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Joe Kudla recently watched a new documentary about the rise and fall of Von Dutch, one of the hottest fashion brands of the 2000s, with careful interest. He remembers the short-lived fame of the celebrity-driven trucker hat brand well. Back then, he was trying to build a fashion brand in California, too.
‘I envied Von Dutch, which seemed very cool at the time,’ Joe says. ‘When I look at it now, I just think about how nearsighted they were.’
As the founder and CEO of Vuori, a premium activewear label that he started seven years ago just north of San Diego, Joe's giving a lot of thought to longevity these days. With soft board shorts and graphic tees, Vuori outfits the wellness generation as they move from the yoga studio to the office, from a hike to brunch. Last October, the brand landed the kind of validation most founders only dream of: a $400 million investment from Japanese investment giant SoftBank, valuing the company at a whopping $4 billion.
But Vuori is still far from a household name, even when compared to smaller apparel and accessories startups of the direct-to-consumer era, like Allbirds and Outdoor Voices. So, when the SoftBank news broke, tons of press arrived, all with a different version of the same question: what's this clothing company and how is it worth several billion dollars?
Humble beginnings
‘I don't know if I anticipated we would have this big of a response,’ Joe says. ‘But I did know that it would get people scratching their heads a little bit.’
It's even more of a head scratcher given that, more than 10 years ago, Joe's apparel career had reached a dead end, following the closure of two brands he founded. But if there's a secret to Joe's success, it may just be his determination to succeed in an unfamiliar industry.
Joe wasn't always so bold, growing up as a shy kid in a remote part of Washington, but says he found confidence through team sports and a career outside of apparel.
‘The success of [Vuori] is testimony to the fact that he's made really good decisions,’ says Michael Magerman, the president and CEO of United Sports Brands and an early investor in Vuori. He described Joe as ‘one of the best accumulators and sorters of data’ – a skill in an industry where so many decisions are built on trend predictions and incomplete data.
But do those skills help justify Vuori's sky-high valuation? One that's higher than that of many legacy apparel brands, including Abercrombie & Fitch and Urban Outfitters?
‘Obviously there's a long way to go for Vuori to become even as remotely as successful as Lululemon,’ says Steve Dennis, a retail consultant and president of fashion and luxury advisory firm SageBerry Consulting. And, yet, Steve reckons there's likely still market space for another major activewear brand as everyday style becomes more and more casual.
‘[Investors] buy into the Vuori story, not just because they do some calculation,’ but because they believe in the brand's impressive growth story and potential, he says.
Non-linear pathways
Joe's own story began with a stint traveling around Europe as a model in his early 20s. Walking runways for labels like Dolce & Gabbana, he met creative people and got to see luxury products up close, fueling an appetite to start his own brand. But the judgment inherent to the business weighed on him.
‘The actual work itself… walking in clothes, and being judged for that – it's a very tough industry,’ he says.
After returning to Southern California to a job at professional services network Ernst & Young, Joe was itching for more creative work, so launched Sammy Jo, a contemporary women's brand, in his spare time with a designer friend. The line was picked up by influential boutiques like Lisa Kline and ATRIUM, but the pair lacked the capital or experience to take it to the next level: national and wholesale accounts. Ultimately, they shut the business down and parted ways.
‘I was very young and a little bit naive to everything that it would take to scale an apparel brand, so ultimately it turned out to be [that] we bit off too much,’ Joe says.
Undeterred, Joe decided that if he were to put ‘heart and soul’ into building a successful brand, he needed a job that paid better and afforded him more free time. Leaving accounting, he joined talent solutions firm Vaco in San Diego, cold-calling hundreds of executives a day. ‘That was very scary for me, especially doing it on an open floor where your friend can listen to what you're saying,’ Joe says.
Looking back on it now, Joe says the role required him to get comfortable with sales and sees the experience as critical to his maturation as a founder. ‘I feel like entrepreneurship is this path towards becoming comfortable with the uncomfortable – you're constantly faced with these challenges,’ he says. ‘When we move through them, we build this confidence – it gives us this perspective that we can do it. It's like a pat on our own back and we grow.’
Even so, he knew this job ‘was not ultimately what was going to inspire me and light me up as a human’.
Vuori 2.0
The job security, however, did allow him to launch the first iteration of Vuori, running it alongside his full-time gig. The original concept was an organic cotton T-shirt business that centered around philanthropic collaborations, partnering with celebrities and selling products that benefited different charitable organizations.
But, after four years, the business – like many others – was hit by the 2008 financial crisis as mass-market retailers like Walmart started selling organic cotton T-shirts at low prices. Joe separated from his business partner but held on to the intellectual property, believing Vuori still had potential to be a successful growth business. He just didn't know how or when.
Joe's idea for Vuori 2.0 was little more than a concept in 2013, when he left Vaco with enough savings to last him a few years ‘if I lived frugally’. With a small selection of samples and a vision of a men's yoga brand that was a kind of upscale hybrid of Patagonia and Quicksilver, he raised an initial round of $700,000 from friends, family and non-institutional investors.
The first years were a constant grind, Joe recalls, as he and his small team tried to make that money last. But one of the toughest challenges came in the first year, when he realized that Vuori's business model was flawed. The brand was built around yoga and – like the largest player in the space for women, Lululemon – Joe sold first through yoga studios and gyms. But sales were stagnating.
‘If you ask my wife, she'll remind you of conversations that I had with her, coming home, having a lot of doubt, thinking we were running out of money, not knowing if it was gonna work – the business wasn't getting the early traction that we had hoped it would,’ Joe says.
Joe surveyed customers and tested different marketing approaches to find that Vuori’s first customers were less focused on yoga than he thought. So the marketing strategy shifted from yoga to a wider range of fitness and the versatility of activewear. He also invested more in Vuori's online sales and worked on adding larger-scale retailers like REI and Nordstrom to the wholesale mix.
‘If it didn't work, we would have ran out of money – and lights out, game over,’ he says.
Michael from United Sports Brands describes Vuori's first few years as ‘tough’, adding that Joe ‘has shown an incredible amount of drive and commitment to this business’, working with discipline to grow it on limited capital.
The hard work – and strategy shift – paid off. In 2016, Vuori raised its first institutional funding, a $2.2 million round led by financial services firm ABP Capital. By the following year, Vuori had broken even, was growing fast, expanded to include a women's collection and opened its first permanent store.
‘Bringing in private equity can be scary’
In 2019, Vuori raised a much more significant venture capital round: $45 million from Norwest Venture Partners, which Joe described as more influential than the figure might suggest.
‘As a founder who built this business largely as an extension of my personal passions and interests, the idea of bringing in private equity, where you get on a clock, can be really scary,’ he says. But he described Norwest not just as supportive, but also as having a ‘professionalizing’ effect on the business.
So when Joe met a managing partner at SoftBank Investment Advisers, Nagraj Kashyap, for lunch in 2021, he wasn't looking for more capital. He had navigated the pandemic crisis well, and sales spiked as the switch to working from home embedded. SoftBank had been tracking those trends and believed Vuori could capitalize on them on a much larger scale, Joe says.
Vuori's $4 billion valuation drew headlines not only because the brand is still relatively unknown, but also given the recent performance of digitally native apparel brands. Allbirds and Rent the Runway, for example, saw their stock prices sink by more than 50% in their first months; other digital retailers struggled with customer acquisition costs and profitability.
‘We built the business profitably from an early stage,’ Joe says when asked about Vuori's comparison with these other brands. He actually struggled to raise the outside capital he needed to launch Vuori initially, and so had to learn how to operate without external investment from the outset.
With the SoftBank investment, Joe says he wants the brand to reach the potential he saw for it more than a decade ago. ‘I went into this business with the idea that if I could just make a living doing what I love, I would be very fulfilled,’ he says. ‘Now that we see that there's this incredible resonance with what we're doing, we see that there's a really big opportunity, not just in the US, but also abroad.’
SoftBank helped make the decision an easy one by agreeing to his requests, which included maintaining a controlling stake in the business. ‘If we were going to do something, it would need to be a clean transaction, pretty standard terms,’ he says. ‘We were able to arrive at a win-win arrangement with SoftBank that benefited all stakeholders, including SoftBank, and set us up for success in the future.’
A look ahead
The question now is whether Joe can keep the business focused, even with so much more capital in the mix. His goal is to build a company that can rival the Lululemons and Nikes of the world; one that he can still be running in 20 years' time.
Steve from SageBerry Consulting expects Vuori's next stage of growth to be relatively simple. But it's after opening the first 20 or 30 stores that the strategy becomes less clear-cut. So far, the brand has performed well mostly on the coasts of the US, where people are looking for a distinctly Californian uniform of casual workout-to-work wear. That aesthetic differentiates Vuori from its larger competitors in the activewear and athleisure space, but it could be limiting.
‘Vuori has the basic ingredients to be able to be that kind of brand [that justifies a] multibillion valuation,’ Steve says. ‘But it depends on how well the brand travels.’
The fact that Vuori was able to grow so quickly without raising as much capital as its peers, spending on splashy advertising campaigns or opening many stores ‘says something about the discipline and the focus of the management’, Dennis says. It also says something about how much customers like the actual product. ‘The pieces are definitely there,’ he adds.
As for Joe, he's confident he can take Vuori on to its next stage of growth. ‘Being very disciplined in how we execute… it's more important than ever,’ he says. But he still relies on meditation and controlled breathing techniques to deal with the anxiety and pressure of being the founder of a business with such large expectations.
‘I feel like clarity is the ultimate currency in life in business.’
This article was first published in Courier issue 46, April/May 2022. To purchase the issue or become a subscriber, head to our webshop.
