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, Co-Founder @ Allbirds

0:00We have a mountain of cat, 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. Welcome to 20VC and stay with sitting down with Joey's Willinger, co -founder and CEO at All Birds. Now All Birds is an incredible story, a much -loved brown when public in 2021 1. Sawed to a peak valuation of $4 .1 billion, but just two years later, now has a market cap of $142 million. Today, what happened? Why are revenues down? When will they be profitable?

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3:42Joey, I am so excited for this, you know I've been an all buzz fan for a long time, so thank you so much for joining me today. I've been a fan of your show and also just what you do in life and the platform to invest, the platform to learn through you with really interesting people, so I'm pretty delighted to be back on the show. Why, you are far too kind and flattery will get you everywhere by the way. I want to start with just the context, which is, we see the incredible Allbirds brand today. What was the founding aha moment for you with Allbirds and you committing 10 years plus of your life to this business?

4:13Hmm, I'll try to do justice to why Tim and I started this brand together in a really brief time, but you know, we come from very different backgrounds. So Tim Browns, my co -founder, he was a professional athlete, but he happened to have a design background. became the captain of the New Zealand National Soccer Team all the way through the 2010 World Cup. So obviously quite good to this trade was sponsored by the big sportswear companies during that time. And you know, just like most entrepreneurial journeys, it starts with the moment where there's a problem out there that's not being solved for you individually and he certainly had that left wanting something.

4:44And it was around these gigantic logos on the side of his shoes. It was around the fact that the world had casualized and the footwear industry just really hadn't kept up with it. So he had this really unique and intuitive sense for the consumer, for the industry, and wanted to do something. He ended up throwing a Kickstarter up till I get it out of his system, frankly. And that was in 2014. I was one of the first customers of that Kickstarter because our wives happen to be really close friends and were roommates in college. And as all good things happen in life, it's through the people who support you.

5:16And our wives are certainly no exception to that rule. At the time, though, I was working at a biotechnology technology company. It was called Solazim. And we manipulated microalgae to eat low carbon intensity inputs. And so I led the petrochemical replacement area, which was kind of green chemicals and would go out and talk to brands around the world, talk to other businesses about the idea that you could replace what you use today, have a higher performance and no carbon impact on the world. It was like breathtaking. Like, yes, of course we want that. And then all of a sudden it was three conversations later.

5:50It's like, you know We actually just need margin. Can you make this plastic stuff and make it cheaper? And so it was just sycophia and exercise for me where I realized that while the technology existed the consumers wanted it There's no compromise offering was there for the taking and brands could not position it correctly And so Tim and I came together and saw that one plus one could equal three We could blend his design and instinctual sense for the consumer with my material science background and experience an 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.

6:25I mean, you intellectual savante dropping a sissophie in, which is first for people listening is the idea of pushing a rock continuously up a hill really and going not very far. But I'd love that in terms of dropping that in the intro. Incredible. Listen, I said that we'd just be direct. Everyone loves the brand and it's a very well -known brand. Obviously, company went public. I went out at 3 .75 billion. Today is sitting in 127 million. I think we sounded former as like that's the same almost kind of give or take as a series A. What happened to calls that? Well, I would say it's a combination of exogenous factors, and then there are some controllables as well that we didn't do as well as we should have on the same token.

7:09You know, I take responsibility for all of that because regardless of what happens in the external environment, you need to be prepared to grab it now. I'll just say valuation is something that I don't control. All we can control is how strong the business results are. We had oriented the business around a significant growth. In the early days of all birds, we started in 2016 and up until the pandemic happened in early 2020, we were growing exceptionally high rates and started making investments to continue to capitalize on that. And when the pandemic happened, we were in a position where we were not set up for what was to come over the next two to three years.

7:50And I think those factors that happened from what the consumer was doing, how fast they were changing in terms of the direction of what they wanted from different brands and the fact that they gravitated to brands who had incredibly high awareness and they've been around for a long time contributed very significantly to a situation where it was difficult to parse the signal from the noise for us. And so, you know, in that chapter of the company, we made some fantastic decisions, and then we also made some decisions that were not as good. And the external environment also was super tough. And so along the way, we continued to believe that the brand was a billion dollar brand and the business just needed to do some catching up.

8:29And we wanted to further capitalize the business and make sure that we could control our own destiny, could capture the vision that we believe. And the brand foundation is incredibly strong. And we see this every day, whatever we do, consumer insights work. And we do that a lot and quite regularly being a consumer driven business. And the health of the brand is incredible. So we now have a brand that's close to $300 million in revenue. Recognition within a really interesting group of consumer albeit we still have less than 15 % aided brand awareness, meaning only 15 % of the US population knows that all birds exist.

9:06And we know that when people try our products, they love it and they come back. So one of the biggest issues for us is just making sure a lot more people find out about us and we say a nice hello. So we haven't fallen love and I think we'll be well back on the journey for having that business catch up to the promise of this brand. Jerry, I know when you are reflective and you think back on the internal elements that you made mistakes on, what do you think of the cool one or two? Yeah, and you know, look, the externals are good. I won't take credit for that either. And I think there was some things in 2016 that we saw, we identified and we capitalized on those opportunities that were real tailwinds for us.

9:43Frankly, I see some of those tailwinds coming back with incredible bigger now. Think about what's happened over the last couple of years with this maximal build in the trend of how shoe companies have been coming to the consumer marketplace. And the fact that now quiet luxury is really coming back and people really want to celebrate this. almost anonymous luxury with this very elevated premium experience. That's something that is gonna be a tailwind for us in the coming years, and I'm pretty excited about that. But, you know, if I look back on the things that we can control, there's tactical decisions in the business, whether it's specific products or inventory buys, or things like that, those are all really, really important.

10:20Was the move into running an athletics? A good decision, because my take as a consumer was like, You're like a great luxury leisure brand. I get a Nike from my runnage. Yeah, and you can't change the perception of a brand overnight. That's for sure. What we have found over the course of the last year in particular in terms of how we position to the consumer, what we stand for. It's this crossover place between an informal and casual lifestyle with an active health and well -being oriented existence in life. That is the core of where we started the brand and that's where we're gonna bring everything back to.

10:57So I think in part you're very right about that and where we should live into the future. So you thought maybe products, the expansion or lack of was one mistake? Is that it? In some respects, but to answer your question directly, all of the success that we've had and all of the stumbles that we've had, it always comes back to people. The entrepreneurial journey is a leader or a very small company and we've started less than eight years ago. And the balance of who you select, this balance of entrepreneurship and ambition, there's also an incredibly important element around bringing in people with a sharp expertise around the functions and the industry expertise that's required to be excellent at all of the fundamentals.

11:38I 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. And sometimes we've gotten that right, sometimes we've gotten that wrong in terms of the people that we've had and they're all Incredible people, incredibly high integrity people, but there's a right time and a right place for each of these leaders to exist in a business to help us be Extremely effective and honestly it boils down to that both the successes and the failures along the way Do you regret going public? No, I don't we have a mountain of cath 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.

12:19And our market cap is a reflection of the fact that we've essentially been written off by people. And until we start delivering quarter over quarter incredible financials, that trend towards and then eventually meet our long term targets for how this business is structured, we will suffer in that space. And so our job as a company is to urgently march towards that with all the sharp insights that we have and drive towards that. And when we do, the market will come back and come behind us. So, you know, it's a matter of time frame that you think about these things through and a couple of years of reshifting on what we need to do for the right long term thing for the business will pay off for anyone who wants to jump on board now or in the near future.

12:59Do you consider yourself a fashion company or a technology company? Because for years, it was kind of, as you put in the technology bucket, are you a fashion company or a tech company, do you think? We are a product company first and foremost. and we happen to exist in a category where style and fashion is incredibly important. Now, we have developed an incredible set of data and technological infrastructure and something that we have in spades relative to our competition, no matter what their size. Even if there are many, many billion dollars in size, we are leading in terms of the infrastructure, the tech enablement that we've been able to bring into the business.

13:37What's the biggest difference between being public and being private? Well, everyone's seeing everything you're doing every single day. Businesses don't happen on quarterly cycles, but financial reporting and public markets do. 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. That's a stark difference from when you're a private company when you can make certain decisions that have zero implication because you happen to be reporting at that specific quarter. And in this case, it's not. And so, you know, in some ways, the discipline is excellent.

14:13It forces you to have a cadence that is driving urgency towards the business. And in some cases, it could be a little bit intentional with the long -term build of the business. But we've tried to structure things in a way, both from a governance perspective and from a capitalization perspective that allow us to be really good stewards of any investor who has belief in the brand for the long term and sees the potential of what we've created from the early days and now just need to execute on the business side to bring those two things in convergence. You said about who shoot Ross Eingolf. Does that I need?

14:44It's humbling. No doubt. We went public at $15 a share 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 and I take that responsibility incredibly seriously. And so that is of our utmost concern. And so when we don't deliver for those people, that is a humbling experience. And you know, there's a lot that happened in the capital markets when interest rates went up significantly that was unavoidable for us to expect that everything would be exactly the same. However, it doesn't absolve any of the responsibility that I feel to drive the shareholder value that we create.

15:20And so I'm not annoyed, I'm not angry, I'm emboldened to make sure that we get it back and deliver much more than when we came out Like I've always had an vision that the IPO price that we came out with was was a good starting point and that people That invested alongside us at the IPO would make lots of money in the fullness of time and you know given the way things have changed They're gonna need to hang on for a couple years right now and as we execute I think the the future can be incredibly bright. I think a lot of people honestly say it's like Ah, this is the case that D2C doesn't really make sense and that actually like, eh, kind of undifferentiated products and it's just bad unit economics.

16:01That characterization, being lumped into a group of companies that's called the DTC group of companies, that's that history of, yeah. I just think it's a generalization that lacks any kind of understanding of what we do. And so, you were a brand, we're not a channel. DTC is a way to do business. There's been great retailers who started this in our industry, the Gap in the 90s. Lulemon has done a really wonderful job of being a great DTC company, but they're a product first company. They happen to use a DTC channel to reach consumers, and that's what we envisioned was the best way to start our journey.

16:38But we are a brand first, and we've always envisioned that Omni Channel operation where we reach consumers, where they want a shop is the right way to structure the business. There are businesses out there that I'm well aware of that take a commodity product and try to cut the middle man out and reach the consumer directly and that is the business model. And so while a shoe you might think of as a bit of a commodity marketplace, it is so uncommodetized within the space that we play and we are so differentiated and when we are at our best, we offer something to the consumer that they haven't experienced before and they love and I know you're one of those Harry so can I be direct then and and just actually press you and say, do you do a good product marketing job then?

17:18I agree with you, I didn't use a commoditized tool, but I think on actually market the technology very well, the scientific approach to the bubbles and the shoes that also visibly like scientific because it stands out. Do you think you product market the innovation well? When we're at our best, I think we've done wonderfully. So I do think at times, there's been moments in time, particularly in recent times, if you think at the start of the pandemic where companies who were focused on athletic performance positioning, in a moment when people who hadn't run in 15 years decided they needed to buy another pair of running shoes for the first time, and those companies often had 70, sometimes 80 % wholesale distributed.

17:58There's a lot of touch points for the consumers to connect with that brand, and in a moment when everything got shut down, that was an incredible asset for a lot of companies, and so you can see that there's very significant momentum created by some of those external factors and some companies did really good job of grabbing onto that momentum and continuing to execute well. And others didn't do as good of a job of that. And I think we were in the unfortunate position of not being structured in a way that could capitalize exactly on the dramatic change that happened in that world. But we're getting back to a little bit more normalcy here.

18:30What would have allowed you to capitalize on it. We didn't have an athletic positioning at all and yeah we were a hundred percent of a casual lifestyle shoe offering in 2019. That's one really important element where that was just a moment where you can look at the athletic sneaker market and it just absolutely surged during that time period. That's okay we didn't need to be a big part of that and as I said I think that the next five years are going to be shaped by something quite distinct from that. The second element is I remember in the series a fundraising deck that we put together, we had this map of by year, what channel we wanted to reach consumers through and which segments of the consumer population we would be reaching via those channels.

19:11Along the journey there, we expected that we would start to expand our product assortment and be able to put these products into the right channels and reach the right consumers with that connection point. And so that slide, as it said, was, you know, we would start with a digital ecosystem, add stores starting in 2017, and then branch out to wholesale when you get to 2020. 2020, we kind of hit the pause button on that because of everything that was going on, and now we're kind of back on that journey. And that Omni channel vision is the right vision. And as I said, we're a brand not a channel, and so it's important to reach consumers profitably wherever they need to be, wherever they prefer to shop.

19:49Had we been in a situation where we had And a bunch more wholesale distribution we had elevated awareness through that expansion of channel. I think when people shut down and started looking for a product that they were familiar with and knew the brand, they would have had much more opportunity to discover our brand and then eventually see the delightful experience that our products deliver. We're in a new world where people are leaner than ever and kind of questioning large fund ratings. When you look back, do you feel that you needed all the money you raised or do you wish you'd gone lighter on fund raising?

20:21The way I looked at these fundraisings at every step of the journey and I looked at my own role in the company along the same paradigm that I'll explain here is that 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 in these milestones and then you take the money and you go deliver. And we had an incredible history of success of wildly out delivering the expectations that we set when we took money. And then in the process of delivering on those expectations, you start to say, okay, can we move the goalpost a little further?

20:56Do we think that the brand potential and the ambition of what we have requires us to continue to deepen the investment? And when we took extra money, it was because the answer to that was yes in our view. And we thought we had both the capabilities and the strategy and that profound connection with a group of consumers that in a very large marketplace that would suggest that yes, this investment is important to make if we're going to eventually capture the potential of this brand. And so that's when we took the money. Looking back, I could quibble on a detail here or there on a fundraise in terms of the exact amount of money, but that was never important to me.

21:31It was about creating something really special, a multi -generational brand that withstood the test of time and redefined how consumer products and consumption could actually be done, not just in the footwear industry, but much more broadly. And I think we're well on track to do that and yet business is never a straight line up into the right It's pretty squiggly and so that's the fun of it. Did you have acquisition offers along the way? You never know if an acquisition offer is a real acquisition offer until the piece of papers in front of you And you have the opportunity to sign it nothing ever got to that point But we've had a number of companies in the footwear space and that ecosystem of the parallel and footwear more broadly come to us and ask us if we're interested in selling.

22:15It's nothing I'm ideologically opposed to, same for Tim. We want to achieve the multi -generational brand potential that we've created in the early years, and if that's best done with a partner, that's something we would consider, and if it's best done independently, then we'll take that path, and so far it's been the latter. At this market cap, you not like, fuck it, Tim, let's take this private again. Again, that is, again, nothing ideologically opposed private or public. I think we have everything we need right now to control our destiny and to do everything we believe we need to do to build an incredible, incredible business and an incredible brand.

22:50If 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. and we have a board that does their duty quite responsibly to make sure we're thinking about all the options all the time and when we see a huge gap between now for a very prolonged period of time then it's something that has to be considered. I'm really just going for it but we know we can edit out if we need to so fuck it. It's a Friday video. You can't see but it's actually dark here.

23:23Did you mind if you take any secondaries off the table? A lot of founders did in the last few years and I think it's very helpful often to realize upside -downs of relief of financial pressure. Did you manage to? I think that you just framed that's really important. I mean, like if I could guide anyone on this topic, understand the life you want to live first and if you really want to live a life of material luxury, you should try to sell things as quickly as possible at as high a price as possible. If you're interested in making sure that you have financial security for yourself and your family, that more than that is not going to be particularly useful to you, like the diminishing return on that extra dollar is quite significant.

24:05That kind of camp and that thinking is how my wife and myself oriented ourselves around this business and the financial potential that it would create. What does that mean? It means that I like to give our shareholders the opportunity to make their own decisions on that. if they want to sell at any point in time, they should be able to. And I think it's fair for me to have that opportunity as well, of course. But everything now that Republic is quite out there. So I've sold extraordinarily little at the IPO. I sold nothing. And then after that, I've sold incredibly little. And frankly, it's just really to meet that that bottom of the the maslow's for me.