“Socks are often the most requested clothing item at homeless shelters.”
Inspired by this Salvation Army quote, entrepreneurs Randy Goldberg and David Heath created a sock business. Using Tom’s Shoes’ charitable model that donated a pair of shoes to charity for every purchased pair, they decided to do the same with socks.
The former President of Gold Toe Socks, Steve Lowenthal, helped Randy and David during a two-year process of developing and testing their product. After an extensive period of trial and error, they came up with a design featuring unique characteristics based on long-held, proven traditions in the sock making industry.
“Bombas” is Latin for bumblebee, and Randy and David hoped that their sock business would be a hive where they could give back to the community and improve the lives of those who found themselves in less fortunate circumstances.
A month-long Indiegogo campaign designed to raise $15,000 for development yielded more than $140,000. Their business vision, including the charitable aspect and their dedication to extraordinary customer service, appealed to a diverse range of wealthy investors with the same philanthropic vision.
Randy and David looked to dive into the Shark Tank to see if they could take Bombas to the next level.
Bombas on Shark Tank
Shark Tank Season 6 Episode 1
The pair of entrepreneurs, asking for $200,000 in exchange for a just 5% equity in Bombas, explained to the Sharks that the business of selling athletic sock had been approached in the same way for many years. Randy told the panel about the two years spent in comprehensive research and design, with seven substantial improvements that resulted in “the most comfortable pair of socks you’ll ever wear.”
David outlined the charitable aspect of their business, explaining that for every pair of socks they sell, they donate a pair to those in need. As sample socks were passed out to the Sharks, they shared the alterations they had made along the way, including using Peruvian Pima cotton, improved stitching, removing toe seams, and adding proprietary arch stitching. The panel was impressed with both the effort put into developing a premium quality product, as well as the charity aspect to the company.
Robert, an experienced runner, wanted to know what made Bombas different from the large numbers of competitors on the market today. David said they had looked extensively at the other top-selling athletic socks, from specialty running socks that retailed for over $20 to cheap, mass-market packs of that sold for a fraction of that. After performing their research and due diligence, streamlining production costs to be able to charge just $9 for their product, which still included the pair of donated socks for every pair sold.
All sales had been retail so far with not wholesale contracts in the works. Bombas had been in operation for nine months and generated $450,000 in sales. Mark was particularly impressed that all transactions had been made online.
David said their projected sales figures amounted to $1.1 million for the first year, $2.7 million for the second, and upwards of $4.9 million for their third year in business. Their average profit margin stood at 54%, which included shipping costs and donations. While the growth of the company had leveled out the past couple of months, David had secured $900,000 in investment capital to expand the marketing side of the business and valued Bombas at $4 million.
Kevin felt the valuation was “ludicrous” without any exposure in the market and dropped out.
While Robert was impressed with their $400,000 in revenue, he was concerned Bombas would not succeed selling only socks, as it was usually sold as an accessorized product. David responded that they had not spent anything on client acquisition or advertising and that all the sales so far had been achieved through positive word of mouth. The investment capital they were looking for would go to hire someone to manage the acquisition of new customers to increase base sales significantly. Robert liked the socks, but not their answer, and he went out.
Lori also had issues with the strategy of hiring outside to acquire new clients, thinking they should be the ones to seek out and sign clients instead of outsourcing it. She, too, was out, leaving just Mark and Daymond.
Mark was worried that Bombas had plateaued too soon and felt the markup should be higher and felt it would hamper the company’s ability to increase profits over time, and dropped out, also.
Daymond was the Shark with the fashion industry experience. David improved his offer to $200,000 and a 10% stake in Bombas. The offer was extended only to Daymond, who told them he was actually close to dropping out with the rest of the Sharks, countered with the $200,000 for 20% of the business.
Randy and David did not have much flexibility at this point. Daymond let them know he was still not far from dropping out altogether and denied their request to consult with their financial advisors. They needed to make a decision on the spot, by themselves, without the advice of the one who drastically over-valuated the business in the first place.
After some serious contemplation and discussion, David and Randy agreed to make a deal with Daymond for the $200,000 and 17.5% equity with Daymond financing their inventory.
Where Are They Now? Bombas After Shark Tank
Daymond has said his deal with Bombas has turned out to be one of his top three investments in the history of Shark Tank. He has worked with Randy and David to increase to refine their brand and increase visibility through some high profile appearances, such as a Today Show visit that helped give them a significant boost in sales, resulting in projected annual revenue of $1.1 million.
Their focus on customer service has paid off with zero negative online reviews and a seemingly never-ending supply of positive comments about the company and the product.
Disclaimer: The information provided in this article is strictly informational; INSIGNIA SEO is not affiliated with Bombas, SharkTank, or any of its subsidiaries.