"When I got someone on the phone, I'd be told, 'We don't want gangs coming in here,' or 'We don't want shoot-outs in our store,' " recalled the entrepreneur, though he said the message behind the brand "For Us, By Us" was never intended to be exclusionary.
Today, Mr. John presides over a clothing empire that had about $400 million in annual sales at its peak and currently boasts 75 freestanding stores in major markets around the world, including Japan, South Korea, Germany and France. In a complete reversal of his early struggles in business, it is now Mr. John, star of the hit ABC show Shark Tank, who decides which entrepreneurs will receive investment capital as he takes his place alongside fellow business brands Mark Cuban and Barbara Corcoran. And he's not alone in the boardroom.
"Artists, athletes and entrepreneurs from our culture are now fully respected businesspeople who are walking into banks and being sought out by venture capitalists and investors," said Mr. John. "They are no longer the pioneers people don't believe."
Architects of the hip-hop movement like Mr. John and Russell Simmons (Class of 1992) were instrumental in helping to level the playing field for African-Americans in business, paving the way for the successes of Kimora Lee Simmons (Class of 2003), Kevin Liles, (Class of 2003), Damon Dash(Class of 2004), Sean "Diddy" Combs, Jay-Z, Kanye West and many others. By establishing successful businesses in entertainment, music and fashion, these trailblazers broke barriers on a multitude of fronts, turning what was once considered counterculture and marginal into something mainstream that is no longer identified by race, age or gender.
Indeed, the hip-hop pioneers' ability to package their lifestyle into an array of consumer products transformed the landscape of youth culture in general, from white suburban teens in Kansas to Persian heiresses in Los Angeles.
Within a few short years, corporate America got hip-hop religion, using its artists and their influence on a broad swath of the youth market to sell everything from Tommy Hilfiger hoodies to Doritos. The trend created the current movement of the artist as a brand who can sell far more than music or draw an audience for, say, a reality-television show.
"Guys like Russell opened the door and took all the bulls—t for everybody," said Grammy-winning music producer Jermaine Dupri, whose business ventures outside the music industry include Global14, a popular online social network. "He made it easy for people like Kim Kardashian to have a fragrance line."
It all began with music and film. While the rest of the world dismissed hip-hop as a fad that could never lead to a sustainable business, Mr. Simmons proved the naysayers wrong when he established Def Jam Records, and Spike Lee became a leading independent filmmaker whose portrayals of urban culture brought it to the attention of millions of filmgoers.
But Mr. John and Mr. Simmons, through his fashion label, Phat Farm, were among the first to transform this movement into a business outside of music and entertainment by manufacturing, branding and selling the fashions of the New York streets in malls across America.
"They were the first to put urban culture in a bottle and sell it," said Mr. Dupri.
The turning point for Mr. John came between 1996 and 1998, when those small stores that were carrying the FUBU line grew into chains and the larger stores began to realize they were losing market share to these former mom-and-pop retailers. A 1999 Gap ad starring LL Cool J also helped fuel demand. Unbeknownst to the retail giant at the time, the hip-hop artist wore a FUBU-branded hat and snuck in the rhyme "For us, by us, on the down low." Fans of the rap star knew it was a message to buy FUBU and began coming into Gap stores asking for the brand.
"It took FUBU into the stratosphere," recalled Mr. John.
Phat Farm, meanwhile, with the help of manufacturing partner Aris Industries, grew into an international brand with a presence in more than 3,000 retail locations, branching out into women's and children's clothing lines, including Baby Phat, which Ms. Simmons elevated into a coveted global fashion label. Hers became the first and, arguably, only successful female hip-hop fashion house.
While these early hip-hop entrepreneurs took the culture out of the streets and into department stores, the next generation of rap moguls elevated it to the yachts of Capri and the runways of Paris. Sean "Diddy" Combs has built an empire that includes record label Bad Boy, high-fashion menswear and fragrance under the Sean John umbrella, and equity in Ciroc, one of the top-selling vodkas in the world, putting his net worth at about $550 million, according to Forbes.
Jay-Z's portfolio has included Rocawear—in partnership with Mr. Dash—which he sold for about $240 million in 2007, as well as shares in the Brooklyn Nets and various music, fashion and restaurant businesses, putting his net worth at about $460 million, according to Forbes.
Laying the groundwork
"People like myself and Russell Simmons laid the groundwork for Puffy and Jay-Z, but they have taken it to heights I never would have thought possible," said Mr. Lee, whose 20th independent feature film, Red Hook Summer, was released in August. "I am saying this respectfully, because I could never compare my business sense with those two."
As for Mr. Simmons, he is not surprised by the achievements of those who came next. "These poets are not only creative, they are innovators in business, which is why they can fly from one industry to the next," he said.
The hip-hop movement has given birth to countless businesses as corporate America continues to invest millions of advertising dollars in an effort to reach young urban consumers. Shante Bacon, a former employee of Def Jam Records, owns strategic marketing firm the 135th Street Agency, which helps film companies like Columbia Pictures, Screen Gems, Sony/TriStar Pictures and Walt Disney Studios reach those audiences.
"I am a direct product of the house that Russell built," said Ms. Bacon.
CAREER HIGHLIGHT
CRAIN'S HAD ITS OWN ROLE to play in helping the first wave of hip-hop entrepreneurs gain acceptance in New York's business establishment. Daymond John considers his 40 Under 40 profile to be one of the biggest milestones of his career, and he keeps the article framed in a place of prominence on his office wall.
"Prior to that, people assumed I'd have gold teeth, wear baggy jeans and start break-dancing," quipped Mr. John. "That stamp of approval from a respected business magazine meant I could hold my own with other CEOs, whatever I was selling."
A version of this article appears in the October 15, 2012, print issue of Crain's New York Business as "Hip-hop conquers the world".
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