Karmaloop founder keeps ear to street to sell cool clothes

— -- This story was originally published Oct. 13, 2008.

BOSTON — When Greg Selkoe was in grammar school, he would often drop to the ground and break dance for money here in his hometown. About 15 years later, Selkoe used that same gift of gumption to buttonhole potential investors for his urban streetwear website, Karmaloop.

Once, in a local boutique in 2001, Selkoe overheard a man telling the owner about his oil and gas investments. Selkoe asked him if he'd consider other types of investments. The man, real estate broker Frank Celeste, gave him his cellphone number.

Selkoe, 33, called Celeste before he got to his car and set up a meeting for the next day. After lunch, the two visited Karmaloop's offices, where Celeste found about 20 people "all pierced and tattooed" working in a run-down old piano factory that reminded him of a wind tunnel. Wires hung from the ceiling, samples filled the bathrooms and people were working on laptops on the building ledge.

Still, Celeste "got caught up in the euphoria" and became an investor. About five years later, it paid off.

Selkoe's website will sell close to $40 million worth of cutting-edge clothing this year. He sells everything from eye-catching $20 T-shirts to $200 sneakers and $300 dresses that are popular with hip-hop artists, electro and rock musicians and their fans.

Going strong

Karmaloop.com, which includes videos, contests and blogs, gets 2.5 million unique visitors a month. It's ranked No. 359 on trade magazine Internet Retailer's 2008 Top 500 Guide, far ahead of more established retailers' sites, including Timberland and Fye. Karmaloop's online sales grew 143% from 2006 to 2007, more than six times the growth of online retail. During the economic uncertainty of the past few weeks, Karmaloop's sales were still up 100% over the same weeks in 2007.

"Karmaloop may be an example of what it will take to be a successful retailer in the future," says Kurt Peters, Internet Retailer editor in chief. Selkoe, who worked in urban planning while attending Harvard's Kennedy School of Government in the late 1990s, has spent years listening to both his customers and mentors, including late former Filene's Basement CEO and Gap president Sam Gerson and former Marshalls CEO Frank Estey.

In his first meeting with Gerson, the father-in-law of a friend, Selkoe recalls him saying, "Kid, you're going to have your (expletive) head handed to you." He also told Selkoe he liked his attitude and agreed to meet weekly to give him advice.

Something the more established retail executives couldn't have taught Selkoe was how to cater to and communicate with the often-fickle 18- to 35-year-olds who make up his audience. That, Selkoe learned, required him to be in constant contact with customers on the phone, his site and at events. "That keeps us pretty close to the street," says Selkoe. "We want them to feel like part of the Karmaloop family. That way it's not like we're dictating what we think kids think is cool."

All that advice didn't pay off right away. Until he turned a profit in 2006, Selkoe asked investors, friends and family for loans at least eight times to cover his payroll. Childhood friend Marc Daniels, who launched a snowboard fashion line recently, says Selkoe "never accepts no for an answer."

"He'd be like, 'Can I borrow $30,000 or $50,000?' " says Daniels. "The second time, OK, but by the third time, I'm like, 'Again?' "

Daniels says his total investment of about $45,000 is now worth about $1 million. Celeste, who once showed up with $10,000 in cash to cover a Karmaloop check that was about to bounce, says the "couple hundred thousand" he invested has increased "ten- or fifteenfold."

Moving on up

Selkoe didn't take a salary until early 2006, after he and his wife, Dina, each paid off about $80,000 in credit card debt. Before that, almost everything from Dina's salary as a lawyer at a Boston firm went into Karmaloop.

Their recent success has meant the Selkoes' standard of living is improving. Next year, they'll move into a three-bedroom apartment in a new luxury condominium building downtown where the 1,600-square-foot balcony is bigger than their current apartment.

Selkoe says the profits are being rolled back into the website, not the headquarters. Karmaloop's easy-to-miss offices are now in a run-down building across from the Boston Common. The office door is unmarked, and the hallway is filled with trash. The gray carpet is covered with stains, and T-shirts and other alternative apparel are scattered everywhere. Dozens of young workers line conference tables working on computers, one with a new kitten sleeping in front of her on a sweater. The resident long-haired Chihuahuas could be the carpet culprits. (The Selkoes own two of the four office dogs, but they weren't at work during a recent visit because one had just had surgery on a torn ACL.)

Still, there's the same unmistakable energy that Celeste saw seven years ago. General counsel Chris Mastrangelo buzzes in to explain that he left more reliably paying legal work to join Selkoe, in part because they "both like to party and play a little bit." He's far outpaced what he'd be making in other legal work. One floor up, Julian Wadsworth, Chelsea Wolf and Gabe Friedman are taping the MTV-like Daily Loop for Karmaloop TV, which gets 900,000 unique visitors a month after just one year.

Selkoe, Estey says, is "a very bright young man," but he shouldn't get carried away with success, even if it now also includes a store on posh Newbury Street here. "I'm concerned. He should never open another store," says Estey. "The brick-and-mortar business is going downhill."

Gerson let on that he knew success was coming to Karmaloop when Selkoe visited him weeks before he died of a brain tumor in 2003.

"It looks like you guys might actually make it," Selkoe recalls Gerson saying. "I can't believe it."