how much we paid a certain model to look good on it, and then there’s tactics on social media. When you just look at that side of things, the finished product, but we’re actually getting our customers into the process, we’re inserting them into the previous then public release, right? So, we’re getting them involved from day one. It all starts with feedback, all right what do you guys think of this type of feature?
So I have a list of people that I talk to about this, and they’re all customers, previous customers and they’re asking for example, underwear they want the horizontal flyback, that is common feedback. Okay, let’s write that down, we iterate on this, we build the first set of samples and we have a small batch that I can wear, that my partner can wear. Perhaps I lend it out to my brother for honest feedback, more importantly though about 10, 15 of them to a select group of customers that are actual customers, we don’t have any friendly relationships with them. It’s just you are our beta testers. And we get feedback from them which is usually the best type, it’s the most honest and we iterate again, we build upon that and build the next version and then we actually release a bigger batch of about 200, 250 items to a … And we’re not sure how we’re calling this yet, but it’s say what type of sale would this be, right?
It’s a sale, it’s 50% off a pre-released product that is in beta, you forego returns and you can’t exchange them, but you’re getting 50% off. So, it’s interesting, you’re a beta tester getting the perk of a pre-released product that might not be perfect, but hell you’re getting a really good deal and you get to be a part of the process. And who knows participating in this might make you someone indispensable in the company, and then we might end up just giving you stuff away, right?
Roy Morejon: Yeah. Exactly.
Miguel Madrid: Right? But that’s a process that we’re calling engineered menswear, and there’s more to it. In each process we have the core principle, human-centered design. We ask ourselves what do we want people to feel when they put this, usually we land on date-ready, or boardroom-ready, and you know just the feeling of confidence is when I put this on I’m not worried about whether it’s going to perform or not, I’m not worried about, okay is it swampy outside, or this fabric doesn’t breathe really well, this is performance fabric for the gym and I’ll start reeking after one hour. And that’s usually what people end up doing when they put a pair of $200 chinos, they’re like okay this chino is really not for today. It’s really for that specific moment I bought it on that video I saw on Facebook, right?
Roy Morejon: Right, right.
Miguel Madrid: So that’s the idea behind every product. We also have really advanced partnerships with BodyBlock which is a fit prediction algorithm, that takes the actual measurements of the pant in every stage, we adjust it at every stage, it asks you a series of questions like okay, age, height, weight and then it shows you some images of body scans from all over the world and it asks you, pick which one you look like. You probably fit into one of these four, you pick it out, it filters once more and it refines you until you reach your body type.
So it finds your body type in 30 seconds and spits out a recommendation on which size you should be getting.
Roy Morejon: Very cool.
Miguel Madrid: Yeah, the way brands do that is buy, and exchange if it doesn’t fit. We are skipping it, we’re like it’s going to fit perfectly the first time and that’s going to save us some money.
Roy Morejon: So let’s talk about preparation for this crowdfunding campaign and what you’ve changed over the years from your previous crowdfunding campaigns to this campaign. What are some of the tactics that you’ve changed up in terms of the pre-marketing of the campaign, as well as today being launch day?
Miguel Madrid: I think there’s a bit more talk on the why behind the product, that’s a big difference I’ve been really diving into. I’m really big on storytelling now, and I feel that people want to be a part of that story. So, I built the video based on this, and it sort of shows, right? But getting more into the technical side of things, the difference this time is that we prepared it much, much sooner. So about three months worth of preparation just for the Kickstarter launch photo shoots, editing, picking out messaging, running ads for lead generation, landing page build outs, back and forth fighting, hugs, kisses, everything.
Roy Morejon: A couple tears you mentioned, I remember those.
Miguel Madrid: Yeah. But it’s really rewarding when you hit that email, you click launch and you click send and you start getting pledges and you see that little ticker going up, going up, going up, you’re getting some thank you messages, congratulations from family members and friends, and that feeling is exactly what I was going for.
Roy Morejon: Yeah it’s been fun watching the campaign go up, I think we’ve had about a dozen pledges, and a couple thousand dollars come in while we’ve been doing the interview, so that’s always fun to see.
Miguel Madrid: Yeah. I’ve been refreshing, you might’ve noticed the sound of my keyboard.
Roy Morejon: Couple clicks here and there, yeah, yeah.
Miguel Madrid: Yeah. We’re getting there man, we’re getting there.
Roy Morejon: Awesome, well Miguel this is going to get us into our launch round where I am going to rapid fire a handful of questions at you, are you good to go?
Miguel Madrid: I believe so. I wasn’t ready for it, but yeah sure.
Roy Morejon: Let’s do it. So what inspired you to be an entrepreneur?
Miguel Madrid: Having control.
Roy Morejon: Nice. So if you could meet any entrepreneur throughout history who would it be?
Miguel Madrid: Jeff Bezos.
Roy Morejon: Bezos, there you go, Prime Day’s second day. So what would be your first question for Bezos?
Miguel Madrid: What type of people did you hire in the very beginning?
Roy Morejon: Yeah. Who did you look up to growing up as a kid?
Miguel Madrid: My dad, absolutely.
Roy Morejon: What business book or life book would you recommend to our listeners?
Miguel Madrid: It’s called The Myth of the Entrepreneur, shortcut e-myth, that’s what you search it like. And I just have to explain it, and it goes to show why businesses fail, and the conclusion is … You’ll actually have to buy it, so go ahead and buy it.
Roy Morejon: Ooh the cliffhanger. No, it’s a good read too, definitely recommend it for the audience. Where do you see yourself in five years?
Miguel Madrid: I see myself in a transition where the company was bought out, but they still need me and so I’ll stay on for five more years and then I’ll retire in 10.
Roy Morejon: There we go. All right, last question in the launch round. What does the future of crowdfunding look like?
Miguel Madrid: Whoa, I think it looks connected, because it’s sort of its own little island of a certain type of people that have a different personality and also a different type of ordering process which is very generic. I see it being completely connected with today’s e-commerce which is something that will increase its size by at least four to five times, and with that in mind, crowdfunding is going to be huge.
Roy Morejon: Awesome. Well Miguel, this is your opportunity to give our audience your pitch, tell people what you’re all about, where people should go and why they should check you out.
Miguel Madrid: So, imagine a river of feathers going through your butt.
Roy Morejon: Oh my gosh, there we go.
Miguel Madrid: So this is what we call magically comfortable textiles. We’ve worn them for two years, they’re absolutely delicious to wear, they’re breathable, they are mid weight which means they’re year long. This is all in description of our chinos, and there’s plenty of sizes, one of those is yours and years ago a little cotton bud was grown and it sprouted, and it made the cotton fibers that went into the knit of the textile of the pant that is going to be yours.
Roy Morejon: Well I can’t wait to try them on. Miguel this has been awesome, audience thank you again for tuning in, make sure to visit artofthekickstart.com for the notes, the transcript, links to the campaign and everything else we talked about today. And of course thank you to our crowdfunding podcast sponsors The Gadget Flow and BackerKit. Miguel thank you so much for being with us on the show today.
Miguel Madrid: Thanks man. Bye everyone.
Roy Morejon: Thanks for tuning in to another episode of Art of the Kickstart, the show about building a business, world and life with crowdfunding. If you’ve enjoyed today’s episode, awesome. Make sure to visit artofthekickstart.com and tell us all about it, there you’ll find additional information about past episodes, our Kickstarter guide to crushing it, and of course if you loved this episode a lot leave us a review at artofthekickstart.com/itunes. It helps more inventors, entrepreneurs, and start-ups find this show, and helps us get better guests to help you build a better business. If you need more hands-on crowdfunding strategy advice, please feel free to request a quote on inventispartners.com. Thanks again for tuning in, and we’ll se you again next week.