20VC The On Running Memo From Swiss Mountains to NASDAQ IPO The Story of Three Friends Who Built a Sports Giant

Summary Notes


In a revealing conversation on 20 VC The Memo, Harry Stebbings interviews David Allemann, co-founder of the rapidly growing sports brand On, which has sold over 17 million products in 60+ countries. David shares the origin story of On, starting with a prototype running shoe created by co-founder Olivier Bernhard, leading to the company's IPO on the Nasdaq. The brand, known for its innovative cloud technology and minimalist Swiss design, has expanded from grassroots to global presence, even attracting investment and collaboration from tennis legend Roger Federer. On's commitment to simplicity and community, alongside its expansion into apparel and a second sport in tennis, highlights the brand's mission to elevate the human spirit through movement.

Summary Notes

Partnership with Roger Federer

  • David Allemann describes a partnership and friendship with Roger Federer.
  • Federer spends significant time working with the company on products.
  • The partnership is described as fantastic, with alignment between the parties.

"So Roger said, hey, I would love to get involved, but how about not us giving you money, but you giving us money and becoming a co-investor and a co-entrepreneur together with us? And it has turned into a fantastic partnership and friendship where he now probably spends 30 to 40 days per year with us here in onlabs working on products and we're completely aligned."

This quote explains the nature of the partnership with Roger Federer, emphasizing the mutual investment and collaboration. Federer is not just a financial backer but is actively involved in product development, highlighting the depth of the partnership.

On's Global Reach and Growth

  • On is a rapidly growing global sports brand.
  • The brand has sold over 17 million products across more than 60 countries.
  • David Allemann, co-founder and co-chairman of On, joins the conversation to discuss the company's journey.

"On is one of the fastest growing global sports brands with over 17 million products sold in over 60 countries."

The quote highlights the scale of On's growth and global market penetration, emphasizing the brand's success in terms of product sales and international presence.

The Founding of On

  • The idea for On originated in 2009 with Olivier, a Duathlon world champion triathlete.
  • Olivier created a prototype running shoe with rubber pieces from a garden hose.
  • The co-founders recognized the potential for innovation in running shoes.

"You know, it was actually 2009 and the rainy morning when Olivier, my co-founder and Duathlon world champion triathlete, he said, hey, I have this amazing idea of a new running shoe."

This quote marks the inception of On's idea, crediting co-founder Olivier with the initial concept for a new type of running shoe.

The Prototype Shoe and Its Sensation

  • The prototype shoe offered a unique combination of cushioning and responsiveness.
  • The hollow elements in the shoe provided a novel running experience.
  • The founders drew parallels between the shoe's innovation and past experiences with suspension bikes and carving skis.

"And what these hollow elements do is they give you a lot of cushioning when you land, but then they fully compress and they give you this flat surface so that you can push off with all your energy."

The quote explains the functionality of the prototype shoe's design, detailing how the hollow elements create a distinctive sensation that blends soft landing with an explosive push-off, which was a breakthrough for the founders.

Development and Testing of the First Shoe

  • The co-founders engaged in exploratory phases, testing the shoe with athletes and retailers.
  • David Allemann traveled to Asia to learn about shoe manufacturing.
  • The prototype faced initial skepticism due to its complex design.

"That was a little bit messy at first because we were full in exploration stage, and so we weren't sure about it yet."

This quote reflects the uncertainty and exploratory nature of the early stages of product development, where the founders were still gaining confidence in their innovation.

Overcoming Manufacturing Challenges

  • Allemann had to convince factory workers that the shoe's unique design was feasible.
  • The prototype replicated the 'aha' moment experienced by the founders, convincing others of its potential.
  • The shoe won an innovation award and garnered attention from a marathon world champion.

"So first I had to convince them that it's possible to build tooling like that."

The quote reveals the challenges faced in convincing manufacturers to produce the uniquely designed shoe, which required innovative tooling due to its hollow elements.

Full Commitment to On

  • The co-founders transitioned from well-paid jobs to fully commit to On.
  • A hike in the Swiss mountains solidified their decision to take a risk with the venture.
  • By early 2010, they had fully committed to the company, leaving their previous careers.

"And so after that, I quit my job. Casper quit his job, stopped to do his athlete coaches, and we really fully committed and then fully started at the beginning of 2010."

This quote captures the pivotal moment when the co-founders decided to fully dedicate themselves to their start-up, highlighting the personal risks they took in leaving their stable careers.

Early Challenges and Successes

  • Despite a dream start, the company faced the reality of production and delivery pressures.
  • The first batch of shoes was particularly difficult to produce.
  • The co-founders funded the initial stages themselves before securing outside investment.

"Hey, it was this dream start. But then, of course, reality sets in as well."

The quote acknowledges the initial successes but also the subsequent challenges that the company faced as they worked to establish themselves in the market and meet demand.## Initial Business Struggles and Creative Retail Tactics

  • David Allemann and his partners invested their own money into the company, leading to cost-saving measures like complex travel routes.
  • Casper and Olive employed a unique strategy to get their shoes into retailers by offering to go for a run with the store managers, using the personal touch to secure initial sales.

And so I always flew, I think, from Zurich to Dubai to Hong Kong and then took the train because that was the cheapest option. This quote illustrates the financial constraints and the lengths to which David went to save money during the early days of the company.

So their tactic was to call a retailer up at the local running shop, hey, I just happened to be in town. What's your size? And by the way, I just have your size with me. Can we go for a run over lunch? This quote explains the personal and direct approach used by David's partners to engage with retailers and introduce them to their product.

The Importance of Design in Product Differentiation

  • Design was a core component of the brand from the start, influenced by David and Tilo's backgrounds.
  • They chose to break from convention by using visual technology in the outsole and stripping away decorative elements for a minimalist Swiss design.
  • Initially, this unique design was met with skepticism but eventually became a distinctive feature that attracted customers.

Let's completely break conventions. So what we did is this outsole, which is very much visual technology. This quote reflects the brand's intention to innovate and stand out in the market through design.

Let's do form follows function, where we make it very minimal or very much in a swiss design tradition. David explains the design philosophy they adopted, focusing on functionality and minimalism.

Naivety and Eclectic Backgrounds as Assets

  • David acknowledges that while they lacked shoe industry experience, their diverse backgrounds brought fresh perspectives.
  • He suggests that naivety can be beneficial because it might deter individuals from starting a business if they knew the challenges ahead.

What we lacked in knowing about producing shoes and selling shoes, we probably brought some different background to the table. This quote highlights the advantage of having varied experiences and knowledge when starting a business.

Because if you know what's coming your way, you probably know we wouldn't have started in the first place. David suggests that sometimes ignorance of the difficulties can be beneficial for entrepreneurs to take the plunge.

Scaling the Business and Global Expansion

  • It took perseverance and patience to gain traction, with the first two to three years being particularly challenging.
  • The company focused on small retailers and grassroots influence in the running community.
  • David's brand experienced a "hockey stick" moment of rapid growth in their home market after three years.
  • They were global from the start, expanding to Europe, the US, and Japan in successive years, replicating their growth strategy in each new market.

The first two, three years in a market are hard. This quote acknowledges the initial difficulties in establishing a market presence.

So we were in Europe after Espo from day one. Then in the second year, we went to the US. We established our us presence. David describes the deliberate and strategic global expansion of the brand, starting in Europe and quickly moving to other major markets.

Decision to Enter the US Market Early

  • The decision to enter the US market in year two was driven by the belief that a global sports brand must have a strong presence in the US and other key running countries.
  • The strategy involved targeting metropolitan areas and working with the local community.

To us, if you want to be a sports brand, you have to be in the US and you have to be firmly rooted in the US. David emphasizes the importance of establishing a presence in the US for a sports brand to achieve global recognition.

Launch Strategy in the US

  • The brand focused on influential figures in the running community to promote their products.
  • They also established a direct-to-consumer presence with their website and e-commerce platform, leveraging the rise of social media and the shift to mobile devices.

Brand, we just go out and start with some of the most important influencers in the US. David describes their approach to entering the US market by engaging with key influencers.

We also want to have a direct connection to our community. And so we built our first website and our first ecommerce presence. This quote highlights the importance placed on building a direct relationship with customers through digital channels.

Leveraging Influencers and Athlete Endorsements

  • The company utilized personal connections to get their shoes on top athletes.
  • A significant moment was when triathlete Frederick Van Lierde won the Ironman World Championship wearing their prototype shoe.
  • These endorsements helped build the brand's credibility within the athlete community.

So we made sure some of the best athletes were in our shoes. David discusses the strategy of getting high-profile athletes to wear and endorse their shoes.

Fred won the world championship in triathlon in our shoe, and was on that podium wearing the Kona crown, which is the trophy of the world championship of the Ironman. This quote recounts a pivotal moment where an athlete's victory in their shoes brought significant attention and validation to the brand.

Balancing Elite Athlete Endorsements with Broader Appeal

  • David was not concerned about aligning with elite athletes potentially alienating non-professional runners.
  • The brand's crossover into popular culture was confirmed when a celebrity wore their shoes on the red carpet at the Oscars.

As an innovation brand and as a sports brand, you have to come from the core. David argues that starting with a focus on the core, elite athletes is essential for a sports brand's authenticity and innovation.

On the variety magazine, there was the three time Oscar winner in tuxedo, on the red carpet of the Oscars, and he was wearing the cloud. This quote signifies the brand's breakthrough into mainstream acceptance and popularity beyond the niche athletic community.

Expansion into Clothing

  • The decision to create a clothing line was a natural progression, born out of dissatisfaction with existing running apparel.
  • The brand started with a capsule collection and has become more serious about offering a full range of apparel.
  • David believes that to build a global brand, it is important to offer products for the entire body.

It was quite organic. So at some point, we just said, hey, we hate to run in gear from other brands. David explains the organic decision to expand into clothing based on personal dissatisfaction with the market offerings.

You want to happen on the full body, and you also want to bring the capability of what your technology and innovation team can do to the full body. This quote reflects the brand's ambition to apply their innovation across a full range of sports products, not just footwear.

Challenges of Launching a Clothing Line

  • Sizing was a significant challenge due to the complexity and variation in body shapes.
  • Finding the right retail partners for apparel, which is sold differently than shoes, was another hurdle to overcome.

One of the hardest part, I think the innovation part, what we wanted to have was pretty clear, and also all the detailing and the cuts. What was hard is sizing. David highlights the difficulty of determining the correct sizing for a new apparel line.

Shoes? You put on a wall and immedi This incomplete quote suggests that selling shoes may be more straightforward than apparel, which requires additional considerations for display and fitting.## Presentation of Apparel in Retail

  • Understanding how to present apparel effectively is crucial for sales.
  • Apparel needs to be combined into full looks rather than sold as individual pieces.
  • Retail partners must know how to create a universe around apparel.
  • The company's website also requires careful consideration of how apparel is displayed.

"You have to understand how you present apparel. How do you create almost scenes? How do you combine it? You're not just buying one apparel piece, like in shoes, where you probably buy one pair, but you're buying a full look."

This quote emphasizes the importance of visual merchandising in apparel retail, highlighting the need to sell a complete style or look rather than isolated pieces.

Reinventing Retail Experience

  • The traditional retail experience in sports stores is often impersonal and time-consuming.
  • On wanted to innovate the retail experience to increase customer interaction.
  • The "archive" allows customers to quickly try on shoes without waiting, enhancing the shopping experience.
  • The focus is on maximizing interaction time over transaction time.

"How can you reinvent that? That's, again, at on. We always try to do things a little bit differently. And so we created a huge piece, which we call the archive."

This quote describes the innovative approach to retail that On has taken by creating the "archive," a feature designed to streamline the shoe fitting process and improve customer interaction.

Balancing Innovation with Convention

  • On has a strong culture with five key spirits, including the Explorer spirit.
  • The company encourages team members to think independently and bring diverse skills.
  • Innovations are pursued, but sometimes the industry conventions are found to be effective.
  • The balance between doing things differently and adhering to what works is continuously evaluated.

"So many things I think add on are always resource. So we always question ourselves."

The quote reflects On's philosophy of questioning the status quo and exploring new ways to do things, whether slightly or radically different from the norm.

Overcoming Production Challenges

  • On faced significant production challenges, including a factory shutdown.
  • The team had to find creative solutions, such as retrieving materials from the closed factory.
  • The experience highlighted the importance of bringing experienced people into the team.
  • The hiring of co-CEOs Mark and Martin was crucial for scaling the company.

"I remember very clearly in 2013, our production partners called me and said, hey, David, we have a little problem."

This quote introduces a specific challenge On faced, illustrating the need for quick thinking and adaptability in business, especially when unexpected issues arise.

Founder's Role and Bringing in Co-CEOs

  • The right time to bring in additional leadership is when the company's demands exceed the founders' capacity.
  • On started with three founders, emphasizing partnership from the beginning.
  • The senior leadership team is diverse, with significant female representation.

"When you know, you know, if things start to fly around and break, you pretty much know that you have to bring other people to the team who complement you."

This quote suggests that founders should be attentive to the signs that additional leadership is needed to manage the company effectively.

Decision Against Early Venture Funding

  • On had the privilege of initial funding from personal connections in Switzerland.
  • Early investors were hands-on and operationally involved.
  • Community support and connections to the US tech investor community were beneficial.
  • Stripe, a venture capital firm from New York, became their first true VC investor.

"We had privilege that we had built in previous years before on quite good connections."

This quote explains why On did not initially seek traditional venture funding, relying instead on a strong network of personal connections for initial investment.

Partnership with Roger Federer

  • The relationship with Roger Federer began organically, with Federer already a fan of On.
  • Federer's involvement evolved from a fan to a co-investor and entrepreneur.
  • The partnership has been beneficial for both brand awareness and product development.

"So we saw him posting from Paris on his Insta account in onshoots, and they said, wow, Roger now."

This quote recounts the serendipitous beginning of Roger Federer's relationship with On, which started with him being a customer and organically transitioned into a deeper partnership.

Impact of Roger Federer on the Brand

  • Federer's involvement with On significantly boosted brand awareness.
  • His commitment extends beyond promotion to product development, particularly in tennis.
  • The collaboration with Federer has helped On to expand into the tennis market.

"Yes, definitely. I remember we launched our collaboration with a big run through Central park in New York."

This quote confirms the positive impact Roger Federer's collaboration had on On's brand recognition and his active role in promoting and developing the brand's presence.

Insights from Working with Roger Federer

  • Roger Federer's public persona aligns with his private demeanor.
  • His involvement with On is hands-on, dedicating significant time to work on products.
  • Federer's commitment reflects the brand's values and contributes to its authenticity.

"I think Roger comes as he's perceived publicly, so his public image is very much aligned with how he is."

This quote highlights the genuine nature of Roger Federer's partnership with On, noting that his public image is consistent with his actual involvement and contribution to the brand.## Roger Federer's Involvement with On

  • Roger Federer is described as being very humble yet extremely engaged with the brand On.
  • He is proactive in his involvement by asking many questions, which helps push the brand forward.

"And so it's just incredible to see how Roger is super, super humble, but at the same time super engaged. And he asks a lot of questions, which is great because that pushes us."

The quote emphasizes Roger Federer's humble nature and his active engagement with the brand, signifying his positive influence on the company's development.

Definition of Brand

  • David Allemann views a brand as a community and an idea that transcends just equipment for physical performance.
  • The brand On is connected to the mental benefits of sports like running and hiking, not just the physical aspects.
  • The brand's mission is to ignite the human spirit through movement, encapsulating the idea that movement and the human spirit are interconnected.

"I think a brand in the core is a community. And an idea on has always been not just about equipment for better performance of your body, but we feel running, but also hiking, other sports are so much not just about doing something for your body, but they're doing something very much for your mind as well."

This quote reflects the comprehensive understanding of a brand as a community that supports both the physical and mental well-being of its members.

Brand Experience

  • On wants customers to feel cared for in terms of product, innovation, and the sports supported.
  • The brand aims to enhance not just personal bests in sports but also the overall spirit and well-being of the individual.

"We want them to feel that we very much care about product and the innovation and the sports that it supports, but that it's more than that. That it's not just about reaching your new personal best, but that it's reaching the best of you."

The quote conveys the brand's desire for customers to experience a holistic sense of care and support beyond just athletic achievements.

Brand Journey and Awareness

  • On started as a grassroots movement due to humble beginnings.
  • David Allemann believes they could have invested in broader brand awareness earlier.
  • Roger Federer's involvement and the creation of big moments are current strategies to increase cultural relevance and global awareness.

"And so the moment where we see you switch from building a grassroots level brand to then also building broader brand awareness, that's something that we probably should have started a little bit earlier."

This quote signifies a reflection on the brand's evolution and the strategic pivot from a grassroots movement to broader brand awareness.

Capital Investment Strategy

  • On's approach to growth has been characterized as a balance between European prudence and American ambition.
  • The company prioritizes both fast growth and profitability, which David Allemann does not regret.

"Our american friends always told us you're so european, and our swiss friends told us you're so american. And so that probably describes our DNA right at the brink of that very well."

This quote describes the company's balanced approach to growth, blending different cultural perspectives on business expansion and financial management.

Admiration for Apple

  • David Allemann admires Apple for its integration of technical innovation, design, and the human aspect.
  • He appreciates the magic created at the intersection of technology and design, exemplified by features like the breathing light on laptops and the scrolling on the iPhone.

"And if you think back, it unfortunately doesn't have it today anymore. But the breathing light on a laptop that indicates that the laptop is asleep. Is that tech or is it design? So I feel it's right at the intersection."

The quote highlights the admiration for Apple's ability to blend technology with design, creating a user experience that feels magical.

Simplicity in Product Design

  • On's founders spend significant time in the lab to balance feature expansion with simplicity.
  • An example of achieving simplicity is On's invention of the speed lacing system for their shoes, which has contributed to their success.

"We as founders, probably spend 40, 50 days per year in the lab. First of all, you try to make it more features, bigger, better. And then how can you simplify down again?"

This quote underlines the challenge and importance of maintaining simplicity in product design amidst the addition of new features.

Personal Insights and Preferences

  • David Allemann would choose to have dinner with Cleopatra, equating the experience to space travel due to the historical significance and innovation of her time.
  • He believes in striving for perfection over optimizing for efficiency, particularly in product development.
  • His perspective on the future role of AI in creativity has evolved, recognizing the potential for AI to disrupt even the most creative functions.

"I feel just AI was a very abstract concept and we always felt, hey, the more mundane tasks will be at some point automated through machine learning. And now there's this amazing pivot where we learn, hey, potentially some of the most creative functions will be disrupted through AI."

The quote reflects a shift in understanding the impact of AI, from automating mundane tasks to potentially transforming creative processes.

Future of On

  • In five years, On aims to be a global sports brand, resonating with runners and expanding into tennis.
  • The brand plans to offer a full range of products, including apparel, to support physical movement and elevate the spirit.

"On in five years will be a global sports brand that still very much resonates with our core community, with runners, but also has built a second sport called tennis and is happening for you on the full body."

This quote outlines the brand's vision for expansion and its continued commitment to its core community and mission.

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