How my $4 billion startup almost ran out of money

Joe Kudla is the founder and CEO of activewear startup Vuori.

Source: Vuori

This story is part of the CNBC series Make It’s The Moment, in which highly successful people uncover the critical moment that changed the course of their lives and careers, and discuss what prompted them to take the plunge into the unknown .

You’ve probably seen social media ads for Vuori’s popular joggers, one of the apparel products that have taken the Encinitas, Calif.-based startup to $4 billion.

But less than two years after CEO Joe Kudla quit his consulting job to launch Vuori in 2014, “we started to realize we were going to run out of money,” he told CNBC Make It.

Kudla, an accountant by training, started the company as a kind of men’s Lululemon: He enjoyed surfing and yoga and didn’t see high-end activewear companies vying for his attention in gyms and yoga studios.

After raising $700,000 in a “Friends and Family” funding round, Vuori launched its products into local yoga studios and fitness centers. They stayed there and hardly sold.

“We were left with few options and ran out of money very quickly,” says Kudla. “I was really afraid that we would lose the business.”

He asked for feedback from customers Vuori had, who said his vision was wrong: the clothes were just as useful, if not more useful, in everyday life. Fixing this required using a direct-to-consumer e-commerce model, where social media ads target a broader audience with broader interests.

Swallowing pride was hard, and spending the last of your cash on an untested strategy was deeply risky. His company struggled but lived. If that failed, it would be irretrievably dead, and its investors might never bet on it again.

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He took the plunge.

“[The impact] was almost immediately,” says Kudla. Within a few months, the company was recording $2 in revenue for every dollar spent on advertising [ratio]and then we got four to one,” he adds.

At the end of 2017, Vuori was profitable. Today, the company operates 30 retail stores in the US and UK and plans to open 100 more with the $400 million it raised in 2021.

Here Kudla talks about the fear he felt, how he recognized the pivotal moment, and what he wished he had known when making that pivotal decision.

CNBC Make It: What did you think and feel when it looked like Vuori might run out of money?

Joe Kudla: I was very scared.

The idea of ​​failing was scary because I didn’t want to go back to what I was doing before. We had to make a decision to venture into the unknown. We didn’t have much time and we didn’t have much money.

It’s scary, the idea that you’ll go out and spend thousands of dollars when you don’t have much money left, with no guarantee that there will be an answer. You can easily spend your last $20,000 on advertising and not get any sales, and then you haven’t shown your investors a repeatable process, a defined path to growth.

If we didn’t get that message right, we were out of business.

How do you know when it’s time to make such a leap?

It’s hard because I think a lot of entrepreneurs have a kind of distorted reality field. It gives them the confidence to embark on those crazy paths and pursue those dreams.

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How do you step outside of yourself and really think critically and objectively about where your company stands and how it is resonating with customers?

Vuori was Kudla’s third attempt – and could easily have been his last.

Source: Vuori

Yoga and meditation were two things I adopted into my personal life on this journey. They have served me really well by just taking the time to be still, sit with my thoughts and focus on that clarity.

When you do this, you develop a more unbiased, objective awareness that helps you identify patterns in your organization. It’s really important that you find this time for quiet, whether it’s with a nature walk, yoga, meditation, or breathwork.

What would you like to know at that moment?

I haven’t given enough credit to the power of product-market fit and marketing. You can read a million books, but until you live and experience it [you won’t] Understand how a small change in your approach or a tweak in your product can make all the difference.

It would have been really good for me to understand that. I would have expected the ride to be a little bumpier and therefore perhaps slept a little better.

Where would Vuori be now if you hadn’t made this change?

We would have a really hard time raising the money to keep going. The likely scenario is: we would be out of business.

Another possibility is that we were raising money on really unfavorable terms and I would be disillusioned and frustrated with the economics of our business because I would have to give it away to get the money.

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Either way it wouldn’t have been a good situation.

And what about you?

I think once an entrepreneur, always an entrepreneur. You get this error when you bring an idea to life. The addiction for people who choose this path is to see a vision in your head and bring it to life and that is really hard to get out of your system.

So, I think if it wasn’t Vuori I would be pursuing something else.

This interview has been edited for length and clarity.

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