Naadam Co-founder and CEO, Matt Scanlan, found Mongolia by chance, and set out to shake up the cashmere supply chain – in favor of the suppliers
A venture capitalist by trade, Scanlan found himself growing bored by the work and quit. Within weeks, he was driving $3 million in cash into the Gobi desert. “Not your traditional origin story,” he laughed. “But that is how it happened. A buddy of mine had a trip on the books to visit Mongolia, and having nothing better to do, I thought why not?”
Scanlan and his friend dove head first into the country, which at the time “felt like another planet,” he said. The pair met a local in the cashmere trade who offered to show them a herd in the countryside, and some 20 hours of off-roading later, they arrived in exactly the middle of nowhere. “We hadn’t seen electricity poles or homes or roads for hours. Ended up in a ger (like a yurt), drinking goat’s milk vodka, and settled in for the night,” Scanlan recalled.
The next day brought some rather shocking news. “We told our traveling companions that the trip was lovely, everything was beautiful, and we would kindly take the trip back now. They said ‘we’re here for three weeks so you can come with us or find another way home,” Scanlan said. “And that would have been virtually impossible.”
Once the shock dissipated, Scanlan and his friend decided to settle in and acclimate. “I learned how to ride a horse, ride a motorcycle – heck, I was milking goats by the end of it,” he said. “We really dug in.”
“You want to wear clothing that has substance and to be a part of something bigger & meaningful.”
– Matt Scanlan, Co-founder & CEO, Naadam
Through their translator, the pair started to asked questions about life on the open land, and the animal husbandry that has been passed down through generations. The nomadic herders in this region happen to have goats and those goats happen to produce cashmere. “That really stuck with us,” Scanlan reflected. “This is where this stuff comes from. How come no one says that? From that point on, we wanted to learn how to work with these folks.”
From this initial (unintended) immersion in the herding world, Scanlan started Naadam. The goal? To mix business with betterment, shaking up the supply chain in a way that benefited both the company and those it employs – specifically, the nomadic herders in Mongolia. “My business parter Diederik Rijsemus and I founded Naadam as a socially-conscious brand,” said Scanlan. “When we started the company, we were confronted with a wave of inconsistencies that permeated from the bottom to the top of the cashmere supply chain.”
These supply chain inconsistencies include the presence of the outside middle men who enter the market and force prices down. They buy as cheaply as possible and then upsell to make a healthy margin. Scanlan noted, “Since the average margin determines the global commodity cost average, the herder never realizes the value of his organic, hard-earned materials.”
Scanlan and Rijsemus made the decision to go directly to the source, circumventing the middlemen, giving them the ability to outbid the other traders. “The process of how we actually purchase the material takes our business to an entirely different level,” Scanlan said.
In the Gobi desert, the government holds regular auctions, where the mayors of the town work with the herders and the traders to set a price. The trader pays that price, and then sells with an added margin someplace else. “We come into these auctions and speak to the mayor with the promise of supporting every herder in the area through veterinary and breeding programs. We ask for a higher price than the traders, who get forced out.”
Naadam prides itself on providing fair value for the cashmere they purchase, by “setting the price high because, unlike those acting as middlemen, we didn’t need the margin. This approach allowed us pick of the lot, providing the best quality, while also positively impacting the communities and the livelihood of the herders. They get additional needed support and a better price for their labors,” noted Scanlan.
Now, about that $3 million run in the Gobi desert. “I actually had to go to six different banks in the country to take out all of the cash which was stored in plastic shopping bags on the back of a Land Cruiser,” Scanlan laughed. “You don’t need protection, you don’t need guns. We drove out into the middle of the desert and purchased 40 tons of cashmere.”
“In building this company, our objective was ultimately business-related, but our approach has never been about what we could get – it was about what we could give.”
– Matt Scanlan, Co-founder & CEO, Naadam
The Naadam model, one built on social-impact investing, lies outside of the normal fashion supply chain. Instead of working through the traditional channels that exist to increase profit margins through somewhat marginalizing the communities and people at the bottom of the chain, Naadam seeks to nurture a healthy profit margin “without hurting people.”
Scanlan has a true passion for the impact his company has had on Naadam herders, and has authored numerous columns in Fortune outlining these principles. “I want people to understand there is a better way to do business in fashion, because you want to wear clothing that has substance and to be a part of something bigger and meaningful,” he said. “It’s a very simple principle – you support where you get your material from.”
“We build relationships,” he continued. “Our experience doing business abroad boils down to three key things: a common belief system, compounded trust, and collaboration. In building this company, our objective was ultimately business related, but our approach has never been about what we could get – it was about what we could give.”
The name Naadam itself is a nod to the respect and admiration Scanlan and his partner have for the herders of Mongolia. “Their lifestyle has been passed down over thousands of years. Virtually nothing has changed,” he mused. “Their culture and their heritage are linked to things like honor and respect, really beautiful values.” Naadam in classical Mongolian literally translates to “games,” and is a traditional festival held throughout the country during midsummer featuring Mongolian wrestling, horse racing, and archery.
Cashmere used for garment production in general is bought at the yarn stage from a manufacturer, and most if not all yarns are amalgamations of fibers from all over the world. Naadam cashmere comes directly from the source, pure white Mongolian cashmere fibers right off the goat. Scanlan remains proud of the quality their unique method of sourcing produces. “Our unrivaled differentiator is quality of raw material packaged with the best spinning and good manufacturing practices,” Scanlan commented. “No one else in the world controls the supply chain like we do, while only sourcing such a rare material.”
The fashion at Naadam has received attention as well. The team brought on Nadas Saar, previously of Elle Tahari and Vera Wang, to create functional yet novel men’s and women’s apparel. The company focuses on “elevated essentials,” including cardigans and ponchos, appropriate for use in many climates. “The collection appeals to people who are passionate, creative, and appreciate incredible quality,” said Scanlan. The summer collection features lightweight, cotton-infused cashmere knits that are both breathable and insulating. “There is a real design influence in the details, but the silhouettes are inherently essential, made to be worn all the time,” he continued.
The company is making an impact, with $150,000 given to the Gobi Revival Fund this year, and over $250,000 donated to date. In addition to the veterinary and breeding programs for the herds, Naadam has organized book drives for the children and funded a clean water project that built a well that will last 100 years providing fresh water for the first time.