October 25, 2021
Photo: Spencer Platt/Getty Images
The humble venture capitalist puts on her Allbirds one shoe at a time, just like everybody else (or at least everyone else in Palo Alto).
Since its founding in 2015, Allbirds has become an essential component of the tech bro uniform, alongside such staples as the embroidered Patagonia quarter-zip, Lululemon ABC pants, the Zuck-inspired black T-shirt and a Y Combinator-branded Hydro Flask.
But Allbirds wants to become an iconic global brand for shoes and everything else, associated not with out-of-touch tech billionaires but customers who "live an active and curious lifestyle, care about health and well-being, prioritize quality over price, frequently purchase products online, live in urban center settings, and appreciate socially conscious brands."
Allbirds took a big step toward realizing that ambition with its S-1 filing on Oct. 25, 2021. It applied to go public on Nasdaq under the "BIRD" symbol and expects to raise around $181.5 million from the share offering. Allbirds could see its valuation reach as much as $2.2 billion at the upper end of the price range. It has yet to set a date for its trading debut.
Allbirds recorded a net loss of $25.9 million in 2020 and is on track to lose nearly double that in 2021. A key question for potential investors is whether Allbirds — which prides itself on technical capabilities and sustainability — can navigate the turbulent tides of fashion trends as it looks to turn a profit.
Allbirds began as a Kickstarter campaign in 2014. It raised $120,000 within the campaign's first three days and became a company just over a year later. In 2016, Allbirds shipped its first Wool Runner shoe and gained B Corp status in pursuit of its sustainability ambitions.
Allbirds focused on shoes for most of its early history. It wasn't until 2019 that it first entered the apparel category with socks, and late in 2020 when it expanded further to shirts and sweaters.
Some operational highlights in the S-1 include:
Also, a few fun facts from the S-1:
Allbirds has high margins on its products, but ballooning personnel and marketing costs have kept the company from recording a profit.
So what accounts for the net loss despite the high gross margins? SG&A expenses have generally grown faster than revenue and represented nearly half (44.7%) of total revenue in the first six months of 2021. Allbirds said the SG&A increase between 2019 and 2020 was driven by personal and related expenses.
Three risks stand out from Allbirds' S-1: inability to keep up with fashion trends, knock-offs and the associated loss of brand value, and the potential costs of ESG commitments.
The Allbirds brand is very tied to its particular aesthetic. The company could therefore struggle to keep up with changing fashion trends.
Crocs is a good example of a company that has strong stylistic associations and can therefore suffer at the whims of fashion cycles. This has tremendously benefited Crocs in recent months (if you didn't hear, Crocs are back … this time "ironically") but the company went through a slump beginning in 2008 that lasted well over a decade.
Since lack of brand iconography is a core part of the Allbirds aesthetic, there is plenty of room for companies to sell products that look the same but cost less.
Finally, Allbirds has made sustainability commitments that could result in reputational damage or increased compliance costs.
Here's where the ownership of Allbirds stood prior to the IPO share offering and how much each party stands to make, assuming a $2.2 billion valuation: