‘Girlboss’ Sophia Amoruso says she was too quick to fire people at Nasty Gal. She shared what she learned from the startup’s epic rise and fall.

• Sophia Amoruso built Nasty Gal from scratch to a $350 million valuation, but the retailer collapsed.
• Amoruso warned founders about VC money and chasing ever-higher valuations on a recent podcast.
• It's useful to work before starting a company, and founders should be open to acquisition, she said.

Sophia Amoruso learned the hard way that founders who tap venture capital and chase ever-higher valuations can get into trouble. She shared five lessons from the rise and fall of her company, Nasty Gal, on the latest episode of "The Burnouts" podcast.

Amoruso started selling vintage clothing from her bedroom and built the business into a fast-fashion retailer with over $100 million in annual revenue and more than 200 employees at its mid-2010s peak. Her autobiography, "#GIRLBOSS," was adapted into a Netflix series.

Nasty Gal ran into financial and legal problems, filed for bankruptcy in 2016, and was acquired by British rival Boohoo in 2017. Amoruso, 41, launched her own VC firm, Trust Fund, in 2023.

1. Don't be too hasty in firing people

Recalling her mistakes as a boss, Amoruso said she didn't coach or direct her workers enough and "could have given people more chances." She added that she had fired people before finding replacements.

"I just kind of whacked people, and it puts a business at risk when you just remove someone from the company," she told the podcast.

When a worker is abruptly removed, she said, "The people under them are like, 'I got all this responsibility, what the hell?'"

Nasty Gal was sued in March 2015 by a former employee who accused the company of sex discrimination and wrongful termination after she was fired while pregnant, court filings show.

Her complaint cited three other women who, according to the filing, were fired while pregnant, and a man who was set to take paternity leave. The case was dismissed and closed by the court in March 2016 and appears to have been privately settled.

Amoruso didn't immediately respond to a request for comment from Business Insider.

2. The valuation race can be dangerous

Nasty Gal's investors pushed Amoruso to raise money at ever-higher valuations, heaping pressure on the business and restricting its access to cash, she said.

"You don't go bankrupt overnight," Amoruso said. Nasty Gal had "opportunities to raise money at a lower valuation" but her investors were against marking down their stakes, she added.

Her advice to founders is to "just be careful with valuation because the expectations are really high for what you need to do to get to the next round."

"I'd rather a company survive than be able to mark it up and look like I'm successful as an investor," she added.

Amoruso said that instead of focusing on valuation, she encourages her founders to "raise a lot of money now" and "extend your runway as far as you can because sentiment shifts, companies go up and down."

3. Most founders don't need VC money

Amoruso said she bootstrapped Nasty Gal from roughly $75,000 in sales in its first year to about $30 million by 2012, when she raised nearly $50 million from venture capitalists. The company's valuation peaked a few years later at around $350 million.

But Amoruso said the vast majority of founders shouldn't raise venture capital. There's "a lot of glamour around raising money, but for most people, you don't need to do it," she said on the podcast.

She said the advent of AI and other digital tools has made it cheaper to start businesses and enables founders to be "scrappier."

4. Be open to a buyout

Many founders turn down offers to sell their companies and prefer to hold out for a better offer. They should consider just accepting the cash and moving on to their next idea, Amoruso said.

Amoruso said that another apparel retailer offered over $400 million for Nasty Gal when she owned 80% of the company, but she turned it down as her investors wanted her to reach a billion-dollar valuation so they could achieve a better return.

"You may not get another acquisition opportunity," she said on the podcast. "You don't have to like build the bazillion-dollar business to be successful," she continued. "Part of me is just, like, take the money."

5. Learning before launching can be a huge help

Amoruso, who founded Nasty Gal at age 22, said the classic "serendipitous founder story" of dropping out of school to build a startup is a "little overglamorized."

She said aspiring entrepreneurs should work before launching their companies and "learn some chops on somebody else's dime."

That way, they can be "paid to do it rather than putting all the risk up front and doing it for the first time after you start your business," she said.

"I really wish I had that foundation," Amoruso said, as it would have given her "a lot more empathy" for her employees and "a lot more chops" to run her business when it became about "more than shipping stuff, or things that I had already done myself."

Amoruso said it's also important to lay solid groundwork for companies. She advised founders to "create processes as early as possible so that when it scales, people can take that and run with it."

"If you're trying to retrofit them into a business, it's really hard," she added.