In 2019, HYLETE Inc., an e-commerce
athletic performance apparel brand, made approximately $12.6 million in net revenue. In 2020, the Solana Beach-based company, with 28 employees, is projected to reach $15 million in revenue, according to the company.
Matt Paulson, HYLETE co-founder and chief brand officer, credits the company’s success to community involvement and support, and what he dubs the “investomer” model from its “community nation”.
7 Crowdfunding Rounds
Without any funding or backing from venture capital, HYLETE has successfully conducted seven crowdfunding rounds, raising $9.7 million from 4,265 investors. The company’s most recent crowdfunding round in late 2019 raised over $1 million by 1,118 investors in under six days, Paulson said.
“HYLETE was created on the core belief that innovation and quality does not have to come with a high price tag and that empowering and helping our community to live a healthy life will define our success,” Paulson said. “Our community is our best marketing asset; they give us feedback, they share their HYLETE experience with others and many of them are part of our investor community… By removing the noise of traditional retail, customer and investor feedback goes directly into the development of new products and improving the overall HYLETE experience.”
Miro Copic, marketing lecturer at San Diego State University, said its crowdfunding initiatives as well as direct-to-consumer strategy has helped HYLETE’s steady growth.
“By going direct-to-consumer, they are cutting out the brick-and-mortar, thus, they can have higher margins,” he said, adding that the crowdfunding is an advantage in that it helps the company invest more money in “the right areas” and gives an opportunity to “smaller investors to invest in a passion category.”
“The unique thing about their crowdfunding is that they give bonuses if you buy shares,” he said. “So, you get extra shares if you buy, which is a plus… It makes you feel like you are getting something more, which you are… If they go public, which is their goal, it will certainly help.”
Leveraging Its Advantages
Beyond community backing, Paulson said the company leverages its website, email communication, media relations, social media and value-added assets such as the HYLETE Training App, HYLETE project, community blog, trainer community, discounts for special groups (military, first-responders, trainers, students and teachers), and its charitable partnerships, in order to deliver the best products to its customers.
“Every detail of every design of what we create has a purpose,” he said. “Whether it’s fine-tuned for your most intense training session or optimized for comfort outside the gym, our dedication to innovation and quality is clear. By selling direct to our community, the promise of premium product at unique ‘HYLETE pricing’ becomes a reality.”
HYLETE was originally funded by Paulson and HYLETE co-founder Ron Wilson.
They believed in the HYLETE brand so much that they took money from their savings and invested in the company. Paulson said he even convinced his wife to take the down payment they had saved for a house and use it as starting capital. In order to expedite the growth of the company, neither he nor Wilson took a salary for the first full year, Paulson said.
Full Men’s and Women’s Lines
Today, what started with one men’s performance short has grown into a full men’s performance and fitness lifestyle line and a full women’s performance and fitness lifestyle line, as well as footwear.
Some of HYLETE’s top-selling products include the Iris Short, a women’s pant that sells for $58 and the Fuse Short, which is the best-selling men’s product and sells for $72. Some key product innovations include four-way stretch for comfort, thought-out pocket type and placement to minimize content movement and secure items while training, and patented waistband systems to prevent cinching and scrunching, said Paulson.
Other fan-favorites include the Perfect Short, which Paulson describes as a high-quality performance short built for any environment and available in multiple lengths and cuts.
Perfect Short Quiz
Customers can find their best match in the Perfect Short by taking the Perfect Short Quiz, said Paulson. As well as the Circuit II Shoe, with three interchangeable insoles engineered for cross-training, running or lifting “so that users can change their training discipline without changing their shoe,” he said.
All HYLETE products are designed by the company’s innovation team in San Diego, said Paulson, adding that distribution, packaging, labeling and shipping takes place from a facility in Commerce, Calif.
While novelty and origination are primary focuses for the HYLETE brand, it is the community’s backing that has kept it thriving, stresses Paulson.
‘Community Built and Backed…’
“We can’t say it enough — HYLETE is all about community,” he said. “We are community built, backed and driven; we are relentless in our pursuit to innovate and deliver the highest quality products; and we are committed to doing good within our community, by supporting their overall health and wellness, providing tools such as our Daily Circuit App, offering discounts to deserving groups, giving back to charitable causes that are important to the community, and including our customers in our ‘investomer’ model to be a meaningful part of our success.”
Although this is the company’s go-to method, it has been this same approach of turning to the community for funding growth that has been the most difficult for HYLETE, said Paulson. Over the past decade, if it isn’t a technology company, finding capital can be challenging, he said. This is the case for all startups with high capital requirements, he said.
HYLETE has been able to take advantage of the JOBS Act (or the Jumpstart Our Business Startups Act) a law intended to encourage funding of small businesses, and equity crowd fund through its passionate community, Paulson said. And, despite difficulties within that methodology, HYLETE doesn’t plan on changing its tactic any time soon, he said; HYLETE’s goal is to continue to stay connected to its community and deliver the best products it can.
“We pride ourselves in being able to deliver the HYLETE pricing by selling direct to our community through our website, and the ability to communicate directly with our community via email, social media, etc.,” said Paulson. “We want the community to access us directly and have no plans to change our community-driven model.”
For this same reason, HYLETE doesn’t have any desire to open or sell in brick-and-mortar stores, said Paulson, adding that HYLETE’s priority is to become a publicly traded company by the end of this year.