20VC Cotopaxi From Selling $6M of Pool Tables to Scaling $150M in Revenues and Challenging Patagonia, Fundraising Lessons from 100+ Rejections & What Founders Do Not Understand About VC with Davis Smith, Founder @ Cotopaxi

In a revealing conversation with Harry Stebbings on "20vc," entrepreneur Davis Smith shares his journey from selling pool tables to founding the outdoor brand Cotopaxi, which champions social good and is projected to hit $160 million in revenue in 2023. Despite its success, Davis faced challenges, including a difficult fundraising experience, and navigated the complexities of maintaining his company's mission-focused ethos while considering venture capital pressures. He also discusses the importance of family, work-life balance, and his commitment to fighting poverty, which led him to temporarily leave Cotopaxi to lead a mission in Brazil. Davis's story is a testament to the power of purpose-driven entrepreneurship and the potential for businesses to drive significant social impact.

• Davis attempted to raise funds from over a hundred investors, including family offices, for a brand with significant revenue and profitability.
• He sought a long-term investor committed for at least ten years but ultimately faced rejection.
• Davis emphasizes the difficulty and frequency of rejection in fundraising.

"I pitched over a hundred different investors, lots of family offices, and I told the story of this brand that was over a hundred million in revenue. It had been profitable for four years. I thought, I'm gonna be able to go raise money from an investor that's committed to at least ten years. That's what I'm looking for. It's like, I want someone that's committed for ten years. I failed. It was painful. I don't think most people under hand how hard it is. You will get rejected a lot."

This quote illustrates the challenge Davis faced in securing investment for a well-established brand. Despite the company's profitability and revenue, he was unable to find an investor willing to commit to a long-term partnership, highlighting the harsh realities of fundraising.

• Harry Stebbings introduces Davis, the entrepreneur behind Kodopaxi, an outdoor brand competing with Patagonia.
• Kodopaxi has seen remarkable growth and profitability, with revenue expected to reach $160 million in 2023.
• Harry discusses the importance of integrated digital tools like Notion and AI-powered customer service platforms for entrepreneurs.

"This is an entrepreneur who starts off selling pool tables. He scales that business to $6 million a year. He then launches the Challenger brand to Patagonia. That is Kodopaxi. And they have scaled today to be one of the leading outdoor brands profitable for the last four years and expected to do $160,000,000 in revenue in 2023, up from $55 million just two years before."

The quote provides an overview of Davis's entrepreneurial background, from starting with pool tables to scaling Kodopaxi into a leading outdoor brand. It emphasizes the company's significant growth and profitability.

• Davis's childhood involved moving to different countries in Latin America, which instilled in him a deep desire to help others.
• He believes that moving frequently as a child helped him develop compassion, empathy, and the ability to think differently, which later became strengths in his entrepreneurial journey.

"I had moved to Latin America as a four year old, grew up in a number of different countries, the Dominican Republic where we first moved and I was four. And then we ended up, I spent a bunch of my childhood and teenage years in know I'd always known that I wanted to find a way to help people, I think."

Davis's quote reflects on his childhood experiences in Latin America and how they shaped his desire to help others. This foundational value would later influence his approach to business and entrepreneurship.

• Davis started selling scuba gear on eBay during college, which led to the idea of selling pool tables online.
• He and his cousin financed their first inventory by using customer pre-payments and small loans from family and banks.
• The pool table business grew to $6 million a year, but Davis remained grounded due to his responsibilities as a young husband and father.

"One night, I was talking to a friend of mine, and he mentioned pool tables, and it just clicked, and it was, know I could do that. I bet I could go to China to get. Exactly. Flew to China, and with my cousin, the two of us went out there, and I found a couple factories. I had googled pool table, factory china, found a couple of factories in China, flew out there, and started buying them and selling them on the Internet."

Davis's quote explains the inception of his pool table business, highlighting his initiative and resourcefulness in identifying and capitalizing on a market opportunity.

• Davis and his cousin, after building a successful pool table business, decided to pursue business school at Wharton and Harvard, respectively.
• Inspired by Mark Lori's diapers.com, Davis identified an opportunity in Brazil and raised $4.5 million to start an e-commerce platform for baby products.
• The business experienced rapid growth but ultimately led to a painful falling out between Davis and his cousin, which taught Davis valuable lessons about partnerships.

"I'd met Mark Lori a few years earlier. I had this interesting businesspooltables.com. He had this business, diapers.com. We started chatting, and over the next several years, I watched his business go from 5 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, he's got a much more interesting and exciting business than I do."

This quote captures Davis's inspiration to pivot to e-commerce in Brazil after observing the success of diapers.com and recognizing the potential for similar growth in a different market.

• The idea for Kodopaxi came to Davis during a period of introspection and dissatisfaction with his life's direction.
• He envisioned creating an outdoor brand that could contribute to poverty alleviation and inspire other businesses and consumers to recognize the potential for business to effect positive change.

"I basically had the entire idea for Kodopaxi. This idea of building an outdoor brand that could fight poverty, where we could use our brand and our profits to go make a difference in the world. And we could. Hopefully, I wrote in my notes, like, alone, 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 change the world."

The quote outlines the conception of Kodopaxi as a brand with a mission beyond profit, aiming to fight poverty and inspire a movement towards socially responsible business practices.

• Davis defines a brand not by its products but by its core values and the movement it represents.
• For Kodopaxi, the brand stands for fighting poverty and demonstrating the power of business as a force for good.

"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 know. We stand for fighting and eradicating poverty."

This quote encapsulates Davis's belief that the essence of a brand lies in its values and the impact it seeks to make, rather than the products it sells.

• Brand connection goes beyond how someone feels; it reflects their values.
• Driving a particular brand, like Tesla, can signify personal values and what matters to an individual.

"And part about driving is like it says something about what matters to them, what their values are. Right. This kind of shows what matters to me."

This quote emphasizes that the brands people choose to associate with often reflect their personal values and what they consider important in life.

• People may not buy a product solely because the company is doing good in the world.
• A great product must come first before the mission or values of the company.
• In competitive industries, what sets a brand apart is what it stands for.

"But at the end of the day, we're in the outdoor industry. There's like 1000 other brands just like ours. What really sets us apart, it's what we stand for."

The importance of having a unique brand identity is highlighted here, indicating that in a saturated market, the values and mission of a brand can be a key differentiator.

• Finding talent to address specific problems is crucial when starting a business.
• Leveraging LinkedIn to connect with industry professionals and pitch a vision can lead to valuable partnerships.
• Existing relationships with factories and suppliers can give new brands a significant advantage.

"And because they had relationships with factories already, we flew out to these places, the Philippines and other places where we make our product, and we had relationships already."

This quote shows the strategic approach taken to establish a new brand by leveraging the existing networks of industry professionals.

• The best founders can convince top talent to join their mission from the beginning.
• Creative compensation structures, including equity, can incentivize early team members.
• Entrepreneurs must be able to sell their vision and ideas effectively.

"I think the greatest entrepreneurs are incredible salespeople. They know how to sell. They know how to sell a vision, they know how to sell an idea, they know how to sell a product."

The quote underscores the importance of sales skills in entrepreneurship, especially in terms of rallying a team around a vision.

• Personal experiences, such as missionary work, can deeply influence an entrepreneur's purpose and focus.
• Avoiding distractions and focusing on service can change one's worldview and approach to business.
• Rooting a business in purpose rather than materialism can lead to more meaningful success.

"And so it changed the lens in which I saw the world."

This quote reflects how missionary work has profoundly impacted the speaker's perspective on life and business, emphasizing service over self-interest.

• Entrepreneurs often chase wealth, which can be the wrong focus.
• Focusing on purpose, making the world a better place, and creating value for employees can lead to better outcomes.
• Chasing wealth should not be the primary motivator for starting a business.

"I think if you focus instead on why do you exist? What is your purpose? How can you make the world a better place?"

This quote suggests that entrepreneurs should prioritize their company's purpose and the impact it can have on the world over personal financial gain.

• Raising venture capital is compatible with having a mission-driven business.
• The challenge is aligning investor expectations with the company's long-term mission and purpose.
• Entrepreneurs must navigate the tension between delivering returns and maintaining their mission.

"I'm okay providing a fantastic return to investors. Our investors have made great money."

While acknowledging the need to provide returns to investors, this quote also implies that it is possible to do so while staying true to a company's mission.

• There can be misalignment between founders and investors, especially regarding exit strategies.
• Founders may wish to build a long-term brand, while investors might seek quicker returns.
• Open dialogue and clear expectations are essential to navigate potential conflicts.

"There is misalignment, Harry, I will tell you. There is misalignment."

This quote recognizes the potential for differing goals between founders and investors, particularly in terms of the timeline and nature of returns on investment.

• Fundraising is challenging and often involves facing rejection.
• Entrepreneurs need to be persistent and adapt their pitch to resonate with investors.
• Understanding the scale of ambition required by venture capitalists is crucial for successful fundraising.

"You need to go build something that's going to do a billion dollars in revenue. You need to have that vision and you need to go sell that vision to an investor and with confidence."

The speaker highlights the importance of having a large-scale vision and the ability to convincingly communicate it to potential investors for successful fundraising.

• Women investors may have a better understanding of purpose-driven business.
• The speaker's experience suggests that women-led investment rounds have been significant for their business.

"Our first major investor, Kirsten Green. Our second major investor, Ellie Wheeler from Greycroft. Our third major investor, Brooke Harley. Our fourth major investor, Lauren Iveson."

This quote lists the women investors who have played a crucial role in the company's funding, suggesting a trend in their understanding and support of purpose-driven businesses.

• Fundraising requires understanding investor expectations and the market.
• Entrepreneurs must balance persistence with the reality of the market and their business stage.
• Presenting a business idea with the potential for significant growth is key to attracting venture capital.

"I hear a lot of times young entrepreneurs saying, hey, I've tried to raise and for whatever reason, everyone, I've been rejected ten times and it's like, oh, ten, yes, of course you're going to reject if you only pitch it ten times."

The speaker advises that persistence and volume in pitching are necessary in the fundraising process, as rejection is a common part of the journey.

• Davis discusses the constraints of a typical ten-year fund lifecycle with a two-year extension.
• The necessity of providing liquidity to investors is highlighted as a key responsibility.
• The conversation suggests a gap in the market for longer-term fund structures beyond permanent capital vehicles.

"But I have a ten year fund lifecycle and I have a two year extension, dude. I have to provide liquidity. That's my job to my investors, my responsibility."

The quote emphasizes the standard expectation for fund managers to ensure liquidity for their investors within the specified fund lifecycle and the potential limitations it imposes on long-term investments.

• Davis reflects on his desire for permanent capital and the benefits it could have provided.
• He notes a 50% increase in business in the last twelve months, suggesting a missed opportunity for long-term investors.
• The discussion highlights the rarity of investors willing to commit to long-term investments like ten or fifteen years.

"I wanted permanent capital. Even in the last twelve months since I started that fundraising process, we think business has increased 50%."

This quote illustrates Davis's experience with the fundraising process and the significant growth of his business, which could have been an attractive opportunity for long-term investors.

• Davis questions the common pursuit of happiness through short-term gratification.
• He shares his personal experience, finding joy in working towards a greater cause and focusing on others.
• The conversation explores the idea that true happiness comes from selflessness rather than materialism or self-centered desires.

"We'll never find happiness when we're thinking about ourselves. And I found the most happiness when I'm out working towards a greater cause."

Davis conveys his belief that happiness is not found in self-indulgence but in contributing to something larger than oneself, a principle that has brought him personal joy.

• Davis expresses skepticism about materialism providing lasting joy.
• He suggests that empathy and compassion are fundamental human traits, implying that caring for others is a natural source of happiness.
• The dialogue touches on the possibility that societal trends towards individualism may conflict with these innate human qualities.

"I actually have a hard time believing that materialism brings anyone lasting joy."

Here, Davis articulates his view that material possessions are unlikely to yield enduring happiness, reinforcing the theme of the importance of human connections and compassion.

• Davis acknowledges the world's progress in reducing violence and poverty over the past centuries.
• He expresses concern about the current state of leadership and the challenges faced by those who choose to lead.
• The conversation raises the issue of the lack of incentives for inspiring leadership due to the scrutiny and criticism leaders often face.

"I wish we had a world that was less about tearing others down and more about building others up."

Davis's quote reflects his aspiration for a more supportive and constructive societal approach to leadership and personal achievement.

• Davis argues that VCs provide significant value beyond funding, such as strategic guidance and credibility.
• He shares how having reputable investors has helped him make better decisions and attract top talent.
• The discussion suggests that the involvement of VCs can be a game-changer for businesses.

"I think they provide tremendous value, actually. I think it's a game changer for me."

Davis emphasizes the positive impact that venture capitalists have had on his business, highlighting their contribution to its success beyond just financial investment.

• Davis describes how Covid-19 presented both challenges and opportunities for his company.
• He details the company's strategy to avoid layoffs by implementing temporary pay cuts and focusing on innovation and social mission.
• The narrative showcases the company's resilience and commitment to its values during uncertain times.

"We didn't lay people off, but we all rallied together in a big way."

This quote illustrates the collective effort made by Davis's team to preserve jobs and maintain the company's integrity during the pandemic.

• Davis discusses the occasional short-term conflicts between doing the right thing and business interests.
• He shares a personal example of prioritizing family life and work-life balance in Brazil, which ultimately attracted top talent.
• The conversation explores the belief that long-term business success aligns with ethical practices and a balanced approach to work and life.

"I think in the long term, when you're doing the right thing, you end up having great results."

Davis expresses his conviction that ethical decisions, even if they seem counterintuitive in the short term, lead to better outcomes in the long run.

• Davis reflects on the painful process of recognizing when a founder may no longer be the best person to lead their company.
• He shares insights from his CEO transition, including the importance of board guidance and the decision to lead the search for his successor himself.
• The discussion delves into the complexities of CEO transitions and the factors that influence such decisions.

"Well, yeah, this is the most painful thing for a founder, when you get to the point where you recognize I may not be the right person to continue building this brand and leading this brand."

Davis candidly speaks about the emotional difficulty of stepping down as CEO and the introspection required to make such a decision for the good of the company.

• Davis was in search of a right-hand executive for his company.
• He was considering several candidates for the position of president.
• He ultimately hired Damien, who wanted to be CEO rather than president.
• Davis was willing to step down as CEO because his goal was to have an impact, not to hold the title indefinitely.
• After hiring Damien, Davis's church asked him to go to Brazil, which coincided well with his decision.

"The only problem is he wanted to be CEO. He didn't want to be president. He didn't want to be my right hand." "And at the end of the day, I just know I'm not in this so that I can be the CEO forever. I'm in this to go have an impact."

These quotes highlight Davis's flexibility in leadership roles and his focus on the larger mission of his company rather than personal titles. He prioritizes impact over position, which guided his decision to hire Damien as CEO and accept the opportunity to go to Brazil.

• Davis believes Patagonia has remained true to its mission over the years.
• He admires Yvonne Chouinard's decision to protect the brand's values over maximizing profits.
• Davis disagrees with the idea of a single shareholder after many years and prefers equitable wealth distribution.
• He supports capitalism but believes it needs to be executed more effectively to solve problems.
• Davis aims to create wealth for many people within his organization to provide them with opportunities.

"I think they've stayed true to their mission so incredibly well over decades." "I believe that wealth needs to be better distributed."

Davis expresses his admiration for Patagonia's adherence to their mission and criticizes the concentration of ownership. He advocates for a more equitable distribution of wealth within his own company, reflecting his belief in a more inclusive form of capitalism.

• Davis finds it challenging to balance being a great father with building a successful company.
• He realized he was more intentional about his company's culture than his family's.
• Davis and his wife defined their family values and created rituals to reinforce them.
• He believes that spending time with children is crucial and cannot be substituted with material gifts.

"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." "We can't make up for time."

These quotes reveal Davis's insights on the importance of being deliberate in nurturing both company and family culture and the irreplaceable value of spending time with one's children.

• Davis's marriage has improved post-children, although it has changed.
• He grew up alongside his wife due to having children at a young age.
• Parenthood brought responsibility and pressure but also personal growth and gratitude.
• Davis believes in balancing love and high expectations in parenting.

"It's just gotten better. It's so fun." "I had to grow up very quickly and I had to focus on what mattered most."

Davis reflects on the positive changes in his marriage and personal development due to parenthood, emphasizing the importance of maturing quickly and focusing on what's most important.

• Davis uses tools like Officevibe to track and measure company culture.
• He believes in being proactive in identifying and addressing cultural issues.
• Davis applies the same intentionality to his family culture as he does to his company.

"Every single day, I tracked and measured our culture." "We've created rituals and traditions that have changed our family culture."

Davis highlights the importance of actively managing and measuring company culture and the effectiveness of applying similar principles to family life.

• Davis sees the lack of time spent with children as a major parenting mistake.
• He regrets not spending more time with his children when they were younger.
• Davis emphasizes the importance of being present in children's lives over material compensation.

"We can create all the rituals and traditions we want, but if we're not giving our children time, you can't make up for that."

This quote underscores Davis's belief that time with children is a critical aspect of parenting that cannot be replaced by material possessions or experiences.

• Davis had a change of heart regarding taking his company public.
• He is now open to exploring mergers, acquisitions, or public offerings, provided the company remains true to its values.
• Davis believes that many companies go public too early, which can be risky.

"I'm open to all options. All that matters to me is that we stay true to our values." "I think that's the biggest risk, is going public too early."

Davis discusses his openness to different growth strategies for his company, stressing the importance of aligning with company values and the timing of going public.

• Davis is concerned about the volatility of public market valuations and their impact on businesses.
• He cites the example of Allbirds and the disparity between their valuation and actual business performance.
• Davis appreciates the stability of private markets over the fickleness of public markets.

"It creates a real challenge to run a business when you're so dependent on what the public markets are valuing the business at."

This quote reflects Davis's concern about the challenges that public market valuations can pose to the operation and perception of a business.

• Davis would choose Jesus Christ as his top dinner guest, aside from religious figures.
• He admires explorers like Ernest Shackleton and Roald Amundsen for their adventurous spirits and accomplishments.
• Davis is inspired by stories of exploration and overcoming challenges.

"I love adventure, I love risk taking. I love seeing the world, I love discovering."

Davis expresses his admiration for historical figures who embody the spirit of adventure and discovery, which he also values.

• Davis wants to be remembered for his service and love for others.
• He hopes his legacy will be defined by his positive impact on people's lives rather than his business achievements.

"Service. I hope that one day, if I were to be remembered by anything, it's just that I cared deeply for others, that I loved others, and that I used my life to serve."

This quote encapsulates Davis's desire for a legacy centered on service and love, highlighting his values and aspirations beyond his professional life.

• Davis wishes to become less self-concerned and more focused on others.
• He acknowledges the tendency for entrepreneurs to be self-focused due to building a brand or platform.

"I'd love to get to a point where I'm less self concerned."

This quote reveals Davis's introspection and desire for personal growth, aspiring to shift his focus away from himself and towards serving others.

• Davis describes the last six months as a painful period of intense work and personal challenges.
• He has faced discomfort, language barriers, and exposure to poverty.
• Davis is committed to supporting and inspiring young missionaries in their service.

"This has been hard. Leaving everything behind." "It's been hard. And at the same time, I'm so grateful for it."

These quotes convey Davis's struggles and growth during a challenging period, as well as his gratitude for the opportunity to make a meaningful impact.

• Davis is committed to Codopaxi and its mission to fight poverty.
• He plans to focus on rallying other business leaders to join the movement for good upon his return.
• Davis acknowledges that his role at Codopaxi will change, as he has a new CEO in place.

"Codopaxy is a lifelong commitment that I've made." "I hope that I can continue to focus on purpose and mission and impact."

Davis shares his long-term commitment to Codopaxi and his future goals to expand the company's impact through collaboration with other leaders and organizations.