THE BLOG
08/28/2014 01:12 pm ET Updated Oct 28, 2014

Outdoor Company Cotopaxi Puts Its Money Where Its Heart Is

In Davis Smith's third entrepreneurial venture, he's drawing from eCommerce models that were successful in his first two and adding a more altruistic pursuit. The company Cotopaxi sells high-quality outdoor gear that can be sold at an affordable price because they have a direct-to-consumer approach. Another aspect of the brand that has been resonating with consumers since the April launch is their mission-driven ambitions.

The e-tailer donates a minimum 10 percent of its profit to one of its partner nonprofit organizations to create a sustainable impact in the community those organizations serve. Smith's company goes one step further by showing potential and returning customers where that donation is going. For example, the purchase of a Cotopaxi+India water bottle gives clean water to a person in India for six months through their partner charity: water. And a Cusco backpack helps educate a child in Peru for one week.

This model has been popularized in recent years by Toms Shoes, Warby Parker and others who saw an opportunity to develop a profitable lifestyle brand, while generating awareness and life-changing opportunities for people in developing countries. I asked Smith about the hesitation he might face from some consumers due to other less credible brands doing a disservice to this model.

Smith answered,

I'm aware of the stigma and that's OK. I think it's fair to have some pushback, and I think it helps me. At the same time, anyone that hears our story, that hears why we're doing this, and that knows me, knows that it's authentic.

After more questioning, I learned that the serial entrepreneur has seen and lived in impoverished communities that he hopes to shed light on with Cotopaxi. "The entire reason I left me last business was to do something that helped others," he said. Two stories emerged from our conversation that echoed his passion for creating "gear for good."

The first stems from 2001, when he was a newlywed in Cusco, Peru. He and his wife befriended a young boy named Edgar, who offered to shine Smith's shoes, even though they were tennis shoes. On their final night in town, they found the teary-eyed 9-year-old sleeping outside because his shoe shine kit had been stolen. He didn't want to face the impending repercussions back home. The couple gave Edgar the little money they had and as their travel bus departed the next morning, they saw a much happier Edgar with candy to sell for household income. The couple later learned the money they gave him resulted in Edgar being able to buy another shoe shine kit.

Secondly, Cotopaxi may be the first ever public benefit corporation to raise venture capital. Others have raised funding from investment firms and introduced this distinction after the fact, but Smith, despite his attorney's pragmatism, set out to raise money from institutional and angel investors who shared his vision.

Among the impressive investor list, he tapped the co-founders of Warby Parker and Harry's, whom were his classmates at the University of Pennsylvania Wharton School. The founders had approached Smith with the idea of what has become a beloved glasses brand and sought operational insights from his previous business. He liked their idea so much that he made an investment and it's an interesting story arch that they can now show their commitment to Cotapaxi's success by investing and sharing their domain knowledge of the impact-driven business model.

Smith recently returned to his alma mater to speak in front of current MBA students. One of the takeaways for students was to focus on building a network. Smith said, "I had no network. I didn't know one person in Silicon Valley. For me, a lot of business school was plugging in a network really interesting, smart and connected people." It payed off has he co-founded and raised venture funding for successful businesses based in Brazil.

Another piece of encouragement he gave during his talk was for students to use the two years as opportunities to explore a variety of interests. It's clear that the business students are open to his advice, as a rising number of Wharton graduates are opting for entrepreneurship rather than the traditional path of investment banking.

Back in Cotopaxi's Utah headquarters, the company has their $3 million funding to accelerate their growth into a household brand. Smith has already put together an impressive team, including awarding-winning product designers from Nike, Columbia and Black Diamond. On the business side, he recruited one of his Wharton classmates to serve as the company's COO. At 12 employees, Smith was proud to say "this is the best team I've ever built and they're really passionate about our mission to make the world a better place. And the kind of team that has experience to build the next big outdoor brand."

Rather than buy its customers' attention with traditional advertising, Cotopaxi plans to create experiences and interactions that introduce people into their world. The company created a scavenger hunt for grown-ups which they called a "Questival." 5,000 people attended the Salt Lake City event which resulted in 30,000 social media impressions in a 24 hours span. They didn't spend any money marketing the event so the word of mouth virality is something they plan to replicate in major cities across the county.

As for Edgar, he's still working hard and now helping raise his siblings near Cusco. On a trip back to the area, Smith was doubly astonished that he was able to find Edgar and that the now 22-year-old remembered him after only a few interactions 13 years ago. "The cool thing about is, it's not the end of the story, it just the beginning. I'm going to be a part of Edgar's life forever and he's going to be a part of mine," as the two regularly communicate via Facebook.