March 10, 2020

How to Do the Right Thing...and Make Money

How to Do the Right Thing...and Make Money

You know that feeling when you change the toilet paper roll? Or fill the office Brita? Or say “it’ll come out in the wash” instead of Venmo requesting your friends?

You know that feeling when you change the toilet paper roll? Or fill the office Brita? Or say “it’ll come out in the wash” instead of Venmo requesting your friends?

Being a B Corp feels like all of that at once. B Corp companies tick off a long list of boxes, from sustainability to community, to “balance purpose and profit.” Like Bombas, the digitally native sock company with a cult following and a give-back model.

This week on Morning Brew’s Business Casual, Bombas CEO Dave Heath explains why missions to “do good” can coexist with those to “do profit.” Plus why…

  • Authenticity is more convincing than viral marketing
  • Starbucks ought to write the book on product-market fit
  • Venture capital sets any non-tech investment up for failure

 

About that last one...Heath poses some of the hottest VC takes Business Casual has seen. As far as he’s concerned, “there is no silver bullet” for direct-to-consumer retail success...but VCs like to pretend there is.

Listen and decide for yourself. 

While you’re at it...got feedback? Want to advertise with Business Casual? Email us at businesscasual@morningbrew.com.


Transcript

Note: Business Casual transcripts are generated using speech recognition software and human transcription. They may contain errors, although we do our best to avoid them. Please check the corresponding audio before quoting a transcript in print. Questions? Errors found in a transcript? Email businesscasual@morningbrew.com 

 

[00:00:01] [sound of coffee being poured]

 

[00:00:04] [intro music plays]

 

Kinsey Grant, Morning Brew business editor and podcast host [00:00:07] Hey there, and welcome to Business Casual, the weekly podcast for Morning Brew, answering the biggest questions in business. I'm your host and Brew business editor, Kinsey Grant. 

 

Kinsey [00:00:17] And now, let's get into it. So it's my job to curate the themes that I think are going to define the season in business news as part of this podcast. And time and again, one of the major trends that's come up in my brainstorming sessions is giving back. I think now more than ever in recent memory, consumers are making decisions based on their perceived inherent goodness or badness of a company. In fact, the other day, I was at the doctor and she told me she pulled her money [chuckles] out of a bank account she'd had for years because that bank’s investing arm had money in fossil fuels and investments she personally was vehemently against. And we see this happen all the time, most recently with JP Morgan deciding to go green with its own investments. Now, that might be a bit of an extreme example, but it illustrates the point. Well, consumers have a choice. So how are businesses operating in this new kind of woke landscape today? I'm talking with Bombas co-founder and CEO David Heath to figure it out. Dave, thank you for coming to Business Casual. Welcome on the show! 

 

Dave Heath, Bombas Co-founder and CEO [00:01:10] Thank you for having me. I’m glad to be here.

 

Kinsey [00:01:11] I’m really excited talking. I feel like I have to get off my chest before we get into this. I am wearing Bombas socks right now. 

 

Dave [00:01:17] Amazing.

 

Kinsey [00:01:18] Never know like when the shoes are gonna come off. I'm a big fan. I love your socks. They're great—super comfortable. But for those of you who don't know, Bombas started by selling these socks that I am ranting and raving about. you guys moved into shirts as well. 

 

Kinsey [00:01:31] But the premise is basically that for every item that people purchase, you guys give something back.

 

Dave [00:01:35] Correct.

 

Kinsey [00:01:36] Awesome. And you're a certified B corp, which is a big deal when it comes to the kind of give-back business model. It's basically the holy grail for companies that are trying to do good and want to focus on that certification process and your strategy of giving back today. But quickly, before we kind of get into all of the nitty-gritty of B corp, etc., how many socks have you guys sold—do you know at this point? 

 

Dave [00:01:58] Well, yeah. So we obviously we track donations. And so because for every stock that we sell, we donate a pair of socks. I started the company because I learned that socks were the number one most requested clothing at homeless shelters. And so to date, I think we've donated over 35 million pairs of socks. 

 

Kinsey [00:02:17] So when you donate these socks, are they Bombas socks that you donate or are they just generic? 

 

Dave [00:02:22] Yeah. Great. Great question. So when we started the company, we donated the exact same sock that we sold. All right. My thought was I want the people in the homeless community to experience the same comfort and joy that our customers are experiencing. After six months of donating socks, what we quickly learned actually was that the needs of the people who are living on the street are quite different from those of our customers, which may sound obvious. But, you know, when you think about it, at first, we're just trying to do the same thing. And so we then spent six months with working with our charity partners to donate or to design a specific donation sock. These socks are the same core construction of our Bombas socks. But they are treated with an antimicrobial treatment to help prevent the growth of fungus and odor. They have reinforced seams so that they last longer, and they utilize darker colors to help show and minimize visible wear. 

 

Kinsey [00:03:20] Okay.

 

Dave [00:03:21] So now we have a designated donation sock and we started selling T-shirts last year. We have a designated donation T-shirt and similar properties to that. So we design for the homeless community differently than we designed for our customers because they're two different customer segments. We think of them as customers.

 

Kinsey [00:03:40] Different need. Exactly. So it seems like a big part of your mindshare is going to this giving back portion of your business. 

 

Dave [00:03:47] It's in the DNA of everything that we do. 

 

Kinsey [00:03:49] So part of what we're sort of talking about earlier when I was introducing you was this idea that Bombas is a B corp. This has been a trend that we've had on a couple times in Business Casual, but one that I'm really interested to kind of dive a lot deeper into. Explain to me in the simplest terms possible what it means to be a B corp. 

 

Dave [00:04:06] Yeah. So a B corp—first of all, the B stands for benefit. So you are designated as a benefit corporation. There's two different, I guess like, considerations for it. One is it's a certification process and then one is actually now a filing process from a tax purpose. So we are B corp certified, but we still file as a C corp, and have to ask my accounting team what the differences are [Kinsey laughs] from an accounting perspective. But essentially, why we became a B corp—not only obviously for the outward recognition to customers that we're a company that stands to benefit society beyond just capitalism. 

 

Dave [00:04:48] It is an incredibly extensive process by which it's not just saying like, oh, we donate socks so that we're stamped B Corp, right? It is, you have to basically go through this process and certify that in X number of areas or tally points in order to get certified, but it goes from everything from like what your maternity/paternity policy is, what is your sick policy, the way that you are committed to diversity inclusion. What is the way in which you're giving back product or percentage of donations or dollars to, causes in your local community? So there are a lot of qualifications. There's sustainability ones. There's so many subcompartments of—so you can't just do one thing really well and then be like dumping, you know, toxins into the ocean. You have to like qualify kind of a minimum bar across all areas of your business where you are committed to saying we are going to do the best thing possible, not only for our people, for our customers, for the planet, and for the community. 

 

Kinsey [00:05:56] Yeah. And that's something I didn't honestly know was part of B corp certification, that there is this scale and their points that you tally up across a variety of things, like you mentioned. I was researching how you guys got B corp certified. I found it. I guess the scale is out of like 200. Zero is the worst company ever; 200 is ostensibly the best company in the world that doesn't exist yet. A 50-something is like the average company. 

 

Dave [00:06:23] Yeah.

 

Kinsey [00:06:24] But to get B corp, you have to be 80, I believe?

 

Dave [00:06:25] Exactly. 

 

Kinsey [00:06:26] That's crazy that the average company is nowhere near what B corp certified means. 

 

Dave [00:06:31] Yeah. And I mean, you know, it's a lot because look—there are—because we're in a capitalistic society, right. So, you know, I tell people very transparently, I would have loved from day one to not have any plastic in my supply chain, be carbon-neutral, donate product to the homeless community—all of these benefits and commitments to social good require dollars, typically. They're expensive. To go green or to donate a pair of socks—these things cost money and so not every business can be so successful that they can dedicate all of their profits and resources to—especially if you're growing, right, because you run out of cash on the balance sheet. 

 

Dave [00:07:24] There are actual financial considerations you need to have before you just say, like, I'm going to commit to do this stuff. These things take time. But it's amazing that we're living in a time of consumerism—or consumerism is meeting consciousness. And businesses are being rewarded and the expectation of customers is higher, that profits aren't just enough. Shareholders, like the non-financial shareholders, the customers or the people in the community or the planet, want more from and expect more from these companies. Otherwise, they're going to vote with their dollars and go somewhere else. As you mentioned earlier in the introduction. 

 

Kinsey [00:08:02] Yeah. When in the lifetime of Bombas as a company, did you hit B corp certification? 

 

Dave [00:08:06] I think we're three years in and probably around 120-125 employees. 

 

Kinsey [00:08:12] What do you think the everyday consumer thinks of a company when they see B corp-certified? 

 

Dave [00:08:19] I still think we're in a big educational stage of it. I'm sure there's research out there, but I would guess that a very small percentage of customers understand what a B corp is, or maybe they've got some idea like, oh, that's that thing that I guess tells us it's a good company. 

 

Dave [00:08:40] But like by what measure? Again, as a journalist, you didn't realize until you started digging into it, there's a 200-point scale and zero is the worst, whereas average is 50 and 80 is considered good. I don't think that the consumer doesn't know that. And they certainly don't know to what extent does the B corp have to be pervasive through the entire organization. But it's still relatively new. I think it's probably less than 10 years old. So I think it'll take time. But again, that's not—it's not a reason to do it or not to do it. We chose to do it because the right thing and we want it to be a symbol, and we want to be able to say, yeah, we were early adopters of this. Like, we don't do these things. We don't donate socks because we think we're gonna sell more socks. We get the added benefit of selling more socks because we donate socks. But that's not why we do it. We don't become a B corp so that we can wave a flag around and be like, look at how good we are. You should buy our products. We do it because it's the right thing to do. 

 

Dave [00:09:37] And I think, when you see companies—a customer understands and they're, you know, especially in the social media age that we live in—authenticity rules. People can see through like, when a soda company is saying, you know, get outside and go be X, well you’re having 48 grams of sugar in a 12-ounce bottle of soda. 

 

Dave [00:10:02] Like, how can you—you're doing that because you feel like you have to do it, not because you truly believe it, because if you did, then you would stop selling these products and you'd start selling water. So we do it because it's the right thing to do, not because we think it's going to have a marketing benefit to us. 

 

Kinsey [00:10:18] I imagine there is a little bit of a marketing benefit that you like. People love to virtue signal. 

 

Dave [00:10:24] Yeah. 

 

Kinsey [00:10:25] People love to post on Facebook. Hey, I bought these socks and then a homeless person got a pair of socks. That makes them feel good. 

 

Dave [00:10:31] Surprisingly, though, we did a customer survey recently and only 60% of our customers know that we have a mission. 

 

Kinsey [00:10:39] Really? Do you wish that that were a bigger number? 

 

Dave [00:10:42] Of course. Yeah. I mean, not because I want credit for it, but because I want them to know that their purchases are impacting, you know, having a greater impact. 

 

Dave [00:10:52] You're never going to be 100% right. Like somebody is going to pick them off the shelf and never going to know. And, you know, somebody was gonna watch a four-minute video about how we give back. So, I think hopefully over time. So you have to—we're not trying to be a flash in the pan. We want to build a company that’s around for 100+ years. Having that long-term mindset keeps us focused on not going, oh, I got 40% of our customers don't know. Let's start hammering them about our mission in life. These things take time and be pragmatic and practical about how you approach different problems. 

 

Kinsey [00:11:27] I want to talk more about the impact of your giveback mission and B Corp status on the business in just a second. But really quickly, let's take a short break to hear from our partner. — And now back to the conversation with Bombas CEO Dave Heath. So your socks are not the cheapest socks. You know, you could go into TJ Maxx and get a much cheaper pack of five pairs of socks. It might not be as comfortable, but they're definitely less gentle. 

 

Dave [00:11:53] I mean, this is all that's actually exactly where we saw the product opportunity. So I was a consumer of the kind of multipack you buy at Costco or TJ Maxx or whatever. Like a buck-a-sock type of thing. And I saw that when I started looking into the marketplace, I said, OK, there's this massive market of low-cost, low-quality socks. 

 

Dave [00:12:14] But then, there's this really small submarket of super-high performance, really niche-focused category. So I was like, why are these product feature benefits not making its way to the mass market? And so, we always thought that one of the parallels to our business was—and obviously on a much smaller scale—but we always looked to Starbucks. Starbucks didn’t invent coffee. But what they did is when they came to market, everyone's drinking Maxwell House, or, you know, at home or buying a 75-cent cup of coffee at the corner deli or donut shop. They said it's like, oh, actually, if we produce a better product with a better customer experience, we can charge two to three times more for a cup of coffee. 

 

Dave [00:12:55] We did the same thing basically with socks. We said like, OK, normal socks have all these issues. We're going to educate the consumer on what a great pair of everyday socks can be and charge two to three times more per pair. And that was our hypothesis as kind of a business. We didn't know if people were going to gravitate to us. We kind of created the market for it. And it's super-surprising when we look at our customer demographics. We have 25% of our customers earn under $50,000 a year, and 25% of our customers earn over $150,000 a year, and 50% fall in the middle. 

 

Kinsey [00:13:33] What's the kind of lifetime value of those customers? Once you do get them in the pipeline? 

 

Dave [00:13:40] Latest lifetime value. So you have to qualify by year. So our two-year lifetime value, something like $350. So people are, on average, buying between seven and eight pairs a year. 

 

Kinsey [00:13:51] Once you got them in. 

 

Dave [00:13:52] Exactly. 

 

Kinsey [00:13:53] Interesting. You guys have been profitable since relatively early on in the company's life. 

 

Dave [00:13:58] Day one. Profitable first year. We lost a little bit of money second year, which was kind of our biggest growth. I mean, like most infusion of capital growth here, got a real office, hired a bunch of people—a lot of one-time operating expenses. But we were always super, super-laser focused on profitability from day one. I think the time at which we came to market—so back in 2013, you'd already had Fab.com blow up. Gilt Group wasn't doing that great from an overvalued perspective. And when I started realizing, all of these direct-to-consumer businesses kept talking about lifetime value. Lifetime value, cap-to-lifetime, cost per acquisition to lifetime value ratio was this thing. And I was like, but consumer businesses have been around for, you know, for as long as the consumer has been around. [laughter]

 

Dave [00:14:52] And the reason it works is because you buy a product for X, you sell it for Y, and then you operate your company on the margin. So like lifetime value—you should just sell a product profitably on day one. And so that was what we stay focused on. 

 

Kinsey [00:15:11] That makes sense. But not everybody follows that logic. [Kinsey laughs]

 

Dave [00:15:14] I think, because in my opinion, I think you're starting to see, like, you have the outdoor voice article. You had the WeWork, you had the Casper. You have, I mean, you could draw a trail of tears—over the last 12 months has been not great. And I think the narrative—I mean, there's a great article in The New Yorker all about venture capitalism and how while their model worked for technology, where companies don't make money and then they get implemented into a much larger technology company scale. And then all of a sudden, those services can produce, you know, a lot of profits. 

 

Dave [00:15:46] Consumer businesses don't really operate that way. Like they have to—unit economics should be good on day one. Maybe there's at-scale and economies of scale, you get slightly better margin over time and maybe capital can help bridge that gap. But you had all these venture capitalists—tech venture capitalists—coming into the consumer space, expecting that consumer would behave and scale at the same rate that tech was. And, you know, you've got to produce a product. There's a life cycle on these things—takes time, product, adoption, SaaS company. You want a million units tomorrow? It's like, okay, yes, it's been easy. 

 

Kinsey [00:16:23] How are you guys thinking about scale? I mean, you bring up outdoor voice as one of the big criticisms, at least in the coverage of the fallout since Ty Haney is maybe out. 

 

Dave [00:16:33] No, she's out. 

 

Kinsey [00:16:34] She's like, I'll give you more information later. And, you know, there's been some, like, I don't know nefarious backstories, I would imagine. 

 

Dave [00:16:40] I mean, this is not—my call on that is, I bet you, the VCs came in, they took a bunch of seats on the board, and they were like, growth, growth, growth, growth, growth, top line, top line, top line, top line. We'll figure out. We'll figure out and worry about profitability later. And that's unfortunately they dig themselves into these holes where they're so like lifetime value, lifetime value, lifetime value. But like a customer that you acquire today is not necessarily going to behave the same as a customer you're going to hire three years from now. You've early adopters. You have all of these people that will believe your brand. And, you know, rah, rah, rah it. 

 

Dave [00:17:13] And then they're going to spend $600 a year on product. And then the person that you end up acquiring who is, you know, maybe harder to reach, harder to convince—they're going to buy one T-shirt to try you out and maybe they like it. And maybe they don't buy another product, but they don't consume it at the same rate. Yeah, there are exceptions. There's the Lululemon's of the world, and the Under Armour's, and the Nike's. But, again, they're exceptions. 

 

Kinsey [00:17:37] And they feel like a different breed than the OVs of the world.

 

Dave [00:17:41] You look at these companies—they were are built over decades. They weren't built over a couple of years. 

 

Kinsey [00:17:46] Do you think that's the expectation right now for companies in your space, that you become Nike in five years? 

 

Dave [00:17:53] Yes, because they want they want you to—they want you to mimic tech investments, which tech can grow and scale very, very rapidly. And you see the only way that these consumer companies can do it is through capital. And so, let's buy, let's buy customers, buy customers, buy customers, buy customers. Inevitably, the more dollars that come to market, the more VC-backed dollars that end up coming into this space—competition becomes harder. Everybody who lives in this world knows that Facebook CPAs are rising like—it's inevitable. So if you don't have a model that works early on, the idea that you're gonna get that model to work later on, once you've hired a ton of—unwinding stuff is really, really difficult. Are people getting behavioral patterns or expectations, trying to tell them to do something entirely different at a certain point? It's big. It's like trying to move a cruise ship—it takes time. And that's why all these businesses have radical, you know, kind of turnaround plans. But the market has no—the public market has no—as we've clearly seen, has no tolerance for companies that lose money except for like, again, the exceptions, the Amazons of the world. But a big crisis for Amazon for so long was they don't make any money, they don't make any money, they don't get it. It's so overvalued. It's so overvalued. 

 

Kinsey [00:19:11] And now that that approach has been replicated. I'm interested to hear your perspective on the relationship between these venture capital people expecting tech returns immediately with a lot of these companies suggesting that they are themselves tech companies again. And maybe it's less so in apparel.

 

Dave [00:19:31] No, it’s not.

 

Kinsey [00:19:32] All of them—all startups right now are saying in some capacity: we’re not what we actually are, we’re a media company, we’re a tech company. You know, I had the Mirror CEO was on the show and she said that they’re a media company, not an exercise company. Sweetgreen is a tech company. Not a salad company. Is that like in reinforcing that expectation from the venture side? 

 

Dave [00:19:56] The venture side is reinforcing that expectation. 

 

Kinsey [00:19:59] On the startups.

 

Dave [00:20:01] On the startups. The reason that we—I went out to try to raise venture—because I didn't know any better—I was like, okay, that's what everybody else does. And I sat in these meetings and I was like: we’re a sock company, we’re an apparel brand.  

 

Dave [00:20:15] When we go to exit, I've done my research. We’re probably going to trade at 10 to 15 times EBITDA, which most, you know, apparel companies focus on, but are not top-line revenue. And sometimes that translates to two to three times top-line revenue. I was looking at all of these people—my peers—who come before me and they're raising at 8, 10, 15, 20 times revenue and I'm like, well, that seems wildly off, like the compression is gonna happen at some point. The market is not going to, you know, the buyers—so I used this analogy. It's like kids when you're—I remember my parents—I got this baseball card. It's worth $100. And like it's worth $100 when you sell it to somebody who pays you a $100 for it. Just because like some book tells you it's worth $100. Like the market determines actually what the value of it is and the market is when you actually go to bring that thing to market. 

 

Dave [00:21:00] So I didn't want to paint ourselves in these corners and because I sat there and was like, no, we're not a tech company. Yeah, we sell our product online, but that doesn't make us a tech company. And like, yeah, like do we utilize data and analytics and we have engineers and we're utilizing AI and stuff—but that's the new normal, right? It's hard to operate a business these days without that type of stuff. So then in that scenario, everyone's a tech company. 

 

Dave [00:21:24] But our product is apparel. That's what drives our business. 

 

Kinsey [00:21:28] Negative feedback loop. 

 

Dave [00:21:30] So because I didn't sit there in these meetings and say we're a tech company and, you know, we're gonna be worth a billion dollars one day, they're all like not interested. And so we didn't raise a lot of capital because nobody would give us a lot of capital. So we had to kind of figure it out on our own. But when we launched, I didn't have unrealistic expectations. I was like, if we build this thing to $25 to $40 million of revenue, that would be an incredible success. But I would tell that to venture capitalists and they're like, boring. Like, I don't want. Tell me it's good. You know, tell me you're gonna sell a billion dollars. I was like, I don't know how that's possible. 

 

Dave [00:22:07] Yeah. Now, six years later, we're actually on track to maybe hit those marks in five to 10 years. But a lot has to go right in order to do that. And a lot has gone right in our favor. But I can't sit here and egotistically say it was all me, it was all my team. We had things that helped us along the way, market timing. Like you look at the mattress industry. They have 140, 150 competitors. The sock space—it's like us, Stance, maybe. And neither of us really consider each other competitors. They're 90% retail, we’re 98% online. You look at the products—they’re not very similar. I don't think there's a huge overlap of our customer. So like we've basically been operating in an otherwise uncompetitive environment. 

 

Dave [00:22:56] At the time where we came to market, CPA is on Facebook or cheap and like you know, and I remember talking to Blake from Toms and he was like when we came to market, Facebook was free. Like, all you had to do is get fans and you could market to them for free. YouTube free. Like all of this stuff because nobody was there. Now I tell a massive words of warning to people who come to market and think that they can like scale CPA. It's hard now. It's like you've got to find another way to do it because it's really, really challenging, because you've got brands like ours like who are very competitive. It’s a massive mindshare game. Like our closest competitors are actually like Casper, Warby, you know, the people who are spending a lot of dollars online, we consider them more competitive because they're eating our mindshare. 

 

Dave [00:23:46] So I think we benefited from a greatly from the fact that we never had a board. We didn't have venture capital. So we got to run the business the way that we wanted to run it, the way that we thought was the right way to run it, which was profitable. 

 

Kinsey [00:23:59] Does it ever concern you that an exit of in any capacity would impact the way that you have created this business with Giveback and with B corp certifications? 

 

Dave [00:24:10] So that's the great thing about B corp certification, is that if you are B corp-certified at the time of a transaction, it indicates that the buyer has to adopt your bylaws. Well, so it's a signal to the buyer that they can't come in and basically try to be like, well, we're going to throw that one-for-one thing out the window. We're going to cut paternity plans from six months down to two. That's actually one of the great benefits of B corp status—it signals to any potential acquirer. 

 

Dave [00:24:37] Look, there's fine print in loopholes where they basically say, like, they won't—if the company is in dire straits and need to make financial changes, they ultimately do have the power to do it. But I think, again, it's a signal. It's saying like, hey, this is important to us. This is important to our culture. You know what? When you look at kind of our growth and our—we've had seven people in six years out of 150 people leave the company. So you look at a lot of the things that we've done and the success that we've had. And you'd be like, why would I dare unwind or touch any of this stuff? It's working. Do it. Like, keep going at it. 

 

Kinsey [00:25:20] I think that's why it's so interesting to me to hear you explain—maybe not lack of interest, but not the more traditional interests that you kind of see from a lot of venture capital firms when faced with a company that was profitable from the early days. Why people aren't jumping at that opportunity. Does that make sense? Like—I don’t know. These all seem like good things. 

 

Dave [00:25:41] Yeah. And I think because it takes time. For these things to shift and come to market. And so I think now that we are bigger and I think we have more of a responsibility now as kind of a leader in the space to tell our story that you don't have to raise a ton of capital. You can give back to the community. You can treat your employees really well and grow a really big business at the same time. It doesn't have to be a lot of compromises. And I couldn't sit, you know, three years ago. I didn't feel confident or comfortable enough to stand on a soapbox and say that. 

 

Dave [00:26:19] But like, now that we are as big and bigger than a lot of our peers in the space, it's validating to me to say like, yeah, you know what, we've set out to do what we were gonna do. We did it. It's our way of doing it. It's not the only way. But I'd like to share it as advice that it is possible. I'm not saying you have to—I’m not saying in order to be successful, don't raise a lot of capital. But I think if we don't raise a lot of capital, it forces you to be scrappier and forces you to focus on that. You're not going great. Let's open up 23 pop-up stores next year. We had a free pop-up store offered to us in our third year of the business. What a massive, massive distraction that was here. Here is this store in Columbus Circle. It was doing $15,000 a day. No, no, I'm sorry. It was doing like $1,500 a day. Meanwhile, our website was doing like $30,000 a day. 

 

Dave [00:27:13] And we were constantly—people are like, wow, I'm going up to the store. I've got to restock. You know, so-and-so didn't show up. I'm going to go fill in for them. We had like a 13-person staff at the time. We did four people going to work at a kiosk. You know, that was doing, you know, 1,500 bucks a day. While meanwhile, our office is all the way on 30th. I'm like, this is a massive distraction. 

 

Dave [00:27:30] We do not have the time to—so we stayed focused because we didn't have a lot of capital. We had to be good at the one thing that we said we were going to be really good at. We couldn't start to chase all of these opportunities. Let's go into wholesale. Let's open up retail stores. Let's start new product categories. We didn't have the ability to do it because we didn’t have the balance sheet to do it. So we could only reinvest in the thing that we were doing, which I think helped us. 

 

Kinsey [00:27:53] Do you think that, and you know, we might talk about it more than the average listener and not in New York talks about it, because you walk down Bleecker Street right near where I live, and there's all—like the entire street is populated by companies that are digitally native brands that have opened up brick-and-mortar presence for a prop, mostly for the first time. That they think that this is a way to scale the business. 

 

Dave [00:28:14] And for some of them, it is. This is actually Warby. It's wildly, I mean, Warby, it's the key to their success for scale. 

 

Kinsey [00:28:20] You think it just depends on buying or selling. 

 

Dave [00:28:23] I think the other thing that I try to, you know, inform people on is that there is no silver bullet to any of this stuff. There is no one game plan. 

 

Dave [00:28:35] I remember, there was a time where we came really early to Facebook video. We had launched this video for our million pairs donated. It was meant to be a thank you to our customer base. I promised my co-founder—if we ever had a million pairs of socks, I'll get a tattoo of our logo to celebrate. And no tattoos of the time he filmed it. We turned it into this video. We like sent it to our customers. 

 

Dave [00:28:57] Our CMO was like, I want to try this on Facebook. Apparently, video is starting to be a thing for Facebook. Let's put it out there. That one video generated over $20 million for us—insane CPAs. 

 

Kinsey [00:29:08] And how much did it cost to get that tattoo? [laughter]

 

Dave [00:29:11] Like $200 bucks. And so then, of course, people that I would meet or founders that I would be introduced to would be like, hey, how did you create that video? Who did you use? Like, you know, I want to do the same thing. These are moments entirely. You can't go out and replicate the Dollar Shave Club video and expect it to be a success. These are singular moments in time and right place. Right time, right content. It was authentic to us, like just to try to replicate—for us, influencers has never really worked. I mean, you look at socks, it's like I don't know how many influencers are really going to be like: oh, take a look at my feet. I love this product. I don't know. It just doesn't resonate with consumers that way. But like beauty industry, like beauty industry thrives on influencers. It's a massive part of their marketing campaign. So to look at different businesses and say like, oh, I'm going to do that because that's what they did and they are successful. Don't have the expectation that just because podcast works for this one company or direct mail works for this other company or TV works for this one company, that it's going to work for yours.

 

Kinsey [00:30:16] There is no cure-all. 

 

Dave [00:30:17] Yeah. We talked to the guys at Warby [Parker] and they're like TV is small part of our budget. For us, it's like 25% of our budget. I wouldn't have thought socks would work on TV. But guess what—they do. And even TV is like—works on broadcast. Some stuff doesn't work on Hulu. There are all these interesting dynamics, but there's no one playbook. 

 

Kinsey [00:30:39] So is it kind of trying it? 

 

Dave [00:30:41] Yeah, but what I would say is that you don't need $100 million to figure it out. Like start small, be focused, and then figure out what works for you, and then go from there. 

 

Kinsey [00:30:56] Okay. I want to talk more about the give-back industry a lot more broadly in just a second. But really quickly, let's take a short break to hear from our sponsor. — And now back to the conversation with Bombas CEO Dave Heath. So we've been talking kind of about retail more broadly. A lot of this conversation has focused on some of these more quote unquote startup companies in retail. But there have been some that have kind of been around doing this give-back models since before you guys. We talked about Toms briefly before. Thompson's been a really interesting one to follow, I think, because I you know, I remember, like mid-2000s, everybody had to have Toms. They were the shoe to have when I was in the early days of high school. That's not really the case anymore. Is that something that you're thinking about? Is it something that you ever worry about—that Toms became super popular because they really popularized that give-back model, buy a pair, give a pair, and now no one really talks about them anymore. 

 

Dave [00:31:55] Sure. I think and again, this is like, you know, you can't just look at what's happened to somebody or expect the same thing to happen to you. You know, when I look at the Toms business—it wasn't just—while they pioneered the gift-back model and certainly got a ton of media credit and stuff for that, and I'm sure there were a lot of customers who are incredibly proud to tell that story. The style of shoe also became in fashion, like style. You know, the alpha gotta or the espadrille was the combination of, oh, it's got this great story to tell. I feel really proud about the flag on the back of my shoe, so that when somebody asked me, what are those cool little interesting shoes you're wearing because they looked different than—it looks like someone's walking around in a moccasin-type of shoe. It started a conversation. Right. Our product, for the most part, is hidden and it's in your shoe. Your pants are down. And there was always something that was scary for us from the beginning, which is: how do we get brand recognition if nobody sees our product, right? 

 

Kinsey [00:33:01] You got to know someone to show them your socks. [Kinsey laughs] 

 

Dave [00:33:03] Yeah. And then so what we found actually is people would talk about it. I always said it’s a weird conversation that if somebody came over to your house one day and at a dinner party was like, let me tell you about my socks, you'd be like, what? That's weird. But if someone was like, did you know socks with the most aggressive clothing out of homeless shelters, I just bought a pair from this company that donates a pair. That's a much more interesting conversation. So I think when you look back at Toms. I think Toms business suffered from a trend. They were they built their business on a massive trend and they capitalized on that. And, you know, the second and third and fourth and fifth album weren't as good as the first one. 

 

Kinsey [00:33:42] I'd love to kind of hear your perspective. And outside of just giving back to the homeless community or to people that you guys have historically given back to you. But just this idea of corporate social responsibility kind of, by and large, has been something we've talked about. CSR is not something I knew what it was five years ago. Why do you think that right now we've kind of hit this inflection point? Is it people are starting to care more. Are we just a more woke society? What do you think the factors are? 

 

Dave [00:34:12] I think it's certainly a more woke society. Like we're dealing with issues today that I think were never—they've all come to the forefront because they've reached such a pressure point. Climate change obviously being a major one of them. And affecting, you know, that that alone could be the single largest cause of homelessness over the next 25 to 50 years. I also think social media plays a huge, huge, huge role in it now because it gives everybody a microphone. You know, before it was you're just relying on the media organizations to tell you what is important. But now, you have these uprising movements, you know, which can start with something as little as a tweet. And then, you know, it gains momentum and traction. I think the degree of transparency today, because of social media, I think actually social media's probably the biggest catalyst for all of this stuff, perfectly timed with, you know, a lot of, you know, awful, you know, shit coming to, you know, ahead is creating this perfect storm of people saying, you know, really waking up. And becoming woke and saying, I expect more from my companies. 

 

Dave [00:35:21] Like I expect that if they have X number of profits, that they're going to give back a certain percentage to offsetting whatever damage that they're doing to the world, because every company produces a product or ships things or—we're all contributing in some way and every consumer is contributing. So like we all, you know, take transportation, we fly on planes, buy cars. You know, not everyone's like I'm giving them my car and riding around on an electric bike, but a lot of those people still drive gas-powered cars are saying, I care about the environment. So, we're hitting an inflection point that I just think everybody is demanding more. And because of social media, we have the platform by which to then correlate a lot of people around us to say like, yeah, we actually all care about this and we're going to vote with our dollars. And so, you better wake up and start caring about this stuff too. 

 

Kinsey [00:36:15] What do you think the role of the corporation should be today? This is a very meta question. What do you think? 

 

Dave [00:36:23] I think corporations exist within communities. Whether it's in the local community, whether it's in a statewide community, or country-wide community, a global community—we are all universal global citizens today. And corporations are not any different. And as a response, when you are a part of a community, it is your responsibility to, you know, if you benefit from that community, to take a portion of that and give that back or else the community won't exist for the future. Yeah, you can, you know, exploit resources. But everyone realized that if you exploit them long enough and don't reinvest to either find new resources or—and that's across the board—eventually, resources are limited. They're gonna expire. So if you're not playing your part to self-help seed new research, whether it's people resources, whether it's stuff that you're getting from your community, whether it's physical resources—we're going to all wake up and not have a future. None of us. So I think every corporation needs to think of themselves as a human being. As a large entity of human beings and figure out what is the role that we need to play to help make this whole world continue to revolve and move in a forward progression. 

 

Kinsey [00:37:45] OK. Well, we have hit on a lot of very heavy topics, which I love to do, but I am going to now bring out our wheel—we'll try some lighter side. OK, so hit the middle button right there. Let me turn the volume up because, you know, razzle-dazzle takeovers. 

 

Dave [00:38:00] Spin the wheel.

 

Kinsey [00:38:01] All right. Truth or truth? What was it like working? Did you just tell me the truth? What was it like working with Zac Efron on that ad campaign? Which we will put a link to it in the show notes. It was hilarious, I thought. I’m a big Zac Efron fan and I have to ask. 

 

Dave [00:38:22] Zach is a character. He's actually become a good friend. I didn't—I'm not one who's really, you know, all that like, gaga over celebrities. I try to like other people, too, and give them their space. We ended up broing out. He's been super, super funny. He's very, very funny. So here we are. We always have a really good time with Zach on set. Like, he comes and he's like, can I just riff on this one thing and like, can I come with it? We're like, yeah, like, whatever you like, because obviously we had like somewhat of a script in a scene and we're like, you know, can we? But he's an actor.

 

Kinsey [00:39:00] Take another spin around the wheel. Let's see. Oh shit. So what's been an “oh shit” moment in your life that you feel like either—now suddenly you realize everything was changing or you really screwed up big time? 

 

Dave [00:39:17] Business or personal?

 

Kinsey [00:39:19] Either one.

 

Dave [00:39:22] OK. So personal. My junior year of college, I tripped on a carpet in my dorm room and I fractured my femur and tore my ACL and M.C.L and patella tendon and my meniscus. 

 

Dave [00:39:39] Yeah, I mean, I may have had a couple of drinks. So, you know, it was my friend's 21st birthday. And it was like the beginning of my junior year semester. And then I learned that I had to be six months on crutches. I'd have my leg in a machine, called a CPA machine that bends your leg for eight hours a day. So it was certainly an “oh shit” moment. A year of rehab. But it was that one of the probably the greatest lessons of my life. 

 

Kinsey [00:40:07] Interesting. I don’t think we've ever gotten one that tangible. OK. One less spin on the wheel. I'll call it. All right. The one thing. So what's the one thing? It could be a book, a quote, a song. An album. A person who's had the most outsized impact on your career. 

 

Dave [00:40:33] [sighs] So say—it's probably a philosophy of just general idea around focus. When you are trying to do too many things at once, either in your career, I’m quite type-A. So I always used to beat myself up. I would said in the beginning of the year, here's all of the things, you know, my resolutions are goals that I want to accomplish for the year, and I'd write like 40 things down. And at the end of the year, I would beat myself up for like the 10 or 15 things that I didn't get to. And I had a great life coach at one point who is like, no—you're focusing on the wrong things. Look at all the things you accomplished. And it was actually the things that I was focusing on were actually the things that were mostly pushing me forward in life. 

 

Kinsey [00:41:22] Well, I love that and I love ending on a high note. Good focus. Take that with you for the road. 

 

Dave [00:41:27] You don’t want to end on the broken knee. 

 

Kinsey [00:41:28] I would much rather die like let's focus on the wins and things and not broken bones. Dave, thank you so much for coming on Business Casual. It's been an absolute pleasure. I loved learning more about your business and I'm really glad you stopped by. 

 

Dave [00:41:41] Thank you for having me. 

 

[00:41:42] [sound of coffee being poured]

 

[00:41:44] [outro music starts]

 

Kinsey [00:41:45] Thank you so much for listening to this week’s episode of Business Casual. I've got a piece of advice for you. Next time you're stuck in an awkward conversation with a coworker and you feel like you really can't say crazy weather we're having one more time, tell your coworker to subscribe and listen to Business Casual and trust me. Conversations will get much smarter and much more interesting. 

 

Kinsey [00:42:03] See you next week!