Andrea: We're the moonshot company you've been looking for. You either believe in is, or don't. You can get caught up in the details, or you can understand that we’re going to solve these problems.
Andrea Madho wants to revolutionize the way high end clothes are made. She says her company - Lab141 - will be the biggest shakeup to the antiquated fashion industry in a century. And she plans to change everything, by making fancy clothes available to a lot of people who just can’t wear them right now.
But moonshots are called moonshots for a reason. So Andrea will have to convince the investors that her startup is more than just a shot in the dark.
From Gimlet, this is The Pitch. I’m Josh Muccio. Today’s investors are:
I’m Phil Nadel
Phil built companies that sold for hundreds of millions of dollars. Now he manages Forefront Venture Partners, one of the largest syndicates on AngelList.
I’m Soraya Darabi
Soraya, is a founding partner at Trailmix ventures, and she invested in little startup you may have heard of, called Gimlet.
I’m Michael Hyatt
Michael built and sold two software companies for over $500 million dollars and now he invests for himself.
I’m Sarah Downey
Sarah’s a partner at Accomplice where they’ve invested $600 million in over 200 startups so far, one example, a company called Draftkings.
I’m Charles Hudson
Charles started Precursor Ventures where he’s invested $20 million in over 100 startups to date.
On with THE PITCH.
Andrea: Alright. Let’s do this.
Phil: All right.
Andrea: A few years ago, I went to a shopping mall. Had money burning a hole in my pocket. I wanted to buy a trench coat from one of those fancy British brands. I walked in excited and I walked out with nothing. That day I went to dozens of stores at that mall, and I couldn’t give my money away. And retailers are in the business of taking money. And it turns out that I’m too short and too fat for luxury fashion. But I’m five feet tall, which means I’m petite, which is 50% of all American women. I’m also size 18, which means I’m 67% of all American women because I’m plus. I’m the average woman and I can’t buy clothing. But rather than start my own fashion brand I said, how are clothes made? How does this all work? What are sizes? And I turned to my partner who’s a mechanical software engineer and a 3D printing expert and said, why aren’t clothes made the way 3D printed objects are? And he said. I don't know, that’s probably how it should work. And that’s what we’re doing. I’m Andrea Madho, co-founder and CEO of Lab141. For premium direct to consumer fashion brands, we manufacture their clothing using our robotics, analytics and logistics in 72 hours made in America.
Andrea wants to solve the problem of designer clothes that don’t fit the average woman, by making them in sizes that the brands don’t currently have available. She thinks it can be as easy as a 3d printer: download a pattern, change the measurements, and click print. Let the robots do the rest.
Andrea: So the future of advanced manufacturing is localized micro factory production. We’re raising $5 million in order to kit out our first facility, to make our first hires, and to fulfil the unmet needs of brands. Join us as we change everything.
Michael: Nice pitch. Well done.
Andrea: Thank you.
Michael: Well prepared. So how does this work exactly? Tell me how you work with an individual. You're saying it's bespoke for that person? Or is it just saying, hi, I'm this weight, this height and this size and I need this dress? Is that what you're saying? Is that
Andrea: So for a consumer, they’re buying their typical, from their brand So on the brand’s site buy now, only available limited quantities. So that’s what the consumer would see. They would click on that button and then they’re transferred to our website so we ask 20 questions the way a lot of brands do what are your favorite brands, what size do you normally wear, how would you like that adjusted, normally? How does it not meet your needs? We ask the questions, we get their purchase data. And then we drop ship. We actually manufacture and drop ship.
Michael: And you make the shipped product, it looks like it’s coming from the brand, but you’ve actually made it.
Michael: Your 20 questions drilled it down.
Andrea: Yes. So this is one way to capture anybody. And by anybody, this means if you’re tall, petite, plus. If you’re in a wheelchair. It’s actually just a little button on our algorithm that changes it
Michael: And how do you work with a brand?
Andrea: About two weeks before a launch They would send us their fabric and their pattern they would be sending us their patterns, we would digitize it, we'd put it in our system and we would try it on five actual humans. We would make five samples. In extremes. So we have someone who's one of our fit models is four six and three quarters. We have someone who's quite large. Typical fashion is one fit model per brand. We want the extremes.
If Andrea can make sure that the clothes look good on different body types, then the brand can start selling them.
Essentially, these high-end brands pay Lab141 to make their clothes for them.
Andrea: So this is at the premium end of the market. We can't compete with items that are $30. It's between $250 and about $500
Phil: What part of it are you keeping though?
Andrea: They get, we only charge them for the manufacturing part of it So our cost to them would be about $150. If it was a $400 item, they get the difference.
Soraya: So you’re a modern cut and sew?
Sarah: Where are you doing the manufacturing now?
Andrea: So we are a pre-revenue startup. And we've been bootstrapped, my partner and I. So part of it's been in Park Slope Brooklyn.
Andrea: Grand... World headquarters is bedroom number two.
Andrea: We also have a small manufacturing facility in Syracuse, New York.
Phil: I'm a big believer in custom sizing as the way of the future. So much so that we're investing in a company that's doing something similar, it's called Fit3D*. And umm ...
Andrea: So I'll tell you about them. One of the challenges with a lot of the fit companies, or the fit algorithms, is that no one is actually making the clothes. And that's the fundamental problem. So I used one of those apps where you put in your measurements, and it searches out the internet for millions of units. And then it suggests what you can buy. When I put in my measurements and I'm the average American woman, so I'm plus, petite and short waisted, it came back with zero. So the fundamental problems with a lot of these fit algorithms is that the clothes don't exist.
Andrea: And that's what we're solving
Soraya: I would only counter by saying that most luxury brands are incredibly elitist and horrible and they don’t want the average American wearing their clothing. So how do you, how do you respond to that?
Michael: That’s an interesting point.
Andrea: I love that question because we get it all the time. Designers don’t actually run their companies. Bean counters do. And they all want money. Brand dilution doesn’t come from someone chubby like me wearing their brand. It comes from the fact that most people are waiting until it goes on sale before they buy it. It’s brand dilution because they’re not paying full price. When you do made to fit, it is 100% margin. It never gets discounted. And that’s the dilution that no one really wants to talk about, and that’s what we solve.
Michael: It’s a good point.
Soraya: And there's no returns?
Andrea: So returns are, um, that's on the brand. We're a manufacturer. So if there is a manufacturing flaw, we will take that. It's up the brand to decide how they want to deal with their customer
Michael: Don't you see a conundrum though between what you're saying and how big your market is and then the target you have to go after? You say that, look, it's an $80 billion market, all these plus size people, different body shapes, and look most Americans cannot afford any of the type of the clothes you're talking about. So you could only, if you even could do this, and let's say you can, you're in a bracket that people can't afford.
Andrea: 0.1% of luxury clothes are available to the 67% of American women. There are people... Oprah can't buy off the rack. There are lots and lots of...
Michael: Oprah can buy anything she wants. But most Americans don't spend $400 on an item of clothes.
Andrea: But the ones who can, don't have access to it.
Michael: Yeah, but do you think that's an $80 billion market?
Andrea: It's very hard to quantify what can't be assessed. That's what I'm saying So quantifiable data is what we ultimately are. So for brands who want to redeploy their inventory, we can tell them where their missed opportunity is
When Andrea means by missed opportunity is right now, brands have no idea how many customers they’re losing out on because they don't sell clothes in sizes that fit. But if a lot of customers came to Andrea's website asking for a specific size... she knows that the brand could sell a lot more dresses if they just made that size. And then she can sell that information back to the brand.
Andrea: So we are a data company, make no mistake. We have all kinds of information about consumers, about brands, about purchases, it's all of it. We're doing something very big. We're the moonshot company you've been looking for. You either believe in is, or don't. You can get caught up in the details, or you can understand that we're going to solve these problems. This is the, this is the holy grail of manufacturing. It’s no sizes, no inventory, infinite data.
Andrea: No risk
Soraya: I agree with you in that in terms of size of addressable market But I think there's a difference between the stitch fixers of the world, the D&Cos, that are addressing a fuller sized woman who just wants convenience and wants to step away from the shame of being in a dressing room and trying on products that weren't made for her, and a product that takes - I'm counting four steps to checkout. To actually convert that same woman with a high intent to purchase, to get to the finish line. And the finish line of course is dollars spent. There's a lot of steps in this process. And once they do spend those dollars then on the other side of the marketplace we have a hardware business that you mentioned doesn't take inventory. But I'm thinking of those materials that are sent from the brands as inventory. You have to hold that somewhere and keep it very, very organized before reshipping it back to them. So this is a multi-faceted enterprise.
Andrea: Clearly. This is a huge market. And it's very complicated. And everyone asks why has no one gone in there. Most brands don't make their own clothes. They're all made by other factories, overseas or domestically. And that innovation, there's no incentive for those existing manufacturers to innovate. It's because there's low cost sewing, so there's no need to innovate. And we did, so there are lots and lots of moving pieces. But we're going to solve them because we have to. Because this is why we exist. This is my purpose.
She wants investors to buy into her big picture, but in this pitch, the devil is in the details. Andrea is tackling a lot, all at once... Between working with brands, and manufacturing, and collecting data, and the logistics of shipping clothes ...
When we come back, the investors start to pull at the seams of Lab141. And some of those seams, start to unravel.
Welcome back. Andrea Madho has told investors that her new way to make luxury clothes is the future. But with all the moving parts involved, Michael wants to know if Andrea can really pull them all together.
Michael: Okay, so I guess where I’m missing something here is, like, you’re painting this dream, but you’re pre-revenue. You’re not actually doing it.
Andrea: So we’ve completed our MVP for this process. And we need a lot of money. This is a hardware startup. Everyone knows, hardware is hard.
Michael: What kind of hardware are you buying? Like tell us...
Andrea: So we have invented a single ply cutting table that my partner and I are on the patents for. We need to do a much more robust prototype of this cutting table to make it for prime time. We also have some extended technology. It’s not just cut and sew. The future isn’t millions of people hunched over a sewing machine.
Andrea: We’ve also tested bonding technology, so that some of the seams will actually be bonded, not sewn, to automate the manufacturing up to about 80%. We’re not ready for prime time. We have gone from end to end with small units. We’ve done ten. But we have all these brands...
Michael: Ten what?
Andrea: Internally ten... We’ve made ten dresses, and then we did that cycle a second time. So we’ve made a total of 20. But that was enough for the brands that we’ve spoken to. Because they want us, they want to start sending us their fabric.
Michael: So you have massive purchase orders right now from these brands?
Andrea: We have 31 companies that would like to pilot with us.
Michael: Go back to this $5 million you’re raising. How, where’s it going to? What’s it going to?
Andrea: So that’s going towards hiring our first ten people And that includes three data scientists, two ahh... engineers. Mechanical engineers. And then we have two more software engineers. We expect that this is going to be growing exponentially. But we need to deliver on these first 31 customers. We need to at least deal with the first one. So I’ve completed MVP And we need to kit out a facility. We’re looking at the Brooklyn Navy Yard. Just to start on...
Michael: But why 5 million? I mean, that’s a huge number for a retail startup. I mean...
Andrea: Well, we’re not a retail startup. We’re an advanced, we’re a hardware manufacturer. And so we need a facility.
Michael: What kind of valuation do you have at the 5 million raise?
Andrea: Uhh the pre money would be 16.5.
Michael: So you're pre-revenue.
Michael: You're getting started and you would like a valuation of 16.5 million?
Andrea: Pre money, yes. Um, but we've already, so, we're already on target to have... Well we've got 31 brands who are ready to start piloting with us. So we've got latent need.
Michael: What does mean, 31 brands ready to pilot? Do you have like LOIs? Do you have purchase orders?
Andrea: We're actually negotiating an LOI with two very well-funded direct to consumer brands already. I can't really say the name but one of them...
Michael: But when you come here, you say 31 brands. That, to investors, is like, oh whet our appetite. But then you say two. that doesn't sound like you have anything. If I go out and I say, look, I'm going to start this company, would you like to maybe pilot? Yeah, yeah, sure, maybe we'll pilot. But it's a big difference between saying we're $16.5 million already because we have 31 companies ready to pilot, but when I prod it, they're kind of these verbal non-committals.
Andrea: Unfortunately we weren't in a position up until last week to follow through on our pilots. Now that we have completed and tested our algorithm and made dresses and put them on humans, I feel comfortable to do that. But we also know that there is the buy-in, the brands themselves that we've spoken to, have these problems. They don't have solutions and we're the first ones that have come to them and said, we've got a possible way out for you. Because the way that the businesses work isn't working going forward.
Andrea: I see you're...
Soraya: No, I’m smiling It sounds genius. But it’s also very hypothetical.
Andrea: And what we’re trying to do is very big. We’ve been waiting as long as possible. We’ve de-risked some of this by bootstrapping. But we need money to go forward to that next level Um... Yes. There’s nothing but data coming. This market is huge and we’re the first company in this space. So you either believe what we’re saying, that there’s an opportunity, or you don’t
Sarah: What did you do before this? And your partner, as well?
Andrea: So I’m a former Wall Street broker. So I used to raise money for a living. 500 cold calls a day, old school. So I know how to raise money. And then I used to do high tech public relations And then I was a business development consultant. So raise money, get publicity, grow businesses - that’s my background I mean, you’re asking three questions. Who am I? Am I the person to do this? Is this a problem? And is this a big enough market? And the answer is yes. So we just know making one thing to fit each person is the future. And that’s what we’re doing.
Phil: Andrea, you're very confident and very persuasive and eloquent. I think you summed it up when you said it's a moonshot. And I think it is. I think it's a big, big vision and umm it could be a big opportunity. It's just early for me. so respectfully I'm going to pass.
Andrea: Thank you for your insight.
Soraya: I was going to say there are three businesses for us to unpack here, and any one of those three businesses, if we went really deep into each on, I feel like you’d have a really eloquent and superb answer for how you’re going to make it a billion dollar business. But I’m just feeling a little confused because there’s so many different components to what you’re describing. I think that there is an interesting 3D manufacturing business opportunity just for clothing. And I think there is an interesting data play business But it’s a pass for me just because I’m a little confused as to which direction you’re tackling first, and how these different components weave together neatly.
Andrea: Thank you for your insight and your decision making process. I don’t necessarily agree with you...
Soraya: As you shouldn't.
Andrea: But I appreciate it.
Soraya: I love being wrong because that means you’re successful
Andrea: A lot of people use that example of Henry Ford - if we had asked consumers what they wanted, they would have asked for a faster horse. We feel like we've invented the jet plane.
Andrea: And it's a lot of pieces and it's complicated and this is part of our advantage is we think that competitors coming into the space will have a lot of difficulties. So we might have an advantage speed to market.
Charles: I think for me this one's a pass. And it was hard because I liked a lot of what I heard. I think there's an opportunity here. Part of me feels like if you had told me you were raising 1.5 from investors at a lower valuation I think that would have been an easier for me to digest just given the open questions, that I actually think most of the things you said, I actually believe they're going to pan out the way that you said. It's just for a $5 million infusion, I generally need to see more. But I also, we do a lot, about 10% of our investment are in hardware. And you can't really do much in hardware for less than 5 million bucks, so it's a little bit of a chicken and egg, and I'm sympathetic to that But I would have liked to see a little bit more for a check of that size.
Andrea: And I appreciate that
Sarah: I mean, I think, my advice to you would be, like, you're onto something. I would just narrow down on exactly what you can do to simplify. Because I think a common thread among us even is that we're struggling with what is core to this. So it's a pass for me, but I wish you the best. And you are a such a strong spokesperson.
Andrea: Thank you.
Michael: So I think that what is compelling about this is you because you are such a good salesperson and you know it. I'm just going to be a bit more candid I think that your math is really off. And your way too early. 16.5 makes no sense. I don't think the business model makes a lot of sense. I don't think where you are with the 31 brands makes a lot of sense. I think that you've outlined a problem which is real. And huge But I've actually rarely ever seen anybody come in with this kind of valuation and be at the kind of stage you are, which is kind of not really proven out yet. So for that reason I'm out. But I got to tell you, you are a very compelling entrepreneur. And I think somehow you're going to raise this money at some kind of big valuation, and I think you know it, because I think that's what you said, you're really good at raising money. So I wish you the best.
Andrea: Thank you. Thank you very much for all of you. Giving me your insight and kind of believing parts of it.
After Andrea leaves the room empty handed, I stepped in, to ask the investors about what really caused this pitch to unravel.
Michael: I didn’t get it. At all.
Michael: I mean, am I wrong? There’s no equipment yet, there’s no proof in the pudding, there’s no real work through it sounds good, but when you dig into it, it’s... I just, I don't know. I get frustrated when I feel like it’s so salesmanship, it’s lack of being credible.
Sarah: Part of what makes someone a good salesperson is they can sell you things that you don’t need or that don’t exist. And I think a lot of that didn’t exist.
Josh: So my question to you is I think I'm understanding what's complicated about the business. But it feels like to me in order to solve all of those problems, you need to be tackling all three. To be the manufacturer, to get the data, to partner with all of these brands, that's how you solve all three of the problems. I don't know, can you build this business and just build one of them? Isn't that what makes it a big opportunity is that she's tackling all of them?
Sarah: Couldn't the brands collect the data on their own users? Like why... It seems like the manufacturing piece is the part that I'm struggling with because there's so much complexity in returns and construction of garments and sending things back and forth. And then you have the data piece. Like those two things alone are so separate. I mean, I have no idea how to do this, of course. Like it's easier to poke holes in something that someone is presenting to you than to solve it yourself. I don't claim to have the answers. But I just don't think that's the answer.
After the break, Andrea reflects on what she thought the problem with her pitch was. And according to her, it had little to do with Lab141.
Welcome back. A few months after her pitch, Andrea came back to our studios to chat. She told us that she managed to raise 75K from friends and family. And that none of that was from venture capitalists. But according to her, something even more exciting was in the works.
Andrea: Lab141 was selected to be one of the top six contestants for the Tommy Hilfiger Fashion Frontier Challenge. It's a mouthful. We beat out-
Josh: Tommy Hilfiger Fashion Frontier challenge.
Andrea: So Tommy Hilfiger has put out this competition to invite some of the most innovative companies in the world. And we beat out over, I think it's 400 companies to be top six.
Andrea: And we're now pitching for 100,000 euro. Well, all of a sudden we've been having some very big meetings with some well known brands. I can't mention any of them other than Tommy. Tommy is owned by PVH, Phillips-Van Heusen in Amsterdam. I believe their $10 billion fashion house that owns Tommy, Calvin Klein, all these other companies, they believe in us more than anything, we're on the radar of a really big company. So it's a really big deal. When we were pitching these investors they all seem to understand it, but they weren't willing to take that leap. They didn't really get it. These brands are so desperate for a solution. They got it and they're reaching out to us and we're barely out of MVP and they're like, "We need something radical. You sound radical. Let's talk." So yay!
Even though Andrea was clearly disappointed that she didn’t get investment in the Pitch room, I didn’t fully realize that she was really frustrated with the whole fundraising process. So frustrated, in fact, that...
Andrea: I don't know if I really want to raise from investors. So I'm kind of stepping back from the hard pitch. When you were raising money, you're spending all of your time for several months to do that. And right now I'm stepping back and I'm thinking, "You know what? Let's run this like a real old fashioned business. Customers, money, revenue, crazy as that is."
Josh: Let's get enough revenue in the door to fund the next stage of growth for our business.
Josh: Yup. So you're putting the $5 million round, on hold.
Andrea: Right We're hoping to get that from a purchase order or an LOI, in the next-
Josh: From a customer?
Andrea: From a customer.
Andrea: The one thing I do want to mention is, we haven't really talked a lot about that, but as a woman, minority female founder in tech with actual patents, there aren't a lot of us, and I'm not saying I'm better or worse, I'm just saying that it's still very rare that I go into a room and see a lot of people like me.
Andrea: You know that the standards are... it's not a level playing field, so what? Now what? What are you going to do about it? And I'm starting to encounter that and I never thought that would apply to me. I'm a former broker. I raised money for a living. That's for other people. That's not me. And it's actually maybe applying to me and that's hard to understand.
Josh: So you're saying that previously as a broker on Wall Street, you weren't feeling that in your career or you weren't feeling the effects of that. But now as you're raising money and building, this company you're starting to feel like it is harder for you?
Andrea: I used to use the things that were difficult. So when I was a broker, sometimes I would say, "Hi, I want to speak to Bob" and the assistant would just put me through. "Who is this?" "This is Andrea." "Is he expecting your call?" "Yes." And I would just go through, because they never heard a woman broker before. I was able to kind of cut through a lot of clutter because I was a woman because I didn't play by the rules and it helped me.
Andrea: But now, I don't find that it's helping me and that's why I didn't think it was going to be so hard. It might be hard for you or you, but it's not going to be hard for me.
Andrea: And it's hard.
Josh: You thought you were exempt from that?
Andrea: Yeah. I go to a lot of events that only have female investors or investors that are specifically looking for female founded companies. And this is a good thing, but I also don't like segregated investors. I want bro money too. I want all of it. And I want those bros who are saying, "I'm looking for a really good company to cut that cheque."
Andrea: To hold me-
Josh: You don't want investors who are just looking for a solid female founder or minority founder who's building something, you want regular money, people who are just looking for a great company to invest in you.
Andrea: I want bros that are saying that they're looking for an investment to really take a look and make sure that they're asking themselves, "Am I holding her to a different standard than I would hold someone else too?" And that's what I'm finding. If they say, well I'm technology agnostic, do you meet the standard? Are you really applying that standard equally to me? And that I don't think I'm finding it's, "Oh but you didn't go to this school, you didn't go..." Whatever it happens to be, if they say that they're using a standard metric to evaluate an opportunity, then make sure you're really applying it because I don't think you're doing that and I've had 70 something VC angel meetings but no one's gone out of their way to say, "Listen, we had an off the record kind of conversation, but I really like what you're doing. Let's talk about me investing." That hasn't happened either, so I'm disgusted. Screw this VC fake world that's not doing what they're supposed to do, which is taking that earliest cheque, that most risk on those that don't have traction because anybody who got that money on the back of a napkin wasn't me. And who are those people who are actually getting that money? Sorry. Now the anger is coming out.
Andrea: There's a fashion brand that two years ago I saw they raised $5 million and it was a guy who started this fashion brand who said, "Yeah, plus size women are an underserved market. There's 67% of all the American women and there's 0.1% of luxury out there. Those are crazy numbers. Let's do something about that." Raised $5 million with no traction. 5 million.
Andrea: And this is my problem that I deal with on a daily basis my whole life. So I'm just saying numbers actually do matter.
Andrea: And I'm not getting that cheque right now, but I'm going to get it done
To the investors, they’re just trying to make deals, and maybe they’re taking each individual pitch at face value when they hear it BUT when you look at the numbers. They tell a different story. Only 2.2% of the 130 billion in venture dollars last year went to female founders.
Now let’s think about this for one second, about half the population is getting … 2.2% of all investment dollars. That just doesn't add up.
And it’s hard enough being told no over and over again. We can all relate to that. But what changes in venture capital...would it take for Andrea to feel that a NO was just a no to Lab141 instead of a NO to her.
The Pitch is hosted by me, Josh Muccio. Produced by Kareem Maddox and Heather Rogers. We are edited by Sara Sarasohn and Blythe Terrell.
Theme music by The Muse Maker. Original compositions from Breakmaster Cylinder, Peter Leonard, Billy Libby, The Muse Maker and Names Are Hard. We are mixed by Enoch Kim.
Lisa Muccio planned the recording of this pitch. And thanks to helloalice.com, a resource for entrepreneurs, for connecting us with today’s founder.
And here’s a quick disclaimer, no offer to invest is being made to or solicited from the listening audience on today’s show.
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Thank you so much for listening. We’ll be back in two weeks on Wednesday, October 23rd. See you then.