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REI backs entrepreneurs of color with $30 million business accelerator

By Gregory Scruggs, The Seattle Times
Published: March 15, 2023, 6:00am

SEATTLE — Raquel Vélez, the daughter of two Puerto Ricans who settled in New Jersey, grew up with a cultural stereotype ingrained in her: “Puerto Ricans are allergic to snow.”

But when Vélez discovered skiing in her late 20s around Lake Tahoe, California, she fell in love. At first she navigated the slopes in sweatpants under rain pants and a hoodie under a rain jacket. After a few too many jolts of snow down her backside, Vélez decided to invest in a pair of snow pants.

A trip to her local outdoor gear shop was a bust, though.

“Nothing fit me,” she said, an experience she found “devastating.” But that dispiriting shopping trip had an upshot: It inspired a business venture now backed by a Seattle-area outdoor industry heavyweight.

“Not having clothes that fit my body and allow me to safely and comfortably experience the outdoors is a physical barrier to entry,” Vélez said. “That sparked me to learn how to sew, make my own patterns and work in a factory. There are other people like me who like to do stuff outside and also need clothes.”

Vélez’s resolve led her to launch Alpine Parrot in 2019, which makes outdoor technical clothing in sizes 14-30. Today, the California-based brand’s Ponderosa hiking pants and Bristlecone flannel shirts are sold nationwide in 13 brick-and-mortar specialty outdoors stores as well as in international markets like Australia, Canada and New Zealand via online retailers. She expects to stock shorts by summer and a midlayer jacket by fall.

As a Puerto Rican business owner, Vélez represents a stark minority in outdoor retailing: 1% of brands in the $460 billion outdoor industry are owned or run by a person of color. Seattle-area based consumer co-op REI is working to change that imbalance with Path Ahead Ventures, a business accelerator program seeded with $30 million. REI touts Path Ahead Ventures as the outdoor industry’s only such program for Black, Indigenous, Latino, Asian American and Pacific Islander entrepreneurs.

Now in its second year, the accelerator has vetted some 600 applications en route to a goal of minting 300 founders by 2030. Vélez was one of its inaugural participants.

“We’re hopeful that we are creating a bloom of potential entrepreneurs in our industry down the road,” said Path Ahead Ventures director Dan Kihanya.

Embark and Navigate

The seeds of such a bloom are ideas. But not every idea will lead to a company.

To guide aspiring entrepreneurs as they determine whether their eureka is a hit or a dud, Path Ahead Ventures runs a founders school called Embark. Participants in this virtual program receive a $10,000 grant and 12 weeks of workshops and fireside chats to refine a prototype or product design — or even analyze a concept drawn from research as truly a marketable idea or not.

The second Embark cohort wraps in April. Over the two sessions, 47 people from 39 companies explored the feasibility of a wide range of outdoor business concepts. Minneapolis-based Muna Mohamed runs Kalsoni, which sells modest activewear. Martha Diaz in Sacramento started Itacate Foods to muscle in on the market for dehydrated backpacking meals with Latin American cuisine. Brooklyn-based Keva Niver launched a vintage trailer hospitality business, Boheme Retreats, in the Catskill Mountains.

For those businesses that already have revenue and customers but are looking to grow in scale, Path Ahead Ventures runs the more intensive Navigate accelerator. Admission into Navigate comes with a $25,000 grant and the option for equity investments from the $30 million fund — Alpine Parrot now counts REI among its investors. The next cohort will go through a 20-week program later this year.

Vélez quit her job as a software engineer at Slack and found her way to Navigate with encouragement from a potential investor.

“There was a lot I didn’t know I didn’t know,” she said, especially coming from the tech industry. Vélez thought so-called hockey stick growth was the only way to land venture capital. In apparel, however, such growth plans are considered unrealistic and can scare off potential investors. Business skills like production calendars and financial planning also sharpened her efforts to grow Alpine Parrot’s business.

Business acumen was likewise a much-needed boost for Livio Melo, who makes ultralight stuff sacks and other backpacking accessories in the Bronx in New York City under the brand name Allmansright, together with a business partner. Melo studied industrial design and began applying his skills after he picked up hiking and backpacking in his late 20s.

“Since I’m not ultralight, I wanted my gear to be ultralight,” he said with a laugh. “There’s only so many times you can haul 40 pounds up a hill and feel absolutely defeated at the top.”

Allmansright got the attention of an REI designer who suggested via social media that the company apply for Navigate, which had not previously been on Melo’s radar.

“Keeping our heads down and doing the best work that we can has brought us opportunities,” he said. “We’re not so much business people as we are designers and nature lovers.”

But if a designer wants to make their product to market, they need to understand key performance indicators, cash flow, direct-to-consumer, B2B and other terminology.

“They taught me enough where I feel confident now to sit in a business meeting,” Melo said. The program’s grant allowed Allmansright to graduate from an apartment operation to a proper studio, while the fund made an equity investment in the company.

While REI’s public commitment to what it calls REDI (racial equity, diversity and inclusion) is relatively recent, the company’s longstanding reputation in environmental sustainability in the outdoor industry also appealed to Melo.

“I come from a third-world country where it’s not uncommon to see some random kid wearing hand-me-down T-shirts,” said Melo, who was born in the Dominican Republic. “We’re at the bottom end of where trash ends. I design and create with a heavy heart knowing that every thread I cut ends up somewhere.”

Co-op benefits

Beyond the specific demographic focus, REI brings other unique assets to the table that set Path Ahead Ventures apart from existing outdoor business accelerators like Bend Outdoor Worx, San Diego Sport Innovators and Moosejaw Outdoor Accelerator. REI’s 21 million members offer a ready source of customer feedback, while the co-op’s in-house brand yields expertise on supply chains, distribution and marketing research.

And, of course, there’s the fund.

“Capital can’t be understated,” said Kihanya, who brings to this role a career of tech startup experience, the last decade spent in the Seattle area. “A lot of founders struggle in early stages [due to lack of capital].”

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While $30 million is pocket change in tech circles, the eight-figure sum can make a splash in the outdoor industry. By comparison, Patagonia launched its Tin Shed Ventures fund 10 years ago with $20 million.

“It’s the right number in that we’re just figuring out the combination of programming, capital and resources that will enable us to partner most effectively with the broadest number of founders,” Kihanya said.

REI already carries the Firebiner, the signature product of Path Ahead Ventures participant Outdoor Element, and hopes to bring three more program graduates onto store shelves in the next year. Kihanya wouldn’t say who, though Vélez said she aspires for Alpine Parrot to be REI-ready within the next 12 months.

Ramping up Path Ahead Ventures, meanwhile, comes amid backlash toward DEI initiatives in the private sector. Republican presidential hopefuls have proposed tighter regulations on companies who explicitly pursue diversity and equity in their corporate mission, from Florida Gov. Ron DeSantis’ successful effort to revoke Disney World’s self-government to biotech entrepreneur Vivek Ramaswamy’s scrutiny in his book, “Woke, Inc.”

The national mood is different in 2023 than it was three years ago, when these ideas first began percolating at the co-op. That shift hasn’t steered REI off its course.

“If this initiative were transient based on how the winds are blowing, we’d be much more susceptible,” said Kihanya. “We believe our hypothesis: The outdoors will be a healthier, more vibrant industry with more diversity on the creator and founder side. We are in this for the long haul.”