When founders raise money, the goals of their company change. They must now build toward a big exit, so their investors get a return on their investment.

But what if a founder wants to do things differently? Can they ever regain control?

That’s what the cofounders of premium wellness brand Rhone recently did, engineering a deal to buy out their largest investor. As word got around in the startup community, many founders reached out to ask how they pulled it off — because those founders, too, would like to regain some control they’ve lost in the name of growth.

So, how’d Rhone do it? The company’s cofounders are now talking about the deal publicly for the first time.

“In theory, nothing has changed for us,” says Nate Checketts, Rhone’s cofounder and CEO. “But really, it’s the mindset: Everything has changed.”

How Rhone Began

Rhone entered the men’s lifestyle and activewear market in 2014 in direct competition with Lululemon’s run for the male consumer. The brand’s differentiator was something called GoldFusion, a proprietary technology that infuses fabrics with gold particles to make them more comfortable, odor-neutralizing and faster-drying.

Nate and his brother, Ben Checketts (who is Rhone’s cofounder and creative director), completed a seed round of funding in 2015. But by 2017, they needed more money to fuel the company’s growth.

Back then, Rhone had 50 employees and a solid e-commerce business. It also had established relationships with REI, Bloomingdale’s, Equinox, Peloton, and about 150 specialty stores and gyms. But the company wasn’t on solid footing. Nate and Ben were renting unfinished office space outfitted with IKEA furniture and folding tables. They were often just getting by, operating month to month.

Then Rhone found a major investor — the top-tier private equity firm L Catterton, which came in for what Rhone calls a significant investment. L Catterton has a strong presence in the consumer space, having made more than 250 investments in consumer brands and managing approximately $34 billion of equity capital. When the deal with Rhone closed in late 2017, Nate says he felt tremendous relief. “We felt like we’d won the lottery,” he says.

Over the next few years, Rhone kept on winning. By 2021, the company had 103 employees and had grown its revenue by a factor of 15. “If you want to speak to people with a megaphone, sometimes it has to be a bigger megaphone,” says Ben — and that megaphone, in his mind, was L Catterton.

But despite this, the Checketts brothers started to reconsider their dreams for Rhone. By taking the L Catterton money, they’d put themselves on a fast track — leading toward an acquisition or taking the company public. But was that really what they wanted?

“I realized the moment we sell this business or bring in a majority partner, I’m giving away my control in terms of how I get to guide and direct this brand,” says Nate. “I was at a decision point. I needed to sell and leave, or I needed to double down.”

The brothers are clear: They were never dissatisfied with L Catterton. But the partnership demanded a very specific trajectory — and they started to imagine growing and holding Rhone for years to come. They wanted to reinvigorate their sense of autonomy and build the business in a generational way, not with the hope of an IPO or acquisition a few years out. That meant being free from the return obligations that any private equity partner would demand.

To meet that goal, Nate would need to buy out his private equity partner. But who even does that? And how?

Building the Deal

It’s not unheard of for a founder to buy out their investors. Chobani famously did it in 2018. But it’s neither a common process nor a fast or easy one. So the Checketts started slowly and strategically.

“It’s easy to get all motivational Tony Robbins about this, but inwardly I was having doubts,” Ben admits. After all, what if L Catterton reacted negatively? It could impact the company — and in turn, the families of every employee, the Checketts brothers included.

The Checketts began by asking trusted, financially savvy friends and family for guidance. After weeks of research and storyboarding, they settled on a strategy: They’d create a special purpose vehicle (SPV) which allows individuals to pool their money to invest in a single company.

Next, the Checketts needed to find investors willing to put their money into this SPV — which meant finding people willing to bet on them, despite their explicit intentions to grow Rhone more slowly and intentionally, and to be with the company for a long time. In other words, this investment might take a while to pay off.

“Our pitch was, ‘Hey we have built this brand over the last eight years,'” says Nate. “‘We think it can be successful in an IPO market, but we want to hold it for the long term. We believe there will be monetization down the road. You won’t have control rights. We’ll create an SPV and you’ll have a board seat. It’s an evergreen investment and a chance to be a part of a brand you’re proud of.'”

That pitch wouldn’t work for everyone, of course, so Nate and Ben focused on high net worth individuals who didn’t need immediate or even near-term returns on their money. They found success with seven professional sports team owners, including Charlotte Hornets co-owner Gabe Plotkin and Philadelphia 76ers and New Jersey Devils co-owner David Blitzer, as well as athletes including former NFL quarterbacks Steve Young and Tim Tebow, among others. Rhone says these investors were already fans of the brand, and saw an opportunity to nurture it.

After months and months of legwork, the Checketts approached L Catterton in early 2022.

Timing helped: The economy was uncertain, startup valuations were dropping, and private equity firms all over were looking for wins wherever they could find them. The Checketts won’t say exactly how much they offered L Catterton to buy back their shares, but said it was a sizable return on the firm’s investment. While it wasn’t baked into the deal, they also kept Jon Owsley, a managing partner of L Catterton’s growth fund, on Rhone’s board — a sign of how much they valued the relationship.

Catterton said yes, and the deal closed in July of 2022. (“We couldn’t be more proud to have been part of [Rhone’s] journey,” Owsley says.) And just like that, Rhone had a new long-term vision.

After the deal closed, Nate and Ben say, they immediately got to work plotting the company’s path forward. They hired a new chief product officer, who had spent five years in the upper ranks of product at Athleta, and quickly began reinvesting in the business, its materials, and more. This fall, Rhone announced a women’s line — a move the Checketts say they felt especially empowered to make after reorganizing their capital structure.

Now, sitting in the company’s new headquarters in Stamford, Connecticut, Nate is giddy with excitement. He’s talking about the business like it’s brand new all over again, with big dreams and nervous energy to propel it forward. “I started to fall back in love with the company I maybe had lost a little bit,” says Nate. “And now I think about it as a 50-year plan, not a five-year plan.”