William Leonard
Ladies and gentlemen, welcome back to the Atlanta Startup Podcast. My name is William Leonard, your host for this afternoon, and I am really excited to be sitting down with Devon Rifkin, who is the founder of Hangers.com. Devon, welcome to the podcast.
Devon Rifkin
William, thank you. It’s great to be here.
William Leonard
Devon, we’ve got a lot to unpack. You have such a unique story of building scaling and exiting Hangers.com, which we’re really going to unpack today, and a lot of the lessons learned from your perspective. But, I think the best place to start with is an introduction, into your background in your journey of deciding to forego college for the workforce. I want to hear about that story and just all about Devon.
Devon Rifkin
I’m originally from Miami, Florida. I’m a third-generation Miami, and I never had a good experience in school. And so, I just always sort of innately knew that I wanted to go into business. I could definitely benefit from school and benefit from going to college, but it wasn’t my learning style. And so, if you judge a fish by how it climbed a tree kind of thing, and everything with school is sort of standardized. If my view wasn’t to become a doctor, a lawyer, an accountant, or something where I’d need a piece of paper, it wasn’t that I was trying not to go to school, It didn’t turn me on at all. And I was also fortunate to I have cousins all over the world. I’ve traveled extensively all over the world, and I think the greatest part of my education has come from doing and traveling. So, somehow made it through high school and decided that I was just going to start working. I ended up meeting a girl when I was 18 years old, told her the day that we met that were going to get married, her name was Heather. She’s my wife today.
William Leonard
Awesome.
Devon Rifkin
Yeah. Thank you. Which I’m really proud of. And so were both very career-focused, and we stayed together for a few years. I then moved to New York to become a stockbroker. We stayed together the entire time, saw each other monthly, and spoke daily, but it was really about our careers at the time. She was a buyer with Bergdorf Goodman and Sachs on the apparel side. And so, I actually moved to New York and worked for the Wolf of Wall Street firm, the actual firm that the movie was based upon at the suggestion of a relative of mine who knew the owner. That was all I knew. And I just thought, hey, I’ll drive up to New York. I’ll live in a hotel until I get on my feet, I’ll learn how to sell. And that was sort of what I did for the next couple of years until we all found know really what that firm was really about. And you either were fine with it or you weren’t fine with it, I wasn’t fine with it. And so, I moved into Manhattan and got a job at Oppenheimer as a Stockbroker. Try talking your way into that one when you hadn’t gone to college and you had worked for that other firm. But I’m so proud of that time because I learned so much, I don’t want to say more or less, but just different than I would have learned in college. Interestingly enough, my six best friends, who are my best friends through today, all went to Ivy League Schools. And so part of why I think I lost interest in high school was because while I was in 9th grade in regular classes, they were already at the University because they had exceeded the curriculum. I couldn’t even be with them on campus. And so I ended up living on a lot of their know in Cambridge, or at Columbia, New York, or at I saw, you know, these kids are really smart, but half of them don’t even know how to cross the street. And so it gave me confidence in myself just based upon my character and ability to forge forward based upon who I thought or knew I was at that time.
William Leonard
Awesome! And so, you didn’t go to college. Many of your friends did go to these Ivy League schools. You found yourself on campus with them, oftentimes spending time with them. Where did the idea for hangers.com originally was the great American hanger company, is that correct?
Devon Rifkin
Yeah, I’d originally bought the name Hangers.com, which is a pretty neat story, and then had thought there was a need to create an umbrella sort of great American hanger company, which I’ll discuss. But to answer your question directly, were such wannabes. This is in the mid-90s for all the guys that have really made a lot of money on Wall Street, in the stock market. And you could clearly see, or I could clearly see that commissions were dropping and things were headed to e-trading. And so I decided to move back to Miami and figure it out. And I was working for my dad in his warehouse. He sold mannequin racks and store fixtures. It’s a business that his father had started a small business. I was in the warehouse one day, and a jewelry store owner walked in, he was there to buy showcases, as jewelry store owners do. And he asked, “Do you guys sell hangers?” And the answer was no. I went over to him and I said, I think we could procure some hangers. Just give me a week. And this guy ended up buying $500 worth of wooden hangers. And I thought he was nuts. I mean, $500 worth of hangers? I mean, wow, that kind of got my head, and then hangers are something that everybody needs. You don’t really know where to get them. You either don’t care or you care a lot about your clothes. And I’ve always sort of said they’re like pens. They just sort of end up in your drawer. You’re not quite sure how. And then I thought, wow, this is a universally recognized item that everybody needs in one fashion or another. Knowing I wasn’t going into the family business, I decided to leave, got married, bought an apartment with the little savings that I had, and started the business all within a year. I then jumped on a plane, and I went to China for three months to learn everything I could learn about Hangers..
William Leonard
It’s so fascinating how you went back to Miami, you worked with your father in his warehouse for a bit, and this gentleman comes in one day and has this huge order for hangers. What was your wife’s reaction, your family’s reaction to, like, “Devon, you wanted to get into the hanger business? What is this about?” Was there any pushback from your family about that?
Devon Rifkin
Yeah, there was sort of know, why wouldn’t you stay in the family business? But that was never the deal, nor did I want to be in that business. And I was way too stubborn. And so I have the gift, I mean, something that I just don’t take for granted, that I have always had the most supportive parents. I mean, for them to support me not going to college, it’s a pretty big deal. I mean, when you say pretty much all of your friends went to college, everyone went to college. And so, they were very supportive, with a pretty limited downside if it didn’t work and a pretty big upside if it did. And as I sort of explained, think about it. Retailers need hangers. Not just for use in the stores, but also for resale in other stores for people to take home. Closet companies, hotels, all of these on and on. Everybody needs hangers. They said, Give it a shot. So I did. I went to China. I borrowed $30,000 against this apartment that we had just bought and gave it a shot.
William Leonard
Wow, that’s awesome. So, you go to China, you were there for about three months, spending some time boots on the ground, building relationships. Did you have the confidence that this was going to turn into something? When you went over there, what was that moment for you where you felt like, okay, I’m here. I’m actually doing this. I can turn this into a viable, cash-flowing, revenue-generating business.
Devon Rifkin
I think the first thing that gave me confidence was that this was an existing product in an existing industry that in some form or fashion must have been working to a certain degree. This is at the time when domain names were really people started buying them and talking about them. And I said to myself, I want hangers.com. I reached out to the person who owned the name. After I got back, he was in Washington, DC. His name was Nat. He says it’s yours for $250,000. I mean, he may as well have said $20 million or $20,000, that I didn’t have any of it. And I had said to him, listen, man, I had lied. I said I’m just trying to open a dry cleaner. I don’t really need the name, but I’d love the name and build a relationship with him. And in the end, I told him that I was really just starting to start this Hanger company and it would be great to have it. And I ended up buying the name for $10,000. And I remember my friends making fun of me, not in a judgmental way, but in a, what? Are you out of your mind? It’s a ton of money. It could go nowhere. And so once I had secured that name, I thought, you know what? I’ve got as good a shot as any is making this a pretty big business if this whole domain internet thing is going to work out. And I think it was at that moment that I realized I had a real chance once I had actually convinced him to sell me the name.
William Leonard
Right. It sounds like this was in the 2000s or early 2000s time frame. Is that about right?
Devon Rifkin
This was February of 1999. Started the business on October 19, 1999.
William Leonard
Wow. Yeah.
Devon Rifkin
Right?
William Leonard
Yeah, right. The internet and Hanger.com boom was starting to happen now. And as you think about hangers.com, as you began to get the business off the ground, it sounds like this became or was an international company from early on. And how did you think about globalizing your business and achieving global scale and maintaining that scale as you sort of scaled the business from day one?
Devon Rifkin
Great question. My vision was global. My vision was huge because that’s just the way that we’re all sort of trained to think that bigger is better. And I got my first big dose of reality when I realized that the shipping of Hangers, they’re waiting. I might be getting requests from all over the world, but until I’ve got a true logistical system to be able to support that with inventory in various places, it actually started very regionally in Miami. It started by knocking on the door of a tuxedo company, Cecino’s Formal Wear in South Miami, right off of Sunset Drive. I went in, I met the owner, and he gave me his first order. And at that point, I really didn’t have the money to bring in my own container. So I started buying hangers again. This was an existing industry from a company called International Hanger out of Austin. And so they took from their inventory, printed casinos on it, sent it to me, I shipped it to him, and so that was how it started. And then a lot of requests would come in through Hangers.com. And so here was the thought. I’d come up with this concept for college hangers licensed. You have 50,000 kids at the University of Florida. How many of them need hangers? They all need hangers. But that was ego, that was I wanted everybody to know what I was doing. I want to be known as the hanger king. I want this to be huge. And then I sort of thought at the time, that’s ego. I mean, why not focus on what’s already working? From a foundational perspective, let me bring in hangers that are already selling.
I’ll know pretty much what I’m buying them for and what people are buying them from me for, and build the base by wholesaling hangers. So I started by doing that and then started selling to companies that were reselling them. And then I built it from there, and then from that inventory, I could also entertain a one-off homeowner or shop owner coming to me directly, and then I’d say, oh, we have 20 different styles that I can sell to you. And that’s pretty much how it started.
William Leonard
Right, and you did a really great job explaining the scaling of operations globally there. How do you think about scaling the people side of the business? Team hiring talent? What were some of your do’s and don’ts around? We’re running this business. We’re operating internationally. We should do this about hiring. We should not do this about hiring. Any insights there for founders? Because I’d say a decent amount of our audiences are centered around early-stage seed, stage, series type founders who are at this inflection point of they need to scale their teams. Now they’re getting capital. It’s time to scale, and build out a team for specific functions within the business, sales, marketing, operations, and finance. How did you think about that?
Devon Rifkin
I think the answer actually lies in something that you brilliantly said that I so seldom hear, and that is you use the word we. When it was myself for the first year and a half, I always had a we mentality and always felt that it’s people who run businesses. It’s people who make businesses successful. And so I always felt and still feel very strongly that the team member comes first. I don’t even feel comfortable using the word employee because we’re all in this together. It’s a we thing. To me, there became a joke around the office. We’re just this piddly little hangar company. It never got much bigger than that. Even when we sold it, were still, by definition, a small business. But people would say, gosh, it’s easier to get a job at the FBI or the CIA than at this place. And I was now when I was working in these other places in New York and wasn’t really recognized and things were promised to me, I thought, these people just really don’t care. And when we started growing the business, these were team members who were with me more than they were with their families. So, number 1, I feel very strongly that team members always come before customers because if team members are happy, your customers have a shot at becoming happy. And the second thing is that as passionate as I was and am about the team, I always made it very clear that I was thrilled to fire someone. I was thrilled to fire someone because if I’m making a promise to somebody coming in that this is the vision, we don’t know what’s going to happen, but we’re going to do everything we can do in our power to succeed. If I allow a B player on my left and a C player on my right or someone who used to be an A player that’s now a B player to be there, what message does that send to the team in terms of their future? What you’re asking and hitting upon is, to me, what was most important to me, and that was hiring. The other thing in hiring the right people was, I think that interviews are just very canned and stuffy. It’s kind of interesting. People are like, I got to hurry up and interview somebody so we can kind of get back to it. There is no getting back to it. That is it! And so I would always open up and just say whenever to somebody that I was interviewing and I interviewed everybody up until maybe we had 80 or so people. Interviews are uncomfortable. You’re probably nervous. I might be a little bit, whatever. This is a conversation, let’s have a conversation. And immediately you can kind of get the essence of who someone really is when approaching an interview like that. So there are a number of things in there, but I think critical because it’s people, at least up until now, until we move forward a little more with AI and humans really taking a backseat that run businesses.
William Leonard
Yeah, that’s great insight there, Devon. And I can agree with the point about the mean, I don’t think anybody enjoys an interview because as you said, it’s so canned, oftentimes very scripted. And when you can sit down and have a conversation with someone, I think that’s the way to get to know someone authentically and you get to see that person for their true self. And so I can agree and resonate with that 100%. As you think about you reach this inflection point of you’re operating globally, you’re probably generating a few million in revenue now you’ve got a team with you. When did the thought come across your head that, maybe I need to exit the company? Maybe we could sell this thing. We’ve got a huge opportunity. We’re solving this core problem in the market. We’ve got a real shot here to exit, have a successful exit, should I say?
Devon Rifkin
I started the business with the goal of selling it, and I’ve learned some lessons since that I’ll share. And the reason is because nothing lasts forever. I certainly likely don’t have what it takes to I might be a great starter, I might be great in another level up. But I think one of the real challenges that founders deal with is they were great at different stages and then it’s very difficult to step back and sort of let go. So for us, from the end of 1999 until September of 2008, we had never had an unprofitable month. And the reason that we had never had an unprofitable month was obviously the business model was working. But there are two schools of thought. One is I’m going to get these huge offices and all these warehouses and hope to fill them. The other school of thought is I’m going to grow the business and earn the right to sort of get to the next level in a more conservative way. And there are other reasons for that. You don’t give up as much of the business. You don’t need as much capital. The other thing is you would think traditionally that hangers are a very low-margin item because they’re a very basic meat and potatoes item and usually someone’s working on a 5% gross margin. Our average gross margin was close to 75%. And the reason it was 75% was because I was very selective not to just expand for the sake of expanding beyond hangers. It would have been very easy to start with store fixtures and closet systems and all these other things. But most importantly, by design, I never let our biggest account become more than about 3% or 4% of our sales. And I also tried with the Internet, all these orders coming in on the Internet to have the majority of our business by credit card instead of having all of this money on the street. So, the reason that I led up to 2008 was we’re at 60, 70, 80 people, we have facilities in China, facilities in Reno, facilities in Miami and we had condensed everything, built a big facility in Savannah, a new corporate office in Miami and then all of a sudden, Lehman Brothers went out of business and the great recession hit and were faced with some really serious stuff. So, up until that point, were the darlings of everything, this award, that award. But now, it was a matter of survival and going back to the basics. So the thought of selling the business at that point took a backseat and my first big lesson was holy shit, there are a lot of things out of my control here.
William Leonard
Throughout the business and building the business, did you take on venture funding? What type of capital funded the business?
Devon Rifkin
It was completely bootstrapped, It was grueling. Of course, it was easier before I had three kids and my wife and the whole thing. But we reached a point in 2005 where I learned from a mentor that finding money is kind of easy. It’s really more the character that comes with it and who you’re surrounding yourself with. And if you find the right investor, they’re going to want to help you beyond just their investment. So, there was this guy that invested in the business. It wasn’t a ton. I said I want the right to buy back 50% of your stock. He kind of thought, there’s no way you’ll be able to, so fine, and if you do, great. But he introduced me to a bank that ended up giving us a major line of credit from that. And then at that point, a year later, when I was able to buy out his 50%, I had told him I wasn’t going to do it because I felt that would be the slap in the face to the spirit of how were holding hands and working together. The other thing that I’ll tell you is that part of I traveled to China 60 times, and the reason I went there so much was I wanted to learn. I knew that if I sat in a room, what I was saving and the negotiation was far greater than the cost of the trip, but also it gave the factories confidence that I was going to be back. And I was very complimentary and thankful for the incredible job that they did instead of just going over there as an arrogant American. And so my point in telling you that is that they ended up offering me credit in addition to the investment I got from the investor, in addition to the bank. They gave me credit, which was unheard of, and I would sooner kill someone than not pay them on time. And that was how I was able to grow the business without seeking much more investment.
William Leonard
I think an underlying gem in what you just shared was proximity and relationship to your partners are so important because you went to China 60 times, and then seeing your face, establishing that relationship, building that relationship, and maintaining it allowed them to do something that they typically don’t do, especially when they’re operating with businesses halfway across the world. I think that can really trickle down to the startup founder. Listening to this today of being close to your customers physically. Go see your customers, shake hands with them, look them in the face, get that feedback, and the same with your partners. Whether it’s a banking partner or any other type of channel, partner, maintain and cultivate that relationship. I appreciate that insight there, Devon.
Devon Rifkin
Spot on. And I think there is such incredible power in the willingness to be vulnerable. We’re all people. And when I travel there and talk about family challenges, friend challenges, health challenges in the United States, what’s going on with your family really culturally, you have to know what you’re getting into because there are some pretty strong cultural norms in other countries that you can’t just make assumptions on. But I think when you approach people just as a human being and you stay close to them, it just opens up a world of possibilities that are different than just putting a face on that we all put on. One other thing, if I may, back to hiring. We all, for the most part, buy into such prescriptions. Like, everything is so prescriptive. This is how you hire somebody. This is how you interview somebody. I could tell you some of our best hires came from being in a restaurant and just really appreciating the way that the waiter, and waitress were interacting with me. One time, the best salesperson I ever hired was with her boss in front of me on a plane. We’re sitting in the back of the plane. I could hear how she just had it. She had IQ, she had EQ, and she was respectful. She was a good listener but she was holding her ground with her boss. And I slipped a note to her, I was right behind her. I slipped a note to her and I said, “One, I think you’re terrific. I’m not a psycho, don’t be offended by my approach, but I really wanted the opportunity to have a conversation with you”. And we ended up working together for, I think, seven or eight years.
William Leonard
Wow.
Devon Rifkin
And so there are just unorthodox ways of doing things, whether it’s on the interviewing side or on the customer side or on the vendor side.
William Leonard
That’s awesome.
Devon Rifkin
Yeah.
William Leonard
That is such a great story. And so I’m looking forward to it. Now, you had so many accolades when you were running Hangers.com, right? I think you were in entrepreneur magazines, Entrepreneur of the Year, three-time consecutive Inc. 5000 fastest growing company, and Inc. 5000 as well. What are you doing today after you’ve sold Hangers.com? Where can we find Devon at now?
Devon Rifkin
Well, I just want you to know one thing. I want to dispel this myth of awards and there’s now, we could add the imposter syndrome conversation because I’ve very much lived in that. But when I was younger and I would read about all these people with my lack of experience and immaturity, I would think they were successful because they had a good idea, they worked hard, and they got it all right. And I know how ridiculous that sounds, but when you’re reading about people, it was literally the week after I’d won that Entrepreneur of the Year award, and the economy had crashed. And I remember distinctly just sitting in front of my office with everybody inside waiting for me, and I was crying because we were faced with this great recession. And so they’re not talking about that in the magazines. People aren’t just opening up about that. But every entrepreneur experiences something heavy like that, and there’s a real mental toll that it plays. I just wanted to mention that because, again, I think we all put on a face, and things are so interchanged today between personal and business and 24/7 communication and whatnot, what I did the night I sold my business. Getting to your question, my dream was always to rent a beach house in California because I just worked so hard and really dedicated myself when the kids were younger. And so the night I sold my business, went out to California, and convinced someone to let me rent their place that summer. Went out, and hung out and I think the stress of the day was, do we spend 2 hours or 7 hours today looking for sea glass and when are we going to have a barbecue? Came back to Miami, decided that we wanted to leave Miami, spent the next few years looking where to move, and came to Atlanta, to be honest, I didn’t jump into something right away. Not because I had some dollars and some breathing room, but because I was so burnt out. I was so burnt out and I very quickly looked back at where I spent my time in the business and thought shit, I end up spending 90% of my time in areas that I’m either not good at or hate. And that was what burnt me out aside from the great recession and whatnot. So I thought, what would the 90-year-old billionaire say? The 90-year-old billionaire would say, I would trade it all tomorrow to be in my forties and I’d spend more time with my kids. So, I had committed the last ten years since I sold my business to consulting, which doesn’t excite me so much, but I also don’t get so pulled in, start something for the sake of starting something and really spending time with my kids because I’m never going to get those years back. And so inevitably I would consult with people on startups, I would also consult on reorganizations and restructuring since I went through that the hard way for four years when went through the great recession. And inevitably my superpower and my love is people. It’s working with people. And so consulting would usually turn into working one-on-one with a CEO to really discuss how difficult and terrifying and exhausting and scary and all of it that we all know but we just don’t. So, that’s up until about two years ago what I had been doing and then I started a new business called the Human Group. So that’s what I’ve been doing for the past ten years.
William Leonard
Man, what an incredible story and journey that you have had of building this company. And it sounds like you’ve always been really a builder and a relationship connector as well. And Devon, I think you just gave our audience so many unique insights and gems just around company building, taking risks, building and forging and maintaining relationships with partners, thinking about talent, hiring, taking risks around, slipping notes to somebody on an airplane that you met. And I just think this was such a fascinating episode and how can one of our audience members who maybe wants to reach out to you or touch base with the Humaan Group? What is the best way for them to do that?
Devon Rifkin
They can call me directly at 305-992-3707 or email me at devon@humaangroup.com. I’m on LinkedIn and I would love to hear from anybody.
William Leonard
Awesome, Devon, we appreciate your insights today. We’ll talk soon.
Devon Rifkin
Thanks so much for having me.
Thanks for being a part of the community of courage by listening to the visionary founders and investors on the Atlanta Startup Podcast. Subscribe now so you don’t miss a single episode of the over 200 investors and founders sharing their insider tips and secrets to growth. Our regular listeners tell us we’re the briefing room for the innovation economy in the fastest-growing region of the country, the South –and when you subscribe, you become part of the inside circle.
The Atlanta Startup Podcast is proudly hosted by Valor VC. Valor is a venture capital firm that leads seed rounds in AI and B2B SaaS startups. If you like the podcast, check out more of Valor’s programs for courageous founders and investors, like Startup Runway.
Over $100M in early-stage venture capital and counting is catalyzed through Startup Runway’s grant-making program for pre-seed startups. Go to StartupRunway Dot ORG to learn more and apply directly for non-dilutive capital.
Valor celebrates VC DAY, the largest early-stage private capital conference in the region, at the end of the year. The top founders in the region, leading VCs, endowments, and family offices focusing on venture capital outperformance attend. Learn more at VC Dot Day.
At Valor, courage is the currency of innovation and the heartbeat of our culture. Thanks for listening and come back next week.
