Greg Selkoe’s Bad Karma

He built the nation’s hippest online clothing company into a $127 million e-commerce titan. When Karmaloop filed for bankruptcy in March, everyone wanted to know: How did it all go wrong?

karmaloop bankruptcy

Photograph by Toan Trinh

At 2 a.m. inside the Boston Marriott Quincy, Kanye West was out of booze. No problem. He knew who to call. West had just met an entrepreneur named Greg Selkoe in Boston, and the two bonded over their shared love of urban fashion, Japanese culture, and West’s music. After playing a concert at UMass Boston that night, West brought his posse back to his hotel room, but the party threatened to end when they exhausted their alcohol supply. Selkoe answered West’s emergency phone call in the dead of night and jumped to his new celeb friend’s aid—convincing a buddy at a bar to rush a carload of liquor over to the Marriott. The guy even “brought some girls over and some other stuff, too,” Selkoe recalls. Selkoe was known as the kind of guy who could make things happen. And he had an uncanny knack for winning over the kinds of people—rappers, investors, tastemakers—who would help him build an empire.

It was 2006 and Selkoe was an unlikely hipster. A blond Kennedy School grad from Jamaica Plain, he had steered his Boston-based company, Karmaloop, out from the volatile early days of the e-commerce industry and made it into the premier destination for streetwear—then a constellation of small, independent, but highly influential clothing brands shaped by house music, graffiti, and rave culture. Streetwear was in fashion, but was sold mostly at small boutiques, inaccessible outside of New York and Los Angeles. Karmaloop opened that world to suburban kids across the country. West had yet to launch his own line of eye-popping black-and-white knitted sneakers, but if he had, Selkoe would’ve been the guy selling them to the masses. Karmaloop, which at one point would generate nearly $130 million in revenue, was in the midst of one of the most impressive runs in the history of online apparel.

Selkoe was already thinking much bigger: He knew his company could do a lot more than move T-shirts and hats. He wanted Karmaloop to become the voice of its generation. The idea of brand as lifestyle would soon become corporate orthodoxy, but Karmaloop was already building an online community to attract kids amped on underground dance music and hip-hop, positioning Selkoe and his team of loyalists at the center of a glitzy, fast-paced scene. The company threw lavish parties at hip clubs in New York and Las Vegas—or sometimes right in its downtown Boston offices.

Selkoe was committed to running his business in his hometown, and to making the city a cooler place for young professionals. He donated $300,000 to restore the Brewer Fountain in Boston Common. He founded the nonprofit Future Boston, which sought to bring together the city’s creative class by hosting arts events. And he fought publicly with then-Mayor Tom Menino over stretching nightlife past 2 a.m. Selkoe became a bicoastal frontman for the company—hanging with superstar DJs, showing up at Pharrell Williams’s wedding, and bailing street artist Shepard Fairey out of jail—all while tweeting his enviable life to his tens of thousands of followers.

For more than a decade, through 2012, sales soared. Karmaloop expanded its retail websites and launched a video channel that became one of the most popular on YouTube, with celebrity interviews featuring actors, artists, and major hip-hop stars. Millions of viewers flocked to the site each month, solidifying Selkoe’s reputation as the guy who could reach so-called alpha consumers—kids cool enough that they could sway other kids’ opinions about brands and style. These alpha influencers are considered the holy grail by brands and marketers, because they don’t respond to conventional tactics. Soon, venture capital came calling, injecting tens of millions of dollars into the company and pressuring Selkoe to grow. Pharrell Williams signed on as creative director to help Karmaloop launch what was envisioned as a 24-hour cable-TV channel, similar to MTV, and there was even talk of taking the company public. To the outside world, it was an incredible success story. But behind the scenes, Karmaloop was unraveling like a cheap sweater.

Truth be told, Karmaloop had stopped making money years ago. By 2013, it was deep in the red. In March 2015, the business filed for bankruptcy, claiming it owed a staggering $116 million to creditors. When the company was sold at auction two months later to a south Florida firm called Comvest Partners and Chicago’s CapX Partners, the new owners’ first move was to evict Selkoe as CEO. Since then, customers, vendors, and business analysts have been trying to untangle what went wrong. But recent court filings and interviews with Karmaloop employees reveal a startling picture: Selkoe may have been a visionary with a talent for trendspotting, but former colleagues say he bred chaos all around him and knew little about running a business. From the inside, says one of Selkoe’s former colleagues, Karmaloop “was like Lord of the Flies.”