A 35-year-old entrepreneur risked his parents' house on a $2.5 million loan to start a fashion brand, which now generates $100 million in annual revenue.

The tale of Matt Scanlan, Diederik Rijsemus, and the Naadam cashmere apparel brand is reminiscent of an exciting adventure novel.

In 2013, two college friends went on a globetrotting vacation and ended up stranded among Mongolian goat herders in the Gobi Desert for three weeks. During their time there, they learned about the wool trade and came up with a business idea: to create low-priced cashmere goods by purchasing wool directly from the herders, cutting out the middlemen who bought low and sold to apparel brands at a high markup.

In 2015, Scanlan and Rijsemus were able to secure a $2.5 million loan from a private lender, despite having no industry experience or funding. They used Scanlan's parents' home as collateral for the loan. With the money, they purchased 50 tons of unprocessed cashmere wool from Naadam, which they transported deep into the desert in 32 plastic shopping bags, filling the back of an SUV.

In 2022, Naadam generated $100 million in revenue by selling a variety of cashmere products, including its best-selling $98 sweater, sweatpants, and tank tops. However, the company declined to disclose its 2023 sales figures before the end of its current fiscal year. Naadam sells its products online, in select Saks 5th Avenue stores, and through its own brick-and-mortar locations in New York and Los Angeles.

Scanlan, the CEO, acknowledges the absurdity of the events that led to the desert shopping spree with borrowed money and the lack of experience in running a company. He admits that there were times early on when he was unsure how they would repay the loan.

Here's how Naadam defied the odds.

'A little bit of luck and opportunity'

First, they obtained the wool, but then they were unsure of how to proceed.

The yarn was first sent to Beijing for cleaning and purification before being shipped to Italy for spinning. After selling most of it to pay off their loan, the co-founders used the remaining yarn to create sweaters, as stated by Scanlan.

Scanlan drove the sweaters to the east coast for a sales trip, visiting stores from Maine to Charleston, South Carolina. He pitched his product to every store he could find, laying out the sweaters neatly and telling his story. The result was 50 orders, each worth $1,000. Scanlan learned how to perfect his story during this trip, not realizing that he would continue to do so for the rest of his life.

Since 2018, Naadam has grown exponentially after the co-founders shared a three-minute video online detailing their early desert adventures and company vision. The video has been viewed over 35 million times.

"Scanlan states that the video played a significant role in defining Naadam's success for a long time and it is likely the best advertisement they have for their brand."

Naadam secured over $50 million in funding from investors such as private equity firm Vanterra Capital, according to Scanlan. He attributes his success to a combination of factors, including his parents' support and taking calculated risks.

"Scanlan believes that having a great business plan is not enough; luck and opportunity also play a crucial role. He states, "Every major inflection point that we've had along the way... we're just at the right time, right place.""

A good story only gets you so far

The cashmere industry's middlemen are responsible for the existence of Naadam, as they buy goods from remote farmers at low prices and profit by reselling up the chain, resulting in the high costs typically associated with the fabric, according to Scanlan.

Fixed pricing strategies resulted from the remoteness of the goat herders, making it difficult for them to negotiate the value of their raw material effectively, according to him.

Rijsemus and he deduced that they could compensate the herders with twice their usual payment for their wool while still maintaining substantial savings for customers. Naadam's most sought-after cashmere sweater is priced at $98. Similar sweaters are typically sold for hundreds of dollars or even more than $1,000 for luxury brands.

Additionally, Naadam provides high-end options such as a cashmere coat priced at approximately $700.

Scanlan argues that no matter how affordable the price or engaging the story, clothes that appear unattractive or deteriorate quickly won't be successful in the market, as it would be a waste of all the effort put into bringing them to the customer.

The Naadam $98 sweater, which was last updated in December 2023, has been reviewed by The Wirecutter. Despite developing some fuzz over time, its quality is comparable to that of sweaters costing twice as much.

"Scanlan says, "To make money, we need to ensure that the product is amazing, and once you get it, you'll go, 'I'm going to tell everyone I know about this, and I want ten more of these in every color.'""

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