Posts Tagged ‘Nau’
Sunday’s Oregonian attempts to explain what sustainable businesses might learn from the closure of apparel maker Nau early this month. The paper draws a conclusion similar to my immediate reaction when I heard the news: that Nau’s ambition got the best of it.
The Oregonian’s assessment is too brief to be of significant value to existing or would-be green entrepreneurs. For instance, the paper responds to one of its own questions, “Is a sustainable business unsustainable?”:
Nau wasn’t around long enough to tell. And certainly, organic food companies have profited as demand increases. And renewable energy ventures — biofuel, solar power — still attract investors’ bets. “There are a lot of sustainable plays that are more capital efficient and less risky,” said David Kirkpatrick, founder of SJF Ventures, a Durham, N.C.-based firm that invests in green companies.
I’m sure the paper felt compelled to ask this question because many who heard the news of Nau are probably asking it. It would be sad indeed if people concluded from Nau’s experience that operating a business with social, environmental and profit motivations equally in mind cannot be sustained long-term. Unfortunately, the paper’s response to its question doesn’t really get at the answer.
How about we flip the question: Is an unsustainable business sustainable? Or ask it from a macro view: Can our economy continue to run indefinitely on the backs of companies whose only measurement of success is financial return?
Throughout our history as a country that’s the way business has operated. And the American economy has flourished as a result. But for how much longer can this go on? Especially as China, India and other countries look to duplicate our success.
I hope people don’t see Nau’s failed attempt at “challenging the nature of capitalism” as evidence our economic system does not need serious repair. Yes, the company’s ambition exceeded its reach. But the folks at Nau knew there’s nothing sustainable about business as usual. And we all need to pick up where they left off.
I only knew my hometown sustainable clothier Nau by what I read and saw in the media. Sadly, they closed their doors so fast I didn’t have a chance to buy any of their clothes. I suspect they would have been right up my alley.
Even though I didn’t really know Nau, something about them seems very familiar: venture capital. Or more precisely, reliance on venture capital. I spent more than 20 years in high tech. Venture capital is the lifeblood of most tech startups.
Venture capital, however, is not patient capital. Most VCs are seeking to make their money back plus a handsome profit within three to five years, usually by selling to a larger company or going public. Nau had reportedly raised $34 million since its founding in 2005. Its inability to close another round of financing led the company to shut down last week.
Nau was in many ways the perfect candidate for venture capital. They had name-brand management, an incredible commitment to innovation and ambition as outsized as any venture capitalist. The media took notice. Fast Company reported in June 2007, “The business plan projects $11 million in revenue this year (2007), growing to $260 million and 150 stores by 2010.” Nau CEO Chris Van Dyke told the magazine:
“We’re challenging the nature of capitalism. We started with a clean whiteboard. We believed every single operational element in our business was an opportunity to turn traditional business notions inside out, integrating environmental, social, and economic factors. Nau represents a new form of activism: business activism.”
In the end, none of that was enough as Nau could not survive in the suddenly tight-fisted capital market. Its plan to grow to $260 million in revenue by 2010 clearly required a constant stream of capital.
Having seen this story line play out over and over in high tech (especially in the dotcom era), I’m hardly surprised by Nau’s fate. I only wish the universe would have rewarded Nau for its commitment to doing the right thing for Earth and its inhabitants.
Some day soon, I hope to be reading case studies of what the Nau founders could have been done differently. Maybe these study authors will answer the question uppermost in my mind: Should Nau have hitched its wagon to the race horse team of VCs or reined in its ambition to change the world overnight and settled into a trotting pace that could be sustained indefinitely?
Even more than financial capital, patience is in short supply in business. I understand the world needs big, audacious ideas like Nau’s to meet the urgent social and environmental needs of our time. But it seems to me there’s a lot to be said for thinking big — and starting small.