You started SwagUp around when I saw you at my conference, Hustle Con, right?
I started 2017. It was middle of the year. I think Hustle Con was towards the end of that year. I don't know, October or, I don't remember what it was.
Basically it was the first time we ever wore branded shirts. We went out there, we talked to people. It wasn't like the launch strategy or anything, but it was definitely the first thing that we ever kind of did publicly.
Kind of said in the group, "Hey, we just launched the company two months ago, three months ago, excited to meet people there and stuff." So that was kind of the backstory with it.
How old are you?
I just turned 28. I was 22 when I started it.
What were you doing before that?
I was partners with this guy, Steve Weatherford. He was a NFL player and basically I helped him kind of build himself into a fitness persona and then we launched different training products and eventually supplements and was just building a brand around him.
So we did a lot of Snapchat content and YouTube and Instagram and stuff and then just launched products around him.
I was at a VC fund for a very small amount of time while I was coming up with this idea. And then before that I was at William & Mary for finance. I dropped out after two and a half years.
Before that it's just lifelong entrepreneurship. Four-year-old kid selling stuff to neighbors and stuff.
Where are you from?
New Jersey, Monmouth County area. 45 minutes south of Manhattan. I live in Fort Lauderdale though. Yeah, I was in Miami the last year and a half and then we came to Fort Lauderdale just six months ago.
How big is the business now?
We have about 150 people on the team and close to 6,000 customers that we've worked with in the last five years.
We've done about $140 million in revenue in five and a half-ish years, something like that.
We're over $50 million a year from a revenue standpoint. We're shipping out, I don't know, millions of units of swag a year.
And you’re bootstrapped?
For the most part.
The first four and a half years were 100% bootstrapped. Then at the beginning of last year, like March, April, we brought in some angel type of money. $2 million across some SAFEs with angels and friends that I had. But we haven't really done any major equity investment.
We just recently this year, like a month ago, did a revenue-based financing vehicle, like several million dollars. Just more as a capital cushion with the economy being what it is just to have. But that also kind of refinanced some other stuff that we had.
We had some bank lines of credit and stuff that we had gotten that we had to flush out because of this. But pretty bootstrap for the most part.
What's the end goal for you?
There's this huge opportunity in this space because it's so fragmented. It's a very antiquated industry that lacks technology. There's all these mom-and-pop shops that are side companies.
If you were doing Hustle Con in Oakland or something, you could probably find some local vendor that does $1 million, $2 million a year and they can handle this process very manually, but those businesses can't scale at all and they kind of cap out at a few million bucks.
What we want to do is, "Hey, we were able to break through this plateau and build a $50 million plus business really quickly in a industry that's very operationally intense and lacks technology." So we had to build a lot of technology to run the business and we do a lot of the operations ourselves and basically we want to make that available to the industry as a whole.
So become kind of like the operating system that all the industry's volume kind of funnels through.
I have a lot of parallels to Fanatics. I like that Fanatics has built this vertically integrated operations infrastructure and then they spin up all these different E-commerce front ends to go after this team, and this league, and stuff like that.
We want to do that, but we also want to make it available so that other people can basically compete with us using our capabilities and technology.
So it's like $50 billion plus market that doesn't really have any clear winner. There's one company that does a billion and then the rest are all much smaller.
What's that company?
You have 4imprint. They're a public company, they do like a billion dollar top line-ish, pretty low margin, just traditional E-commerce business.
Then underneath that you have a few private equity roll up Vehicles that do several hundred million and they just buy a lot of the $5-$10 million swag companies out there. But they don't really have any technology or efficiencies at scale that make them worth more than just the aggregated value of all of them.
Other than that, you have some marketing agencies that do $50, $60, $70 million that are pretty decent companies, but there really hasn't been a SaaS kind of platform that does swag management at scale.
And also taking that platform orientation to say, "Hey, we're going to build the technology that really makes this industry move much more effectively and efficiently" because everybody just wants to sell the items, but they don't want to solve the supply chain problems.
We found that the only way to really scale past hundreds of millions is you have to actually solve those problems. You have to take them on yourself.
Do you think Teespring and those types of companies your competitors?
Not really. They're more consumery on-demand. So you have this print on-demand sector and then everything else.
And print on-demands like Printful and Teespring and Bonfire Tees, and there's a whole bunch of these different companies out there, and they're mostly for creators to sell merch to people or you want to start some side business where you have an audience that is all around this topic, so you might as well also sell them some stuff and I don't have to worry about inventory and they'll just print it and stuff and ship it.
So that's not really what corporations are looking for. If you were to talk to HubSpot, they wouldn't say Teespring is a solution for their global swag procurement and distribution needs.
So it's more like the marketing agencies that handle swag that can provide more of that service. And there's other E-commerce companies that are a little bit more, like Custom Ink and 4imprint and these types of companies that I think sometimes get the enterprise deals.
But the average order size on something like a Teespring's probably $30. Ours is like $8,000. So it's a much different buying habits.
Are you technical?
I've become much more technical just working in the business. I manage one of our engineering squads. We're taking very much an API first approach. Everything that we're building is always start with the APIs and then build around them.
But that was more of something I just learned through interacting with our CTO and observing other companies.
So I never get in there and engineer anything, but I work with the engineers and I say, "Hey, let's go through the code and tell me what's going on here, and let's change the logic, and all that kind of stuff."
Did you guys build everything from scratch?
Well, the first website was on Wix. So it was a Wix website that had a Typeform integrated into it like iframe.
So that was the initial e-commerce experience. You'd go on to this Wix website, you'd go into this Typeform and it would have categories and be like, do you want a water bottle, yes or no? If yes, pick the water bottle.
And you'd go through that Typeform experience and submit it and then that would shoot into Trello via Zapier and Trello was the workflow management that all the orders were kind of on.
We'd have a design team that would know when they're in this status, you need to do the designs, you have to upload them, then I'll go to the next status and I'll send them to the customer.
So it was very hacky like that for the first two years. We did like $6 million like that the first two years, just with no real tools or technology.
We had Google Sheets that people would put their addresses in so we could fulfill the packages for people. It was very manual. Then like two and a half years in, we brought in our CTO and we started to build everything from scratch primarily.
We do use Salesforce a lot, not only as a CRM, but also it's just like this ERP and warehouse management system. So we've built a lot of custom components inside of Salesforce and our Salesforce bill this year is like $210,000, but we've also built Android scan apps in the warehouse for all the teams to do their jobs.
We have iPad apps that they do different QA and receiving processes on. And then everything on the customer facing side is all from the ground up, built from scratch, react apps, custom APIs and components and stuff like that.
So yeah, we have 35 people on the product and engineering team, and they used to be primarily in the US and now we've started to build an office in Hyderabad, India.
So we have about 12 people over there now and they're starting to transition more that way with US-based product managers.
That's pretty crazy. You got to $6 million just using Zapier and Trello.
We actually did some webinars and case studies on it with Zapier and kind of showed the different workflows that we had early on in the day because it was pretty robust and it was showing people that you can build an eight-figure business potentially without ever having to expend more than 500 bucks on tools.
We could have kept that but the Trello boards started to get really slow with all the information on them.
Do you think you could have stayed the same?
We definitely wouldn't have been what we are today, but if I was happy with maybe getting to $10 million and just optimizing some workflows, it would've happened.
But the whole reason we needed to scale beyond that is that you need to have records of truth that say, this is an account and this is a product and if you want to reorder this product, you have some sort of way of doing that.
And everything was just manual agency style, but if I wanted to just be really profitable and make $3 million for myself every year, then I probably would've taken a much different path.
But I've continually deferred making any money or cashing out because I'm trying to reinvest as much as possible into building the tech that we want to kind of commercialize.
Of the 100+ people that you have, how are those people broken down?
So it's a little skewed because we run our own fulfillment operations.
We have 65,000 square feet of space in New Jersey and there's about 60 people there on a daily basis.
They're in the receiving department, in the packing and assembly department, you have inventory management distribution.
We run almost like our own 3PL there, which it's been really hard, but I also think that it's better to run it yourself.
And then the other 90ish people are broken out.
The revenue org has the biggest, is about 35 people, and that's account executives, project managers, customer support, people that handle the inbound leads, that kind of stuff. Then you've got a purchasing team and they do all of our sourcing, so they're interacting with our vendors. That's about eight people.
So they're placing orders with the vendors, they're doing negotiations on contracts with the vendors.
Then we have about six or seven people in finance and accounting.
You have people that are paying bills and accounts receivable. One of the biggest unlocks is that we have a really favorable cash conversion cycle. So we get to hold onto our customers' cash for 24 days, something like that.
We get paid on average in four to five days and then we pay out in 30 days. The finance team obviously helps drive collections and that kind of stuff.
And then you have in-house council, and then you have 30 people on the product and engineering team. Like I was saying, you have a couple designers, like four product managers, and then a bunch of different types of engineers.
To clarify, of the $50 million in revenue, is that $50 million just your service fee or does that include the merchandise purchased?
Yeah, so we give people the technology for free. So you can use our dashboard, our API integrations, all that stuff for free. And we just charge you for the swag, and the storage, and the shipping. And we make about 40% gross margin on it. So if you were to take the gross profit on that $50+ million, it's $20-$22, whatever, something like that.
The problem with selling hard goods is your cash position is poor even if your revenue is growing. And it seems like you've done a really good job of that.
Well, you don't have to figure out inventory management because everything's custom.
So every order is made to order for the customer. So you're only purchasing stock as you need it. Now there's a big opportunity for us to vertically integrate and capture another 25% points of margin if we do a lot of it ourselves, but you can make that decision later.
I've always been a fan of, use other people's infrastructure to begin with so that you can be asset light for as long as possible, but then ultimately to break past the plateaus you have to control a lot of these things yourselves because otherwise you just have too much risk with third parties executing.
And the companies in this space are just not very good at executing. So what ends up happening is it's a very low MPS industry and a lot of companies lose customers constantly.
They switch, "Oh, I'll use this vendor, they fuck me over, go to this vendor." And you just constantly switch and we want to break that habit by just having the best experience possible and controlling more of it.
Where were your first customers from?
The first few were just hustling of people that you know or you meet. We got this office in New York City in the very beginning on 222 Broadway. It was a WeWork space and we tried to get a few people from the WeWork and stuff or go out to some startup events and meet a few people.
I think we got a customer at the Hustle Con by being in that Facebook group. I'm pretty sure a few people ordered there. And then the biggest thing is just trying to get some order that will give you credibility.
It's like some random team at Facebook and just being very, very customer-centric in those early days of accepting whatever terms you need to to get those first few orders.
There was this company that had an offsite in Mexico at a Ritz Carlton and we almost messed it up and weren't going to get the items there in time for their annual kickoff.
So we sent somebody on a plane to go hand-deliver the products to make sure that they got there in time. So we did a lot of those types of things in the early days to just build that story and get them to talk about us and just get them to tell other people about us.
Of the 150 million or whatever, 140 million we've done, we've only spent about 1.5% of that on marketing. So it's been a lot of organic viral people finding out about us, which has been good because it allows us to stay bootstrapped and reinvest the excess gross profit into other things like R&D and the facility and that kind of stuff.
So now we're at a spot where we need to think about scalable marketing channels that will help us get into the hundreds of millions, but we've been more focused on if the experience is good, there's no shortage of demand for custom branded items.
It's just a matter of, can you really fulfill on the promise at scale over and over again and then give people technology so that they use this stuff more often so they start thinking about other ways to use swag.
So right now we're less focused on growth because I feel like we grew a little bit out of control.
The pandemic pushed the business so hard because what we were doing was so needed. We went from 6 million to 22 million to 50 million in a matter of two years. And in a physical product operationally intense business, a lot of things start breaking when you move that fast
You're so mature and successful at a young age. Who taught you how to have this poise and wisdom you think?
Well, first off, I think everybody looks successful from the outside. There's still a lot of time to see it play out. But I don't know. I was like, some people are just genetically different. I was the type of kid at three years old reading a newspaper or if I was eight years old and going to my friend's house, I wasn't hanging out with my friends, I was hanging out with their parents and talking to them about what they're doing and their job or something. So I was always that more mature kind of weird kid.
I bought my first stock when I was 13. It was Ford Motor Company, which is a terrible investment. It's been flat for so long, I think.
But my mom's boyfriend at the time when I was like 13, 14, was a big wealth manager for UBS. He managed $6 billion and I just would talk to him for so long and just learn from him.
What you see when you're around people that just have so much money and they're so successful, you start to realize that it's possible. That, oh, these are just normal people and you can dream big.
I was sending him a $4 million house once when I was 22.
He is like, "Are you putting an offer in?" People like him they don't even think that's a crazy thing. You're like, "No, I'm just 22 years old, I barely have any money. I just got out of college. I'm not doing that." But they inspire this confidence in you because they don't think anything's not possible.
And then also my dad is an entrepreneur as well, and I grew up just around him and his business and around athletes and celebrities a lot. It just kind of forces you to grow up quickly.
Also my mom and dad got divorced when I was six and my mom had to work full-time in New York City, so I was kind of alone a lot when I was eight or nine or 10.
So again, you kind of have to just figure it out and support yourself in a way and grow up quickly. So I think just all these things together just lead to the type of person I am now.
What's your end goal?
I want to build the Fanatics for this customization and corporate merchandise space, but that doesn't mean that swagup.com is the thing I want to do the whole time.
I've almost thought about splitting the entities apart and swagup.com is just an E-commerce business that leverages our technology and our platform, basically, and it's just one of the users and have somebody else run that company day to day because it's a very different business.
It's just a marketing business and a sales business and just keep scaling it and getting more customers.
Whereas the things that I'm really excited about is building the technology on the backend that makes this business really scalable, really different than what other people are doing. So that's where I want to spend more time. I just think that if you take the supply chain, you make it available to people that don't really know anything about sourcing products or manufacturing or kitting and distribution, they can start to get creative about building businesses.
There's all these creator tools that are out there that made individuals be able to build really big businesses without a lot of resources and I think if you can connect the physical world part of that too, it unlocks a whole new dimension.
I think that's just more exciting and we can enable a lot of other people to be successful. So I don't know, it's a business that it has no bounds because you're just taking supply chains and trying to digitize them.
There's a lot of ways that you can leverage that.
As a kid, I was always the one that had three businesses running at the same time, like all these side hustles. But I never get distracted with SwagUp because it's endless in terms of the avenues and how big you can make it. So it keeps me interested in it versus getting distracted by some other interesting opportunity.
What other opportunities interest you?
I used to think about the ones outside a lot, especially in the first couple years because I don't know if I was as committed to SwagUp is the thing for the next 10+ years.
Something I was interested in was income sharing agreements before they were really popular, being able to invest in kids in high school and college to pay for their college and then get the upside of their career later on.
That's a lot less practical than what you did though. I think you took the safer and better route.
Yeah. Sometimes there's a part of me... I was talking to Andrew Gazdecki once and he was saying "Just sell the company, get your big hit, get your safety net, and then go do something big and real risky."
Sometimes I think about that too. It's like you have this SwagUp company that you could probably sell it for, let's say conservatively in a bad market, like 20 million bucks or something, and I own almost all of it.
That's a pretty good foundation at 27 or 28 to then go take on some really ambitious problem. And I've thought about that too, but I don't know, I can't.
Sometimes when you see something so clearly you can't shake it, you just want to go and keep doing it and you know that nobody else is going to do it. But then there's all these other ways that I think that people can leverage our infrastructure as we make it better and better.
So for example, one of the things I was thinking about is let's say you're a company that does conferences or something and you have all these different sponsors.
And a lot of times they do some sort of swag that all the sponsors can be a part of or something and give it out to people and send it to people. All those processes are so manual. They have to coordinate with all the different sponsors. Hey sponsors, send in your logo, we'll put it on the item for you, we'll get it sent out.
And I think you can take our APIs and build a cool platform that says, hey, Hustle Con is in January 2024. Tier 1, 2, 3, 4, 5, you can pay 15 grand, upload your logo and then we will insert your swag item in this conference event bag and then it's going to get sent out to all these people.
Or having crowdfunding platforms like Kickstarter where it's automatically integrated into a swag API where each of the different tiers of crowdfunding get automatically sent different items based on how much they contributed. And just making that whole process where... I've talked to crowdfunding people that are manually just putting stickers and bags and sending 500 to the people that put in $200 and $500.
So there's just all these things that people wish they could do that they just don't end up doing because the physical world's too annoying.
What would make you proud by the time you're 30?
I think the main things are we need to automate a lot of the stuff that shouldn't be manual and let the business just run really efficiently without our intervention so that we can abstract ourselves to work on the forward looking big initiatives and then also have the time to enjoy life in different ways.
We just had a baby, she's six months old. By the time I'm 30, she'll be three. She'll start being a little bit more aware and going to school and stuff.
So I want to be at a point where I can dedicate a lot of focus and energy to making sure that that goes really well and I can bring her to school and coach and stuff.
So I want the business day to day to be operating really effectively and efficiently, have good processes and technology in place so that all that stuff is streamlined.
And then I'm really just dropping in from a strategy and product development standpoint. So okay, here's where we're trying to go. I'd probably put a CEO in place in the business and then just move to more of an executive chairman or just run the platform side or something. So I want to be able to make sure that the business is set up for success without my involvement on that side and move on to bigger problems, still within the same company and ecosystem, not leaving, but I don't think we'd sell it.
I would consider some sort of liquidity, some sort of secondary where we sell some of it and then have that safety net and then go after it for the next five to 10 years without any sort of regret or anything. Because there's definitely a capital constraint thing. I don't take out a lot of money from the business.
I never really paid myself too much because I'm rather hire three people than pay myself. I just want to keep moving in that direction.
But at a certain point I'd like to be able to continue to do that, but also know, okay, there's $10 million or $5 million in the bank while we still do that kind of stuff.
But I'll always put the business first because I don't really care about making a million dollars a year right now. I'd rather make $100,000 a year, live a fine life, and then keep progressing on the path that we're trying to go on.
My goal was to sell a business while I was young. I took the route you talked about. But I think you're making the right decision by going bigger.
It's very clear it's not a pie in the sky idea that the business can be several hundred million dollars in revenue in the next five years, like $500 million in revenue, but also has the potential to be let's say a billion plus.
And there's like steps that have to happen to make that happen. But like it would be very difficult to take The Hustle (Sam’s business) to 300 million in revenue in a 10-year period or something.
We had to continually to invent new things, whereas you may have to invent new things, but there's also a world where you can just do the same thing just over and over and over again, and a little bit better, and it becomes incredibly valuable.
What we're trying to do is we're trying to take all of our operations and technology and build this platform around it and then be able to spin up different versions of SwagUp very easily for different use cases, verticals, and geographies.
So it's like what SwagUp is, is a corporate swag management platform, but that's a very broad kind of use case. Whereas there's a lot of niche versions of SwagUp that you can have.
For example, uniforming for home care services companies or conference swaging. There's all these different nuances around how companies need to use conference swag in the workflows and operations where SwagUp can never be everything to everybody. But with this really great platform and a flexible E-commerce front end, you can spin up all these specific use case versions of it.
But then you can also spin up geographic versions of SwagUp where you say, Hey, the SwagUp for India, the SwagUp for Australia, the SwagUp for China, and it's all running through the same infrastructure.
So it's not that operationally taxing to actually do it, but from a marketing scalability standpoint, you can just keep scaling over and over again because you have these sub $3 million businesses that solve a really niche problem really well and you just keep doing it over and over again. But also we don't need to be the one to operate them either.
You can take our infrastructure and white label it and resell us because that market better than us. Maybe you really understand real estate agencies in the Midwest, take SwagUp's infrastructure and build the swag company for real estate agencies in the Midwest and just focus on sales and marketing, and we'll handle all the execution on the backend.
So that's why it's very clear to me that as long as we keep solving the operational supply chain stuff and then have a really easy to use tech layer on top of it, we can just keep replicating that over and over again for a long time and build a big business.
The best thing that you've done, I think the company that you've built is amazing, but I think the even more impressive thing is you didn't raise financing right off the bat. I think for this business that is the right move because it grew nicely, and now you're going to have potentially a venture sized business that you own almost all of.
I always find it weird that people jump so quickly to raise money in the beginning when that's the most expensive capital. Because the company is so nascent, you have so much to prove, so you're selling big chunks of the business for little amounts of money.
Unless you've just been super successful over and over again and people will give you a ton of money in the beginning.
But a lot of people are saying, "Oh, I'm going to sell 25% of my business for 500 grand." Can you not find some other way to get $500,000 in revenue or profit or something and just try to defer that raising a little bit and save?
Because that's huge dilution in the very early days. I think the more that you can kind of, can we get a year or two into it and show more traction and get some revenue before we start thinking about raising and people will save themselves tens of millions of dollars in the future.
But I don't know if everybody thinks of it as like, hey, I'm on a 10-year journey and this is a long term thing.
They're just thinking about what they need right now in the next six months. But if you think it's going to be successful, then you're going to regret that eventually.
But most people don't realize that when they're 24 years old.
Yeah, I don't know. And not every business you can do that. I mean it depends. If you're in a business that needs a lot of upfront capital or R&D, you should try to find some other business that can fund that for you. Some sort of agency style business or something that brings in cash upfront so you can funnel it.
All the R&D that we have, we really don't need it. If we just wanted to be really profitable swagup.com, we could and we would just cut out a lot of the expenses, but we think of swagup.com as the money engine that we can funnel back into technology for the long term without diluting ourselves.
So it's like how do you create an engine on the front end that creates cash that you can reinvest in something that's bigger and more long-term orientated?
You're incredibly impressive. I think you're going to be a superstar. You already are, but you're going to be more than where you are now.
We'll see. I appreciate it. But I think the key is when you know something really deeply, the things become really clear.
When you stay focused on something for a long time, the strategy and what needs to happen becomes very crystal clear and then you can articulate it well. So I just kind of know what I'm talking about, I think.
© 2023 Copyright Hampton VC LLC
