Apocalypse Nau? No, Just Business Reality
Wednesday, May 14, 2008 / KW
It seems as if there's a bit of angst among believers in sustainable business over the demise of Nau, an apparel company based in Portland, Oregon, that aimed to make and sell outdoor clothes and sportswear made from recycled materials using environmentally friendly business methods. "Is this a bad omen for sustainable startups?" wonders at least one blogger.
For what it's worth, my answer is No. The failure of Nau reflects less the inherent weakness of the sustainable business concept and more a series of miscalculations made by the company's management, most of which had nothing to do with environmentalism or social consciousness but rather with plain old business sense.
As this article details, Nau committed some of the same management blunders that have doomed thousands of other startups. They counted on a website to generate 50 percent of their sales, then dawdled over repairing the site when it proved to be awkward and difficult to use. They chose not to make their products available through traditional retailers, thereby eliminating a potential source of vitally-needed early revenue. They decided to "mute" the appearance of their logo on their garments, eschewing a powerful tool for building brand awareness and loyalty.
And most dangerously, they overspent, especially on personnel: "Among the 60 employees at [Nau's] Pearl District headquarters, about 10 held the title of vice president or higher . . . Most hailed from large companies such as Nike." In other words, they hired pricey talent accustomed to big-company perks and working conditions--always a risky choice for a brand-new company.
Given these mistakes--all of which, I hasten to add, are easier to spot in retrospect than they would have been at the time--it's not hard to see why Nau ran out of funds and couldn't find a venture capitalist willing to provide another infusion of money.
The lesson of Nau's collapse? A would-be sustainable company needs to be run at least as well as a traditional firm--because having great environmental and social goals doesn't exempt you from the laws of business physics.
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For what it's worth, my answer is No. The failure of Nau reflects less the inherent weakness of the sustainable business concept and more a series of miscalculations made by the company's management, most of which had nothing to do with environmentalism or social consciousness but rather with plain old business sense.
As this article details, Nau committed some of the same management blunders that have doomed thousands of other startups. They counted on a website to generate 50 percent of their sales, then dawdled over repairing the site when it proved to be awkward and difficult to use. They chose not to make their products available through traditional retailers, thereby eliminating a potential source of vitally-needed early revenue. They decided to "mute" the appearance of their logo on their garments, eschewing a powerful tool for building brand awareness and loyalty.
And most dangerously, they overspent, especially on personnel: "Among the 60 employees at [Nau's] Pearl District headquarters, about 10 held the title of vice president or higher . . . Most hailed from large companies such as Nike." In other words, they hired pricey talent accustomed to big-company perks and working conditions--always a risky choice for a brand-new company.
Given these mistakes--all of which, I hasten to add, are easier to spot in retrospect than they would have been at the time--it's not hard to see why Nau ran out of funds and couldn't find a venture capitalist willing to provide another infusion of money.
The lesson of Nau's collapse? A would-be sustainable company needs to be run at least as well as a traditional firm--because having great environmental and social goals doesn't exempt you from the laws of business physics.
Labels: apparel, Finance and Investment, Management and Organization, Nau, Portland, Small Business
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