Outdoor Voices, founded by Tyler Haney in 2014, became a lifestyle choice as much as a clothing brand. Credit...Sarah Karlan for The New York Times

How Outdoor Voices, a Start-Up Darling, Imploded

The founder was pushed out after clashing with experienced executives, highlighting a generational and gender divide within the clothing retailer.

Last summer, Tyler Haney, the founder and chief executive of Outdoor Voices, appeared to be golden.

In just five years, the Instagram-friendly athletic apparel company that she created in her 20s had become a sensation. There was more than $50 million in funding, nine stores and appearances on the business conference circuit. A glowing profile in The New Yorker had anointed Outdoor Voices the next Lululemon. In July, Ms. Haney shared the news that she was pregnant on “Good Morning America” with an enthusiastic message about work, family and having it all.

But behind the scenes, Outdoor Voices was cracking.

Store openings were delayed after leases were signed. A string of experienced executives, hired to professionalize the start-up, had abruptly left. An anonymous letter sent to the board of directors blamed Ms. Haney, now 31, for the exits and accused her of being “spoiled” and mercurial. The clothes were selling at discounts. The office in New York, where Outdoor Voices was based before it moved to Austin, Texas, would soon be shut down.

And a schism had opened between Ms. Haney and Mickey Drexler, the retail legend heralded for his leadership of Gap and J.Crew, who gave Outdoor Voices a halo of can’t-fail credibility when he became an investor and its chairman in 2017.

Mr. Drexler’s decades of experience and deep knowledge of the retail industry were expected to help Outdoor Voices make the transition from scrappy start-up to mature business. But his input was not always welcomed at a company built on the vision of its charismatic founder.

Heading into the new year, Outdoor Voices needed money. In January, the company pieced together a dismal financing that valued it at just $40 million — down from $110 million in 2018.

Part of the deal: Ms. Haney would be replaced as chief executive on an interim basis by Cliff Moskowitz, the former president of InterLuxe, a New York investment firm. She would stay on as “founder.” The Business of Fashion, a trade publication, reported the news in February. Days later, Ms. Haney surprised employees by announcing that she was leaving. She retained her seat on the company’s board.

In a cryptic Instagram Story post, Ms. Haney wrote that her exit was tied to the “heartbreaking narrative of an individual trying to cause harm,” which four current and former employees said was taken as a reference to Mr. Drexler. Mr. Drexler, 75, who also remains on the board, declined to comment for this article.

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“I’m heartbroken,” Ms. Haney, 31, said of no longer working at the company.Credit...Drew Anthony Smith for The New York Times

Ms. Haney’s exit, just months after the difficult birth of her first child, has left Outdoor Voices’ work force of primarily young, female employees shellshocked. Fifteen employees were laid off afterward. All were women, according to one of the dismissed employees and two current employees. The interim chief executive and all members of the newly structured board, other than Ms. Haney, are men.

The company declined to comment on the laid-off employees.

The shake-up has highlighted the generational friction that can arise between idealistic start-up founders, the employees they hire and the seasoned executives their companies often need for success. And it has added to questions about the viability of money-losing e-commerce start-ups, which have amassed piles of venture capital in recent years as they try to disrupt the markets for everything from toothbrushes to watches. In recent months, as investors have become more skeptical, the valuations of a number of these cash-burning “direct to consumer” businesses, like the online mattress company Casper Sleep, have plummeted.

This account of Outdoor Voices’ struggles is based on documents and interviews with 15 current and former employees, investors and people close to the board, some of whom spoke on the condition of anonymity to discuss internal company matters.

“As a young founder, I know my strengths, and I was excited to bring in experienced retail leaders to scale,” Ms. Haney said in a statement. “But in doing so, I was no longer able to lead this company in line with the values and vision that guided me early on.”

“I’m heartbroken, but have learned a lot,” she added. A spokeswoman, Michelle Wellington, said Ms. Haney could not comment further because she had signed agreements that prevented her from speaking about the company’s financial situation or its operations.

Peter Boyce II, a partner at General Catalyst who sits on Outdoor Voices’ board, said the company, like other direct-to-consumer companies, has been grappling with heightened consumer expectations around discounting during the holidays and rising marketing costs on Facebook and Instagram.

“It’s part of the evolution of these businesses,” he said. “There becomes a more sustainable, thoughtful growth rate that makes sense as companies get bigger and bigger, and that’s part of a recalibration taking place in the broader environment.”

Mr. Boyce, who said he also spoke on behalf of major investors, said Ms. Haney had been involved with the board’s search for an “operational partner” for her for about a year and a half, as well as its last fund-raising effort.

Ms. Haney began Outdoor Voices in 2014 after completing a business program at the Parsons School of Design in New York, quickly finding success with “rec kits,” which could pair colorful compression tops and matching leggings. The brand’s profile grew when it was picked up and sold in J.Crew.

The company’s striking, colorful designs and marketing, which portrayed young, diverse women wearing yoga pants while moving and hiking, was a hit on Instagram. Its hashtag — #DoingThings — spoke to a lifestyle. Ms. Haney was a compelling spokeswoman for the brand, which resonated among millennials and college-age customers with money to spend. The company attracted millions in venture funding from high-profile firms like GV, the investment arm of the Google parent Alphabet, and Forerunner Ventures, an e-commerce specialist.

Mr. Drexler viewed Outdoor Voices as something of a swan song as he stepped back from J.Crew and focused on smaller projects, a former employee familiar with his thinking said. And his experience transcended the traditional brick-and-mortar retail business. He had served on the board of Apple and advised the direct-to-consumer eyeglass company Warby Parker. His presence raised the company’s profile among investors and attracted money.

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Outdoor Voices moved to Austin, Texas, in 2017.Credit...Sarah Karlan for The New York Times
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The company’s motto on its headquarters.Credit...Sarah Karlan for The New York Times

But soon after he joined Outdoor Voices, there was tension. In meetings, Mr. Drexler would quiz employees, expressing frustration when they couldn’t calculate things like profit margins on the fly, according to four people who witnessed the interactions. The exchanges prompted dismissive “OK boomer”-style text messages among the workers, two of the people said.

By 2019, Ms. Haney was telling colleagues that Mr. Drexler was old and out of touch, according to two former employees. Mr. Drexler, in turn, was saying unpleasant things about Ms. Haney to professional acquaintances, according to two people who have worked with him.

Ms. Haney could be dismissive of the traditional ways of retailing, even as the freewheeling start-up grew. This attitude could make it difficult for the company and a revolving door of hires to take basic steps for budgeting, inventory planning, merchandising and store expansion.

“Too often when ‘experience’ walks in the door, that ‘totally possible’ mind-set is gone,” Ms. Haney said to Chip Wilson, the founder of Lululemon, in a conversation published in July by an Outdoor Voices publication.

Outdoor Voices struggled to recruit experienced executives, and when it did, they did not last long. Pam Catlett, a former Nike executive hired as president last year, was gone after five months. Executives from Under Armour, American Apparel, Amazon and J.Crew left as well. The company’s challenges were compounded when it moved its headquarters in 2017 from New York to Austin, with a smaller pool of experienced retail executives.

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Mickey Drexler, who had run Gap and J.Crew, clashed with Ms. Haney after becoming chairman.Credit...Clement Pascal for The New York Times

Some employees bristled at Ms. Haney’s management style. She put pressure on the social media team, which was told to “like” replies to the brand’s Instagram photos within an hour, according to two former employees. When employees left the company, she blocked them on her Instagram account, the former employees said.

In June, an anonymous email that claimed to be written by 14 employees criticized Ms. Haney and was distributed to the board and a group of executives. It mentioned the numerous exits of senior executives as “a huge red flag” and said employees worried that if they disagreed with Ms. Haney’s decisions — even if citing data — they could be fired.

There were also questions about the company’s financial strategy. Outdoor Voices nearly doubled net sales in 2018 to $38 million, according to a prospectus obtained by The New York Times. But it also spent heavily, losing $19 million that year on an adjusted basis. The company predicted annual losses would continue until 2021, when it forecast a $6 million adjusted profit, according to the prospectus.

In 2018, the company’s handful of stores were spending roughly $22,000 on Maison Louis Marie No. 04 candles, $45,000 on fresh flowers and $36,000 on Topo Chico bottled water, according to an internal memo from February 2019.

The retail strategy seemed haphazard. Leases were signed for several stores, including at least one that Mr. Drexler pushed for, that failed to open in a timely manner, running up costs in areas like Manhattan’s Flatiron neighborhood, according to three people familiar with the plan.

Outdoor Voices’ brand cachet began to erode last year as it unloaded excess products, including at the off-price chain Nordstrom Rack. Competitors mimicked its wares, and social media ad costs rose. It expected $54 million in net sales last year, according to the prospectus, but came up short, two sources said.

Mr. Drexler quietly stepped down as chairman in July but remained on the board.

Internally, employees who felt a deep sense of pride working for a female-founded company that projected a message of positivity are now trying to adjust to the reality of Ms. Haney’s absence and the company’s largely being run by men. (Mr. Boyce, the board member, said, “We have open seats on the board right now where we’re making diversity a priority.”)

Anna Katsios, a design and development project manager who was recently let go, for instance, said she believed she suffered professionally after she told the company that she was pregnant this year.

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Outdoor Voices expected $54 million in net sales last year, but came up short. Credit...Sarah Karlan for The New York Times

“While Ty was out on her own maternity leave and slightly prior to that, the management shifted to more males,” she said. “I think that had an effect on how my pregnancy and imminent leave were going to be viewed.” Outdoor Voices declined to comment about Ms. Katsios.

Investors that had once lined up to pour money into the promising company seemed to evaporate. In January, the company secured a new round of financing from some of its existing investors at a slashed valuation.

Terry Sullivan, the founder of Paragon Advisors in Shaker Heights, Ohio, invested in Outdoor Voices in 2014 based in part on his belief in Ms. Haney, and participated in an interim funding round last June. At the time, the company said it expected to be worth at least $240 million in its subsequent round. On Jan. 31, he received a term sheet that valued Outdoor Voices at $40 million and shared plans to find a new chief executive.

Mr. Sullivan was gobsmacked. He said the board had not responded to his inquiries about what happened. “Obviously these things don’t self-implode in a minute,” he said.

Sapna Maheshwari covers retail. She has won reporting awards from the Society of American Business Editors and Writers and the Newswomen’s Club of New York and was on Time’s list of “140 Best Twitter Feeds of 2014.” More about Sapna Maheshwari

Erin Griffith reports on technology start-ups and venture capital from the San Francisco bureau. Before joining The Times she was a senior writer at WIRED and Fortune. More about Erin Griffith

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: The Crash of a Start-Up Darling. Order Reprints | Today’s Paper | Subscribe

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