In three years, Rothy's saw sales of more than $140 million; now, they must balance expansion with fending off copycats
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Roth Martin grew up in San Francisco, the bluest of blue blood in his veins. His father’s side: The de Youngs, founders of the San Francisco Chronicle. His mother’s: The Matsons, founders of Matson Navigation, now a $1.6 billion (market cap) shipping giant. After graduating from Boston University, he spent five years at Glencore, the commodities-trading firm, then returned to San Francisco. While renovating a Victorian, he began collecting mid-century furniture and art objects. It intrigued him, and in 2003, he opened a gallery with a business partner. Hawthornthwaite, meanwhile, went to Duke, then Wake Forest for law and spent his career in finance, including time at global investment bank GCA and Barclays. A South Carolina native described in his online bio as a “well-dressed Southern gentleman”, Hawthornthwaite gravitated to working with ecommerce companies as a banker. The two became friends through their wives, Emily and Erin, who met in a moms’ group, more than a decade ago. They trained for marathons and triathlons and got together with their families (Martin has four kids, Hawthornthwaite two). In 2012, Martin was tiring of the art world’s demanding, wealthy collectors, and Hawthornthwaite wanted a chance to run his own business. At the time, Martin recalls, San Francisco was overrun with women wearing black yoga pants. But Martin didn’t see a go-to shoe to wear with them. “My wife would buy fashionable ballet flats and go back the next season and they’d be gone, or she would wear running shoes when she wasn’t running,” Martin says. Despite having no experience with shoes, he and Hawthornthwaite figured they could create something better. After a 2013 trip to China, they came up with the idea of knitting—then a new concept for shoes and one that meant production could be done with less waste. The yarn itself is made of recycled plastic water bottles that are sterilised and melted into pellets. Like 3D printing, 3D knitting starts with a computer design, but from there the processes differ. Rothy’s 3D knitting machines have thousands of needles that race back and forth and knit the yarn into the shoe’s uppers; a 3D printer, by comparison, creates parts layer by layer. These 3D knitted uppers come off the machine in one piece, unlike typical shoe construction that stitches pieces together, and can simply be attached to a recycled rubber sole. Martin and Hawthornthwaite wanted to make their knitted flats in the US. They figured they could better control the process if it wasn’t thousands of miles away at a Chinese contract manufacturer. Made-in-America was also a pretty good marketing hook. They attempted to do it at a 3,000-square-foot factory in Maine but couldn’t produce a shoe at scale without quality problems. The margin for error on shoes is minuscule—6 millimetres separates a size 6 from a 7—and skilled workers were tough to find. “It was getting laughable with our friends and our wives whether we were ever going to make a shoe and whether we were ever going to launch,” Martin says. They tried for a year, self-funding the operation, ultimately putting in $1 million each. Martin returned to China in 2015 to find other options. They shut down the Maine factory and set up two knitting machines and a programmer in the industrial city of Dongguan. That December, Rothy’s turned on its website. Martin emailed a few thousand contacts from the gallery, and Hawthornthwaite did the same to his network. As friends and business contacts bought shoes, word spread. “We were desperate to get the product out after so much time,” Martin says. “In short order, we sold $100,000 worth of shoes.” With no support staff, they were overwhelmed by simple things like exchanges. Quality and fit still weren’t quite right. For the next six months, they went dark. In 2016, things began to come together. Martin began building the factory in China, allowing Rothy’s to manufacture its shoe in-house. The company also launched in the farmer’s market at the Ferry Building in San Francisco. People waited in line, ordering shoes on iPads. Like other direct-to-consumer startups, Rothy’s relied on Facebook and Instagram (where it now has 235,000 followers) to get consumers’ attention at low cost. There were still kinks to work out as demand far exceeded their production capacity. In January 2017, when Rothy’s opened its new China factory, the startup made 900 pairs of shoes and sold more than 4,000. At the peak, the waitlist for certain styles reached the tens of thousands. “The brand just sort of took off,” Martin says.(This story appears in the 13 September, 2019 issue of Forbes India. To visit our Archives, click here.)