I was on a call yesterday with an Outdoor Voices investor, talking about everything but Outdoor Voices—because who cares about Outdoor Voices these days—when someone texted me a pitch deck. It came from Interweave, a newish investment firm, and two partners, FightClub Management and Goodlife Clothing. Denver Rayburn, Interweave’s founder and C.E.O., previously worked at the well-known venture capital firm Norwest, which bought a stake in another, seemingly more successful activewear brand, Vuori, in 2019.
This deck was an attempt to secure financing—“as little as $4 million-$6 million”—to buy Outdoor Voices, the pioneering (and subsequently distressed) activewear brand that ended up being more style than substance. Founded by Tyler Haney and Matt McIntyre in 2012 or 2013, depending on whom you ask, its rise and influence on the way people dress was documented by dozens of outlets, including The New Yorker (ugh, I hated that piece)—and me, here, here, and here—as was its spectacular fall, which perfectly encapsulated the tension that develops when venture capitalists look for fast, profitable growth in apparel companies that require a longer timeline to develop. Not to mention the risk associated with investing in a company founded and run by someone with zero experience. Really, it’s the story of the last 20 years of startup culture. But especially in startups that sell apparel.
By the time Haney was ousted as C.E.O. in early 2020, Outdoor Voices was losing money on something like $74 million a year in gross sales, according to this deck. (Mindshare over market share!) Then, a few months later, during the pandemic, an entrepreneur named Ashley Merrill, C.E.O. of the direct-to-consumer pajama line Lunya, bought a majority stake in the brand through NaHCO3, the firm she started with her husband, Marc, one of the guys behind Tencent-owned Riot Games. Merrill and Haney played nice for a few months, and then Haney fully dislodged from the business.
Last year, in the summer of 2022, I viewed another pitch deck—this one from Outdoor Voices, itself, which was looking to raise more capital or sell. At the time, a person with access to the company’s finances told me that Outdoor Voices was not profitable on an EBITDA basis, despite the fact that the deck lauded the brand as “first order profitable,” whatever that means. Merrill followed up, noting to me that the company closed 2021 as “EBITDA neutral,” with month-to-month profitability varying. Nothing came of that attempt to exit—at least nothing that was made public.
What’s Going on Here, People?
Why couldn’t Outdoor Voices find a buyer last year? Given that the company generated close to $100 million in top line revenue in 2022, the $4 million to $6 million required to finance Interweave’s bid seems like a tiny sum. But here’s the knife. Despite pretty chunky revenue for a brand that sells mostly direct-to-consumer, the company lost nearly $19 million in 2022, and posted a “profit before taxes” of negative $35 million, accounting for $15 million in interest expenses. (So much for that recent New York magazine story on Haney, which casually claimed that OV was profitable.) “OV has a complex cap table and investor history, all of which can be side-stepped by acquiring the company through its lenders in a bankruptcy process,” the deck reads, calling OV “a beloved brand without a business model.”
The would-be owners cite an “over-reliance on discounting and markdowns of slow-moving inventory,” and a “bloated corporate structure” as major culprits, declaring its COGS (cost of goods sold)—64 percent of net revenue in 2022—“worst in class driven by lack of sourcing sophistication and unoptimized shipping and logistics.” One of the more alarming stats is the cost of labor and consulting—$17.6 million in 2022, or 29 percent of net revenue—up from $14 million, or 20 percent of net revenue in 2021. That’s not normal. Especially given that marketing expenses—which are actually in line with what they should be—barely increased year over year.
Basically, this says that Outdoor Voices is a shit show, and while there’s still plenty of goodwill from consumers, it appears, at least according to this deck, that it’s going to sink if someone doesn’t swoop in.
When I reached out to Merrill, she said that Outdoor Voices began fundraising talks with Interweave back in April, but that the company decided not to move forward, and that Outdoor Voices is not in any active conversations to sell. And yet, this pitch deck is still circulating in mid-August, outlining a scenario in which Interweave raises $2 million to $3 million to buy the company’s debt from Silicon Valley Bank at a discount, then raises another $2 million in financing to allow OV to keep operating during the Chapter 11 proceedings. (The deck says the process would begin on July 24, so it’s got to be more than a month old.) When I texted Merrill about this detail, she said that the company has no plans to file for bankruptcy protection, and someone on the Interweave side confirmed to me that Outdoor Voices’ debtors are not pushing for this.
In fact, Outdoor Voices has raised an additional $10 million this year, I’ve learned. According to a top OV executive, the company has improved margins and “drastically” improved operational issues when it comes to sales, inventory management and workforce inefficiencies, although they did not share updated figures.
As for whether Interweave is still trying to secure financing and then go back to Merrill and the board with an offer: it’s possible, although it’s unlikely that the plan would be the one outlined in this particular deck, but would entail an equity investment instead. (Apparently, there were multiple financing scenarios laid out by Interweave, and I just saw one of them.)
Outside the Color Block Thinking
Regardless of how they did it, would Interweave be a better owner for Outdoor Voices? In the deck, they lay out a four-pronged plan that includes licensing the brand’s I.P., further developing the wholesale business, improving the product, and contracting celebrities to help promote and “add freshness to the brand for any consumers who have been turned of [sic] by lack of brand evolution.”
Sure, that could work, maybe. I don’t know enough about Interweave, Rayburn, and the other players to know if they are capable of a turnaround. Interweave, founded in 2020, already owns Snowe, a direct-to-consumer homegoods line, which it acquired in December 2022. I did find out that the firm, which is made up of financing and supply chain people, has done a couple more deals, and while they’re looking at dozens of DTC brands a year, it’s not Interweave’s only area of focus.
But would Outdoor Voices be open to new ownership? It’s been years since the company’s original investors were hopeful that they’d make any money at all on the venture, so there likely wouldn’t be much pushback. (In New York mag, Haney said that she would expect to make about $90,000 if it sold today.) Moreover, I would hazard a guess that most of Outdoor Voices’ investors—which include top consumer firms General Catalyst, Forerunner Ventures, and Google Ventures—don’t care what happens to it, having presumably written down their stakes to zero, and are reluctant to waste any more time on the company.
There are people who do care, who can’t seem to let go. Including Haney, despite her insistence otherwise. She is certainly passionate about the brand, and the role she played there. When I broke the news of her exit in 2020, she messaged me on Instagram to say, “You’re on the wrong side of history.” Last year, after interviewing her about her newer ventures, my perception was that she had moved on. Then, just a few months ago, she started leaving correct, if unnecessary, criticisms of the mediocre marketing and product on the brand’s Instagram posts. Finally, there was the why-are-you-doing-this-to-yourself New York article, in which she targeted her chosen nemesis, the retail executive and former Outdoor Voices chairman, Mickey Drexler.
I get why Interweave would be interested in Outdoor Voices: Haney created a good brand, and changed the market. Lululemon may have popularized athleisure, but OV made it kind of cool. Or at least fashionable. In the deck, they call “OV” a cultural icon. The word “icon” is vastly overused, but I understand what they are saying here.
The problem, of course, is that the OV consumer has moved on. (Mostly to Alo Yoga, which merged the Lululemon and OV playbooks to make something a little more cheesy, but a whole lot more scalable.) Many investors who might have backed Interweave’s proposal have moved on, too. (I reached out to a few potential acquirers, and the ones who had seen the deck all passed.)
Honestly, speaking not as a business reporter for a moment, but as a person who likes clothes: I wish someone would just give Haney money to start something new. She clearly has a talent, and taste, and I want to buy things she makes. Putting my reporter hat back on: After talking to many of Outdoor Voices’ investors, as well as others in the investment community over the course of the past 10 years, I don’t think there are many people in the world who trust that she is capable of building a business, or capable of letting someone else build a business while she develops product. I actually hope I’m wrong. Because there is something about this dinky little company that gets people riled up. And I do think it’s Haney.