20VC: From a $1.1M Acquisition to $1.4BN in Revenues; The Meteoric Rise of Hoka Running with Deckers CEO, Dave Powers

24:11Yeah. Yeah, hawk or cricketers and cyclists. All great brands built in niches. I think so. I think they're a niche consumer need that has been met yet or they're solving for a problem that is meaningful to consumers. I think that's where all great brands start. I mean, if you look at Teva, when we bought Teva, that was the first sports handle because river guides in the Grand Canyon were frustrated with their flip -flops, fallen off their feet. So they invented straps to put on the sandal. And that was Teva. And that was for a very, very specific consumer at the time, but look at it now. It's on runways.

24:45We just did a collab with Chloe. So if you look at all the other brands, Birkenstock, Crocs, most of them start with a real niche, but something that's super important for that consumer. So what did you do right with ARG? It started off as like a surfer brand. Yeah, I think the team, probably in the early 2000s, made the pivot to positioning it as a kind of fashion staple and a cold weather staple. And that's where the team started selling to Nordstroms and some fashion of Calents. You started seeing it showing up on celebrities in Southern California. And then the real turning point was when Oprah put it on her list of favorite things for that year.

25:23But that was when it really made the switch from a functional boot for surfers to a fashion icon. And that just opened up a whole another world of opportunity in total market time. I often think people overthink how much of a role being in the newspapers will have or being in press will have and actually they're in vogue and like it doesn't actually make that much of a difference. When you have like Oprah put it in her list, do you just see it got up into the right for a continuous amount of time? At that time yes. I mean they were chasing business, it was a freight strain and they were just trying to keep up for a good five years.

25:56It's a really interesting comparison to Hoka. We offer great runners and we stay there and we solve that problem. Argy is not that, but as you said, there was a position or reshift in terms of focus, and the messaging to surface didn't continue. How do you think about that when you compare the two? To me, it's very polarizing from an aesthetic standpoint and a fashion standpoint, but I've met very few people, if any, that have said they put it on and were disappointed. And at the end of the day, it comes down to how they feel and how they make you feel emotionally. That's what we've found in our consumers is they love how it feels on their foot But it also is and this kind of sound corny, but it's like a warm hug or it's like they're cozy blanket when they put it on And so we've been able to tap into those two Insights to build what we are now two billion dollar plus brand We mentioned kind of about maintenance of brands it feels like I'm in London But like it feels like in London.

26:54I don't know whatever that time period that was ten years ago Pete and then it went through like a bunny a desaleration period in terms of growth of arc. Yeah, wasn't as cool as it was Yeah, where did it go off track over distribution? You know we were selling basically the same items so the classic tall boot to every account that asked and so when you walk down High Street and you looked in the windows Everybody had the same product and there was no differentiation and you know Then it also kind of became a chav boot, right? It was seen as lower market because everybody had it. It was off price.

27:28You could get it anywhere and we lost The specialness of the brand and it took us five years in the UK and Europe to get that back How do you not lose the specialness of the brand but increase adoption increase usage because you're not gonna do a Chanel or a Patect for leap and limit supply Significantly so how do you do that without making it cheap, but me? What we ended up doing, and this is in the US and in Europe, is pulling back and making it almost kind of disappear in the eyes of the consumer for a while. It was just an average boot at that time. It was everywhere. It was nothing special.

28:03People were then making fun of it about, you know, basic bitch, right? And like, you know, pumpkin spice lattes and chav consumers, and it was like, people made fun of it. So we had to pull it all back, retrench, and then selectively start going back out to the right consumers, make sure the presentation was right, working with the right influences to reposition it in a new way. How do you pull back? Because you'll consciously then saying, we're going to have Registraven use Registra office. And you have to be okay with that. Yeah, the goal was profit. So when we went through our journey back in 2016, when I came into the role, we told the street, we're going to pull back on revenue growth.

28:42but we're going to improve our profit profile. That gave us the air cover to do what we needed to do to be able to pull back distribution and tighten up our sales. How do you keep a team excited when you're pulling back in that way? It's tough. We really have to give them something to believe in. We had a lot of turnover at that time, which I think probably the right thing to do would definitely the right thing to do. We needed fresh perspective on the brand. That creates new energy. It gives people a reason to believe, gives them purpose. And we're all in the fight together. But it's not easy.

29:12I'll tell you. Yeah, I'm sure it's uneasy. On the re -exceleration, talk to me about how one approaches that. If we start on products, is it keep same product? Is it innovate? Is it more skews? Less skews? Yeah, it's funny. We brought it in a new president around 1617 for the brand. My remit to that person was just disrupt this brand. You need to change people's perceptions of the brand. Get people to notice this, uh, in a new different way. Andrew, who was the president at the time, you know, really ran with it, pushed the fashion envelope of it, pushed creativity, you know, brought in a lot of color materials, different influences repartored with.

29:50And next thing you know, it was like, oh, there's something happening at UGG. And then we started introducing iterations of the classics, new product that still had some of the DNA of the original brand. You know, it just started changing people's perception. And at that time, we were cleaning up the marketplace to be able to go back out with the right people when the right locations with the right inventory. And now it's all about focus. We're reducing skews. We're innovating off the classic in really exciting ways. We're leveraging some of the best influencers in the world. It's a re -acceleration complete.

30:23Are we re -accelerating or are we still plateau -slash? There's so much excitement about the brand, one, but then we have so many best -selling styles now that allow us to reach different consumers, different wearing occasions. So people are buying traditionally, they would buy one boot every two and a half years, right, the classic boot. And now we have people buying two or three times a year because they're buying different products. So it's definitely on the upswing and the men's is a massive opportunity for us to. Can I ask what are your lessons on the importance of a hero product? When you look at Hoka, Ark, the other brands you have, how much of a role do hero products play continuously.

31:02I mean, they're massive. I've had the fortune of working at companies that were founded on a hero product. You know, the yellow booted timberland, the chucktailer at converse. They just allow you to do so many things because of the scale, the volume, the margin, the consistency of the business. If you don't have that, it's really hard to run a successful, sustainable business. As long as you continue to stay true to what those products did in the first place and why consumers love them and you iterate off of those, you should have a good run. But you cannot underestimate how important those iconic styles are to the overall business.

31:36And I've said to our team recently, you know, we have multi brands at Decker's, right? Five brands all over the world. If you look at some of the hookah styles and the hook style. What's the top style, like number one driver of revenue? I don't know if I have to top my head or I want to share that information. But you know, the fact is that these styles are just super, super important and you have to treat them with the care and respect that they deserve because otherwise you'll see, you know, you'll go where Aguent 2013 or 2014 and it's not a good place to be as a brand. I think you're seeing a lot of brands out there today struggling because of that.

32:09When you look at kind of those iconic styles, they allow you to charge premium prices. You people want converses, not a ripoff of converses by another brand and so you can put another whatever percent that is on top. I read a lot especially about Bernard Arnoy and they say about your relationship to fashion and particularly high fashion is irrational. And he responded, it's entirely rational. Luxury is the only place you can get luxury margins. Which I thought was brilliant. My question to you is, how do you think about getting luxury margins? And is that only available once iconic brands are built and hero products have made?

32:48Well, I get it. You know, they've done an incredible job maintaining, well, first of all, demanding obscene margins, right? Based on what I know what those products cost and what they're getting for them. Their geniuses are building aspirational love for their consumers. Listen, if you can pull it off and you can sustain it, you've got an incredible business going. But the key is to create product that has that level of positioning and aspiration and then maintain it. When we said about that, maintain it. In the UK, I'm particularly aware that there were huge, huge love for Abercrombie and Hollister, not 10 years ago.

33:23And then just absolute obliteration of both brands. You think intensely about brand -dave. Is that only what you think will take away from the brand build and brand destruction there? It's interesting. I think luxury in a way has its own built -in defense mechanism where there's a certain type of consumer that can afford that product. And they're the ones that are wearing it around town and where it's where you're seeing it. So it kind of stays up in that stratosphere because a lot of people it's unattainable. from a price point. But when you look at an Abercambi or American Eagle even Gap, you know, when I was there.

33:58And I remember I had a conversation at the Gap one time over our logo gap sweatshirt. And the CEO, Mickey at the time, was pissed off because he was like, I see that on reality shows and talk shows and people in the audience. He's like, he's starting to show up everywhere and on consumers that aren't good for the brand, so to speak, right? And so I think when you start looking at Abercambi and American Eagle and even Gap at that time, It was the hot new thing until it wasn't. And when it wasn't, it's because it was showing up on everybody all over the place. It became ubiquitous. There was nothing special about it anymore.

34:32You started seeing it on discount in the stores, and you could tell it was a brand that was slowing down and dying versus on the upswing. How fast is brown decline, do you think? It's quick. Yeah. It catches you off guard. And the worst thing is you have all the inventory plan for growth, and all of a sudden it slows down, and that's when you're in real trouble. because you get a clear all that inventory and just makes it worse. But then there's also brand immortality, I think, which is like, you know, Balenciaga, I'm sure you know the brand. Yeah. But when it went through recently in the last year, I can't remember whenever it was.

35:03Yeah. Just brand destruction with some of their campaigns. Balenciaga, selling more than ever now, brand immortality. At what stage does a brand become too big to fail, almost? I think it's really the legacy brands, you know, newer brands. they don't have that longevity or the history, the archives that a lot of these luxury brands do and they can reach back to their history as a way to go forward. If you're a young brand and you don't have that, you run the risk of just being flashing the pan. But Blancyaga has such a history and they also have a just a baseline of consumers. They'll ebb and flow and they'll grow and you know contract a little bit, but you're not going to walk into a Blancyaga and see a Black Friday fire sale ever.

35:46I hope. No, I mean, I would love it in Chanel. It might make my face more shocking, a little bit cheaper, but not I know. Fuck you. You're protected, you know? Unbelievable. I mean, we discussed Hoka, we discussed art. Yeah. Two incredible acquisitions. And you mentioned five brands before you, why aren't you acquiring more Dave? Yeah, you know, we could ask that question a lot. And we talk about it a lot internally. The best answer is we don't need to. You know, we have such organic growth with UG still, with Hoka, that we feel we have a path where we could add billions on to our revenue today over the next five years, organically, which is the best way to grow a business because it's built in, the margins are there, it's not disruptive to the company, it's predictable, and the return on investment is massive versus overpaying for an acquisition that you're in the whole financially from day one and you're spending the next five, 10 years getting out of it before it pays off.

36:44Just pushing your strategic thinking here. Why not cut two others? You mentioned Hoka, you mentioned Argg, Gottata. The two others, I'm sure, probably account for minimal revenue in the grand scheme now compared to the others. Why not cut them and just focus? Yeah, we just announced that we're going to, you'll look for a buyer for one of our brands to look. And so we're really placing a bet on Tava. You know, when we look at acquisitions, we've looked at a lot of smaller outdoor brands out there because we feel that's a category in a space that has opportunity. And honestly, when we looked at Teva and compared to all these brands that we could have potentially purchased, Teva has the best global awareness.

37:21It has the best margins. It's an iconic heritage brand. So we're treating that as an internal acquisition. It's a good question. You know, we don't need the smaller brands to be successful. I like them because they have potential. We learn from them. They're great development opportunities for employees. We can test a lot on these brands without making big mistakes. And you never know. Some of these smaller brands could end up being massive, just like Alganhoka. Why didn't you buy Strava? If you think about the world that you do not currently in as the technology world, it's the online world. We power your feet, now we power your community.

37:57Yeah, you know, I had conversations with the founders there a couple times. Not in that context, but just getting to know them and our brand's partnering. And for them, they had really, I don't think they had any ambitions of being acquired and wanted to go down their path because they saw a real great opportunity. And we figured it's better to partner with them versus acquire them. We're not a technology company. You know, you've seen folks like Under Armour and Ludlow Lyman acquire technologies. It's hard to do and keep it going and do it right. And I think we're better off just partnering with brands like that versus making major acquisitions.

38:28Can I ask, when you look at two such high growth brands in the portfolio, how do you trade resources between each of them, given both of them. Probably being quite starved of resources just because they're growing so far. How do you manage that trade -off? Yeah, that's one of the things that we have done, I think, really well over the past six or seven years, is focus our allocations and resources against those two brands. You know, when I came in to the CEO role in 2016, we were a company that kind of spread a little bit to everybody. So we had seven or eight brands, hey, everybody, here's what you need, each region, here's money, each channel.

39:04And what we've been able to do over the last five years is really focus our resources. The good news is we have very healthy profit margins. We're an 18 % operating profit. Don't need to tell me, but I'm just intrigued as like a software investor. What is like healthy margins and shoes, an impact? In the industry and operating profit above 10 % is healthy, probably average 10 to 12. And so you have folks out there like Crocs, which is high 20s, but aside from that, Decker's at 18 plus percent is one of the top performers in that place. So Decker's at 18 blended. Can I ask which is the most high margin brand?

39:43Initial margin is OK, but Ugg is a close second. I mean, they're both very, very healthy in the industry. Are you seeing margin improvement over time? Or is that like margin maintenance and stability? On occasions, with air freight changes and material changes, But you know the real shift at a company level for us is full price sell through in DDC That's where we get our highest margins all price sell through many you don't have a discount. Yeah minimal discounts So initial margin it's really about cost of materials in a retail price transportation Logistics etc. But net margin ideally you want as few mark downs as possible We want to sell through your profitable channel.

40:19Why are all D to C companies getting hammered Dave? I had, I mentioned Joey O'Dolberds. Yeah. I mean, but why is all DDC pretty much getting hamlet? We've looked at a lot of them. When that was really a happening sector, we got caught up in it too. Like, hey, we need a DDC brand. How can we learn from them, et cetera? But what you find out after a while is the DDC model is hard to keep sustained because you're spending so much on marketing, 25%, 30 % of your revenue, or you're putting back into marketing to fuel the sales, the minute you pull that marketing away to make profit, your sales lines drops like a rock.

40:58And if you don't have wholesale, if you don't have other sources of revenue, your e -commerce site quickly goes from high growth, decent profit, low single digit, just if you're lucky, a lot of times negative to just dropping like a rock from both top line and bottom line. And so I think what people didn't appreciate at first is if you take away that marketing spend, Will the brand still stay on a positive growth trajectory? What a lot of companies are finding now is that that's not the case when you pull away that marketing So I think it's a flaw in the model unless you just have a brand that also is in wholesale has the margin structure to be successful at wholesale And is important enough on its own to sustain the growth versus just digital marketing spend I'm always like when you say about sustain the growth I'm like well you have a word of mouth Yeah, people using, why, and expose them in public.

41:47You have repeat usage in a lot of these cases. So I didn't really think that's a good answer if I'm honest. Maybe the product is not that good. Yeah, maybe that's the case. That's the separation between good and great. Great product, great brand, meaningful to consumers will outlast the marketing spend. If your brand and your product is interesting for a moment because you saw it on Instagram, feed, and you click through and you bought it, and then you kind of forget about it you weren't as excited when you got it at home, then it's not gonna last on its own. Do you agree that the best CEO is the best resource allocator?

42:21As we mentioned, Bernard, I know earlier, we mentioned luxury and margin. Do you believe the best CEO is the best resource allocator? It's definitely a component of it. I don't think that's it. You can't just be good at the financial side of the business. You still have to motivate your teams. You have to make sure the product engine and the innovation engine, all those things. What's been the best resource allocation decision you've made since being CEO? and what did you learn from it? I think the best decision we made was reallocating money from smaller brands, smaller businesses. You know, if you think about the complexity of our business globally, seven or eight brands, global, three channels, everybody needs a little bit of money to be successful.

43:00Myself and the finance leaders at time did 16 and 17 would say, actually, no, you don't all need that money. These two things need that money and we're going to reset. That was the biggest reallocation success that we had and then you just got to put financial guardrails around it going forward. How do you do that? Tactically, you do it in a budgeting process to say, hey, here, your goal is 15 % operating profit for your brand. If you grow 3%, that's great because we're taking the resources we're putting them against the biggest opportunities. We just got to hold people accountable to their targets.

43:32There's always a flip side by friend. What's the worst resource allocation decision you've made? What did you learn from that? For a time, we were starting to build a massive infrastructure in Asia. We had an office in Hong Kong and we were building out teams and we at the team there, you know, they wanted to build a decker's website and start selling online to all different countries and hire too many people and it was like they had a vision for it and we kind of went with it for a while or I did and then finally I was like this is not a game worth playing. We got to cut our losses here and so we had that pretty much closing that office.

44:04We still have a small office there of a team that are managing the region but that was just getting out of control and That's what can happen when you get a big company and you're not disciplined on spend everybody can present a good reason why they need the funds But the end of the day you got to be super clear and we're where you're gonna get the biggest payback What's the hardest thing about your job today? Is that it the hardest thing about my job today It's honestly not the business. I always say the business is the easy part It's the people that is what keeps me up at night. You know business is black and white You're making decisions on the fly that's best at interest of the of the business and the financials but keeping an attracting talent is my biggest concern right now.

44:40How do you think about your personal relationship to money stay? I used to think it was everything, if I'm honest. I grew up without money and then I got a bit of money and realized that I was just as lonely and insecure and it's really nice. You're still growing up. You're still young. Yeah. Same for me. I grew up without a lot of money in a small town and, you know, obviously now I've been successful on it. it frankly blows my mind. That my life has ended up where it is. And CEO of a company and financially successful, I mean, I never would have imagined any of these things happening. Why? I just never thought I would be one of those people.

45:17It's not how I thought about myself. Being a CEO of a company was not my aspiration growing up. Can I be so rude? So rude. Yeah, yeah, yeah. Would you blame your parents for that? And the reason I say that is just because like, I would want my children to know they can do anything. Yeah. That president role they can get is not that old. You know, we were just talking about this the other day with some friends. I grew up in New England, very kind of old school conservative, setting its ways. You know, I'm one of the only or few people in my extended family that have left New England pursued something beyond what was available to me there.

45:52And so I think that there is a mentality in my parents that was like, you can't do that, that's crazy. I wouldn't blame them for it, but I think that the small thinking was part of my family culture for sure. My parents. What do you tell your kids today to avoid small thinking? I try to model opportunities for them. You know, I talk a lot about my job and the work and the travel and I try to give them experiences globally that will open their eyes to possibilities. But it's up to them. I want my kids to be good humans, to be happy with themselves and I don't care if that's Being a woodworker, a fishing guide, or a CEO, doesn't matter to me what they do.

46:29I just want them to be comfortable in their own path and be good humans. Oh no, I want mine to found Decaquans, I'm much more obsessed in New York. A final question that I do have to ask. I love this one. If you could cool yourself up the night before your wife had your first child, 23 years ago, I guess. Oh man. What would you tell yourself knowing all that you know now? Don't do it. Don't do it. Yeah, no, definitely do it. And be more in tune to it. Really, really tune into your kids. You know, it's hard when you have your own life and your own career and that comes first, which, you know, for my generation, it did.

47:07It's hard to also give that same level of energy and attention to a young baby or your kids growing up. I found it to be the challenge. That's changed over time for me, but that would have been my bias. Can you still be as efficient and as killer with kids as you are without them? I don't have kids today. Everything I do I do it to win and you can't do that when you're a parent. No, I think you have to make some sacrifices, but it all depends on what's important to you at the end of the day. Did you have a moment when you were like, actually I'd rather take a slight hit there in order to have kids?

47:41Like was that a conscious realization? Every parent has that, God, I wish I could spend more time with my kids, there are more for my kids, you know, that are in the workforce and working. Unfortunately, not everybody acts on it, or does the work to kind of bounce it out. It has the opportunity to bounce it out because grinding it out just to make sure your family's taken care of. Every parent wishes they could spend more time with their kids. Okay, we're going to do a quick five, Dave. I say, if you want to stay with me, give me your immediate thoughts. That's not okay. Yeah, cool. Let's go. What do others not know that you know to be true?

48:12Well, I think for me, it's an introvert. I don't think a lot of people realize that. You can be CEO of any other company for a day. What would it be and why? I would love to go back to the gap. It's such a shame to see how bad that business has become. Is it still growing? It's still going. I don't think it's still growing. I mean, it's still struggling. So I would love to go back there for a day to say, hey, what is actually going on here? And then if you had carte blanche decisions that you could make, what would you do to get it on the right path? What is the right way to view composition? This is the harsh word, but your enemy and your friend.

48:45If you're smart, you will learn from your competition as much as you try to take them down. If they're truly competitive, they're doing something right. Here's your biggest competitor, Dave. I find it helpful to align a team around one and name them. Is it Nike? Is it Adidas? Is it On? Well, for Hoka, it's Nike. That's the one that really drives us internally. Is, hey, we think that we could take a chunk of their business. You know, we have a few ex -Nike employees here. I was at ex -Nike. I am an ex -Nike employee. Nothing like loyalty, hey Dave. Okay. Tell me, you can have dinner with anyone dead or alive.

49:21Who would it be and why? I would say either Bono or Dave girl. Bono, I just think he's just fascinating the way that he has transformed himself from a punk kid, garage band and Dublin to this global international national character that is beyond the music, what he's been able to do on the global stage for AIDS in Africa and et cetera, and the amount of people that he's met with and worked with is fascinating to me. What's the best piece of advice you've been given? I don't know if it's advice, but it was a reminder that my dad used to say all the time, nobody ever said life was gonna be easy.

49:54You know, every time I'd come to him and complain and be like, well, I don't know why you thought that was gonna be easy. Nobody ever said life was gonna be easy. What do you do to de -stress? Alcohol helps. at the end of the day, unfortunately. I mean, in all seriousness, as anybody in a really high stress job, you kind of develop healthy habits or coping mechanisms, right? It depends how you wanna look at them. But for me, you know, coming home and having a beer after work, but really exercise. Like I love mountain biking, I love trail running, I love music. Nothing helps like a beer. I was expecting like, I go and I do 13 miles in trail.

50:31And I was like, yeah, hi, Nikon. I do whatever I need to get through the day. That is amazing. Dave, where are you in 10 years' time? It's 2033. You still see your Dakars doing something else? What do you want for your 10 years? Yeah, 10 years is like a lifetime for me now. You know, I'm in my upper 50s. And whether I'm at Dekker's or not, my ambition is to be doing something that is still super creative. I need that in my life. I need creative outlets. that I need to be able to explore that and push that. I'm not an artist or a musician or anything like that, but I have so many other creative interests.

51:05And then it's not doing that is very purposeful and giving back. Dave, I absolutely love this. You've been fantastic to have on. I can't thank you enough for putting up with my pressing. I love this. This is great. I'd love your questions. You were fantastic. So thank you. No thanks. Now if you want to watch the full episode, then you can check it out on YouTube by searching for two zero VC. that's 20vc on YouTube, but before we leave you today, there is no shortage of helpful AI tools out there, but using the mean switching back and forth between yet another digital tool, what was supposed to simplify your workflow just made it way more complicated, and less of course, you're in Notion.

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