591: From $0 to $3.4 BILLION Selling Socks | Bombas (Best of Foundr)

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Welcome back to the Founder Podcast. What if I told you Shark Tank's most successful investment is now worth$3.4 billion? Well, Well today's guests, David Heath and Randy Goldberg are the co-founders of Bombas, the salt company that turned comfort and purpose into a global movement. In this episode, you'll hear how a simple insight about homelessness sparked their mission, the scrappy steps they took to bootstrap from an Indiegogo crowdfunding campaign to a multi-billion dollar brand and their playbook for scaling a DTC business profitably in an era where customer acquisition is more expensive than ever.

1:25So if you've wondered how to blend profit with purpose and scale without losing focus, this is an absolute masterclass you do not want to miss. Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

1:47First question I ask everyone that comes on is, how did you guys get your job aka how did you find yourself doing the work you're doing today does feel like a job sometimes it's funny to say that you know yeah i don't ever really think of this as our job right well sometimes i feel like i work for every a different person every week at the company or it's like god this week it really feels like they're work for kate or something like that you know yeah i think i think our stories are are are shockingly somewhat similar You know, my story is that, you know, I grew up in a family of entrepreneurs.

2:23My dad's an entrepreneur, first generation immigrant. I watched him build a business in the basement of our house into a multimillion dollar business over 35 years. You know, he just retired at 75. And I think whether through genealogy or osmosis, you know, I was destined to be an entrepreneur. I was the kid in the neighborhood who had lemonade stands, walk dogs, clean gutters, anything I could do to hustle for a buck. When I was little, I would do. When it was time to go to college, I went to school for entrepreneurship, majored in management and entrepreneurship and marketing. I think I always knew that eventually I wanted to start and run my own company.

3:15I didn't have kind of the eagerness like right out of school to be like okay this is what I'm going to go and do or you know I've got some great crazy idea I think I was like I want to go work for startups and like learn you know what it's like to be a part of a fast-growing early stage company and I think that that path ultimately led me to meeting Randy where we were both early stage of place at a media startup. I want him to share his story. Yeah. I mean, I guess it was sort of similar for me in that my, my parents owned a business together. My father was an entrepreneur and then, you know, I, I guess I had that ball girly on.

3:56I washed cars and shoveled snow around the neighborhood. Um, but I didn't major in entrepreneurship like Dave. I didn't really, I don't know. I guess it didn't think it was part of going to be part of my career path. And, um, I mean, Dave probably knew it when he met me, but maybe I didn't. I don't know. I think we're both pretty entrepreneurially minded. But I worked in the ad world as a copywriter and a strategist and built my career that way after some other weird right and left turns. But we ended up, like they said, working at a company together and we just became friends. And I think a shared outlook on the world and appreciation for similar things.

4:38Although coming at the work from different disciplines, we made us like good friends and good potential partners. And I think there was a moment where we were like, we're going to do something together at some point. Not sure what it is. It wasn't socks. That wasn't our, we have to start a sock company. Like that's not, I don't think anyone grows up dreaming of that. Right. But, you know, I think you, you talk to a lot of entrepreneurs, ideas come from anywhere. Right. So how did this idea come about? How did you guys start Bomba Socks? Yeah. So, you know, as Randy mentioned, you know, we became kind of fast friends and spent five years working together.

5:20And I think during that period of time, you know, we had this kind of shared experience at this fast growing organization and commiserated over the things that we thought were done poorly and celebrated the things we thought were done great. but we we've found ourselves oftentimes eating lunch together going to the gym together and I think when you spend a lot of time with somebody especially if you're interested in entrepreneurship you know just the randomness of ideas start flowing right you're like what if we sold popsicles to just children like I don't know so like you know these we're like what that already exists it's called an ice cream truck you're like oh right bad idea um but you know you keep your eyes open and are you claiming to have had the idea for the ice cream truck is that you know you know no bad no bad idea to brainstorm um and you know so so we we walked around i think with our eyes open our ears to the ground and and always looking for opportunity and you know i think like all things in life opportunity strikes when you least expect it and i was scrolling on facebook one day and i came across a post that said socks are the number one most requested clothing item at home shelters and i remember immediately feeling both surprised and sad i was like that's upsetting that an item of clothing that i personally never spent more than a few seconds a day thinking about is perceived as a luxury item for hundreds of thousands of people here in the United States and even more so abroad.

7:00When I remember going over to Rainey's desk and sharing the quote with him and seeing kind of a similar look come over his face. And at that moment, we weren't like, we've got it. We're going to do a one for one stock company. I think we sat with it. We were like, what can we do? Let's go out and buy some socks. And so we carried some socks around in our bags to and from work and handed them out. And, you know, this is early 2011. And, you know, I think the the light bulb went off when we kind of connected the growth that Tom's shoes had been experiencing. They were in their fifth year of business doing hundreds of millions of dollars.

7:39Warby Parker had just launched and, you know, took the one for one shoe idea from Tom's and applied it to eyewear. and we were like maybe this is the solve maybe we can donate a pair of socks for every pair of socks we sell um but never had aspirations of like it being this massive thing we're like you know this should be a fun little hobby you know maybe we'll create some cool fun socks like on our path to our real business you know idea um and yeah we just started working on it and uh because they always say like the rest is history yeah wild so indiegogo crowdfunding campaign you guys raised 140 000 on there what what happened next like how did that happen um was that was that the the pilot to launch and and to really validate the product or you guys had already got some validation and traction well i guess we had validation from like our parents and some friends and some strangers at the gym but this was our first you know public moment with the product this is that was the whole point of it was all right let's see if some strangers are interested in this idea and you know we always say like when we wrote this script for the video for for our indiegogo campaign that was kind of the the writing the covenant of the bombas brand you know like we took three months probably to write that script and we would probably take three hours to do something like that now but at the time it was the wrenching work of making sure everything was in the right order and the ideas were written down and memorialized the right way and that was an important step for us um and it gave us confidence and then we had that video and we worked that that campaign like it was a full-time job a lot of elbow grease to create the success in that campaign um and that that got us to a point where we had a couple thousand people who had believed in it and who had signed up.

9:43And the nice thing about that was we got those email addresses. And we launched our website from there. And we got it live and we go, okay, now what? So that's sort of a moment. I think a lot of, I talked to a lot of founders where they have that, they were fighting hard for something and then that happens. And then you go, oh, right. Like now what? And how do you get people to come shop here? And we're like, okay, we know email. We worked in a company that was pretty good at email. We've got this list. Let's start there and let's build it. And let's be smart about where we spend our money because we don't have any.

10:20And let's think about the things that all four founders do really well. And let's use those skill sets as sort of free labor until we can afford to hire more people. And it's just a lot of the early work, I think, looks the same at a lot of companies where, you know, you're pushing really hard on things that seem so important. And then further into it, you get those things become easier and it becomes secondhand and you're building, you're building work on work that you don't even realize you're doing. And you're building hopefully the foundation of something great that's appreciated in the marketplace and good timing has a good fit and you get a little lucky and you're a little good and you surround yourself with really smart people and advisors.

11:01And, you know, that was sort of the early days. You know, I think sometimes we would look back and be like, wow, we got a lot done. And if Charlie thinks we're moving really slowly. And I don't think we can underscore that time in the business enough because I think, you know, everybody thinks look from the outside looking in, you know, oh, it's a total overnight success. Right. Like they just hit it out of the park or they got lucky. And yeah, luck did play a part along the way. But, you know, I think one of the greatest tragedies to happen to kind of entrepreneurship over the last, you know, 10 years, this is this idea that like anybody with a idea on the back of a napkin can go raise a million bucks for an idea.

11:50and you know it's especially harder for those that don't have the means or the network or the access and you know we did this the old-fashioned way right we like bootstrapped out of the gate we we built an indiegogo campaign for five thousand dollars we like put our money together we we stayed up late worked on weekends while we had jobs you know you know putting this campaign together, you know, and then even then, once we had initial traction and success, you know, everyone was like, oh, so you're going to go out and raise money, you're going to raise money. And we're like, no, we got to like, see if people want to get the product, do they come back and buy the product?

12:29Do they tell their friends about the product? You know, how can we like get as far as we can without like, you know, putting anything into this, you know, from a monetary standpoint, you know, and before we had done about$500 ,000 in our first, you know, five months before we decided, all right, like now we feel like we have validation. You know, we've talked to customers, the feedback is amazing. You know, people want more from us, you know, and we really did. We hustled it out. Like we did it, we did it the old fashioned way. And, you know, and I think that's a key cornerstone to even the way that we grew this company.

13:05I mean, a lot of D2C brands, particularly you look at, you know, they've raised 30, 40, 80, 100, 200 million dollars. and we've built our entire business on$4 million of capital raised, a million of our seed funding and$4 million in series A. Mind you, from no venture funds, no institutional capital, all of it was kind of small checks from an angel network of different people that I went out and made myself. So we kind of built this thing brick by brick, the old-fashioned way. um so you know you don't need access to tenants and tons of capital early on in order to get proof of concept yeah love it thank you for being so open and honest about this because i'm a big fan of bootstrapping too and i'm curious um with your guys one for one model how do you like in those early days how did you balance that desire to give back but while remaining profitable were there many mistakes early days that you could perhaps share with with this model because you know as you said you guys were bootstrapped and haven't raised much capital i mean listen a little bit of this was luck in terms of the margin structure of the category that we're in but from day one we were donating a product for every product that we sold it was not there was no chance that we would compromise that.

14:33We understood the power of that. And we started this business to help solve a problem in our community. So if we weren't donating, it wouldn't be bombings, right? It just couldn't, these things, it couldn't exist without it. So when we would meet an investor who would say, you know, how you're giving away half of my profits by donating a pair, like Mr. Wonderful said on Shark Tank, or a lot of people said this to us along the way. Like if I had to be honest, like I don't know how the donation model scales, but we built it into the unit economics from the beginning. I like to think of it like learning a foreign language, right?

15:10Like the earlier you learn it, like when you're a kid, the easier it is and the more fluent you are at it. And you know, you can't remove it later on. You just know French or whatever. So it's the same thing because we started so early because it's so foundational to who we are. you know the business benefits are clear to us it's a flywheel for our business the the idea of what it what it is it's why people are a lot of our customers it's the number one reason people purchase our products you know it's sort of like it is who we are so we couldn't you know the investors who got it got it you know and and that was that and those are our people and you know for us, it was just profitability had to come with that included.

15:56There was no way around it. So that just made us figure it out. And listen, if we weren't able to figure that out, we wouldn't be sitting here today. It wouldn't be like we would have abandoned it and just been a sock company with crazy designs or something like that. That wasn't interesting to us. Yeah. So it sounds like that that is the core and you guys just made it work. Yeah, I think, you know, it's interesting along the way, we've come up against a number of challenges. And I think, again, I look back at our fundraising strategy. And because we only took capital when we knew that we could take capital that we could spend to get an ROI and return on investment, whether it was through marketing or through headcount, we weren't doing it to solve problems with our business, right?

16:43We said, okay, if there is a fundamental challenge that we have with the business, we have to be able to solve it without money or else we're just going to keep going back to that well every time we have a problem. I think it's the trap that a lot of venture-funded businesses fall into. It just becomes the easy way out. Let's go try this thing. We spend a bunch of money on it. It didn't work. Let's go raise more money. Let's try a bunch of things. It's like when you're actually bootstrapped and your dollars matter, you take the time and caution to really try to scenario plan or what we call war games internally.

17:26You run it on a model where you talk it through to ad nauseum to you're like, I feel like we are convicted in the right direction. And do you always get it right? No. But like, the more time you take, especially in those early days to like, face challenges and think about how do you how can you build structure, or process or, you know, a fundamental approach to how to get past these challenges, rather than just throwing money at the problem. It makes you a better business. And it also trains that muscle so that when you do get big, you know, we're sitting here with a rather large balance sheet.

18:04And it just keeps growing because it's not our instinct to just say, all right, let's go spend some money on it. We're like, let's do the hard work. Let's dig deep and find the answer ourselves. The timing matters there too. If you have a mandate to grow super quickly, that's from a VC investor. it could make it challenging not to go chase after some of those opportunities and not to focus on the thing that you're great at and getting better at it. And that's where I think not having that pressure, allowing our to take the time and make the mistakes that we made, build the things the way we wanted to build it, go a little slower, figure out when we needed to move a little faster.

18:49And like, ultimately, could we have grown faster? I don't know, maybe we've been very fast growth company for the last eight years so there's probably some there's i think we're the sort of proof that you don't have to try and speed through everything and return someone's money immediately and you know if that creates the kind of pressure that creates mistakes in my opinion yeah i love how you talk about this idea of these these constraints so you just have to make it work and you have anything to fall back on. Um, I'd love to shift gears and talk a little bit about Shark Tank and that experience.

19:26Um, can you take us through what that process looked like in the early stages? Yeah, I think this is, this is probably one of those moments of luck. Um, you know, but again, I think we created this scenario in which, you know, luck, uh, luck decided to knock on on our door um we randomly got an email one day and it was like shark tank casting 40321 at gmail.com and i was like this feels like a scam um and they're like hey would you be interested in applying for shark tank and i shared it with randy and i was like this can't be real and he's like just reply let's see and so we replied um and it turns out they use like like freelance, you know, casting agents.

20:14And they said they like, they were like, hey, we discovered your Indiegogo campaign. We love the mission. We love the brand. You know, clearly you had some success. You and Randy seem really comfortable on camera. Like we'd love for you guys to skip the kind of formal audition process and like move into the casting process. And we were like, there's no way this is real. Like, you know, to think back this moment, you know, we're on a conference call with these people and you know every call it got realer and realer um you know over kind of a four month period um and it just kind of consumed us at the time but again we never i think we were really pragmatic about it in the way that we were like look if this happens great you know but the likelihood of us actually filming and then actually airing and then actually getting a deal like we're not going to bet our business on it it's just like approach this the way that we approach everything else, get super prepared, know our information, give it the best shot we can, but set ourselves up to run a great business without it.

21:17And the thing, I think this is another lesson for early entrepreneurs that I hear far too often is that they think that if they just get that one break, that that's all they need. If I can just get on Oprah's favorite things, or if Justin Bieber just sends one tweet about my company or if I get it's like all right well you know you can't bank your company's success on whether you capture lightning in a bottle you know randomly you know um so similarly I think you know we're just like all right let's do it like we always do prepared incredibly well did our did our research watched a ton of episodes saw the ones that did well saw the ones that didn't um and just and just like grinded it out and really did our homework and walked into it um um they ended up you know in the in the tank we got a deal but weren't sure if they were going to air our episode because they're like you know we won't tell you if it's going to air until two weeks before so like you know just wait and see and maybe it won't at all and then two weeks before the season premiere we got a phone call they're like your episode's gonna air we're like cool we are not ready for this at all if it's like a janky little website you know we had like no team um we went from zero customer service i was our customer service person to like ramping up 40 freelance customer service people like overnight um it was intense and our site still crashed and our site still crashed many times many times um but it was an awesome experience i mean you know we did 900 000 in sales pre shark tank in the first year and then in two months we did 1.8 million.

23:00It was a massive growth engine for us at the time. Sold out of all of our inventory. They ended up re-airing our episode on Black Friday. It was a massive moment for us as a company. I think a big catalyst from a momentum standpoint for helping us get off the ground. Yeah, wow. You asked about the early part of it as well. The process of preparing for that show was a very helpful process for the business in general. And I think if you're a young founder or a young entrepreneur and you have a business that's growing, I think pretending that you were about to go on to Shark Tank in like a month is a very good exercise because we had to confront the possibility that they could ask us anything they want on national television and we had to have an answer for it.

23:53So if there was something that we weren't talking about or weren't addressing because it was a touchy subject or we will deal with it later, then we had to stand there and talk about it amongst ourselves in case they asked, are you full-time? We only want full-time people on it. Whatever the question is that you're not addressing with your co-founders or with your employees, keep going through an exercise. You force yourself to talk about everything in a series of interviews, even with other people in your company, I think that would be very useful. That was super helpful for us. Even if we never made it to air, I think it helped us address some of the things that would have been issues later on.

24:31Totally. Great point. Gold. Okay. So can you tell us about your relationship with Damon and what is the best piece of advice that he's ever given you? Yeah, our relationship is great. You know, he, he's been an incredible, you know, mentor and friend to us. You know, interestingly enough, I think, you know, he spotted us early on and was like, you guys have, you know, all of the things that are great about your direct to consumer business are all the things that I see wrong with running a wholesale business, which is what he had kind of been known for. And so every time we've kind of called, asked for advice, he's like, you're the new generation, you're the experts, like keep leaning into what you're doing.

25:20That being said, I think there was a moment, a couple moments in the company where we wanted to maybe expand into other things faster, whether it was selling into wholesale stores or moving into new product categories. and you know he was just like guys your business is growing you know three four hundred percent year over year he's like just keep doubling down on what you're doing it's like stay focused stay diligent you know and just keep doing the thing that like you're doing really well like that's what's gonna that you know that's what's gonna continue to you know fuel your growth you know for the future and if you ever find yourself in a point where growth is slowing then we can talk about these other options but like don't be distracted like you know if if if it's working for you just like keep going at it and then he always says something like rise and grind you know or one of his like book titles you know oh that's cool um so just wrapping and rounding out the shark tank piece what advice would you give to founders or any entrepreneur that is thinking about or wanting to go on Shark Tank.

26:28Yeah. I mean, I do think Randy summarized it well, is that like, be prepared, you know, go through the exercise and, and whether you're not, whether you get on it or don't get on it, you know, it's, it's, it's again, a kind of amount going on Shark Tank to, you know, like saying like, okay, well, I want Bieber to tweet about me. It's like, it's not something you can control. Even if you get into the application and screening process. I mean, about seven times every call that we had with them, they're like, just because we're talking about this doesn't mean you're going to get on the show. Like, you know, they were really, really careful.

27:05And look, we showed up to set with 140 other businesses and they're like, by tomorrow, 70 of you will be gone. And by the next day, another 30 of you will be gone. So like, even people that they flew out to LA to pitch would get cut. So, you know, go through the exercise, know your business incredibly well inside out, have the hard conversations, talk about the things that you might be avoiding, you know, and then apply and, you know, hopefully you get on as a crapshoot. But I think knowing your business again, as Randy said, is probably the best piece of advice we can give you. Okay. Switching gears just around e-com, direct to consumer, obviously you know you guys started around the time when shopify and you know a lot of e-commerce business was were starting to pop up now if you fast forward almost 10 years later that is rampant right so i'm sure you guys uh speak to a lot of early stage e-com d2c founders like what is what is the biggest mistake you believe um people are making or the most common that you're seeing I mean, I can jump in.

28:18I think that anybody, I think that one of the biggest mistakes is that anybody believes that, you know, just because something is not sold online, that like that's their opportunity. It's like, guys, you know, there's no branded direct to consumer basketball company. Like we're going to be the biggest direct to consumer basketball company. It's like, all right, like that just like you can't put like direct to consumer in front of a product and then think it's revolutionary. I think the other thing too, which we're seeing at scale, is when we started, we started in this interesting moment where the Facebook advertising algorithm was starting to get sophisticated enough where it was powerful, but it wasn't widely adopted, so it was cheap.

29:13When we were first spending money on Facebook, we were getting CPAs for like two to like six bucks to acquire a customer. You go out today, just starting today, you're in the like 20s and 30s. So brands need to spend so much more to kind of get to that point of realizing, finding out who their customer is or what ad works. I mean, we had a tremendous amount of runway from just being able to test very, very cheaply on Facebook to hone in and say like, okay, this type of customer responds well to this, this customer responds well to that. If we tweak the copy here, we're going to see an increase in conversion rate.

29:58But it was so cheap that it didn't cost us a lot to figure that out. If you 10x the cost of that, we would have run through capital so much faster and probably wouldn't have been able on the small budget that we had to get to that proof point of figuring out where our customer buckets were that we could then more efficiently lean in and really pump the scale on. I think they think that, you know, I think what we benefit from today is our size and scale where, you know, we have access to data and tools and we're working in the Facebook disruptors group. They're giving us access to new ad tools and platforms.

30:37And we've got teams dedicated to figuring out within the matter of minutes if a piece of advertising creative is going to work or not. And so we've kind of crossed the chasm. And again, I think we benefit from a category that has high margin, is a low considered purchase decision, easy for sizing, available to everybody. So I think that some of the pitfalls that people fall out today is they think, oh, Bombas is selling socks at scale. Well, I can sell toothbrushes or hairbrushes or any other brushes. Brushes and ice cream trucks, just right? Yeah, all day, every day. It's a challenging environment.

31:28We talk often, if we were starting over right now, we wouldn't do it the same way. It would have to be completely different. So we're actually looking at the next generation of companies who are reinventing how to find their customer base, how to market themselves. because there was a model in direct consumer brands where it was raise a bunch of VC money, dump it into a Facebook, just transferring money from VC to Silicon Valley, transferring money to try and build up a customer base at a certain price. And then you run out of money and you raise more money. And there's pressures that we talked about earlier.

32:04We avoided one part of that and not the other part. We had a lot of success with the other part, but it's a different environment now. So, you know, customers are, companies are getting smart and figuring out new ways to find an audience, new ways to, to like grind out like the brand, you know, like customer by customer and being smarter about it. And now we're trying to learn some of that new language in addition to capitalizing on our momentum. Yeah. Blazing your own path here is, you know, looking at the moment that you're starting and figuring out what's the angle, you know, how many times, Randy, along the years, did you have people be like, oh, your million pair video, which was this video we shot, you know, ended up being a Facebook case study, you know, has, you know, over 100 million views online across all platforms.

32:53people are like hey can I get the name of the director for that video I want to create that video for our brand and I'm like no it's done it's over like you can't just do what somebody else just did and expect the same results like no one could look at the dollar shave club video and be like I'm gonna do exactly that for my brand and have it work because the consumer is like no bro that's already been done before like you're not authentic you're not real you're not doing your own thing and so like it's like a sequel right totally like how many how many sequels are better than the original maybe one two yeah like you know like you gotta do something and and even worse than they're kind of like blatant rip-offs um and we just saw it and and you know people would be like i don't get it we did the same thing you did and it's not working i'm like exactly like you got to do something different yeah no that's a really good point that you make um so i'm curious like In terms of channels now for you guys, obviously Facebook ads, it sounds like you guys are doing quite well.