The word rag has several meanings:

1. A worn-out piece of cloth used for cleaning. When you wipe up a spill or dust furniture, you might grab an old rag from under the sink. Rags are usually made from old clothes or towels too tattered to use anymore. Mechanics use rags to wipe grease off their hands, and painters keep rags handy to clean up drips.
2. To tease someone persistently, often in a friendly way. If your friends rag on you about your new haircut, they're giving you a hard time about it. Brothers and sisters often rag each other about little things. This kind of teasing usually isn't meant to be cruel: it's more like gentle ribbing between people who know each other well.
3. A newspaper or magazine, usually one considered low quality. People sometimes call tabloids rags because they focus on gossip and sensational stories rather than serious news. You might hear someone dismiss a rumor by saying “I read it in some rag,” meaning they don't trust the source.

The phrase from rags to riches describes someone who starts out with very little money and becomes wealthy, like an entrepreneur who builds a successful company from nothing.