The next big environmentally minded startup may be funded by an unlikely source: Patagonia. The clothing giant recently decided to launch an internal venture fund, called $20 Million & Change, that will invest in startups working to make the world a better place via the clothing, food, water, energy, and waste industries.
Patagonia has never been a traditional clothing company. It has always cared more about environmental impact than most of its counterparts--last year, the company went so far as to launch a campaign asking customers to buy less stuff. Then it started selling salmon jerky in an attempt to build a better seafood supply chain (much like it has done for the clothing industry).
$20 Million & Change is one piece of a larger restructuring of Patagonia, which has long been part of a holding company owned by founder Yvon Chouinard and his wife. Now Patagonia is part of a new holding company, Patagonia Works, that owns Patagonia, Inc., Patagonia Provisions (a food line set to launch this year that will include the aforementioned salmon jerky), Patagonia Media, Patagonia Government Sales, Fletcher Chouinard Designs (a surfboard manufacturer), and the new venture fund.
"We basically doubled the company in the last five years, tripled the profitability, and we had the excess cash besides the regular capital that we need to run the businesses that we have," says Rose Marcario, president and CEO of Patagonia Works (and former COO and CFO of Patagonia). "Yvon wanted to put that cash towards creating some good in the world as opposed to hoarding it on the balance sheet. Part of the way we do that is by investing in these companies that are focused on progressive environmental practices."
The company only announced $20 Million & Change on May 6th, but it has already received inquiries from companies, VC funds, and investment groups. The fund is still so new that Patagonia doesn’t have any solid leads for companies yet. "I don’t know that we could handle investing in more than three to five companies over the next two years as we start to get the fund going," says Marcario.
Patagonia plans to invest approximately $500,000 to $5 million in each company. The type of partnership created will depend on the startup. "We could nurture other businesses by helping them through our distribution, through telling their story. There are many ways that we could invest. We could invest as a minority, a majority, a joint venture, and we can co-invest," explains Marcario. The $20 Million & Change startups won’t just get cash; they’ll get advice, cachet, and potentially the opportunity to take advantage of Patagonia’s extensive distribution network.
"We’re not saying that we’re the model responsible company," explains Marcario. "But we are saying that we have 40 years experience in examining what it means to be socially and environmentally responsible."