News and Press
Wandering Bear Coffee Raises $8M
Cold brew coffee maker Wandering Bear Coffee has completed a $8 million Series A equity round of financing.
In an interview with BevNET, Wandering Bear co-founder Matt Bachmann declined to identify who led the round, citing an agreement not to publicly disclose the other party. He described the investor as “a single new large equity partner that we view as strategic” and that has made at least one previous investment in coffee. The investor will also be appointing a member to the company’s board of directors.
The raise comes less than a year after Wandering Bear completed a $2.4 million equity raise led by food and beverage venture capital fund AccelFoods last April. AccelFoods and other existing investors, including M3 Ventures, also participated in the new round.
Wandering Bear, founded in 2014, sells its high-caffeine cold brew in 11 oz. single serve cartons, multi-serve bag-in-box taps and in 5-gallon kegs for food service operators. After launching in New York City, the brand is now sold in over 750 retailers, including select Target and Whole Foods locations, in nine states in the Northeast and Mid-Atlantic.
Bachmann said that the new capital is aimed at getting the pieces in place to scale the company, including assembling talent.
“The vision here is to really build out the team, the leadership and the advisory [group] that we need to build a business that’s truthfully even bigger than I think what we had dreamt when we started this,” he said.
By his own admission, that includes shaking off some of the DIY-ethic that has fueled Wandering Bear’s growth thus far, noting that “to really invest in people is the new paradigm.” Strengthening and expanding the sales team will be one of company’s primary goals.
“There are certain things that bringing in individuals that have expertise in wholesale food service and in grocery, those are going to be the key hires,” he said. Wandering Bear has pursued an omni-channel retail strategy in rolling out through the Northeast, which Bachmann called one of the company’s greatest assets as well as a management challenge for the current sales team. “Some sales strategy is blocking, tackling, and execution based on experience,” he said. “We are bringing in that experience to build out a national distribution network.”
In building that network, Bachmann said the sales team would take a data-driven approach based on sales analytics from Wandering Bear’s direct-to-consumer business. “We are following the demand we are seeing in our direct channels in both consumer and B2B and focusing a lot on the whole sales effort to back that up and round our those markets,” he said.
While acknowledging that there is “still a lot of work to be done on the East Coast for us,” he noted national expansion could come quickly after. “I don’t think we’ll suspend our instincts to be methodical and plotting. I just think we’re going to develop a comfort for speed.”
As that strategy suggests, Bachmann sees Wandering Bear as a broadly appealing offering with strong potential for ritual consumption. While still keeping the cold brew’s potent 25 mg of caffeine per ounce, Bachmann spoke about the challenge of making the product broadly appealing without honing in on a single specific callout, such as indulgence or refreshment. In that spirit, the brand released the 11 oz. on-the-go package last September to complement its multi-serve bag-in-box format, with additional (and larger) sizes set to follow in the innovation pipeline.
“Our mission is to create products that people want to consume everyday, and that has a taste component, a functional component and a health component,” he said. “Getting the platform built that’s capable of delivering on those has been a lot of the work over the past year. You’ll see a lot of innovation coming out this year that takes advantage of that.”
Dallas Organic Beverage Startup Mooala Raises $5 million
DALLAS BUSINESS JOURNAL 1/31/18
While iconic soft drink makers are able to stir up multi-billion-dollar deals, smaller investors are still flocking to healthier alternatives in the market. Dallas dairy-free beverage start-up Mooala has raised $5 million through a new round of funding, the Dallas Business Journal has learned.
The deal is expected to be formally announced next week. The company was started in 2016 by Jeff Richards who is lactose intolerant and had trouble finding non-dairy alternatives that were enjoyable. Mooala makes plant-based almond and banana milk that is sold in Whole Foods and Albertsons-Safeway. The latest round of funding was provided by Dallas food and consumer goods investor Sweat Equities and New York venture capital firm M3 Ventures. The company expects to use the new funding to expand across the Midwest, Southwest and North East.
There are plans to place Mooala drinks in more than 1,500 retailers along the Northeast coast, which would grow its distribution network by more than 40 percent. "We've been extremely pleased with the market's response to our line of family-friendly, organic, plant-based beverages," Richards said in a statement. "This investment helps us ramp up production and expand our distribution network, making Mooala widely available to fans that have been requesting us for a long time."
Food and beverage venture capital investments have been on the rise as smaller companies are able to move their products through new distribution channels. This in turn has allowed many investors to offload these companies to the big-brand competitors that have been losing market share and are making acquisitions to keep up. Early-stage VC investors did $685 million worth of deals in 2016, up from $184 million just three years prior, according to data presented last year by investment firm Rabobank. Later stage VC investors did more than $1 billion worth of deals at their end of the market in 2016.
Foot Locker, Inc. Announces Strategic Investment In Carbon38
PR NEWSWIRE 1/22/18
Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, announced today that it has made a strategic investment in Carbon38, taking a minority stake in the world's destination for women's luxury activewear. The $15 million Series A funding round brings the total raised by Carbon38 to $26 million since 2013.
"We have admired the Carbon38 story and mission since we met three years ago," said Lauren B. Peters, Foot Locker Inc.'s Executive Vice President and Chief Financial Officer. As part of the partnership, Ms. Peters will join Carbon38's Board of Directors. "Katie and the team at Carbon38 have done an amazing job creating a brand with an extremely loyal following in the fitness and fashion worlds. In addition to the support of Carbon38's exceptional growth potential that our investment provides, we expect to leverage the team's keen industry insights and focus in order to elevate our own SIX:02 banner's performance."
"We are excited to have Foot Locker as an investor as we continue to scale our business and expand our omni-channel strategy, both in the U.S. and internationally," said Katie Warner Johnson, Carbon38 co-founder and CEO. "This funding enables us to accelerate our path of rapid growth and achieve our mission of defining a new category of luxury active ready-to-wear for women."
Guggenheim Securities is serving as exclusive financial advisor to Foot Locker, Inc. in connection with this investment, with Skadden, Arps, Slate, Meagher & Flom LLP providing legal counsel. Piper Jaffray and Latham & Watkins are advising Carbon38.
About Carbon38: Carbon38 is the world's leading women's luxury active apparel company. With a single-minded focus on meeting the needs of the modern American woman, Carbon38 provides the wardrobe and platform for women to live life on their own terms. With a highly curated blend of the world's foremost designers and Carbon38's exclusive branded label, Carbon38 is a lifestyle brand dedicated to strong, beautiful women everywhere.
About Foot Locker, Inc.: Foot Locker, Inc. is a specialty athletic retailer that operates approximately 3,350 stores in 24 countries in North America, Europe, Australia, and New Zealand. Through its Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep, and SIX:02 retail stores, as well as its direct-to-customer channels, including Eastbay.com, footlocker.com, and SIX02.com, the Company is a leading provider of athletic footwear and apparel.
Equinox bets on Rumble’s boxing theme
NY POST 1/7/18
Equinox, believing boxing-inspired group fitness will become the next big thing, just picked up a “significant minority” stake in Rumble, a 12-month-old fitness company with a boxing mentality.
Backed by Sylvester Stallone and Justin Bieber — and with a cult following that incudes Selena Gomez, Kendall Jenner, Hailey Baldwin, Jason Derulo, David Beckham and Kevin Hart, Rumble has two Manhattan locations with plans to quickly expand.
With such a pedigree, the company was recently valued at about $80 million, according to a recent letter to investors.
Rumble, with gyms in Chelsea and NoHo — and a third location set to debut on the Upper East Side, at 1495 Third Avenue, between 84th and 85th streets — is the latest expansion move by Equinox Fitness Clubs, which already owns Blink Fitness, Pure Yoga and SoulCycle.
“We believe that Rumble is the ‘next big thing’ and that we are uniquely positioned to help shepherd and expedite its growth,” said Harvey Spevak, Equinox’s executive chairman and managing partner.
Rumble was founded by entrepreneur Andy Stenzler, who co-founded Cosi and Kidville; Eugene Remm, a nightclub guru, restaurateur and Rumble’s chief brand officer; Noah Neiman, former Barry’s Bootcamp master trainer and a Bravo “Work Out New York” star; and Anthony DiMarco, an 11-time Ironman competitor and former managing director at Google.
“We come from the hospitality and fitness worlds and look at this as an emotional experience as well as a fun full-body workout,” Stenzler said.
Millennials, according to Stenzler, work out with friends instead of going to bars. “It’s like a party every night,” he said, adding that Rumble was 70 percent female, from youngsters up to Baby Boomers.
Rumble’s workouts are built around a 45-minute full-body strength-training and conditioning class that features teardrop-shaped, water-filled punching bags (designed not to hurt wrists or other joints), and moves to floor workouts with weights before going back to the punching bags — with inspiring hip-hop and house music mixed with “classics” from Biggie Smalls to the Fugees.
Rumble’s new Upper East Side location will also include a Drybar, a hair salon, and details like an infrared sauna.
Rumble has also launched its own clothing line and is unveiling an energy and recovery beverage that will cost $5 a bottle — to drink before class for energy or after class for recovery, Stenzler said.
Equinox operates 92 clubs in the US, Canada, and the UK. In addition, a hotel chain, Equinox Hotels, will launch in 2019.
WANDERING Bear Raises $2.4M, Expands Retail Business
After two years of limited self-distribution, Wandering Bear Cold Brew is finding a home for itself on store shelves throughout the Northeast, and a newly completed fundraising round enables the company to trek further.
The New York-based bag-in-box coffee brand completed a $2.4 million equity funding round this week, giving founders Matt Bachmann and Ben Gordon the capital to tackle expanded distribution and a growing product line.
One of the leading investors in the funding round was food and beverage accelerator AccelFoods. Bachmann said AccelFoods has been involved with Wandering Bear since the brand started. M3 Ventures, a strategic investment firm based in New York, and company insiders also invested.
“We are thrilled to deepen our partnership with Wandering Bear,” Lauren Jupiter, AccelFoods Managing Partner, told BevNET. “Matt and Ben represent the type of strategic and innovative founders with which AccelFoods seeks to partner. We look forward to continuing to support the Wandering Bear team as they expand distribution beyond New York and continue to build out their differentiated product portfolio.”
With AccelFoods’ investment, Jupiter joined Wandering Bear’s board of directors.
The raise comes as the company is rapidly expanding its retail footprint. Founded in 2014, Wandering Bear had been entirely self-distributed, with much of its business coming from sales to offices and online orders. At the end of 2016 Wandering Bear was available in just 10 retail outlets in New York City, primarily in Manhattan and Brooklyn.
“That was the story we raised off of,” Bachmann told BevNET. “The traction, the loyalty, the depth we had been able to achieve in our home market. We raised the money and brought in as much as we could to expand the brand. To drive some product innovation, but also to expand geographically.”
Wandering Bear had strategically held off on making a dedicated push into retail and grocery until the company was properly funded, Bachmann said
Since January, Wandering Bear has quickly gained additional distribution via UNFI’s “Next” program and at Target. The brand is now available in more than 250 stores in nine states, with placement primarily in New York, New Jersey, and Massachusetts. Wandering Bear is also available in several Whole Foods stores in New York.
“As a brand owner, I don’t think we ever could have imagined how exciting it is for us to walk around the city and see the product on the shelves,” Bachmann said. “To see the pickup on social media, to see the mentions and phone calls and texts from people spotting the product.”
Retail sales are still a small part of the business, making up less than 10 percent of revenue. However, Bachmann said its expansion is moving “full-steam ahead” and he expects retail to continue its rapid growth. It’s necessary, he said, both for the visibility gain and for further integrating Wandering Bear into consumers daily rituals.
The money raised in the equity round will also go toward new product innovation. Until last year, Wandering Bear only offered a single black bag-in-box cold brew. The company launched a seasonal Peppermint Mocha flavor last winter and according to Bachmann, more flavors are coming for retail this year with potential size variations. But the company is also looking to offer new options to bring the brand into larger scale food service.
L Catterton makes 'Significant' investment in rhone activewear
The men's brand is expected to use the funds to drive its digital offering, wholesale reach and add retail stores.
L Catterton, the private equity arm of LVMH Moët Hennessy Louis Vuitton, is extending its reach in the active arena with a “significant growth investment” in Rhone, a men’s activewear brand.
The size of the investment from L Catterton’s Growth Fund was not disclosed.
L Catterton was formed in 2016 as a partnership between Catterton, LVMH and Groupe Arnault and is the largest consumer-focused private-equity firm in the world, with 17 offices across five continents. It has investments in Peloton, CorePower Yoga, Sweaty Betty, 2XU, Gant, Pepe Jeans, Sandro and Maje, Hackett and Emperor Watch and Jewellery, among others.
“Rhone represents a compelling opportunity to invest in a differentiated and on-trend concept within men’s activewear, a large and growing category,” said Jon Owsley, co-managing partner of L Catterton Growth Fund. “We seek companies in great trend areas with consumer appeal. Rhone is very well positioned to ride the wave of what’s happening in men’s apparel. It has all the technical aspects of fitness wear but designed with an eye for regular wear.”
He pointed to the company’s commuter pant as an example, saying that while a man may wear it to ride a bike to work, it looks good enough to keep on all day.
The brand’s GoldFusion technology, which it introduced last year, is also seen as a “potentially revolutionary fabric in the men’s wear space,” he said. The technology infuses gold particles into the brand’s highest-performing fabrics, resulting in a softer, safer, faster-drying, longer-lasting, odor-neutralizing garment, according to the company.
Owsley said he expects Rhone to use the additional capital as well as L Catterton’s resources to expand its digital offering, wholesale presence and build brand awareness.
Rhone was founded in 2014 to appeal to men seeking active apparel that was not an afterthought to women’s wear or so full of “bravado and chest-pounding” that the marketing overshadowed the merchandise.
It is carried in more than 400 doors, including Bloomingdale’s, REI and Equinox and offers shorts, pants, long- and short-sleeved tops, socks, hats, gloves and other accessories. Its assortment is centered around comfortable, innovative fabrics such as GoldFusion. The company has one store at Chelsea Piers in Connecticut.
“Given their strong retail expertise, significant history working with leading health and wellness brands and deep knowledge of the active consumer, L Catterton is the ideal partner to help us take the Rhone brand to the next level,” said Nate Checketts, cofounder and chief executive officer. He said the company will use the investment to improve its supply chain, continue to seek out innovative fabrics and increase the name recognition of the brand.
Opening stores is also in the cards, he said, adding that the brand would like to add two locations this year, with New York at the top of the list.
Checketts said before negotiating the L Catterton investment, Rhone had received an acquisition offer, but turned it down. “We built Rhone to be better, not to be squeezed by a larger company for profits. That’s why we’re so excited about L Catterton. They know brands and they know health and wellness.”
Rhone has attracted several investors since it launched. In 2015, the brand closed on a $5 million Series A round of financing, bringing the total amount raised to $6.2 million. Prior investors include Steve Bornstein, former president and chief executive officer of the NFL Network and former chairman, president and ceo of ESPN; David Stern, NBA Commissioner Emeritus; Ryen Russillo, host of ESPN Radio’s Russillo & Kanell; Shane Battier, former NBA player, and M3 Ventures, an investment fund managed by former CAA executive Martin Dolfi.
Gear FOr Good: Outdoor start-up cotopaxi on why millennials want stories, not things
If you watch enough Shark Tank a few trends quickly emerge. None of the judges like snake oil salesmen (especially Mark Cuban). They prefer start-ups born from a personal passion. And if you say the word “retail store” you might as well just pack up your display and go home.
What these trends speak to more broadly is the modern ascent of the “digital native vertical brand”. “DNVBs”, as they often are referred to within investor circles, are the opposite of a traditional chain brick and mortar store. They tell a passionate virtual story online that brings consumers along for the ride. They speak to buyers directly through B2C marketing and social media, avoiding middlemen, distributors, and retailers who might not understand their core message.
More structurally they put culture, passion, and giving back ahead of quarterly profits and annual investor reports, which has huge appeal to Millennial consumers who value the experience of “participating” in a product more than simply the fact of owning of it.
I never really thought about what this all meant to building a business in the modern economy until I met Davis Smith, the 38-year old CEO and co-founder of outdoor apparel and equipment start-up Cotopaxi, which is fast encroaching on traditional outdoor legacy brands like L.L. Bean, Eddie Bauer, and Patagonia.
Smith grew up a natural entrepreneur. Before Cotopaxi the Wharton business school grad started (and exited) two other businesses, one of which based in Brazil raised over $40 million in start-up venture capital in 2010 and had 400 employees at its peak when Smith got out.
Smith also grew up learning early on that the world can be cruel. Smith’s dad was a Mormon missionary in Latin America after high school. He later got his engineering degree and moved his family to the Dominican Republic, eventually carting them throughout rural Central and South America in the 1980s. Davis Smith was 4 years old when his family first moved to the Caribbean. He still vividly remembers local children his age standing naked on the side of the road malnourished, begging for food.
“I’ve never forgotten that image,” Smith tells me. “I didn’t really know what the emotion was at the time but I guess in retrospect I now know that it was empathy. This was poverty at the most desperate level. Most people in America don’t even know what this looks like. That there are still places in the world where there are no safety nets at all. Where children still die because they don’t have clean water.”
After graduating from Brigham Young University and Wharton, Smith made the decision to spend his life starting businesses that give back focusing particularly on issues related to children and poverty. Except that Smith didn’t share the traditional percentage of end-of-year profits approach to corporate charity. With Cotopaxi specifically Smith set out to re-imagine with what he characterizes now as “product, design, supply chain philanthropy” as well as “structural” corporate social impact.
The New Age Of The Digitally Native Brand
That Smith chose the outdoor gear and adventure apparel space to seed his pay-it-forward, Millennial-styled corporate philosophy makes perfect sense.
Legacy outdoor brands like Patagonia and L.L. Bean were some of the first pioneers to build their companies around cause-based marketing back in the 1970s, most often championing preservation efforts related to wilderness, river, open space, and environmental protection. Broadly speaking, consumers who buy outdoor gear and apparel are also well traveled, understand the impact (good and bad) of their purchasing decisions, and love a good story.
“I was always passionate about adventure and the outdoors,” Smith says. “Growing up in Latin America on vacation we floated down the Amazon, climbed into volcanoes, and survived on spearfishing while camping on remote islands. Adventure travel and the outdoors were genetic for me. My co-founders and I ultimately realized (three years ago) that there was a need for a digitally native brand in the outdoor space that told a story, could connect with what Millennials wanted, and make technologically advanced gear and apparel that made a difference.”
Smith got a lot of no’s when he initially went out for funding. Many traditional capital sources didn’t think that a new digitally native brand could knock the outdoor industry’s brick and mortar incumbents off their perch. Others didn’t think that a brand that “helps people” instead of saving grand, iconic landscapes would resonate with anyone. A few still wondered why you needed to tell a compelling brand story at all.
Millennials, CSR, And The Future Of Business
Smith, Jacob, and Whittaker launched Cotopaxi in April 2014 with $3 million in seed funding, five backpacks for sale, and a website. They launched their first apparel collection six months later.
Key to the company’s start-up launch, Smith tells me, was buying a llama (whose wool is the primary insulator in many of Cotopaxi’s jackets) on Craigslist and taking it around to various college campuses in a trailer to promote a 24-hour adventure race sponsored by Cotopaxi called Questival that would incorporate inherent acts of kindness along the way (think the show Amazing Race meets community service).
Over 4000 students and other supporters, particularly Millennials, participated in Cotopaxi’s first Questival event in 2014. It trended nationally on Twitter. Most of the early adopting participants remain loyal Cotopaxi evangelists and continue to organize community events with Cotopaxi’s support every year including donating mosquito nets, working with food banks, and environmental preservation efforts.
“The 1980s model of corporate social responsibility was to throw some money at something at the end of the year,” Smith says. “Today for most businesses their largest market is Millennials who value experiences more than things. Your product has to tell a story that resonates . You can’t just compete on the best technical performance, or make the best backpack anymore. You have to go deeper, and make a human connection that’s meaningful.”
The New Supply Chain Philanthropy
Cotopaxi has so far managed to nail that elusive Millennial retail balance between product quality, design innovation, profit, story telling, brand loyalty, and paying it forward.
Case in point is Cotopaxi’s Kusa Collection which utilizes a natural insulating fiber from llamas raised in some of the most remote parts of the Altiplano, Bolivia's high desert. Llama fleece is hollow, making it lightweight, self-insulating and hypoallergenic. Cotopaxi partners closely with local communities to preserve the tradition of llama farming and create pathways to market for rural smallholder farmers who would otherwise make less than $100 a year (yes that’s a year).
The other success story Smith likes to point to is the company’s Del Dia line of backpacks which are manufactured in the Philippines. In addition to fair wages and hours, the people who sew together Cotopaxi’s expedition-level backpacks are given the opportunity to participate in design process instead of simply being told what to do. So most of them add their own custom stitching, pockets, or customized design accents.
“Our customers love the creative uniqueness of each of our backpacks,” says Smith, “And the people we work with love feeling that they’re involved in creating something that becomes a personal piece of art. If you start thinking about people throughout your entire product process as a core value these are the little things that emerge that can change your company’s entire approach to design and development.”
Follow The Money
Smith’s pitch on making “gear for good” while rewarding investors still elicits shock and bewilderment in some traditional venture capital circles. Yet Cotopaxi is part of a wave of successful start-ups who are proving that fundamentally realigning the balance between profit and philanthropy can generate win-win relationships for everyone involved .
And if you trust Shark Tank’s instincts, as well as thousands of other investors, digitally native brands are going to continue to reinvent the definition of the “retail” experience for years to come.
“Eradicating poverty whether it’s in America or globally can’t happen just through government and non profits,” says Smith. “Whatever your cause it’s expected these days that you give back as a business. But using your supply chain and the products you make to affect change rather than just your profits creates a culture that transforms how we look fundamentally at how we do business.”
In addition to a $3 million in initial seed capital, Cotopaxi has closed an additional $10.5 million including an investment from Campfire Capital, which is a new venture fund established by 35 current and former Lululemon executives, including the former CEO and CFO. The round also included an investment from TOMS Social Entrepreneur Fund. Cotopaxi is also about to announce another significant investment next month.
M3V Partner Tracy Dubb in WWD: Fashion Needs a Winner
ONE TRAILBLAZING NEW SUCCESS WOULD POINT THE WAY FOR OTHER DESIGNERS AND INVESTORS
The economics of building a fashion empire have broken down.
No longer can a young designer with vision and plenty of stick-to-itiveness get a favorable nod from a few key retailers and rave editorial reviews and parlay that into a business with bigger wholesale accounts, lucrative licenses for fragrances and handbags, flagships in major fashion capitals and a sustainable, multibillion-dollar growing empire.
The biggies from fashion’s last age — Giorgio, Ralph, Calvin, Tommy, Donna, et al — all took some version of that path to fashion superstardom. And their success was a beacon, a bright light followed by hordes of other designers, dreamers and, importantly, investors.
That Ralph Lauren or Giorgio Armani managed to become Ralph Lauren and Giorgio Armani and get rich doing it helped nearly everybody who aspired to great commercial heights in fashion. Designers pushing vastly different aesthetics could look to them or any of the other big names and plot their path ahead.
They could also sell others on that future.
It was — on the business side, at least — a matter of finding a few retail supporters, a little bit of free marketing love from a magazine and then explaining to any one of a number of investors looking to get into fashion how one was going to be the “next Ralph Lauren.”
It was never easy to pull off, but it was an easy story to understand and get behind.
Now, not so much.
There are established successes in fashion, but no one who gives the impression of really killing it in the age of Amazon, social media and retail apathy. Plenty are trying and making headway — the likes of Alexander Wang, Proenza Schouler or Derek Lam and, at the more recent end, Cushnie et Ochs, Jonathan Simkhai, casual L.A. brand Rails or outdoor specialist Cotopaxi — but no one’s made it far enough to sketch out a clear roadmap. And the companies that have garnered the most attention, like Warby Parker, Bonobos, Rent the Runway and Bauble Bar, aren’t designer labels.
There are glimmers of hope, though. One contender in the accessories area is Kendra Scott, which recently sold a minority stake to private equity firm Berkshire Partners that reportedly valued the firm at around $1 billion. The Austin, Tex.-based brand is savvy online with more than 50 doors and a core base of strength in Texas and Oklahoma — far away from the fashion capitals.
But Scott is an outlier.
“There hasn’t been a ton of validation around the new types of fashion companies,” said Tracy Dubb, partner at M3 Ventures, which has investments in Cotopaxi, Rhone and others.
Dubb said investors are forced to “choose what the new way forward is going to be” and that there would eventually be companies that succeed on the strength of their marketing, or their supply chain or some other attribute.
“The truth is that they’re just all going to look a little bit different than Michael Kors did,” she said, noting the rush to invest in fashion brands after the company’s 2011 initial public offering.
For now, the moneyed crowd is largely on the sidelines, waiting, looking for something that is, if not a sure thing, than at least a decent bet.
Fashion needs a winner to rally behind.
“Back in the day, it was a template that might have worked for a generation,” said Jeffry Aronsson, who worked as chief executive officer of Oscar de la Renta, Marc Jacobs, Donna Karan and others and is now scouting for developing brands. “[Now] whatever the template might be might work for [only] that moment and that instant because of the speed of change and the convergence of new ideas, new technologies, new methods of selling.”
Department stores used to be the lifeblood of the designer business. Not so much any longer.
“You know you’re on a slippery slope and you get to the point where you can’t live with [department stores] and you can’t live without them,” Aronsson said. “What’s the new template? I think maybe that there is no new template. It demands creativity, it demands innovation, it demands focus and wise allocations of very limited resources, no matter how much they have.”
While the path is not clear, there is something of a consensus about what the winners of the future will look like:
• They’ll have good product.
• They’ll have social-media savvy, be adept at telling their own stories to customers and able to convert followers into buyers.
• And they’ll be quick to adapt and tight with their purse strings.
“My analysis of it is, the new model is magazines don’t matter,” said Gary Wassner, fashion financier and cofounder and chairman of InterLuxe, which has investments in Jason Wu and ALC. “What they have to say doesn’t matter to Millennials.”
He said the designer brands that are growing, such as Cushnie et Ochs (in which he has a personal stake), Alexander Wang and Jonathan Simkhai, are all good digital communicators.
And that’s perhaps the most important new skill in fashion since the once-mediated conversation between brand and consumer has moved to Instagram and become unfiltered (or, in the case of the president-elect, Twitter).
“You have to have a very strong digital marketing concept,” Wassner said. “It can’t be fake. You have to dig deep into what your brand is about and you have to tell your story. We’re not creating a marketing budget any longer for print. We’re looking at really targeted marketing.”
It’s not just the fashion press — stores are also in large part losing their role as decider, of both what a brand is best at and what customers want.
“Institutions that have worked on a business model for so long, they never thought it would change and they never envisioned this kind of change,” said Wassner, who is also head of Hildun, a factor that extends financing to brands selling to department stores that are now being threatened.
But with e-commerce still making up just 8.4 percent of total retail sales, according to government figures, digital is just part of the picture.
Investment banker Janki Lalani Gandhi, managing director at Lincoln International, said there are plenty of concepts rooted in the web, but that they still haven’t proven they are lasting brands or clearly shown how click-and-bricks can best work together.
“I don’t think it’s clear what that combination is,” Gandhi said. “We really do need omnichannel, but what’s that mean? What’s the right formula? I really do think that varies. Most concepts are so young they’ve only been around 10 years max, but in their current form, it’s been three to five years.”
The first wave of fashion-tech hybrids, including eyewear disruptor Warby Parker or fashion rental player Rent the Runway, drummed up a lot of attention and money on the tech side of the equation, but it’s not clear that those companies are profitable yet.
Broadly speaking, the fashion-digital disconnect is that social media followers stay followers and don’t become buyers. “On the beauty side, we’re seeing winners left and right,” Gandhi said. “That’s really because…you truly have the conversion from social medial into actual dollar purchases. Apparel and accessories [companies] still need to figure out how to truly leverage digital advertising and marketing.”
There is also a more vibrant wholesale base to play to in the hot beauty sector.
“Even if [as a fashion brand] you’re selling through most Nordstrom doors, Anthropologie, Saks, Neiman [Marcus], you maybe get to a few hundred doors,” Gandhi said.
The case is different in beauty, where vendors that break into Ulta’s 949 stores and Sephora’s 2,300 doors are linked into a thriving retail network that provides sizable distribution and a safe haven for their brands. That doesn’t even account for department stores or, at the mass level, the thousands of drugstores.
Apparel enjoys no such refuge and the pressure, financial and otherwise, is on.
“There’s this evolution that’s been occurring for 20, 30 years, but the snapshot of today is, we’re clearly in the early part of this changeover and I think Amazon in a weird way, not so much with high fashion, but with fashion and other consumer products, has really pushed people,” said Joseph Lamastra, founding managing partner of Sandbridge Capital, which counts Thom Browne, Derek Lam and Rossignol among its investments.
“The winners of the future, whatever they are…the key is going to be strict expense control,” Lamastra said. “What the online presence has done, it has eliminated any ability for you to have any fat in your company. If you’re fat in your company, you’re going to get killed. Someone will disrupt you. It’s not the sexiest thing to talk about, but it’s the reality. We are really on top of our cfo’s [chief financial officers] to make sure that they’re on top of their expenses.”
Many fashion companies are extremely wary of doing business with Amazon and but still worry that, if the web giant wants their brand and can’t get it directly, the sales dollars will instead go to a competitor.
“It’s a little scary, they almost have too much power,” Lamastra said. “It hasn’t really reached the luxury level yet, but what if it’s coming?”
That’s the question that a lot of people have.
Amazon could be the great threat or the great opportunity, the secret weapon of the next big brand.
Bloomreach research found that 55 percent of online shoppers turn first to Amazon to search for products. In part, that’s because the web giant has a vibrant marketplace, with its own fulfillment service that delivered more than two billion items last year.
Amazon’s fashion business is mostly in basics now (an area it’s building out with its own private-label offering). But higher-end fashion is clearly in the crosshairs. The company has tapped influencer Olivia Palermo to hawk fashion in online-only videos, it’s sponsored fashion events in India, launched a streaming style show and more.
The desire is there, but hot brands are still playing coy, likely being cautious for good reason.
In the end, the path to the future might lead inevitably to or at least through Amazon. And the next big name might be not just socially slick and operationally efficient with compelling product, but also good at meeting consumers where they are — on Amazon.
Start-Up Rhone Is About To Disrupt The Activewear Market Again With Its GoldFusion Line
Rhone, a premium men’s activewear start-up, has been a disruptive rookie force since launching in 2014. The company saw a narrow niche between big players like Nike, Under Armour, and Lululemon and shot right through the gap.
Rhone differentiated itself from day one by offering a high-end, premium product line not designed for obsolescence. More innovatively, they combined classic cuts and designs with elevated technology, like silver molecules, to create a faster drying, more odor-resistant, and more durable product that was specifically designed for men.
“Men stink,” Rhone's CEO Nate Checketts, 34, tells me, laughing, since as a life-long athlete he knows that he’s talking about himself. “They sweat. They smell really bad. And they’re really, really hard on their workout clothes. We knew that the traditional apparel technology that was used for women’s yoga pants simply wouldn’t work for guys.”
Ergo Rhone. Born from everything that the modern, active man is and represents: sweaty, stinky, hard on themselves, hard in life. But still ever conscious about how they look, feel, and perform outwardly to the world.
Checketts has always been an entrepreneur. He started selling lemonade at a local golf course at age 12. He expanded his business at 13, collecting golf balls for “shankers” who hit them into the water for a per ball fee.
By 15, Checketts had started his own sports summer camp, teaching 4-6-year-olds how to play soccer and football, and instructing them on the value of discipline, hard work, and the importance of what it means to be a part of a team. Checketts’ camp ran for eight years. Personally, he pocketed over $40,000 one summer in just four weeks of work. By the time he was 30, Checketts had founded, launched, and sold four other companies (no one ever bought the lemonade stand or golf ball recovery businesses).
“Entrepreneurship was instinctual for me,” Checketts says. “It ran in the family. Especially in sports.”
That’s a modest understatement. At 28, Nate’s father Dave Checketts became president and general manager of the NBA’s Utah Jazz, making him the youngest chief executive in NBA history. He became president of the New York Knicks in March 1991. The elder Checketts eventually went on to become president and CEO of Madison Square Garden, which owns the Knicks as well as the New York Rangers.
Yet while the younger Checketts may have grown up with a relatively polished silver spoon and a sports business pedigree, it was always served with a heaping dose of hard-working Utah Mormon salt.
“My father taught us early on to appreciate the value of hard work,” Checketts recalls. “We had to earn our money the hard way growing up. On the weekend we raked leaves, hauled trash, and mowed lawns, all while being encouraged to go out and start our own businesses. At the time, I didn’t know that this was called entrepreneurship. I just realized that I liked building things that allowed me to be self-sufficient.”
Checketts pauses. “I didn't mind making money as well."
Given the already over-crowded space that is today’s athleisure market, you’d think that someone with CEO Checketts’ generationally honed entrepreneurial instincts would stay a thousand miles away. But two things happened in 2013 that hinted to him that there was a small hole in the market that could have outsized potential.
The first was right in front of his face. A few years after graduating from Utah’s Brigham Young University, Checketts moved back east to work for the NFL heading up sponsorship strategy for new business development. This led to a flood of product swag landing on his desk every day, including t-shirts, sweatshirts, and other promotional “active wear”. The problem was that they all fell apart after a few trips to the gym and a dozen cycles through the wash. They also stank.
“These were real products from the big box active wear companies,” recalls Checketts, not naming names. Most active wear products are treated with chemicals to fight odor and retain color fastness that only last for 15-20 washes. That means if you go the gym every other day, your t-shirt only runs at peak performance for a month. That’s when Checketts first internalized what obsolescence really meant in the activewear market.
Checketts’ second pivot point moment had far less to do with competitive market analytics.
“For Christmas in 2013, my mom went with my sister-in-law to a Lululemon store and bought all six of us boys in the family (Checketts has three brothers and two brother-in-laws) a pair of Lulu sweatpants. She couldn’t believe that they had active wear for men and she thought that this would be such a great Christmas present for all of us because she could buy clothes in one place and we were all into fitness.”
When Checketts told his friends and co-workers at the NFL what his mom gave him for Christmas, they all crowed, “Wait, are telling me that you're going to start wearing my mom’s yoga pants? Do you buy your underwear at Victoria’s Secret as well?"
The opening in the market for a premium, well-designed men’s activewear line hit Checketts like the funk from an old sweaty gym shirt. Still working their day jobs, Checketts and his fellow Rhone co-founder Carras Holmstead (also one of his brother-in-laws who got a pair of Lulu sweats that Christmas) wrote Rhone’s business plan commuting on the train in and out of NYC over the next few weeks. It was based on a simple premise: How do you create a high-end, fashion-forward active wear line for modern men based on how they live, work, and sweat?
They sold over $80,000 of product in their first two months in business. These sales were driven in part by innovative design and technology, which among other things included incorporating silver thread into their garments’ fibers which resulted in a fabric that was anti-microbial and odor-fighting as well as more breathable and faster drying than the traditional men’s activewear on the market.
In the two years since, Rhone’s rapid growth has no doubt gotten the attention of Under Armor and LuluLemon’s CFOs: 400% in 2014, 250% in 2015, and 250% in 2016 year-over-year. In 2014, Rhone had seven full-time employees. They now have 23. They expect to have 50 by the end of 2017. They’re about to move into a new headquarters five times the size of where they originally started.
Rhone raised its first $1.2 million seed round shortly after launching in 2014. The company raised a $5 million Series A round in June 2015, including from some sports industry icons like Steve Bornstein, the Former Chairman, President and CEO of ESPN, as well as former NBA Commissioner David Stern. In addition to its online sales, Rhone’s apparel is now also available in over 400 brick and mortar stores, including Bloomingdales, Nordstrom, and Equinox.
Rhone’s hockey stick growth curve has been based in large part on Checketts’ relentless inquisitiveness about how far the apparel innovation envelope can be pushed.
“We started Rhone by asking ourselves the most obvious questions about what men wanted. And every time we introduced something new, like the first media pocket in an active wear line, we kept hearing from customers, ‘We’ve been waiting for this forever’. So we kept asking ourselves ‘Why not?’, ‘Why can’t we do this?’. As most businesses grow it makes it harder and harder for them to innovate. But being a start-up we’re more like a speedboat than a freighter. We can always think about how to do things differently. In an ironic way our inexperience in the fashion industry has also been our biggest asset since we’ve never been told what the boundaries are.”
Some clever marketing has also been key to Rhone’s rapid rise.
“We decided to name our products after inspirational male icons like Ernest Hemingway and Walt Whitman rather than begging for celebrity and sports brand ambassadors like so many other start-ups do,” Checketts tells me. “We wanted our clothing to embody what it means to be an inspired, modern man, a good husband, a contributing force in the world, as well as leading a healthy lifestyle. Being active isn’t just about running faster. It’s about not standing still. It’s about reminding yourself of the man you want to be.”
You can thank Checketts’ Mormon upbringing for that. To this end, all of Rhone’s clothing includes inspirational quotes embroidered on the inside as a potent nudge when you least expect it—like in front of the washing machine—that you can always be a better man, not only in sport but in life.
Not one to ever stand still himself, Checketts is upping Rhone’s technological edge over the competition again in 2017 with the launch of the company’s new GoldFusion line as part of its upcoming Spring Collection.
By infusing 24-karat gold nanoparticles into the company’s highest-performance fabrics, Rhone’s GoldFusion line is longer-lasting, more color-fast, more odor-neutralizing, more breathable as well as wicks moisture quicker and dries three times faster than any other active wear on the market today. Even after 100 washes, which is three-times the industry testing standard, GoldFusion’s benefits remain 99% effective.
Checketts was integrally involved with the development of Rhone’s GoldFusion technology over the past year alongside some well-known biochemical development companies (no names mentioned yet again), who themselves hadn’t even thought about its potential use in fabrics, fashion, and the active wear industry. They were all blown away by what they had discovered.
“When we first were introduced to this technology it sounded like magic, like it’s too good to be true,” Checketts recalls. “But then we saw the results of our own internal testing, and we were in a state of disbelief. The next immediate question for us was ‘How can we own this?’ since we knew immediately that every other active wear line in the world would want this technology as well.”
Fortunately, Checketts is no rookie when it comes to patents, technology, and intellectual property rights. Rhone’s biochemical partners hold the exclusive patents to the GoldFusion technology, and Rhone holds the exclusive license for its use in the fitness and activewear markets. In Checketts’ former NFL parlance that’s the equivalent of locking up Tom Brady to a ten-year exclusive deal.
Not surprisingly, with Rhone’s lock on the GoldFusion technology and the overall active wear industry by some estimates expected to reach $83 billion in sales by 2020, some of Rhone’s “no one’s naming names” competitors are already tip-toeing around an acquisition and Checketts phone has started to ring.
“It’s flattering to get those calls,” Checketts says, “But acquisitions, IPOs, and looking at the exit door are all distractions from what we’re trying to build. I don’t think about it all.”
Knowing Checketts’ entrepreneurial lineage, however, it’s hibernating somewhere in the back of his mind.
“Our niche from the very beginning,” says Checketts, “Has always been to create an up-market activewear product for sweaty men who live a modern, active lifestyle. We’ve never deviated from that. And there are millions of sweaty, modern, active men out there.”
Note to Under Armor and Lululemon: did someone say millions?
A Pair of Former Vogue Editors Are Behind Spring’s Most Enticing New Label La Ligne
“When you are tired of stripes, you are tired of life!” declares Valerie Boster, cofounder of the new fashion brand La Ligne, paraphrasing Samuel Johnson. That august gentleman was talking about London, and Boster about fabric, but the sentiment is the same: Wonderful things are eternal. Boster and her coconspirators, Meredith Melling and Molly Howard, may have given a French name to their direct-to-consumer fashion company, but to my mind their project is distinctly American: a line—a ligne!—of clothing with nothing over $550, everything made of the finest materials and with a ferocious attention to detail, and all of it available only from its own Web site or Net-a-Porter. The inaugural 50-piece collection includes an irresistible flight suit; a phalanx of work-to-weekend trousers, shirts, and shirtdresses; even a basket embellished with a wide white bar.
“You know those six pieces you have in your closet that are pretty much the only things you wear?” Boster says. “We want to be one of those six things——” Melling cuts her off: “We want to be all six!” Though she and Boster have been obsessed with stripes for years, La Ligne has a rather looser interpretation—sometimes the stripes are full-on, as in a faithful homage to the French marinière (the pullover beloved of Jean Genet and Jean Paul Gaultier); other times they turn up as subtle white lines encircling the neckline of a perfect sweater or dancing down the seam of a trouser.
In a world where more and more women want to buy what they see when they see it, endeavors like La Ligne are on the cutting edge of fashion’s future. The site will show the clothes on professional beauties and other professionals, including Joan Smalls, Lily Aldridge, and Dianna Agron, while sharing their candid backstories (shoppers are invited to share their stories, too—a resolutely informal approach with an eye toward building a community beyond mere commerce). There are also practical advantages to running your business like this: If, say, a particular pant is a big hit, the company can keep making it in different colors and materials—as long as people are still interested in a product, well, then, so is La Ligne!
Boster and Melling were both Vogue editors until they struck out on their own two years ago with La Marque, a styling and fashion-consulting venture. (Howard was an investment banker and the head of business development at Rag & Bone before joining La Ligne as CEO.) Despite the dream that all your clothes—every day!—will sport La Ligne labels, the three know that in truth you will pair these items with your own jeans, your own leather jacket, your favorite Stan Smiths. And though they will be happy to share info on where to procure these iconic non–La Ligne items, they are not fools. “You won’t be able to click out of our site,” Boster says, laughing.
Melling says that they are determined to inject a bit of insouciance—“a certain irreverent human touch.” So, for example, traditional monograms are slashed with a diagonal line to echo the way you’re friendly with your personal stationery. “Soullessness doesn’t do very well these days,” Boster avers, summing up La Ligne’s credo. Or, as another British author, E. M. Forster, put it: “Only connect.”
Move Over Lululemon, Rhone Is About To Take Over The Men's Activewear Market
FORBES SPORTSMONEY 11/11/2015
The business of premium women’s activewear is booming, with sales reaching more than $11.5 billion alone in 2013. Yet while brands like Canada’s Lululemon Athletica - $1.8 billion in sales last year – have captured a substantial portion of that business, they account for only a drop in the bucket of the global sports apparel market, which is expected to grow to $178 billion by 2019. Ironically, the biggest reason why activewear makes up less than 10% of the total market is not lack of demand, but rather supply; there simply aren’t enough premium product offerings available to the primary market consumer – men.
Enter Rhone Apparel. Founded in 2013, Rhone was specifically created to fill the current void in the high quality men’sathleisure market. The company’s product line aims to separate the brand from competitors like Lululemon, Nike and Under Armour, whose premium men’s offerings are both generic in design and few and far between in availability. To that end, Rhone garments incorporate silver into the fibers to create an odor-fighting, antimicrobial fabric, as well as a new Polartec Power Dry patented construction to create a fabric that is quick wicking with maximum breathability and performance. With an eye on attention to detail, Rhone product names take their inspiration from various iconic male figures throughout history and aim to inspire season after season through the use of quotes embroidered on the inside of the garments.
In just two years, Rhone’s growth has been nothing short of extraordinary. Buoyed by strong online sales, the company’s product lines are already available in over 90 brick and mortar locations, including but not limited to, Bloomingdales, Nordstrom, and Equinox across the country, as well as the brand’s first retail space in Soho, New York City. In addition, Rhone plans to expand into a 4,000 square foot retail storefront and office in Stamford, CT by early next year. It should also come as no surprise that Rhone’s rapid rise is turning heads in the business world. This past September, the company announced the closing of a $5 million Series A financing from a proverbial who’s who of influential sports, media and fashion investors that includes: Steve Bornstein, Former Chairman, President and CEO of ESPN; David Stern, NBA Commissioner Emeritus; Ryen Russillo, host of ESPN Radio’sRussillo & Kanell; and Shane Battier, former NBA player and captain of Duke University’s 2001 NCAA championship team.
“We’re incredibly excited about the growth of the brand and what this [new round of] financing allows us to do in terms of expansion,” saysRhone co-founder and CEO Nate Checketts. ”While we’ve made great strides over the last two years, more than anything we’ve learned a great deal about what our target audience wants in a premium activewear product. Most men simply aren’t comfortable wearing women’s yoga brands. Coupled with the fact that other sports apparel manufactures aren’t really offering high quality men’s activewear lines and you realize that half the world’s population simply doesn’t have the access to a product they clearly want,” he adds.
While Rhone still has a long way to go before it can go toe to toe with sports apparel’s biggest juggernauts, the strides it has made thus far provide strong evidence that the brand is positioned for rapid growth. With the activewear industry expected to reach $83 billion in sales by 2020 (assuming an influx of men’s lines), there simply is no telling just how high the brand can go in the near future. What we can be certain about is that with its high quality products and stylish designs, Rhone has firmly cemented itself as 2016′s hottest men’s activewear brand.
Rhone Announces $5M Raise; Brand Positioned to be a Leader of the Athleisure Movement
Investors include Steve Bornstein, David Stern, Shane Battier, ESPN's Ryen Russillo and M3 Ventures
NEW YORK, Sept. 21, 2015 /PRNewswire/
Rhone, the premier men's active wear and lifestyle brand, announced today the closing of a $5M Series A financing. The round included several influential sports, media, and fashion investors, including Steve Bornstein, Former President, CEO and EVP of Media for the NFL Network and former Chairman, President and CEO of ESPN; David Stern, NBA Commissioner Emeritus; Ryen Russillo, host of ESPN Radio's Russillo & Kanell; Shane Battier, former NBA player and captain of Duke University's 2001 NCAA championship team; and M3 Ventures, a newly formed investment fund focused on early and growth stage consumer brands. Prior to the new cash infusion, Rhone had raised $1.2M during a seed round in late 2013.
"The Rhone brand has expanded at a rapid rate since our inception in 2013," stated Co-Founder & CEO, Nate Checketts. "In addition to ever increasing sales online at Rhone.com, come Fall the brand will be available in 20 Bloomingdale's locations, 15 Equinox locations, and 2 Nordstrom locations, as well as over 12 Core Power Yoga and 20 additional gyms and specialty stores." Checketts attributed Rhone's growth to the brand's premium product offering and the commitment and expertise of the current 10-person Rhone team.
Rhone will utilize the financing to further the brand's product research and development, increase distribution, drive customer acquisition through strategic marketing opportunities, and double the headcount for the Rhone team. In addition, Rhone plans to expand into a 4,000 square foot retail storefront and office in Stamford, CT by early next year. More immediately, Rhone has plans to re-launch their e-commerce site with a focus on customer experience, and has secured the www.Rhone.com domain as the first step in this facelift. Rhone will also launch a temporary retail space in Soho, NYC, opening October 2015 and remaining open through the holiday season.
Rhone uses the most innovative materials and advanced technology available to create a product that is best in its class. The company incorporates silver into the fibers of Rhone garments to create an odor-fighting, antimicrobial fabric, as well as a new Polartec Power Dry patented construction to create a fabric that is quick wicking with maximum breathability. Rhone garments also feature Ultraviolet Protection Factor (UPF) 50 fabrics for sun protection, as well as a Rhone-developed ultra-lightweight, nylon four-way stretch fabric with wicking and quick dry components that allows for maximum performance. Taking the attention to detail a step further, Rhone product names take their inspiration from various iconic male figures throughout history and aim to inspire season after season through the use of quotes embroidered on the inside of the garments. "At Rhone, when we wear the product, we remember these men and the ideals for which they stood, and then strive to better ourselves each and every day," Checketts further stated.
In addition to offering premium products designed by and made for men, Rhone also focuses on inspiring men to push harder, both personally and professionally, and to be the best version of themselves possible. In order to inspire, Rhone leads by example and partners with numerous charitable causes each year to give back and support men in and around their community. Some of Rhone Apparel's most recent charitable partnerships include The Navy SEAL Foundation, Wounded Warrior Project, Testicular Cancer Foundation and The Dana Farber Cancer Institute.
Founded in 2013, Rhone is a premium active wear company that produces high-quality attire for men. Created to fill the current void in the menswear market, Rhone speaks directly to how the modern man lives, works and sweats. Rhone blends innovative materials and classic elements of design into products that stand up in the gym and excel during transitional times. This painstaking attention to detail results in superior fit, form and function. Currently, Rhone Apparel is sold at select Bloomingdales, Nordstrom, Equinox and CorePower Yoga locations as well as on Nordstrom.com. More information can be found at www.Rhone.com.