Ed Cowan
Allbirds rings the bell on the Nasdaq today and has chosen an apt ticker to do it: BIRD.
It started with a humble, natural wool (and extremely comfortable) shoe, but Allbirds is not merely an apparel company today. It has now become a materials innovation company disrupting how clothes are made. The company is driving change in the industry through the open sourcing of materials for others to benefit, and in doing so, is becoming the industry’s standard bearer on sustainability practices.
The fashion industry alone dumps 2.1 billion tonnes of carbon dioxide into the atmosphere every year. That equals twice the amount of pollution generated by every car currently in use in America. Most of what we wear on our bodies today is made from plastic. Plastic comes from oil, which comes from fossil fuels.
This needs to change. And it will.
Allbirds is more than simply clothing their customers. It is enabling people to contribute to the possibility that their children will enjoy the lives that they did and making them feel good about it — through comfort, style or performance — and in doing so, creating a brand they don’t just align with, but love.
Allbirds is not alone in this vision or innovation — Tesla’s job is far greater than simply getting a driver from one place to another; Impossible Meats’ job is more than just feeding a hungry customer. The job for all these businesses is to ensure that the planet we live on not only survives, but thrives in the coming decades, all while giving consumers a choice to participate proactively without compromising quality of lifestyle.
Sustainable companies are most likely to lead the next generation
While people agree on the importance of becoming sustainable, sustainability practices are likely to take legacy players years to put in place and perfect. The consensus view underestimates and underappreciates just how hard it will be to simply catch up in a race long after it has started. This is a huge opportunity for founders to build a purpose-native company that will have generational impact on the community, for employees and investors alike.
The sustainability theme isn’t just restricted to consumer goods, it applies to every business. On any given day, you can find news on the funding of sustainable technology at the small end of towns (every large venture capital firm has at least one alternative meat company in their portfolio) or the ESG responsibility of large corporations.
According to The Economist, investors poured more than $500 billion in 2021 into “energy transition” (shorthand for decarbonizing everything from energy and transport to industry and farming), twice as much as they did in 2010. The investment required to decarbonize the planet is estimated to be more than $30 trillion, presenting people with a rare opportunity to invest in companies that will be involved in the race to net-zero carbon emissions. Climate change is the biggest investor tailwind of the century.
There is a perception that the current valuations of the likes of Tesla — around 16x EV/NTM revenue — compared to other car manufacturers that trade between 7x-10x earnings, or Beyond Meat, trading at around 10x forward revenue, are extremely lofty.
To be invested in these businesses, you need to believe that the shift is not just to “sustainable.” You need to believe that there is a dramatic long-term shift to where the long-term winners are those that can put their sustainable practices at the heart of every decision.
If you are starting a company today, it has to be “purpose native.” For these companies, their current adoption and growth rates can, and likely will, continue for far longer than any of their peers have seen because of this advantage. Sustainable-first companies have the greatest chance of becoming the next generation’s winners.
Will Allbirds become the next Nike and compound at ~25% for decades? I don’t know, but I do know they are much more likely to than any other early-stage challenger. Let’s hope the world does not eat itself before sustainability gets its chance to chew on some CO2.
TDM Growth Partners are invested in Allbirds.
Comment