FIGS: Trina Spear and Heather Hasson. The $2.5 Billion Scrubs Brand That Investors Said Would Never Work

Reimagining hospital scrubs

0:00The value of what you have, the shares you have, are worth a lot of money. Yeah, I mean, I think, you know, we made the Forbes, like, wealthiest women alive or whatever list. And then the following year, after the stock went from, like, $50 to $5, we were the two women who fell off. Meet the two women who are now not on the list.

0:30We're an $8 billion company. Now we're a $400 million company, $600 million company. Now we're a $2 billion. Like, none of it, it's so transient. And you can't get really tied emotionally to any of it. Yeah. In terms of your self-worth, let alone your net worth. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

1:05I'm Guy Raz, and on the show today, how two founders with barely any background in healthcare built figs, what some people call the Lululemon of scrubs. All right. So I'm going to give you a really good idea. An idea for a business that, if executed correctly, could make you a lot of cash.

1:36Here it is. Here it is. Ready? Adult Incontinence Okay, maybe not what you thought I'd say, but hear me out. There are 26 million adults in America who experience some form of, you know, leakage, which is a little over 7% of the U.S. population. Now, if you could come up with cool products or a better experience to help them feel less embarrassed or awkward, I would argue this could be huge. But most of us wouldn't even look at a category like this because, well, it only reaches a fraction of the total population.

2:13But that fraction of people, they can be massively important consumers. This was the brilliant insight that today's guests had around a different product, hospital scrubs. There are 24 million healthcare workers in the U.S., again, around 7% of the U.S. population. And many, if not most of them, wear scrubs. And for a very long time, scrubs were things you bought at a medical supply store. They were boring and baggy, and almost no one looked good in them.

2:44But Heather Hassan and Trina Speer saw an opportunity to reimagine scrubs and to build a brand around them. In 2013, they formally launched FIGS. And initially, they faced a lot of skepticism from friends and especially from investors. But what they proved was that there was a demand for a better-fitting, better-looking hospital scrub. Today, FIGS is a publicly traded company with a market cap of over $2.5 billion.

3:15And Heather and Trina are still very much running the business.

Heather Hassan's early path

3:18In many ways, the two are total opposites. Trina grew up in Miami and followed a traditional business path. She went to Harvard Business School and worked in finance for a few years afterwards. Heather, on the other hand, grew up in Los Angeles and attended the University of Wisconsin-Madison. And though she was always creative, what she really wanted to be was a doctor. Yes, I always wanted to be a surgeon. Actually, specifically a reconstructive surgeon so I could combine the two skill sets, which is art and science, into one.

3:53And, you know, I tried really, really, really hard in school. And I just didn't cut it. I didn't do well. And so, but I tried so hard. Organic chemistry is impossible. Whoever, you know, possible. That's where people, like, that's where it ends for a lot of people. Organic chemistry, right? It's just so hard. It's really hard. I think, I mean, anatomy is really hard. Everything's really hard. So, I didn't become a doctor. But I really, I was into fashion.

4:24I love fashion. And I got out of school and, you know, got a job. Where did you get a job? I got a job at a few jobs. In Madison or in L.A. or where? Yeah, no, in New York, too. And so, New York. So, I got a job at Levi's. Oh, you moved to New York after you graduated? Very, very briefly. And worked for Levi's in New York. Correct. Yes. Okay. So, you're in New York. And I guess at some point, you started a business, a handbag business.

4:55Tell me about, I guess this is around, like, 2005, maybe. Yes. 2006. Tell me what this is. Tell me the story. So, I started, you know, I love design. So, I started making handbags. And how? I had some connections in Italy. So, in college, right, I went to Italy for about a year and a half. And I was actually making coats and selling coats to Americans. And that's, I think, my first foray into actual, like, designing with my hands, not just drawing,

5:27but, you know, cutting patterns and things like that. Okay. Amazing. And then, you know, fast forward, now I'm in New York in 2005, starting this handbag company. And I had, you know, connections in Italy because I was there doing that for about a year. And then I meet Stephen, who was my business partner. Who is Stephen? Just some guy in New York? Or was he Italian? Some guy in New York. He was actually Italian, too. He was actually Italian from Italy, yeah. Okay. Really great guy. He started a bunch of different companies, you know, tech companies, cafes.

6:01He just did different things. Really interesting, human. So, he was your partner that started a handbag business. Did it ever go anywhere? I mean, did you make handbags? I did. Yeah, we did. We made beautiful handbags. Beautiful. Out of leather or what? Unfortunately, yes. I'm a vegetarian now.

6:21And where were you selling them? I didn't even get that far. Okay. I didn't get that far. We just made a bunch of bags. We're about to go and we're going to get, like, a, you know, sales team and do the whole thing. But he passed away. He had a lung cancer and he passed away. And it was very unfortunate. He died at a very young age. And it's just... How old was he? He was, I want to say, 36. Wow. Yeah. He was really young. But I was very fortunate. I mean, he, you know, he funded my business and he really believed in me.

6:52Um, and, you know, the whole thing just came shuddering down, crashed down because, you know, passed away. And that was that.

Kenya and school uniforms

7:02So what did you, what did you do at that point? I mean, you've got a bunch of handbags and you're so young. And this is kind of sputtering out. I honestly, I was so heartbroken for, uh, you know, a number of things, um, that I decided to go to northern Kenya. I went there just to clear my head. I didn't go for any actual purpose or I had nothing.

7:33I had no money. I had no plans. My business partner died from lung cancer. I had zero going for me. So I'm like, let me see what's going on in Kenya. But I think, I think my parents are probably like, what is she doing? And what, what did that, I mean, did that lead to anything or was it just an awesome experience and kind of cleared your head as you, as you had hoped? Uh, yeah, it led to actually, um, a few things. So I would, I was traveling around. It's really inexpensive in Kenya and you can travel for, um, you know, just a little bit of money.

8:07And, um, I went to a lot of different schools and I was looking at these kids and I said, oh my God, how come these kids aren't wearing uniforms or why aren't they going to school? And then, you know, a lot of the teachers were saying, well, they don't go to school because they don't have uniforms. And I said, that's ridiculous. And I thought, well, how much is it to make a uniform? Just like helping some, you know, kids out so they can go to school. And I think that this was my real foray into uniforms and the meaning of what a uniform really does. When you do see a child go to school, you know, they're put in a nice uniform and they go and they crush it.

8:41It's a different mentality. And it's amazing if you can make even a difference in that respect. I just, it really stuck with me. And, and so that experience, I guess, what like inspired you to figure out a way to get, to get school uniforms to those kids. And it's not entirely clear to me whether or how it's connected, but, but I guess while you're figuring this out, right, how to make these uniforms, you go back to LA and started a business. It's not, but not bags this time, but I guess like scarves and ties and things like that.

9:14Yeah. I wasn't actually intending it to be a business. It was really to help children, but I didn't have any money. So I had to sell ties so I could put these kids in school. So it wasn't, I wasn't doing it as like, oh, let me do a business. I was doing it so I can just help some people while I clear my head. And the ties were bow ties and neckties and scarves and they were like silk and wool and. The whole nine. Tell me about that. How did you do that? I mean, again, you were young and clearly, you know, very resourceful, but like, how did you get it going?

9:50How did you get the money to buy the material and to then make this stuff? And, and that, cause you were, you know, you were broke basically. Oh yeah. No, I had nothing. I really had a few thousand dollars in my pocket, but also the, the material for ties very, it's very small compared to, you know, three yards for, you know, a pair of pants. I was working in retail stores in LA. I don't even know if it's around today, but it's called Theodore in Malibu. I was making $9 an hour and that my $9 an hour was actually paying for whatever I could afford for the ties.

10:25So what do you, you want to help kids in Kenya? Where, how do you want to sell the ties? What's, what's the game plan? Literally like a door to door type of situation, a combination of, you know, website, trunk shows, word of mouth. And did you call it figs at that point? I've seen references to fashion inspired global sophistication. That that's what it stood for at the time. Is that right? Well, I just put that, but I didn't, it didn't really. The, the real meaning behind it was, um, I'm almost like a fruitarian.

10:57So I love figs. I love the fruit. So that's why. So you're doing this, but it's not, this is not a huge business. Of course. This is a small. Tiny. Yeah. Tiny. I wouldn't even call it a business. I would say this is like a little hobby. I'm just trying to, you know, get my ducks in a row and I wanted to design and I thought it was fun and I can put some kids in school and that, that was that. Right. And I put about 10,000 kids in school. So I, people bought a lot of ties from me.

11:28And just, just rewinding for a sec, um, to your time in Kenya. Another thing I think that you noticed while you were there, uh, was that medical workers didn't have proper uniforms as well. Right. Like they didn't have scrubs. And I guess you want to do something about that too. Correct. Yeah. I was in one clinic and they were, they let me in the, the OR, the operating theater, and they were operating on this little boy and they didn't have scrubs. And these nurses have been nurses for 25 years and these doctors, same thing.

12:01And I thought, let me just send them some scrubs, help them out. And, and so when you came back to Los Angeles and you kind of implemented this as part of what you were already doing for kids and uniforms, how did you, you knew how to design clothing. Where did you get the scrubs made? Did you just like find a place in China? And cause this is like today you could just go to Alibaba or whatever and just like, I want a thousand scrubs and get them next week. Right. This is a little bit harder in 2010, 2011 to do. So in 2010, here in LA, you know, there's fabric stores and there's sewers and I bought fabric off the shelf, made the pattern, hired a sewer, sewed up a few, I don't know, maybe 30.

12:40And then sent them out to a couple of clinics.

12:45I remember there were forest green and then I put the label in bright yellow figs on them and then I sent them out. And I didn't really think of anything of it. I was just trying to help people cause it feels good to like look good. But then it, it, it triggered to me, I was started to walk into certain hospitals and just sit there.

Noticing broken scrub retail

13:10Did you have friends who worked as nurses or as medical workers? Yeah, I definitely did. But yeah, it really, it really kind of struck when I started sitting in hospitals and I had coffee with a friend of mine who was a nurse practitioner. And she, when I met her for coffee, I was like, what are you wearing? You're a nurse practitioner. This is garbage. But scrubs aren't supposed to look good. They're supposed to look like, right? It's like. That's right. But you, you, you sort of noticed this. You're like, you don't look good in those scrubs.

13:40I mean, who looks good in scrubs in 2010? Well, and when I was in college, right, you have to wear scrubs. And when you're in anatomy, you have to wear scrubs. Right. And they do a one size fits all. So I had the extra large giant scrubs, right? And I didn't think of it then, but you have to roll your scrubs up, you're wearing it. And it's like, your sleeve is kind of getting in the way. And then, you know, meeting this woman for coffee and thinking, how has this not evolved since I was in school? How is this even possible? And that's when it really, it bothered me.

14:13Um, okay. So the gear, I can see the gears in your head start turning, but I don't think you're quite there yet thinking, oh, this is a business. You're just thinking, huh, maybe this is interesting. Well, I did think there were, had to be something out there. So I said, let me go shopping for you first. Let me just go shopping. I'm going to go to these, where do you find a scrub store? And then I was driving so many miles away to go to these like strip malls. And then the scrubs were obviously the same as what she was wearing. And I was like, okay, there's nothing here.

14:44I'm going to tailor your scrubs. So that's what I did. And, and she called me, she was at Cedars and she called me, she goes, hey, can you tailor me another pair? And then one of her friends, she asked, said, Heather, can you tailor, you know, one of mine? I said, this is weird. And then that's when it shifted in my head. This is what I want to do. This is awesome. Okay. At the time, I would just assume there's like a scrubs room at a hospital. You go there and there's like, okay, what do you need? And you just pull the scrubs out and you put them on and you go to work.

15:17That's not how it works. There was at the time, that's how it works, but not a hundred percent of the industry. So very small percent, the hospital did provide, right, in vending machines, scrubs, right, for their employees, for the HCPs. But you got to, most people have to buy their own scrubs. That's correct. But if you were to go into a quote unquote scrub store, oh my God, the retail experience, there are cardboard boxes, bedpans, crutches, everything in the store.

15:48It's where it's like, why are you, why is a healthcare professional, right? Why is a surgeon? Why is a dentist? Why are they coming into this type of retail experience? I just thought it was like absurd and inappropriate. I mean, it's interesting because just before I bring Trina in, did you get that reaction from people that you talked to? Were they like, I'm so angry that scrubs suck. Like I wouldn't even know that people would think that. I would just think, oh, whatever, just like.

16:18No, the reaction was, well, this is what we wear, Heather. Right. I was like, why? Stop it. We're going to stop this. We're absolutely going to stop it. That's why your reaction is so interesting. It's very unusual. I mean, you were literally angry about something that the people you were talking to didn't seem that angry about. They didn't seem that angry. It's because they didn't know that there was something better. Right. I was very upset. It came from a place of being so upset that the people who are saving lives, the people who are pulling, you know, all-nighters are subjected to wearing these boxy, ill-fitting, scratchy clothing every day.

17:01And after doing my research and like going to these scrub stores and getting calls from, you know, friends saying, hey, can you tailor my scrubs? I said, I'm going to make the best damn scrubs out there. But of course, I didn't have any money. So how was I going to do that? Right. How was I going to do that? But then I found a manufacturer who was really cool and believed in my vision and helped support the first production run of my designs. It was a very small production run. I think it was like 15,000 at the time.

17:34I got people off Craigslist to do a photo shoot, got it on the website, and then started selling out of my car in emergency rooms. Wow. Okay.

Trina Speer joins the company

17:43Trina, I want to bring you into the story now because Heather was kind of taking this kind of windy path to get to FIGS. And at the same time, you were on a – I would say like a more traditional track. You had an MBA from Harvard. And when the two of you met, you were actually working in finance at Blackstone in New York. Heather is a random person in Southern California doing something a little quirky.

18:15How did you even come across your radar? So we had a mutual friend. She worked at a private equity firm across the street from Blackstone, and we would go every day at 3 p.m. to get a coffee. We would talk about random things. And she was like, my friend is working on this idea for scrubs. And I was like, that's really interesting. Could you connect us? And so she did. Why did you think that was even interesting? You know, I think I wanted to do something more entrepreneurial. I – Blackstone, I realized there were a lot of people a lot smarter than me and a lot more passionate about the work that we were doing there.

18:53And I was like, even if I could, you know, get there in terms of all the things I would need to learn, which I think I could. It was that passion, I think, that separates, you know, the good from the great. And they were much more passionate about those jobs than I was. Okay. So you contact Heather and you're like, hey, tell me about what you're doing. Yeah. And at the time, I was actually headed to L.A. to visit one of my friends from business school. And so I said, you know, would love to meet you.

19:24And she said, oh, I see that you play tennis. So why don't we hit some balls?

19:31I got smoked. I got smoked. Smoked. So we met up. We played tennis. You know, I was in L.A. for – I think it was July 4th weekend. This was 2012. And we were talking about what she was doing and her idea and her vision. And, you know, what really stuck with me was this concept of, you know, there's so many companies that are building amazing product, amazing gear for athletes.

20:01And at the time, I mean, so to this day, you have Nike and Lululemon and Under Armour that are creating the most technical gear for people to score more goals and run faster and swim across all the lanes. But what about the people saving lives? Who's building for them? Who's creating for them? So here's my question for you, Trina, because I think you are – I mean, you're a business school grad and you're in finance and you're working with, like, data.

20:33And you had done diligence as an analyst. So, like, I'm thinking – I'm just going to take a leap here and think that you would want to know if there's actually a there there. Like, at the time, what – did you try to look into this and validate whether there was a real opportunity there? Yeah. I mean, and I didn't leave my job for about six months after I met Heather. What did you start to, like, look into to see if there was – what did you discover?

21:04Well, I remember Heather said, well, before we start working together, can you help me with this financial model? And even before we would start working together, as a friend or as somebody I just met, can you help me with this? And so – and I think, Heather, if you remember, you had somebody build something for you and you sent it to me. And I was like, this is crap. We've got to redo this. And so I, you know, used all my financial modeling skills from my – from banking and private equity. And to your point, Guy was, you know, started looking into the industry.

21:38How big is the market? Who are the players? How does it work? And it was such an attractive industry, right? Healthcare uniforms, healthcare apparel is mandated. You have to wear them to go to work every day. But the hospitals weren't paying for them. And the healthcare professionals were on their own to go buy them. The industry is replenishment-driven. You have to order your uniform over and over and over again. It's a non-seasonal business. Most apparel companies are waiting for that holiday order, right, in order to – and that's where they make all their revenue for the year.

22:12It's a non-cyclical business. Healthcare is recession-resistant. And healthcare jobs are recession-resistant. And so there's all these attractive dynamics, but the industry was fundamentally broken in that all the players were going about it wrong. They didn't sell to healthcare professionals, even though 85% of healthcare professionals buy their own uniforms. They sold through distributors. And that's where the problem was. So this is amazing. I mean, 85% of medical workers had to buy their own scrubs. So that – right then and there, that's huge.

22:45Did you find out what the total addressable market was? Yeah. So the total addressable market – so there's 24 million healthcare professionals in the U.S. There's 140 million healthcare professionals around the world. The industry in the United States at the time I think was about $10 billion. It's a lot bigger today. It's over – That's insane. Yeah. It's over $12 billion now. It's $80 billion industry around the world. And so massive industry. Yeah. It's incredible.

23:15All right. So, Trina, you meet Heather. And from what I understand, you start to come out to L.A. every couple weekends to do informal work together. But you were not yet formally working together. Is that right? That's right. So – and, you know, in finance, you get a bonus at the end of the year. So at this point, I'd already put in about half the year. So you might as well wait for the other half. And I still had a lot of debt coming out of business school, right? I had only been at Blackstone for about a year when I met Heather.

23:50And Heather was – already had the collection. And we were selling – and she was – I think, Heather, you said to me, Hey, Harvard girl, if you want to work with me, you got to sell some scrubs out of my car. And I was down. So we would go at 7 a.m. and 7 p.m. when all the doctors and nurses were changing shifts. And we would sell scrubs on the sidewalk outside of emergency rooms. And these were tops and bottoms? Tops and bottoms, yeah. Tops and pants. Yeah. I always had the north star of something in my head called technical comfort.

24:25And so we wanted to come out with a product that had stretch and that was super soft and really worked for the HCP. Yeah. But also I thought, why don't we give healthcare professionals colors that I believe they should have? So, for example, a graphite. So if you see, you know, business folks and they wear slacks and they're wearing a Heather Gray slacks, why shouldn't healthcare professionals wear that same type of Heather Gray? Okay. So you guys are selling scrubs out of trunks.

24:57And Trina, what did you see? I mean, were you – I mean, it sounds like clearly like more and more this was being validated in your mind. You were like, yeah, wow. People are just – were they flocking to the sidewalk? Was it like, I need a large, I need an extra large, I need a small? Like what was the scene like? Yeah. I mean, I think there was some of that. But it was also – for me, it was a lot – it was a big learning experience of what do you love about your scrubs? What do you not like? And where do you hold your, you know, your tools?

25:28And what types of pockets are needed? And – but yes, we also sold a lot of scrubs on sidewalks. And we would go in the morning, we would go get a big thing of coffee from Starbucks, a big thing of hot cocoa. And we were just giving people free coffee and hot cocoa coming off a night shift and, you know, learning more about them. That's smart. Yeah, it was really great. That's smart, yeah.

Selling out of car trunks

25:50Trina, you are still a Blackstone. I mean, I know that basically in January of 2013, you decide to leave and go full-time on figs. But Heather, when Trina was like, hey, I think I want to do this, what was your – how did you feel about that? In the beginning, I was like, absolutely not. Like what? Why? Yeah, why? Because, you know, my – in terms of funding, right, my manufacturers were funding myself and I had an intern.

26:22They were funding the production, which was – it's very hard to convince your manufacturer, hey, believe in my vision. I know it's going to sell. You got to, you know, front the production run. So you had this funded. So you're thinking, I don't need anybody. Right. And then Trina and I, we got to know each other and I was like, we are magic. We are so different. But at the same time, we come from the same cloth, essentially, in terms of that we are both very competitive by nature.

26:56And I really appreciated her so much. I was like, I think we can do something awesome together. You're going to do everything I don't want to do. And she goes, great. I like to do that. I want to do those things. And I said, amazing.

27:11Okay. And Trina, you had some savings, right? Your 401 – I guess 401K through your work and I'm assuming you still had some debt. But I have to imagine that to do this, you had to make – put in some cash to make a financial commitment. Yeah, I mean, and I think that was my commitment to Heather as well. Like she had, you know, done a lot before I got involved. And so, you know, I did liquidate my 401K, which is a horrible tax decision for those listening.

27:44It was 50% of everything. Yeah, horrible. And I did have business school debt as well still that I was paying off. So you put some money in and do you mind telling us how much you were able to put in? $70,000. Okay. So that was everything you had. Yeah. So I think it was – the 401K was $140,000 and then divide by two. Yeah. And this is tricky. We always – there's a tricky conversation. Okay, we're going to be partners. How does this work, you know?

28:16Heather, you've been running this now and you had it up and running. And now you've got a partner springing in $70,000. You guys have to figure out how this business is going to be structured. Yeah. And I think we came up with an equity split that we both felt good about. And so, you know, Heather is a creative genius and her equity was greater than mine. But I think that was in line with what was fair and what was right and what had been built. I think a lot of people really get caught up on what am I getting and what are they getting?

28:48And we just have never had that relationship because at the end of the day, if it fails, we both lose. And if it's great and it's successful, we both win. But a part of me thought, like, even if this didn't work out – and I think Heather and I both have this belief in ourselves, like, I could only fall so far. Right? I did work. I did go to Harvard Business School. I did work at Blackstone. Like, if I wasn't going to do it in my late 20s, like, I was never going to do it. I didn't have a mortgage. I don't have a family. I don't have kids. Like, you know, if I wasn't going to do it then, like, when would I do this?

29:19Yes, and I think any time you, you know, get into any type of partnership, especially business, it's a massive risk. But I think there was more – there was a larger risk us not partnering up. Like, life is a risk. Just also have fun, right? And so I thought Trina was also, like, a lot of fun. And I want to have fun in life. And we only live once. Did anybody say, Trina, you're going to leave Blackstone? Like, are you – to sell scribes? Like, really?

29:50Is that a good idea? Everybody said that. Everybody said that. They said, you know, what are you doing? And what's a scrub? Both questions.

30:02When we come back in just a moment, Trina and Heather get turned away by hundreds of investors and learn the art of the quick no. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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32:19Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2013, and Trina leaves her job at Blackstone and moves to L.A. so she can work with Heather full-time on figs. The two of them are sharing an apartment, and they start to use Shopify to fulfill orders. So we had a two-bedroom apartment, and the living room was cleared to have our stacks of figs.

32:51And they were in these light plastic polybags at the time, which would slide, and Trina would always, you know, pile up the right colors and the right sizes. We would ship out of our quote-unquote warehouse. And the initial, like, units, let's say, were made where? I mean, I'm assuming they're made overseas. They're made in Asia. Even though I know there's still quite a bit of manufacturing that happens in L.A., clothing's made there. It's just, it's very expensive to make it there.

33:23We tried that, too, though. I mean, we tried in the beginning. It was, you know, production in Los Angeles, production in China, production in Vietnam. And then I was in Vietnam for quite some time. And we did have a production issue early on. And so in order to, like, really get the quality and the fit right, we ended up, to Heather's point, coming back to L.A. to perfect it to then go back overseas. And so that's kind of how that worked. Yeah. And I would spend a lot of time in Vietnam commercializing our product, right? I spent a lot. Working at the factories?

33:55Yeah, dye houses, factories, yarn, mills, everything. So I'm very particular about our fabric, very particular about our yarn, very particular. And it takes a lot of time and energy, and especially when you're creating your own fabric and you're not just buying something off the shelf. And I think when I was doing that and dealing with the commercialization of the product and perfecting the product, Trini was out running our operations and then raising capital. So from what I gather, you were able to, you guys were able to bring in $2 million from friends and, like, a friends and family round.

34:30And do you remember how many people it took? Because $2 million, I mean, it's not that easy to raise $2 million. Like, how many people were in on that? Do you remember? I think it was about 40 to 50 people, $5,000 checks, $10,000 checks. People that believed in me, believed in Heather. You know, we actually didn't really take money from family at all along the way. Yeah. Were you nervous about doing that? Like, because that, if you lost it all, like, they'd lose money.

35:00I don't know. I think it was they wouldn't give us the money. Yeah, they didn't give us the money. And, yeah, I think I didn't want that to be an additional pressure. It was enough pressure, given what, you know, we set out to do. All right, let's talk about, Trini, you arrive in 2013. And you guys are living in a two-bedroom apartment. And you've got a website on Shopify. And I'm just going to throw out a number there. I'm thinking you're doing, I don't know, you can't be doing more than $20,000, $30,000 a month, right, at that point?

35:35Less than that. Less than that. Okay, so small. Okay, so, and again, at the time, it was, you know, in 2013, it was a unisex clothing? Or was it specifically for, cut for? Oh, yeah, no, it was specifically cut for male and female. And we really tailored the product. And I was really focused on the glutes area. The glutes area was a big deal, right?

36:06Yeah. You know, it's interesting you say that because, I mean, this was the secret success of Lululemon. Everybody who bought them said they make my butt look better, right? And that was a key kind of innovation that they had. And so it makes sense that that would be an area you would think about. Yeah, and we still think about it today. And I think also bringing fashion to healthcare professionals, to the design, was very, very, very important. So back in 2013, we had, I think, very original, not just fabrication, right, but also the style, the silhouettes.

36:43And we had our first, like, for example, a slim pant. We had a slim pant. And everybody was like, what is this? This is horrible. And I was like, no, we need a slim pant. And that was actually one of our top sellers. Instead of just baggy, like, scrubs. Mm-hmm. And so we came out with something called a Raffaella top, right, which is a top with no sleeves, essentially. And everybody's like, this is crazy. What are you doing? Like a muscle shirt. Like a muscle shirt, exactly, like a muscle shirt. And so, you know, everybody's like, what is this?

37:15This is not going to sell. This is terrible. I was like, no, it's forgiving. It's flowy. It's feminine. You can wear underscrubs. What's an underscrub, right? We invented the underscrub, the layering pieces. And that was our number one selling top.

Rejecting traditional wholesale

37:31Huh.

Rejecting traditional wholesale

37:32Now, let's talk about even before you raised the first real seed round, which I think happened in 2014. What was the sort of the thinking about how you were going to sell these products? Because you need to bring in cash. And one of the things that I would have thought of, that everybody thought of, I'm sure, was like, hey, you're going to make money by just selling these in B2B. Like, go to hospitals, go to medical centers, go to private clinics, and just have them buy tons of this stuff.

38:03Did you get any traction with that approach? No. None. No. They weren't interested. Yeah, they weren't interested. They didn't get it. They aren't the end. They're not our customer, right? For the most part. The administration of hospitals and clinics are not our – they're not healthcare professionals that are, you know, helping patients and doing that work. It was super frustrating and upsetting, but at the same time, that was the blessing, is that, like, none of the routes that we were going, that most companies go. They go for, I'm going to sign up a celebrity.

38:35I'm going to get a lot of press. And I'm going to go get some big institution to say we're great. All of those things didn't work for us. Every aspect of getting a gatekeeper to say, oh, FIGS will do great, none of that worked. And the only thing that ended up truly working was going direct to this community and building a relationship with them one-to-one at scale. It's interesting because, like, a nurse, for example, right? It's a very good job. I saw the median salary for a nurse in the United States is close to $100,000 a year.

39:08Now, we're talking about 2014, so it was different. But still, it's a very – it's an in-demand job. It's a hard job, but it's a very good job. And so I'm assuming that the scrubs that they were buying, that were available to them, might have been a little bit cheaper than what you guys were selling. But a lot of these people had the incomes to pay a little bit more for something a little nicer. Is that right? Yeah, I mean, I think that we think a lot about, like, the price-to-value ratio.

39:44So because these companies that were making scrubs sold through distributors and paid licensing fees, the cost of their product was really low. Because in their margin structure, they were giving 60% of the total price to the retailer, and they were giving 8% to 12% of the retail price to the license holder. So that left very little to innovate or create a great product. We were selling direct. And so when you think about our business model, our cost is about double, but we only had to charge about 15% to 20% more.

40:18Because you didn't have all of the middlemen. Because we didn't have all the middlemen. Makes total sense, right? And direct-to-consumer, certainly in 2014, like, that was the way to go. But you still had to acquire customers, and that would require cash, which meant that you still had to raise money. I mean, apparel is cash-intensive business. We know that from, you know, dozens of episodes of this show and just, you know, knowing what I know about the industry. So going to really start to raise money, I think, in 2014, this is when you, I think, started to go to more institutional investors or professional investors.

40:55Yeah. But the process of raising that money, I have to think you do get no's. Oh, we got, yes. I mean, we probably got 300 to 400 no's. Yeah. And then— 300 to 400? 300 to 400 no's. Easy. How are you pitching 300 to 400 people? Easily. Oh, I'm—we're a machine. We don't stop. I mean, and it was life or death, right? It was—we were very focused on getting fast no's. Fast no's. So, you know, when people were not sure or were not getting back to us, okay, that's a no.

41:32Why would people say no? Because you would show them the data and say, here's the opportunity. What were the reasons? Nobody cares. No one cares. As a healthcare professional, you don't care how you look. You're getting blood and you're getting liquids on you. Nobody cares. Yeah. Well, actually, you know, and we can talk about all the reasons people do care, but— And also, one thing from an investor standpoint, they were like, the TAM's not big enough. It's not big enough. It's not big enough. But you were saying there's 20 million people. It's not big enough. It's not big enough, right? And our point was, maybe it's not.

42:05But that's not the right business to invest in. You need to create the TAM. If you create TAM, that's a whole other ballgame. That's something you would want to invest in. Wow. So you couldn't convince investors, every investor. That's right. And it took a number of contrarian thinkers who believed in us and believed in what we could do that didn't best. Okay.

42:35You raised the money, 3 million.

Reaching direct-to-consumer scale

42:37Well, it was 2 million was the seed. We raised a million-dollar bridge round, and then we raised another 2, and then we raised 5 to get us to a total 10 million. Okay. Yeah. I want to talk about this time. This was kind of a golden moment, 2014 to really 2018, 2019, even into 2020, for direct reaching consumers directly through particularly Facebook. Right? Like, and some people have said it was like shooting fish in a barrel. Like, you could really, the customer acquisition costs we know were much lower.

43:11You were going to be a direct-to-consumer brand. So I have to assume that some of that was going to go to really try and target health workers who are on Facebook. Yeah, digital marketing was definitely part of our marketing strategy. And, you know, I think the unique benefit that we had was that the other players weren't really doing digital marketing, like at all, right?

43:42And then over time, because we – because health care professionals are in very densely populated institutions, word of mouth very quickly became our largest customer acquisition driver. And so, you know, health care professionals are walking billboards, wearing figs. Yes, it's a tribe. Yeah, I mean, this is – it's interesting, right? Because it is – because it's a unique product and it is – even though millions of people are buying this, you don't – most of us don't see it unless you do see people wearing scrubs if you live near a hospital, right?

44:15But for the most part, most people who don't work in the health care industry don't see scrubs all day. Yeah. I think the thing that is truly unique about figs is how we've built a community around a profession. And that community is diehard obsessed with figs. And we are obsessed with them. And that's the thing you can't replicate. That's the thing you can't copy. This is a very tightly knit community that we penetrated very early on and became like a part of their life in a way that was inextricable.

44:53Okay. So either around this time or within this period of time, you guys were co-CEOs, I should mention. At that time, Heather was CEO. I think I was COO at that time. And then we became co-CEO, I believe, in 2017. Okay. And there was an investor who you guys met or caught – he kind of – I don't know, he found out about you, a guy named Thomas Tull, who would become significant, a significant investor, the significant investor.

45:26Tell me about him. He was already a very wealthy guy. He'd owned some innovation labs. Tell me about how he – who he was, how he came across the business. Yeah. So in 2014, 2015, one of our investors said, you know, you got to meet Thomas Tull. He runs a movie studio called Legendary Entertainment. And we got to get figs, scrubs into the movies. And we were trying everything at this time.

45:56And so we meet with Thomas. And, you know, I think Heather – both Heather and I were like, that's not going to be the thing. Like, but at the time, we just said, okay, let's meet with Thomas and see what we can do here. The conversation was super interesting. We ended up – he ended up investing in our Seed Round and our Series A. And he really got it. And he was focused on these outdated industries, right, that were, in his words, run by the mafia.

46:27And not to say that the medical apparel industry was that, but if you look at what, like, Uber did with the cab industry or what, you know, like that type of phenomenon that, you know, these Garmentos were just running these industries and not building – really bringing technology in the best minds to build something truly innovative. That was the thesis. And he said, you're doing that in the medical apparel industry. And so he invested in us and then in 2017, you know, he bought out all of our other investors for a great return.

47:04And then that took time and it was a process. But we ended up getting that done. And he would end up, as you say, not only putting in more money but then basically buying out the cap table, like clearing the cap table in 2017. Yeah. So I think this would be a turning point, right? Because you are – you would have now some really significant cash behind the business to scale it further. Because I think by the end of 2015, I think you'd done about a – you broke a – cracked a million in sales.

47:36That's right. Roughly. Okay. And do you remember 2016 roughly? Four million. Four million. Okay, great. So you're now – in 2017, Thomas Tull buys out or he basically clears the cap table, puts I think about $65 million into the company, becomes the majority owner of FIGs. Now, on the one hand, this is great because you don't have a bunch of investors and a bunch of calls. But on the other hand, it could be tricky because now you've got one investor.

48:06And so there are different – there's different views on whether this is an advantage or not. I think in the end, it worked out for everybody. But was there ever part of you – or did anybody say or give you advice like, hey, you want to be careful having just one investor behind you because that's your boss? I mean, we structured it, I think, really well where Heather and I had two out of the three seats on the board. So we've never lost control of this company. To this day, we have – we control the vote.

48:37So we have – as a public company. And so I think that was something that we were really focused on. In 2015, we had raised money from a group called Campfire Capital. At Vancouver, right? And, you know, one of the reasons Thomas ended up buying them out in addition to all the other investors is that they tried to kick us out. They tried to kick you guys out as the operators? Yes, yes. Uh-huh. Thomas was – he was an entrepreneur. He was an operator. And so he wasn't about kicking out the founders.

49:08He was about ensuring that we had all the support and resources we needed to go and crush it. And it worked out great. And it meant that you didn't have to fundraise. Well, and at that point, though, by 2017, we were making money. So really 2018, we did $55 million in sales. 2019 was $110 million. $263 million in 2020. And then the rest is history.

Fighting an $800 million lawsuit

49:32Okay. Basically, as you start to get more and more successful, I imagine you start to attract attention. Because even at this point, I don't think that any big sort of well-known brands were making Scrubs. Now Fabletics does it and other – their other competitors have gotten into this space because they see there's money to be made. But you guys got sued by this company called Strategic Partners. And they have a lot of different brands that they own that do Scrubs, like Dickies. And I think Dickies is one of them. Cherokee. Dickies and Cherokee mainly.

50:03They sued you guys for, I don't know, a bunch of different things. That you made false claims about your products and that maybe that you stole trade secrets from them. And this went on for like a long time. Like it was like a four-year legal battle that you decided – you guys decided to fight this. Yes, yes. I mean this was a company that was basically suing us for – they were basically saying everything that we had ever done was a lie. They were – obviously your business was – as it was growing, it started to threaten – potentially threaten their business.

50:37Yeah, and we had – you know, the legal battle started in 2019, early 2019. And so that's when I think they woke up and realized like, you know, we were doing something unique and different and healthcare professionals love figs. And they needed to – and their whole strategy is litigation, not innovation. So that was their whole playbook was suing companies and taking them out of business. And we thought, we're not going to take this lying down. We got to go fight this. When we come back in just a moment, we'll find out how the jury ruled in the case and who wound up benefiting the most.

51:16Stay with us. I'm Guy Raz and you're listening to How I Built This.

51:36Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2022 and after a three-year legal battle, the lawsuit against figs has finally come to a close. The jury winds up ruling in favor of Heather and Trina, but the founders pay a big price.

51:59How much did this cost you guys to fight? $40 million. $40 million to fight this. Yeah. It's so crazy to me. The only winners are the lawyers. That's right. But that's – I mean, that's America, right? The most litigious country on the planet. It's so crazy. But I would say, like, it's also the best thing that ever happened to us. Like, I mean, I don't know if Heather would agree, but – $40 million? It's a lot. No, not that part. But, like, this really showed the world, like, not to – you can't mess with us.

52:30We're not going to settle. We're going to fight you because we know who we are and that we didn't do anything wrong. They wanted you guys to settle, presumably. Yeah. I mean, and lawyers at times were like, let's just settle this. And I have to give credit to our board, our board at the time, because we were already public. So we had, you know, amazing people that said, no, we're not going to take this lying down. We're going to fight. We're going to go to trial. What if you could have settled for $2 million and, you know, and not admitting anything? I mean, we probably would have done that, but that wasn't the case.

53:01I think you have to think about the cost of doing business. So we were being sued for, I believe it was $800 million, right? So if we're going to spend $40 million or $60 million, that's absolutely worth it because we knew we were going to win because we just did. We knew we were going to win because what they were suing us for was just ridiculous. And they lost because we were innovative. That's really how we won because we're an innovative company and we put great product out there. We have a great business. And that is why we won the lawsuit.

53:31But $40 or $50 million, we spent way more than that because of our time, right? So my time and Trina's time and the company's time and the board's time, it's... Discovery and depositions. That's right. You know, and if you can compartmentalize and block that and keep going and doing your day, awesome. It is hard to do, but you've got to train yourself to be able to do that. So you keep going forward and, you know, building a great company, even though you're being sued here for $800 million in the background. How did you compartmentalize?

54:02How did you just do your job and also, oh, God, I got to do deposition today? I mean, it was really hard. And you're going to have lawyers. Their lawyers are going to be aggressive. They're going to ask you all kinds of aggressive questions. They're going to try and make you mad. They're going to try... They want you to get mad. They want you to get testy. They want you to lose your cool. Well, not to speak for Heather, but I think one of the things that helped us win was how angry she was at the trial. And the jury saw how angry we were that this has taken so much of our time and it is so ridiculous.

54:34And, you know, and I think that... I mean, I didn't do a great job of compartmentalizing over that time, especially not at trial. I mean, it was all day long. We were living in a hotel in Santa Ana. Like, it was... I don't know how people do it if you don't have money. I don't know how you do it. It's awful. And so, you know, I do think the anger... I think at many times our lawyers were like, don't be angry. You have to be this. You have to be that. And in the end, we were just authentic and honest because we didn't know how to be anything else. And, you know, I would say the best moment of that whole thing was after we won, we met the jury.

55:09We had a jury and we met them and they were crying and just saying how sorry they were that we went through this. I mean, it was just... I mean, it was unbelievable. It was unbelievable. It's been... Yeah, it's part of, I guess, part of business in America. Okay, so I wanted, because this trial would take so long, but I want to wind back for a second, which is COVID.

Navigating the pandemic

55:32And, wow, I mean, this turned into, for obvious reasons, an insane moment for you because all of a sudden, there is a massive need for, obviously, you know, clothing, but PPE, protective gear, which was not your business. This is not what you were doing, but you very quickly got into that business, making masks and gowns, certain gowns, isolation, hazmat suits. Like, tell me about just how did you get that done so quickly?

56:06Yeah, I mean, I would say, just to be clear, on the hazmat suits, isolation gowns, and other PPE, we didn't sell that. So that was all donation during that time. But, you know, we did shift our supply chain. And we did, you know, find suppliers to help us make PPE. We were making masks that, you know, were actually maybe two, we had N95s, and then we also had our FIGS masks that we, you know, were selling. And I think... The cloth ones, right?

56:37Yeah, exactly. And so I think it was, it was just like, we felt this deep responsibility that we needed to show up and support, given who we are and what we do and the business that we're in, to ensure that our community was safe and taken care of. But how are you dealing with supply chain challenges? I mean, there were, all of a sudden, like, a shipping container went from, you know, $35 to, like, $2,000, for example. And there was a backlog. I mean, how were you guys keeping up with demand during that time?

57:10Yeah, I mean, it was hard. And we were, we weren't necessarily keeping up with demand. I mean, if... Were there shortages in the website, like sold out, sold out? Oh, my God. All across the board. But I think we had incredible manufacturing relationships, right? Our partners we had worked with for, at that point, eight years, you know, seven, eight years, right? So they were in it with us.

Taking FIGS public

57:32And during this time, because 2021 was still COVID, you guys go public, you do an IPO, and you go public in 2021, May 2021. And I have to, I mean, this is an amazing opportunity and moment because you had done, it had such an incredible year in 2020. Was that sort of the idea, like, wow, we have an opportunity. We better seize it at this point because we are really, we're doing great.

58:05I don't think we thought about it like that. It wasn't about the capitalizing on the opportunity. I think it was the company should be a public company. You know, we had built a real business with the scale and with a disciplined approach around revenue and profitability. We did have one investor that at some point would need liquidity. And then the IPO was really about celebrating our community. We brought 150 healthcare professionals, the New York Stock Exchange. We had the best party ever. They rang the bell with us, not our, you know, our management team.

58:38It was a moment to celebrate them. And it was a moment to celebrate all that we had done to get to this point. Yeah. Yeah. When you go public, literally, I mean, at this point, you knew, you had a sense it was going to happen. But now it becomes real. On paper, the both of you become very wealthy, multimillionaires, like worth hundreds of millions of dollars. And it might make you feel uncomfortable. I may be not. I think it's an amazing achievement. But it's true, right? Like your shares are worth so much.

59:09And instantly, the both of you who did not have, did not go into this business wealthy, did not come into the, you know, into this thing flush with cash. The value of what you have, the shares you have are worth a lot of money. It's valued, you know, as a multi-billion dollar brand at this point. Yeah. I mean, I think, to your point, it was on paper. And, you know, we made the Forbes, like, wealthiest women alive or whatever list. And then the following year, after the stock went from, like, $50 to $5, we were the two women who fell off.

59:45Meet the two women who are now not on the list, right? So I think it was a point in time, right? It was a point in time. And not to say that we haven't done well and we haven't, you know, taken money off the table. To your point, we have. And it's amazing, right? We're able to support our families. We're able to support people we love. And that's what being financially secure enables you to do. But that's not what drives us every day. And I think, for me, it's like having gone through that, right? That roller coaster of having nothing, being worth X, and then being worth nothing.

1:00:18Like, you know, we're an $8 billion company. Now we're a $400 million company, $600 million company. Now we're $2 billion. Like, none of it, it's so transient. And you can't get really tied emotionally to any of it in terms of your self-worth, let alone your net worth.

1:00:40Well, it's interesting because I think now, I think the market cap of the brand is $2.4 billion, but you're more profitable than you've ever been. So I think that's right. I mean, I've looked at the financials and you're actually, your customer acquisition costs are lower. And so it's interesting, right, how that works. Right. And the public markets, you know, are at times rational, at times irrational, you know, over, you know, the standard quote, like over time, it's a weighing machine. In the short term, it's a voting machine. But like, we went from like, when we went public, like, the stock went up to $50 in the first month.

1:01:16Yeah. And, you know, people are inviting Heather and I to their castles in Italy, right? And then a year later, the stock's at $5. And it's like, we murdered their firstborn, right? So you're not invited to the castles in Italy anymore? No, it's like, we literally murdered their children. So, you know, I do think like having gone through that, you kind of realize it's all a little bit fake. And the amount of entrepreneurs that I'm sure you probably interviewed that sell their company for billions of dollars and then go into deep depression, right? Happens a lot.

1:01:46Not a lot, but it does happen. Yep. You lose sense of purpose. They don't have that purpose. Like, we're operating this company with the same amount of passion that we had in day one. But we just started a foundation. Like, it's so awesome. We built a hospital in Kenya.