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Inside Rothy’s $1 Billion Valuation

A new strategic investment is helping Bay Area footwear and accessories brand Rothy’s advance its mission to go global.

Brazilian footwear and lifestyle label Alpargatas S.A. announced Monday that it would acquire a 49.9-percent minority stake in the company with the goal of fueling its growth. The two-step transaction will include a primary capital investment of $200 million, followed by an offering to take on about $275 million in Rothy’s shares from current stockholders, resulting in a post-investment valuation of $1 billion.

The investor, which owns flip-flop brand Havaianas, along with Brazil-based lifestyle brands Dupe and Osklen, said the agreement would elevate the firm’s international profile while helping Rothy’s execute its retail expansion strategy, grow its verticalized factory operations, and bolster sustainable innovation. Rothy’s will now have access to Alpargatas’ six Brazilian factories, which will complement its owned manufacturing base in Dongguan, China.

Rothy’s co-founders Stephen Hawthornthwaite and Roth Martin founded the brand nine years ago on the premise of sustainable design, developing a proprietary 3D-knitting process for crafting washable footwear made from plastic waste. The shoes quickly gained traction with the young tech set in the company’s hometown in San Francisco, blending eco-friendly design with polished styling. In 2021, Rothy’s expanded into men’s footwear and accessories, and to date, the label has diverted a total of 100 million single-use plastic bottles from landfills.

Eager to expand the brand’s reach both stateside and in markets like Asia, Europe and Brazil, Hawthornthwaite and Martin will continue to oversee Rothy’s operations while maintaining a significant equity stake in the company. The co-founders’ agreement with Alpargatas comes with a call option to acquire additional Rothy’s shares from selling stockholders between the first and fourth anniversary of the transaction.

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Existing Rothy’s investors like Lightspeed Ventures will also maintain meaningful equity positioning, the groups said. Roberto Funari, CEO of Alpargatas, and Stacey Brown, an independent member of Alpargatas’ Board of Directors, will become members of the nine-seat Rothy’s board.

“In less than a decade, we’ve transformed our two-person passion project into a successful, sustainable and deeply innovative company—and redefined the shoe category,” Rothy’s CEO Hawthornthwaite said in a statement about the agreement. “This partnership with Alpargatas marks the beginning of our next chapter of growth, and reaffirms the strength of our business model and momentum in the marketplace.”

According to Hawthornthwaite, the firm’s financial support, scale and expertise will help Rothy’s—a 98-percent digitally native business—expand into new markets and develop a greater physical retail presence. The company has been steadily growing its store footprint in recent seasons, and by early 2022, Rothy’s will have 12 brick-and-mortar locations in cities like New York, Los Angeles, Boston, Chicago and Washington, D.C. Rothy’s told Sourcing Journal in November that it has plans to double its U.S. footprint in the coming years.

Alpargatas’ verticalized manufacturing capabilities will also help the brand advance product development, especially with regard to circular design, the CEO added. In March, Rothy’s announced a suite of benchmarks to eliminate waste and curb carbon emissions through material and supply chain advancements over the next three years. The shoes’ polymer-based fibers are ripe for continued recycling, the brand said at the time, and its sustainability team is piloting a plan to recycle and reuse shoe components in future designs.

“Alpargatas has built a portfolio of desired and hyperconnected brands, including the world’s largest open footwear lifestyle brand, with over 260 million pairs of flip flops sold annually across more than 130 countries,” Funari added, speaking of Havaianas, which has piloted its own shoe recycling and upcycling programs under Alpargatas’ direction.

“We are excited to welcome Rothy’s to our portfolio, and admire Rothy’s entrepreneurial, passionate founders and team,” he added. “We value their digital-first business and loyal customer base, and view this partnership as an important opportunity to advance our global strategy with increased relevance in the North American market.”

“In Alpargatas, we are pleased to have found an established industry leader with a rich heritage, tremendous scale and resources, vertically-integrated operations and a people-first approach that clearly aligns with our values at Rothy’s,” company president Martin added. “Very few footwear brands understand the challenges and unique opportunities that owning a factory presents—and Alpargatas has written the playbook.”

“We are confident that Alpargatas will be a valuable thought partner for Rothy’s, and look forward to working together to prove that it is possible to run a large-scale, profitable business sustainably and responsibly,” he added.