Cubcoats

Cubcoats is a Los Angeles children's apparel brand, operated by parent company Peak Theory, that sells a patented two-in-one product: a plush stuffed animal that unzips to become a children's hooded sweatshirt. Products are made from machine-washable, ethically sourced materials and offered in sizes for children aged two to eight, retailing at approximately $50. The initial line comprised eight animal characters, each with its own name, personality and backstory developed with art director Mimi Chao, including Pimm the Puppy, Kali the Kitty and Tomo the Tiger.

The company subsequently added licensed versions based on characters from NBCUniversal and Walt Disney Co., including Mickey Mouse, Minnie Mouse, Darth Vader, Bob the Minion, Black Panther and Trolls. Beyond apparel, the founders positioned the business around building intellectual property and content, including a planned cartoon series based on the Cubcoats characters, and described an ambition to develop a broader category of two-in-one consumer products. The company was a 25-person enterprise as of December 2018 and was co-led by co-chief executives Zac Park and Spencer Markel.

Founding story

Zac Park and Spencer Markel, longtime friends who met through a mutual friend in the San Francisco Bay Area, left careers outside the fashion industry to start the business: Markel had spent seven years as a mergers and acquisitions attorney, including at DLA Piper, while Park was a product director at digital advertising agency AKQA, had consulted on numerous fashion-related Kickstarter campaigns, and had founded and sold a watch company. The concept drew on a shared childhood affinity for Transformers and Mighty Morphin Power Rangers, and on Park's prior work on a Kickstarter campaign in the hoodie space; the pair aimed to create a novel product that children would form a lasting attachment to. An early prototype was a stuffed elephant sewn onto a J.Crew hoodie, which drew strong reactions from children they showed it to. The team began prototyping in September 2016 and iterated through more than 100 prototypes, including the decision to seat the stuffed animal horizontally rather than vertically in the hood, and secured a utility patent.

Business model

Cubcoats' core business is direct-to-consumer e-commerce through its own website, supplemented by wholesale retail distribution (Nordstrom) and temporary company-operated pop-up stores. Hoodies retail for roughly $50. The company also licenses third-party characters from media owners such as NBCUniversal and Disney for licensed product lines, and was developing its own character IP and content, including a cartoon series, as an additional avenue.

Revenue comes from product sales of children's hoodie/plush toy units, sold primarily direct-to-consumer online at approximately $50 per unit, plus wholesale sales through retail partners and pop-up retail.

Traction

In its first year Cubcoats sold more than 100,000 hoodies and averaged more than 25,000 daily website visitors. Revenue expectations for 2018 were reported as $5 million to $10 million by the company and the Los Angeles Times, while TechCrunch reported founders citing $2 million to $5 million for the first full year; the company projected up to 500% revenue growth in its second year. Social media generated 50 million-plus views, with the Los Angeles Times reporting 65 million to 70 million views across platforms in 2018, more than 31,000 Facebook page likes and 28,100 Instagram followers. Distribution reached more than 100 Nordstrom stores plus two pop-up locations, and the company received more than 100,000 comments requesting adult sizes.

Latest developments

The seed round was announced on November 1, 2018. Around the same period the company launched licensed character Cubcoats, entered more than 100 Nordstrom stores for the holiday season, opened pop-ups at The Grove and the Americana at Brand, and stated it was developing story content and a cartoon series for deployment in 2019 alongside international expansion to Canada, Australia and Asia and eventual adult sizes.