May 01, 2015
Cottonwood Heights, Utah
Backpacks and outdoor gear
Cottonwood Heights, Utah
"It's the first time a company had incorporated as a B Corp from inception and went and raised venture capital," says Smith.
He was warned that filing as a B Corp -- short for Benefit Corporation -- could keep venture capitalists away since B Corps are required to meet certain social and environmental standards while generating revenues.
"We're big believers that businesses can be a force for good in the world and that businesses have a big responsibility to look beyond their own bottom line and how businesses can positively impact people and planet," Smith says.
While the company is based in Utah, it incorporated in Delaware. "When we incorporated as a B Corp, the legislation hadn't passed in Utah yet," Smith explains.
Smith says the young outdoor sporting goods company is thrilled with the $9.5 million raise. He also sees it as a bellwether. "In my mind there's a very clear shift in investors, the business world, and consumers. We're starting to see that businesses can think about doing good and people will still invest in them."
The company offers backpacks, clothes, and water bottles that are made throughout the world, including apparel made in Portland. "We have a really awesome factory in the Philippines," says Smith. "We care a lot about how products are made. We tried to pick factories that share our same vision and mission and if that means we pay more for the product, that's okay. We'd rather pay more for a product and know it was made responsibly and know people were paid livable wages."
The company also manufactures in Bangladesh where a 2013 factory collapse killed more than 1,100 people. "A lot of these large global brands pulled out of Bangladesh because it was too much of a risk," says Smith. "These brands should say we're going to stand up, not abandon these people. 100 percent of their economy is based on textile fabrication."
Given the company's mission-driven nature and it's willingness to pay higher prices for its manufactured goods, which will also include some higher-quality features that other companies won't purchase because of the margin loss, it's no surprise that it's also a direct-to-consumer (DTC) brand. Like most DTC brands, Cotopaxi uses affiliate networks and paid search to spread awareness. But it's also making an effort to acquire its customers in person. "We're doing these huge events called the Questival," Smith says.
The Questival is based on events like TV's The Amazing Race. Every person who registers for the event gets a Cotopaxi pack. "Then they have 24 hours to do a scavenger hunt on steroids," Smith explains. "They run around and have all these challenges that involve the outdoors, service to the community and a bunch of challenges."
Participants document their achievements using social media, which led to 30,000 social media posts on its launch resulting in a reach to 1 million people. "It's just a phenomenal and very unique way we were able to launch this business and it's something we're pretty excited about."
During Cotopaxi's first year, it held the events in Utah, San Francisco, and Las Vegas. In 2015, the company has about 20 of the events planned in cities across the U.S.
Challenges: "Creating brand awareness," Smith says. "We have a really unique authentic story. About 90 percent of traffic on site is organic, not paid, which is great. But it often means slower growth."
Opportunities: "What I really see is an opportunity to build a new outdoor brand that caters to the Millennial generation," Smith says. "One thing that really resonates with this younger generation is corporate social responsibility."
Needs: "We need to keep delivering on the product front," Smith says. "Our goal with this is to get to break-even where we don't have to raise more venture capital if we don't want to. It allowed us to scale quickly, but we want to reach profitability."