Nau shuts doors after only 14 months

Nau Inc. is shutting its doors forever. Despite having raised $35 million in financing in previous rounds of funding, Nau was unsuccessful in its attempt to secure additionally needed funding in a series D round. As a result, Nau’s board of directors voted to shut down. And, the end is coming quickly.

The company’s five stores — one each in Portland, Ore.; Bellevue, Wash.; Boulder, Colo.; Chicago; and Los Angeles — will close at the end of the day on May 3. Ironically, Nau just opened its Los Angeles store 10 days ago. Currently, all merchandise in all stores is marked down 50 percent.

Ian Yolles, director of marketing for Nau, told SNEWS® that the company will keep its website (www.nau.com) open for business as it liquidates the company’s spring/summer 2008 product.

In addition to the 40 full- and part-time sales employees at Nau’s stores, all employees in the Portland, Ore., company headquarters, numbering 60, according to Yolles, will no longer be employed as of end of day May 2.

We have learned that quite a few employees were also investors in the company, and to compound the pain, no investor will see anything back from the investment, we have been told.

On its website this morning, Nau published this personal goodbye message:

It didn’t take long for the Nau passionate to begin expressing disbelief and discouragement.

“It hurts to think that a business striving for positive change in the world had to shut its doors. I am troubled by the thought of people using this case study as a means to prove that business cannot be done for the common good and the profit and philanthropy cannot coexist. I believe they can. I will strive to continue to push the limits of what many deem as impossible business practices to pay homage to Nau — the only company whose brand loyalty I’ve ever felt,” said Brent Schwager, summing up what others had posted and will likely continue to post.

When we asked Yolles to pinpoint what led to the board making this decision, he quickly stated it was market conditions that drove the business to the failing point. “The reason we have had to make this decision is because of the dramatic change in the capital markets and evaporation of liquidity in the market. Funding for what is essentially still a high-risk retail startup just was not there,” said Yolles.

“I truly believe it is not about our business model or our business. We have a growing and very fierce group of customers. We have received an enormous amount of attention in certain quarters that exceeds in a certain magnitude the size of our organization. And, because of our ideas, we have been turned to by others outside of our direct market as thought leaders — which is certainly flattering,” added Yolles.

Noting that everyone at Nau was too focused on working forward to think about what might be next, Yolles added, “We take solace in that that we know there is an incredible community of people that will continue to work on the bigger ideas.”

SNEWS® View: “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” So said Signore Machiavelli, and while he was not speaking of Nau then, he may as well have been. The Nau effort was a bold, visionary statement to establish what many hoped would be a new paradigm in retail — a self-contained, fully sustainable business that served to inspire and uplift. As we said when we first broke news of the company’s launch back in May 2005, this effort was either going to succeed brilliantly or fail spectacularly. Well, we were wrong in one respect. No failure is spectacular. This one is tragic, disappointing, frustrating.

While we agree that the difficult market conditions certainly did not help Nau, it is likely a few more issues were at play here. One of Nau’s biggest challenges was the fact it basically tried to not only shift the concept of retail as usual to a fully sustainable model but also manufacturing as usual. Perhaps too much change, too many new ideas all at once?

It was a business platform built on the very strong pillars of philanthropy, environmental responsibility and sustainability. All business decisions had to be guided by those pillars to be accepted. It was a revolutionary idea and to be applauded for its chutzpah. However, it is likely that in this economic climate, possible investors did not look too favorably on the fact that the charitable giving component was in play before the company was even turning a profit.

As a manufacturer, by choosing to only go direct to consumer through a limited number of storefronts and on the web, it eschewed a wholesale distribution model that may have given it an additional and vital revenue stream and made it more palatable to investors who are certainly far more risk averse than ever in the current economic climate.

While sales were exceeding the company’s stated goals — certainly a very positive trend — they were not sufficient to demonstrate that the business model was going to be successful enough to entice investors to continue to give millions of dollars more to keep the Nau ship sailing. A few retail hiccups that required some retooling in terms of improving merchandising and messaging in the company’s four stores in 2007 certainly did not help either.

Whatever the reasons for the run to come to an end, Nau represents and is a manifestation of some bigger ideas that need to continue. The fact it was not able to deal with a financial hurdle that has caused it to go out of business should not mean the end. Ideas live on, thankfully. Nau’s run as a business venture may be over. As a catalyst for positive change, we suspect that “Nau” is just the beginning. SNEWS® applauds everyone at Nau. It was a short, but meaningful run. Thank you.