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February 20, 2025 • 30min
A more compassionate capitalism, with Cotopaxi’s Davis Smith
Masters of Scale
This episode features Davis Smith, founder of outdoor gear company Cotopaxi, in conversation with host Jeff Berman. Smith shares the origin story of building a mission-driven outdoor brand, the challenges and successes along the way, and his recent decision to step away from the CEO role to pursue humanitarian work. The discussion explores how to build a successful business while maintaining a strong social impact mission.
A more compassionate capitalism, with Cotopaxi’s Davis Smith
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Key Takeaways
- Mission-Driven Business Model: Cotopaxi was founded with the mission to eradicate extreme poverty through conscious capitalism and using business as a force for good
- Innovative Launch Strategy: The company launched with a 24-hour adventure race event that generated 30,000 social media posts in the first day
- B Corp Pioneer: Cotopaxi incorporated as a benefit corporation from inception in 2014, despite advice against it
- Impact Focus: The company donates 1% of revenue (not just profits) and hired a Chief Impact Officer before a Chief Marketing Officer
- Sustainable Products: Sold 5 million backpacks made from remnant/repurposed materials, reducing costs while minimizing environmental impact
- Leadership Transition: Founder Davis Smith stepped away as CEO to pursue a 3-year church mission in Brazil, demonstrating values-based leadership
Introduction
This episode features Davis Smith, founder of outdoor gear company Cotopaxi, in conversation with host Jeff Berman. Smith shares the origin story of building a mission-driven outdoor brand, the challenges and successes along the way, and his recent decision to step away from the CEO role to pursue humanitarian work. The discussion explores how to build a successful business while maintaining a strong social impact mission.
Topics Discussed
Early Entrepreneurial Lessons (4:57)
Before founding Cotopaxi, Smith experienced failure with an e-commerce business in Brazil that provided valuable lessons:
- Scale without efficiency led to accelerating losses and constant fundraising needs
- Co-founding with family resulted in a painful relationship breakdown with his cousin
- Key lesson learned: Choose co-founders based on complementary skills needed for the specific business idea, not just personal relationships
The Birth of Cotopaxi (8:19)
Smith describes the divine inspiration that led to Cotopaxi's creation:
- Spent 36 hours in deep ideation, writing down the complete vision including colorful backpacks and social mission
- Named after Cotopaxi volcano in Ecuador where Smith spent time as a youth
- Chose the llama as mascot based on childhood experience seeing wild llamas at Cotopaxi's base
- "I knew exactly what was happening...it was divine. I don't know how else to describe it" - Davis Smith
Launch Strategy (17:02)
The company executed an innovative launch that immediately created buzz:
- Purchased llamas from online classifieds to tour college campuses
- Organized 24-hour adventure race where participants earned points through outdoor activities and community service
- Generated 30,000 social media posts in first 24 hours
- Culminated in celebration with 5,000 people wearing product
Funding Journey (18:26)
Smith's approach to raising capital:
- Met with over 100 investors initially
- Secured backing from Kirsten Green at Forerunner Ventures
- Additional investment from founders of Warby Parker, Harry's, and Bonobos
- "I've gotten really very good at rejection. My mission experience as a 19-year-old kid really prepared me for a lot of the rejection that I dealt with as an entrepreneur" - Davis Smith
Social Impact Mission (20:16)
The company's core mission and approach to impact:
- Goal to help eradicate extreme poverty in Smith's lifetime
- Donates 1% of revenue, not just profits
- Incorporated as a benefit corporation from inception
- Hired Chief Impact Officer before Chief Marketing Officer
- "We are not an outdoor brand or a backpack brand. We are a brand that does good." - Davis Smith
Impact Measurement Evolution (22:39)
The company's approach to measuring impact evolved:
- Initially focused on personal connections like supporting an orphanage in Bolivia
- Chief Impact Officer implemented rigorous measurement systems
- Board questioned prioritizing impact team before marketing
- "If we don't get this right, nothing else matters in this brand" - Davis Smith
Conscious Capitalism (25:52)
Smith's perspective on business as a force for good:
- Leads by example rather than preaching
- Focuses on inspiring other entrepreneurs
- Demonstrates that doing good can drive business success
- "When you do business the right way, when you do it better, it saves so many other costs" - Davis Smith
Leadership Transition (28:08)
Smith's decision to step away as CEO:
- Accepted church mission call to serve in Brazil for 3 years
- Recognized need for different leadership skills at company's current scale
- Remains involved as board member
- "It wasn't that it was so easy to do. It was very hard. But it was an easy decision because it was so aligned with our values" - Davis Smith
CEO Succession (29:46)
The process of finding a replacement CEO:
- Prioritized values alignment and understanding of company mission
- Sought someone with experience scaling businesses beyond Cotopaxi's current size
- Used social media to announce search
- Maintained connection through board role
Future Plans (31:33)
Smith's thoughts on his next chapter:
- Likely to return to Cotopaxi in executive chairman role
- Plans to focus on mission, culture and impact
- Interested in mentoring young leaders
- "I love working with young people...I'm helping scale the next generation of world changing leaders" - Davis Smith
Conclusion
Davis Smith's journey with Cotopaxi demonstrates how a clear social mission combined with innovative business practices can create both commercial success and meaningful impact. The company has grown from a startup with llamas touring college campuses to a hundreds-of-millions in revenue business while maintaining its core commitment to fighting poverty. Smith's willingness to step away from the CEO role to pursue humanitarian work further reinforces the authenticity of his values-driven leadership approach. The episode provides a compelling blueprint for entrepreneurs looking to build mission-driven companies that succeed both financially and in creating positive change in the world.
