Investors put $110 million into a sock company. No, really.
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Silicon Valley’s venture capitalists are known for pouring big bucks into a lot of seemingly out-there ideas (we’re looking at you, Juicero). The latest one? A premium sock company. Sarah McBride wrote about the the sock company Stance for Bloomberg. She talked with Marketplace host Kai Ryssdal about what puts this company above the rest. An edited transcript of their conversation is below.
Kai Ryssdal: I will tell you, I read a phrase in this story that I don’t think I’ve ever come across before: a “premium sock startup” is what this company Stance is. Tell us about that.
Sarah McBride: Well, it’s a company that makes socks that have caught the eye of a lot of people. Tons of celebrities wear them. [Canadian] Prime Minister Trudeau even wore them on stage at the U.N. recently and they’ve attracted the eye of a lot of venture capitalists who usually invest in AI, in the cloud and lots of really tech heavy things and decided to give this company $110 million.
Ryssdal: And we are talking here the granddaddy, one of the granddaddies of venture capital in Silicon Valley — Kleiner Perkins is in on this thing. What do they see in socks?
McBride: Well, they used a lot of words that they usually use for other types of companies. They told me the sock industry needed disrupting. They said it was wildly misunderstood and that there’s an opportunity for somebody to come in and dominate it the way that Nike dominates shoes. And they made a good case, I have to say.
Ryssdal: Well, so tell me about the case that the company made. Because it’s clear in your article that while it is a small company, it’s not about socks, right?
McBride: Right. It’s not about socks at all. In fact, the CEO is very open about liking brands. He was on the board of Skullcandy, the headphones maker, for many years and he just wanted to find a brand that he could build up. So he went about this in a very methodical way. He identified all kinds of attributes he wanted to see, and he didn’t care what the company was. He described literally walking up and down the aisles at Target looking at things like sunblock and luggage, and he just kept coming back to socks, and he realized that was where he thought he could make his mark.
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Ryssdal: OK, so here’s the question though: I know you know of, and our listeners will know of, Juicero, the $700 internet-capable juice thing that got a gazillion dollars from venture capitalists and just recently went bust. Is there too much VC money out there if we’re putting $110 million into socks?
McBride: OK, well, that is the billion-dollar question. So everybody for years has been saying, “Oh, there’s way too much money going into venture capital.” But then you keep hearing these astounding stories of success in this area. There’s a pet food company in Florida called Chewy. People love Chewy. It had some venture money, it raised about the same amount as Stance and it sold to Petsmart this year for $3.35 billion. These VCs are trying to tell do we have the next Juiecro on our hands or do we have the next Chewy on our hands?
Ryssdal: It’s interesting what this company has done just in terms of of building its business, I suppose. They’ve got a chief technology officer for socks that they hired away from an Israeli sock company. They’re going all in.
McBride: Oh sure. So even though they say we’re not a tech company, they are making it as technologically forward as they think it’s possible to make a sock company. I saw so many contraptions and testers at their headquarters in San Clemente, [California,] I began to wonder if they even needed all of them. But they can do these incredible things — stretch socks to giant sizes, make sure their socks are cooling faster than competitors’ socks. It’s pretty incredible.
Ryssdal: How much is it going to cost me if I want to buy a pair of Stance socks?
McBride: That’s the rub.
Ryssdal: Ha ha ha ha.
McBride: It could cost you, like, $30. It could also cost you $10, but they’re still pricey.
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