Entrepreneurs

How Daymond John faced failure and ended up winning big

Daymond John speaking at the Iconic Conference in New York on June 7th, 2017.
David A. Grogan | CNBC
Daymond John speaking at the Iconic Conference in New York on June 7th, 2017.

When people fail, they often feel like they want to give up. But for the most successful, like Daymond John, failure is just an opportunity to learn.

Before becoming an investor on ABC's "Shark Tank," John built his reputation in retail, turning $40 worth of fabric into a $6 billion apparel brand, FUBU.

Still, there's something John has failed at selling.

"I have a warehouse full of FUBU socks," John admits on the "The James Altucher Show" podcast.

"Socks are the hardest things to sell," he says. "First of all, if you're wearing them, I don't know what brand they are. They're in buckets and barrels over at Burlington Coat Factory, right?"

So when a pitch on "Shark Tank" from the founders of a sock company came along, John was skeptical. But Bombas actually convinced John to rethink the product.

Bombas sells re-engineered athletic socks. And, for every pair they sell, they donate another pair to charity. Their name comes from the Latin word for bumblebee, and their motto "bee better" is stitched into every sock as a reminder of the business' philanthropic mission.

Bombas co-founders David Heath and Randy Goldberg were working together at a lifestyle website when they saw a post on Facebook about homeless shelters struggling to find socks, according to The New York Times. The idea led to the creation of the company.

"If other companies can do this for developing world countries, why can't we do this to solve a problem that people don't even know is right here in our backyard?" Heath says in the Times.

When Heath and Goldberg pitched the sharks in 2014, they had $450,000 in sales. Although no other judges were interested in the business — fearing the give-away aspect would be too expensive — John was willing to make a deal to invest $200,000 for 17.5 percent equity.

John says the company's online-only model was a new way to think about socks, and a reason he was interested in the deal.

"They were selling socks, but they weren't selling in traditional retail stores," he says. "They were selling them direct to the customer."

In fact, Heath says that was some of John's best advice — to stay out of brick and mortar.

"We had early ambitions of and thoughts of going into retail," Heath says. "[John] actually convinced us that really, e-commerce and direct-to-consumer is kind of the future."

For John, the other reasons why Bombas' business works are simple but powerful.

"Number one the socks are amazing, they have no seams on the front so your toe doesn't get jammed up," he says. "Number two is they donate a pair to the homeless shelter, because the homeless, one of their biggest challenges are the care for their feet."

The experience taught John a lot.

"I started to learn that I can't sell the crap of socks that I have in a warehouse in Secaucus now, but these guys are selling it in a whole new way," John says on the podcast. "So I started to educate myself on new ways to do business."

In the two months after the Bombas "Shark Tank" episode aired, the company did $1.2 million in sales and completely sold out of inventory, Heath tells CNBC Make It.

Now, the company is on track to do $50 million in sales for 2017. The success has also allowed them to increase their donations, from 70,000 pairs before "Shark Tank," to now over 4 million.

Though they taught John a thing or two, he's also helped them with their success. "He's really open minded," says Heath of their shark, "and just generally a smart business guy."

Don't miss: Daymond John broke his 'Red Lobster' rule to do these 'Shark Tank' deals—now they're his top 2 companies, making millions

Like this story? Like CNBC Make It on Facebook.

Disclaimer: CNBC owns the exclusive off-network cable rights to "Shark Tank."