For many, socks may seem like an insignificant wardrobe staple. But for David Heath and Randy Goldberg, founders of buzzy sock start-up Bombas, socks are not only big business, they are helping make people's lives a little bit better.
Founded in 2013 and backed by "Shark Tank" star Daymond John ("I'm really happy to be part of what they're doing," John tells CNBC Make It), Bombas is often referred to as the "Toms" or "Warby Parker" of socks for its socially conscious business model: For every pair of socks sold, Bombas donates a pair to the homeless.
In fact, the charitable aspect of the business isn't just an afterthought, it's what sparked the idea for the company in the first place. In 2011, Heath stumbled upon a Facebook post that said socks were the most requested clothing item at homeless shelters. The statistic gnawed at him.
"I thought, 'How sad is it that — something I've never spent more than a couple of seconds thinking about [how to pay for] could be seen as a true luxury for somebody else,'" Heath, now 36 and CEO of Bombas, tells CNBC Make It.
At the time, Heath was working with Goldberg at a media start-up, so he told his friend what he'd learned. Inspired by the boom of other buy-one, give-one companies, they thought maybe they could replicate a similar business with socks.
"We didn't grow up dreaming of starting a sock company. I'm not sure anybody ever has. But we got obsessed with socks," says Goldberg, now 40 and Bombas' chief brand officer.
"We looked at every pair of socks in the market [and] we realized that what most people were wearing just weren't that comfortable. And there were ideas and features that we started to notice that we could improve upon, and we just set out on a ... journey to create one, amazing pair of socks."
To begin constructing the perfect pair of socks, the duo worked with manufacturers around the world, testing existing socks then sampling their own versions and giving them to friends to test. It was a challenging time, since they were still working their full-time jobs while hustling on Bombas at night and on weekends from home and at coffee shops.
Friends and family were interested in giving them seed money, but Heath says they chose to bootstrap the research. They believed if they could just get the product out there, it would be a hit.
After all the testing, Heath says they decided to make seven material improvements with Bombas socks for better comfort, including using high-quality cotton and merino wool, reengineering the toe seam, creating a "honeycomb" arch support to hug the middle of the foot and using an improved stitching technique on the heel to grip the foot. Additionally, Bombas calf socks were created so they don't slide down or leave marks on the leg, and for its ankle socks, there's a cloth blister tab to avoid rubbing.
The toe seam improvement was actually inspired by Heath's own embattled history with socks. He has ADHD and as a kid, suffered from hyper-sensitivity issues, so finding a comfortable pair of socks was something he struggled with.
"I tried pretty much everything on the market," he says. "I ultimately resorted to turning my socks inside out, because the toe seam over the front would always irritate me. Whether I was in class or playing sports, I just couldn't let it go. So, in a weird way, starting this company kind of fulfilled somewhat of a childhood problem that I solved."
In 2013, the co-founders quit their day jobs and launched a crowdfunding campaign on IndieGoGo that spring and summer. Originally, they set a goal of raising $15,000 in 30 days, but within the first 24 hours, Heath recalls, they had raised over $25,000. In total, Bombas crowdfunded just over $140,000. With the capital, they officially launched the business that October.
In 2014, Heath and Goldberg raised a $1 million seed round from friends and family. The entrepreneurs also went on ABC's "Shark Tank" and scored a deal with Fubu founder John. (The original deal was $200,000 for 17.5 percent equity in the company, but The New York Times notes that the terms were renegotiated after the show.)
In the two months after their episode aired, according to Bombas, the company did $1.2 million in sales and sold out of its inventory.
"It's been a dream working with them, honestly. They're laser-focused," John says. "I don't even know if they ever call me for anything more than a little bit of words of advice, and they go out and they execute, so it's not been a lot of heavy lifting on my part. They've also taught me about the value of when a consumer feels that you have a social cause that is really amazing and they believe in you, how they will support you."
At first, Bombas offered just ankle and calf socks, but it has since expanded to offer everything from no-show to ankle to quarter and knee-high styles and athletic socks as well as dress. And Bombas socks are not cheap: A 12-pack of women's ankle socks can cost $145, while a single pair of men's vintage stripe calf socks costs $12, and a pair of women's no-show socks costs $10.50.
But people are buying them.
In 2015, Bombas did $4.6 million in revenue, according to the company, then $7.5 million in revenue in 2016 and $46.6 million in 2017, a notable jump that Bombas attributes to its full-team working together on everything from product design and development to marketing. In 2018, its revenue was $102 million, according to the company. The latest valuation of the New York-based company was in 2015 at $15 million, according to PitchBook.
The start-up has had issues along the way. Customers complained about incomplete or incorrect orders and a lack of customer service response during the 2018 holiday season, for example. Bombas says it is committed to customer satisfaction and refunded or issued gift cards to orders that were affected.
Others have questioned the general effectiveness and ethics surrounding the altruistic business model, which is core to Bombas' brand. Some have even called the practice "guilt laundering." But giving back is deeply ingrained in the company and not something it simply puts in marketing, Bombas says. The Bombas team volunteers weekly, according to the company, connecting directly with the organizations it donates to by handing out socks and serving food.
Then of course there's the fact that $12 for a pair of ankle socks seems steep. But Goldberg likens Bombas' pricing model to Starbucks, explaining that pre-Starbucks, Americans weren't spending that much money on coffee, opting to brew Maxwell House at home or purchasing a cup at the corner deli for a handful of change.
"[Starbucks] improved the quality so much and improved the experience around coffee, that they were bringing the price up to three times what they used to spend," Goldberg says. "So if it's 75 cents at a corner deli and it's $2.25 at Starbucks, you're willing to pay extra for a better experience, for a better product. And it's the same thing for our socks."
But as of Monday, it's not just about socks for Bombas. The company launched its first new category of product: T-shirts. The shirts are made with Peruvian pima cotton and are designed to feel soft and cool (kind of like "the other side of the pillow," the company says). Bombas T-shirts cost around $36, and for every shirt purchased, Bombas will donate a shirt to someone in need. The company opted for T-shirts, Bombas says, because of customer demand.
"They waited a good amount of time to do it, they didn't spread themselves too thin," John says of the T-shirt launch. "When their product comes out, it has been worked on and really well thought of and developed."
The Bombas team plans to launch additional categories of apparel and — as a result — donate more. To date, Bombas says, it has donated over 18 million socks and T-shirts, items that are engineered to "specifically meet the needs of people who don't have the luxury of putting on clean clothes every day, such as anti-microbial finishes, reinforced seams and darker colors to show less visible wear," according to the Bombas site.
"Something that we say sometimes is, 'It's just socks.' But when we say that, what we're saying is, 'It's just socks, but look at what socks can do,'" Goldberg says. "You hand somebody a pair of socks who's having a hard day, and it starts a conversation and that's a moment of dignity and then all of a sudden, you have a little bit more compassion, a little bit more understanding, and you've helped somebody out."
"These are the types of things that when you start a business, you don't imagine all the subtle and important things that can come of it," he says. "But the basic concept is what drives all this."
Correction: This article has been revised with Bombas correcting its 2015 and 2017 revenue numbers.
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