Black Diamond Equipment: Peter Metcalf

In 1989, after years of scaling some of the most challenging peaks in the world, Peter Metcalf took on a daunting new risk: resuscitating a bankrupt climbing-equipment company, and putting himself into deep debt to do so. From the defunct assets of Chouinard Equipment, Peter launched Black Diamond Equipment, and capitalized on the growing popularity of sport climbing to grow it into one of the most recognizable outdoor brands in the world. By the way, Yvon Chouinard, the founder of Chouinard Equipment, went on to build his next company, Patagonia, into an iconic outdoor apparel brand. It’s a great HIBT story, and you can listen to it HERE https://wondery.com/shows/how-i-built-this/episode/10386-patagonia-yvon-chouinard. This episode was produced by Josh Lash, with music by Ramtin Arablouei Edited by Neva Grant, with research help from Alex Cheng. You can follow HIBT on Twitter https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and email us at [email protected] mailto:[email protected]. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 5:22Speaker 01

  There's no question it was risky. I had my life savings in it. I had personally guaranteed the loan, even though I only owned 10% of the business. And it was my job and career, so had it gone down, I would have lost everything. And one of the largest outside investors said to me when he heard that, he looked at me and said, "I'm sorry to hear that, but that's very reassuring. That means to me that you're going to do everything in your power not to let this company go down." And I looked him straight in the eye and said, "Yes, I am."

• 6:02Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:14Guy Raz?

  I'm Guy Raz, and on the show today, how Peter Metcalf took a bankrupt business and built it into Black Diamond, one of the world's best-known brands for climbing, hiking, and skiing.

• 6:33Guy Raz?

  Way back in the first year of the show, we ran an interview with Yvon Chouinard, the founder of Patagonia. It's a classic episode, well worth your time, and we'll put a link to it in the show notes. Anyway, before Patagonia became Patagonia, Yvon ran a tiny little business called Chouinard Equipment that basically sold metal tools for mountain climbers. As you can probably imagine, the market for mountain climbers alone was pretty small and niche, and by 1989, Chouinard Equipment basically went bankrupt. But it didn't exactly die. The employees who were left behind decided to raise the

• 7:15Guy Raz?

  money to buy it. The leader of that pack was Peter Metcalf, who is also today's guest. Peter believed that a new, reimagined brand could reach a much bigger set of consumers, and not just mountain climbers, but skiers and hikers, and eventually, all kinds of outdoorsy types. He renamed the company Black Diamond Equipment, and over the next 20 years, Peter turned Black Diamond into one of the most recognizable sports brands out there. But as you'll hear, the road from bankruptcy to success was anything but easy. Along the way, Peter had to be nimble and decisive when faced with the prospect of

• 7:56Guy Raz?

  failure, the kind of skills he picked up from a life of climbing some of the most challenging mountains in the world. Peter grew up in New York City in the 1960s, the child of two German immigrants. He discovered rock climbing when he was just 14 on a trip upstate. And almost immediately, he fell in love with the sport. But he also found a community.

• 8:22Speaker 01

  I was just magnetically attracted to these people immediately. This rather bohemian, nomadic, iconoclastic group of outsiders that were made up of everything from young people to older people, physicists, scientists, mathematicians, professors, factory line workers, just a mishmash of eclectic people. People who really enjoyed and loved the outdoors and also people who, I think, felt this desire and need to sort of push themselves doing something a little bit unusual, somewhat adventurous. And also, there was, especially back at that time, not the mainstream, and it was certainly a bit risky.

• 9:04Guy Raz?

  So I guess by the time you were sort of 16, you were hooked in the sport. And I read that, and I can't even believe this. Because this would have been in the, you know, maybe early 70s. Right before, like, I guess a couple of months before you graduated high school, you joined a few friends in a Volkswagen van and drove from New York to Alaska to go on a climb. Tell me this. First of all, I don't know how your parents let you do that. But tell me about that story.

• 9:37Speaker 01

  Yeah, sure. Let me see. You know, I think one of the blessings of being the child of two immigrants to America who came to the country after a horrific period of time. You know, for them, every day... Life was an adventure and just living, surviving was a true adventure. And I think they, as in my youth, I got instilled with that sense of adventure. And I engineered my life to be, work as little as possible and climb as much as possible. So I didn't own a car. I did odd jobs. I worked two winters on, as a roughneck, on Wildcat drilling rigs in Wyoming and Utah.

• 10:22Guy Raz?

  Wow.

• 10:22Speaker 01

  Chainhand.

• 10:23Guy Raz?

  That is a dangerous job, working on oil rigs.

• 10:26Speaker 01

  Yeah, people say that and compared to climbing, I didn't find it overly difficult.

• 10:31Guy Raz?

  Right, I guess fair enough.

• 10:33Speaker 01

  So by the time I was 16 and beginning to plan this expedition to Alaska, I had already gone on my own out to the Canadian Rockies and doing some technical routes out there. Let's find a big peak in Alaska that we can do a technical new route on, do an expedition, and let's go do it. And the combination of the research led us to a peak that had only been climbed a few times, had a beautiful unclimbed ridge on it. We started the planning, organizing, bought 30 days' worth of food, baked our own Logan bread, got all the ropes we needed, arrived at the Alaskan bush pilot's little hangar there, right on the water, because it's a water plane.

• 11:15Speaker 01

  Walked in the office, introduced ourselves, and the first thing the receptionist said to us, "You're the expedition? You kids? Do your parents know you're here?" Anyway, they flew us in and we were on the mountain for just under 30 days, succeeded in doing this new route on this major Alaskan peak, and it was a game changer.

• 11:39Guy Raz?

  I guess you, I mean, I know you sort of, for the next several years, would kind of go in and out of college and have some seasonal jobs, but really it was all designed, from what I've read. To finance these trips, different trips to go to the Alps or Alaska, just doing these intense climbs. And I read about a particular climb that you did in 1980, where you, I guess this was a, again, I'm not a climber and I don't know these mountains, but this is a particularly challenging climb, which is the south face of a mountain called Mount Hunter, which, you know, from what I understand, like, it had been completed only once at

• 12:22Guy Raz?

  that point. And it was like, it took 145 days or something?

• 12:26Speaker 01

  Yeah, yeah. This Mount Hunter climb, I had done now two major new routes in Alaska. But as it turned out, it was the most significant failure in my climbing career. Nobody got hurt. It just was clear, we're not gonna, it wasn't gonna work. The weather was just horrendous, just absolutely horrific. And we did not bring tents, because I didn't believe in a route that steep that one could actually find places always to place tents. And where the slopes got low enough angle, I thought we could find snow and we could dig snow caves. We had climbed through a long day of storms up these very steep, fluted

• 13:10Speaker 01

  ice ridges that were very hollow, had a lot of air in them, very dangerous to climb, but you could climb them. And that night, we finally were able to dig a cave in for the first time, get in there and realize that we were fully committed. At this point in time, there's no way that we could safely descend what we had just climbed that day, let alone the previous days. And that if we were going to live, let alone to succeed on the route, the only way was up. And it was quite a both sobering revelation at that moment, but it was also an absolutely inspiring revelation. Because as a climber, when you're doing big new routes, what you're constantly thinking about with part of your brain is

• 13:54Speaker 01

  analyzing, how am I going to get down? Do I have the gear to get down? How long will it take? So you're using a certain amount of your energy to make sure that you can retreat from something if you have to.

• 14:04Guy Raz?

  Yeah.

• 14:05Speaker 01

  You know, it was very liberating. So it's like 100% of our mental thought. And energy is going to be focused on getting up this route however we can do it. And so it was each day, let's break it down into what are we going to do today? How far up this route are we going to get? And one of the things that really taught me was that you can do a lot more than you really thought possible if you just break it down into the components. It also showed me the importance, all of us, of being brutally honest with one another. Because in a situation like this, we were out now almost 14 days.

• 14:46Speaker 01

  It was 13 and a half days, it was six days worth of rations, just enough gear to keep us alive. And there were some days where somebody didn't feel like leading, another day where somebody felt weak and scared. And you just had to be able to say to your partners, man, I just don't feel like leading this today. Can you lead? And it's like, yeah, I'm up to it today. I can lead this. Everybody is dependent on one another. So you better be really aware and cognizant of the wellbeing of your partners along the way, mentally, physically, you name it.

• 15:21Guy Raz?

  I guess that climb would eventually get you thinking about what you wanted to do. I mean, you had been kind of an itinerant worker, doing different jobs to finance your climbs. But I guess around the early 80s, so you were probably, I mean, I guess, late 20s, you happened to meet Yvon Chouinard, of course, the founder of Patagonia. He was on the show many years ago. And he also, if people listening remember that episode, founded another company called Chouinard Equipment. And that was his first company. And they basically made climbing gear.

• 16:03Guy Raz?

  You had met him and that would eventually lead to a job with him. Tell me a little bit about that.

• 16:13Speaker 01

  Yeah, so by the early 80s, I was realizing this itinerant life I was having focused on climbing, I didn't think it had a future. I wanted to have more in my life than climbing. And at this point in time, the embryonic American outdoor industry was just beginning to get large enough that it was beginning to hire sales reps, which was brand new to the outdoor industry. And I thought, this is intriguing. I'm outgoing. I know people in the industry. I know retailers. So I wrote a bunch of letters and the Patagonia Chouinard was one of them. I had met Yvonne, but I didn't really know him. And in the spring of 82, I just got back from Alaska again. And there was a letter from Yvonne's

• 16:57Speaker 01

  general manager of Patagonia, Chris McDivitt, saying that Yvonne was looking for someone to become, to train and become the general manager of Chouinard Equipment, the little climbing equipment company. And as soon as I saw that, I thought, wow, this is it.

• 17:11Guy Raz?

  And even though you didn't have a whole lot of retail sales, you were very qualified, presumably, for that job because you knew the equipment backward and forward, probably.

• 17:21Speaker 01

  Yeah, my expertise was I knew the equipment incredibly well, what was right with it, what was wrong with it. I had a plethora of new ideas for products, just based upon my using them all the time. And I had modified products and actually built a few things along the way with partners of mine. So that part I knew. What I didn't know was manufacturing, the actual marketing, the R and D process there. But it was a little company. It was a small number of people.

• 17:49Guy Raz?

  All right. So you arrive at Chouinard Equipment as the manager of climbing gear. And from what I gather, there was, I mean, and this is not uncommon. I mean, Yvonne Chouinard famously, he really liked, at least his reputation is of somebody who really kind of let go, right? And let other people run the company. And I guess he let go off for three months and go fishing. And then he didn't want anybody to contact him. Anyway, I mean, during the years you were at Chouinard Equipment, I guess Yvonne's focus began to shift over to Patagonia and some tension began to emerge between the two of you, right? What was going on?

• 18:29Speaker 01

  Yeah, this is absolutely true. So first, let me begin by saying, I owe Yvonne and Chris McDivitt

• 18:35Speaker 01

  So much thanks and appreciation. Everything I learned about business, or much of what I learned about business and how to operate one, the culture, the familial culture, so many things was through all of them, and they remain dear friends of mine. And then, to your point regarding the tension, yes, that did happen. And I think that what was a little bit of an irony here was that Yvonne, who built Chouinard Equipment on innovative product in Patagonia then too, and to this day, when it came to climbing, at this point in time, he had shifted his focus to the clothing, and also a bit away from climbing. He was surfing, he was kayaking.

• 19:19Speaker 01

  And to him, I think the golden years were the 1950s and 60s, and maybe the very early 70s. And I think that they were in the rearview mirror, and that the direction that climbing was moving, the improving gear, the methods, the styles, it just wasn't his cup of tea. He didn't embrace it. He wasn't excited by it. And that really came clear in 1987, when we produced the 1987 Chouinard Equipment catalog, which was like a yearbook. I saw the catalog as a yearbook on climbing, a celebration of why do you climb, capturing the culture, the climbing styles, the image.

• 20:02Speaker 01

  And we gave him a copy, and he called myself and my marketing director, who really was my partner in the business. And we said, as he looked at the catalog, that he was really ashamed of it, that it represented everything that he stood against in what was going on in the world of climbing. And as you can imagine, that was both very embarrassing...

• 20:28Speaker 01

  Concerning, frustrating and disconcerting. But that wasn't resolved. It was just a fundamental disagreement on this. But we continued to move forward.

• 20:40Guy Raz?

  And you did. I mean, you did help things move forward. I mean, based on some of your innovations, the brand, which had been kind of faltering before you got there, became a pretty solid, small business again. I think it was doing like $7 million in revenue.

• 20:57Speaker 01

  Yeah. Basically, what I attempted to do, and I think I was successful at it, was bring the energy, the vision and the products to the company that had originally made it successful in the late 50s, 60s and early 70s, before Yvonne's focus began to shift to Patagonia and the clothing. And the company really began to take off again and become the leader it had been, but had lost that leadership position.

• 21:25Guy Raz?

  But then, I guess, by the late 80s, you guys started to face a threat, almost an existential one, right? Which was affecting other companies in the outdoor space, too. And what it was, was that you guys started to get hit with some pretty serious lawsuits, right?

• 21:41Speaker 01

  Yeah. So you had this issue of equipment, companies being sued literally out of existence. And that was happening at this point in time.

• 21:50Guy Raz?

  Being sued because equipment was...

• 21:53Speaker 01

  Not safe enough. You might say, let's put it this way. At this era, you can probably remember that at some point in time, you go into a hardware store, now Home Depot, and every step ladder began to have a sticker on the top step saying, "Do not step here. This could collapse. You could get hurt." You know, in 1982, that wasn't the case. You didn't have to have warning stickers all over everything. And the same was true with climbing equipment. There were no climbing standards at this time. There was no quality assurance standards at this time. And there was no labeling standards at this time. But because of this rapid change in tort law, this became just the dream of plaintiff's

• 22:36Speaker 01

  attorneys going after companies when somebody got hurt.

• 22:39Guy Raz?

  So basically, you guys were getting sued in what, I guess, you would argue were frivolous lawsuits, but still, these were tying the company... I mean, a company making $7 million a year in revenue to deal with four or five lawsuits, that's a massive expense. I mean, that can... Not only slow things down, that can tank a company.

• 23:00Speaker 01

  Yeah, I mean, I'm not sure I'd call them frivolous, but they were failure to warn, which was what you call them, failure to warn suits, that we failed to have the appropriate instructional information, warning language, whatever it was needed. And it also involved two fatalities. So the size of the potential judgments against the company were huge. And without any of the standards, the risk to the company was enormous.

• 23:26Guy Raz?

  And I imagine the insurance policy was huge.

• 23:29Speaker 01

  That's, this was one of the major issues. When I arrived at Chouinard Equipment in 1982, we had $5 million worth of insurance. It cost, I think, $10,000 a year and had a $5,000 deductible. By the time that all these suits hit and what we were facing, the cost of an insurance policy for $1 million was $350,000 with a $250,000.

• 23:56Guy Raz?

  A year?

• 23:57Speaker 01

  A year, with a quarter million dollar deductible.

• 24:00Guy Raz?

  That's insane. The premium was $300,000, over $300,000 for a $1 million policy with a $250,000 deductible. I mean, that just shows you how these insurance companies assess the risk. They were basically saying, you are 100% likely to get sued.

• 24:19Speaker 01

  Yes, we were being, unfortunately, being sued. And so this, that combination of these premiums made the company, obviously, not profitable.

• 24:29Guy Raz?

  Unsustainable.

• 24:30Speaker 01

  Yeah, not sustainable.

• 24:32Guy Raz?

  I guess around this time, from what I understand, I mean, it didn't, it didn't seem to, understandably, from Yvon Chouinard's perspective, he's watching his apparel business, Patagonia, grow, and he's got this other business, Chouinard Equipment, which is just saddled with lawsuits and increasing insurance premiums. And he, I mean, he told us this story when he was on the show several years ago. I mean, he kind of comes to the conclusion that it's pointless to continue this. Like, it's just going to hurt Patagonia and his other businesses. And so.

• 25:07Guy Raz?

  You know, I think he basically said, I've had enough. I'm just gonna, and I'm gonna file, he files for bankruptcy.

• 25:13Speaker 01

  Yes, it was just, it wasn't worth it. So he made the decision to put it into a Chapter 11 bankruptcy and asked me to come up with a plan to sell the assets as quickly as possible.

• 25:26Guy Raz?

  And the assets were belays and ropes and carabiners and all the things that you would use to, forgive me, climbing, people listening who are climbers, I'm clearly a neophyte here, but all that equipment, right, needed to be sold?

• 25:40Speaker 01

  Yeah, it was the existing inventory, there's tooling. We were a manufacturer of that, so we made it. So we had tooling. And it was also a very tired manufacturing base, meaning most of the presses and equipment was very, very old, not, I wouldn't call it state of the art.

• 25:56Guy Raz?

  And it was based, where was it based again?

• 25:58Speaker 01

  Ventura, California.

• 26:00Guy Raz?

  Okay, so which is where Patagonia's headquarters are. So this was also in Ventura. And everything was being made there? And I got you, okay. Yep.

• 26:08Speaker 01

  Yeah, so no one was interested in buying those assets. I interviewed several different people, companies, there was no interest. So at that moment, after two weeks, Yvonne just said, give me a plan on how to liquidate the assets, lay people off as quickly as possible with the least loss possible. And that is when I had the epiphany and thought, wait a minute here, there is an opportunity here.

• 26:36Speaker 01

  There's both an opportunity and I don't want to make a mockery of the past seven years where I rebuilt this Chouinard Equipment Company from where I had been in 1982, going down, and made it, once again, a market leader, a little leading American climbing equipment company doing really good work.

• 26:55Guy Raz?

  So you basically decide that you wanted to buy the assets and create a new business, basically, a new business that would be an outdoor climbing business?

• 27:07Speaker 01

  Yeah, that's absolutely correct.

• 27:09Guy Raz?

  And from what I understand, you decide that you, that you want to see, I guess, if you can gather the employees and all together, figure out how to buy these assets and basically start your own company all together, is that right?

• 27:24Speaker 01

  Yeah, I figured we'd probably need somewhere between $3 to $5 million total.

• 27:32Guy Raz?

  And how many employees total were you talking to about joining you?

• 27:36Speaker 01

  We were just under 50 people, in the 40s.

• 27:38Guy Raz?

  And did those 50 people together, could, did they have the money? Did they have the $4 million together, all together?

• 27:46Speaker 01

  Well, no. I mean, the plan was never to raise $4 million in equity. It was, I thought, maybe if we could put together somewhere around a million, we could borrow 3 to 4 million more, leverage it.

• 28:00Guy Raz?

  Okay, right.

• 28:02Speaker 01

  You know, as a climber, you're a risk taker, within reason.

• 28:07Speaker 01

  You understand what you're up against, and if we could do this, it was quixotic. I mean, it was romantic. And a quote I once read way back in the early 80s was from Peter Drucker, who talked about how the true opportunities for entrepreneurship, which is based upon innovation, lies in the gap that opens up between where a market is and where it's going. And I thought that was the genius we were applying at Shennard Equipment. It's what Yvonne had done in the 50s and 60s. He'd never articulated it like that, but that's what I saw. And I thought, that's what we can continue to do.

• 28:48Guy Raz?

  So, from what I gather, you begin what would become a nine-month negotiation, which is, I guess, in the grand scheme of things, isn't long, but it is long, because it consumes your life. It is everything, every day, all the time. It's frustrating. And the negotiation is to buy the assets of Shennard Equipment. But what I'm trying to figure out is, how did you start to even attract the possibility of getting the money, the 3 million that you needed to do this?

• 29:25Speaker 01

  Yeah, all good, very good questions. So immediately I dug into this, just fortunately, you know, climbing, as I mentioned earlier, has, I had a lot of friends who were in finance, attorneys, and mirrored different places, who are all climbers and friends of mine. And I just started calling anybody I knew who I thought could give me advice on how you'd do something like this. And the amount of free advice I got was phenomenal. I mean, this company would never have gotten off the ground if it wasn't for people like that. And then I got introduced to some significant investors, and some were intrigued and interested. And we went ways, and each of them then said, I'll only do it if I have 51%.

• 30:07Guy Raz?

  Right. It's risky, because from their perspective, this is like a niche business. This only appeals to a certain kind of person. There's no mass market here. That's their, that's their argument.

• 30:16Speaker 01

  Yeah, no, it's a good point. And so that didn't, and I, for the effort that we're going to put into this, I did not want myself and the employee group to lose control of this business. It wasn't worth doing. If that was going to be it, it was like, let's walk away from it. It would be a brilliant failure.

• 30:36Guy Raz?

  Right.

• 30:37Speaker 01

  We're only going to do this if we can do it our way.

• 30:39Guy Raz?

  When we come back in just a moment, how Peter convinces people to invest in his new company without really telling them how they'll make their money back. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS

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• 33:44Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1989 and Peter is trying to raise about $4 million to buy the assets of Schenard Equipment. And one way to do that is to reach out to their customers.

• 34:00Speaker 01

  Schenard Equipment had a mail order business. And I thought, okay, I wonder if there's any wealthy people who are regular customers of Schenard Equipment. So I sat down with my, I had two people running my mail order business. And this is back before the internet and all that. And I just said, I want you to print out a list of everybody who's bought from you multiple times in the last year, and that you've talked to multiple times and you think has money. They're rabid consumers of our product. And they seem like from your conversations that they're wealthy people. I got a list of about 15 people. And I just started call calling and saying, here's who I am. Hey, I'm the general manager of Schenard Equipment. As you heard, it's in bankruptcy. It's going to be liquidated,

• 34:44Speaker 01

  but I'm starting a brand new company. Here's the vision behind it. I'm trying to raise money. And would you be interested in investing? And some people immediately hung up and said, absolutely not. Some, it went aways. And a couple of those people ultimately became the most significant investors in the company and advisors and board members.

• 35:04Guy Raz?

  All right. After a nine month negotiation, which at times didn't look like it was, apparently Patagonia had put together a press release saying the deal fell through and it's not going to happen. Like at the last minute, that didn't go out. You did strike a deal. And you were able to acquire the assets and start from scratch, I guess.

• 35:29Speaker 01

  Yes. And then in November, we closed on it. And December 1, we completed remarketing everything and opened our doors. 1989, December 1, 1989, is the highly leveraged, young, black diamond equipment company.

• 35:44Guy Raz?

  And highly leveraged in what way? Like, how much money were you ultimately on the line for?

• 35:52Speaker 01

  I raised just under $900,000 of equity, another like $150,000 worth of sub debt, and then went to a commercial finance company and got the debt we needed at nearly 15% interest, 14%.

• 36:10Guy Raz?

  Wow, that's high.

• 36:12Speaker 01

  Yeah.

• 36:13Guy Raz?

  And 14% interest on how much money?

• 36:16Speaker 01

  We borrowed in the end, separate from the sub debt, which was at 15% to the investors, about another two, almost 3 million.

• 36:27Guy Raz?

  Wow. I mean, that's scary.

• 36:30Speaker 01

  Yes, it is.

• 36:30Guy Raz?

  That is a lot of debt, and that's a high interest. I mean, again, this is the 80s and 90s when interest rates were just higher than they are now, but still, I mean, you know, your revenue had to be significant just to service that debt.

• 36:43Speaker 01

  Yes, I figured that the numbers showed we had to hit $5 million. I mean, the company had been about $7 million, almost, or right about 7 when it went down, Stone Equipment. So that Black Diamond, my numbers showed that we had to not go decline less than 5.

• 37:01Guy Raz?

  So you had to do a minimum of 5 million a year, which was realistic, but that was just, I mean, that would be like barely paying anybody anything, I guess, really, and really being lean and still having to figure out how to innovate to grow in the subsequent years.

• 37:18Speaker 01

  Yes.

• 37:19Guy Raz?

  All right, so now you've got Black Diamond Equipment. End of 89, you own, you and your team, your employees, it's now an employee-owned business. And just to clarify, you guys controlled it. You guys had, you and the employees owned more than 50% of it, or you had 50% voting power? 51%?

• 37:38Speaker 01

  If you include our Japanese distributor, we were at 51%.

• 37:44Guy Raz?

  Okay, I got you.

• 37:45Speaker 01

  And the investors we got were all people who were very willing to invest in the long term. When I was asked about liquidity strategy, I said, "Look, I don't have a liquidity strategy in the short term. This is not philanthropy. We will have one, but this is a long-term investment. I can't tell you how long, but we're going to build a successful business, and at the appropriate time, we will find you liquidity."

• 38:10Guy Raz?

  But this was still a risky venture, because...

• 38:14Guy Raz?

  In order to make that an attractive investment, everybody involved had to imagine that this could be seven to 10 times bigger, which of course it would get to. But at that time, who, I mean, I think it was kind of, it was hard. I think it would have been hard for a lot of people to see that happening.

• 38:35Speaker 01

  There's no question it was risky. I mean, and at the same time, we were true believers. And I wouldn't have, you know, for myself, I had my life savings in it. I had personally guaranteed the loan, even though I only owned 10% of the business. And it was my job and career. So had it gone down, I would have lost everything, our house, my job, my savings, everything. And one of the largest outside investors said to me, when he heard that, he looked at me and said, I'm sorry to hear that, but that's very reassuring. That means to me that you're going to do everything in your power not to let this company go down. And I looked him straight in the eye and said, yes, I am.

• 39:18Speaker 01

  And, you know, the goal at the time, when you talk about how big it could be, no, we didn't envision it being a 25 or $50 million company. We were going to be very satisfied if it was self-sustaining in five or six million, could give a small dividend to the shareholders and make a difference for the community. If we could be employed, make a difference to this community at five to 10 million, hey, that would be great.

• 39:43Guy Raz?

  What's not clear to me is when you took over the assets, right? I mean, Shennard Equipment basically said, look, we're done with this. I mean, all these lawsuits and this and these insurance costs, it's not worth our time. Plus, we've got Patagonia. You basically say, hey, we think we can do something with this, which was an interesting gamble. But how are you going to deal with the insurance premiums? I mean, that alone was going to cost you hundreds of thousands of dollars a year.

• 40:11Speaker 01

  Yeah, it's a very good question. So one of the things I did was research this very carefully and during the process of negotiation and brought together the small climbing industry of America, our competitors in the United States and our largest retailer, REI at the time, held a series of meetings, found insurance experts and realized that if we as an industry got together and decided that let's have standards for quality assurance, standards for quality control, labeling standards, performance standards, if we do all that together, if we come together, we can survive. But if we don't do this, none of you guys are going to survive. We're not going to get insurance. You guys are all going to disappear.

• 40:56Speaker 01

  And through a series of meetings and work, the industry organized out of self-preservation and caring about the customer too. And we found a way to pool, have an insurance pool, create standards and find affordable insurance. But it changed the industry, created the first industry group, standards, everything was needed before I could open the doors of Black Diamond and secure my investors.

• 41:21Guy Raz?

  I guess sort of pretty soon after you guys acquired this, you must have been thinking, you know, Ventura is not the right place to be. Ventura is a wonderful place and it's a surf town and you know, you're in California. But I think that you started to think about moving and you would eventually make the decision to relocate to Park City, to Salt Lake City in Utah.

• 41:45Speaker 01

  Yeah.

• 41:46Guy Raz?

  And tell me how you convinced everybody to do that, to pull up and go to Salt Lake City from California?

• 41:56Speaker 01

  Yeah, I mean, we did a true systematic search of the West. At the time that I looked at Salt Lake Park City, there was no other outdoor nor ski company here. We would be the first, which made it a little bit...

• 42:10Speaker 01

  Create some anxiety for people to come here. But from the standpoint of what these environments had to offer, it was absolutely outstanding.

• 42:19Guy Raz?

  Yeah.

• 42:20Speaker 01

  So I went down to Salt Lake, contracted with an industrial commercial broker and said to him, this is who we are, this is what we need. Starts showing me properties, showed me a few of the possible likely candidates that an industrial company would want out by the airport, met with the owners of those buildings. They took one look at our balance sheet, what our history was, one-year-old, highly-leveraged company, and said, no way I'm going to do any tenant improvements for you to move into these buildings. You're too risky. And so at that moment, I decided, well, we don't really want to be out in an industrial park. I want to be up against the mountains on the east side of town, anyway. And told the broker, I said, you know what?

• 43:05Speaker 01

  Everything I've read is that Salt Lake City is on its knees economically. There's tons of bank-repelled properties. Let's spend the day and show me every bank-repelled strip mall, big box building, bank-owned, old industrial building, whatever you have on the east side of town. And as we started going around, I looked at one property after another and came across a property, a bank-repelled, non-operating Scandinavian shopping village on the backside, on the east side of town, that was owned by the bank. And thought, okay, this could be it. This place could be transformed into a cross between Toyota City and Disneyland for climbers,

• 43:48Speaker 01

  with our home, a place for a climbing gym, a retail store, a guide service, a restaurant for climbers. I turned it into the center of climbing for Utah.

• 43:58Guy Raz?

  So you move, the team moves out there, and you're now in Salt Lake. Tell me a little bit about, I mean, you had to hit 5 million a year. I think you did that, and a little bit better, but I think by 91, you had about 7 million in revenue. Were you profitable by that point?

• 44:26Speaker 01

  We were profitable on day one.

• 44:28Guy Raz?

  On day one?

• 44:29Speaker 01

  We had to be.

• 44:30Guy Raz?

  Yeah.

• 44:31Speaker 01

  We had to have positive cash flow to go down.

• 44:33Guy Raz?

  Because you had the debt, you had to service the debt. So even if you were doing 5 million in revenue, you were profitable.

• 44:42Speaker 01

  Sufficiently profitable to pay the debt.

• 44:45Guy Raz?

  But, but I have to imagine that for the first couple of years, salaries were pretty low.

• 44:49Speaker 01

  They were, yes, they were very low, though I think this is where having employee owners makes a difference, where people who are working for you and low salaries also have a piece of the action, knowing that at some point in time, that stock will hopefully appreciate and be worth something more.

• 45:08Guy Raz?

  So by the mid 90s, you guys had reached about $20 million in annual sales. What was driving that, those sales? What was, what was driving the growth?

• 45:20Speaker 01

  It was a combination of a very steady stream of truly innovative products in all of the categories that a climber, alpinist, or off-piece skier would need. And then I should also add that, you know, life is serendipitous as well, that at this moment, climbing, for a variety of reasons, including gear, just began to take off and grow very quickly.

• 45:45Guy Raz?

  Was there a reason why? Was there like a movie or something?

• 45:47Speaker 01

  So fundamentally, it was the advent of what is called sport climbing. Up until the late 1980s, the only climbing out there was what we call traditional climbing, where you place your own protection, meaning a peaton and not a spring-loaded camming device and ice screw into ice rock, et cetera. And so if you didn't do that, or you didn't do it correctly and you fell, you could get killed or badly hurt.

• 46:15Guy Raz?

  Yeah.

• 46:16Speaker 01

  Sport climbing developed in Europe in the 1980s where there's so much limestone. Difference about limestone is very compact. And they just decided that they were going to take industrial Bosch drills, battery-operated drills, drill into the rock and place expansion bolts. The risk factor is greatly reduced.

• 46:33Guy Raz?

  Just to, just to explain this to me and to people who are not climbers.

• 46:36Speaker 01

  Yeah.

• 46:37Guy Raz?

  This, these were permanent screws. These are permanent anchors that were screwed into the rock. And now you can see them all over the world. And this enabled other people, months, even years later, to use those same anchor points to safely climb a rock.

• 46:55Speaker 01

  Yeah, I mean, if you took a fall, it'd be a very short fall, right?

• 46:57Guy Raz?

  Right.

• 46:58Speaker 01

  So you knew that every six feet, every eight feet, there would be something to clip your rope through. So it really made it much more accessible to people.

• 47:07Guy Raz?

  Okay.

• 47:07Speaker 01

  And then, and just right behind that by a few years was the advent of climbing gyms, which were slow to first take off. The first one was in the very late 80s. And now today, climbing gyms are absolutely everywhere.

• 47:21Guy Raz?

  Yeah.

• 47:22Speaker 01

  So we were at the right place at the right time. And our first five years in business, after that first five plus million, we grew for our first five years, we were growing at a compounded rate of over 35%.

• 47:35Guy Raz?

  But I wonder whether by, you know, by the time you start to hit 20 million in revenue, are you thinking about expanding the appeal of what you do? I mean, in other words, are you starting to think, well, maybe, maybe we need to think about reaching a community just beyond climbers and skiers, you know, maybe a more of a sort of general outdoor enthusiasts?

• 48:03Speaker 01

  Not quite. For the first five years, we really didn't need to do a lot of planning.

• 48:08Guy Raz?

  Yeah.

• 48:08Speaker 01

  Meaning strategic planning. And it was after five or six years that we had our first very slow year. And it was at that point I organized company-wide strategic planning to talk exactly about this issue. And the first tier of this was really to look at, okay, we are focused on climbers, skiers, alpinists, but there's a larger swath of people who these products really appeal to. People who are not necessarily the hardcore climber, alpinist, off piece skier, but need the benefits of these products of a quality headlamp, gloves.

• 48:42Guy Raz?

  Headlamps. Headlamps. So these are for like backpackers, hikers, maybe?

• 48:47Speaker 01

  Well, hikers, backpackers, mechanics. I mean, the number of people who can use a headlamp is unlimited. They just didn't know it.

• 48:55Guy Raz?

  And when you introduced headlamps, I think in 98, did that have a significant impact?

• 49:01Speaker 01

  It's a game changer.

• 49:02Guy Raz?

  Wow.

• 49:03Speaker 01

  I mean, that category became a huge category. It proved to be far, far greater than we ever anticipated.

• 49:10Guy Raz?

  Because I remember getting a Black Diamond headlamp when I was a, I got one when I was a foreign correspondent. I would use it all the time to set up my satellites and, you know, and things like that. What, what made your headlamps different than, than the leading producer at that time?

• 49:25Speaker 01

  Yeah, the leading producer was coasting on its laurels. And right at this moment was when the first LEDs were being introduced to the market. There was no LED headlamps, but they were appearing in electronic devices.

• 49:38Guy Raz?

  Yeah.

• 49:38Speaker 01

  They were appearing as Christmas lights. And we looked at that, at their low energy consumption and thought, there is a potential future here. Secondly, no one was using at the moment chips to control the power usage. No one was taking the reflector and engineering the reflector to better focus the light or using higher quality bulbs. Those were the, the key ingredients and put together in a very intuitive, beautiful pack, lighter package.

• 50:08Guy Raz?

  All right, so the sport is kind of growing and, but the, the headlamps are really a game changer because now all of a sudden you're starting to presumably reach people who are not part of your traditional community.

• 50:20Speaker 01

  Yeah. And then we went on to do the same thing with trekking poles, which is a little bit more limited than say lighting, and also gloves and mittens.

• 50:30Guy Raz?

  But I read about a project that, that, that was less of a success. This was a, I guess it would be like a new line of backcountry ski boots. And you guys put about $5 million into developing this product, four years, huge project. But it, it, it, it didn't quite take off in the way you expected, if, if I'm not mistaken.

• 50:55Speaker 01

  I mean, it took off initially, it was a huge success initially, but there was a fundamental mistake made. And let me give you a metaphor because I worked in drilling rigs as a roughneck. And I remember once walking into a bar after a 12 hour shift with my fellow. Roughnecks in red desert and the driller, my boss, walks up to the first guy at the bar and flicks his hat. And a bunch of guys get up and one of them swings. And you realize, my metaphor is that if you're going to flick the hats of a bunch of big guys, they're not going to take it without swinging back at you.

• 51:33Guy Raz?

  When we come back in just a moment, what happens when the big guys take a swing at Black Diamond? Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 51:59Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2009 and Black Diamond has just made a risky investment in a brand new category, ski boots for backcountry skiing.

• 52:12Speaker 01

  We had some really good innovative ideas for those products in both fit and performance and flexibility and came up with three brilliant boots and brought them forth. And I thought that, okay, we're in this niche. The big Alpine companies don't seem to be very interested in this niche. It's growing nicely, slowly but steadily. This is going to be our niche and let's do it. Big tooling costs, but we'll get a long lifespan out of this tooling. So we enter it, launch the product. It gets amazing press, well received. We do initially very well. We go to the big European trade show where the booths are open. We have the product out there, the word's all over the place. And nonstop, we couldn't stop them.

• 52:55Speaker 01

  There come the guys from Solomon, Atomic, all the competitors, the R and D guys immediately come in with their cameras, putting their cameras inside the boots, looking at them and just copying them. And within no time, these companies that are doing, you know, tens of millions in ski boots, just look at this and realize this area is growing. We're going to get into this. So it became somewhat of what I'd call an arms race, meaning your tooling for plastic boots is expensive, let alone the R and D. And those ski companies could take what I call a... A medium expert boot modify it with components and turn it into a boot somewhat similar

• 53:39Speaker 01

  to ours at half the price. And so, within a number of years, within a decade, less than a decade, we were being overwhelmed by the products that the big ski boot companies were coming out with. And it just became clear that we can't compete against this. We're not in the big leagues.

• 53:56Guy Raz?

  Yeah.

• 53:57Speaker 01

  And I think the takeaway from that was, you know, as a business person, you have two fears in life as a niche player. You won't be successful with your investment, or you'll be too successful. If you're too successful, it becomes mainstream and bigger guys can get into it and out price you.

• 54:17Guy Raz?

  You guys, 20 years, on your 20th sort of year in business, 2009, you hit about 86 million in revenue. And 2010, it was you close a deal with an investor who acquires Black Diamond for $90 million.

• 54:37Speaker 01

  A little over.

• 54:39Guy Raz?

  A little over. And which is a nice return for everybody involved. But I imagine that, you know, 20 years is a long time at that point. And you're thinking, okay, this has been 20 intense 20 years of just, you know, just a lot of struggle, a lot of stress. And from your perspective, I imagine you thought, okay, I'm gonna, I'm gonna wind down. I'm gonna get out of here soon.

• 55:04Speaker 01

  Yeah. I recognize that I don't, I didn't own the company. I was a 10, 11% owner of the company. And I wanted this business to go on beyond me. And I felt it was a need for me to make a decision to change the ownership structure while I still had a number of years left in me to actually run it and not wait until I'm exhausted. Let's just figure out what to do. So I went to my board at this time. And said, I know numerous people have been asking about liquidity. Let's figure out, give me a year, I'd like to take a year and figure out what kind of transaction to do, how to do it, private equity, sell it to another company, take it public, I don't know, but I want to really research this.

• 55:49Speaker 01

  And the plan that we came across was to sell to a publicly traded, balance sheet-rich company, Clarus. And the deal we cut with Clarus was they would acquire us and on the day the deal closed, we would be the successor organization. It would be Black Diamond. And then we would, those who wanted to leave their money in the business could swap it for now, public shares, and those who wanted liquidity could get liquidity or a combination thereof. So it was, it seemed like a great plan, and I think it was a great plan.

• 56:26Guy Raz?

  And so this now becomes a publicly traded company. Black Diamond essentially becomes a publicly traded company at this point.

• 56:33Speaker 01

  Yeah. I made a commitment for at least three years. I signed a three-year contract that could be renewed to be the CEO of that company to move it forward.

• 56:47Guy Raz?

  So one of the things, and by the way, it's still a publicly traded company, I think under the Clarus name, right?

• 56:52Speaker 01

  Yeah.

• 56:53Guy Raz?

  Yeah. And this is 2009, and so you see Patagonia at this point is massive, and North Face is a huge brand, and Columbia, these huge outdoor brands, many of which did not begin as apparel brands, are just massive.

• 57:08Speaker 01

  Yeah.

• 57:09Guy Raz?

  You had done apparel earlier, but now you really, at this point, once this merger happened, really want to expand apparel to make that, as from what I gather, a very significant part of the business.

• 57:22Speaker 01

  Yes.

• 57:23Guy Raz?

  Can you explain the thinking behind that, why you wanted to pursue that?

• 57:28Speaker 01

  Sure. We had some ideas on what to do differently with apparel over what the North Face and Patagonia were doing, for example.

• 57:36Guy Raz?

  Yeah.

• 57:37Speaker 01

  Secondly, we really know the sports very well. So when it came down to things like Alpine pants and ski pants, the materials you need, the detailing of what you want, we feel what we felt we really knew that. We also saw opportunities for different fabrics or hybrids of fabrics to have in the product. And so those were modest. I mean, they're not revolutionary, the way many of our hardwood products have been, but we felt they were enough to launch the brand and to grow it out from that.

• 58:11Guy Raz?

  You stepped down from running the business in 20, I think, 2015, 2016, you transitioned out. It's a long time, 26 years, running the business. And, I mean, I imagine at that point, you were kind of done. I mean, you had put everything you had into the, into that, into building that business.

• 58:36Speaker 01

  I was done with the responsibility that comes with the daily, it's 24/7. It's not just daily, it's 24/7. That business was my life. And I had still my health, my passion for the sports was still very, very strong. And I wanted to do more to give back. I wanted to work to champion these last wild places where we ply our craft and to do the activities myself.

• 59:07Guy Raz?

  And do you still climb?

• 59:09Speaker 01

  Oh, yeah. I'm very, very active and more active than I've been since before I went to work for Yvonne.

• 59:15Guy Raz?

  And still do the same kind of level of risky climbs?

• 59:20Speaker 01

  Absolutely not.

• 59:22Speaker 01

  You know, it's, um, I don't have the, I can't dig as deep as I did in my twenties or thirties. You just don't have that ability. The key, if you're going to stay alive doing this activity when you're turning 70, is to make sure that you align your aspirations with an honest assessment of your abilities. I want to push, but I know, I know my limitations. So I don't want to do it to the point where I kill myself and I don't want to dig as deep as I did. But I enjoy it immensely and I'm still climbing today. I'm blessed.

• 59:57Guy Raz?

  When you think about the journey you took and, you know, going from, from working for Shannard Equipment to taking it over and, and building a new company and then, and then, you know, taking it to where it got to, I mean, how much, how much of that do you attribute to the work you put in? How much do you think has to do with just good fortune and luck?

• 1:00:17Speaker 01

  Let's face it, luck and serendipity plays a huge role in everybody's life. But to the luck itself, I would equate it to, it's probably 60% of hard work, tenacity, the teams that you put together, all of that, and 40% is the serendipity and the luck. I don't, I think that Black Diamond certainly was emblematic of turning every disaster into an incredible opportunity. But it was understanding how to do that. And I think it's still that is nothing ventured, nothing gained. In alpinism, we try great things and sometimes we fail. That's okay. So long as we don't die in the process.

• 1:01:01Guy Raz?

  That's Peter Metcalf, founder of Black Diamond Equipment. By the way, as Peter mentioned, at the age of almost 70, he is still climbing and loving it. This summer, he spent 10 days in the Swiss Alps and he just returned from a climbing trip in the Catskills, the very same area in upstate New York where he first fell in love with the sport more than 50 years ago.

• 1:01:27Guy Raz?

  Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyraz.com. This episode was produced by Josh Lash with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Alex Cheng. Our audio engineers were Robert Rodriguez and Maggie Luthar. Our production staff also includes Alex Cheng, Carla Estevez, J.C. Howard, Sam Paulson, Chris Messine, Devin Schwartz, Kerry Thompson, John Isabella, and Elaine Coats.

• 1:02:10Guy Raz?

  I'm Guy Raz, and you've been listening to How I Built This.