20VC From $4.1BN to $142M Market Cap; Why Public Markets Have Written Allbirds Off, What Allbirds Need to Do to Get Profitable, Why Growth has Slowed and The Bull Case for Allbirds Next Five Years with Joey Zwillinger, CoFounder @ Allbirds

Summary Notes


Joey Zwillinger, co-founder and CEO of Allbirds, joined the 20vc podcast to discuss the significant valuation drop of Allbirds since its 2021 IPO peak at $4.1 billion to a current market cap of $142 million. Zwillinger reflects on the company's rapid early growth, the impact of the pandemic on their strategy, and the importance of brand awareness, as Allbirds still has less than 15% brand recognition in the US. He emphasizes the brand's strength, consumer loyalty, and the potential for future growth. Zwillinger also addresses Wall Street's perception, the company's commitment to sustainability, and the balance between entrepreneurship and expertise within the team. Despite the challenges and market skepticism, he remains focused on over-delivering on expectations and is emboldened to regain and surpass Allbirds' initial market value.

Summary Notes

Allbirds Company Overview

  • Allbirds is a brand that has experienced significant growth since its public debut in 2021.
  • The company's valuation soared to $4.1 billion but has since dropped to $142 million.
  • Questions arise around the causes of the revenue decline, profitability timeline, and strategies for recovery.

"Now, Allbirds is an incredible story. A much-loved brand that went public in 2021 soared to a peak valuation of $4.1 billion, but just two years later now has a market cap of 142,000,000 today."

This quote outlines the impressive initial success and subsequent decline in Allbirds' market valuation, setting the stage for a discussion on the factors contributing to these changes.

Wall Street's Perception of Allbirds

  • Wall Street perceives Allbirds as a fickle entity, and the markets have been unforgiving.
  • The company's current market cap reflects a sentiment of being written off by investors.

"We have a mountain of cash. We have control of our destiny. The fact that Wall Street's written us off as a fickle beast, as it is, the markets are unforgiving. Our market cap is a reflection of the fact that we've essentially been written off by people."

The speaker indicates that despite having substantial financial resources and the ability to steer their own course, Wall Street's negative perception has heavily influenced the company's market capitalization.

Founding of Allbirds

  • Allbirds was founded by Joey Zwillinger and his co-founder Tim Brown.
  • Brown, a professional athlete with a design background, was dissatisfied with the footwear industry's lack of casualization.
  • Zwillinger had a material science background and experience in entrepreneurship, focusing on sustainable petrochemical replacements.

"So Tim Brown's my co-founder. He was a professional athlete, but he happened to have a design background. [...] And just like most entrepreneurial journeys, it starts with a moment where there's a problem out there that's not being solved for you individually."

This quote provides context for the founding of Allbirds, highlighting Tim Brown's personal dissatisfaction with the options available in the footwear industry and his desire to create something new.

The Entrepreneurs' Backgrounds and Vision

  • Zwillinger's experience in biotechnology and green chemicals complemented Brown's design and consumer instincts.
  • The founders aimed to create a business that would leave a legacy their grandchildren could be proud of.

"We could blend his design and instinctual sense for the consumer with my material science background and experience in entrepreneurship. And we decided that this was a worthwhile endeavor for leadership, for business, and for a legacy that we thought our grandkids would be proud of."

The quote encapsulates the synergistic partnership between Zwillinger and Brown, combining their skills to create a brand with a lasting impact and legacy.

Allbirds' Valuation Decline

  • The decline in valuation is attributed to both external factors and internal mistakes.
  • The brand's strength remains high, but the company's business results need to catch up.
  • Consumer awareness is still low, with only 15% of the US population knowing about Allbirds.

"Now, I'll just say valuation is something that I don't control. All we can control is how strong the business results are."

This quote emphasizes the focus on business performance over market valuation, acknowledging that while the latter is beyond their control, the former is where they can make a difference.

Reflection on Internal Mistakes

  • Zwillinger acknowledges internal errors alongside external challenges.
  • Strategic decisions around product offerings and inventory management were identified as areas with room for improvement.

"And the balance of who you select, this balance of entrepreneurship and ambition, there's also an incredibly important element around bringing in people."

The speaker highlights the importance of team selection and the balance between entrepreneurial spirit and ambition, suggesting that personnel decisions are critical to the company's success or failures.

Product Expansion Strategy

  • Allbirds' expansion into running and athletics is questioned.
  • The brand's positioning is being refocused on the intersection of casual lifestyle and active well-being.

"And you can't change the perception of a brand overnight. That's for sure."

This quote acknowledges the challenge of shifting consumer perceptions and the strategic need to align product offerings with the brand's core identity.

Leadership and Team Dynamics

  • Emphasizes the importance of industry expertise in leadership roles.
  • Leaders are compared to reference books rather than playbooks, suggesting they should be a source of knowledge but not dictate rigid strategies.
  • Acknowledges that success and failure are part of finding the right leaders at the right time for a business.

"I often talk about with our leaders that what they bring in is deeply needed and deeply respected, but we need to think about it as a reference book, not a playbook."

This quote highlights the speaker's view on leadership, suggesting that leaders should provide knowledge and expertise without imposing inflexible strategies.

Going Public and Market Perception

  • No regrets about going public despite being underestimated by Wall Street.
  • Emphasizes the importance of delivering consistent financials to regain market confidence.
  • The company has a significant cash reserve and maintains control over its destiny.

"We have a mountain of cash, we have control of our destiny. And the fact that Wall Street's written us off as a fickle beast as it is, the markets are unforgiving and our market cap is a reflection of the fact that we've essentially been written off by people."

This quote reflects the speaker's confidence in the company's financial position and acknowledges the harsh reality of market perception.

Company Identity: Fashion vs. Technology

  • Identifies as a product company with a strong emphasis on style and fashion.
  • Boasts a leading technological infrastructure and data capabilities compared to competitors.

"We are a product company, first and foremost, and we happen to exist in a category where style and fashion is incredibly important."

The quote clarifies the company's focus on being a product-oriented entity that values style and fashion, while also leveraging technology.

Impact of Public Status on Business Operations

  • Being public exposes all business activities, forcing a discipline that aligns with quarterly financial reporting.
  • The company has structured governance and capitalization to benefit long-term investors.

"Every single thing that you're doing from that point, when you become a public company into the future, is exposed for all to see, the good and the bad."

This quote explains the transparency required from public companies and how it affects their operations and investor relations.

Market Value and Responsibility

  • Acknowledges the humbling experience of a significant drop in share price.
  • Feels a strong responsibility to restore and increase shareholder value.
  • Is motivated by the decline, not angered by it.

"We went public at $15 a share and now we're at like a dollar, dropping more than 90% of the value for shareholders that you orient the success of your business around."

The speaker expresses concern for the decrease in shareholder value and the sense of duty to improve the company's financial performance.

Direct-to-Consumer (DTC) Model and Brand Perception

  • Disagrees with the generalization that the company is just part of the DTC group.
  • Emphasizes the company is a brand first, envisioning an omnichannel approach.
  • Differentiates their products from commodities, asserting uniqueness in the market.

"We're a brand, we're not a channel. DTC is a way to do business."

This quote emphasizes that the company's identity is rooted in its brand, not just the direct-to-consumer sales model.

Product Marketing and Market Adaptability

  • Reflects on the company's marketing effectiveness, acknowledging both successes and recent challenges.
  • Discusses the missed opportunity during the pandemic due to the lack of athletic positioning and reliance on casual lifestyle offerings.
  • Outlines an omnichannel vision to reach consumers profitably across various shopping preferences.

"We didn't have an athletic positioning at all, and we were 100% of a casual lifestyle shoe offering in 2019."

This quote reveals a strategic gap that prevented the company from capitalizing on market trends during the pandemic.

Fundraising Strategy and Business Growth

  • Justifies past fundraising decisions based on the ambition to capture brand potential.
  • Reflects on the non-linear nature of business growth and the excitement it brings.

"You set out a set of expectations to a group of people that you say, I need this money, I'm going to invest it here, and it's going to generate these outcomes and these milestones."

This quote explains the rationale behind fundraising efforts and the commitment to meeting investor expectations through business milestones.

Acquisition Offers and Independence

  • Discusses receiving informal acquisition interest but prioritizes achieving the brand's multi-generational potential.
  • Open to partnerships if they align with the brand's goals, but has remained independent so far.

"You never know if an acquisition offer is a real acquisition offer until the piece of paper is in front of you and you have the opportunity to sign it."

This quote indicates that while there have been acquisition inquiries, none have progressed to a formal offer, and the company remains focused on its long-term vision.

Company's Control and Value Perception

  • The company has the necessary resources to shape its own future and build a strong business and brand.
  • Public market valuation may not always reflect the company's true value.
  • The board is responsible for considering all options, especially if there's a persistent discrepancy between created value and market valuation.

If along that journey, the public markets don't see the value that we're creating, and there's a big gap between the value that we are creating and what the enterprise value is of the company, then I think it's prudent to consider all options.

This quote emphasizes the importance of aligning the company's intrinsic value with its market valuation and the board's role in evaluating strategic options when discrepancies arise.

Founder's Financial Decisions and Philosophy

  • Financial decisions should align with personal life goals, whether prioritizing material luxury or financial security.
  • Shareholders, including founders, should have the flexibility to sell shares as they see fit.
  • The speaker has sold very little of their shares, focusing on financial security rather than material excess.

Like, the diminishing return on that extra dollar is quite significant.

This quote discusses the principle that beyond a certain point, additional wealth does not significantly enhance one's quality of life, guiding the speaker's financial decisions.

Leadership Evolution and Company Challenges

  • Leadership wisdom has grown significantly in recent challenging times.
  • It's important to maintain discipline and an even-keeled approach in both good and bad times.
  • The company has reduced investments, leading to a sales decline for the first time in its history.

Victory has a thousand fathers. Failure has only one.

The quote reflects on the tendency for success to have many claimants, while failure is often attributed to a single individual, underscoring the importance of accountability in leadership.

Business Strategy Adjustments

  • The company pulled back on distribution, marketing, and halted store growth to address inventory issues.
  • This strategic pullback is part of a transitional plan aimed at setting up future growth.

We got too fat with inventory, so we needed to clean that up.

This quote signifies the company's need to streamline its inventory to improve financial health and operational efficiency.

Market Perception and Performance

  • The stock market consists of algorithms and real people with varying opinions on a company's prospects.
  • The company aims to exceed expectations to build momentum and silence doubters.

We're going to put up expectations and then wildly over deliver.

This quote conveys the company's strategy to set ambitious goals and surpass them as a way to build credibility and investor confidence.

Path to Profitability

  • The company has communicated its goal to become cash flow and EBITDA profitable by 2025.
  • Cash flow and EBITDA are key metrics for valuing a company in their industry.

We'll be cash flow and EBITDA profitable in 2025.

This quote provides a clear timeline for when the company expects to reach key financial milestones, signaling its path to profitability.

Retail Strategy Insights

  • The speaker has learned that successful retailing is challenging, especially with changing consumer patterns and locations.
  • Consumer behavior in urban environments has shifted, affecting where and how people shop.

Being a good retailer's heart.

This quote acknowledges the complexities of retail strategy and the need to adapt to evolving consumer behaviors.

Work-Life Integration and Family Involvement

  • The speaker integrates family into work, involving his wife in business discussions.
  • Balancing work and family life involves being present and focused in each domain.
  • The last two years have added stress and anxiety, requiring new coping strategies.

I really try to integrate my family into the work.

This quote highlights the speaker's approach to blending personal and professional life, allowing for a more holistic and fulfilling experience.

Team Dynamics and Stress Management

  • The speaker relies more on the team, encouraging open communication about anxieties and concerns.
  • Addressing workplace stress and anxieties can lead to practical solutions and relief.

Having a focus on giving room, for myself included, to really express what people are thinking and what those anxieties are.

The quote emphasizes the importance of creating a supportive environment where team members can share and address their concerns openly.

Economic Outlook and Business Strategy

  • The consumer market is perceived as fragile and delicate, with an expectation of decreased spending in the upcoming six months.
  • Businesses are advised to adopt a conservative approach to investment and focus on areas that can generate value.
  • Companies should prepare for economic cycles by structuring their businesses to be resilient.

"The consumer is in a more delicate and fragile situation than people understand. It's going to be more difficult and there's going to be less spending than people think in the coming six months."

This quote suggests an anticipation of economic challenges ahead and the importance of businesses preparing for a downturn in consumer spending.

Consumer Loyalty in Footwear

  • Americans on average buy eight pairs of shoes per year, totaling approximately 2.5 billion pairs annually.
  • Consumer loyalty varies across different segments of their shoe collection.
  • Innovation and new offerings can attract consumers, but deep connections foster loyalty.
  • Purchase frequency and brand loyalty differ across businesses.

"The average American consumer buys eight pairs of shoes a year. That's about two and a half billion pairs of shoes sold every year."

This quote highlights the size of the footwear market in the U.S. and implies the potential for customer retention and loyalty.

Expanding Product Range

  • Allbirds considers natural extensions beyond footwear, such as clothing and accessories.
  • The company focuses on consumer experiences and natural materials.
  • Success is attributed to maintaining a sharp focus and not getting tired of the brand story.

"There's going to be natural extensions for us to go."

This quote indicates Allbirds' strategy to expand its product offerings while staying true to its brand values and customer experience.

Consumer Awareness and Sustainability

  • Surveys consistently show the environment as a top concern for consumers.
  • A significant gap exists between consumer values and actual purchasing behavior.
  • Companies that align product excellence with sustainability and consumer values are predicted to lead the next generation of brands.

"Every single survey that comes back about social issues that consumers care about, environment's number one across almost every single one."

This quote emphasizes the importance of environmental concerns among consumers and suggests a potential shift in consumer behavior towards more sustainable products.

Aspirations and Inspirations

  • Allbirds admires companies like Tesla for their commitment to performance, quality, and sustainability.
  • The company aspires to emulate these qualities and achieve lasting impact and success.

"I'd say a company that has done a really nice job in an area that I take a lot of inspiration from would probably be Tesla."

This quote reveals the admiration for Tesla's approach to product excellence combined with sustainability, serving as inspiration for Allbirds' own aspirations.

Vision for the Future

  • Allbirds has a clear vision for its future, aiming to align impact objectives with financial success.
  • The brand seeks to grow significantly while maintaining its core values.
  • The alignment of business and sustainability goals is key to the company's strategy.

"We've done a great job of aligning what our impact objectives are with our financial objectives."

This quote indicates Allbirds' commitment to integrating sustainability with business success, aiming for significant growth without compromising on values.

Leadership and Storytelling

  • Leaders should remain engaged with their company's story and mission, even if it becomes repetitive.
  • The consistency in messaging is crucial for both internal and external audiences.

"I always say, as a leader, when you get bored of telling the story and the mission you're just starting, it should be boring to embrace that."

This quote suggests that leaders should persevere in communicating the company's story and mission, recognizing its importance in shaping company culture and consumer perception.

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