Out­door gear maker Co­topaxi stitches its so­cial goals into ev­ery back­pack

Bloomberg Businessweek (Europe) - - NEWS -

Cus­tomers who or­der one of Co­topaxi’s $49.95 Lu­zon del Día back­packs don’t know what they’re go­ing to get. That’s be­cause the out­door gear com­pany lets work­ers mak­ing the packs at a fac­tory in the Philip­pines se­lect the com­bi­na­tion of col­ors used, so no two are the same. Be­sides in­ject­ing some cre­ativ­ity into what is typ­i­cally mind-numb­ingly repet­i­tive work, the strat­egy helps cut down on the amount of fab­ric that goes to waste.

The $646 bil­lion out­door re­cre­ation in­dus­try is filled with com­pa­nies that have staked their brands on green ideals, Patag­o­nia be­ing among the most prom­i­nent. Fewer of th­ese busi­nesses, though, have em­braced a hu­man­i­tar­ian mis­sion, says Davis Smith, Co­topaxi’s founder and chief ex­ec­u­tive of­fi­cer. “When I looked at a lot of the work other out­door brands do around the en­vi­ron­ment, it’s amaz­ing work,” he says. “Some­times it’s around preser­va­tion of land or na­tional parks. The sad thing is, re­ally, it’s the elites that go to those things.”

A Whar­ton grad­u­ate whose pre­vi­ous startup was a baby prod­ucts e-tailer in Brazil, Smith draws in­spi­ra­tion from his itin­er­ant child­hood. Co­topaxi, which he founded in 2013, is named af­ter the vol­cano that looms over Quito, the cap­i­tal of Ecuador—a city where he once lived. Its logo is a sil­hou­ette of a llama’s head.

Smith ini­tially set out to model his Salt Lake City-based com­pany on shoemaker Toms Shoes and eye­glass e-tailer Warby Parker, whose buy-one, give-one for­mula has helped turn them into house­hold names. When Co­topaxi in­tro­duced its first back­packs, a por­tion of the sales of each de­sign was ear­marked for a par­tic­u­lar non­profit.

It made for a nice story: Buy a Cusco pack and help fund a shel­ter for street chil­dren in the Pe­ru­vian city of the same name. But as the com­pany’s range ex­panded to in­clude al­most 100 prod­ucts, from wa­ter bot­tles to tents, its do-good man­date be­came cum­ber­some to ad­min­is­ter. It also left Co­topaxi’s ben­e­fi­cia­ries ex­posed to the va­garies of con­sumer tastes: If a new back­pack can­ni­bal­ized sales of an ear­lier model, a char­ity could see its do­na­tions dwin­dle.

“I know noth­ing about the non­profit world, other than that I’m pas­sion­ate about it,” Smith says. “That’s why I needed Lind­sey to come in and fix ev­ery­thing.” That would be Lind­sey Kneu­ven, who joined the com­pany in June of last year to fill the newly cre­ated post of chief im­pact of­fi­cer. Kneu­ven, whose ré­sumé in­cludes stints at the Sil­i­con Val­ley Com­mu­nity Foun­da­tion and the Sales­force Foun­da­tion, has re­vamped the giv­ing strat­egy so five grantee or­ga­ni­za­tions, down from nine pre­vi­ously, re­ceive a steady 2 per­cent of the com­pany’s rev­enue. “We are work­ing on build­ing a sort of en­dow­ment with those

“He said that ven­ture cap­i­tal­ists would not want to in­vest”

funds as well as ac­tively grant­ing with them,” she says.

The non­prof­its in Co­topaxi’s port­fo­lio fit into one of three cat­e­gories: ed­u­ca­tion, health, and liveli­hood. They range from scrappy non­govern­men­tal or­ga­ni­za­tions such as Ed­u­cate Girls, whose work is fo­cused on In­dia, to more es­tab­lished groups such as the In­ter­na­tional Res­cue Com­mit­tee. “One of the most ex­cit­ing things about work­ing with Co­topaxi is their po­ten­tial and abil­ity to tap into the young pro­fes­sional, young hu­man­i­tar­ian au­di­ence that we are look­ing to en­gage,” says IRC Cor­po­rate Al­liances Of­fi­cer Shan­non Paz. She says Co­topaxi helped IRC raise about $28,000 dur­ing last year’s Giv­ing Tues­day, a day in Novem­ber that NGOs want to turn into a Black Fri­day for char­i­ta­ble causes.

To ex­pand aware­ness of its brand, Co­topaxi stages one-day ad­ven­ture races it calls Ques­ti­vals, in which teams of two to six peo­ple com­plete out­door chal­lenges for a chance to win gear and trips. At the com­pany’s up­com­ing world cham­pi­onship, which runs April 22-30, par­tic­i­pants will race across seven coun­tries, from Belize to Panama. Along the way, they’ll have to squeeze in good works, such as vol­un­teer­ing in soup kitchens. Arm­chair ad­ven­tur­ers will be able to track the teams’ progress on a pro­pri­etary app.

Co­topaxi is one of about 1,700 busi­nesses world­wide that have reg­is­tered as a Ben­e­fit Cor­po­ra­tion, or B Corp, a le­gal cat­e­gory for cor­po­ra­tions that hew to the con­cept of a dou­ble bot­tom line, in which fi­nan­cial goals don’t take prece­dence over so­cial ones. (Patag­o­nia, Method Prod­ucts, and Plum Or­gan­ics are also B Corps.) Smith says his at­tor­ney ad­vised him against go­ing this route so early in the com­pany’s life: “He said that ven­ture cap­i­tal­ists would not want to in­vest in this new type of en­tity that was giv­ing away money be­fore you even make money.” Turns out his lawyer was wrong. Co­topaxi re­ceived $3 mil­lion in seed cap­i­tal in 2014 and last year raised $6.5 mil­lion in a fund­ing round led by Gr­ey­croft Part­ners.

“Hav­ing to bring in out­side in­vestors, that’s kind of when out­door brands go a bit side­ways—when there are greater profit pres­sures,” says Mike Geraci, chief strat­egy of­fi­cer at Mer­curyCSC, a mar­ket­ing firm where he’s worked on brand plan­ning for more than 50 out­door com­pa­nies. “By al­ready hav­ing some sort of pa­tient in­vestor com­ing in and say­ing, ‘I re­ally like what you’re do­ing here and I be­lieve,’ that is the model of the fu­ture.” Lind­sey Kra­tochwill

The bot­tom line At out­door gear maker Co­topaxi, back­packs and tents have a so­cial mis­sion stitched into them.

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