Adam Bernhard: How I Started HauteLook

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Part of being a successful entrepreneur is being able to recognize and make bank off of the opportunities around you. It’s a skill that comes naturally to some but can also be learned, and there are only a few who are better to learn from than HauteLook’s founder and former CEO, Adam Bernhard.

Adam is and always will be a serial entrepreneur as his thirst for business and knack for exploiting opportunities began long before HauteLook’s success as an online marketplace for retail flash-sales.

“My first business was buying gum at the corner store and taking it to school and waiting for the book drive on campus where I knew the kids would have some money on them. I set up my gum on the table and I waited for the kids to come and then I gave all the cool kids a piece of gum. Then I sold a piece of gum for a quarter apiece and I bought them for a quarter a pack.”

Unsurprisingly, Adam’s first business model was the key to HauteLook’s success. Adam has also dabbled in food service, owning a chain of pizzerias in mall food courts, and the liquidation business, which served as his jumping off point for HauteLook. As he explained to us, “I really like different business models and I’m not an industry specific type of person. I like to see how different businesses evolve.”

We had the pleasure of sitting down with Adam over lunch at The Farm of Beverly Hills. He shared his business wisdom on developing a company’s brand, why he thinks young entrepreneurs today are euphoric, and the four key points to making your company successful.

The story of HauteLook began when Adam was abroad in Europe and Asia helping a friend set up international distribution for the clothing company Schwa. There he discovered an interest for the liquidation business, founding his own company Liquid8 just two years later. Liquid8 was buying and selling excess inventory from fifteen top contemporary brands and began selling clothes at college sorority meetings on Monday nights to gain more margin than selling to off-priced retailers. Earning higher profits and gaining popularity, Adam made the process more efficient by going from door-to-door sales to building a website, at that point realizing the true potential of his new business.

“So it just started with a little idea and we used our capital from our liquidation business to fund building the site. There was no out of the box solution for a website. Back then, you didn’t have a site like Shopify so I had a guy who sat in the corner of my office and wrote the software from scratch.”

With some help from Daily Candy, Hautelook’s first editorial was blasted to their subscriber list, garnering fifteen thousand members in one day. HauteLook launched in December of 2007 and by March of 2008, as Adam told us, “I had to close the liquidation business because the HauteLook business was taking up all of my time as it was rapidly growing.”

What is the greatest lesson you learned from starting HauteLook?

“I tell all the young entrepreneurs, there is no job too small for you to do at your company. At HauteLook, I took the pictures of the clothes, I entered inventory into the system, I sent the P.O.s to the brands, I helped with Google Adsense, and I chose the words that we ended up using. So as the business expanded and we had more human resources, I really knew what their job entailed because I had done it.”

On hiring a branding firm to help develop HauteLook’s company culture:

“I started when I felt that our competitive set was doing a better job with identifying their brand than we were. We were doing a good job at providing great brands at great prices, but beyond that we weren’t really branding HauteLook, so we brought in this great firm called 72andSunny, a local firm here in Los Angeles. They spoke to our customers, they did competitive analysis, they spoke to people who worked for us and what they really unearthed was that we had a brand but we weren’t portraying that to our customers, which was California Casual Chic.

We were a California based company and what we were selling was very California Chic. It was a lot of denim, a lot of t-shirts, and the girls shopping on our site would tell us that was the “uniform” they wear that was reminiscent of what the California lifestyle is. So we were selling that entire lifestyle, but not really branding HauteLook as the place to get it. We worked with the firm to help us get underneath what we were. Once you identify it as a company, it’s much easier for you to have the entire company singing the motto of what you are. But unless it comes from the top, unless you are fusing that into everything that you do from how the pictures are taken, to what the editorial looks like, to what your photo shoots look like, I don’t think you’re doing your brand a service. We were here in California saying “Hey, be Californian,” and it worked really well for us.”

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Why is it important for startups to develop a brand for themselves?

“On the West Coast, we were the prominent flash sales site and building a brand was really important. I think it was of real importance for the community that was working at HauteLook to see the brand book and understand what we were really going for. So in their work, no matter what they did in the company, how they answered the phone, how they dealt with a customer service issue, anything that we were doing really came from that brand book. I would implore every company to get a brand book, build it and hand it out to everybody and literally have them everywhere in the office. In any relationship, the only way to be successful is to communicate. So if you’re not communicating to your employees who you are and what you do, then it’s not their fault that you’re failing.”

Tell us about stepping down as the CEO of HauteLook; was it tough to exit your company?

“It wasn’t because it was a great relationship. I’m still very close with the Nordstrom family. We sold them the business in 2011, but we had already started working together to get the deal done in 2010. I thoroughly enjoyed it. They were amazing partners and I think as an entrepreneur when you sell your baby, you want to make sure that she’s in good hands and I think I spent enough time there making sure that the business will continue to be successful. As an entrepreneur we think differently; corporate dealings are different than being an entrepreneur and I think it was just time. We worked very well together though and we have another business with Nordstrom that we’re doing together called Sole Society.”

Within your busy routine, what do you typically do to recharge?

“There’s a certain pace that most entrepreneurs move at. Like right now, I’m not working but my phone probably rang ten times in the twenty minutes we were sitting together for this interview. I just live with that pace and I don’t mind it. I’m enjoying some of the freedom of not having to go to an office everyday, but I’m still taking some board seats. I normally have meetings with young entrepreneurs here in L.A., I’m a coach, I’m an investor, and I’m a friend to a lot of companies so I like to be in the game and I like to help young entrepreneurs.

Something that I said when I sold the business was that I was going make it a focus of mine to help young start-ups here in Southern California, and being a mentor to young businesses and helping them, that’s my job. That charges me. When I’m asked what I do to recharge, I go surfing and I ride my bike and work out and do all those things that one should do to feel healthy, but being mentally stimulated with the young entrepreneurs is probably the most exciting thing I do during the week.”

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You mention young entrepreneurs all the time- in your opinion, what is one thing that they just don’t get about the startup lifestyle?

“I don’t want to be mean about it, but there is an underlying sense of entitlement that is rampant in the startup world. What happened at HauteLook doesn’t happen very often; we went door to door for three years. People read that and they think it isn’t doable because it took so long. You don’t need to grow your company faster to make it successful. If you look at the strongest companies in the world, they have long histories. Look at who I sold our business to- Nordstrom, a hundred and twelve year old business, very solid, and a twelve billion dollar cap which is warranted.

When you look at these market caps of these new frothy IPO markets, I think that they’re euphoric. These companies are definitely not worth the market value people give them today, though not to say they won’t be worth that someday. I think it’s given young entrepreneurs big eyes, but rather than have big eyes, I think they should have their heads down. There are so many good ideas, but execution is everything and if you find the right team with the right chemistry and you work hard, you’ll get there. And take the time to get there. Everybody wants to go public because of the money. For young entrepreneurs, it’s always about the money as opposed to wanting to change the world and do something really interesting. With this IPO market today, at some point it’s going to bust; the bubble is going to burst because so many of these young companies are going public with no profitability. That’s not a sustainable model.”

Lastly, what is your best advice for entrepreneurs starting out?

“Build a good company, have a sound foundation, have a sound infrastructure, and the spoils will come. Being public isn’t all that it’s cracked up to be. Being a public company is very different as an entrepreneur, so if you’re the CEO, you stay because they need you most of the time if they don’t throw you on your butt; I think the thing that I would say to answer that question in one sentence is don’t think about the money, think about doing something very smart, very strong, and sustainable.”

Photography by Melly Lee

Special thanks to The Farm of Beverly Hills

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