How This Entrepreneur Built A $50 Million Company On Upscale Water Bottles?

By SARAH WILLIAMS | INNLIVE

Sarah Kauss couldn't find a water bottle as fashionable as her handbag, so she set out to make one.

It should surprise no one that Sarah Kauss, the founder of S'well water bottles, is a former accountant and also a former Girl Scout. Looking more the latter in a denim shirtwaist dress, it's clear that New York-based S'well did not jump to $47 million in revenues last year, from just $2.5 million in 2013, by chance.
While other entrepreneurs at Kauss' stage of growth are desperate for the systems that will impose order on their burgeoning empires, Kauss has got this thing nailed down.

"I'm so organized, it drives everyone nuts," she says. "I started my career in public accounting. Really, I'm just a recovering accountant." Given the speed and scale of her growth, that's probably a good thing. "Last year was really challenging," she says. "We went from being a project to a startup to a midsize company in a year and a half."

Eighteen months ago, Kauss had 19 employees; now she has 47 and a five-year "innovation road map for beverage containers." Only S'swell bottles are allowed in the amphitheater at TED conferences; S'well bottles are for sale in the gift shop at the Museum of Modern Art. Jimmy Kimmel joked he'd like his ashes to be buried in a S'well bottle. Clearly, S'well has arrived. 

You might not have known the world needed yet another water bottle--never mind one that can cost $45--but Kauss sure did. "I was from Boulder, and always an environmentalist," she says. "I used another brand of water bottle for years. But I was paying a lot of money for a handbag, and then pulling out a water bottle that looked like a hiking accessory." She wanted the water bottle to be as stylish as her bag. "I wanted people to feel that it was a luxury product," she says.

That was hardly the only criteria. The bottle had to be double-walled stainless steel, the better to insulate beverages, and more sustainable than plastic. The bottle should fit in a cup holder, including those on strollers. There couldn't be any condensation on the outside, because she didn't want water dripping in women's handbags. She didn't want a sip top or a carabiner or anything fussy. The neck had to be narrow, to make it less likely someone would get splashed in the face while drinking, but wide enough to accommodate half-moon-shaped ice cubes.

There was also no way S'well would sell the same five colors for five years, as some makers of water bottles do. This was fashion, after all, so Kauss would do two collections a year. Now, says Kauss, "We're not afraid to kill off designs, because we know new ones are coming. Our customers become collectors." They have plenty to choose from, with S'well bottles available in 78 designs including a best-selling teakwood pattern (at left), "opal marble," and "super nova." 

Unable to find a factory in the U.S. that made double-walled steel bottles and was willing to take a flier on her, Kauss contracted with a factory in China. By 2010, she had 3,000 peacock-blue water bottles crowding her apartment.

Kauss personally brought her bottles to 17 gift shows that first year. Her first account was Mxylplyzyk, a gift store in Manhattan; her first big account was Crate and Barrel. "At Mxylplyzyk, Kevin, the buyer, was amazing," Kauss says. "I didn't even have an order form." She had no packaging. "I would go into stores and ask what they were looking for," she says. "I didn't know how to make an SKU. I didn't know what a case pack was. They'd ask, 'What's your packaging?' I didn't have any packaging."

Though Mxylplyzyk no longer exists, independent specialty retail stores--at last count, about 2,200 of them--are still crucially important to S'well, which also sells through larger chains such as Nordstrom and Anthropologist. The small stores help tell the story of S'well, of course, and advise the company on the designs customers are most likely to gravitate toward. But small retailers also tend to pay on their credit cards, meaning that S'well gets paid fast. "It's not like a big retailer that's supposed to pay in Net 60, and you pray they pay on time," says Kauss.

International distributors help Kauss manage her cash flow, too. That's because the distributors put down a 50 percent deposit when S'well takes their order. "Their deposit helps fund our industry," she says. "Without that I would have been in trouble. That's sort of a counter intuitive thing about working with big international distributors."

Between her savings, her independent retailers, and the distributors, Kauss has never had to seek outside financing. She hasn't even had a credit line from a bank, and owns 100 percent of S'well. She believes it's been helpful not to have had investors, because she's had the freedom to turn down partnerships, even those that might look promising to others. Target wanted to collaborate with S'well two years ago, but Kauss said no, because she didn't think the company could handle it.

Now she knows S'well is ready. Before launching a new line, called S'ip by S'well, with Target, she sent "a killer ops person" to Target's headquarters in Minnesota to learn its systems and pore through its 1,000-page vendor guide. She heard another big retailer (she won't say which) was hard for smaller companies to deal with, but she says she hasn't had any problems. "You just have to watch your ratio of sales people to ops people," she says. "You can't hire too many sales people without the ops support."

And while Kauss isn't seeking funding, she admits there have been times when some backup would have been nice. During the longshoremen's strike that crippled the Port of Los Angeles, Kauss had nine 40-foot containers of S'well bottles -- an entire season's worth -- stuck on a ship. She had just one model left in stock, and she still had to make payroll. "Even when the strike was over, the warehouses were busy, and it took another month to get through the backlog," she says.

But barring out-of-the blue events like that, Kauss clearly believes the hardest part is over. "Now people are coming to us and saying, 'Hi, I want to collaborate and do something with you,'" she says. "Before it was like, 'I'm Sarah, will you try this bottle?'"

"We'll be a billion-dollar company," she says. "It's easy. I know what to do now. We have the people and the processes in place, and the market is just there." The alternative? "We could just be a $50 million company," she says, "but that seems kind of boring.