Reflecting The Market: Lost gains sophistication without losing its edge.

More than 230,000 cars pass by Irvine’s Sand Canyon off-ramp on Interstate 405 each day, and in November each of those drivers had something new to look at. There on the side of a building bigger than a football field is now the word “Lost.”

For those familiar with the surf market, the new sign was a bit of a shock — like finding the name of the class cutup on the top of the honor roll. But its indicative of Lost’s growth.

Since it launched in 1992, Lost has been the raw, unfiltered real deal. It’s a brand not afraid to poke its finger into the eye of a sometimes too-serious surf industry. And to this day Cofounders Matt Biolas and Mike Reola remain firmly in control of the brand’s message and image — and continue to cut their own path through the market.

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But they also brought on help. Former Gotcha CEO Joel Cooper joined the company as a partner and the CEO in 1999 and drove a year of triple-digit growth. Then in June 2000, Biolas, Reola, and Cooper signed a fifteen-year agreement with La Jolla Sportswear, the highly successful licensee of O’Neill Clothing.

Since then Lost has been among the fastest-growing companies in the surf industry, meshing La Jolla’s infrastructure and production expertise with the Biolas’ and Reola’s unwavering determination to portray the surf culture how it really is.

TransWorld SURF Business recently sat down with the three owners to get a handle on the past, present, and future of this entertainingly unorthodox brand. Here’s what they said:

When did Lost start, and who was involved?

Matt Biolas: It was just a bunch of kids scribbling “Lost” on their notebooks and spray-painting it places. It was a little underground thing started by me and my friends.

Then a few years later {in 1992} I was making Mayhem surfboards {Biolas’ surfboard label}, tagging them with “Team Lost,” and somebody said, “Hey, you should put your surfboard artwork on T-shirts and make Lost T-shirts or something.”

Mike {Reola} and I were crashing at people’s houses at the time. Back then I never wanted to make clothes. I just wanted to make surfboards and art. It was Mike who kept saying, “Let’s do it. I’ll make sure we don’t lose money. We’ll just make some T-shirts and call it Lost.”

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So Lost was an apparel brand before a surfboard brand.

Yeah, there was never Lost surfboards until years after we started making Lost clothing. We were selling Lost clothes with Mayhem surfboards. But a lot of people were like, “Why don’t you put Lost on the surfboards?” We thought about it and said to ourselves, “Well, we could do that.” Then the surfboards got a lot of notoriety because the guys who were riding them.

Mark Occhilupo put Rusty on the map back when it was Canyon Surfboards. Who put Lost on the map?

Initially it was Chris Ward. But Lost’s popularity was a combination of a lot of different things.

Mike Reola: We were in 50 or 60 shops before Chris {Ward} started riding for us. He probably got the most exposure for the brand, but the first video was released in ’93.

How important were your videos to getting the idea of Lost across to people?

Reola: The videos helped us get in to about half the stores we got into. The videos set the tone for what Lost was.

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I had an plan in my head about how I wanted to do grow the company using videos and teamriders. It was also about having parties, going to the trade shows, and putting out a good vibe. We hung out with the shop owners and buyers. We were still just kids, but we surfed with all the kids who rode for the shops. Because of that, we probably knew 30 or 40 shop owners before we started.

Was there a moment when you thought, “This has gotten a lot more serious than we expected”?

Reola: From ’92 to ’94, we just blindly went forward. Matt would go and shape half the day and then come home and wo on Lost. We lived in this house in San Clemente and ran everything out of there. We had a lot of parties, and neither of us had a car. We’d borrow cars from the people who’d crash on our couch. We didn’t have a car until 1996.

Biolas: We had already broken a million in sales before either of us owned a car.

Reola: We did what we had to do. We learned how to screenprint and do everything ourselves. We learned how to make patterns. But there was a plan. We kept making videos. We put as many guys on the team as we could afford and started giving everyone photo incentives. All of the sudden, we had ten teamriders. That got the ball rolling.

Did Matt concentrate more on the boards and you on the apparel?

Reola: No, Matt put as much time into the clothing as I did. I also handled the checks, balanced the book, got the loans, worked out the terms with the vendors, and all that sort of stuff. He made sure everything got made.

Was it a little bit trial and error? Or were there people you relied on?

Reola: We did do our research. We didn’t go to a screen-printer that makes soccer T-shirts or someplace where we’d have to pay five bucks a shirt to get them made. We went straight to the source. We went into Gotcha’s building and talked to its screen-printer. We’d say, “We want to do this, and we want to do it inexpensively. How do we do it?”

It was trial and error, but we made educated decisions. By 1998 the window of opportunity was there. We knew that if we continued on like we had been, that opportunity could have come and gone. That’s when Joel {Cooper} came on.

A lot of brands seem to run into cash-flow issues as they grow. Was that what happened?

Biolas: We never really had a problem with cash flow. It’s just — how did you put it — we didn’t have the savvy in the marketplace. We knew production and how to get certain things made, but we didn’t really know how to make a lot of business with the shops. We didn’t have racks or all the things that shops needed for us to go to the next level. That’s where a lot of Joel’s strengths lie.

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Joel, what was your opinion of the Lost brand at that point.

Joel Cooper: I had never met Mike or Matt, but I spoke to other people in the industry and they recognized the talent and potential that existed at Lost. Basically, some of the guys said, “Hey, this is perfect for you,” so I approached them.

What did you bring to the Lost brand?

Cooper: I was the CEO of Gotcha, so I brought some experience to the table. But I also recognized myself in what they were doing.

When I was brought on, I thought the biggest challenge would be for us all to get along, because here were these young guys who did it their own way. Instead, it all seemed very familiar.

Lost started up in the same way Michael Tomson and I started Gotcha. It’s the coolness of starting off at the roots with no money and getting real people behind you and building this whole momentum from the ground up that makes the brand so special.

What did you do first when you joined the company?

Cooper: First of all, we put additional money into the company. With that additional money we were able to immediately bring in a financial person and put a computer system in place — basically do all the little things necessary to elevate Lost to that next level. Matt was doing all the creative and overseeing the merchandising. Mike was doing all the marketing. I was doing all the sales and the finance — kind of keeping everybody together.

It helped. Business doubled that year, then doubled again. But even with what I brought to the table and even with the people we hired and everything else, we were stuck. We weren’t that efficient. We didn’t have the best computer systems or production manager. We were still expensive because we were producing small quantities.

When La Jolla {Sportswear} came to us, it offered us the ability to take Lost to an even higher level. With La Jolla involved, we were suddenly hooked into a company five times our size with amazing production and accounting departments and computer systems. We were able to do in one year what might have taken us maybe three or four years.

It’s worked out well. We’ve been able to retain everything that makes Lost unique in terms of its creativity and marketing. La Jolla is like our behind-the-scenes partner, but on the face of it nothing has really changed.

So La Jolla isn’t looking over your shoulder when it comes to marketing?

Biolas: If we want to do a two-page, ten-thousand-dollar ad that’s basically a ludicrous joke and has nothing to do with selling clothes, we can still do it.

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Is there any downside to dealing with a company like La Jolla instead of doing it yourself?

Cooper: The loss of complete, 100-percent control is the only potential downside, but the advantages far outweigh the disadvantages. We’ve been able to make sure that in the areas where we don’t have control it doesn’t make a difference.

You painted a pretty grim picture of the surf industry in your ads for The Decline video. Do you still feel the same way?

Biolas: We just called bullshit on the marketing that the surf industry tends to put out to kids, that these teamriders of theirs are bigger than Tiger Woods.

We’ve tried to represent the surf culture as it really is. What we were saying in that ad is that other people try and tell kids what surf culture is. They already know. They’re living it every day — and without big expensive pro contracts. We’re trying to say, “Hey, all you kids out there in the U.S. surfing all these different spots and driving your dad’s truck or doing whatever it takes, you are the surf culture.”

We tried to show that in our video Lost Across America. Other companies want to show their teamriders acting out skits about how superstar they are. Well, we’re calling bullshit on that.

Reola: But it’s all tongue-in-cheek.

What prompted the “Nobody Knows, Nobody Cares” ads?

Biolas: It started after Cory Lopez won his first WCT event and it seemed like no one in the media cared about what the guys on the ‘CT were doing. The media isn’t doing a good enough job promoting the skills of the guys on the ‘CT. Instead, they put some surfer on the cover doing some lame air because his sponsor does the most advertising. We respect the best surfers doing the best surfing. We totally respect the WCT.

Does Chris Ward’s marketing value change if he’s on the WCT?

Reola: I hate putting value on a surfer. It’s such a weird concept. Everyone thought Chris Ward could be the next world champ when he was seventeen. He was all the public talked about for a while. To get people to talk about him like that again he’s going to have to get on the WCT. When he gets on the WCT, he’s going to win contests. He’s a natural talent.

Everyone already respects him as being one of the best surfers in the world. We just would like to see him achieve his potential, and everyone else would, too.

Will your marketing message evolve as the company gets bigger?

Biolas: As we grow, we get to do more marketing, so we can vary it a little more. There was a time when we were doing three ads a year and we’d literally work on an ad for six weeks. We’d cram a couple of hours of reading into each one.

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Reola: We’re not reaching for a different customer, we’re just able to get through to more of them now.

Do you have an ideal customer in mind when you sit down and plan a line?

Reola: Ten years ago we made products solely based on what our friends who walked through our front door said to make. That doesn’t really cover the whole market, so we’ve expanded from there. But the idea that we’re designing for our friendsame to us, it offered us the ability to take Lost to an even higher level. With La Jolla involved, we were suddenly hooked into a company five times our size with amazing production and accounting departments and computer systems. We were able to do in one year what might have taken us maybe three or four years.

It’s worked out well. We’ve been able to retain everything that makes Lost unique in terms of its creativity and marketing. La Jolla is like our behind-the-scenes partner, but on the face of it nothing has really changed.

So La Jolla isn’t looking over your shoulder when it comes to marketing?

Biolas: If we want to do a two-page, ten-thousand-dollar ad that’s basically a ludicrous joke and has nothing to do with selling clothes, we can still do it.

[IMAGE 5]

Is there any downside to dealing with a company like La Jolla instead of doing it yourself?

Cooper: The loss of complete, 100-percent control is the only potential downside, but the advantages far outweigh the disadvantages. We’ve been able to make sure that in the areas where we don’t have control it doesn’t make a difference.

You painted a pretty grim picture of the surf industry in your ads for The Decline video. Do you still feel the same way?

Biolas: We just called bullshit on the marketing that the surf industry tends to put out to kids, that these teamriders of theirs are bigger than Tiger Woods.

We’ve tried to represent the surf culture as it really is. What we were saying in that ad is that other people try and tell kids what surf culture is. They already know. They’re living it every day — and without big expensive pro contracts. We’re trying to say, “Hey, all you kids out there in the U.S. surfing all these different spots and driving your dad’s truck or doing whatever it takes, you are the surf culture.”

We tried to show that in our video Lost Across America. Other companies want to show their teamriders acting out skits about how superstar they are. Well, we’re calling bullshit on that.

Reola: But it’s all tongue-in-cheek.

What prompted the “Nobody Knows, Nobody Cares” ads?

Biolas: It started after Cory Lopez won his first WCT event and it seemed like no one in the media cared about what the guys on the ‘CT were doing. The media isn’t doing a good enough job promoting the skills of the guys on the ‘CT. Instead, they put some surfer on the cover doing some lame air because his sponsor does the most advertising. We respect the best surfers doing the best surfing. We totally respect the WCT.

Does Chris Ward’s marketing value change if he’s on the WCT?

Reola: I hate putting value on a surfer. It’s such a weird concept. Everyone thought Chris Ward could be the next world champ when he was seventeen. He was all the public talked about for a while. To get people to talk about him like that again he’s going to have to get on the WCT. When he gets on the WCT, he’s going to win contests. He’s a natural talent.

Everyone already respects him as being one of the best surfers in the world. We just would like to see him achieve his potential, and everyone else would, too.

Will your marketing message evolve as the company gets bigger?

Biolas: As we grow, we get to do more marketing, so we can vary it a little more. There was a time when we were doing three ads a year and we’d literally work on an ad for six weeks. We’d cram a couple of hours of reading into each one.

[IMAGE 6]

Reola: We’re not reaching for a different customer, we’re just able to get through to more of them now.

Do you have an ideal customer in mind when you sit down and plan a line?

Reola: Ten years ago we made products solely based on what our friends who walked through our front door said to make. That doesn’t really cover the whole market, so we’ve expanded from there. But the idea that we’re designing for our friends is still kind of the root.

Biolas: I’m at my surfboard factory 30 hours a week, and I see all the surfers coming through. Mike’s got any number of team guys or friends of team guys coming though his house at all times. We travel. I go on shaping and promo trips around the world. We do the East Coast tours. We have a skate team and marketing guys who are in their early twenties working here. We’ve got a ramp in the warehouse so the skaters are coming through all the time. Joel has a young son and he’s out at the skateboard park on the weekends. You have got to keep your eyes and ears open.

Cooper: The challenge for a brand like ours — who always wants to be considered different — is even if we do a solid trunk we need to put a little twist in it. We understand that while we want to crossover to the larger market, we don’t want to lose that thing that makes us different.

In terms of markets, where is Lost the strongest?

Cooper: We’ve always had a very strong team in Florida. Normally you start on the West Coast and then head to the East Coast. We were equally strong on both coasts.

Reola: Before Joel joined the company, we focused on Florida, North Carolina, New Jersey, San Diego — everywhere but Orange County where you have twenty people putting stuff on consignment at every store. When Joel came on, Orange Country really caught up with everywhere else.

Does the international market offer Lost the biggest opportunities for growth?

Cooper: We actually have a really well-developed international business for the size of our company. It comes from the surfboards and videos being in those markets first.

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Biolas: I went to Japan for a month each year for seven or eight years. But whether it was going to South Africa to make boards or Europe, the board business really got our foot in the door. It helped to get the brand known, and then Joel really capitalized on that recognition.

Will there be a certain point when you guys say, “We’ve done it. We’re happy, and we don’t need to grow anymore.”

Cooper: When you stop trying to grow — and even growth isn’t the right term — but when you stop trying to be competitive and you think you’ve reached the top, you’re going to be on the way down.

We’re not a public company. We don’t have the pressure to have to grow. We can all be happy with a well-rounded business all over the world — like a Stüssy. You can be highly profitable and not necessarily do that much volume.

Biolas: You never stop trying to get better — but that doesn’t necessarily mean bigger. It could mean being more efficient. For example, this year wasn’t about growth for our surfboard business. It was about streamlining our operations. At the size we’re at, we can barely keep up with orders. We want to be able to keep up, make better boards, have faster turnaround times, and generally have better service. We want to get ready so if there is an opportunity to grow, we’ll be prepared.

What would you most like retailers to remember about Lost?

Reola: That we’re not trying to manufacture a message. We’re not sitting here saying, “Okay, what’s our message going to be?” It’s more like what Matt said, we’re a mirror of what the culture is.

Cooper: We see ourselves as needed because we’re different. We offer variety. Right now one of the biggest criticisms of surf stores is that everyone looks the same. Not only are we different in our product, we’re different in our marketing — which makes us different for the kids. Getting that message out to the retailer has been our biggest challenge and our biggest opportunity. Give us the floor space and we’re going to perform.ends is still kind of the root.

Biolas: I’m at my surfboard factory 30 hours a week, and I see all the surfers coming through. Mike’s got any number of team guys or friends of team guys coming thoughh his house at all times. We travel. I go on shaping and promo trips around the world. We do the East Coast tours. We have a skate team and marketing guys who are in their early twenties working here. We’ve got a ramp in the warehouse so the skaters are coming through all the time. Joel has a young son and he’s out at the skateboard park on the weekends. You have got to keep your eyes and ears open.

Cooper: The challenge for a brand like ours — who always wants to be considered different — is even if we do a solid trunk we need to put a little twist in it. We understand that while we want to crossover to the larger market, we don’t want to lose that thing that makes us different.

In terms of markets, where is Lost the strongest?

Cooper: We’ve always had a very strong team in Florida. Normally you start on the West Coast and then head to the East Coast. We were equally strong on both coasts.

Reola: Before Joel joined the company, we focused on Florida, North Carolina, New Jersey, San Diego — everywhere but Orange County where you have twenty people putting stuff on consignment at every store. When Joel came on, Orange Country really caught up with everywhere else.

Does the international market offer Lost the biggest opportunities for growth?

Cooper: We actually have a really well-developed international business for the size of our company. It comes from the surfboards and videos being in those markets first.

[IMAGE 7]

Biolas: I went to Japan for a month each year for seven or eight years. But whether it was going to South Africa to make boards or Europe, the board business really got our foot in the door. It helped to get the brand known, and then Joel really capitalized on that recognition.

Will there be a certain point when you guys say, “We’ve done it. We’re happy, and we don’t need to grow anymore.”

Cooper: When you stop trying to grow — and even growth isn’t the right term — but when you stop trying to be competitive and you think you’ve reached the top, you’re going to be on the way down.

We’re not a public company. We don’t have the pressure to have to grow. We can all be happy with a well-rounded business all over the world — like a Stüssy. You can be highly profitable and not necessarily do that much volume.

Biolas: You never stop trying to get better — but that doesn’t necessarily mean bigger. It could mean being more efficient. For example, this year wasn’t about growth for our surfboard business. It was about streamlining our operations. At the size we’re at, we can barely keep up with orders. We want to be able to keep up, make better boards, have faster turnaround times, and generally have better service. We want to get ready so if there is an opportunity to grow, we’ll be prepared.

What would you most like retailers to remember about Lost?

Reola: That we’re not trying to manufacture a message. We’re not sitting here saying, “Okay, what’s our message going to be?” It’s more like what Matt said, we’re a mirror of what the culture is.

Cooper: We see ourselves as needed because we’re different. We offer variety. Right now one of the biggest criticisms of surf stores is that everyone looks the same. Not only are we different in our product, we’re different in our marketing — which makes us different for the kids. Getting that message out to the retailer has been our biggest challenge and our biggest opportunity. Give us the floor space and we’re going to perform.