Decidedly low-tech bag-maker Timbuk2 Inc.has enjoyed venture investment not just once but twice during its 15 years. In 2000, an early investment from Pacific Community Ventures helped the company prepare for growth anticipated from launching its Build Your Own Bag website. Just two years later, though, the San Francisco company was operating at a loss, until a change in management helped it get a follow-on investment from PCV.
What made Timbuk2 a good investment? In a word: jobs. PCV, also based in San Francisco, invests only in businesses that have the potential to bring entry-level or blue-collar job opportunities to low and middleincome communities in California. "We don't measure jobs per dollar invested, but we have to feel comfortable that the business model will incorporate job creation elements," says PCV's managing partner and COO, Eduardo Rallo. Since Timbuk2 was already providing 20 sewing jobs at its factory in the Mission District of San Francisco, the fund was eager to see the company's operations grow.
"Of course, the company must also demonstrate a solid financial business model," says Rallo. Although Timbuk2 was not profitable at the time, Rallo says that the company had a solid record of increasing sales and the potential to grow into something much bigger. "We always look for a company that can bring the right financial return, but we also invest for social return. Timbuk2 had significant employment in the area, so they fit both our social and financial criteria."
Timbuk2 president and CEO Mark Dwight, now 45, quickly began to implement an aggressive growth plan that included expanding the product line and, ironically, moving some of the production to lower-cost factories offshore. Now, some of the company's new products--including a successful computer case for Apple Computer laptops--are manufactured in China. And yet, Dwight and PCV have also managed to increase the number of sewing jobs, now employing over 50 people at the Mission District location.
Despite the higher labor cost, Dwight says the Mission District sewing facility still makes good business sense. "There is value in the made-in-USA products," he says. "And locally produced bags can be customized to customer requests on a very short lead time. That quick response is a unique advantage."
Rallo says Timbuk2 is a star member of PCV's portfolio. And Timbuk2, now profitable with $10 million in revenue for 2004, likewise counts PCV as a valued advisor.
In fact, Rallo and Dwight seem to be cut from the same cloth. Timbuk2 donates hundreds of messenger bags each year to At the Crossroads, a homeless youth foundation, and sponsors various local arts and education initiatives. That's typical, says Rallo: "Many of our entrepreneurs are very involved with things that have social impacts. It's not something we ask them to do, but it's the way they run their lives and their businesses."