Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 2 of 2

In a beautiful San Francisco neighborhood stands a brick warehouse containing something unusual and inspiring – a startup that uses lean manufacturing and sustainable business principals to make products in the US. Relying on local vendors, an honest culture, and talented people, Rickshaw Bagworks produces bags that people love.

Mark Dwight

Below is the second half of the transcript from our phone conversation. The first half is available here.

Q: From your experience starting your own business – how was that to take that step? What would you say to budding entrepreneurs that want to make that same jump?

Well, the first part was that “I got pushed.” I got fired from Timbukt2, and that’s ok. It was a new group of investors. They bought the company for a lot of money and they weren’t there to have a party. They were there to build it even bigger and sell it themselves. They looked at me and said, “Look, you’re a really creative guy. You did a great job of growing this from 4 million dollars in sales to 20 million dollars in sales, but we need to make it a 100 million dollar company and you have no experience doing that. I was like, “You’re right.” So they said, “Well we’re going to go find a 100 million dollar man.” So I said, “Ok fine. You know, what do I have to say about that? You own the company, not me.”

So I left there and as I was thinking about what I was going to do next, I thought, “Well I could go buy another little, small company.” But that’s usually hit or miss. I had been very fortunate with Timbukt2. It was struggling, but it had a great brand and a bigger-than-life image. It was ready for someone to take it to that next level, and I was fortunate to be able to do that. Whether I could have taken it to that next level of 100 million dollars, I don’t know. Frankly, in retrospect, I’m not so sure I would have wanted to.

Rickshaw Bag in ProductionI looked around a little bit and I didn’t find anything that was obvious that I might want to buy. One day a friend of mine said, “Mark, you’re spending a whole lot of time avoiding the bag business.” I had been hesitant because I thought, “If I run off and start a bag business, everyone’s going to say, ‘that’s just Mark. He’s mad about Timbuk2, so he’s going to go start his own bag company out of spite.'” I didn’t want people to think that at all. In fact, I had fallen in love with bags and the bag business because bags are the most personal of personal accessories. People love their bags. At Timbuk2, we’d have people come in with a ten-year-old bag – it looked like trash – and I’d wonder, “Dude, how can you walk around with that on your back?” and they’d say, “I would never give up this bag.” These people would say, “I fell off my motorcycle and it saved my life,” or they’d say, “This stain here is where my wife, when I proposed to her in a French cafe, she spilled her wine. And that stain right there, I don’t ever want to lose that.” This made me think, “Wow, bags are interesting. Every bag tells a story.” I had learned how to make them, and I love making stuff. So I said, “Ok, I love bags, I love making bags, I know how to make bags.” I knew that Timbuk2’s custom business was profitable. Some of the other stuff we did was less profitable, but the custom part, the online customization, was really profitable. “Well, ok, I’m going to give this a try.”

Then I had that idea for a chassis strategy for custom computer bags. I thought, “Hey, I’ve got some innovative ideas, I love bags.” I had a little money from when I left Timbuk2. I had the grubstake to start, so I decided to do it. A friend of mine said, “You’re spending all of that time avoiding the bag business, why don’t you just go do it? You love it. Go do it. Don’t worry about what other people think.” We all spend a lot of time thinking about what other people think, but finally, I thought, “You’re right. I should just do it.” And I did. That was 6 1/2 years ago. It’s been a long slog; be careful what you wish for.

Rickshaw Bagworks Staff

Q: I watched a Stanford video that you did, and I liked what you said about not trying for a hockey stick growth pattern. You just want a good sustainable business that has modest growth. You go to work each day and you’re happy.

Yeah, you know, I’m not here to be the king of the bag business. I tell people, “I’m not here to make as many bags as possible.” Let’s face it, if you work for investors, your job is to make as much stuff and sell as much of that stuff as possible. That’s how investors make money, not my company. I’m not grading myself by how many bags I sell. I want to sell as many bags as necessary, not as many bags as possible, as many bags as necessary to run the kind of business that I want to run. Of course, I’m competitive like the next guy, but I don’t need to beat Timbuk2 at their game or feel like I’m competing with JanSport. I want my company to be respected for what it does, and I want it to be sustainable financially.

Sustainability starts at the bottom line. If you’re not profitable, it doesn’t matter what else you got or stories to tell because you’re not going to be around long. Hence, I want to run a financially sustainable business. I love working with my team. I love being my own factory. I love everything about it. Do we want to be a little bigger? Sure – because we’re just on the cusp of profitability right now. It’s been almost seven years, a long time. We’ll all be really proud of ourselves when we get to profitability.

Rickshaw Factory Floor

I think the company could be two or three times bigger than it is today and still be a company that I feel is an authentic, make-what-we-sell kind of thing without help from outsourcing. Frankly, I’ve played that game, and I’m not that interested in it. At some point, you have to decide what you really like to do. I love to make my own products. It’s not me sitting down at a sewing machine. I love my company making what it sells in its own factory and the kind of control, and not just control but satisfaction, that comes from that. It’s what makes me tick. That’s just me, and it’s nothing against people who design things and go have other people make them. That’s great. You’re a great designer; you don’t have to be a great manufacturer. I’ve tried to become both. Actually, that worked backwards.

I said I wanted to be a great manufacturer, and then I taught myself how to design and do the other parts. I tell people, “I’m here to make a living, not a killing.” It’s just bag. Yes, we’re creating a brand, like Timbuk2.

Timbuk2 had been around for 13 years when I joined them. We basically took that brand and blew it up. “Let’s go to China and make a $99 computer bag – we will sell tons of them.” And that’s exactly what we did. I said, “This company’s making expensive bags in San Francisco. We’ve got a great brand. I know how to design computer bags. Let’s do a $99 computer bag, make it in China, and exploit the Timbuk2 brand and heritage.” That’s what we did, and we sold tens of thousands of those bags. It was the bag that turned around the company. But, as I look back on it, I think, “Well, that’s one way to do it.” But it feels a little like you’re prostituting the brand.

I think what came with that strategy was a level of exposure that sort of betrayed the roots of the company and all the of the sudden people started saying, “Oh, you guys don’t make bags in San Francisco anymore.”

“Well, no, that’s not true at all; we still make our custom messenger bags here”

“Oh, but I just see all the stuff you make in China, so to me, you’re just a China-made company”

“No, that’s not it at all.”

With Rickshaw, I’m trying to be a little more true to that, even though I started out in China. Now I’m of the attitude of, “The more I can make here, the better.” We learn more every day. Part of it is training ourselves to make bags.

The reason China is so great at bags is because they have expertise, equipment, and capacity. The supply chain is all right there. You can sit in your factory there and say, “I want to see the buckle guy.”

“Ok, well let’s give him a call. He’ll be here at 2 o’clock”

“I want to see the webbing guy”

“Ok, we’ll drive over to his place.”

Everyone is right there. It’s like making cars in Detroit with the way it used to be when everyone was a local vendor. You could go over to the vendor, work stuff out, and go on with your life. Now, you say, “Ok, I have to book a flight to China – how many days do I loose when I go?” and all those headaches. Either you do it remotely or you plan these epic trips over there. It’s very costly, so what we try to do is build our own local supply chain.

Rickshaw Bicycle DeliveryQ: There’s definitely something to be said for having the local vendors right there. And I’ve heard that you sometimes visit them on bikes?

Yes, as a matter of fact I’m standing on the curb right now because I was delivering a box of canvas tote bags that we just made for Whole Foods Markets. A couple of their stores here in town are carrying some canvas bags that we make. I get a kick out of delivering by cargo bike occasionally. It gets me a little exercise.

Q: When you started on your own 8 years ago, knowing what you know now, would you do it again?

Oh, absolutely. I love every day of it. It’s really fantastic. Running your own business has its own headaches, but working for other people has its headaches too. I like the ones I give myself better than the ones others give me.

I’m very fortunate that I’ve had the resources to get as far as I have. That’s one thing I do advise entrepreneurs when they go into their own venture. I say, “Look, I guarantee you it’s going to take more time, more effort, and more money than your business plan says – even if you double everything. It just does. And I guarantee you that 3-5 years from now your business will not look the same as your business looks today.”

For example, Huckberry is a company that curates products for companies like us. They just opened a pop-up store nearby; they’re based in San Francisco. I was just talking to the two founders, and they said, “You know what Mark, we were just thinking back about when we met you three years ago and the advice you gave us.” They said, “We distinctly remember you saying ‘so, how long do you guys think you’re going to be in this business’ and we remember you saying ‘better give it 3-5 years.'” Then they said, “Here we are, 3 years later.”

I said, “Well you’re fighting a good fight if you’re here three years later.” I’ve been at it for almost seven years. It takes more time, effort, and money than you ever think. But, if you’re enjoying it, it’s ok. And for me, my business at Rickshaw is not only my occupation, it’s my hobby, my life, and my life style. I quite enjoy it. I don’t think about the work-life balance. I have four teenage kids, and I want to spend time with my kids, my girlfriend, and people in my family. But, they all know, “This is what Dad does. It’s a big part of his life.” It’s just what I live and breathe. I try not to let it consume, but it’s also what keeps me interested and vital. When I’m out in the world, I’m thinking about bags.

Q: I know you founded a non-profit supporting companies making products in San Francisco – how did you start that?

I founded the organization called SFMade. I conceived of the idea while I was at Timbuk2, and actually, it’s kind of a funny story.

When I started making this computer bag over in China, the San Francisco Chronicle ran an article about us in the local newspaper. Basically, the gist of the article was that we finally had faced economic reality, and we were manufacturing in China like everybody else. We were facing the fact that it’s too expensive to make stuff in San Francisco. And in the that article, they showed a fairly large black and white photo of a sewer, a seamstress, who was a Chinese woman. If you read the headline and saw that picture, you would had said, “Oh, well of course, there’s one of their sewers over in China.” Well, the Chinese community in San Francisco is the backbone of the sewing community. That Chinese sewer was in my factory at Timbuk2 Headquarters in San Francisco. Now, it said so in the caption, but you read headlines and you see pictures – the same way you read a comic book. So that really irritated me. So I started thinking, “We just don’t get enough credit for what we are doing here in San Francisco.”

SFMadeI was in Silicon Valley working in high tech when Intel launched their famous campaign, “Intel Inside.” Here’s a company that is behind the scenes, no one really knows them, and they decide, “You know what, we’re going to convince people that if they’re going to buy their own computer, then they should demand that it should have an Intel chip. People don’t even know what a chip or microprocessor is, but we’re going to tell them, if there’s Intel inside, it’s going to work the best.” And they went to great lengths to make it seem like “Oh, your Microsoft Word isn’t going to run properly if it’s not on an Intel chip,” or “the operating system’s not going to work the same way.”  I thought that was brilliant.

I thought, “Intel can do it with technology, why can’t we do it with Geography?” The Champagne region did it. They protect the word champagne with vigilance. This notion in wine is very common. San Francisco is a special place. People think of us differently, “Whack jobs out on the west coast; super-progressive, liberal city; summer of love; the gold rush.” All those things that happened here in San Francisco are part of our culture. We have a very special place, plus we’re beautiful geographically. We should use San Francisco as an ingredient brand. So I conceived the idea of geographic ingredient branding, just like Intel did technology ingredient branding. I came up with this little logo for SFMade, and we started using the SFMade logo on our custom “Made in San Francisco” bag at Timbuk2.

When I left Timbuk2, I negotiated with the investors, “You know, this SFMade thing, it’s really for San Francisco. It’s not just Timbuk2’s thing.” I invented it, and they let me take it with me. They actually stopped using it after I left.

So when I started Rickshaw, I started using the SFMade label. Then I had the opportunity to launch the organization as a nonprofit. The executive director, Kate Sofis has done all the hard work to make it what it is now. Today, it’s 500 companies, in San Francisco, who are either making things themselves or having local subcontractors make things for them. Being an SFMade product means it has to be made by a San Francisco-based company here in San Francisco.

Q: A deeper question for you, what advice or life lessons have guided and motivated you personally and professionally?

My father was a successful Silicon Valley entrepreneur. He founded a company, the first commercial laser business called Spectra-Physics back in 1962, when I was 2 years old. So I grew up around an entrepreneurial environment. Business was the topic of conversation.

One thing that my father has always stressed is integrity – personal integrity and business integrity. He’s always made it clear, “There is no mistake so heinous that you can’t tell the truth. It’s the not telling the truth that makes minor mistakes major mistakes.” I tell that to my company, because you know, you get scared. You make a mistake and you get scared, especially if you’re on the job. “It’s the boss’s money.” or whatever fear you have. I tell my team, “There is nothing you can do here that you can’t tell the truth about, because otherwise it just gets out of control—a small problem becomes a huge problem.” We haven’t had a problem that was a mortal wound. We’ve had problems, and we’ve solved them. If we catch them early, they do less damage. I try to impress upon everyone that your personal integrity is your foundation. It’s your bedrock. Don’t do anything to compromise that, no matter what. Sometimes the truth hurts, but I tell people, “The truth hurts for a day, a lie can last forever.”

Q: Here’s a fun question for you. If our readers are looking for a nice new bag, which one of yours is your favorite and which would you tell them to check out?

What’s my favorite bag? Well, my favorite bag is one you can’t buy yet. I’m usually wearing a prototype. But as computer bags go, I love our Commuter bag. It’s my third or fourth bag design for computers and I think it incorporates all I’ve learned over the last 15 or so years of designing.

I like our messenger bag a lot, and I wear our Zero Messenger bag a lot. It’s nice and simple and I can just throw stuff in it, sling it over my back, and I’m off and going.

We have a new backpack coming out. We’re just finishing up a run of 2,000 backpacks for Google. We designed the product just for them. We’re going to be launching that on our website soon, so that will maybe be my new favorite, but for now it’s the Commuter and the Zero.

Thanks again to Mark Dwight for sharing his thoughts. Leave your thoughts in a comment below.

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