Timbuk2 Designs is a manufacturer of custom configured sewn goods headquartered in San Francisco. Founded in 1989 by Rob Honeycutt, a former bike messenger, the company launched its initial product – customized messenger bags – for the retail and wholesale market in 1996. Since its founding, Timbuk2 has grown from a home-based enterprise (operated out of Rob’s apartment) into a leader in mass custom manufacturing, with distribution throughout the United States, Canada, Western Europe and Southeast Asia.
The Company has continued to refine its manufacturing processes in order to reduce production time and increase cost efficiencies – evolving from an average production time of 144 minutes per bag to a current 16 minutes per bag. Due to the strong interest in strategies to increase efficiency and enable custom configuration, the they launched a “Build Your Own Bag” e-commerce website in mid-2000. The site enables consumers to design individual bags over the Internet, selecting from a range of variables, including size, color, material and add-ons. Timbuk2 is in the process of launching its next major product line.
Timbuk2 and Silicon Valley Community Ventures came together in summer 2000. The Company approached SVCV with an interest in both advisory and financial resources to support its growth plans, including technology development and new product development. A business advisor with an extensive background in building and growing companies came on board to help Timbuk2 launch its e-commerce strategy, as well as provide general advice on operations and management issues. In late 2000, Silicon Valley Community Ventures participated in the company’s first round of equity financing.
Timbuk2 draws its 25 factory workers from nearby San Francisco neighborhoods. As the company grows, so will its hiring needs – an anticipated 30 new jobs will be created for factory workers in 2001. The Company has worked with SVCV to develop some creative strategies to build assets and opportunities for employees in the business, including a gain-sharing program which links productivity and profitability in each manufacturing cell with incentive bonuses, and an agreement to set aside 5% of its common stock to be distributed upon sale or relocation of the company. Timbuk2 is committed to maintaining an environment that fosters productivity, high morale and team-based work through a system in which employees participate in the entire spectrum of the manufacturing process.
After an initial investment in 2000, we led the company’s 2002 recapitalization necessary for the company’s long-term success. Along the way, the company expanded its product lines and distribution with the addition of over 30 new items – from computer carrying cases to luggage to daypacks. Over the life of our investment, Timbuk2 grew its San Francisco workforce while increasing both wages and benefits for its front-line workers. Over the same period, Timbuk2’s revenue grew more than four times.
With Timbuk2’s sale from the portfolio in 2005, our investment funds realized a substantial return multiple. In addition, the sale triggered an equity-based Wealth Sharing Mechanism – negotiated by PCV at the time of our investment – that produced payouts of up to 2 times annual salary (more than $1 million total) for the 40 factory and warehouse employees of the company.
“Based on the precedent we set under the terms of the investment, and the positive outcome we achieved, I was able to negotiate a similar Employee Wealth Creation program with our new investors. As a result, the next major liquidity event in 3 to 5 years will trigger another bonus payout for the employees of Timbuk2 — provided, of course, we are successful achieving our growth objectives.” — Timbuk2 CEO Mark Dwight