How Nasty Gal Went from an $85M Company to Bankruptcy
I was very close to insiders at the company, can&#x27;t tell you who I know, but you&#x27;ll have to trust me. Nasty Gal was a lot worse of an environment that this article leads on. There&#x27;s a lesson to learn here, so that&#x27;s why I&#x27;m posting.<p>Basically, Nasty Gal made a string of horrible investments, one after another, which makes one wonder if they were trying to fail. Lots went wrong, but I&#x27;ll cover the stuff that hasn&#x27;t been reported.... First they tried to raise their average price point from $60 to like $400. They started off selling cheap crap from asia (think F21), but then when Sheree Waterson from Lululemon came onboard, she convinced Sophia they could follow the Lululemon model and charge insane prices for clothes. (Keep in mind Waterson was a failed exec from Lululemon that joined NG after being fired from Lululemon so she had her own issues) That idea failed and NG alienated customers, while also having a lot of inventory they could sell on hand. Huge loss of capital on that idea.<p>Second, Sophia Amoruso became increasingly obsessed with building a &quot;cult of personality&quot; around herself and using that to sell clothes. Amoruso would regularly commandeer NG&#x27;s customer mailing list to send out mailers about herself and what she was up to. These emails would result in the highest unsubscribe rates. NG, like a lot of online retailers, lived and died by their weekly emails. Then she decided she had to write a book, so she spent around $500,000 of company money on a ghost writer and marketing for the book. She had a publisher, but the publisher only picked her up because Amoruso was paying all the costs to publish out of the NG&#x27;s pocket. Amoruso, again use the company mailing list to promote the book, which resulted in a lot of unsubs.<p>Amoruso basically bet that women would buy her clothes if they identified with her story, so she doubled down on building her cult of personality and plastered her face and story all over Nasty Gal. There was some degree of success for Amoruso in the form of fame, but this did NOT result in an increase of sales to the company. Essentially, Amoruso traded company revenue, for personal fame.<p>Thirdly, there were frequent and arbitrary layoffs at NG which killed moral. If Amoruso didn&#x27;t like a how a project was going, she would fire the whole team. This lead to lawsuits and Nasty Gal has had deal with at least 5-10 different plaintiffs claiming wrongful termination. Many of these settled out of court for a good sum of money. Some of the fired women were pregnant and they accused Amoruso of firing them for actually being pregnant. They had enough of a claim that Amoruso had to settle with them out of court.<p>Fourthly, going back to Amoruso&#x27;s vanity... She became obsessed with building a lavash office in downtown Los Angeles. She spent about $10-20M on a beautiful, but very expensive office. This came back to bite them later.<p>Lastly, Nasty Gal was continuing to generate money, about $70M a year according the bankruptcy docs, but they were still losing money on that. They still had a big email list that they built up years prior, so that kept them selling. They had to take out what basically amounted to a &#x27;shark loan&#x27; from Hercules Capital to stay afloat. About $10MM in 2014. After they failed to right the ship, Hercules basically forced them into bankruptcy and that&#x27;s why they are where they are now.