How Bombas pairs scaling impact and profit

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1:17Every step along the way, including the day that you are filming in front of the sharks, they are like, just because you are here filming in front of the sharks does not necessarily. mean that you are going to air. That's David Heath on getting picked for the hit TV show Shark Tank with his then nascent sock company, Bombus. And here's his business partner, Randy Goldberg. They give you no guarantees. If we call you and you do all the work, you may not film. If you film, you may not air. So like you cannot bank at any moment until they call you and say, two weeks out, your episode is going to air.

1:56You have to act like business as usual. They did get the call though, and they held a watch party for their episode. So the moment comes, we're elated. We have friends and family around. We have a team in place. We think we're ready. The episode begins and then we're watching it. By the way, watching yourself on TV when they're trying to make it look dramatic and you're sweating, it's not the most comfortable, you know. So we're watching this, and then you start to get the texts, and then you start to get the calls, and the calls say, the site is down. It's the last thing you want to hear in the biggest moment in the history of your company.

2:35You're pouring everything into this process to get this thing on the air, to, like, be on national TV, and then the site is down, and you just feel like you blew it. Despite that rocky takeoff, Shark Tank helped launch Bombus into hyperspeed. The mission-driven company donates a pair of socks for every pair sold. That's led to more than 140 million donations so far.

3:05You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

3:35This is Masters of Scale.

3:41I'm your host, Jeff Berman. David Heath and Randy Goldberg are two of the co-founders of Bombas. Their story is full of lessons about how to design a product that stands out and scale not just your profits, but your impact on your community.

4:08David and Randy, welcome to Masters of Scale. Thank you for having us. Thank you. Excited to be here. I'm thrilled to have you. Long time wearer, first time conversation. And this is long time listener, first time conversation. There we go. So why socks? Randy and I were working together at a media company and I was scrolling on Facebook as one does back in 2011. And I came across a post from the Salvation Army that said socks are the number one most requested clothing item in homeless shelters. and it kind of stopped me in my tracks where I was like wow here's an item of clothing that I don't spend more than a few seconds a day thinking about and yet this is being perceived as like a luxury item for 600 ,000 people living here in the U.S.

4:51and even more globally and I remember kind of thinking like that's pretty sad and I walked over to Randy's desk and I was like did you know this fact and obviously he had it and I watched a similar reaction and the reason socks are such an issue is because most organizations and shelters don't accept used sock or underwear donations and if you're sleeping on the street for hygiene reasons obviously even for socks for socks yeah i mean foot hygiene is a big issue if you're sleeping on the street a fresh pair of socks means a lot potentially you're walking more or you don't want to take your shoes off at night you're afraid they're going to get stolen all sorts of foot issues come up and this is what we heard and then we would we talked to organizations and they said we have to buy socks and our budgets are strapped as it is.

5:37So we were like, wow, this makes so much sense. We really want to help. We kind of drew the connection to Tom's Shoes. I mean, at that time, I think in the fifth year of business doing a couple hundred million of revenue, really pioneered that buy one, give one model. At the time we were like, well, why don't we see if we can create a fun little sock company? Didn't really think it would be much that could give a pair of socks to the homeless community for every pair that we sold. And that was kind of the spark of the idea. But this was before it was relatively easy to start an apparel company where, you know, a lot of the logistics problems are solved, you know, manufacturing, et cetera.

6:13E-commerce? And the technology was prohibitively expensive at the time. But what's interesting is if you could afford e-commerce at that moment and you could afford to build a site, the marketing was basically free. Now that's totally flipped, right? Because the social landscape was less crowded because they weren't charging for like, you know, I don't think. whatever you posted all your followers would see it right right i mean facebook ad platform barely existed at the time but before we get to marketing how you sell that you have to have a product to sell yes yes so you become obsessed with socks but how do you even figure out how to start manufacturing socks we knew that we wanted to donate a lot right and given the model we then realized okay in order to donate a lot we had to sell a lot in order to sell a lot what product like white space, were we going to fill that was differentiated from what we were seeing out in the marketplace?

7:03And I think when we looked at the marketplace, we realized very quickly, 85 % of all sock sales were dominated by the low cost, low quality commodity type brands. Think of 12 pairs of white socks in a plastic bag. You're going to get a Costco, Target, Walmart, TJ Maxx, whatever. And then the other 15 % was this hyper niche athletic performance focused categories by brands that were super small but focused on running, cycling, basketball, skiing, you name it, right? Hyper-focus. We went down to the local sporting goods store here in New York City, Paragon, and we looked at the wall of socks. And we were like, what differentiates an$18 pair of socks from the sub$1 a pair that you're going to get in this plastic bag?

7:47And the more and more we started to test the product and wear it, we were like, whoa, there's actually a tremendous amount. As you might imagine, if someone's running a marathon, they can't have blisters. They've got to regulate their temperature. It's got to be super cushiony, have the support in all the right places. And that's where the second aha moment came. We were like, why do athletes, why should they be the only ones who are feeling comfortable and supported and having zero experience in the apparel, manufacturing, retail world outside of a three-month stint I had at The Gap when I was 14?

8:23It's a great salesman. Doesn't qualify me. You learned how to fold a t-shirt. Yeah, I did. A lot of t-shirts, which is ultimately why I quit. You know, I remember telling my dad over dinner one night, I was like, I have this idea for the sock company. And he was like, funny enough, your godfather was in the sock business. Turns out he was the president and CEO of a company called Gold Toe. Sure. Yeah. And most people know it's the one with the little gold toe over the sock. He was that in the late 80s, early 90s, and then started a private label sock manufacturing company, which he grew to like a couple hundred million in revenue.

8:57He had brands like Tommy Hilfiger, Calvin Klein. He was doing all the socks for the big department store brands that they just licensed that product out. So we met with him and he was like, tell me what you want to make and I will help connect you to the best factories in the world. And so that was a certainly one of those like luck moments. right where well let's also be honest he said don't do it why he said you're looking to do something nobody wants good socks they want cheap socks they're sold by the dozen pennies per dozen like you're talking about all these high-end features and bringing these niche ideas into a mass product he was jaded by years of experience and he's the first of many people let's be honest who told us don't do it.

9:46But we said, all right, make the introduction. We hear you, Steve, but respectfully, we're excited about this. What kept you going in the face of someone so experienced saying this is a terrible idea? I mean, I think it's just the entrepreneurial drive, right? We were, I think, more motivated by creating something. And we had this mission underlying too, which I think was a big fact. We were like, if we get this right, this could actually help a lot of people. And we didn't have much to lose at the time either. It was a trust your gut. We feel this. We're going to keep going. Yeah, this wasn't something that we were like, oh my God, we need to quit our jobs tomorrow and raise$50 million to go.

10:27We were like, we can go at this at a snail's pace. And if it turns into something, it turns into something. And if it's not, then it's a fun project that I get to work on with one of my best friends and see where it goes. So what was the inflection point from the godfather saying, don't do it. You're going to regret it to getting to the starting line to actually having a product in market. It took two years because we were obsessed and we would test, for example, 137 different tension levels on a calf socks. It would stay up and not fall down, but wouldn't leave a mark on your leg. We just got really into the details.

11:01And we knew at that point that putting on a good pair of socks could change the way you felt for the day. You'd bootstrap this, you're spending your own money. Yeah, barely any. Yeah. I mean, you know. And so when you get that sock where the tension level is right and the padding is right and the feel is right and you're like, okay, we've got this good enough. We're ready to go. What happens then? How do you actually get the product in market? So we knew that we wanted to be a digital brand and we knew that we wanted to try to get some validation in market in the most capital efficient type of way.

11:37And 10 years ago, maybe a little bit longer, 12 years ago, it was kind of at like the high point of crowdfunding, right? Like everyone was, oh, wow, there's this new model. You can go on Kickstarter or Indiegogo and put up a three-minute video. And people may or may not buy your product sight unseen. But there's no commitment to making it unless you hit a certain milestone. And we were like, we're good storytellers. We knew that. And so we were like, why don't we put this out into the world, see if we can tell our story and see if people will care within a pretty low risk. I think it cost us like$4 ,000 to produce a video.

12:16And I think we had a goal of$15 ,000 in 30 days. 30 days. We did over$20 ,000 in our first day. Amazing. $150 ,000 in our first 30 days. and I think at that moment we were like okay like way more people seem to be interested in this than we thought was that terrifying on some level or was that no no it was exciting I mean we've been working on this for a long time it was valid what would have been terrifying is if we had actually just hit our goal and we had to manufacture for$15 ,000 worth of socks and it didn't feel like a win. And this felt like a very big vote of confidence. I think another part of our product validation story that I think gave us a lot of confidence in the product that we were actually producing, Randy and I, we would go to our local gym and we'd be that weird sock guy at the gym that would interrupt people's workouts.

13:10It'd be like, hey, take your headphones out. I saw you're wearing these Nike socks. Can I give you a pair of these? Tell me what you think. And they're like, Like, all right, bro. But then the next day they come back up to you and they're like, yo, those things are amazing. Where can I get more? And you're like, that's a validating proof point that the product, this guy doesn't owe me anything. He doesn't know me, but he wants more of this product now that I've given it to him. So I think validating that, we knew the product was gonna be good and then go out to a digital audience who wasn't gonna touch and feel it, but was gonna resonate with the mission and the product story.

13:42We knew that once we sent the product to those people, that they were gonna love it. So at some point, Shark Tank comes into the picture. Why Shark Tank? We got an email from Shark Tank that said, hey, do you want to try out for Shark Tank? They discovered you through Indiegogo. They actually sent you an email. It was like a producer who had a Gmail unrelated to the show. We thought it was a prank at first. And, you know. It's like Shark Tank casting 13278 at gmail.com. You're like, I'm waiting for this person to ask me for my banking information. Right, right. So you get the email, you validate that it's actually Shark Tank, you come out to LA and you get on set.

14:23And what happens? It's a pretty wild process. I mean, the legal alone is daunting. But for us, once we decided that we wanted to do it and that we thought that it would be good for us and good for our brand, we treated it like a full-time job. And it's actually a pretty good process for a young business to go through because they don't tell you what they're going to ask you. They can ask you any question about your business on national television, and you have to have a good answer prepared. So we knew we had to sit down and answer every question that we were maybe avoiding answering at that time about our business.

14:58And then we just did all the research. We looked at every single episode. We compiled a list of questions. I mean, we treated it like we were going to win Shark Tank, like it was a game show. And like the prize was not embarrassing yourself on national TV. Did you think you would actually raise money or did you think that more is that this is incredible marketing and exposure for us and if we raise money, fine? I think we were open, right? We obviously saw the sharks all had tremendous success in what they did. We had a hierarchy of sharks that we thought were better fits for us than others. Ending up with Damon, built a billion dollar apparel brand, New York based, obviously was our number one choice.

15:35It's who we ended up with. But we had a strategy for every single shark, every type of offer. And I mean, it was a very exciting proposition, but we still operated the business like it wasn't going to happen. right we said like we need to continue to fundraise we need to continue to market and build this brand because every step along the way including the day that you are filming in front of the sharks they're like just because you are here filming in front of the sharks and just because you get a deal does not necessarily mean that you are going to air so like you cannot bank at any moment until they call you and say two weeks out your episode is going to air, you have to act like business as usual.

16:17Right. So how big was the response after the Shark Tank episode? The first weekend we did like 300 ,000 in sales. And our website crashed. Yeah. Up until that point from August, including the Indiegogo through September when the episode aired. So roughly 13 months, we'd done about 900 ,000 in sales, all organically bootstrapped, some press here and there. And then night of, weekend of, 300 ,000 in sales. Two months after, collectively 2 million in sales. They re-aired our episode on Black Friday that same year. Our site crashed again. Two weeks before Christmas, we completely sold out of every piece of inventory that we had.

16:59So how did you end up solving the inventory problem? I mean, this is incredible demand, but it's not linear. It's not consistent. So at the time, you think these things are going to sink you. Your site crashes in the biggest moment for your company. And you think we blew it. You run out of inventory. You think we blew it. But you work your way through everything like every other problem. And we had to get smarter about inventory planning. Raising money was a part of that. Having funding to be able to buy more product. Also, having a strategy of our product early on where everything was sort of core and we weren't yet designing seasonal product allowed us to buy more inventory.

17:36If we could afford it, we could buy it, and we knew we could sell it. If one color sold out, we were pretty good at selling the next color. There was a lot working in our favor that we didn't know when we entered the category, but it really helped us with that piece of it. Still ahead, we talk about how Bombas has kept to its core values amid rapid growth and how they built a nationwide network of giving partners. Stay with us.

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19:48So if you're scaling, make it simple with Deal. Go to deel.com slash mos and get up to three months free.

20:22How you all developed those systems and made that work? When we first started, we had the idea and we said, okay, we've got to make the best socks in the history of feet so that we can donate as many products as we possibly can. And we set a goal to donate a million pairs of socks in 10 years and we're over 140 million items donated. But in the beginning, we didn't know how to make a sock. We didn't know how to donate a sock either. The making part, we figured out and it took us a couple of years. The donating part, I mean, listen, we just Googled it. That was our strategy. Like this was a beginning of who's donating socks.

20:56We found a organization in Ohio called Hannah Socks, still one of our giving partners. It was started by a girl. I think she was seven at the time. And she was serving dinner Thanksgiving at a homeless shelter. And she saw somebody who was wearing tinfoil around his feet. And she asked her mother, why is that man wearing that? I mean, she's seven, right? So she started an organization where she's donating socks to shelters in her local area. We called this organization. And in the same way that we kind of thought Shark Tank was a prank, they were like, wait, you just want to give us all the socks?

21:32And we were like, yes, can you take them, please? and that was our first giving partner and we would send them socks when we made sales we created a schedule we'd send them product and eventually we started talking about the needs of the community and how we could change the product to i don't know make them more technical and specific to serve the needs of people facing homelessness what what are the different needs so we had an antimicrobial treatment to prevent the growth of fungus. We use darker colors to show less visible wear, and we reinforce the seam. So on our core socks for our paying customers, we tend to use a seamless toe, which is really light, but less durable over time than reinforcing the seam.

22:17So things like that, the same base yarns, we're trying to make really smart products for our non-paying customers and do research, market research, having conversations with that customer the same way we do with our paying customers. So we adjusted and adapted those products over time based on the conversations we're having with this organization. And then we started to add more organizations. And eventually we said, our customers are in all 50 states. We need to be donating in all 50 states. So we started to add giving partners everywhere across the country. And then we started to let people apply to be a giving partner.

22:50And organically over the years, we've built up an infrastructure of giving. And we have a pretty advanced network of 4 ,000 partners across all 50 states. And our same fulfillment partner that we send to our customers is sending product to our giving partners in the shelters all over the country. And we have this logistical expertise that we've built up for donating product as just a natural extension of how we've run the business. Wow. And how many socks donated to date? 140 million items. So that includes socks, underwear, slippers, and T-shirts, our forecast. Socks is the bulk of it. But the last three years, we've introduced other products.

23:29Yeah, incredible. I mean, 140 million units. It's like a hard number to wrap your head around. It is. I mean, and an extraordinary thing. I mean, think about all the lives that have been changed by that decision and by the focus on that. It's extraordinary. So thank you. One of the challenges that we talk about a lot is, especially in the gravel road phase, you start out a dirt road and hopefully you get to a paved road. of it in that gravel road phase is, you know, companies literally create, you call them departments, but they call them divisions in a lot of companies. It's kind of a terrible word for it.

23:57Yeah, it's a great point. Right. And managing culture consistency, keeping those values front of mind is really hard in that phase. You all seem to have done an incredible job of that with your values deeply infused in your company. As you've scaled, how have you kept that front and center for your team? Well, I think we talk about it and prioritize it. And we don't always get it right either. We survey the company every year and ask how we're doing on these things. we work on the areas where we need to improve we have to shift and be honest about that we're not 15 people in sitting around one table anymore and you have to adapt things but you have to decide what those core values are like dave was talking about right what are the things that you're just unwilling to compromise on how do those shift over time and what makes sense for a company at your scale what can you actually do how do you serve the good of the company and make people you know it's the balance of having people come to you a little bit with the things that you believe in and also listening to where people are and what the world looks like and how people want a company to serve them in their careers and finding that balance and being open with people and listening.

24:57It's not rocket science, right? It's just making sure that it's an important thing that you talk about. We sit around at our executive meetings. We talk about these things. I also say from day one, our core values have been a large, it's 75 % of our interview process. Like every person who's interviewed is given a core value to test the person against. And so it becomes this filter of people. I think naturally our brand and what we stand for attracts a certain type of person. But then this becomes the, you know, the filter by which we say, are these people legitimately here because they want to be a part?