Davis Smith, CEO of Cotopaxi, a sustainably sourced outdoor gear and clothing company based in Salt Lake City, Utah, exemplifies how entrepreneurship can make a difference in people’s lives. Nine years ago, he founded Cotopaxi as a certified benefit corporation with the goal of helping underserved communities worldwide.
Since its launch, Cotopaxi—known for its colorful designs embossed with its llama logo—has grown into a 350-person company with $100 million in annual revenues. In the process it has aided 3.8 million individuals who live in extreme poverty through its nonprofit foundation. It’s a business model that proves capitalism can be a force of good and companies can use profits to help society.
“Doing good and doing well as a business are not mutually exclusive,” says the 44-year-old entrepreneur. “Any business can find a way to make an impact on people’s lives.”
Launching a social impact startup
Cotopaxi maintains its benefit corporation status by adhering to verified performance and accountability standards on a range of factors, from employee benefits and charitable giving to supply chain practices and sustainable materials. As a certified carbon neutral company, Cotopaxi works with factories worldwide that employ fair labor practices and use recycled, repurposed, and responsible materials to make its products, which range from backpacks, duffel bags and hip packs, to active wear for men, women and kids.
Cotopaxi typically allocates 2% to 3% of its annual revenues to the Cotopaxi Foundation. The foundation supports currently supports the International Rescue Committee and United to Beat Malaria among others. Cotopaxi is also a member of 1% For the Planet, a nonprofit that gets member companies to donate at least 1% of their annual revenue to environmental causes.
“The goal is to empower and help poor communities through health care, education and livelihood,” says Smith, noting these are the three pillars linked to poverty alleviation. Smith adds, “millennials and Gen Zers don’t just want to buy things anymore, they want to connect to brands they support. Similarly, they want to work for companies that are socially responsible too.”
Demonstrating that cultural shift in attitudes among consumers, Smith notes that Cotopaxi has recruited what are called “Do-Good Ambassadors.” These influencers are environmentalists, creators, outdoor enthusiasts, and community leaders who are helping the company build its brand through a grassroots effort on social media.
Paying It Forward
Smith’s passion to help others took root when he was a young child living in the Dominican Republic, Ecuador, and other South American countries in the early 80s and 90s. His father, a missionary and contractor for the Church of Jesus Christ of Latter-day Saints, brought him to remote villages and orphanages where he saw firsthand the plight of children who were naked and lacked basic necessities. “It was an experience that revealed the inequities so many people face,” he recalls. “It triggered a calling to use my life to fight poverty at a very young age.”
Smith himself served as a missionary for his church in Bolivia when he was 19, but he realized going to business school could help him figure out how to develop a private sector model that could tackle the problem. While an undergraduate student studying international studies at Brigham Young University and later while getting an MBA at Wharton, he started to think about ways he could build a social enterprise.
The idea to launch a benefit corporation outerwear company was triggered when he was in Brazil pondering a New Year’s Resolution in 2013. “It was like a spiritual experience,” says Smith who decided to name his company after a volcano in Ecuador, located near a town where he grew up.
He launched the company in the fall of 2013, raising about $150,000 from family, friends, and angel investors, which included the founders of Warby Parker, Harry’s and The Honest Company. The pre-seed money was used to hire a team and make product samples. “In those early days we officed in our apartments and homes and worked on a pitch deck that explained how we planned to disrupt the outdoor industry with a new brand.”
But hooking venture capitalists on the idea of backing a benefit corporation startup wasn’t easy. Smith says he pitched his idea to more than 100 VCs, angel and impact investors and found no interest. But in January 2014 he raised a $3 million seed round led by Kristin Green, managing partner of Forerunner Ventures.
“It took a female investor to recognize the value of what we were trying to create,” say Smith, who claims Cotopaxi was the first benefit corporation to receive venture capital.
Building a fanatical fan base
With the capital in hand Smith hired designers to create outdoor clothing and gear, found factories to produce the vibrant, contemporary jackets and backpacks, and launched an ecommerce site.
To build consumer awareness around his new brand he decided to target adventurers who loved the outdoors. But that was a huge challenge considering companies like Patagonia already had a big share of that market.
“To differentiate ourselves I knew I had to target a diverse group of people who cared about a host of social issues and not just focus on environmentalism like Patagonia,” he says.
To create buzz, he launched the Questival, a 24-hour adventure race for teams of friends in Salt Lake City. He attracted possible participants by bringing two llamas that he bought on Craigslist—Cotopaxi’s logo is a llama—to college campuses, telling students about his new brand and Questival adventure. Teams would win points and gear and international trips for activities ranging from 1-mile runs and mountain climbing, to donating time to community organizations.
About 5,000 people participated in that first race. Participants received a backpack and Cotopaxia got 30,000 social media hits on Instagram and Facebook. The company was off to a running start. The concept resonated so well that within five years Cotopaxi was holding 100 Questivals around the country, creating its earliest brand evangelists. In 2016, Smith opened his first retail store in Salt Lake City on Main Street.
Smith has been able to attract $75 million in angel investment and venture capital from such funds as Greycroft and Bain Capital Impact Fund. The company’s mission of using business to improve lives has attracted an impressive list of angel investors including Blake Mycoskie, the founder of Toms Shoes.
Today, Cotopaxi sells hundreds of products to over 1,000 retailers including Dicks Sporting Goods, Public Lands, REI, and Nordstrom. It has about a dozen of its own retail stores in the U.S. in California, Colorado, Oregon, Utah, Washington, and abroad in Japan.
This year revenues are expected to hit $160 million, says Smith who believes the company is on track to build a one-billion-dollar brand in 10 years.
Now that Cotopaxi on a good growth trajectory, Smith has promoted Damien Huang, the company’s president, to the CEO role. Starting July 1, Smith will become Cotopaxi’s chairman and embark on a three-year religious mission in Recife, Brazil. After that hiatus, Smith will return to help lead the company.
“My goal is to become a case study of how companies can do good for the world,” says Smith. “Think of what an impact we can make if we inspire thousands of brands to join me in this mission.”
Favorite quote: “If correcting all the world’s ills seems a daunting task, so be it. Go out there and be undaunted. If we cannot look to you to change the world, tell me to whom we should look.” –Elder Jeffrey R. Holland
No. 1 lesson learned: Love is one of the most underutilized tools in leadership. If we love people sincerely, we will get the most out of them. Love will bring out the best in us and refine our leadership as we seek out after the growth, happiness, and progress of those around us.
Advice for aspiring entrepreneurs: Find a way to weave deep purpose into your daily work and into your business. It will make life more fulfilling and will help you attract extraordinary talent. People want to be part of organizations that stand for something.
Mentor: Steve Gibson who runs the nonprofit The Academy for Creating Enterprise. He taught me that entrepreneurship is a way for people to get out of poverty. Supporting microenterprises is key.
This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.