Osprey Packs: Mike Pfotenhauer

With a passion for design and a skill for sewing, Mike Pfotenhauer grew a bespoke backpack business into one of the world’s most popular outdoor brands. He got his start in the 1970’s, when it was hard to find a pack that wasn’t clunky and uncomfortable. Operating out of a little shop in Santa Cruz, California, Mike started making better-fitting packs for hikers, and—with no advertising except for a sign out front—began to get noticed. As demand for the packs grew, Mike was forced to shift production twice: first to a tiny town in Colorado, where Navajo craftsmen helped with the sewing; then, to a sprawling city in South East Asia, where Mike moved his family so he could stay close to the design process. It took more than 25 years, but Osprey eventually grew into a massive global brand, which was sold in 2021 for over 400 million dollars. 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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• 0:46Guy Raz?

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• 1:32Guy Raz?

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• 2:16Guy Raz?

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• 3:00Guy Raz?

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• 3:45Guy Raz?

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• 4:27Guy Raz?

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• 5:13Speaker 01

  We just simply could not deliver enough product on time. We just could not grow the manufacturing enough, simply because there were not enough skilled sewers. We've found it very difficult to find people to do that kind of work in Santa Cruz. It's pretty much a retirement or university town, and you just never knew when your employees were going to show up. You know, if the Grateful Dead came through town, they would be, they would be there, not at Osprey.

• 5:50Guy Raz?

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

• 6:01Guy Raz?

  I'm Guy Raz, and on the show today, how Mike Fotenauer's love of art, design, and the outdoors led him to launch a bespoke backpack brand, Osprey, which grew into one of the most popular backpacks in the world.

• 6:22Guy Raz?

  We live at a time when people feel a sense of urgency to succeed quickly. Just look at my inbox. Every single day, I'm inundated with ads for get-rich-quick schemes and pitches for young entrepreneurs who became rich just a year into launching their business. And to you, I say, congratulations. Except, that story, that narrative, the get-rich-quick-with-little-effort trope, it's extremely rare, and it's usually not that interesting or instructive. What is interesting is a get-rich-slow story, which is the one you're about to hear today. Because Mike Fotenauer's company took about

• 7:02Guy Raz?

  20 years just to hit $1 million in annual sales. And for a business with several employees, that's not a lot of revenue. Mike founded Osprey, and if you're a camper, or a hiker, or you drive a Subaru crossover vehicle, you can mute my voice for a moment. For the rest of you, Osprey are backpacks, widely considered to be among the best. Mike founded Osprey in 1974 in Santa Cruz, California, which is also partly where he grew up. Now, not surprisingly, Mike came from a family of hikers. And in the 70s, if you were really into hiking and camping, the off-the-shelf options for gear weren't

• 7:42Guy Raz?

  that great. In fact, lots of brands you know of today, Patagonia, North Face, Columbia, these companies were started by people who simply wanted better gear for their own adventures. And that's why Mike started making backpacks, to solve his problem of not being able to buy one that he liked. And eventually, other people wanted him to make their backpacks. And so for much of Osprey's first 25 years in business, it was a very, very small company. Mike Fotenauer never had ambitions to build a massive global brand. But something happened in the early 2000s that would change the trajectory of Osprey. The price of making the packs in the United States became unsustainable.

• 8:27Guy Raz?

  So reluctantly, like his competitors, Mike moved manufacturing to Asia. That shift, as you might imagine, transformed Osprey into an efficient and eventually huge backpack brand. In 2021, the company was acquired by Helen of Troy, a big consumer products company that also owns things like Hydro Flask and OXO Kitchen Tools. The price paid for Osprey? Over $400 million. And after 50 years running the business, Mike finally stepped away from the company. Mike Fotenauer was born in Portland, Oregon in the 1950s and 60s in a large family. Seven kids, in fact.

• 9:10Guy Raz?

  His dad was a Lutheran minister, and Mike can remember going to church every week with the whole family and not really connecting with the message.

• 9:20Speaker 01

  I think it was something I never quite understood. And I would sit in church and I would look around me and go, do these people believe what they're hearing? Actually, that's probably the place where I gravitated towards designing things in my head, just to keep awake and-

• 9:41Guy Raz?

  Pass the time.

• 9:41Speaker 01

  Pass the time. I mean, I'd probably heard several thousand sermons of my father's. They were fascinating on one level, but on another level, probably too much for a child.

• 9:55Guy Raz?

  Yeah. So, I mean, having seven kids in the family, I mean, how did your parents manage it? I mean, it's hard to imagine today, right? Raising a family of seven, you know, on a minister's income. I mean, people did it, people managed. But what do you remember? I mean, were you, you know, was money tight growing up?

• 10:14Speaker 01

  Money was very tight. We didn't really understand how tight it was. I think we probably went out to dinner maybe once a year.

• 10:26Speaker 01

  My father was born in Canada, grew up in Canada, and so every summer we would go up to Canada on vacation and

• 10:34Guy Raz?

  You would drive up there?

• 10:36Speaker 01

  Yeah, we had an old Ford Ranch wagon and we would fit, somehow we would fit nine of us. I recall I had the wheel well in the back of the car as my own space.

• 10:49Guy Raz?

  I, I read that, you know, from your early childhood, you were on, you were going on hikes with your family and, and we, we do, we hike every weekend with my kids, but for the first couple of years it was a forced march, like my kids really hated it. And now they, they they'll grudgingly admit that they like it and they'll go. But if, if I think if we left them to their own devices, they'd probably just want to play video games, but we do hike every weekend. Do you remember being a kid and not liking it?

• 11:16Speaker 01

  Oh, yeah. Actually, I think I was usually the guy in the back, trailing everyone else, kind of enjoying what I was looking at and wondering why everybody was hustling so fast, but continuously being behind and also wondering why was I doing this? What was the point of all this? But as I grew older, I definitely fell in love with backpacking and being in the outdoors.

• 11:44Guy Raz?

  And pitching tents and, you know, and all of you would do it? All the kids would be on these trips?

• 11:50Speaker 01

  Yeah, they would. We would drive long distances, stop late in the evening and pitch tents in the dark. Horrible old smelly canvas tents that my father must have had since the war. He was a Marine in the, in World War II, so he, he had a lot of gear from that old backpacks and things that he's continued to use for his whole life.

• 12:14Guy Raz?

  Yeah. Um, I heard a story about something that happened when you were a teenager, that you actually like went off on your own in the Sierras and got lost. What's, what's the story? What happened?

• 12:28Speaker 01

  That's, I forgot all about that. That's true. I, we were camping in the Sierras, the whole family, up at a lake at about 7,000 feet high. And we were camping and we were going to return back to Tahoe.

• 12:45Speaker 01

  And the drive to get to that lake was horrendous. It was perhaps a five hour drive along windy dirt roads. And I refused to go in the car. I wanted to have an adventure. So I announced that I was gonna hike there.

• 13:00Guy Raz?

  And meet them back where?

• 13:02Speaker 01

  Uh, in Tahoe City.

• 13:04Guy Raz?

  In Tahoe City. They were gonna drive back. You did not want to drive back. You were gonna

• 13:07Speaker 01

  Right.

• 13:07Guy Raz?

  hike back on your own.

• 13:08Speaker 01

  Yes.

• 13:09Guy Raz?

  And did your parents, were they cool with that?

• 13:12Speaker 01

  They argued a bit about it, but my father prevailed and said, go, go off, do it. And I had a ridiculous map, I think about perhaps a state of California map.

• 13:27Speaker 01

  And somewhere along the trail, without paying attention, I lost the trail. It just sort of petered out and I, I was lost. And it was growing dark and I scrambled through Manzanita brush. And for several hours, came out exhausted into a clearing, threw my sleeping bag down and fell asleep and woke up and found that I was on the trail.

• 13:55Guy Raz?

  What, weren't you scared?

• 13:56Speaker 01

  I was a little bit scared, but I, at the same time, I kind of appreciated the challenge of trying to navigate the terrain. I, I did see some Basque shepherds up in those mountains and knew that I could probably get help if I needed it.

• 14:12Guy Raz?

  Yeah. Yeah. This is the other thing that's, I just just learned about this, that that whole part of Nevada, that sort of border area of Nevada, California, around Lake Tahoe, there's a massive community of Basques who grew, who were shepherds, who raised sheep.

• 14:26Speaker 01

  Yes. Yeah, they were, I could see them in the distance.

• 14:30Guy Raz?

  And I guess when you were around like middle school age, your family ended up moving to California, to actually to Santa Cruz. And then for college, you stayed there. You went to UC Santa Cruz and, and I, and I guess majoring in like art, photography, basically?

• 14:50Speaker 01

  Yeah. A lot of photography and some etching, drawing and printmaking, which was something I was always quite interested in. And I had my own darkroom anyway, and I It allowed me to learn more about that art. To this day, I've always loved to do art. I still do it.

• 15:10Guy Raz?

  Yeah. Tell me about, so while you're in college, right? I guess you were also kind of got into sewing your own backpacks. Like this is a time, because this is the early 70s. This is a time when, you know, obviously, we think of outdoor gear today, just didn't, it wasn't really a huge industry, right? Like, a lot of people made their own stuff.

• 15:32Speaker 01

  They did. There were kits you could buy that would send you all the cut parts with instructions. Or you could learn how to do it yourself. My mother taught me how to sew. And I have always built my own gear. It's, I don't know, it's a, I guess it's a feeling that if I'm out in the wilderness, I know what I'm using, I can rely on it, I know what's right and what's wrong with it. And I love making things. Even built my own bicycles, braising and putting those together. So it's just something I'm always doing. I feel more comfortable when I am surrounded in my environment by things I've made.

• 16:16Guy Raz?

  And what were you, I mean, I'm assuming like, early 70s, this is like, the technology obviously has changed a lot, which we'll talk about, but you were making, what? You were making backpacks out of like canvas, or cotton material, or maybe polyester?

• 16:32Speaker 01

  No, nylon fabrics. They were available back then.

• 16:36Guy Raz?

  Nylon, okay. So you would make this stuff for yourself, originally for yourself, right? You were making this for yourself. But I guess at some point, what happened? Did somebody ask you to make some stuff for them?

• 16:49Speaker 01

  Yeah, to make money, I would occasionally build things for other people, which led eventually to it dawning on me that I could start a business that way. I was working in. A restaurant at the university and I had done some work in restaurants to make money as a young person and I quickly decided that I really didn't want to work for anyone else. I wanted to start my own company and I gravitated towards what I knew how to do.

• 17:22Guy Raz?

  But this was not like, when you say you wanted to build your own company, you did not have ambitions to build a massive company. I'm assuming you wanted to just have a storefront where you'd make backpacks for people or?

• 17:33Speaker 01

  That's right.

• 17:34Guy Raz?

  Yeah.

• 17:35Speaker 01

  I opened a retail shop in downtown Santa Cruz and started out by repairing product for people and custom making gear for them for their, whatever trip they were going on or activity.

• 17:50Guy Raz?

  So this is 1974, I think, when you opened the shop and it was originally called Santa Cruz Recreational Packs and you dropped out, I think you dropped out of school. You figured that this is just kind of pointless. I'm not, this is not what I want to do. I want to just get on with my life.

• 18:07Speaker 01

  Well, I realized that making art was going to be a tough proposition to make a living doing and I think I also felt like I needed to contribute by making something functional, let's say, rather than simply artistic, something more practical.

• 18:28Guy Raz?

  Yeah. I'm just curious, was it, I mean, today you think, wow, opening a store, you got to get a three to 10 year lease and you got to put like all these deposits down and was it complicated like that when you did it?

• 18:41Speaker 01

  It was actually very simple. I started the company with my girlfriend, Lori White, and we decided to find a location. We looked in the paper. There was an ad from, I think it was a lumber company in downtown Santa Cruz that said they had a house for rent. I wrote them a letter, got a reply very quickly. The rent was $150 a month for a retail house and shop. Things were much easier to, back in those days, it was affordable to start a business.

• 19:17Guy Raz?

  How did people know about it? Was it in a busy part of town? Was it on a street that people passed by? Did you put a sign up in the window? How did anyone even know that you existed?

• 19:27Speaker 01

  It was on a main street, a thoroughfare from the highway into downtown. I put a sign up. I never spent any money on advertising until perhaps 20 years later. And I had an industrial sewing machine. I borrowed $1,000 from my parents. And they would, people would come in and either they would bring their gear that needed repair, or they would explain to me what they were doing, and I would draw out a design and build that product for them. Probably like a five-week waitlist.

• 20:02Guy Raz?

  Wow. And just backpacks?

• 20:04Speaker 01

  Well, backpacks, but I did other strange custom things. For example, I recall once making a harness case for a climber who was rescuing Peregrine Falcon eggs.

• 20:19Guy Raz?

  Wow.

• 20:20Speaker 01

  Off of one of the walls in Yosemite. And I would do climbing gear for climbers. They kind of liked the fact that I throw in a lot of extra stitching where they had concerns.

• 20:32Guy Raz?

  So, really, you were an artisan. I mean, you were like a 19th century European artisan, like, you know, a cobbler, or, right? I mean, you were a maker. That's what you were doing.

• 20:42Speaker 01

  Yeah, that's right.

• 20:43Guy Raz?

  Shoes, you'd be making shoes. You were making bags.

• 20:46Speaker 01

  I was. I was pretty far from being a businessman. I never paid much attention to the sides of a business that you should, finance and sales and marketing. I've never really been very much interested in that. And I've surrounded myself with people that did that much better than I ever could.

• 21:05Guy Raz?

  But you were really not running a scalable business. It was you and your girlfriend, and the two of you were making one bag at a time, and presumably would take a while to make a bag.

• 21:18Speaker 01

  It would take a while. I could sew an internal frame pack in maybe five hours of work.

• 21:23Guy Raz?

  Hmm.

• 21:24Speaker 01

  And that back in those days, that was a $75 product. Now it's about 300.

• 21:30Guy Raz?

  Yeah. So, given that it was hard to scale that, it was just the two of you working in that shop. How, I mean, the amount of money you could make was fairly limited.

• 21:38Speaker 01

  It was enough to survive on. I suppose that's all I really cared about at that time. Being 20, 21 years old, I didn't have any huge ambitions. I was able to put enough gas into the car to go up to the Sierras. And it was, I could work at my own hours. I would get up just before 10 o'clock when the shop would open. And I would work, do a lot of my work late in the evening.

• 22:03Guy Raz?

  Yeah.

• 22:04Speaker 01

  It was a great life. I feel bad for people now that want to do something like that. And I just think it's not quite possible anymore.

• 22:13Guy Raz?

  Yeah, just because the cost of doing business is so much higher.

• 22:15Speaker 01

  Yeah.

• 22:16Guy Raz?

  And did you, and so imagine, you know, in your mid 20s, you're thinking, this is great. I mean, this is what I do. I've got this store and I'm happy doing it. And this is what my life is gonna be.

• 22:29Speaker 01

  That's true. I did that sort of work for well over 10 years. I'd say from 1974 to, I got married in 1984 to Diane, my wife.

• 22:47Guy Raz?

  Right.

• 22:48Speaker 01

  She joined the business. She came over to work for, with myself and my girlfriend at the time, before I had a girlfriend from earlier. And we grew the business. And at some point, she said, I think we need to move to the next level. And I

• 23:09Speaker 01

  That involved borrowing money, which has always been a difficult thing for me to do. But I agreed. This was in around 1986.

• 23:20Guy Raz?

  So we've jumped 10 years, but I want to kind of just understand that 10-year period for a moment because you start this in 74 and it really is a custom backpack and repair shop in Santa Cruz. And at some point, you changed the name to Osprey. And it's a bird, I know that. Tell me the name, how you came up with that name.

• 23:38Speaker 01

  I chose that name for one reason. A lot of backpack companies out there were named after the founder or the owner of the company. If you look at how my name's spelled, it's pretty much unpronounceable and no one could spell it.

• 23:55Guy Raz?

  Yeah.

• 23:56Speaker 01

  On the other hand, I really didn't want to name a company after myself. I felt like it's, I just didn't want that burden of seeing my name out there on product. I had seen Osprey in the wild, backpacking with my father and my brothers. I believe it was in the Little Grand Canyon of Wyoming and it was during an electrical storm and our hair was standing on end and these three or four Osprey came zooming up over the edge of the canyon and it was just such a memorable thing. And I just chose to use that name.

• 24:31Guy Raz?

  All right. So you've got this business going and at some point Diane joins you as your third employee.

• 24:40Speaker 01

  Well, actually around that time when we decided to expand, there was a fourth person, a woman named Gabriela Salinas. And the four of us decided to go into wholesaling.

• 24:53Guy Raz?

  How did that happen? I mean, because for 10 years, you were really a repair shop and a custom store and presumably you were getting more work, right? You had to hire one person than another person.

• 25:06Speaker 01

  Yes.

• 25:07Guy Raz?

  So what happened to get, to get you to sort of say, let's go and expand even further if, you know, it seemed like things were moving, moving along just fine?

• 25:20Speaker 01

  Well, we had four mouths to feed. We didn't really have enough business on the level that we were

• 25:27Guy Raz?

  You mean the four of you, the four people working there?

• 25:29Speaker 01

  The four partners, yes.

• 25:29Guy Raz?

  Yeah.

• 25:31Speaker 01

  We were not making enough money. I think at that time, 1986, we figured we were probably making about $3 an hour.

• 25:39Guy Raz?

  Right.

• 25:40Speaker 01

  And it was not enough to live on. And we realized that we needed to grow the company. We needed to move into the wholesale realm where we could pick up a much greater customer base. And we were extremely naive about what we were doing. Moving from retail to wholesale involves a pretty radical change in your ability to manufacture product.

• 26:04Guy Raz?

  Yeah.

• 26:04Speaker 01

  In a way that's profitable. But we didn't know. We just decided to do it. We went to trade shows and we, I learned also from repair, what works and what doesn't work, and what's going to last out in the field, and what will fail. So you put all those things together and start talking to, when we hired sales reps, you learn from them on what the market needs. So it's just a learning process.

• 26:33Guy Raz?

  So you, like roughly around 1984, I guess, you decide to get into wholesale. And what did that mean? I mean, were there wholesalers in Santa Cruz that you could, you know, make a bunch of backpacks for and have them sell them? Where were you going to go find outlets to work with?

• 26:55Speaker 01

  Well, the first thing that it entailed was getting a loan.

• 26:59Guy Raz?

  Yeah.

• 27:00Speaker 01

  I think at the time, this is actually 1986, we borrowed $35,000 from a local community credit union. And then we had to find a location to start a larger scale production.

• 27:14Guy Raz?

  Yeah. And this was all done by hand? This is all going to be done by hand?

• 27:17Speaker 01

  Yes.

• 27:17Guy Raz?

  People making this money? Okay.

• 27:19Speaker 01

  Yeah, with industrial machinery. And then to tap into the wholesale market, I hit the road with my wife. We would drive from one retail mountaineering shop to another and show our product line. And there were some shops that took a chance on us. I think our first order came in Santa Barbara. We thought it was a big order. It was only $800. And it took us like three or four nights and days of sewing.

• 27:52Speaker 01

  To put that order together, but we delivered it on time.

• 27:55Guy Raz?

  And the retail, I mean, retail price for each of those bags was about 75 bucks. So, but I'm assuming you weren't delivering 10 bags. You were probably delivering many more than that because you were gonna, you couldn't sell it to the retailer for $75. You had to sell it to them at wholesale price.

• 28:11Speaker 01

  Right. I would say by that time, 1986, a backpack was more like maybe 150, which meant we would sell it to them for roughly around 70, $75.

• 28:23Guy Raz?

  And it was just the four of you guys sewing these bags?

• 28:27Speaker 01

  Initially, and then we've, we picked up a small crew of sewers and some people who would assemble the packs.

• 28:35Guy Raz?

  And you had a little, you had a sort of a factory space in Santa Cruz, right? Like 10,000 square feet or 5,000 square feet?

• 28:43Speaker 01

  Actually, I think it was 2,500 square feet.

• 28:45Guy Raz?

  2,500, so it's very small. I mean, you had a $35,000 loan. Were you, I mean, once you transitioned to working with wholesalers, did your business start to boom or did it actually become harder to make money?

• 29:01Speaker 01

  Well, initially it was harder. We just simply could not deliver enough product on time, simply because there were not enough skilled sewers. We've found it very difficult to find people to do that kind of work in Santa Cruz. It's pretty much a retirement or university town and you just never knew when your employees were going to show up. You know, if the Grateful Dead came through town, they would be, they would be there, not, not at Osprey.

• 29:33Guy Raz?

  Yeah, right.

• 29:34Speaker 01

  Or if the surf was up or the wind for windsurfing or whatever, it's, you just didn't know.

• 29:41Guy Raz?

  When we come back in just a moment, how Mike moves Osprey to a place where the Grateful Dead has probably never played. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 29:59Guy Raz?

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• 32:11Guy Raz?

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• 33:36Guy Raz?

  Hey, welcome back to How I Built This. So it's around 1990, and Osprey is having trouble meeting growing demand. And that's a good problem to have, but it means Mike has to find more workers and a larger factory. And he eventually finds them both in rural Colorado.

• 33:54Speaker 01

  I had always wanted to check out Telluride, and I got a call from Economic Development in Cortez, Colorado, in the Four Corners area.

• 34:06Speaker 01

  And I liked the town of Delores, which is 10 miles above Cortez. And there was an old building in town. I kind of was looking for a place that we could afford to rent that was large enough. This building was, I think, 7,500 square feet. The economic development guy had no idea what was going on in that building. We knocked on the door and low and behold, inside was a contract group that was building for Gore-Tex. They were kind of doing top secret work on, I think NASA space suits. And they told us that that was their last day in operation.

• 34:49Speaker 01

  And that the building would be available and that there were 35 skilled sewers that needed work.

• 34:55Guy Raz?

  Wow.

• 34:56Speaker 01

  In addition to that, there were several hundred Navajo sewers down in Cortez, 10 miles to the south, that also were out of work. So we decided this is the place to move Osprey.

• 35:08Guy Raz?

  This is a place in, it's quite remote. I mean, it's in the, what, the southwestern corner of Colorado and it's, it's very far from major cities like Albuquerque or Denver or Salt Lake City or Las Vegas. It's far. I mean, it's not like.

• 35:25Speaker 01

  It's far.

• 35:26Guy Raz?

  It's not like a 20 minute drive. It's like four hours to the nearest big city.

• 35:29Speaker 01

  That's right. Albuquerque is the closest, four and a half hours.

• 35:32Guy Raz?

  So, I mean, was any part of you a little concerned about building your business in such a remote place without access to key markets and distribution networks and, you know, without a whole lot of infrastructure? Because I looked at the map, I mean, Delores is, even now, it's tiny. It's a tiny place. What's the population, like 1,000 or 2,000?

• 35:56Speaker 01

  It's 1,000, 900 or 1,000 people. It hasn't grown since those days.

• 36:00Guy Raz?

  Was any part of you concerned about that?

• 36:03Speaker 01

  Well, I would have to say that's where the benefits of naivety come in.

• 36:09Speaker 01

  I didn't really know what I was getting into. I knew that it was possible to ship out of Dolores using UPS or FedEx.

• 36:16Guy Raz?

  Right.

• 36:17Speaker 01

  But you have to remember that back in 1990, it was modern technology, data systems, et cetera, communication systems were still quite primitive.

• 36:29Guy Raz?

  Yeah.

• 36:30Speaker 01

  And in fact, we would go to the library to do our faxing. And the simple fact that there were so many skilled unemployed sewers was really what was the most important thing to us. And they were primarily Navajo. Many of them had been sewing for many years.

• 36:50Guy Raz?

  Right. So at that point, and it was, and you had the money to do it. You had a little bit of money and it wasn't going to cost you a lot. So, so you decide to settle down in Dolores, Colorado and start making backpacks there. And who were your, who were your customers? I mean, again, the small retailers around the country?

• 37:10Speaker 01

  Small retailers that I would pick up at trade shows. And that word, we didn't advertise, the word of mouth would go around that we had unique designs. Nevertheless, it was still difficult to meet demand. It was, the demand was growing and we couldn't ramp up very quickly. So it was super challenging. And we didn't have a lot of money. I recall when we moved from California, we had $5,000 in receivables.

• 37:39Guy Raz?

  Hmm. That was all, that were all your orders or all the money that was owed to you at that time?

• 37:44Speaker 01

  Yeah.

• 37:45Guy Raz?

  That's not a lot. Yeah.

• 37:46Speaker 01

  Yeah, I had, Lori and Gabriella had stayed in California, so I paid them off what I could. And it was Diane and I and my son Rory who moved to Colorado.

• 37:59Guy Raz?

  How old was your son at the time?

• 38:01Speaker 01

  See, he was about three years old.

• 38:04Guy Raz?

  Wow. Right. Okay. So you're still very small. I mean, this is a, a tiny, tiny business. And you mentioned this, that they were unique, they had unique designs. What was unique about them? I mean, I think of an Osprey backpack today and I think of that like, that top, very sort of, you know, it's very recognizable. But what, what was unique about it in 1990? One or 90 when you moved to Colorado.

• 38:30Speaker 01

  Well, I think I focused on anatomic design. Having been an artist, I understood a bit about how the body worked. And I certainly spent a lot of time drawing naked people. I learned that in in college. So I understood the shape and form of the body. And I spent a lot of design time trying to focus on how to make these packs fit comfortably. And how to transmit the load from the pack to your body comfortably. For example, how you wear a hip belt and how that pack sits on your body without causing you a lot of discomfort. And also a lot on function. You're, I think you were talking about the lid, the top pocket of a

• 39:15Guy Raz?

  Yeah.

• 39:15Speaker 01

  Pack.

• 39:15Guy Raz?

  The lid, right.

• 39:16Speaker 01

  We figured out how to turn that into a fanny pack. You know, if you're in a, at a base camp, you could take your top lid off and go on a day hike with a fanny pack. Features like that that made us unique.

• 39:31Guy Raz?

  All right, so you're now in Dolores, Colorado. Tiny town, starting from scratch there. And it's you and your wife running this thing. And you've got some employees. How many people were you able to hire?

• 39:47Speaker 01

  Well, I think initially I hired five. You know, we just picked it up from day to day. We would hire more and more and they were, they were primarily Navajo. And in the meantime, I was covering all the other parts of the business, the designing, patterning, payroll, HR.

• 40:08Guy Raz?

  Yeah.

• 40:09Speaker 01

  Purchasing, quality control and overseeing the production.

• 40:13Guy Raz?

  And going to trade shows to presume, because that was probably the best channel you had to find new customers.

• 40:19Speaker 01

  Yeah, I was doing so many jobs that the design was just a small part of it. And that always frustrated me because that's what I love to do. I would find myself driving to a trade show and pretty much writing up the price sheet on the steering wheel of my car as I'm driving. Just to complete all the details that you have to have ready to to present at a trade show. Of course, nowadays, it's far more professional.

• 40:47Guy Raz?

  Mike, I'm wondering, how did you know that your designs were the right ones? I mean, were you doing any surveys? Were you getting feedback from customers? Or was it just your intuition and instinct, like what you liked?

• 41:01Speaker 01

  It's a combination of all of that. I we would hire sales reps. They would give you feedback on what worked and what didn't, what the retailers needed. We certainly paid attention to that. I also would go out backpacking and we would bring people in, like all of our sales reps, and do our sales meetings out in the canyons and test the backpacks. So and then, of course, you look at the competition and see what they're doing. But there was never I never was happy with what I was making. I knew I could do it better. And so it was just actually, I got criticized often for changing designs.

• 41:40Speaker 01

  Retailers don't like that. I I didn't really spend enough time understanding where they were coming from. And I would inflict them with new designs, maybe every year, and that would obsolete their inventories. But I to me, it was absolutely important that I move forward and and build a better product constantly.

• 42:02Guy Raz?

  Yeah. You know, Mike, I keep thinking about you doing all this in this tiny little town in Colorado with this this community of Navajo sewers making your backpacks. I mean, do you do you remember any any stories from that time that that just made you realize like what an extraordinary like out of the way place that you you chose them to start this business?

• 42:25Speaker 01

  Yeah, I mean, I'm not even sure I can like doing peyote ceremonies with the Navajo is one example.

• 42:33Guy Raz?

  Oh, tell me that story.

• 42:34Speaker 01

  Really? Okay. This happened here in Cortez during our the period where we were working with the Navajo in production. And one day, one of the guys, Otis Williams, who was sort of in charge of our quality control and our assembly, and was also a Navajo medicine man, came into my office and said, Mike, we need you to do a ceremony. And I kind of facetiously said to him, well, I'll do it as long as I get some peyote. And I was really only joking. And he had a serious look on his face and said, well, of course.

• 43:15Speaker 01

  And the story unfolded that someone had put a curse on our factory. Huh. An ex-employee had gone and worked with somebody in the black magic community of the Navajos and had planted a Kachina doll, which was, according to Otis and the people he was with, was active in our factory and was disrupting communication and was in extreme danger. And we needed to do a ceremony to cleanse and to eliminate that risk. And I thought, well, I, a hard thing for me to grasp,

• 43:58Speaker 01

  but I can tell that these people totally believe this. So I, my sister, who had worked with me at that time, and another guy, we went down to the reservation and to this guy's place. And we did a ceremony there with about maybe 20 Navajo. They had brought in a medicine man, a special medicine man, who started bringing out all these relics and arrowheads and started grinding up something. It was dark in there. I couldn't really exactly see what he was doing. But he stood up and put a large mouthful of this paste in my mouth

• 44:42Speaker 01

  and then proceeded for the whole night. We were under the influence of peyote. And the medicine man did chanting and a very powerful night. They were trying to expel this force that had entered our factory. And my sister and Eric, the guy that was with me, were having visions. And I was trying to maintain because I was kind of the face of the company and having a difficult time.

• 45:12Speaker 01

  It went on all night and

• 45:14Guy Raz?

  Wow.

• 45:15Speaker 01

  Funny thing is that in the morning, when we got up to leave, we were charged with the task of going to locate this Kachina doll, which we eventually did. I gave it to Otis, our medicine man, and he took it up into the mountains and did a ceremony and cleansed it and proclaimed that our factory was now back in running order. And we've had a number of experiences like that that I could go on and on, but one thing I've learned is working with other cultures, you you really gain a lot of understanding the more time you spend with them and they add so much to how you see things. It's been a very key part of our company.

• 45:59Guy Raz?

  Yeah, I mean, it is. It is amazing. And you would actually go through another pretty significant cultural shift, like a few years later in the early 2000s, when you decided to move the company out of Cortez to to Asia, eventually to Vietnam, which I think you were reluctant to do at first, right?

• 46:19Speaker 01

  Yeah, I was pretty resistant to that idea.

• 46:22Guy Raz?

  Yeah.

• 46:22Speaker 01

  Because I wanted to keep all the people we had employed. We had about 100 people, I think, at that time, working in Cortez. And I felt very

• 46:36Speaker 01

  responsible for them, of course. And it just, I could not fathom picking up and moving the whole operation.

• 46:45Guy Raz?

  So what convinced you that you had to do that?

• 46:49Speaker 01

  Well, I think most, if not all of our competition, had moved offshore. And our competition would get better and better at it. I mean, the fact that they could buy their product made at half the price and not suffer any loss of quality, in fact, perhaps get a better product, made the decision not that difficult when you looked it straight in the face.

• 47:14Guy Raz?

  Yeah.

• 47:15Speaker 01

  And the ability to find more skilled workers was was becoming more difficult. I think you could say that our skilled sewing population was starting to age out. Young kids were not picking up that skill. And our workforce was growing old and maybe tired. And we would have to turn down some great partners because we couldn't meet demand. For example, REI was approaching us every year to pick up our product. And we always had to say, no, we can't meet that demand. And they were baffled. They, you know, they were almost angry about that because they, there was a demand growing

• 47:59Speaker 01

  for Osprey within their retail chain. And I'd go up and talk to them, but I, I'd just say, we cannot fulfill orders.

• 48:08Guy Raz?

  Yeah.

• 48:09Speaker 01

  You know, after you do that enough times, you realize this can't go on. We've got to do what everyone else is doing and go offshore. And I took a trip to Korea. A friend of mine took me over there who knew the industry and introduced me to sewing factories over there. And they made counter samples and I was blown away by the quality of their workmanship. And the price was astounding. It was pretty much the equivalent of what we were paying for materials alone.

• 48:39Guy Raz?

  Wow.

• 48:40Speaker 01

  And you have to understand that the raw material supply chain was drying up in the U.S. It was moving offshore so that the raw materials that you needed to make this were becoming less and less available because all the other competitors had already moved offshore and were having everything made over there. And it was like so obvious that this was a wave of potential that we couldn't deny and that no one else was either.

• 49:11Guy Raz?

  Yeah. And, and when you made that decision, I mean, it sounds like you kind of agonized over it and obviously because of the, the workers that you had, you know, supported in, in Colorado since, at that point, since you'd moved there in 1990, so it'd been 11 years or 10 years since you'd been there. Did you feel, I don't know, maybe guilt isn't the right word, but just, or maybe that is the right word.

• 49:34Speaker 01

  No, that's, that's the right word. I felt guilty about doing that. It just was an inevitable economic move.

• 49:43Guy Raz?

  Yeah.

• 49:44Speaker 01

  We moved production to a Korean, several, three different Korean manufacturers. It was either that or shut down, I think.

• 49:54Guy Raz?

  When we come back in just a moment, why Mike decides to move his factory and his family from a town of 800 people to a city of 8 million. Stay with us. You're listening to How I Built This.

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• 51:44Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's the early 2000s and Mike is still running Osprey out of Cortez, Colorado, but he's moved the production of the backpacks to Korea. And then he decides to move again, this time to Vietnam.

• 52:02Speaker 01

  So I took a trip down to Ho Chi Minh, really enjoyed being in Vietnam more than Korea. It just seemed like a warmer, friendlier place. And Vietnam prices, FOB prices, were lower.

• 52:18Speaker 01

  And that, once the US had normalized trade, which I believe they did in 2001, that's when we decided to move up production to Vietnam.

• 52:28Guy Raz?

  So what did that mean for sort of the home front in Colorado? Were you doing all the designs in Colorado and faxing them to a factory in Vietnam? I mean, how was that working?

• 52:39Speaker 01

  Yeah, I was doing design work in Colorado. We were keeping our sales and marketing. Those people continued to work in Cortez. Once we started production in Asia, we were quickly able to grow. We were able to pick up REI. The orders started pouring in and we were running out of places to store our product. We were filling up all the empty buildings in town. We even took over the old Walmart building and filled that to the brim. And we're paying a fortune to ship that out. You know, at some point, we got wise and moved all of our fulfillment to Utah,

• 53:23Speaker 01

  where there was a train service, which saved us a lot of money.

• 53:27Guy Raz?

  What, I mean, but what happens like, so you've got the production happening in Vietnam. These are contract factories. Did you have somebody on the ground there at all times? Or, I mean, because how would you communicate what you wanted or what you didn't want?

• 53:42Speaker 01

  I was traveling there probably four times a year, spending about at least a month each time. So after doing that for a couple of years and not having a very happy spouse because I was gone so much.

• 53:59Guy Raz?

  Yeah.

• 54:00Speaker 01

  And also realizing that my kids were growing up in a tiny town and they were perhaps becoming susceptible to the dangers of drinking and other things that can happen when you're bored and there's nothing to do.

• 54:16Guy Raz?

  And how many kids did you have by that point?

• 54:18Speaker 01

  Two kids, Rory and Amelia.

• 54:20Guy Raz?

  Two kids, yeah.

• 54:22Speaker 01

  So yeah, we decided, I talked to my wife and I was, I said, well, you don't want me traveling there, why don't we just move there? And I was shocked when she said, okay.

• 54:30Guy Raz?

  So you moved to Vietnam, to, I think to Ho Chi Minh City in 2003. And you're going from a place, a town of a thou- under a thousand people to what, 10 million? I don't know how many people live in Ho Chi Minh City, but a lot of people.

• 54:45Speaker 01

  We went from a town of 800 to a town of 8 million.

• 54:48Guy Raz?

  Wow. Oh, what was that like?

• 54:51Speaker 01

  I loved it. I loved the culture shock, the complete change in the, not only the climate, but in the, the people, the language, the food was outstanding. And having, it freed me up to focus much more on design because so many headaches disappeared when I was able to move my production over there.

• 55:15Guy Raz?

  It's kind of remarkable because this is roughly almost 30 years at that point, since the, when you started this business, right? Which began in Santa Cruz Backpacks.

• 55:28Guy Raz?

  And you literally went to Vietnam and, but that move really, it sounds like it really allowed Osprey to scale in a big way. Because now you could manufacture at scale and you could fulfill massive orders for big retailers.

• 55:45Speaker 01

  It was a miracle. And it, it allowed me to go back to pure design work without all the trouble and headaches of running production and dealing with HR issues and...

• 56:00Guy Raz?

  Where did the design happen?

• 56:02Speaker 01

  Well, the design happened still with myself and one or two people that we had back in Colorado. The thing that happened when production moved to offshore with a lot of companies is that they also forfeited their design to those companies, to those manufacturers. I called it the Vietnam melting pot of design. It's this forfeiture of brands' unique designs.

• 56:32Speaker 01

  Over to the factories. And consequently, I decided really early on to continue to do our own prototyping and design, sample making within our own facility and not allow the factories to do that so that we could maintain our identity and our signature product.

• 56:52Guy Raz?

  What were you trying to, I mean, there are obvious, you know, there are obvious competitors, right? Patagonia, North Face, REI makes backpacks, you know, a bunch of different backpack brands. What, I mean, were you looking at your competitors to figure out what they were doing that what you could do differently? Or like, how are you thinking about your products and why somebody would would choose them over a competitor?

• 57:19Speaker 01

  Well, I think for one thing, I didn't look at our competition much. If I did, it was simply to make sure I wasn't accidentally doing something that they were doing, that they had already done already. I had so many ideas on product and how to evolve it that I never was at a loss to move on to the next idea and concept. I didn't really borrow any concepts. I mean, occasionally you'd run into some idea that somebody else had done that was undeniably the only way to do it properly. And everybody followed. But in general, it was, it was, it was, we were trying to do our own thing in our own little space.

• 58:04Guy Raz?

  What, you, you stayed in Vietnam, I think about a little over three and a half years, close to four years, maybe?

• 58:09Speaker 01

  Four years, yeah.

• 58:11Guy Raz?

  And you come back to the US in 2007. Was there a reason why? Was it just, you sort of had your, you felt like the operation there was in good shape and it didn't need you to be there anymore?

• 58:23Speaker 01

  Actually, I think the strongest reason I came back was that, well, I had promised my wife that we would be there for two years and it had extended to four. She kind of just said, it's time to head back. And I said, okay, it's, you get to pick where we live now. And we moved back to the Bay Area.

• 58:42Guy Raz?

  So you had the operation still in Cortez, Colorado. And then you moved to the Bay Area to open up a new, like a design office here, I guess?

• 58:52Speaker 01

  Right, in Mill Valley.

• 58:53Guy Raz?

  Right.

• 58:54Speaker 01

  I was able to focus on the design in California. It was easier for me to continue traveling back and forth to Vietnam based out of San Francisco.

• 59:04Guy Raz?

  Right. Let me ask you about IP, about intellectual property, right? Because it's, obviously, you can, you can design something and patent it in your, in your industry, but it's, it's pretty easy to copy it, too, to get away with it. And there's, I mean, there are plenty of products, probably, that if I went on Amazon today, that really are trying to look like Osprey. And that's probably, probably been going on for a long time. Did you ever worry about rip offs and knock offs?

• 59:37Speaker 01

  I never worried too much about it. From the beginning, I had a negative attitude about intellectual property and patenting. I always felt like what really matters the most is making it better and not being frozen and stuck with a patent. So for many, many years, I refused to patent anything. Sometimes I regret that because a lot of those ideas and concepts were quickly copied in the industry and became a standard. But as the company grew, I certainly ran into interference within the company on that theory. And we have patented a few things that.

• 1:00:24Speaker 01

  We felt were important and necessary.

• 1:00:28Guy Raz?

  What are some things that you didn't patent that were ended up being copied?

• 1:00:33Speaker 01

  Well, one thing that comes to mind is if you look at a shoulder strap, normally you would sew a tube up and turn it inside out and insert foam inside of it. It's a fairly rigorous process to build a shoulder strap. And I came up with a way of laminating fabrics to foams and punching them with a die cut press and then binding the edges with tape. And, you know, probably took half the time to build a harness. And once I showed that at a trade show, it caught on. There are, you know, a few cases like that where I probably could have made royalties or whatever on a patent, but I was too focused elsewhere to worry about that.

• 1:01:17Guy Raz?

  How, I mean, the other question I wondered about, Spray, was you really focus mainly on bags, backpacks and travel bags and duffel bags. You never got into, I mean, there are obviously there are other outdoor brands that got into gear and jackets and sleeping bags and other things. I mean, presumably there were people, even in your own company, who might have said, hey, we got to expand our product line.

• 1:01:42Speaker 01

  It's true. That would come up on occasion and I always, my answer to that was, we're not experts in those other realms and look how long it's taken to get to where we are. And you want to start back again at the beginning and pretend like you're an expert and that you're competitive in that field. I always relished when I saw my competitors pick up outlying products, tents, sleeping bags, et cetera, because to me it meant they were going to lose focus and expertise on what they already were doing and kind of water themselves down.

• 1:02:19Guy Raz?

  You know, Mike, it's interesting because you started the company, but you really, very rarely were you the CEO and really only at the beginning. What was it about, about that role that you didn't not want to do? That you really, I mean, I think already in the, by the late 90s, you had somebody doing that job. Why didn't you want to be doing that?

• 1:02:40Speaker 01

  Well, I think I relished the design work so much and really did not enjoy.

• 1:02:50Speaker 01

  Dealing with finance and marketing and money and and I never really had any desire to be CEO of the company. In fact, when I look back on all the years that I've done this, I think the reason I maintained ownership of of my company for so long was simply that no one else could tell me what to do.

• 1:03:15Guy Raz?

  Mm hmm.

• 1:03:15Speaker 01

  And I could focus on what I wanted to do and have a great time doing it.

• 1:03:19Guy Raz?

  I'm curious, given that you were the owner and you never took any investors on, right?

• 1:03:26Speaker 01

  No, I we did in 2016. We picked up a minority ownership of a private equity partner.

• 1:03:35Guy Raz?

  But really, I mean, until then, but but

• 1:03:37Speaker 01

  Yeah.

• 1:03:38Guy Raz?

  Until the very end, you didn't you didn't have any outside investors. You were the primary owner.

• 1:03:44Speaker 01

  Right. We didn't even we really didn't even borrow money unless it was to, for example, do an addition on our factory down in Cortez.

• 1:03:54Guy Raz?

  So it was financed entirely from from cash flow?

• 1:03:57Speaker 01

  Totally.

• 1:03:58Guy Raz?

  I have to imagine that, you know, many points, certainly, maybe in the last 10 years, you had people maybe approaching you to see if you would sell. And and eventually you did. You were sold, I think, in 2021 to a company called Helen of Troy. They acquired Osprey for 400, a little over $400 million. Was that, I mean, it's great outcome. I mean, you started this little storefront in Santa Cruz. Was that decision because you didn't, I don't know, maybe none of your kids were interested in continuing it or you just you were kind of done? I mean, tell me about the thinking behind that.

• 1:04:42Speaker 01

  It's true that my kids were not interested in taking over the company. My daughter would sometimes think that she could, but I would tell her, you have no idea what you'd be getting into and you're not prepared. So unless you start going to business school or figuring out what how you want to run this, forget it. But also, I wanted to find an owner that would have similar thinking to what I have, where I felt that people were the key of the business. And we talked, I think, maybe thirty five different companies. It was a very difficult time because COVID was going on.

• 1:05:22Speaker 01

  In fact, at the most intense part of negotiation, our factories were shut down because of COVID.

• 1:05:29Guy Raz?

  In Vietnam?

• 1:05:30Speaker 01

  In Vietnam.

• 1:05:31Guy Raz?

  How did that affect the, I mean, did that mean, does that mean there was no products coming into the US?

• 1:05:36Speaker 01

  Right. There was, there was nothing coming out of the factories. They were all closed down.

• 1:05:40Guy Raz?

  Wow.

• 1:05:41Speaker 01

  So that, that certainly influenced some potential buyers. You know, they have had no idea what was going to go on with COVID. Neither did we. And I, I appreciated the ones that hung in there. It meant they were serious and they, they really wanted the company and they believed in what we were doing.

• 1:05:59Guy Raz?

  Now that you're sort of retired from the company, I mean, do you plan to spend the rest of your life in, in Cortez, in Colorado?

• 1:06:11Speaker 01

  It's a good question. I, I sort of am coming out of the woods here. I've done this for fifty years and I'm almost seventy. And there are other things I want to do. I'm still in good health and my plan is to go back to art. I'm converting my backpack design studio over to art and printmaking. I do consider backpack design to be a form of art and it's sort of coming full circle to me, starting with pure art and moving back into that. And I love to travel. One of the things I look forward to is being able to sit back

• 1:06:50Speaker 01

  and, and see just how big we are and how successful we've been. And I, I do get big hits of that when I go out traveling, maybe to remote parts of Asia or anywhere. And I see our packs out in the field and I see people enjoying the use of them and I.

• 1:07:11Speaker 01

  I don't usually say anything to them, but I, it's a great kick to see that.

• 1:07:18Guy Raz?

  When you think about this unlikely story, right, and everything that's happened and, you know, I mean, $400 million, it's a massive company that you sold and what an incredible outcome from something that began as a storefront in 1974. How much of that do you think has to do with just how hard you worked and how much do you attribute that to luck, to lucky breaks?

• 1:07:48Speaker 01

  Oh, boy, that's a tough question. My feeling about luck is that luck happens when you're prepared to recognize it. You know, sometimes opportunities fly by you and if you aren't aware that they're present at that moment, you don't catch them. I certainly worked hard, but I've enjoyed it. So to me, it hasn't been work. It's been, it's just been a life. It's been a wonderful life.

• 1:08:18Guy Raz?

  That's Mike Fotenauer, founder of Osprey. By the way, a cool bit of trivia. Back in 2001, the company got the kind of free publicity that a brand can only dream of. When Time Magazine put Eric Weinmeier on the cover, Eric was the first blind person to climb Mount Everest. In their on-the-cover photo, he poses triumphantly on the side of the mountain, wearing a bright yellow Osprey backpack.

• 1:08:48Guy Raz?

  Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is [email protected]. If you want to follow us on Twitter, our account is at How I Built This and mine is at Guy Raz. And on Instagram, we're at How I Built This and I'm at Guy dot Roz. And don't forget to follow this show wherever you listen to podcasts so you don't miss a new episode. This episode was produced by Kira Joakim with music composed by Ramtin Arablouei. It was edited by Niba Grant with research help from Catherine Seifer. Our production staff also includes Elaine Coats, John Isabella, Casey Herman, Kerry Thompson, Alex Chung, Chris Messini, Carla Estevez, and Sam Paulson.

• 1:09:30Guy Raz?

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

• 1:09:40Guy Raz?

  Thank you for listening to our next episode of How I Built This.