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Good morning! It's Tuesday, February 27th. Today’s post uncovers how the founders of men’s fashion brand Chubbies made an unexpected transition into the software space with Loop Returns, a $340M B2B SaaS company!

THE FEATURE

Men’s Fashion Brand Spawns $340M Software Venture

From its launch in 2011, Chubbies took the men's fashion scene by storm, resulting in a 9-figure acquisition deal in 2021. 

But, more interesting is how its co-founders stayed in the game post-acquisition through Loop Returns, a spin-off company in the B2B software space.

Let's break down Chubbies' journey in the retail space and how its founders transitioned that success into a $340M valuation in the software industry!

So, What's the Business?

Chubbies was created by Standford students Kyle Hency, Rainer Castillo, Preston Rutherford, and Tom Montgomery. The friends bonded over a unique passion: retro short-shorts they'd scour thrift stores to find. 

In 2011, they created Chubbies to revitalize that bygone short style and introduce a vibrant competitor to the men's fashion industry.

Chubbies was an instant hit thanks to a unique marketing strategy. They sent free shorts to fraternity presidents at universities from all across the country to increase brand awareness. 

Frat bros quickly embraced the flashy shorts, generating $2.4M in sales in 2012. A grassroots community formed around the brand, calling itself "Chubster Nation," and was known for creating meme content around the apparel. 

Chubbies' founders leveraged that organic content and reposted it via Instagram. The brand still drives social media engagement through viral content, as its Instagram profile looks less like a retail brand and more like a meme account. 

Before the acquisition, Chubbies generated ~$50M in annual revenue with 50% YoY sales growth!

The Innovation: Turning Return Processing Software into a Business

Loop Returns' $340M valuation comes from selling proprietary software to e-commerce businesses looking to save money on returns. Returns are among the leading loss drivers in the e-commerce industry, with 20-30% of e-commerce sales being returned. 

So, what does this have to do with Chubbies?

A cursory search of Loop Returns' connection to Chubbies won't reveal much, aside from Loop's about page, which mentions a consultation with Chubbies in 2017. However, this is far from the full picture. 

In reality, Chubbies co-founders created the software at the center of Loop Return's business to process their own online returns and exchanges. Despite having brick-and-mortar stores, 80% of Chubbies' sales were through e-commerce. This entailed countless returns, which were time-intensive for the business and its consumers, who needed to prove and validate the return manually. 

As "a bunch of nerds from Stanford," they built software that transmutes returns into exchanges at a high rate. When Chubbies customers wanted to make a return, they were taken through an online questionnaire aimed at keeping their business by promoting and streamlining the exchange process. 

The software was so successful that other businesses reached out to Chubbies co-founders to access its proprietary software. To not distract from their core business, they built a team and created Loop Returns as a separate entity in 2017. 

Since its $65M funding round in 2021, Loop Returns has grown revenue from $4.7M to $31M last year!  

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