Ryan Cotton is trying to keep Bain Capital on the right side of consumer history — and if that means communing with a higher power (Beyoncé), he’ll do it (and enjoy it).
Picking the companies that will prevail in the fast-paced, digitally transformed fashion landscape is tough to near impossible. Cotton, who is managing director at Bain, has what he believes is a formula to separate winners and losers, those on the right or the wrong side of history.
But first it is useful to situate Cotton in the investing genus of private equity power player, which has two distinct species.
There are the slicers and dicers, who dazzle with spreadsheets and projections of synergy (and are skilled at reaping profits even from corporate wreckage). And then there are the builders who are looking for growth companies and ideas they can help supercharge (that’s not to say they don’t sometimes also leave corporate wreckage in their wake, it’s that they don’t see it as a profitable fallback plan going in).
Cotton is a builder.
More than that, he’s a thinker, an academic sort with glasses and a giddy smile, who speaks a mile a minute, overflowing with observations, correlations, historical precedents and more.
Cotton’s calling card is Canada Goose, which he helped buy in 2013 and then four years later bring to the public market, where its value has doubled, giving it a market capitalization of $3.6 billion. He also helped grow Sundial Brands, which specializes in multicultural brands and was sold to Unilever, and works with Toms, Blue Nile, cruise line Virgin Voyages, and more.
He described himself and his partners at Bain as calculated risk takers. “We’re not swashbucklers.”
“We’re the single largest investors in every deal that we do — me, my partners, the people who work at Bain Capital,” Cotton told WWD. “Twelve cents of ever dollar we invest is our money. The industry standard is about 1 or 2 cents.”
To take those calculated risks, Cotton has a framework to pick winners and losers, something he said would have been hard to construct even five years ago.
“The world was just very uncertain,” Cotton said. “What we knew was that Amazon was painful. The Internet, painful, and that it was going to be hugely disruptive.”
Now he said the market is developed enough that it is possible to “understand the basic rules of the new consumer economy.”
Cotton’s right side/wrong side of history litmus test comes down to the answers to two questions:
• Do you deliver the best possible value to the customer every day?
• Do you deliver what they want, the way they want it, when they want it, where they want it?
Companies that can answer “yes” to both are pointed in the right direction.
Cotton said “the consumer’s not going to get hoodwinked” on price in an age of transparency and that they are accustomed to “living in a world where all of our instincts and all of our needs are satisfied in a momentary basis on our cell phone.”
“We’re not going to tolerate brands and companies who are forcing us to do it their way,” he said, noting brands need to go to their customers.
“If you are neither what the customer wants, where they want it, how they want it, nor are you a good value to the customer, I don’t know that that’s fixable,” he said.
And Cotton doesn’t see himself as a fixer anyway, but as a partner.
“I don’t have the entrepreneurial spark. I don’t have the visionary idea,” he said. “If your idea’s a bad idea, I can’t make it a good idea. But if your idea’s a good idea, we can make it succeed a lot faster and a lot bigger and that’s the goal.”
While he works with a 35-person team of consumer specialists who can help take an entrepreneurial company and professionalize it for growth, it’s Cotton’s job to get in the door, make the connection and build the relationship before digging into the business.
That requires a lot of interpersonal skill and business acumen — and in at least one instance, a working knowledge of the Queen Bey.
Richelieu Dennis, founder and chief executive officer of Sundial Brands, recalled a time when he had to negotiate both Cotton and a Beyoncé concert in Philadelphia with his four daughters.
“I’m talking to Bain, how do I tell them that I’m going to this concert and I’m blowing off what I’m supposed to be doing at work and there’s nothing you can do to stop me?” Dennis said. “[Cotton] says, ‘I love Beyoncé,’ and I say, ‘OK, we can get this done.’
“There’s more to this than spreadsheets and presentations, there’s real people, there’s real emotions, there’s real passions,” Dennis said. “Having simple, common joy makes it easier to connect on the hard issues.”
Dennis said Cotton intellectually and intuitively understood Sundial’s business to provide skin and hair care to demographics traditionally ignored by the mass market and helped shape the growth strategy.
But Dennis said, “His biggest role was psychologist to me, that was his biggest role and his unofficial title.”
Cotton is not a psychologist. But he did get some serious training in thinking from Princeton University, where he picked up a bachelor’s degree in philosophy — an unconventional course of study for an investor.
“Philosophy is the art of applying rigorous logic and scripted thoughts to these amorphous questions to drive to a framework that helps you make sense of the world,” Cotton said.
“And that’s the essence of my job, taking in tons of disparate information from the 200 companies we meet a year, from the 100 bankers I talk to, to the 100 executives and industry experts that we meet with and filtering all of that down into some framework that I can explain in 10 minutes, that I can use to evaluate businesses and that I can use in partnership with people to also challenge their assumptions in a very structured and thoughtful way,” he said.
While private equity is a “math job” for the first couple of years, Cotton said, “I don’t do a ton of math in my job, I do a ton of abstract pattern recognition.”
That makes Cotton sound a bit more wonky than he actually is. He’s more of a heart-on-your-sleeve kind of guy (now) with a bit of Bruce Springsteen and a firm competitive streak thrown in for good measure.
“I grew up gay in Texas, which is a weird thing, and particularly in the early Nineties, it was a very weird thing,” Cotton said. “It taught me and teaches you to sort of hide yourself and hide who you are.”
After graduating from Dallas private school St. Mark’s School of Texas, he went to Princeton and, loving baseball, worked at the Boston Red Sox while staying in the closet.
General manager Dan Duquette invited him one night to see Bruce Springsteen at Madison Square Garden.
“It was just so alive and so electric, I was just so excited that night that this is a thing,” Cotton said. “It set up a lifelong love of Springsteen.” (Duquette, now at the Baltimore Orioles, remembers Cotton as “a bright, industrious kid who did a great job for us.”)
His favorite song is “Darkness on the Edge of Town,” which he quotes readily, pointing to the verse that describes how people can get dragged down by their secrets.
“I just remember hearing that in this formative moment in my life and feeling like, ‘I don’t want to go there. I don’t want to be that guy,’” he said. “It hit me at exactly the right moment in time, at exactly the right moment in life and it was different after that.”
Cotton passed on a career in baseball and instead opted in 2001 to take a job as a management consultant at Bain & Co., which was closer, but didn’t fit with his constitution and the competitive spirit he nurtured in baseball.
“I like winning and losing, as a consultant, you sort of tie every day,” Cotton said. “In private equity, you win and lose with your partners and you’re on the playing field and I missed that, I missed having a win/lose record.”
Owning who he was worked for Cotton, but there were some bumps.
As he recalled in a 2015 address to students at his old school in Texas: “When I first joined Bain Capital in 2003, I was riding pretty high on a wave of professional success. I had gone to Bain & Co. knowing very little about business, worked my way to the top of my consulting class and survived an interview gauntlet to get my new job. I thought I was pretty talented and then I got my first performance review…and I learned quickly how far I had to go. Its cut-to-the-chase summary read, ‘lots of great raw material, but style, quality control and glibness are real issues.’ I had real issues. That did not sit well. In fact, it set me back. I lost my confidence, I lost my swagger. I just felt lost.”
Cotton said he eventually learned how to see the review as important feedback and, channeling Springsteen, counseled students at his alma mater to “grow toward the authentic you.”
Clearly, he got his swagger back.