Bombas: David Heath and Randy Goldberg (2022)

31:33That was really kind of the initial like spark. And so the spark was, wait a minute, if this is the number one most requested thing at homeless shelters, maybe there's a model we can build similar to Tom's or to Warby Parker. I mean, were you thinking along those lines or did it just kind of come to you? What do you remember? It was community first, I'd say. So first we asked why, why are socks the most requested clothing item in homeless shelters? So we made a call, we called a shelter and we said, is this true first of all and why? And they said, well, you know, if you're living on the street, you might not take off your shoes at night and, you know, A fresh pair of socks means a lot.

32:16You walk everywhere. You have hygiene issues around your feet. And then it can be a huge issue if it rains. This is a big issue. And because socks are a wear-through item, we don't allow people to donate them. So you cannot donate used socks to the majority of shelters and organizations that help in the homeless community. And they said, so we end up having to buy socks. So it's a big issue. All right. So it was around 2011. You read that quote, and it sparked the idea of whether SOX could be a one-to-one business model. But you didn't launch right away, right? Like that wouldn't happen for another two years officially.

33:02David, you had left Urban Daddy, and Randy, I think you hung on. So what made you guys actually take action and pull the trigger? So, Randy, do you want to jump in? No, go ahead. I mean, we should probably at some point talk about The Godfather. Yeah, yeah, I was going to get to that. The movie or A Person Called The Godfather? No, no, no. This is A Person Called The Godfather. When we come back in just a moment, how a key connection gave Randy and David a leg up in the sock industry and how they struggled but eventually found their footing without venture capital. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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37:21Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2012 or so, and Randy and David are starting to put together a team to launch and run their sock business. But they realize pretty quickly that they know nothing, really nothing, about the sock industry. So enter stage right, the godfather. I remember sitting down for dinner with my dad one night and I said, you know i'm thinking about starting this sock company it's going to donate a pair for every pair of purchase but i don't know the first thing about making a pair of socks and he turned to me and he said well you know your godfather spent 40 years in the hosiery business and did incredibly well i don't know what huh i don't know what he did but you should give him a call and so i didn't talk to this guy in 15 years so i give him a call where did he live he lived in in westchester um I call him up and I said hey Steve I have this idea for a sock company and it turns out that Steve Lowenthal was the president and CEO of Gold Toe in the late 80s and 90s which is like Gold Toe socks I remember gold they must be still around right yeah definitely Gold Toe socks the toes were gold yes I mean not real gold they were gold colored gold fabric and the idea was that that's a quality You got your toes in the gold part of the sock.

38:48That's the quality sock. He left Gold Toe and then started one of the first and largest private label sock manufacturing distributors in the country. He worked for brands like Nautica and Polo. And he would make their socks, like white label. He would make their socks as a white label. So he understood global supply chain when it came to socks. And so me, Randy, Andrew, and Aaron sat down with him in this meeting once. Andrew's your, just a, just a. Andrew's my brother. Andrew's your brother. And Aaron is. The fourth co-founder who I'd worked on Regalus with from the branding perspective. So the four of us sit down with him and we say, here's our idea.

39:36and he said, tell me the product you want to make and I will introduce you to the best factories in the world. Wow. And so we start working together on figuring out what are the components from each individual sock that we like the most, you know, the toe from this one, the calf from this one, the fabric from this one, the arch support from this one, it kind of Frankensteined this sock together. And we like cut up a bunch of socks, put them in a plastic bag and handed them to the godfather and he said let me come back to you in a few weeks and see what i come back with ended up introducing us to this factory partner in asia and because of his legacy and credibility in the sock business they were willing to work with us um i mean this is a factory that produces for nike and you know sockany and smart wool and some of the biggest sock brands in the world yeah And here they were talking to us and we didn't even, we didn't have like two nickels to rub together, let alone like a full blown brand or concept.

40:39Right. And their willingness to work with us for almost a, almost two years on product development, where we'd go back and forth and say, we like this. We don't like that. Send us some samples. We give them, we try them out. We'd give them to friends. Um, and this development process that, you know, ultimately led us to a product that we thought was pretty great. All right. It reminds me a little bit of, I mean, Warby Parker saw a gap, right? And the gap was glasses shouldn't be so expensive. I mean, they're, it's, you know, the markup is crazy and they figured out a way to make them more affordable through this direct to consumer model.

41:19How did you identify, I mean, how, because now you look back on, you're like, of course, because socks were like made by Nike or Adidas or they were tube socks you'd buy in packets at Target or dress socks that you would buy, you know, or whatever it was, thin dress socks, athletic tube socks. And, you know, but now I can look back and say, of course, there was a gap, but it didn't, I can't imagine it was super clear to you at the time, was it? I think it was pretty clear pretty quickly. I mean, we didn't have the data. We weren't in the apparel business, you know, and I think this was a big advantage for us.

41:57We just look, we took a look around and we just saw what was available and what was available was always the same over and over and over again. And it just, it felt like an afterthought. I don't know, Dave, maybe you have a different perspective on this, but I think we knew pretty quickly. Yeah. I think the sampling process for us was a pretty big eye-opening experience, right? We didn't go into the product development process with margin or pricing targets, or, you know, this speaks to Randy's, you know, comment around us not having any experience in the manufacturing or, you know, retail apparel world.

42:31So we kind of came at it from a pretty blank slate of just saying like, what's the best product that we can make? And then as part of the development process, we would give samples out to friends and family, and they would come back and they'd say, wow, these are really great. And then we'd be like, yeah, but maybe they say that because they're our friends and family. And so I very distinctly remember bringing samples to the gym with me and I'd walk up to complete strangers and I'd say, I know this is really strange, but I'm developing a sock company. Would you be willing to try these socks for me?

43:05And you know, if I see you next week, tell me what you think. And I'd get a lot of really weird looks. And inevitably though, I'd show up the next week and those same people would come back and be like, where can I get those? Those are amazing. What are they? All right. I want to talk about the design process because the four of you are working in this factories in China? China, yes. And so they agreed to work with you on product development, which meant that what, they had a designer there or you would sort of send them socks you liked and say, or sort of email them pictures and say, I want a sock that looks like this, but has these features.

43:42More the latter. So you'd send them a photo and say, I like this, but I want these features in the sock. We'd also send physical samples and we would send pieces of socks and they would, you know, they started with a prototype and they'd send us things. And while you were working with this factory to just get samples, I mean, presumably you had to pay them something. So what did it cost you? Luckily, the sampling was like the inexpensive part. I think they were thinking longer term, like, oh, if this is turns into something, we'll get the business. And again, by having my godfather tied to this, I think they were less concerned or they had a higher degree of faith that it would be successful.

44:21um you know we you know i had to incorporate the business right so i hired a lawyer and ultimately when we decided to um launch on indiegogo we had to pay for the you know video and and some of the creative assets but our whole approach to launching this business was try to bootstrap as much as possible um i think by the time we launched on indiegogo I had about, I don't know,$12 ,000 to$18 ,000 of credit card debt. Okay. So it was not insignificant, but it wasn't doable. I mean, there was four of you involved. And by the way, how did you decide how to divide up the business? Was it based on how much money each person could put in?

45:08In terms of the ownership or the work? Yeah, the ownership. So it was pretty easy because, well, I have to say it was pretty easy. A lot of hard conversations early on. That's a fraught conversation. I've had this conversation with my business partner, so I know it's not easy. Yeah. A lot of hard conversations early on that I think were determinant of, you know, I had kind of put most of the capital up front in terms of, you know, paying for the legal incorporation and some of these other things. Um, I think the, the, the rest of it was kind of determined by, you know, who could take the risk to, you know, jump first.

45:56Um, you know, Aaron had a family at that time. Right. So he was like, he valued being able to keep his day job, and keep a steady paycheck. As a graphic designer, as a creative... Yeah. Andrew was working at Regalis, so he had a paycheck coming in. So the most likely person to kind of take the leap first, like I didn't really have anything else going on and I didn't really like the job I was working at. So I kind of took the leap first and kind of front-loaded a lot of this stuff. And I just think naturally, you know, while certainly difficult, it wasn't, it was never like argumentative or contentious.

46:37And I think everybody kind of just agreed to let, you know, kind of made separate agreements and decided to divide the business up, you know, the way we decided to divide it up. We had the luxury of time, right? Because, you know, like we took two years, there was no pressure from anyone but ourselves to build this at that time because it was bootstrapped. And it gave us time to develop the idea. And like Dave said, he leapt first. And then in early 2013, when I was no longer at Urban Daddy, we sat down to write the script for our Indiegogo campaign. And that was sort of a moment where we felt like we were writing the covenant of the business.

47:20It took three months for us to write that. and something today that would take, you know, three hours for a copywriter to do. But it was putting all of our ideas down on paper in the right way and getting our storytelling, you know, around this product that we believed in at the time. And by the way, the name Bombas, was that the name from the beginning? Yeah, that was the name from the start. And it means B, Bumblebee, right? It's like the Latin word for Bumblebee? Yeah, so the word Bombas comes from the Latin word for Bumblebee. you know obviously we're a company that's community based bees live in a hive they work together to make the world a better place we love like the inspiration and the idea of things coming together in a hive to work together to improve their world how did you did you just come up with a name or did you work with like a branding agency to help you come up with a name so i think when we got to the point where we were ready to like name it um randy and aaron said give us the weekend uh right let us we kind of know what this company's kind of feels like and stands for let's throw a bunch of things up on the wall and come back and present you know me and andrew and the group with a broader set of ideas and the the two that kind of they came back with that were the most you know the the top were something around bees or ants because these are two animals that are naturally altruistic, that work together as a community to make their world collaborative.

48:50And so I didn't think that ants were that marketable. Bees tended to be a little bit more playful and fun. And so it kind of landed on bees. And it was mostly Aaron had kind of come up with this idea of naming it Bombus. The Latin word for bumblebee is Bombus, but with an A, B-A-M-B-U-S. Right. and kind of our thought was well if you google Bambus you're going to get a bunch of like beekeeper information you know and so we thought all right change the A to an O and make it a little bit more unique and ownable. So you guys came up with a name over a weekend it's a great name I mean it doesn't doesn't like I'm sure there are people who are like well but it doesn't scream socks just call it like call it feet mittens or call it You're hired.

49:43You know, whatever. Did anybody say that to you? Call it something that screams out socks. We had somebody tell us that you have to write socks with an X. S-O-X. It's the only way you're going to stand out. Spanx. People tell you crazy things. You have to have conviction around the reasons you put a brand together and how you build the world of a brand. Yeah, fair enough. All right. So, so how, I mean, you get, you're getting all these samples back and forth and, and, and I guess we should say like, I mean, doing, doing research about this interview, I discovered a lot about socks, you know, like this arch support in socks and, you know, these like honeycomb weaves and stuff like that.

50:29Um, when did, like at, at what point, you know, cause I know you landed on like mainly cotton and merino wool. Probably. I think you also do some synthetics now, right? Yes. Yeah. Cotton was what we launched with. Cotton. Okay. And, uh, a different kind of toe seam and like this honeycomb arch support. So how many iterations of the samples did it take? Do you remember before you were like, that's it? We got it. Hundreds. Hundreds. Hundreds and hundreds. I mean, just for the calf sock, tension level alone, it took us 137 tries. Tension on the foot. On the calf. Like if you pull up a sock, like on a calf sock, you pull up a calf sock, right?

51:15You want it to feel comfortable and not too tight, but not so loose that it'll stay down. And you want it to be supportive, but you don't want it to leave a mark. so we just were these are the types of details where once you're in it and you have the luxury of time like this is the type of this was the approach right and this is still sort of the way we approach product design today but that is it right like thinking about each little detail and the idea that all these little things that nobody thought about or cared about could when you put them together just come up with something that's greater than the sum of the parts right like you don't have to remember the honeycomb arch support or a seamless toe or a wide-stitched heel or that we used, you know, Pima cotton.

51:58But when you put it on, the feeling is this feels different and I like it more and I want to wear this every day. That's what we were going for. Yeah. You know, it's interesting. I'm looking at my sock now here and I got a seamless. Yeah, I guess that toe, right? There's like that little toe thing there. And I never thought about that really, you know? Yeah, this is a product that we discovered most people don't think and or care about. Yeah, this is where the opportunity comes in, right? Like you're a thoughtful guy, but you haven't spent a lot of time thinking about, well, it's not something people think about.

52:38It just wasn't, right? Like we didn't, Dave and I didn't grow up dreaming of being in the sock business. I mean, nobody did, right? Like this is something that we stumbled upon, but it was, it was an opportunity to test out an approach and a brand and do something great. And it was all really motivated because we wanted to make a difference, right? The idea looming out there was how can we donate as many pairs of socks as possible? And that is a real motivating factor when you're building a product. All right. So you have this, so you land on this idea, you land on this sock. And at what point do you feel, Randy, comfortable quitting your job and quitting your steady paycheck to actually go into this full time, full force?

53:26I think things were coming to an end for me at the end of 2012 at Urban Daddy. You know, it was time to move on. It wasn't a good situation at the end. There was conflict. There was, it wasn't ideal. But we were also, you know, things were moving pretty quickly compared to how they had started with Bombas. We started to get a little momentum. him and Dave had left his job. And, you know, there's that moment where you have to say like, okay, now's the time. Let's, let's do this thing. And again, we, we had other things going on. So we had a little bit of safety, but you know, after having a job for six years to be in a position where you're just building something, building multiple things, even it's a moment.

54:15And I think a lot of people face that moment when they're doing this and you just have to, you have to give it a little bit of a leap and you have to have put in the legwork, I think. You know, it's interesting because you launched this product as an Indiegogo campaign, essentially, right? You went out on Indiegogo to raise some money to see if you could get the capital to do a, presumably to do a first run of socks. But it's interesting because now that I think about that, and we're going to talk a little bit more about this in a second, it's kind of, David, it kind of reminds me of your job at Cutco, right?

54:47Because you weren't selling people knives. You were a college student who was genuinely earnestly trying to gain experience, and that was a gateway in. And then you had this great product that you could also sell. And it seems to me that there's a connection between what you were also offering here, which was the Indiegogo campaign was saying, hey, you can help give people socks, and you can also get a pair of socks too. Is that a fair kind of analogy? We felt like this was really our one shot to get it. And so being relentless, I even think to a certain degree, shameless. I found a way to download my entire Gmail contact database.

55:31And I don't mean like just the people that are like in my contacts. I mean, every single person that I'd ever emailed with ever in my Gmail, You can like find a way to do this in Gmail. And I remember downloading this like 12 ,000 person email file and sending it out, not knowing who was on it entirely. And I got response back from people who are like, this is awesome. I sold you a set of concert tickets on Craigslist four years ago. Like I'm going to buy a pack of socks. And then I had people. Wow. You just everybody would ever person. I went to like, you know, sleep away camp with eight years ago was like, haven't heard from you since.

56:07This seems interesting. I also had a fair amount of people be like, bleep you, don't ever email me again. Stop spamming me. And I was just like, whatever. It's actually amazing because you really, I mean, you really had developed all of these tools that would lead you to this moment, right? Like, Randy, you know, you're sort of copywriting and David, like, selling, just selling stuff and understanding, like, how to sell stuff. And it all kind of coalesced, it all kind of arrived at this moment on Indiegogo. I'm just making the observations on a question. It's just so smart how you sort of landed on this approach.

56:51Because, you know, Indiegogo, you're not going to raise that much money, you know. But if it works, if it catches fire, it can get a lot of attention. Yeah, and it's attention. Attention that we were after, validation, right? You know, our friends and family said we loved it, but you know, your mom loving your socks is not that hard, but a complete stranger putting their money in to say, I will, you know, buy this product before it's available to me and wait however many months to get it. That to us was enough validation to keep going. All right. So you launched an Indiegogo and I think the goal is to raise 15 ,000, but you had raised within, I think the 30 day period, like 140.

57:35We did$25 ,000 in our first day. I mean, now the idea was to do how many, like initially, what was your idea? How many pairs of socks were you going to make? We weren't. $15 ,000 was the minimum amount we needed in order to place the minimum order production run for like all the styles and colors that we had. But we knew that if we only got$15 ,000, it was probably curtains. So you needed to make more money, to raise more money. With$140 ,000, now you've got to fulfill all these orders too, right? And so, yeah, I mean, did you just basically go to the factory and just hit the go button and say, let's go?

58:21And I'm assuming you just had one skew, just one kind of sock at that point? Or did you have multiple colors and options? Or was it just like, you're going to get ankle white socks and that's it? Now we had a calf and an ankle in a black and a gray base with four accent colors. You could like select what you wanted on, you know, when you like fulfill the order. And so about halfway through when we were at about$50 ,000 of sales, we, that's when we actually hit the go button on the order. Cause we're just like, well, we've clearly surpassed, right? We've got plenty of time left. Like this is way more than we thought.

59:04We placed the production order so that we could at least beat the lead time that we would have on promising people when they would get delivered. And there was a thought, well, get them delivered before the holidays so that if we have more inventory, people could come back and rebuy for Christmas. What was the plan once you got the socks delivered? Because this is like, I mean, Shopify is around and kind of this, you know, these kind of drop shipping thing is starting to happen. But, well, I mean, I'm assuming you're going to get a huge container, maybe a half a container, you know, full of socks.

59:39And then what, are you guys going to package it yourself and slap on UPS labels or USPS labels and send them to people? Well, Randy, do you remember we, like, looked at each other and we did the math. And we said, to pack 2 ,300 orders, and this is where my brother came in with his, like, finance brand. And he was like, well, it would probably take the four of us two weeks in a garage to pack 2300 orders. No way. And we looked at each other and we were like, no, I don't think that's a good use of our time. It's not us. So Andrew went out and found a local 3PL that was willing to do what at the time was a very small run.

1:00:20What's a 3PL again? A third party logistics provider. Third party logistics. Like a warehouse that would do the pick packing and shipping of the product. And so they would handle all that. All right, so you had 2 ,000 plus orders to fulfill. Was it quick? You're just reminding me now about all the Kickstarter campaigns I've contributed to and never got my product. Yeah, this was a big issue. Where's my damn drone that I bought in 2014? Sorry about your drone, yes. I know. I gotta go back to my Gmail account and find that thing. But how quickly were you guys able to get these socks to people? Well, Dave was smart about this, right?

1:00:59Because he said about halfway through the campaign, he hit go on the order. And that's a little risky because we don't know exactly how much it's going to be. But we were very, very adamant about trying to deliver our product within the window that we promised. And then following up every person that ordered with a personalized email, thanking them. And listen, you launch on. How did you do that? It was, we did it in phases, right? like every week there would be order did you use the ai software that you were selling back in the day uh david to make that work or was it was it was a human beings typing thank you for your order you use some of our old email tricks from urban daddy to yeah you know personalize personalize them yeah but you wanted everybody who ordered to get an email we we had a product and now we had customers and we had orders to fulfill but we didn't have a website and we didn't we didn't really know what to do next because we weren't sure how this was going to go right and we started to see it happening we started to plan yeah okay what do you do now okay like we know how to build websites we've done i've done this for lots of other companies but now you got to do it for yourself and what are we saying and how are we putting it together you know shopify was not the shopify it is now so we had a lot of like technology decisions to make at the time and we needed to move quickly.

1:02:21So this was like a little bit of a period where you say, we've got something here, we've validated it in the marketplace, we've got these 2 ,500 customers, let's build something and then just take one step at a time. All right, you guys, so you have this momentum, and I think pretty, not too long after in 2014, you decide to go out and raise a little bit of money. Initially, I think a seed round, mostly from friends and family. It was about a million dollars that you raised because now you've got to stand up a website and try to get the word out. Because even with the customers that you got from Indiegogo, you now have to build a customer base, right?

1:03:03You need to create awareness around this product. So you need money to do that. And tell me, and then I know that later that year, you raised another$3 million, and this is from angel investors. But tell me with that, I mean, was that money primarily to, for marketing or was it just to make more product? Yeah. So after Indiegogo, we launched the website, shipped the orders, and we kind of wanted to see like, would people come back? Would they be rebuy? Would they tell their friends about it? Yeah. The following few months, we did another couple hundred thousand dollars in sales. In the beginning of 2014, we said, okay, feels like we have something here.

1:03:42You know, as you mentioned, we ended up raising money from angel investors, but at first, you know, I went out to the broader venture community, right? I met with first round capital, general catalyst, Maveron, you know, all the names that we know today of backing up some of the biggest and best brands and companies. And despite having connections or relationships with people, when I showed up with a deck talking about building a sock company, I was all, but, you know, pretty much laughed out of the room. Like how, how big could a sock company be? Or like, you know, it's a pretty boring category.

1:04:23And I think from a confidence level standpoint, that made us like re-question things a little bit too. And so I think as a result of that, we said, okay, like maybe let's not push it as hard as we could. And let's just focus on building a great brand with great product and give back to the community and kind of see where it goes, right? And we kind of were tempered our expectations a little bit. And so as a salesperson, that was pretty hard for me to take. But it ended up being good for us, Guy. Oh, amazing. Right. Because did you raise beyond a Series A? Did you ever raise any more money after that?

1:04:58We brought in a private equity partner, but we never raised any more primary capital. Wow. So you got incredibly lucky that those venture firms decided not to invest because it didn't dilute your ownership stake. I mean, in the end, it worked out great. And it also allowed us to focus the business on sustained profitable growth versus go out, raise$50 million, build a multi-hundred million billion dollar brand, but be losing hundreds of millions of dollars every year, which we're starting to see how that's playing out for those companies today. When we come back in just a moment, how against all odds, a truly lucky chance at a TV show changes the scope of Bombas literally overnight, and how that momentum is nearly derailed with a very unlucky server malfunction.

1:05:53Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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1:08:07Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013 and Randy and Dave have raised some money and they're feeling pretty good. But at the same time, they don't have an easy way to get their products noticed in a bigger way. You know, my dad, he said at some point, you guys should go on Shark Tank. And we said, yeah, good luck with that. You are crazy. And then they get a thousand pitches a week. Absolutely. I mean, what do they say, Dave? 30 ,000 people, companies apply every year, something like that. So it seemed like a long shot. And then out of nowhere in April of 2014, Dave got an email and it was from a Gmail account.

1:08:51So we weren't sure if this was somebody like a friend of ours that was just pranking us or if it was real or not, but it was, it was a shark tank producer reaching out and asking about our company. They had seen our product on Indiegogo, our campaign, and they were curious about where we were in the process. And that started the conversation for us getting on Shark Tank. Wow. Did all four of you fly to LA to film it or just the two of you? All four of us went, but Randy and I went on the show. All right. And I know the way it works is you don't meet the sharks until they like open the screen. They're like, and well, you know, and here are the sharks.

1:09:24Like, right. You don't really like schmooze them beforehand. No, there's no contact. You are basically in a bubble for a week. They know nothing about us. We only know what we know about them from the TV show. That's it. Right. Okay. Nervous. You must have been nervous as hell. I'll tell you this. The week that we were set to film Shark Tank, my father passed away. So he passed away on Father's Day in 2014. And we were supposed to fly that day to LA. So we almost didn't go. Dave and I had a conversation. they you know we talked to the show we decided we were keeping the date uh i went down to florida where my parents were living at the time and my mom and i dealt with the arrangements we had like a really like uh interesting conversation and i said you know i'm not gonna go dave will go on by himself we'll figure this out and she said to me you know if your father knew that you were skipping this opportunity because of him, he'd be furious at you and you have to go.

1:10:31And we've done all the work and the funeral will be next week and, you know, go. Um, which was very hard. Uh, and I got on a plane and Dave picked me up at the airport with Aaron and Andrew. And the four of us had a moment where, you know, we'd been preparing for this. So we felt prepared in a weird way. This took a lot of the pressure off because it just, you know, it was an important moment, but it also, you know, it was just in a very different space. And Dave and I were sharing a hotel room that week. Right. And so I was there with my friend and I was away from my family and it was really hard, but we were here to, to do this thing and it sort of, it galvanized us and in at the same time took the pressure off.

1:11:18But yeah, to your point, you get to that moment and it is a moment of nerves. They open those doors and you walk down that hallway and you think to yourself, hey, that looks like Shark Tank. And you're like, oh, okay, I'm on Shark Tank. And you walk in that room and then it's on. All right. So you guys are on the set. Make your pitch on Shark Tank. Bombas are athletic leisure socks engineered to look better, feel better, and with a mission to help those in need. The mass market athletic stock hasn't changed in decades. Same basic colors, same styles, same cardboard feel until now. But as soon as you finished with your pitch, you got like lots of pushback from the Sharks.

1:12:01I think at first, like not a single one was interested in investing. But then like at the last minute, one of them, Damon John, who's been on the show, he kind of stepped out. Okay, guys, I'll tell you what, I'll try to meet you somewhere in the I'm going to finance the inventory,$200 ,000 for 17.5%. That's it. No line of credit. I'm financing the goods. I'm already, I'm on the hook for the goods right now. Can we take a moment and call our CFO? No. Your CFO gave you the bad advice. They're ready to ask for that valuation. Dame and John did make an investment. I think the deal, the original deal was like 200 grand for like 17.5 % equity.

1:12:45I guess what a lot of viewers don't realize is that you don't actually have to take the deal, even if you accept it on the show. And then sometimes you can renegotiate the terms, which from what I understand is what happened, right? You accepted that deal on the show, but then you renegotiated the terms? Yeah, you accept the deal in good faith. It's kind of a good faith clause. And, you know, a big part was let's even see if the episode airs, right? Cause they, they film something like 150 businesses and then they air like a hundred, right? So it was a 33 % chance that we weren't even going to get on air.

1:13:22And so we told Damon or Damon told us like, let's see if this thing comes on air and then we can talk about it. Um, because kind of no sense in doing anything if it gets cut and we were out fundraising at the time. And so we were like, all right, we're going to run our business as if we were never on shark tank and we never got a deal, um, and continue to fundraise over that summer. and beginning of September, we get a phone call that says your episode is going to air in three weeks on the season premiere. Get ready. Wow. So pick up the phone, call Damon. We said, all right, well, we've got to get a deal done.

1:13:59And we just closed our million dollars of seed funding and basically said, look, we don't need any more cash. So, you know, can we renegotiate the deal to provide you with some upside with no kind of cash investment. And the two of us, Damon and Bombas, came to an agreement that both parties I think were pretty amicable with and set the foundation for a really, really amazing relationship that has only built over the years. And I think both people feel really happy with what they got out of it. Mm-hmm. All right. That episode airs. and what happens to i mean do you see an instant spike yeah our website crashed guy and it was terrible i mean yeah that was you know it was like a super joyous moment and a huge moment and then a moment filled with dread and terror i think we were we had a viewing party i mean do you remember this dave like and just looking at each other and thinking we've been up for the last 48 hours, we didn't sleep the night before because we were working on the website and we were like trying to get the website ready for this massive event.

1:15:15We were like trying to scale up customer service people. Cause that's the one thing we heard was like, people are like, Oh, hire a bunch of temporary people to answer the phones and answer emails. Cause like, you will not be able to do this on your own. And so we didn't sleep for almost two days. We're at this like viewing party that we had put on like zombies and then we're getting phone calls that the website's crashing over and over and over and over again yeah it was a nightmare all right so this happens the orders start coming in and is it i mean at this point what what are the hires that you're making i mean are you thinking about you got to come up with new designs you got to come up with a, do you start to kind of expand your team and designers and marketing experts?

1:16:03And what do you start to think about in terms of expansion? Well, I think in that moment, you know, there was sort of a new floor for the business. It's kind of the way we thought of it. We had all these new customers and we had made a lot of promises through this business, right? We promised we'd be donating a pair of socks and how do we show people the work that we're doing on the donation side. We promised a certain level of comfort and quality with our product. How do we ensure that people understand that in what we're communicating and how do we back that up? So customer service became super important.

1:16:38Dave mentioned he took every customer service call for the first year plus of the business. We would be out at a bar, he'd get a call and he'd go outside and disappear for an hour talking to a customer. But in that shark tank moment, we brought in a team and that was the beginning of our customer service team and our happiness guarantee. And then we realized that like we had, we had brought somebody on to help fill that marketing gap, right? We just always wanted to surround ourselves with people that were smarter than we were about the things that we didn't know a ton about. We had our skill sets, right?

1:17:10Dave was a great leader, a salesperson, right? Aaron and I could handle the creative and the design. Andrew was running the finance and operation side of things. And we just started to fill in the gaps around us. So eventually that was customer service, marketing, product design, right? These were, and then we had a sort of like GM and PR figure was our first employee, Emily. And like this early team started to really galvanize around what we were doing and all with the same attitude of let's figure out the things that we need to do to keep building this, to keep pushing it, to keep growing it and be really honest about what we don't know.

1:17:49Yeah. I think this is an important moment to though interject that you're not a pretty high pinnacle moment so in the first 13 months before shark tank we did about nine hundred thousand dollars in sales pretty organically and then in the two months following shark tank we did 1.2 million it sold out of every single item of product that we had leading into holiday and we felt like we were on top of the world and we just closed this million dollar seed round and i think you put you know three people like me, Aaron and Randy in a room, right. We're pretty optimistic, you know, growth focused. And we were like, oh, like, let's go for it.

1:18:30And Andrew really became like the voice of reason from a CFO perspective and kind of is my brother and really instilled this moment of, you know, let's focus on continuing to build a good foundationally unit economic positive business that generates profitability and we weren't going to sacrifice profitability at the expense of growth. So because we didn't feel like we were getting the recognition or validation from the venture community, that this might be a little bit of a harder road for us to go down. And I think it was also the moment where we looked at the brands and companies that we admired most, right?

1:19:12The Nikes, the Lulus, the Under Armors, the Patagonias of the world, brands that had endured the test of time over decades and decades and decades of growth. And the one consistent thing that we found in those companies that was different than our peer set of the Aways and the Warby's of the world is that they didn't grow by raising hundreds of millions of dollars of capital and trying to skyrocket the highest valuation possible in a short amount of time. They did it brick by brick, slowly over time, sustained growth year over year, over year, over year. And that was the playbook at that time that we kind of at that moment was a pretty pinnacle moment for us to say that, you know, we're not going to try to be the biggest company as quickly as possible.

1:19:56We just want to be the best company and be around as long as possible. Yeah. I think you reached profitability by year three. We did. We were profitable in year one. In year two. We made a lot of capital investments in inventory mostly because we were growing so fast that we were just like, we've got to stay on top of inventory. And inventory became the cash crunch for us always. Every single year heading into holiday where we do about 50 % of our business, that September PO order was always very expensive. because we're front-loading these costs and wouldn't really get those back until the books closed at the end of the year.

1:20:40So I wonder, I mean, you're growing every year over year over year and COVID hits in 2020. And most D2C companies were freaking out. Of course, it turned out to be a good year depending on the company, including for you guys. But before you started to see a spike in sales, were you preparing for the possibility of layoffs and of retrenching? 100%. I mean, we watched our business go from like 50 % year over year in growth in that January to a negative 12 % year over year growth in March of that year. and I'm grateful that within a matter of weeks it had rebounded and we were back at like 30 % plus year over year and then 40 % and then we were like had comps that were insane.

1:21:34But yeah, I don't think anybody was prepared for that moment. I actually think the biggest fear for us is that we had built this amazing, incredible culture that we felt like fostered innovation and efficiency and was so collaborative. Um, and we just built out a brand new 33 ,000 square foot office in union square, you know, millions of dollars of investment took over a year to build it. And then two months later, everyone's remote. And we're just like, how, how do we operate? How does the, you know, are people going to show up to work anymore? Are they, you know, just going to mail it in or you turn their videos off or whatever.

1:22:16And probably one of the proudest moments I've ever had as a leader was we shut the office down on that Friday. And by Monday, everything was like up and running and like people were showing up to meetings and they were like, yeah, it was almost like, it almost like rallied us. I think people were like, and, and, and this is a point actually where I think the mission comes back, right? Because totally it became this moment where we're like, wow, this is actually a time where we can step up and use this other arm that was mostly used to just distribute socks. And now here we are as a platform that's helping a lot of our peer brands learn what it means to give in times of need.

1:23:03What is the ultimate, I mean, you do have investors and people have put in some seed money and you're profitable. But at some point, you either sell or you go public. So I know there's been some chatter about maybe going public. Tell me about the possibilities of selling the company or going public or something along those lines because obviously you do have investors. You have some investors involved. Yeah. I think the way we think about that is we're incredibly opportunistic. We didn't design this business from day one to say, oh, it's got to be X billion dollar valuation or we're going to sell it to this person.

1:23:52Or I think, again, in hindsight, looking back by not having influence from large institutional partners early on, it allowed us to really kind of make up our minds and decide that, like, we're just going to run a great business. and if someone comes and is interested in buying us, we'll talk to them. And, you know, if it's a good fit and we feel like they'll be good stewards for the product, the brand and the mission going forward, then we'd entertain that. If not, you know, and there's an opportunity in the public markets to kind of fortify, you know, what we've built and, you know, help us kind of build the dream that we're looking to build in the future, we'll go that route too.

1:24:37You know, when you think about this, this, you know, the partnership and you guys sort of meeting at this company and kind of batting around ideas and then coming together and building this brand that is really big, you know, and, and even the fact that you got, you couldn't raise capital and all these things that happened along the way, the fact that your godfather happened to be involved in the sock business. How much of this do you think has to do with all the work that you put in, the skills that you brought to the table, and how much do you attribute to luck? So I practice stoicism, and one of the great stoics is Seneca.

1:25:17And he has a quote that says, luck is when preparation meets opportunity. And so I think for me, we were very opportunistic and we were really prepared. You know, we we put ourselves in a lot of these positions, right? We saw this quote and decided to do something about it. We went out and researched product, but then led us to my godfather, which that, you know. So I think a lot of certainly luck that played in part to the moment in time in which we formed this company to all the fortuitous events that have led us here, right? Yeah. It's a combination, of course, right? That's kind of the only answer.

1:26:11We time things well, which feels like luck. But, you know, everything that led us here personally, the two of us to that moment, the four founders to this moment to start the company. And then the things that we committed to doing and that we stood by through the years, you know, things that we've put against tough decisions and core values. Dave mentioned, understanding what we're great at and what we need help with being humble leaders, like really committing to, to doing something that benefits our neighbors in need, like all these ideas, like that feels like the hard work. And then let's, it lets you be opportunistic around some of the lucky moments and capitalize on some of the lucky moments and things like that.

1:26:58So it's a wild combination, and it's been a good ride because of that. That's David Heath and Randy Goldberg, co-founders of Bombas. By the way, didn't one of you guys make a promise to customers that you wrote into your FAQs really early on? Can you tell me that promise? If we get to a million pairs donated, Dave wrote this in. He's promised that he would get a tattoo to celebrate. And we thought that this would take 10 years, right? And mind you, I had none at the time. So this was not like a, oh, whatever, I'll go get another tattoo. I had zero. Right. None. Right. Yeah. So at about the two-year mark, we started to look at each other and we'd say, yeah, we're about to hit a million pairs donated already.

1:27:50And a promise is a promise. Right, Dave? And yes, if you're wondering, Dave did get the tattoo. It's a bee like a bumblebee, which has become kind of a mantra for the brand. The phrase bee better is stitched on the inside of every pair of Bombas socks. And thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyroz.com or on Substack. This episode was produced by Kerry Thompson with music composed by Rumtin Arablui.

1:28:30It was edited by Andrea Bruce with research help from Sam Paulson. Our production staff also includes JC Howard, Devin Schwartz, Alex Chung, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.

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