Cotopaxi, multi-million dollar toilets and centralized power
Venture Capital backed, Utah headquartered Cotopaxi looks to shut down their SF location after millions of dollars of theft losses. San Francisco plans to pay way too much to build a toilet.
Cotopaxi leaves SF
In the news this week is the founder of Cotopaxi, an outdoorsy retail brand took to LinkedIn to announce they are shutting down their San Francisco store due to rampant, coordinated looting campaigns. The founder did an interview with The Atlantic that’s really quite shocking. The store was looted dozens of times, multiple times a week and it went on for over a year. Each time looters would pour in and steal as many hundred, $200, $300 dollar backpacks and jackets that they could carry. The whole episode reflects really poorly on the San Francisco Police Department and city government. I hope that the crime stops and these criminals face justice for their property crimes, but in the shower the story got me thinking.
Cotopaxi is a Series C company headquartered out of Salt Lake City. It was founded in 2014 and has raised over $77 million from Venture Capital firms like Greycroft and institutional investors like Bain Capital out of Boston. Cotopaxi markets themselves as a brand to help alleviate poverty, which is pretty rich for any VC backed startup, as those companies are primarily looking to deliver outsized returns to their investors. I’m sure they’d claim they’re “doing well by doing good”. In The Atlantic interview the founder repeatedly states that what he cares about isn’t policing strategies or politics but instead the safety of his employees and “changing capitalism—using capitalism to do good in the world”.
“I’m not an expert in crime,” Smith told me in a phone call last week. “I’m not a politician. I’m not involved in policy. What I care about is changing capitalism—using capitalism to do good in the world.”
-The Atlantic interview with founder of Cotopaxi
Never mind that capitalism is a political and economic system and changing it is inherently political and involves policy. This founder man has raised millions from investors and built a business to sell backpacks to people while convincing them that they’re doing something to help poor people. Fine. I’m sure they’d point me to their donations to the Cotopaxi Foundation which then launders the money to other global nonprofits as proof that they’re changing poor people’s lives. “What are you doing?” they’d say. “Builders build”, Marc Andreesen would chime in and everyone would go their merry way buying boats with their venture capital money. With the money from chic Cotopaxi backpacks the good people at the International Rescue Committee can employ college grads and career non-profit workers to do savior missions for the global poor in a way that’s eerily similar to how San Francisco treats its homeless today. There’s definitely a lot to this mission of “changing capitalism” and why Cotopaxi and San Francisco are such a good cultural match but that’s not even what I wanted to write about today..
What struck me from The Atlantic interview was how fucking much money Cotopaxi lost from thieves before the founder decided to close his store. He states in the interview..
Smith: I don’t know the exact number off the top of my head. I can tell you that the theft has happened dozens and dozens and dozens of times. We’ve been open for a year, and, I mean, this is, like, multiple times a week.
Nyce: Is that all mass-grabbing of merchandise?
Smith: Yeah, it’s not shoplifting. Shoplifting would be different.
Nyce: It’s happening dozens of times?
Smith: Oh, yeah. We’ve lost track, but it’s multiple times a week for a year. You just do the math and it’s like, I don’t know, 50 times, 100 times.
He said their store was set up where there were racks of $250 down jackets and looters could grab 20 of them “really easily”.
There’s a lot to unpack there. I’m not trying to victim blame here and I’ll reiterate that all these criminals should be brought to justice. People should be able to engage in commerce in peace, it’s pretty much the most basic job of a functioning government but let’s look at the property crime against Cotopaxi more closely.
The founder doesn’t say how much money the company lost but back of the napkin if each looter stole 5 grand worth of merchandise and they need like at least five looters to make a successful run that’s $25,000 in merchandise on each looting. The founder says this happened multiple times a week for a year. Hundreds of times this happened to one store. That’s like… over $7 million dollars. Cotopaxi’s latest funding round was last year for $45 million so that’s like 15% of their funding round going to theft from this one store.
There’s definitely an irony about a company claiming to change capitalism by giving back 1% of its revenues to entrenched non-profit interests being robbed for 15% of its venture capital financing round. It would be stupid to call this theft direct giving to the poor but it kinda is if you look at it through Robin Hood’s lens, the age old enemy of capitalism.
But how is Cotopaxi changing capitalism? First, as explained in the brilliant book Shoe Dog retail businesses didn’t used to be backed by Venture Capital. Instead retail companies would make products in America and grow slowly. The rise of Nike led to the Nikefication of many American retailers where firms outsource apparel designs to contract manufacturers, mostly in Asia. Cotopaxi outsources its manufacturing to Latin America and has raised millions in venture capital, allowing them to put many very extremely expensive products on their shelves very quickly, and restock them too despite massive losses. Cotopaxi lost tens of thousands of dollars worth of merchandise every week from one store without shutting it down. If this was a locally owned firm where employees knew the people making the backpacks instead of a firm backed by New York Venture Capital money concocted by a Utah founder things might have turned out differently. If it was a smaller business without the luxury of venture capital a present founder might have bought a gun to confront this outrageous threat to his livelihood. Instead employees were instructed to stay out of the thieves way, leave it to the absent cops.
The reality is that yes the police and the city of San Francisco need to do better but we also need to look at the warped incentives and burdens Venture Capital backed businesses put on our communities. I do hope that Cotopaxi stays because they make cool looking swag and working at a Cotopaxi store seems like a good job. The founder of Cotopaxi has the ear of City Hall now where he can make his VC backed interests heard. Public tax dollars can be used to better defend the salaries of Cotopaxi employees and the bottom line of Venture Capitalists. People should be able to do business in San Francisco but we should also scrutinize the type of businesses and capitalists this city attracts.
SF board approves a $1.7 million toilet
I really enjoyed this thread from Mountain View based startup 1build on how ridiculous SF’s $1.7 million toilet project is.
Kroger-Albertsons insane acquisition deal
Private equity is why we can’t have nice things.
Before this deal actually happens Albertsons is going to pay all of its working capital, $4 billion to its private equity overlords, making things more difficult for regulators. If the merger doesn’t happen Albertsons will be totally fucked and then they’ll say look we’re a failing business we have to be bought.
The standard justification for the merger by Kroger and Albertsons lawyers and economists on their payroll is that they have to merge to compete with Wal-Mart. The thing is is that centralization and bigness are the problem. Fewer companies is the problem not the solution.
Adobe acquires Figma further centralizing the power of Big Tech
I wrote up a whole thing on why the Adobe - Figma is a bad idea, but it doesn’t seem like a battle we can win. If you’re interested in more details I suggest reading Matt Stoller’s breakdown: Should the Government Block the Adobe-Figma Merger?