The Twenty Minute VCDavis Smith: From Selling $6M of Pool Tables to Scaling Cotopaxi to $150M in Revenues | E1095
EVERY SPOKEN WORD
150 min read · 30,215 words- 0:00 – 0:52
Intro
- HSHarry Stebbings
What do you think entrepreneurs chase today that they shouldn't be chasing?
- DSDavis Smith
Wealth. It's the wrong focus. If you focus on (censored) , everything else will work out. I think a lot of entrepreneurs don't understand how big and ambitious the idea needs to be to go raise venture capital.
- HSHarry Stebbings
What do founders not know about fundraising?
- DSDavis Smith
I don't think most people understand how hard it is. You will get rejected a lot. I pitched 100 investors to get our first investor. We ended up with a lot of people that kind of jumped on board.
- HSHarry Stebbings
What was the price on that first round?
- DSDavis Smith
We raised (censored) .
- HSHarry Stebbings
Whoa. Davis, I am so excited for this. I told you beforehand, I have the best job ever because I basically find brands that I love, like Codopazzi, and then I get to interview the founders. So thank you so much for joining me today.
- DSDavis Smith
Harry, it's such a pleasure. I've just, I've loved, uh, your podcast, I've loved listening to it, and so it's an honor to be here with you.
- HSHarry Stebbings
Uh, the British accent gives me about 10 extra IQ points, I think,
- 0:52 – 2:26
Early Passions and Entrepreneurial Beginnings
- HSHarry Stebbings
but I'm thrilled that you liked it. I always think that a lot of, like, who we are is shaped in actually who we were as children. Davis, when you go back to your childhood, what did you want to be when you were growing up?
- DSDavis Smith
My mind changed a lot, but I, I, I definitely had like a common thread, which was, I, I had a real deep desire to help other people. Uh, I had moved to Latin America as a four year old, so my, my, with my dad's job. Grew up in a number of different countries. Uh, the Dominican Republic, uh, is where we first moved when I was four, and then we ended up, uh, I spent a bunch of my childhood and teenage years in Ecuador, and a few other countries. And so, you know, I'd always known that I wanted to find a way to help people.
- HSHarry Stebbings
Do you know, it's so funny-
- DSDavis Smith
Yeah.
- HSHarry Stebbings
... I'm interrupting you, but one of the biggest commonalities in the most successful founders that I interview is that they move a lot in their childhood. I, I think it, uh, it forces you to embrace different cultures, different types of people. Uh, how do you think moving a lot changed and shaped you?
- DSDavis Smith
Yeah. You know, it's a great question. I look at my childhood pictures, like in school, and I'm like, "I just stand out." Like, I look nothing like everyone else around me in my, in my s- class pictures. And I look back now and I think, you know, there were, um, just such beautiful moments that I had as a child, um, a lot of times where I didn't connect with everyone, where I didn't, I didn't fit in like everyone else. And I had, I thought differently, I, l- you know, of course looked different. And I, I think that ended up being a real strength for me as I got into adulthood, where number one, I had a lot more compassion and empathy for others that maybe didn't fit in. I was, I found myself looking out for those, those people. And then the other thing is, I, I was okay to think diff- It was okay to think differently. And so it certainly, as an entrepreneur,
- 2:26 – 4:15
Young Entrepreneur to Multi-Millionaire
- DSDavis Smith
it certainly helped, uh, shape that path.
- HSHarry Stebbings
I, I, I absolutely agree it does. So you get out of college and you start sc- I, I heard this from your investors, selling scuba gear and then snooker tables. You're like, okay, you're like, "Cool, entrepreneurial start." But to the tune of $6 million a year. Uh, how did that happen? Just (laughs) take me to that.
- DSDavis Smith
Yeah. So, you know, I, I was in college and I met, uh, a man named Steve Gibson. He was this, uh, he was a, an adjunct professor at the university, Brigham Young University, where I'd gone to undergrad. He was a successful entrepreneur and had also started ... And once he sold his business, he had started a nonprofit in the Philippines. And, uh, I admired this man because he was helping pull people out of poverty. I wanted to work for him. I thought, "You know, I'm gonna work in the nonprofit world. I'm gonna work for this guy." I wanted to expand to Latin America. And I, I had this chance to sit down in his office and talk with him, and he instead convinced me that I shouldn't do that, that I should really, if I wanted to make a difference in the world, that I should become an entrepreneur. So that's kind of this ... It totally, totally shifted the way I was thinking about my role in the world and how I could make a difference. And so I started brainstorming ideas. One of the ideas that came to my head was, uh, you know, I started selling dive gear, scuba gear on eBay, just 'cause I, I loved diving and, uh, I had no money, but it was like, "Hey, if I could maybe buy and sell some dive gear here, maybe I can make enough money where I could go on a trip and go diving somewhere." And I kind of discovered this platform of eBay, this market, this ama- this amazing marketplace. Like, it was like the invisible hand that you read about in Adam Smith of supply and demand. And, um, one night I was talking to a friend of mine and, uh, he mentioned pool tables and it just clicked, and it was like, "I could do that." Like, I, I bet I could go to China. I'd studied international studies in undergrad, I hadn't studied business, and knew all about China.
- 4:15 – 5:49
International Ventures: Scuba Gear in China
- DSDavis Smith
It was kind of emerging at the time, early 2000s.
- HSHarry Stebbings
So you went to China to get snooker tables?
- DSDavis Smith
Exactly. Uh, went, flew to China, and with my cousin, the two of us went out there and we'd, I found a couple factories. Uh, I had googled "pool table factory China." And, uh, this is back when like the internet ... Like, I actually used these AOL disks that would get sent in the mail to our home and that would like give you thir- like 30 days of free internet. You know, the internet was so early and I, and as a poor college student, it was like I, I wasn't paying for internet, but I was using these, these free disks and found this, a couple factories in China, flew out there and started buying them and selling them on the internet.
- HSHarry Stebbings
Okay. So you, you start buying and selling these snooker tables. Respectfully, like, how did you have the cash to buy them? How did they get delivered to you?
- DSDavis Smith
I, I didn't have the cash. Um, didn't have the cash, but what we decided to do is when we listed them on eBay, we said, "10 week lead time. Custom made hardwood pool table, 10 weeks." You know, a lot of people probably are like, "I'm, there's no way I'm waiting 10 weeks." But other people are like, "Hey, I'm building my house or I have 10 weeks, no big deal." And so enough people were willing to do it where we actually used customers to finance the first inventory.
- HSHarry Stebbings
Oh.
- DSDavis Smith
And, uh, then we went to my grandma and, you know, we, my cousin and I, neither of us came from money, so my grandma, I think she lent us $10,000 and, uh, then we went to the bank and we got a small, uh, small business loan and, you know, I think it was $25,000. And so we just kind of, you know, pulled together some money from friends and family and yeah, uh, just ended up pulling a little, anything we had out of savings to kind of ... Borrowed some credit cards. We got credit cards in the mail that it was like, you know, that we
- 5:49 – 8:41
Achieving Financial Success in College
- DSDavis Smith
used to go finance the business, so yeah.
- HSHarry Stebbings
Dude, when you're doing six million a year, you're a millionaire yourself, right?
- DSDavis Smith
Sure. Kind of. On paper, I guess. Yeah.
- HSHarry Stebbings
How old were you when that happened, and were you happy when that happened? I ask because like-
- DSDavis Smith
Mm-hmm.
- HSHarry Stebbings
I remember being 21 when I made my first, and I had no friends, little in my life.
- DSDavis Smith
Yeah.
- HSHarry Stebbings
I'm just intrigued how you were.
- DSDavis Smith
You know, i- it's interesting because, uh, you know, I actually got married when I was in college.So my wife and I, we met in college and we got married. And so married very, very young. And, uh, so, uh, I had been d- I had spent two years away from college on a, on a church mission, uh, in Bolivia. So I finished college a couple years later than most people do. But I was 22, m- I got married, and then finished, finished college, and then my wife and I had our first baby, like, immediately after. My life was so different from wha- most people experience when they're in college and when they finish college. So I, you know, honestly, I was very grounded. I had so much responsibility. I, like, I had to provide, I had to be a dad, and I had to be a good husband. And so my focus was totally different from my prob- you know, probably most 23, 24-year-olds.
- HSHarry Stebbings
Can I ask, do you ever feel like you missed a bit of your childhood? People often say that to me. Like, "Oh, you never had those party days. The, you never let it out of your system. You never let off steam." Do you ever feel that?
- DSDavis Smith
You know what? I don't. I, I felt so much purpose and, uh, clarity in my life. This is such an odd thing to be talking about on a podcast, but I have actually never, I've never had alcohol, ever in my life. And so, like, I don't have a craving for it. I don't desire it. Like, I don't even know. And, uh, and honestly, like, I don't feel I'm missing anything. Like, I have such a fulfilling life. I have a beautiful family. I have purpose. And in a lot of ways, it's, it's v- it's a very different, uh, my, my experience growing up, my experience as an adult has been very different, but it's been incredibly fulfilling.
- HSHarry Stebbings
Can I ask, does the pu- And I, I, I had this beautiful schedule, but this is far too interesting. Does the purpose ever waver? And I ask because every entrepreneur starts off with that gung-ho mission purpose, and sometimes you're just not feeling it. Do you ever not feel that purpose and it wavers?
- DSDavis Smith
You know, I think one of the things I've, uh, I've had since I was a, a child was a very clear sense of purpose and mission. And so I can honestly say, like, that's never wavered. Uh, even from when I started my very first business, that pool table business, all of our passwords were connected to social impact, because that was what was in my head. That's what I wanted to do. The business had no social impact. I didn't know how to, like, meld, like, doing good and ha- and having a business, but that was my desire. That was the deepest yearning of my soul, was to go find a way to help people. And so over time, it took me about 10 years as an entrepreneur to get there, but I ended up finding a way to, to kind of marry business and purpose in one. And so yeah, it's, uh, it's something I've always had a very,
- 8:41 – 10:52
Diverse Business Ventures and Growth
- DSDavis Smith
you know, very clearly in my head of what I wanted to do.
- HSHarry Stebbings
I'm so enjoying this. Okay, so we're, we're doing six million a year in pool tables, and then we're like, "Ah, Mark Lori inspiration. I'm gonna go do, you know, baby store Amazon-style in Brazil." Take me to that pivot and that moment.
- DSDavis Smith
Yeah, so my cousin and I, uh, you know, we'd spent about six years building this pool table business. It was bootstrapped, you know, no venture money, very early digitally native brand, what we call, you know, what we say today. Back then, that, that term- terminology didn't really exist. But made our own brand, sold on the internet. You know, in the pool table space, which is a very small industry, it was kind of the leader in, in online pool table sales. So, you know, we were proud of it. At the same time, it was kind of a, a very small industry, nothing to be that excited about. But we'd built something that worked, and so we decided, uh, you know, my cousin was like, "Hey, you know, Davis, I'm going to business school. I want to... I've, my dream has always been to go to Harvard Business School. I want to go." And I'd always thought it'd be really amazing to go to the Wharton School. They have this, this dual degree program, an MBA and an MA in international studies called the Water Institute. I was like, "You know what? I'm gonna do it too." So we both applied to business school. I only applied to Wharton, to this dual degree program. I was lucky enough to get in. He got into Harvard. And then we spent two years thinking about what we were gonna do next. We still had the pool table business kinda on the side, uh, being run, and we decided, uh, you know, I, I had met Mark Lori a few years earlier, and I'd watched, you know, I had this kind of interesting business, pooltables.com. He had this business, diapers.com. And it was just like, wow, these are, you know, these are fun. It's a fun connection. We started chatting. And over the next several years, I watched his business go from five million to 20 million to 70 million, and in the meantime, I'm building this pool table business that's not growing in that way, and I'm thinking, "Wow, like, he's got a much more interesting and exciting business than I do." You know, when I was in business school, a lot of my friends were Brazilian, and I just started thinking a lot about Brazil and if there's an opportunity there. And it just kind of, this idea happened where it was like, "Hey, what if I went down to Brazil and started basically a, a diapers.com, an e-commerce platform for baby product- a marketplace for baby products?" And
- 10:52 – 14:09
Overcoming Challenges in Family Business
- DSDavis Smith
so that's what we ended up doing.
- HSHarry Stebbings
Tell me, you raised millions in venture funding there. What happened?
- DSDavis Smith
You know, i- this is a, this is a wild story. So we're in school, we raised like $4.5 million based on a PowerPoint. We'd had the success to build off of, of this pool table business, right? And so people saw these two young, you know, ambitious kids that had, uh, you know, gone to great schools and that had built a business previously. We move down to Brazil, we launch the business, and it, it kind of catches fire. I mean, things are going hot. I mean, we grow to, like, 300 employees in, like, 18 months.
- HSHarry Stebbings
Wow.
- DSDavis Smith
And so it's, ends up being kind of a darling of the, the startup story in Brazil, and we were the startup of the year in 2012. A lot of exciting growth and, uh, lots of venture capital. First time we'd raised venture capital. It ends up being a very tragic story, Harry. I mean, it was, uh, my, basically my cousin and I, we were like brothers, closer than brothers. I mean, we did everything together. We had lived on the same street i- in the US. We'd gone to school at the same time. You know, we went to Brazil and started this business together, and our relationship fell apart. Honestly, it's like, it's been, it's been over a decade, and it's, like, the saddest thing in my life. Um, you know, it's, it's-
- HSHarry Stebbings
Can I ask why, why did it fall apart?
- DSDavis Smith
It's complicated, and, uh, I think we're just, I think in, over time, we just grew apart. We had different desires, different interests, and, uh, a different vision for what we wanted to, to do, very different personalities, and, uh, we were co-CEOs, and it, it just created-... a lot of tension. And-
- HSHarry Stebbings
What did that-
- DSDavis Smith
... um-
- HSHarry Stebbings
... teach you about partnerships? A lot of founders are, obviously, co-founders. What did it teach you about partnerships and what do you advise founders in partnerships today?
- DSDavis Smith
We often hear that you shouldn't start a business with a family member. And, uh, you know, I-I think that's wise advice. Maybe the lesson I learned was... And I did something differently when I started my- the following business, which was instead of just choosing my partner from the beginning and saying, "Okay. Hey, let's go work together. Let's go find something to do together," instead, I tell entrepreneurs, "Why don't you go identify your idea? Why don't you go figure out what you want to go build and then go find the best person in, in the world to go help you solve that problem?" It probably is not gonna be your cousin. It probably isn't gonna be your brother or your best friend. And so, um, that's the advice I'd give, is go find the right person that has the right skillset that can help you go solve the problem versus someone that you, you think you'd really love working with 'cause, um, you know, it, it can create a lot of pain. And especially with a family member, it's like, I-I can't just walk away, you know. We're, we're related. We have, you know, we have family reunions and I, and I care for him. And so, uh, it creates, it creates a lot of pain. I ended up deciding to leave. I, I decided to leave Brazil, and it was very painful. Our investors had invested a lot of money. At that point, we'd raised around $40 million in venture capital and-
- HSHarry Stebbings
Is the business still going today?
- DSDavis Smith
... uh, he ran the business for, I think, another five years. Uh, four and a half or five years. And over that period of time, uh, the business ended up failing. You know, Brazil is a very, very hard place to do business. I, I don't blame him. I, I think he, he's brilliant, he's charismatic, he's, uh, he's driven, and I think there were some things probably out of control. And it's not the story that I think we all hoped and wanted it to be.
- HSHarry Stebbings
Okay. So then, we, we decide,
- 14:09 – 15:56
Founding Journey of Cotopaxi
- HSHarry Stebbings
you know what? He can run that. How does Cotopaxi come to be? How does like, "Hey, I'm gonna challenge Patagonia with this new innovative brand"?
- DSDavis Smith
You know, I, I'd say this wasn't just something... In, in some ways, it's interesting because it actually happened over like a 36-hour period. And at the same time, it's something that took... It was like a lifetime of experiences building up until this culmin- you know, this culmination experience. I was basically in bed in Brazil, and I'm, I'm so unhappy. You know, I'm feeling... I'm depressed. I'm, I'm so sad about the loss of this relationship. Um, I'm not happy. And I'm thinking about this desire I've had my entire life to find a way to help others, and I'd made a New Year's resolution that year, and I had it on a Post-it Note in the bathroom on the mirror that I wanted to change somebody's life. And I was feeling so discouraged that I'd spent 10 years as an entrepreneur, I had not yet figured out how to make a difference in the world. I had this goal. I was like, okay, I'm gonna make this small goal, just one person. I don't need to change the world, just one person. And it'd been like four and a half months, and I still hadn't done anything. And I was like, "What am I doing with my life?" Like, I just don't feel fulfilled, I'm not happy. And, uh, as I laid in bed, I just started having ideas kind of come to my head, um, about what I could do next. Uh, I got out of bed, I sat on the couch all night, the next day, and the entire following night. So 36 hours on this couch, and during that period... And I took detailed notes. I still have the journal entries on my computer, and I basically had the entire idea for Cotopaxi. Um, this idea of building an outdoor brand that could fight poverty, where we could use our, our brand and our profits to go make a difference in the world. I wrote in my notes, like, "Alone, this, a single brand can't change the world, but if we can create a brand that can inspire thousands of other businesses and millions of consumers to think differently about the purpose of business, I think we really could
- 15:56 – 20:34
Brand Essence and Identity
- DSDavis Smith
change the world." And so that was, that was the hope.
- HSHarry Stebbings
You said a single brand can't change the world. What does actual brand mean to you? I think we both feel that brand is kind of thrown around in loose term. What does brand mean to you?
- DSDavis Smith
I mean, brand, it really comes down to values and what does, what does, what is, what does it represent? What, what's, what's at the very heart of what you're doing? Why, why? The why o- of behind something. And so, for us with Cotopaxi, I always tell people, "We're not a backpack company, we're not a jacket company, we're not an outdoor brand. We're a movement of showing that business can be a force for good in the world." You know, we stand for fighting and eradicating poverty, and that is, that is at the very heart of wha- every decision we make. And if you go inside the organization, you'll see it every single day. It's like, that's the discussion that we're having, is like, how can we, how can we go accomplish this big, ambitious mission as a brand?
- HSHarry Stebbings
I think that brand is how you make people feel. I'm a big fan of, like, Maya Angelou, "It's not what you say, it's not what you do, it's how you make people feel." And I think-
- DSDavis Smith
Mm-hmm.
- HSHarry Stebbings
... you know, like Chanel as a brand makes people feel elegant. It makes people feel grace and this kind of seamlessness. I don't know if that's the same as values. Do you know what I mean?
- DSDavis Smith
Hmm. Yeah, fair. Uh, you know, maybe. Maybe. Uh-
- HSHarry Stebbings
And there's, there's no, there's no right or wrong. It's just interesting how you put... And like Cotopaxi-
- DSDavis Smith
Yeah, yeah.
- HSHarry Stebbings
... it makes me feel cooler.
- DSDavis Smith
Yeah.
- HSHarry Stebbings
Okay. Which is like, I'm not doing Patagonia, which is more obvious. The colors are cooler. And so it's different, which is better.
- DSDavis Smith
Yeah. No, you know, I really like that definition. You know, with a brand like Cotopaxi, I think what's special about it is that when people know the brand, it connects to something much deeper inside of them. It's more than just, like, how they feel, but it's like, this is something that I deeply care about. Like, I, I care about a world that is more equitable. I care about a world where we use... where we look out for the people that have been left behind. And so, if I'm wearing this brand, it's like I'm representing values that I s- that I, uh, that I hope to stand for.
- HSHarry Stebbings
Can I be direct?
- DSDavis Smith
Sure.
- HSHarry Stebbings
Of your customer population, how many people do you think buy because of mission and good versus cool, love the product, some other reason?
- DSDavis Smith
We actually know the answer to that 'cause we've done a lot of, of research on this. And, uh, and actually, I, I will kind of rewind because it goes back to when I first had the idea. I was talking to the-... to one of the founders of Warby Parker, who was a classmate of, of mine in business school at Wharton. And I was telling him about this vision that I had of building this brand, and he's like, "Davis, I love it. You know, Warby Parker has a mission. They have a mission of, uh, of using their business to do good, they help people get eye care in the developing world. But it's kind of a little more on the periphery of their brand, it's not the first thing you know about. A lot of people probably don't even know about it." And the advice that he gave me was like, "Look, Davis, people, uh... That's wonderful, but people are not gonna bri- buy your product because you're doing good in the world. You need to first create a great product." And he was absolutely right. So, I really do think that's first. Like, you have to go build a great product. But at the end of the day, we're in the outdoor industry. There's like a thousand other brands just like ours. What really sets us apart is what we stand for. And it's, it's so deeply rooted into who we are, it sets us apart in such a big way. So, it's the reason that we've had success.
- HSHarry Stebbings
How did you get first product? Like, you mentioned now the importance of that first product.
- DSDavis Smith
Yeah.
- HSHarry Stebbings
Did you just contact, you know, Outdoor Products China again?
- DSDavis Smith
You know, I mentioned earlier about if you're gonna go start a business, go try to find someone that can help you solve a specific problem. So, I knew I needed to start this outdoor brand, so I went on LinkedIn. You know, I was in Brazil at the time. I, I s- I just go do these LinkedIn searches for... I, I made a list of, like, 20 different brands that I really admired in the outdoor space, and I started doing searches for designers that had worked for these brands. And I found a few designers, a woman that had worked for a number of these brands before that did apparel, this amazing guy that had done, uh, a bunch of, of packs and gear. So, CJ Whitaker and Cherie Sanguinetti, and I reached out to them on LinkedIn. I just said, "Hey, uh, I wanna connect with you. I'm, I'm an entrepreneur. I built a few businesses in the past, but I have this vision for building this outdoor brand that's about fighting poverty, and I'm wondering if you'd jump on a call with me." We jumped on a Skype call back then, this, we had this Skype call and I just kinda sold them on this vision, and both of them said, "I'm in." Uh, so that's how we started, and because they had relationships with factories already, we flew out to these places, uh, Philippines and other places where we, we make our product, and, uh, we had relationships already. And these... Because they had relationships, these factories that normally wouldn't have given us the time of day as a brand new brand, they said, "Sure. You know, I really like this designer
- 20:34 – 23:33
Attracting Exceptional Talent for Startups
- DSDavis Smith
and why don't we give it a shot?"
- HSHarry Stebbings
Okay, really interesting. I had this debate with someone on Twitter where I said, "Fundamentally, the best founders are able to convince amazing talent from day one to join them on a crazy mission and vision." And someone was like, "Totally moronic, you're never able to do it," and like, "Great people won't just move." Do you agree with me that the best founders can convince the best talent from day one, or do you think actually no?
- DSDavis Smith
Absolutely possible. And you have to get creative. Like, you know, with them, it was like, you know, give them a little bit of equity and, uh, we figured out some creative structure around compensation if we ended up fundraising. If we didn't fundraise, it was like I didn't have to pay anything. So, they were taking a little bit of risk with me, but because of that, they got some upside with equity and it's, you know, it's been a win for them, and, uh, definitely a win for the business and brand. And so, the greatest entrepreneurs are incredible salespeople. Uh, they know how to sell. They know how to sell a vision, they know how to sell an idea, um, they know how to sell a product. And so, you're selling every single day as an entrepreneur, and I, I think that starts with that, that original idea and getting people on board.
- HSHarry Stebbings
Can I be so blunt? Does Mormonism and does religion help you sell? Because you have to sell early, don't you, in terms of tho- those early years, in terms of, like, delivering the message of Mormonism.
- DSDavis Smith
Yeah.
- HSHarry Stebbings
Does that help you sell externally?
- DSDavis Smith
Yeah. So, you know, as a member of The Church of Jesus Christ of Latter-day Saints, uh, they call us Mormons sometimes. I was a missionary. Yeah, I mentioned this, I was a missionary when I was 19, 20, 21, moved to Bolivia, and it was a life-altering experience for me. I think about it every single day for the last 25 years. And, uh, one of the greatest-
- HSHarry Stebbings
Why? Why?
- DSDavis Smith
Uh, okay, a few things. Number one, I developed such a deep love for the people there. And so, I c- I talk, I talk with the people I met there almost daily, uh, even after 25 years. Number two, I became so deeply rooted in my purpose in life, um, during those two years. I knew what I stood for, I knew what mattered most to me. I think a lot of times entrepreneurs, they're distracted by things that just don't matter. And, uh, we forget... A- and actually I can tell you. I'm, I'm in Brazil now and we haven't talked about that yet, but I'm back in Brazil right now and I'm seeing how it's become so clear to me over the last six months of being here how distracting the world can be. We focus on the wrong things; materialism, buying things. We think happiness comes from the more stuff we have. That never brings us joy. And we've known this for the whole of human history. I mean, like, the wisest people have said this for thousands of years, right? But somehow, we keep chasing the wrong things. And I think those two years as a young 19-year-old, every day was never about me. And as a 19-year-old, usually life is about you. It's like, "How do I go get pleasure? How do I go have fun? What am I gonna do when I grow up?" It's like it's all about you. But when I was 19, those two years, it was every single day you woke up at 6:30 in the morning, every night you went to bed at, at 10:30 at night. There was never a day off, there was never a vacation. You woke up and every single day was you're going out and you're looking to serve and help people. And so, it changed the lens in which I saw the world.
- 23:33 – 27:35
Pursuing More Than Just Wealth in Entrepreneurship
- DSDavis Smith
Um-
- HSHarry Stebbings
Can I ask, what do you think entrepreneurs chase today that they shouldn't be chasing?
- DSDavis Smith
Wealth. It's the wrong focus. I think, uh, so many entrepreneurs today, their, th- the reason they go start a business and what drives them is like, "How much money can I raise so that I can make as much money as possible?" And, uh, it's the wrong thing to focus on. I think if you focus instead on, uh, why do you exist, what is your purpose, what can, h- how can you make the world a better place, how can I give them a life-changing experience working with this brand, how can I make sure they're compensated fairly? If you're focused o- on, on the things that make your team happy and on make, and add value to the world, everything else will work out. I think that's where entrepreneurs get, get it wrong. They spend so much time...... focused on things that really are the wrong thing, and it actually, I think it ends up, it ends up hurting them.
- HSHarry Stebbings
Does this mean that you shouldn't raise venture capital? If you shouldn't be chasing wealth, should you be raising venture capital?
- DSDavis Smith
Uh, ab- yeah. You can absolutely raise venture capital. I mean, I think, you know, there's, there's different, uh, there's obviously different ways to build businesses. And, uh, you know, I have the pool table business, which is a longer story that we sold it. I actually bought it back a few years ago, so I actually own the business still. Uh, the pool table business. It's quite a bit bigger than it was, uh, you know, back when we, you know, back when I w- went to coll- when I went to grad school, but, you know, it's a relatively small business compared to Cotopaxi. But, uh, we converted to a benefit corporation, and we're using the profits to s- to fight poverty as well. So, uh, you know, I found a lot of, a lot of joy in that. I've had two very different experiences. One business where I, I own outright, and, uh, you know, it, it's bootstrapped, and then another business where we've raised venture capital. It's grown very, very quickly. And I have all sorts of different pressures, uh, external pressures that don't exist with the, the pool table business. And so, uh, there's different ways. There's not one way that's right or wrong. There's-
- HSHarry Stebbings
But if, but if you go to entre- if you go to VCs, uh, I'm a VC for my sins-
- DSDavis Smith
Yes.
- HSHarry Stebbings
... if you go to me and say I'm not chasing wealth, great, but I kind of want you to be. Like, you know, we, we are chasing an exit. We are chasing liquidit- not, not an exit, but like, yes, a meaningful company. But that has to translate to cash in some way.
- DSDavis Smith
Totally agree, Harry. Totally agree. And this is what's unique, I think, about Cotopaxi. It's, the thing is, my focus is not personal wealth, you know? Uh, I have, I have enough. You know, I, I, I, you know, I live a very simple life. I, I don't need much. But what I am chasing, I'm ambitious. Uh, I'm ambitious because I wanna go do something that's gonna be significant, and I wanna go build a brand that's gonna change the world for the better. I want to eradicate extreme poverty in my lifetime. And the way that we do that is by building a massive business. You go build a multi-billion dollar brand that can use its profits to go change people's lives and that can inspire many other businesses to look differently about how to build a business. So, I want to accomplish the same thing that a VC wants to accomplish. Let's go make something massive.
- HSHarry Stebbings
Okay, but do you? Okay, I'm just pushing back on you. Are we misaligned? Okay, let's say, um, Patagonia goes, "God, we're losing more and more market share to these guys. Let's pay two and a half billion for them. Let's just do it now, cut it early. Great. Thanks." As a VC, I'm owning 10%. That returns my fund. It's fundraising cycle. It's tough markets. Davis, I want, I want out now. The comp's, uh, there's a misalignment.
- DSDavis Smith
No, Harry, I will tell you, there is misalignment. There is absolutely misalignment. Uh, at the same time, I think w- we all want the same thing, ultimately. We want to grow. We want to grow-
- HSHarry Stebbings
Yeah.
- DSDavis Smith
... and, you know, I'm okay getting people great return. I'm okay providing a fantastic return to investors. Our investors have made great money. Our early investors had great outcomes. Our investors that are coming later, Bain Capital, they, you know, they invested, uh, two and a half years ago. You know, we, we-
- HSHarry Stebbings
Okay, so you let, you let people out who want-
- DSDavis Smith
We let people out, yeah. Bain Capital, they bought out a lot of our early investors, and those early investors made a fantastic return. And now Bain Capital invested two and a half years ago, we've more than tripled our revenue, you know, since they've invested two and a half years ago. And so, now Bain Capital's gonna get a return. That said, Harry, you're right. There's a misalignment. And I don't know the answer yet. I'm trying to figure out, and I'll just tell you,
- 27:35 – 31:31
Faith and Leadership: Mission-Based Challenges
- DSDavis Smith
I haven't talked publicly about this, but earlier this year, about 12 months ago, I, I knew I was leaving the company, leaving my CEO role to go, uh, lead a mission for my church, uh, in Brazil. Uh, my church asked me if I would leave my life behind, my, with my family, move to Brazil, go lead a church mission. It makes no sense, right? It's like, why would you possibly, why would you go leave this brand that's growing? You know, we'd grown 100% almost the year before. Uh, you know-
- HSHarry Stebbings
It's such a good brand. You've done such a good job, dude. (laughs)
- DSDavis Smith
(laughs) You know? So, it's like, why would you possibly leave? And we can talk more about that. But it's like, I, uh, you know, it was so aligned with what mattered to me. And so, I made the decision to leave, but I started thinking a lot about what is, what was the future of Cotopaxi? And I had this misalignment where I had Bain Capital and some other investors that were looking and saying, "Hey, you know, this has been a great investment for us. How do we get out? How do we go create a return for our investors?" Which is fine. I'm, I'm happy for them. At the same time, I wanted to build, I want to build a brand that can, that can be durable over decades. I want to build a brand that's not beholden to an investor. I want to build a brand that's, that's beholden to our mission and our purpose. And so, I actually went out and I tried to fundraise, and I went through a process about six months long that was painful. I pitched over 100 different investors, lots of family offices, and I told the story of this brand that was over 100 million in revenue, that was growing, you know, at these, at this crazy rate. It had been profitable for four years. I thought, "This is a great story. I'm gonna be able to go raise money from an investor that's committed to at least 10 years." That's what I'm looking for, is like, I want someone that's committed for 10 years. I failed. It was painful. It was sad. Like, I, I was so disappointed in myself. And I, and I'm, and I would say, I pride myself in, in knowing how to fundraise, in knowing how to tell the story.
- HSHarry Stebbings
What do you think you did wrong?
- DSDavis Smith
I don't know. I don't know. It was probably a combination of, uh, a few things, like number one, timing of the market, very hard market. You know, uh, anything in the public markets, as we all know, is just a disaster. So, you know, that, that definitely impacts things. I think part of it, too, I may be too ambitious. You know, I, I wanted to restructure the organization that gave, took power away from investors and gave power to our foundation to go drive decisions, to go, you know, to use the business truly to do good and, uh, at the same time promising great returns. It's like, we are going to be a multi-billion dollar business. We will. It's just a matter of time. And we're profitable, and we'll continue to be profitable. But we don't want to be driven to make the wrong decisions, because that's the... The mo- the biggest thing that we need to protect as a brand is our purpose and our mission. And so, I think I was too ambitious, and, uh, I think there weren't enough in- there are not enough investors that will, that say, "Hey, I'm willing to stick to something for 10 years."
- HSHarry Stebbings
Do you think, respectfully, I don't know how to say this without being too direct. Without, uh, w- your purpose-driven goodness-... is kind of concerning for investors.
- DSDavis Smith
Sure, yeah. I'd say you're, uh, for many investors it is.
- HSHarry Stebbings
How?
- DSDavis Smith
But the thing is, it was... When I started the brand, same thing, right? It's like, I pitched a hundred investors to get our first investor. You know, Kirstin Green of Forerunner, she, she backed us. I pitched a hundred investors in our first, to raise that seed round, and, uh, we ended up with a lot of people that kind of jumped on board. But I led with our mission. It's like, we are building a brand that is going to fight poverty. We're gonna use profits, and actually, we're gonna use money before we have profits to go fight poverty, so I really needed investors that bought into it. And some did, a lot didn't.
- HSHarry Stebbings
What was the price on that first round?
- DSDavis Smith
Uh, we raised three million dollars, uh, and had a... So a seven pre, 10 post.
- HSHarry Stebbings
Whoa.
- DSDavis Smith
Yeah. This is back in, uh, 20-, uh, 2014. You know, we hadn't sold anything. It was just, uh, literally a PowerPoint, and, um... But you know what? People believed in us, and Kirstin and those other early investors, they made, they made the right decision. They invested in a, in what ended up becoming, uh, a really
- 31:31 – 36:15
Business Acumen and Women's Perspectives
- DSDavis Smith
great brand and a great investment for them. You know what, Harry, the interesting thing though, I will say, I don't know, uh, I can't really explain why. Our first major investor, Kirstin Green, our second major investor, Ellie Wheeler from Greycroft, our third major investor, Brook Harley, our last investor was Bain Capital, Cecilia Chao. There's a trend. Women are leading rounds in our business. I really believe that women better understood and understand purpose in business than men did. And, um, it's not that men didn't invest. We have male investors that believed in us. We've had some amazing, uh, incredible investors that are men. But oftentimes, it was women that kind of led and believed first. But yeah, you're right. Many investors, because of our mission and purpose, are like, "Uh, I just don't know that this is right for us."
- HSHarry Stebbings
What do founders not know about fundraising that you think they should know, given the many rounds you've tried and successfully sometimes and not successfully other times raised?
- DSDavis Smith
I think a few things. Number one, I don't think most people understand how hard it is. Uh, you will get rejected a lot, and it's a tricky balance to understand. Uh, when do you walk away and you say, "Hey, I'm just realizing that I'm, the mark- the market isn't right, the timing isn't right. I'm not at the right place in the business to go raise money," or being persistent and saying, "Hey, I've got it right. I just need to listen and figure out how to better present what I'm trying to build to connect with investors"? You know, I hear a lot of times, y- young entrepreneurs saying, "Hey, I, I, you know, I've tried to raise, and for whatever reason, everyone, I, I've been rejected 10 times." And it's like, "Oh, 10, that's... Yes, of course you're gonna get rejected if you only pitch it 10 times. You need to go do this a lot, lot more." The other thing is, uh, I think a lot of entrepreneurs don't understand how big and ambitious the idea needs to be to go raise venture capital. Uh, you know, a- a lot of times they'll get it, send a deck, and say, "Hey, I'm gonna go raise money. Here's the deck." I'm looking five years out, they're raising, you know, they're, they're selling $15 million a product or something. And it's like, that's not... Venture capital is not gonna fund that business. You need to go build something that's, that's gonna do a billion dollars in revenue. You need to have that vision, and you go, you need to go sell that vision to an investor, and, uh, with confidence, and you need to go, uh, have the data behind it to kind of explain how it's gonna, how you're gonna get there. So yeah, I think people a lot of times don't understand what VCs are looking for, um, to make sure you're aligned, in terms of, you know, what kind of returns they need to get. They, they know most of the- these businesses are not gonna make it, so they need, the ones that do make it need to be very, very big.
- HSHarry Stebbings
I totally get you, and I agree. Are there any other misalignments, you think, between venture investors and founders? I think liquidity is one big one, for sure. Are there any others that you think is?
- DSDavis Smith
Well, it depends on the founder. You know, there's the founder that just kind of wants to make as much money as quickly as possible. You know, "Let's build something, scale it, sell it, you know, get a bunch of cash, and live like a king." Uh, they're gonna feel, actually, honestly, they're gonna be more aligned with a VC. Uh, you know-
- HSHarry Stebbings
(laughs)
- DSDavis Smith
... it's, it's, it's founders like me that are maybe a little bit more misaligned because I, I'm not driven by the same economics.
- HSHarry Stebbings
Do you think we are missing a product for founders like you? And what I mean by that is, I think funding is a product too, and there's different types of customers. But we, you know, I have a 10-year fund life cycle, and I have a two-year extension. I, I, um... Dude, I, I have to provide liquidity. It's my job to my investors, my responsibility. Do you think we are missing funds structures that are much longer term? Because the only ones really are permanent capital vehicles, which is quite a limited supply.
- DSDavis Smith
I believe we are, and, and only based on the experience I had in the last 12 months. Like, I wanted permanent capital. Uh, and e- even in the last 12 months, since I started that fundraising process, we've, I think business has increased 50%. It's like, it would have been a great investment for someone that would have come in and said, "Hey, we believe. You've already been growing on this, uh, amazing tear. We believe in your vision, and we're committed to a, a 10-year commitment or a 15-year commitment." And it's like, "Let's go build this together. Let's go build the next billion, multi-billion dollar brand." But very, very few investors are committed, uh, to that kind of timeline. They're all, everything's so short-term minded, which is frankly... I mean, this is the world we live in. Everyone is focused on short term versus long term. How do I get happy quickly? Uh, how do I go satisfy this instant desire that I have?
- HSHarry Stebbings
Is it bad to chase happiness? I, I heard somewhere, yeah, I think it was Walter Isaacson say that, you know, Elon Musk's specialty is he doesn't actually ever look for happiness. Um, is it bad to chase happiness?
- DSDavis Smith
I think when you chase happiness, we're oftentimes chasing the wrong thing, because just the hu- human nature, we think what brings us happiness is things that don't. We'll never find happiness when we're thinking about our- ourselves. And, uh, I found the most happiness when I'm working towards a greater cause, you know. Uh, you know, this last six months for me has been
- 36:15 – 43:33
Happiness as an Entrepreneurial Goal
- DSDavis Smith
some of the greatest joy. Was I scared to leave Cotopaxi? Absolutely. Uh, was I sad to leave? Very sad. I'm still sad. I'm still sad. I love that brand, and I, I... It was the greatest, uh, professional achievement of my life, and I loved every minute of it. I'm still sad thinking about walking away from that. And at the same time, every minute of my day t- you know, these days, is focused on someone else. This is what truly brings joy, uh, what truly beings, brings happiness. This is the stuff that fills the soul.... every minute thinking about somebody else. And so, this is where I, you know, at least for me, where I found happiness. And, you know, I, I think, uh, I think that there's nothing wrong with wanting to be happy. Uh, I just think, uh, we need to, we need to remember what actually brings happiness.
- HSHarry Stebbings
Do you think people are all as good as you? And I don't mean that rudely but some people are deeply fulfilled by materials, and they are happy with (laughs) , with whatever that may be. Everyone is different or is everyone the same do you think?
- DSDavis Smith
Oh, I mean, everyone is different for sure, but at the same time I, I mean, I think humans, uh, we're wired very similarly. I, I actually have a hard time believing that, that materialism brings anyone lasting joy. And I think just part of being human is like, we care deeply for others. I mean, that's what makes us human. It's like we have empathy and compassion for other people, and I think, yes, are there exceptions? Of course, there are exceptions, but I think overwhelmingly, humans care about-
- HSHarry Stebbings
But you're not sure we're getting worse, we're getting more and more isolationist, we're getting more and more self-important, self-centered, and actually it becomes more and more protectionist around myself versus the world?
- DSDavis Smith
Um, it's possible that that's, that's true. Um, you know, I, I also tend to think that, uh, that humans in a lot of ways, we're better than we ever have been. I mean, I think we live in ... While there's so much violence in the world, there's so much, uh, pain and suffering, uh, we actually look at the world, it's so much better than it was a couple of hundred years ago. Um, there is less violence than there was a few hundred years ago, there's less poverty. You know, 94% of the world lived in extreme poverty 200 years ago. In 1820, almost the entire human population lived in extreme poverty, it's now 8.5%. It's like, it's an amazing world we live in. I wish we had a world that, that was less about tearing others down and more about building others up, and, you know, I think we have a, a fundamental lack of great leadership in, in the world. And, but at the same time, like, why does anyone, why would anyone want to lead? Because when you, when you volunteer to lead, uh, you get torn down, you get picked to pieces if you ever disagree with someone or think differently, right? So it's like, there's not a lot of incentives to want to go take on these, these great ... You know, I look at, uh, the presidential election in the United States and it's like, how in a, in a country that size do we not have more inspiring leadership that's stepping up?
- HSHarry Stebbings
Well, the truth is you do that just at Goldman Sachs earning six million a year, or in some other private market earning a lot more-
- DSDavis Smith
(laughs)
- HSHarry Stebbings
... not having the shit of daily papers and tabloids. Can I ask you, going back to the, the venture side, people often say that VCs detract more value than they add. Do you think ... And cash is a great value on its own, to be clear, but do you think VCs provide much value outside of funding?
- DSDavis Smith
Oh, yeah. I think they provide tremendous value. Uh, actually, I think it's a game changer for me. You know, I've done both and I'd say one of the greatest advantages is the value add of investors. Uh, having brilliant minds around the table that are helping you make better decisions.
- HSHarry Stebbings
In what way? Is it like hiring? Is it like strategic expansion? Is it new product? What ways is it game changer?
- DSDavis Smith
I mean, all of the above. Uh, you know, I think of the investors I've had around the table, you know, I've just, I've made much better decisions and I've been able to recruit better talent because I have, I have credibility, because we have, you know, someone with credibility that's at the, that's on the, at the board table. Um, they help me close, you know, hiring. It's like I, I say, "Okay, I need this person closed," I go get Kirsten Green or someone from our board, Cecilia Chau from Bain Capital, to go jump on a call. And it's like, you know, they, I can help, I can attract and retain talent better. Uh, I'm making better decisions as a business leader. You know, a lot of times as a business leader, you know, I'm driven by our impact and I, I love people, and so I'm very, a very people-focused leader. And sometimes I need someone on the other side of the table to say, "Hey, I, I know how much this matters to you, but here's a different perspective," and like, "Here's another way we could be thinking about this."
- HSHarry Stebbings
What was the best first meeting you had?
- DSDavis Smith
Kirsten Green. I know I've mentioned her a few times, uh, and, and I, the reason why is because she was our earliest investor. That one was really special t- for me, because I, I saw it in her eyes, she believed. She believed in what, she believed in this vision. You know, I, I didn't win her over instantly. I, I, I had to do some arm twisting. There was some arm twisting that had to happen. I think she felt the passion that I had for why this brand needed to exist, and ultimately she, uh, she took a bet on us, and I'm so grateful for it.
- HSHarry Stebbings
Can I ask, I heard that COVID was actually a time when you grew the company to new heights, and during the pandemic you excelled, new products, new company rituals. What did you do and what worked?
- DSDavis Smith
Yeah, COVID was an interesting time for us. Uh, in some ways it was what allowed us to break out. Although it wasn't interestingly, it wasn't our highest growth. Our slowest growth year in the last 10 years was actually 2020. We grew 40% that year, but, um, we were profitable, significantly profitable. And it was 'cause we tightened our belt in such a big way. Uh, we didn't lay people off, uh, but we all rallied together in a big way. And I just told the team, "Look, I don't want to do layoffs. I'm gonna take a big pay cut, the executive team is gonna take a big pay cut. We're gonna ask the entire team to take a 10% pay cut for three months and then a 5% pay cut for the rest of the year. Let's all experience a little bit of pain together to save everyone's jobs, and let's rally together." And, uh, we doubled down on our social mission, we gave 3% of our revenues that year to impact work. You know, when everyone else would have said, "Hey, let's not give money this year, like, we don't have the money to give, it's a, it's a scary time," we instead, from the, from day one of the pandemic, I committed to our team that we would not waiver on our impact work. And so we rallied together and we innovated, we started selling masks, face masks, which was, uh, outside of the scope of what we normally did, but we sold a lot of them, and it, it really kind of saved our business.
- HSHarry Stebbings
Does anyone internally go, "Hey-"... I, I get it on the giving. But I've got a family. Like, if I don't need to take a pay cut and you make me take a 10% pay cut, come on.
- DSDavis Smith
Well, look, uh, you know, we have a team of believers. You know, they are not there because this is, uh, a career move. They are there because it is a calling. They feel called to this work. And at the end of the day, you know, we ended up giving everyone what they, what they had given up. At the end of the year, we gave everyone bonuses. We c- We gave them everything that they had given up and more. And what I think we all believe is that when we do the right thing, when we commit to our mission first, the business is gonna be better. I really believe that. You know, the reason that our business has worked is because of our mission.
- HSHarry Stebbings
Is there any time when doing the right thing and the business being better are at odds? Be it margin optimization, be it letting go of people, whatever that may be. Is there ever a time when doing the right thing and the business are at odds?
- DSDavis Smith
Of, I mean, of course. Uh, of course,
- 43:33 – 1:02:42
Implementing Work-Life Balance Strategies
- DSDavis Smith
uh, and I think in the short term, yes. Uh, maybe, uh, you know, one quick example. You know, when I was in Brazil, uh, I, uh, was living in Sao Paulo, 20 million people, very busy city, traffic is crazy. It would take an hour and a half to two hours to commute, uh, eight kilometers, five miles. I wanted to see my family, you know? I had two little girls at home and, uh, I wanted to be a great dad. And so, I started ... I decided I was gonna leave the office at, at, uh, 5:00, 5:30 every single day, which in Brazil was unheard of. You know, most people would work till 7:00 or 8:00 or 9:00, especially in a start-up. It's like, "What are you doing leaving at 5:00 or 5:30?" And I actually had one of our investors say, "You know, Davis, if you leave at that time, the entire team's gonna leave at that time." And I said, "You know what? I'm, I'm great with that." I, I want these people to go home and, and balance their family life and this work life. And, uh, you know, in the end, what ended up happening was people did leave when I left. And we also ended up recruiting some of the most amazing female talent in the country because we started having this f- th- a huge number of female executives that heard about this and said, "You know what? I want to be a mom too. I have kids at home and I don't wanna just work till 9:00 PM and this is a place that respects families." And so we had men and women that started joining our team saying, "I wanna work at this place. I'm willing to take a pay cut. I'm willing to wait, you know, to go, go to join this start-up that's high risk versus, you know, this big company I'm at because I wanna go be part of a brand and a culture that, that aligns with my values." So, uh, I think in the short term, sure, maybe. But I think in the long term when you're doing the right thing, you end up having great results.
- HSHarry Stebbings
Oh, I'm gonna get into trouble for this, but fuck it. Anyway, I'll do it. Um, I don't... And I'm just kind of teeing you up here, but, um, I don't think you can be truly, truly great and have balance. Let me just pause on that one. You can build a b- an, a billion dollar business is amazing, huge. No one does that, point zero. But like, truly, truly great, generation changing... Patagonia, they say, "Let's go surfing, let's go surfing." Speak to anyone that works for them. It's like, the most intense full-on culture you could ever have. Like, if you wanna build a $10 billion plus, there's no balance.
- DSDavis Smith
You know what? I, uh, I think I disagree with this one. I, I disagree. (laughs)
- HSHarry Stebbings
Hit me. Hit, come on.
- DSDavis Smith
I think... And...
- HSHarry Stebbings
Can you name, can you name me one?
- DSDavis Smith
Let's just look at the Cotopaxi case 'cause that's the case I know the best, right?
- HSHarry Stebbings
Yeah.
- DSDavis Smith
It's like, you know, 10 years and, uh, for 10 years, did I put a lot of work into the business? Of course I did. I put a lot of work into the business. Uh, I worked a lot of long hours and at the same time, I really did have balance. And it's not that every single day was perfectly balanced. That's not, of course, not the case. But when I look at the whole of my time building this business, I was very balanced as a father. I've got, I've got four kids. I spend a lot of time with my family. I spend a lot of time, uh, doing social impact work that I care about. I spend a lot of time volunteering with my church. Um, you know, every, uh, several nights a week, uh, f- several hours each night, uh, Sundays, you know, for 12 hours a day. Like, I prioritize the things that matter to me and they weren't just work. And at the same time, you look at what Cotopaxi has done. Uh, are we a multi-billion dollar business? Not yet, but we will be. If you look at, you know, the percentage of businesses that have s- that have started in the last 10 years, we are in the top 1%. And so, um, I think we're a great example of a business that, that has shown that, yes, you can have balance and you can still build an extremely efficient and great business that's doing great work. You don't have to put in a 120 hours a week, 100 hours a week and not have any balance and, and torch, you know, family relationships and everything else just to, to go build a business.
- HSHarry Stebbings
Uh, I, I do have to ask, do you ever think about like, what it means to give effectively? Because like, I, I speak to many, you know, billionaires who have philanthropic arms of family offices and all of them say, actually, that it's so much harder to give than it is to make, which, you know, sounds like the thing a billionaire would say. Um, but, (laughs) um, how do you think about like, effective giving and do you have to own the vertical of giving entirely to be effective?
- DSDavis Smith
No. In fact, I'd say you shouldn't own the vertical entirely, uh, to give effectively. I think you specialize in what you're great at. And as a, as a brand, we specialize in building a great brand and building great product. And, uh, we then identify the world's best, uh, nonprofits. The world, you know, the, the nonprofits that are out in the, in the world fighting poverty, uh, that are focused on the areas th- that we believe are really critically important. Education, healthcare, livelihood training. Those three pillars, we believe, are inextricably linked to poverty alleviation. We're not gonna go start a nonprofit that's go solving, that's solving education challenges for refugee, you know, Venezuelan refugees in, in Ecuador. Um, but we can find a nonprofit that specializes in that and we can go donate to them and support the work that they have and we can go help tell their story and the amazing work that they're doing. And so, you know, this is... I've definitely learned a lot of lessons about giving. When we first started the business, uh, I was leading our impact work, not because I was an expert, just because, uh, I was passionate about it and we didn't have someone that had more experience and so, I chose a few nonprofits that I cared about to go support. One of them was, uh, was a little orphanage in Bolivia and, uh, we've-... uh, what I found out about, eh, about 10 months into the business, we hired a chief impact officer, and she had worked for Salesforce. She led the Salesforce Foundation. She'd done all this great work, and she came in and she basically told me I was doing it all wrong, and she was right. Um, you know, I hadn't been disciplined enough in identifying what were the specific root causes that we were tack- tackling, how were we measuring the impact that we were having, and how were we... how did we report on that impact work. And so we now have... You know, every year we release an impact report that I would say, uh, I've never seen a better impact report that's more thorough, more transparent, and, uh, I, I think, uh, you know, I think bringing in experts that know how to give is gonna be a key to doing it right.
- HSHarry Stebbings
Can I ask you, speaking about kind of bringing in talent, um, a CEO transition is a really hard thing to do, as you said about your love for the brand and how much of a part of you it is. Can you take me to the CEO transition and your biggest lessons having gone through it on what it means to do CEO transition well?
- DSDavis Smith
You know, this is the most painful thing for a founder, right, is, uh, when you get to the point where you recognize, uh, "I may not be the right person to, to continue building this brand and leading this brand."
- HSHarry Stebbings
Was that it here, though, or was it the, the calling? Do you know what I mean?
- DSDavis Smith
It's...
- HSHarry Stebbings
Because it's common.
- DSDavis Smith
You know, I would say it's a little bit of both.
- HSHarry Stebbings
Mm-hmm.
- DSDavis Smith
Um, you know, eh, they, they kind of coincided simultaneously. This is one of the advantages of having a great board, is they help you see blind spots, and I, you know, my board, uh, was so proud of the work that I'd done in building this brand, and at the same time, I wa- started hearing from board members saying, "Hey, we think you'd benefit from having a right hand, a, a company president that had done this before, that had taken a business from 150 million in revenue to a billion and a half in revenue. You've never done that, Davis," and they're right. I had never done that. I, I had no idea how to do that, and so, uh, I started thinking a lot about, "Okay, what kind of person-"
- HSHarry Stebbings
Do you, do you, do, do you need that, Davis? You'd never sold scuba gear either. You'd never sold-
- DSDavis Smith
No.
- HSHarry Stebbings
... snooker tables. Like, you... Everything we're told, you need someone who's done it before, but it's always the first time for someone, and I'm just pushing you here. Maybe you did, but-
- DSDavis Smith
No, for sure, you know, and could I have stayed, could I have stayed and kept doing it? Sure. You know, I, I probably would have figured it out. At the same time, like, I care a lot more about, I wanna go have the biggest impact we can possibly have, and if I can get someone to come in and do a better job than I could do, I'm gonna go have a bigger impact. It's not about, like, what's best for me or what I want. It was, for me, it was really about, how do we go have the biggest impact? And so I listened to the board and I thought, "You know what? I think they're right. I think they're right. I would benefit from this," and I started a process. Bain Capital gave me a handful of search firms to go talk to. I talked to four or five of them. I didn't want... I didn't hire any of them, and I decided, "I'm gonna go run the process myself." And, uh, Bain Capital was like, "That is a mistake. You should not do it. You should hire these professionals to go do it." But look, like, I asked them to give me, uh, blind profiles, profiles of people that they would go put in this role. I looked at these lists and it was like, number one, I know, like, 30% of the people on the lists already, and they are people I would not choose for this role, or I'm looking at them and it's like, "These are not the kind of people I'd want." And I felt like if I pay them a bunch of money and Bain Capital is on my, is on my tail, like, saying, "Hey, who are they bringing to you? Who's gonna be the per- best person?" Once they, we narrow it down to the top one or two or three people, I'm gonna be forced to choose one of those people because we just ran this expensive process. Instead, I said, "Hey, I know what I want. I know what the brand needs, and so I'm gonna go run the process." I, uh, reached out to about 100 different, uh, friends, uh, Joey from Allbirds being one of them and a bunch of others, and I just said, "Hey, who are the best leaders you know? When you think about a consumer brand leader, who are the best leaders you know? Who are the people I should be talking to?" And a former president of The North Face that I reached out to has, who has become a friend, he said, "Hey, there's one person that I think you should be talking to." His name is Damien Wong. He's the CEO of Eddie Bauer, but he previously led product at Patagonia. He was... He led product here for me at The North Face. He is brilliant, maybe the most talented product person in the outdoor industry. I don't know that he'd ever leave his job at Eddie Bauer, uh, you know, but he'd be... If you could get him, he'd be amazing. So, I get on the, on this phone call with Damien and I start telling about this vision for this brand, and it turns out, you know, the name Cotopaxi is named after a volcano in Ecuador where I lived as a teenager. It turns out that Damien had done a study abroad when he was at Duke, uh, for, uh, like, six or nine months in Ecuador. He'd climbed Cotopaxi, the volcano. He felt deeply connected to our mission. Hi- Both of his parents are immigrants. So it's like all the sudden, it was like he was this dream, uh, person that you just would, would hope that someone like him would be willing to take the role, was interested. The only problem is, he wanted to be CEO. He didn't wanna be president. He didn't want to be my right hand, and I had some other options that were really great right hands that would have been happy being president forever, um, and at the end of the day, I ju- I just decided, you know, uh, "I'm not in this so that I can be the CEO forever. I'm in this to go have an impact." And so I, I chose to hire Damien, and then shortly thereafter, my church asked me if I'd be willing to go to Brazil, and so, uh, it all kind of lined up and worked out perfectly.
- HSHarry Stebbings
Weird question. Do you think Patagonia have lost their roots in terms of that, uh, outdoors nature? Now they're the VC parado- like, parody of, you know, corporate jackets, and there are corporate jackets all over the world. I'm sure a lot of their revenue's in corporate jacketing and the like, and it's probably 5% that is outdoors. Do you think they've lost their way, and do you worry about losing yours?
- DSDavis Smith
You know, uh, I don't know that... I don't know if Patagonia's lost their way. I, I would probably say no. Uh, I don't think they have. Um, I think they've stayed true to their mission so, like, incredibly well over decades, and in fact, this last move, I think, by Yvon Chouinard was brilliant, uh, and a way to protect the brand and say, "Hey, we don't care about getting the most money out of this business, uh, for me or for shareholders." Uh, I think they've been very true to their mission. Um, you know, the cool thing about Cotopaxi is, like, our mission has always been about our purpose. It's not about, uh, being the ha- the top of the mountain, the most hardcore, uh, outdoor brand. Yes, we make incredible outdoor gear.Um, I, I think the one thing that I'd love to do better though, uh, than what I've seen Patagonia do, uh, and this is coming from someone with deep admiration for Yvon Chouinard and for Patagonia, I guess if there was a criticism I'd have is, why, after 40 years, was he the only shareholder? I fundamentally disagree with this. Uh, I'm proud that so many of our ... We have people that work in our warehouse, uh, that lead our retail store operations that have equity. I just, I believe that wealth needs to be better distributed. And, uh, I actually think it's a win, eh, for, for Cotopaxi to ... Like, I don't want to give the company away to a, to a foundation. I actually want to create something that can create wealth for many people, uh, within our organization, and that can allow them to go, uh, pass on this to their children and allow their children to go have new opportunities. I want the business to continue doing good, but I think there's a way to preserve our mission. I, I'm a believer in capitalism. I believe that capitalism, if it's done right, and it needs to be done better than it has been, but I think that it can, it can solve a lot of problems. And, uh, so yeah, that's something I, I aim to maybe do a little differently.
- HSHarry Stebbings
Can I ask you, you mentioned a couple of times about, you know, your being a father. Um, you know, we have many, many, (laughs) many thousands of fathers that listen to this and parents that listen to this. What does being a great father mean to you, Davis?
- DSDavis Smith
Well, first of all, I'll say that being a f- a father is the most important role that I have in my life and it's th- it brings me the most fulfillment of anything I've ever done. I'm not a perfect father and, uh, you know, I think it's hard, like, to your point, it's hard to balance, uh, you know, the ambition to go build something great and to be excellent at it and to be a great dad. One thing, one realization I had a few years back was that I was being more deliberate and intentional about my company culture than I was about my family culture. I've been very specific in Cotopaxi about identifying core values, about being, uh... specifically creating rituals and traditions that reinforce the values. Every single day, I tracked and measured our culture.
- HSHarry Stebbings
Yeah, so how do you track and measure culture? It's traditionally quite, uh, intangible. How do you track and measure?
- DSDavis Smith
Yeah. Uh, there's a number of great tools. One of my favorites is actually a, a company called Officevibe. It sends out polls through Slack. We, we use Slack. And I measure, uh... Literally every day, I'm, I'm tracking and measuring our culture. And I can tr- I can slice the data based on gender, based on tenure in the company, based on all these different metrics. I can look at each department and I kinda see where there are issues, where there are problems. And I can identify things before they blow up, and so I can start seeing trends. I, I was so intentional about my company culture, and when I came to my family culture, the organization that mattered the most to me, I was not following any of those things. And so my wife and I actually sa- We sat down and we created, we identified the values that mattered most to our family, and we put them on our wall. And they actually ... They're, they're aligned with, uh, S-M-I-T-H, r- our last name, Smith. Each one of those stands for something. Our children all know what they stand for. Once a week, we have a meeting, uh, with the whole family, a family evening that we have together, and we talk about our goals, we talk about these values. We've created rituals and traditions that have changed our c- our family culture. And so I think being a great dad is being intentional.
- HSHarry Stebbings
Uh, well, so S-M-I-T-H. Can I, uh ... If you're able to share. I don't mean to pry, I'm just intrigued. What do they stand for?
- 1:02:42 – 1:07:49
Quick-Fire Round
- HSHarry Stebbings
could talk to you all day. I want to move into a quick fire round. So, I say a short statement. Having just peppered you with questions about your marriage changing with children, which was entirely on the cards.
- DSDavis Smith
(laughs)
- HSHarry Stebbings
Uh, I'd love to, I'd love to start with, what piece of content would you most recommend someone engage with today if they were to pick up anything, video, movie, book, passage, whatever?
- DSDavis Smith
The content that I've been most into the last, I'd say six months, it's interesting because I wouldn't have said this six months ago, um, and it's very specific to the role I'm in today. And many people that are going to listen to this are not religious, and I'd say that's, that's great. The parables of Jesus Christ, mind melting for me. I've been studying them deeply the last six months. They are so deep, they are so profound, and there's so much meaning in them that's, that's beyond the surface. And I found like as I study those parables, that content, this is some of the greatest content that's ever been created. In 2,000 years, I find so much clarity and so much purpose and understanding of how I can become a better person and why it matters. And so, I know this is old, that's old school advice, it's not as exciting as saying, "Hey, go follow this one podcast," or, "Go read this one thing." But, uh, you know, for me, just given in the phase that I'm in right now, I'd say it's been the... some of the best content that's ever been created.
- HSHarry Stebbings
Behind 20VC, Davis. Just, just important-
- DSDavis Smith
Behind 20VC. Behind 20VC.
- HSHarry Stebbings
Important just to that expectation.
- DSDavis Smith
(laughs)
- HSHarry Stebbings
We don't want anyone upset when they do engage.
- DSDavis Smith
(laughs)
- HSHarry Stebbings
Um, tell me, what have you changed your mind on in the last 12 months?
- DSDavis Smith
Well, you know, I talked to you about that, that failed fundraising process. And, um, I was so convinced 12 months ago that I would never take this company public, that I didn't want to sell it to anyone, I just wanted to stay independent and private forever. And I'd say I've changed my mind. I, I don't... I'm open, I'm open to all options.
- HSHarry Stebbings
Why did you change your mind there?
- DSDavis Smith
All that matters to me is that we stay true to our values. And if we can do that, um, through an M&A process, if we can do that by going public at some point. You know, going public is, I have a number of friends that have taken companies public over the last few years, it has been depressing. It has been depressing to watch what they've gone through. So, there's not a lot... I look at that, I'm like, "Why would I ever want to do that?" But I think at the right time, let's say the, uh, you know, let's say Cotopaxi is, you know, 500 million in sales and has, uh, you know, 75 or $80 million in EBITDA. Uh, at that point, it's like, it's stable. You know, the business is stable. Uh, I think that is kind of a phase where you could go public and it would be okay. I think a lot of companies are going public way too early. They're not profitable enough, uh, they're not stable enough, the, um, they're not meeting expectations of investors, and I think that's, that's the biggest risk is, uh, you know, going public too early. But if we did it at the right time, maybe it would make more sense.
- HSHarry Stebbings
Do you worry about public market valuations of consumer brands just crushing your potential? Like, you know, we mentioned Joey in, in Allbirds, um, yeah. Just pure... I- I love Joey and I know you do, too. A, a tough ride there. I mean, tough ride across the board for all things consumer. Warby Parker is not easy either. Do you worry about that?
- DSDavis Smith
Of course. No, of course I worry about it. And I, I think this is the, this is, uh, the challenge of public markets is, you know, Joey is a great example. Arbur- Allbirds, you know, their, uh, you know, their, their peak valuation versus, was versus where they are today, it's down like 95%, right? Or, or more. But their revenue is still... They have a great company, they have an incredible brand. Joey's done such a beautiful job in building this company and they've got great, great product. And so, um, you know, they've had some challenges and, you know, revenues, I think have maybe shrunk a little bit, I'm not sure. Not 95%. But the, the public markets, you know, they're so fickle. And so, um, it, it creates a real challenge to run a business when you're so dependent on what the public markets are valuing the business at. That's where... That's the nice thing about being in the private markets, you know. VCs, PEs, you know, they're, they're not going to look at your business and devalue the business by that much just because, um, you know, a, a hiccup in, in, in the business.
- HSHarry Stebbings
You can choose a dinner guest, all right? Dead or alive, who would you choose to have dinner with, and what would you ask them?
- DSDavis Smith
I love adventure.... I love risk-taking. I love seeing the world, I love discovering things. Um, you know, every year I do a survival trip or two where I go survive on an island, bring no food, spear fish, eat coconuts, build a shelter. I love this type of thing. And so I love reading about explorers, I love reading about people that have done really hard things. So Ernest Shackleton is just this, uh, this figure that I just admire so much. I love the story of the Endeavor, the HMS Endeavor, and how, you know, he goes down, gets stranded in a- Antarctica. For two years, they live on this iceberg, basically, you know, and everyone survives. Like, he is such an inspiring figure. So someone like Ernest Shackleton, uh, is someone, or Roald, r- you know, Roald Amundsen, you know, the Norwegian explorer. You know, there are some really great explorers that I'd love to, to have at the dinner table.
Episode duration: 1:12:51
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