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- [00:13]
A
Hello and welcome to the Consumer VC Podcast, where we discuss the intersection of venture capital and consumer innovation. I'm your host, Mike Gelb, and if you're enjoying the show, you can subscribe to my newsletter where you'll receive every new episode a week early. Head to the consumerbc.com and click subscribe. All content episodes are for informational entertainment purposes only and is not investment advice. Hello and happy Holidays. Just like we've done in years past, during this special time of year, we're going to be sharing recaps of our most popular episodes from this past year. 2022, an annual roundup, so to speak. It's going to be during Hanukkah and Christmas, so every day from December 18th through December 26th. This is a highlight episode with Joe Kudla, who is the founder and CEO. Vuori Viori is performance apparel that's built to move in and sweat in, yet styled for everyday life. I'm a huge fan of the brand, wear a lot of their clothing. We discuss why Joe wanted to start an athleisure brand, his inspiration and approach to targeting specific customer Personas, and how we thought about differentiation and and scaling the brand as well as and I know that we talk about this a lot on the show, but profitability versus growth. I love this conversation and learned a ton from Joe. Without further ado, here he is. Joe, thank you so much for joining me today. How are you doing?
- [01:39]
B
I'm doing great, Mike. Honored to be here. Thanks so much for having me on.
- [01:42]
A
Really, really appreciate you taking the time. Once you had the idea for Vuori, like what were like the first steps for launching the apparel band? Maybe like what went into the launch when you first started Vuori?
- [01:53]
B
Dating back before our launch, the first big step for me as an entrepreneur. And I just want to share this because some people might be experiencing the same thing. But it's for me, it was like, do I jump in with two feet or not? Because I had built another business. It was in a totally different world, but I had a comfortable lifestyle. It would have been easy to do Vuori out of the garage and try to do both until I got enough traction. But I had done that in other apparel business. I'd always wanted to be in apparel. I just there was a creative aspect of my brain that wasn't being expressed in what I was doing. So I wanted to create an apparel business and be able to bring that creativity that was in my brain and express it. And so I had to make the decision if I was going to ever be able to do that? Because I wasn't a classically trained designer. I had to jump in with two feet and literally cut the bow lines and just sink or swim, for lack of a more sophisticated term. And so my first big decision was deciding to leave that business that I had built and go all in. And I really do believe that that would be a difference maker between success or failure. And so I made that decision. The second thing was I had to raise some money again. Raising money for this business was very challenging. So I convinced a couple friends and some family to give me a little bit of money to the first kind of beta launch, put together and get. Get samples. And then I had to hire a couple of people that could help me because I wasn't in the apparel industry. And I needed help actually creating what we call tech packs. But it's essentially the idea of taking your design and building it into a file that can be sent to a factory to help you build it. And I needed help with sourcing. And so the first thing I did was start networking. And I met an incredibly talented designer that's still our head of men's design today. She was so wonderful. And we were very much aligned with the type of product that we wanted to create and how we wanted to bring something fresh to this market. So first thing first was hiring her, and then our head of marketing, who's now our CMO and has been with me since day one. You know, the three of us really kind of came together to start building the brand strategy and bring product to market. To answer your question specifically about the launch, it's a big joke. It's something I find a lot of humor in anyway, because at the time, you know, we were like, how are we going to bring this to market? And, you know, there wasn't really a wholesale marketplace that would sell this product because it was premium price point. Activewear was really sold through sporting good dealers. And then you had Lulu was building its own vertical distribution. Boutiques didn't really carry activewear. Some gyms and yoga studios were starting to play with it, but it was very much peripheral to their core business. And so, you know, we were like, okay, here's our launch plan. It was essentially, you know, my personal contact list. It was my head of marketing's personal contact list. And it was a couple of posts on Facebook, and it was like knocking on people's doors and literally like, you know, asking if we could send them an email. And so our launch went off, and it was very underwhelming. Like, you know, there wasn't a lot of response. And so it was kind of like, okay, now what? You know, now we actually have to go out and build a business from scratch. And I was envious of, like, people with a lot of notoriety or star power that, you know, could, could post on social, launch a business, sell out of all their inventory, drop one, it's gone, go to investors, tell the story, build excitement. Vori was the exact opposite. It was like, bring it to market, underwhelming launch. And then it was like, okay, now what? And so I packed up a suitcase, I took samples to New York, I went to every gym and yoga studio that would talk to me, showed them the collection. You know, we started selling online, but, you know, we were really early in digital advertising and so, you know, very small budgets, but enough to kind of get a little bit of traction and get, get a couple people buying the product. And, you know, we can talk more about how the brand's message evolved. But the brand that we launched back in the day is not the, the brand you see today in all material respects. Like, the product is very much aligned with the product that we launched, but the messaging and what we stand for and how we convey what makes Vora unique is, is very much different. And, and it was because of that, that direct customer relationship that we were able to listen to the customer and make some really important pivots in those early days. But yeah, the launch itself was not some overly strategic, well thought out thing. It was kind of like, let's just start getting product in people's hands. Anybody who will buy it.
- [06:29]
A
I really appreciate you being very candid about that. And the launch, when you did launch, you launched only online, is that right?
- [06:35]
B
It was online and we shipped product to a few yoga studios. But yeah, it was, it was predominantly a direct to consumer focus. But we did think, you know, going back to the early days, we thought that wholesale could play a role in the business, albeit it would be at what we call point of participation, like gyms and yoga studios, where people are going to buy it off the rack to go and put it to use in a workout or a yoga class.
- [06:59]
A
I can imagine you have this launch, maybe you're a little bit underwhelmed by launch, didn't go exactly as planned. How did you then approach, like, online growth and really just like getting the word out and getting above the noise since there's so many, you know, designated brands that were launching in 2015?
- [07:15]
B
I'd imagine so, yeah, there were, albeit nothing like as Competitive as it became in 2017, 2018, you know, we were still relatively early, like signing up a digital marketing agency. You know, they existed, but nowhere near the competition on, like, Facebook and Instagram. Advertising didn't even exist when we launched. So, yeah, I mean, one of the things that I share and this story, it was so pivotal in our kind of evolution as a business. But going back to what we had talked about, we had kind of an omnichannel strategy to launch. We thought that yoga studios and gyms could actually plug a role in getting the business some traction, acquiring some early customers, getting feedback. And we launched with this kind of men's yoga messaging. When you think about the opportunity that we saw at the time, it really derived from my experience at yoga. I started noticing that there were a lot of guys coming to class. A lot of them shared the same sentiment, and that was like they didn't know what products to buy. Lululemon kind of again, felt like it was maybe for their wives or their girlfriends. So they were wearing like surf brands to yoga or they were wearing, going to the main big shopping sporting goods dealers to buy athletic apparel. But I was noticing there's a lot of guys showing up. So I started doing research. I found out there was 30 million guys practicing yoga, or, excuse me, 30 million people practicing yoga in the U.S. and 30% of them were mentioned. So you had like over 8 million, 9 million people that were practicing yoga, men that were practicing yoga. And it was the fastest growing demographic within yoga participation. And so when you compare that to surfing, you know, I'm a surfer and, you know, I knew that there was about 4 million people that surfed in the United States. So I was like, wait a minute, you're telling me that Billabong and Quicksilver and all these brands that are going after, they're all competing for 4 million people, and then there's 8 million guys that are going to yoga, and there's no brand doing anything meaningful for them. So I was like, okay, just before we even, like, think about the broader opportunity for an active brand, just men's yoga would be a great kind of like, niche category to approach. So our messaging was very much focused on, like, a differentiated perspective on men's yoga. With our launch, and so we sold into some yoga studios and gyms. We thought that that would be a great place to like, start building some customer loyalty, getting some feedback and learning. And our efforts digitally were actually not that robust. I mean, we were, we were advertising, albeit not a lot of money was put there. You know, we had raised friends and family money, we didn't have any institutional money on our cap table. And, and so we didn't have a tremendous amount of money to just go throw it a bunch of different things. We had to be really particular and strategic with how we did it. And our strategy was flawed. So at the end of our first year of business, we were running out of money. We didn't really have an engine of growth defined. And one of the things that we decided to do, getting back to kind of your question, was we took every dollar that we had left. We said, forget wholesale, we're going all in on a direct to consumer effort and we're going to start spending a lot more aggressively to get more traction, more data, more customers in our product. And so we hired an engage, we hired a digital marketing firm and we, we got a lot more aggressive and we became laser focused on the customer experience on our website and our advertising strategy online. And we started to learn from customers that they loved the product, but they necessarily weren't resonating with the men's yoga advertising. And we learned through post purchase surveys that they were wearing the product for a lot of things, but yoga was very low on the list. They were running in it, they were training in it, they loved how comfortable it was, they were traveling in it, they were wearing it as their loungewear, they loved the versatility of the product. And so we started modifying our messaging to really speak more authentically to how we used the product. I mean, I love yoga. I was practicing yoga every day, but I didn't identify as a yogi. You know, it was one of the many things that I did to live a well rounded, active life. We found our customers were very much the same. So we started speaking to the versatility of the product and we defined this engine of growth online where what was $1 of sales being driven from $1 of advertising quickly became $2 of sales and then $3 of sales and then 4. And all of a sudden we had a bit of a track record and an engine of growth. We went back to some of those same friends and family that gave us early money and we were able to secure a second round of funding and we never had to look back. We built a really profitable business from there. But, but that pivot to being laser focused on D2C was what saved our business.
- [12:27]
A
How do you also approach with your messaging being very inclusive when obviously when we began the conversation, you talked about your love for Encinitas, California and Southern California and maybe the lifestyle that Viori, you know, maybe represents. But how do you also think about inclusiveness, you know, for customers, since you're trying to appeal to customers that are around the world geographically?
- [12:51]
B
And it's such a great question. I think if you're going to have success as a clothing brand, you have to have a point of view and you have to have a nucleus. And if you're lucky, that nucleus will be broadly accepted by a broader audience of people. But for us, it started out identifying a personal need, right? And really looking at our. At our immediate community. And we knew that if we were going to be successful in New York City, we first had to be successful in our backyard. And that was the way we built the brand. It was from here outwards. And we're fortunate to be inspired by a lot of the same things that I think a lot of the United States is inspired by. You know, when I was a kid, I grew up in Seattle, and my senior year of high school, it rained every day for six months. And I dreamt of the California lifestyle. Like, I literally would dream about growing up on the beaches of Southern California and being able to be in the sun every day and sun tan skin and, you know, wearing shorts to school and like, I watched Baywatch, you know, And I think a lot of the country, I think a lot of country feels that way, and I think that's part of the reason. One of the most successful surf brands ever was a brand called Hollister, which people in core surf in Southern California think Hollister is inauthentic. But they brought that sensibility and those values, they brought that to the rest of the United States so that people could have a part of that. They could. They could be a part of that Southern California lifestyle, irrespective of where they lived. And I think building product for folks here and being inspired by here, it ultimately meant that the brand would be therefore really interesting for folks, people all around the United States. And that's really what we found. But I think it's really important in consumer products, especially apparel, to know your target customer, the person who are you designing product for? Because if you try to be all things to everybody, you know, you'll lose focus, you'll lack discipline, and people won't really know what you stand for. So I do think it's really important to be disciplined through in that lens, if that makes sense.
- [15:05]
A
When did you decide to start launching your own stores? And what was your retail. What's overall like your retailer or Omni.
- [15:13]
B
Channel strategy in the early days before we had launched apparel. I was hosting these events. We called them Live it, but they were these really large donation yoga classes and they were charity events. We, we would go bring the whole San Diego yoga community together. We'd have these big kind of all day classes and we would raise money for different causes that we wanted to give money back to. And that was when I started understanding the power of bringing people together around a common value system and having experiences in the physical world. So when we launched the business and our launch was a little bit underwhelming as we had talked about, and we really had the point of view that we were inspired by Encinitas to build this brand. And so what better place to become meaningful than Encinitas? So we knew we had to become important here first and build out from our core. And so, you know, we knew how to host events. So naturally we felt like we should have a physical space that embodies the values of the brand. And so one of our early investors, actually, he bought a building. It was, it was in downtown Encinitas, not really in the best area for retail, but close enough. And he said to us, look, I'm going to tear this down in a year, but it's just going to sit here vacant for a year. And it was an old consignment furniture building. And so we went in and literally did the work pretty much ourselves with the help of one kind of contractor. And we painted it, we spruced it up, and it was 3,000 square feet, which, you know, is pretty big for a clothing store in those early days. So we took 1,000ft and we used it as our office. We took 1,000ft and we created an art gallery space, and we created a thousand feet of merchandise and Fiori product. And we started bringing the community together, doing that same thing that we had learned kind of prior to launching clothes. And we started having art shows and bringing these incredibly talented artists in, showcasing their work. We would bring other local Encinitas vendors that were launching craft brewery or, you know, different products, and we would have them feature their products and, and collectively we would invite the community to come and they became really fun events. And we were having like once one a month and we would have hundreds and hundreds of people show up. And then before you knew it, people started wearing our clothes and they were wearing our clothes because they resonated with the experience that we provided them and then they liked the clothes, so they started telling their friends and coming back for more. So inevitably, you know, they tore down that building and rebuilt I think it's a bank now. But you know, we realized during that time how to become retailers. So it was almost like right out of the gates we learned that we could sell product at retail and that bringing people together in the physical world and sharing in great experiences was such a great, powerful way to connect people with our brand and to introduce it in a really authentic way. And so when we lost that pop up space, we knew we had to find a new store. And that was when we secured our flagship and we were committed to the same cadence of throwing events and bringing the community together. And in those early days, our stores were just as much about a, they were a community kind of outpost, a community center as they were retail stores. And we've brought that same community mindset to every store that we've opened ever since. But, but I think it was, it was like those early days in the pop up that kind of revealed to us how important it is to connect with people in the real world and to share that, that experience of what Vuori stands, stands for in a really meaningful way. And so, you know, now we have really aggressive plans to open stores all around the country, but every one of them will be approached the same way. And, and we're always asking ourselves, how can we be in service to the communities that we operate in and connect with them in really authentic ways? And so, yeah, we kind of almost fell into it, but it became really, I don't know, really, we, we really resonated with it in a deep way from those early days. While we don't have a third of our stores dedicated to an art gallery anymore, we find other ways of getting out into the community, inviting groups in to host events in our stores. You know, we very much want to be a part of the communities that we serve. And those are lessons that we learned in the early days that we bring to every market. I think it's really challenging. Everybody today wants to talk about what is experiential retail and what, what does that mean? To me, it's not just like a wall with an image that you can take a photo on or in front of and post on social media. Like to me it's about how does your, how are your store employees educated on what you do? What is the experience they get when they walk in? You know, are they greeted by really incredible people that are knowledgeable about your product and then how does your store enhance, how does your brand enhance the communities that they operate in? And so, you know, we're just as much outward facing, getting out into the community and getting to know the different fitness instructors and the people that are doing really cool stuff in their communities. We find out how we can support them, how we can use our store and our brand to be a part of their journey. And, you know, that symbiotic relationship with the community is really, I think, a big difference maker for us. And, you know, the product is. We've always been product centric, so we believe in our product. So when we, when we get somebody in our product, we believe that they're going to have a good experience. And so it further reinforces our efforts to go out and introduce it in a really authentic way.
- [21:03]
A
I know you started off as a men's brand as you, as you spoke about, when did you decide to introduce women's apparel and what was like the strategy there?
- [21:10]
B
Yeah, great question. You know, I would say that the decision to be a dual gender brand dates back to the original decks that we put together for investors. You know, we. The vision for the brand was always to be dual gender, but we didn't end up bringing product to market for women's until the spring of 2018. Predating spring of 2018, we did some test marketing in our stores. And so we designed some very small capsules that were available in store only, and they were designed to just get feedback and to learn from our customers, and they did just that. But then we kind of put together our first collection and brought it to market in a more meaningful way in the spring of 2018. You know, what's really unique about Viori is that today we're a men's brand first, that today 50% of our revenue is driven by men and 50% of our revenue is driven by women. We're, you know, in a class of our own when it comes to, like that gender breakdown in our, in the premium active space. Lululemon really created the category. They were very meaningful to women. And then they had to kind of backpedal and change that consumer sentiment that they were a women's only brand and create a cool men's offering. They've been making progress, but a lot of guys still feel very strongly that Lululemon is a women's brand. And then you've had a lot of brands that have kind of followed that have really been focused on the female consumer and have struggled to introduce men's in a really authentic way. So we didn't plan it that way from the very beginning. But I will say that I think it has been maybe easier for us being having a strong men's brand and a men's positioning to introduce women. I think it's possible to, you know, likely to suggest that, you know, women are more willing to shop from a men's brand than men are to shop from a women's brand. That's something that we've, we've kind of observed as a possibility. I can't say that definitively, but it's a, it's an observation because we've been able to build something for women that's really special. I mean, women are resonating with our offering in a really cool way and it's something we're really, really proud of. But, you know, dating back to the launch, we saw the opportunity in men's first. Like, we knew we wanted to be dual gender, but we really felt like the men's market was underserved. And while, you know, the customer maybe wasn't as mature in terms of looking for this category, we, we felt like we could be on the front end of really doing something unique and fresh and something that didn't really exist for men. I think when I look back today, I think that served us well. Yeah, because I just, I don't think there was as much competition. We were this kind of unique, fresh take on men's active apparel. And that customer, it turned out, was pretty underserved. So we were able to build a great little business and then, you know, really round out what we intended for the brand, brand to be over time. With that dual gender point of view.
- [24:07]
A
How also did you approach. You talked a little bit about on the fundraising side of things. You had some friends and family money for your first round. How did you approach fundraising after that? And, and as well as I know Softbank made a major investment a couple months ago, which. Congratulations. How did that come about? And, and I know as well, like with all this fundraising, I know that profitability has been very much a core of your business. I think you've, you've been profitable, I heard, since 2017. How do you think about fundraising, managing growth and expectations there, but also remain, you know, a sustainable, profitable business?
- [24:44]
B
I would just say this, like, I didn't have a background in apparel and I hadn't raised a lot of money in my lifetime, so I wasn't familiar with the process. And so it made the process very hard for me. I always joke that it was like kind of saying I was going to start a band and then we were going to be the next Rolling Stones and you guys should give me money to go out on the road. Because, you know, I didn't have a track record. So when, when I told people we were going to bring this fresh perspective and do something fresh and disrupt Lulu and Nike and all these big brands, people were like, why are you the guy that's going to do this? Like, they understood the market point of view to a certain degree. But a lot of investors aren't necessarily product people. So getting into the intricacies of design is not a winning formula when it comes to raising money. And so a lot of people didn't. They didn't believe that I could be the one to do this, which was a very humbling experience for me. So naturally, I knew I wasn't great at raising money, so I had to be really disciplined in terms of profitability. And one of the things that maybe is unique to my background is I'm a CPA by trade. I started my career at Ernst and Young, and so they ingrained this financial discipline into us in that career path. And so those early days of working in the audit practice, Bernstein Young, I really developed a sensibility for, you know, financial discipline. And it was always really important to me that we strive for building a business profitably. Like, I saw a lot of our peers that were raising a tremendous amount of money from different financial institutions. And that, you know, that just didn't make a lot of sense to me. I didn't feel like an apparel brand could trade at really big valuations in those early days. And therefore, I just looked at it like, as suffering unnecessary dilution if I wanted to go that path. And so I became much more focused on building really great relationships with my supply chain. I heard, I think it was Kevin Plank. Talk about a lot of investors, or excuse me, a lot of entrepreneurs were caught up in this place of raising their series A and then B and then their C. And they weren't necessarily as focused on their supply chain. And Kevin Plank said, look, if you build the right relationships with your supply chain, they will be your investors in your bank. And that was like an aha moment for me. And I started really scrubbing our working capital model and, like, looking at what would it. What would it mean to our business if we could get extended dating in the early days? And I was able to work closely. I focused a lot of my energy on building relationships with our key factories and. And getting them to understand what we were doing, the success we were having, and, you know, essentially just building trust. And it ultimately led to them giving us great dating. And we were able to focus on unit economics from A customer acquisition standpoint combined with our retail model and our wholesale business. And we were able to build a working capital model that generated free cash flow from a very early standpoint, from a very early time in our evolution as a company. And so we raised a total of about two and a half million dollars. We built a profitable company and we never had to look back to raise additional capital. So yeah, to fast forward to today, you know, we just did a transaction with SoftBank. It was, it was predominantly a secondary offering so the company didn't need to put money on its balance sheet to fund growth and therefore we chose not to. But it was, it was a great win. And you know, SoftBank is a group that I have a tremendous amount of respect for. It occurred very organically. We weren't looking to sell a percentage of our company. I was introduced to the, the, the person who leads their consumer practice through a mutual friend. He happened to live here in San Diego. And so we had a breakfast together and I think we really enjoyed the conversation. And it led to another breakfast and, and, and a conversation around what a transaction or what an investment from them could mean. And it ultimately came down to like, are we aligned by a common vision for the future? And I believe really strong. You know, I'm not doing this, I'm not building Vuoria to sell. I'm a young guy, I have a lot of energy for this business. I want to build something that's going to be really cool in 20, 30 years. I want to build something that my kids will want to work at. And so private equity and institutional investors has always been very scary for me because I didn't want to get on somebody else's clock. Like, it was important to me that we maintained in control of our destiny. And I've brought that same mentality to every cap raise, every investor, every management person we hire, every board of directors. Addition, I'm always thinking about values and a common vision for the future. And you know, SoftBank likes to back bold companies, like companies that want to be market leaders that have big visions for their brands. And I think Vuori wasn't an exception to that. And, and they had a long term mindset and they wanted to be supportive where they could but let us continue to execute on our plan. And the more I learned about them, the more I liked. And so ultimately it culminated in us doing something together. And it turned out to be a really great way to reward those, those investors that believed in us back in the day when we had, you know, nothing to really show one of the proudest moments of my professional career.
- [30:15]
A
Honestly, I feel like sustainable is a word that I don't know if I know what it means just because it's kind of thrown out a lot. I want to know how you think about sustainability and vori, maybe in a broader sense, you know, how you think about sustainable apparel. What does that actually mean to you?
- [30:32]
B
Yeah, I mean, a lot of it comes down to having control over your supply chain. You know, the apparel business is a very dirty business. That is just the truth. And it's hard for me to come to terms with that at times because I could probably do more good by just not having an apparel company. But, but you know, I figure people aren't going to stop wearing clothes, so it's probably good to be in the business, but try to make responsible choices as you go. And so a lot of it comes down to the materials you work with and the chemicals that you work with. You know, everything you wear to get a, get cotton or polyester or nylon a certain color, it requires dyeing. And so it's important that your supply chain, you have control of your supply chain, like where things are being made. And you understand that like those, those mills, those dye houses have more sustainable practices implemented to ensure that like their water is treated and so forth. But the raw materials that you work with, you know, you can buy from so many different places. And so it's about making sustainable choices, meaning, you know, recycled materials where you can, you know, so 80% of the materials that we work with are either made from recycled plastic, recycled nylon, bio based materials or organic cotton. So before we even dye it or touch it, you know, the raw materials are more responsibly sourced. And then we think about things like dyeing like we talked about. We think about the chemicals that are used in treating all of our product to get, give it a certain look or to ensure it fights odor. All of these things, there's, there's choices up and down the supply chain. Some of them are cleaner, some of them are, are more dirty and more, more harmful. So it's about thinking about every input into your product. And then there's just things like, you know, we offset 100% of our carbon emissions, we invest in green projects to offset our carbon footprint. So we're technically a carbon neutral business. And then we, we do the same thing when we look at plastic, we calculate 100% of the plastic used in our supply chain. We work with groups to help us minimize that plastic and then we offset it by cleaning up the environment in excess of the plastic that we put into it. And so we're looking at the business holistically. But that's what sustainability means to us. A final chapter there is just developing more of a circular business model, meaning trying to be intentional about extending the life of your products so that when somebody's done wearing it, they don't just throw it in a landfill. You know, that that you can extend the life by refurbishing that product and selling it again and giving it further life. And so that's another part of our sustainability initiative that we've worked on in a limited capacity but are bringing to market in a more meaningful way in the years to come.
- [33:30]
A
Thanks for sharing how you don't only think of it as inputs, but also as well how in the outputs in terms of the initiatives that you support and donate to. And that's great and agree like I guess the next phase is the circular economy and how you can actually extend the life of current products. Joe, thank you so much for your time. I really appreciate you spending the hour here.
- [33:51]
B
Thank you so much, Mike. It's always a pleasure to chat. Honored that you had me on.
- [33:56]
A
And there you have it. I hope you enjoyed this highlight episode. If you enjoyed this episode, I'd love it if you'd write a review on the Apple Podcast. You're also welcome to follow me, your host, Mike, on Twitter Ike Gelb and also follow for episode announcements at Consumer vc. Thanks for listening everyone.