How Swag.com Grew from $7M to $33M in Revenue Before Being Acquired by Custom Ink (Interview with Co-Founder and CEO Jeremy Parker)

Introduction and What Makes Swag Worth Keeping

Nathan Latka

00:00Hey, folks. My guest today is Jeremy Parker. He's an entrepreneur and award winning documentary filmmaker, currently the co founder and CEO of swag.com, which was acquired by Custom Ink a couple months ago back in November 2021. Swag.com is the best place for companies to buy and distribute quality swag that people will actually want to keep. Jeremy, you ready to take us to the top?

Jeremy Parker

00:16>> Let's do it.

Nathan Latka

00:17So much swag ends up in the trash, man. You guys do something special. What's the secret to swag that people keep?

Jeremy Parker

00:23>> That's actually a good question. So we're very curated. So we don't offer thousands of mugs or thousands of water bottles. It's really the top of what's out there. So the top 20, top 25. It makes sure that people actually get stuff that they want to hold on to, not in the trash, but it also makes the decision making a lot easier. They don't have to be paralyzed by choice. They can find what they're looking for, design

00:43>> it, buy it, and know that the people that get it are really gonna love it.

Nathan Latka

00:46So give me an example. Like, what's the what's the top what's the number one sort of piece of swag you're recommending in 2022 as everyone comes back to conferences and real time events?

Jeremy Parker

00:54>> Yeah. I'm I'm really about not necessarily the flashy things or like the unique things. I I wanna offer people products that they'll actually wanna keep. So even like a really great backpack or a water bottle, except for the bottle is a really high quality one. It's not gonna, you know, be flimsy or break or leak. Wanna I make sure that people are getting stuff that is actually to be held onto. So and also, we try to

01:15>> push people not to necessarily be a walking billboard. A lot of people think of Swag as, look at me, I'm promoting this brand, but it's really about the recipient who gets it. You want them to fall in love with it. And ultimately they could become an evangelist for the brand. So that's really the really high quality stuff.

Nathan Latka

01:31And you got going into this back in, I think 2016, right?

Jeremy Parker

01:33>> Yep.

Nathan Latka

01:34Yeah. We started in 2016.

Revenue, Customer Count, and Growth Since Launch

Jeremy Parker

01:35>> Since we launched, we've grown over a 100 every year. We're on track to do more than 60,000,000 this year in sales. And we have nearly 10,000 customers at this point, ranging from, you know, Amazon and Facebook to a lot of smaller startups.

Nathan Latka

01:4860,000,000 and how many SKUs?

SKU Count and Product Strategy

Jeremy Parker

01:51>> We have about 5,000 SKUs on the site, but about 80% of our products are within about 300 SKUs.

01:59>> From three interesting. 300 SKUs. Very interesting.

Nathan Latka

02:02And so how many individual pieces of Swag is equal to 60,000,000 in GMV?

Jeremy Parker

02:07>> Yeah. It's a good question. It's it's it's millions of pieces of swag. Yeah. It's a lot. It's a lot.

2021 Customer Count and Doubling Goals

Nathan Latka

02:14I'd be surprised if we knew that off the top of your head, but I was curious. Interesting. And I guess a better question would be, let's do last year. So in 2021, how many individual corporations bought at least one piece of swag through swag.com?

Jeremy Parker

02:28>> Yeah. It was nearly 5,000 companies. Wow.

Nathan Latka

02:32Wow. And what do you think it'll be this year?

Jeremy Parker

02:34>> We're hoping to double every year. So it's really about keeping our customers happy, but also getting getting new customers.

Nathan Latka

02:41Well, you can double either your customer account, you can still double revenue by driving expansion. So you do think the strategy of just adding 5,000 more customers, that's where most of your growth will come from, not expansion?

Jeremy Parker

02:50>> I think both. I I think we're trying a lot of different things. We have a lot of new features that are completely different than what we're currently offering that I think will help us expand. But even just the customers right now, like just putting things in perspective, we have about six salespeople. You know, two years ago, we had one salesperson. So we're very early in terms of outbound sales. We have zero outbound salespeople at this point.

Total Team and Engineering Headcount

Nathan Latka

03:11>> All of

03:11our sales people What's the total team size?

Jeremy Parker

03:14>> If you include our our dev team, we're we're close to 80 people at at this point.

Nathan Latka

03:20How many engineers?

Jeremy Parker

03:21>> 25.

Nathan Latka

03:22Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

03:45your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

04:09get a different valuation. A VC is gonna pay a different valuation, private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is

04:31not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple. Maybe you're

04:57going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if

05:19you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the

05:45interview. So 80 minus 25 minus six, that leaves like where's the other fifth what do these other 50 people do?

Jeremy Parker

05:51>> It's operations, a lot of the back end after the orders are placed. It's the marketing team. It's customer success, you know, handling the live chats on the site. It's it's more of that kind of stuff.

Nathan Latka

06:02Interesting. Now from what I my research team is telling me here, you guys are pretty darn even pre acquisition, you guys are pretty darn capital efficient. What was sort of your funding story before November 2021?

Funding Story and Capital Efficiency

Jeremy Parker

06:14>> Yeah. We raised less than 4,000,000 all in, and we only raised about 1,250,000 in the pandemic because obviously, as you can imagine, the whole world fell apart, especially like events and trade shows. A big part of our business went away in early twenty twenty. So we just wanted to make sure we could raise some money just to make sure that we're safe. So we raised our biggest round in the worst time, but really it was kind

06:34>> of to shore up things. So we raised about 1,250,000 right when the pandemic hit. We ended up actually growing over 100%. So we went from 7,000,000 in 2019. The whole world fell apart. Our whole industry dropped 20 to 40%. We ended up doing over 15,500,000 in 2020. 2021, 33,000,000. This year, we're hopefully on track to break 60,000,000 and keep growing. Now, we've really figured out a niche for ourselves. We were very ahead of the curve. So

07:01>> in 2017, we saw a shift of work from home culture of people trying to engage with their employees and teams and best customers. So we built an automated distribution platform so customers can buy Swag. We'll hold an inventory and do individual distributions to remote addresses. This was pre the pandemic. Pandemic hits, it becomes like a need to have, frankly. Everyone's remote. Everyone's disconnected. So we had that kind of source to allow people to keep connectivity happening

07:25>> within the company.

Nathan Latka

07:26So are you paying I mean, are one of your big expenses monthly literally warehouse space? You're drop shipping, you're storing the swag until it needs to be shipped?

Jeremy Parker

07:33>> Sometimes. So sometimes people buy swag and we ship it directly from our suppliers to their office or to their home address. Sometimes we hold an inventory and we do individual distributions. We have a 3PL that we work with. They charge us storage fees and we pass those costs to our customers. So we make it easy for them to do it. And we're not looking to make that a profit center. That's more of just a way that

07:55>> we can allow people to consolidate Swag, bundle things up together, do that individual distribution.

Co-Founder Equity Split and Early Days

Nathan Latka

08:00Yeah. That makes sense. Take me back real quick to the starting days, 2016. I think you had one other co founder. Do you guys just split fifty fifty at the start or what was that conversation like?

Jeremy Parker

08:08>> Yeah, exactly. Fiftyfifty at the start. I was very front of the house, everything to do with the branding user experience. And my partner was very accounting based focused. He was all the back of the house. That has allowed us to really grow because we were never stepping on each other's toes. And he believed in my vision for leading the business in terms of how we're gonna get there. And I believe that he was gonna be able

08:31>> to take care of the business side of things.

Nathan Latka

08:33And and I guess you were basically like so close to being effectively bootstrapped. Right? I mean, you took think I think that first run was an accelerator. Right? It was Techstars?

Jeremy Parker

08:42>> Yeah. We raised a little bit of money before Techstars just to buy the domain name because we knew how valuable the brand name would be from the very beginning of the business

Acquiring the Swag.com Domain for $200,000

Nathan Latka

08:50Wait, Jeremy, what's the number? Come on. What'd you pay for Swag?

Jeremy Parker

08:53>> Well, we had we did a unique a unique thing where we basically licensed the name, and we ultimately ended up buying at a later period, but it was $200,000 that we ultimately that was the number that we bought it for ultimately.

Nathan Latka

09:05Did you negotiate the 200,000 upfront when the license started? So all your license fees contributed to the 200 ks purchase price?

Jeremy Parker

09:11>> It wasn't that way, but it was originally asking, I think, close like 1,200,000. We brought it down to 200,000. Then we worked out a deal where we licensed the name with the option to buy it. So it made sense. Was it worth it? 100%. I mean, being able to convert offline conversations to online purchasing is amazing. So imagine you come across a Swag ad. You might not need Swag today. You might need Swag a year from

09:33>> now. But when you're talking to your coworkers, your boss, and you say, hey, I need some high quality Swag. I wanted to trigger them to go back to our site. And that's what's happening. People just don't forget the name. So it was an unbelievable buy for us.

Nathan Latka

09:44And then I think that pre-seed round — I think what Techstars does, they do 120 for 7% or something like that.

Jeremy Parker

09:50>> Yeah. About that. Yeah. So for us, we were working, you know, out of my co founder's pool table room in his apartment building, still heads down. And we felt like at that point, we need to expand kind of the vision and we need more people to have eyeballs on the product. So, you know, being part of Techstars, you just get introduced to so many investors and so many potential customers and other founders going through similar challenges.

10:11>> So it really allowed us to kind of figure out where we wanna be and where we could take it. So when we joined Techstars, it was just two of us and we had one employee at that point. And from that moment, we did 1,000,000 to 3,000,000 to 7,000,000, 15,000,000, and really, you know, 33,000,000 expanded from there.

The $700K Round and Building Remote Distribution

Nathan Latka

10:26And so why give up about a million bucks worth of equity in May 2019 in that in that seed round? Why? I mean, you didn't need the money. Right? It's dilutive. Why'd you do it?

Jeremy Parker

10:34>> In May 2019, we did about, I think, like, a $700,000 round.

Nathan Latka

10:39Okay.

Jeremy Parker

10:39>> We at that point, we realized this distribution model. We actually needed the money to build out this whole new business. If you think about it, the business was doing really well in terms of growing every single month in terms of bulk ordering and distribution to one address. In 2019, we really realized the shift of work among culture. That was a big heavy lift. It's really building a whole new infrastructure, 3PLs, warehousing, all the complexities of calculating

11:03>> shipping times and shipping costs in real time based on bundling of products and all these kinds of efficiencies that we've never dealt with. So we had to learn this whole thing. We had to hire the right people. We had to build the tech. I would do it all over again because that really allowed us to grow over 100% where our whole industry kind of fell off the face of the world during the COVID. And also it's

11:21>> allowing us to really scale up at this point.

Nathan Latka

11:23Yeah. And, you know, you're not like a traditional SaaS business here. When we say 7,000,000 of sales in 2019, how much of that, what's the margin? It's going to like 30% margin profile?

Jeremy Parker

11:31>> A little bit more. About 35%.

Gross Margin and Unit Economics

Nathan Latka

11:3335%. Okay. Interesting. So 35% of seven million. So you had about, after the cost of the goods,, had about 2,200,000 before salaries and all that jazz top line.

Jeremy Parker

11:41>> Yep.

Nathan Latka

11:42Okay. So that makes sense why you'd raise some extra capital here. It's not like you got 7,000,000, you know, going to the bottom line.

Jeremy Parker

11:48>> Yep.

Nathan Latka

11:49Interesting. Okay. And then you obviously raised during COVID. It sounds really like a cushion. You just wanna be a 100% sure you have lasting power. That sounds like it could be pretty darn dilutive, was it?

Jeremy Parker

11:59>> Not as bad as it could have been. We still did an up round. The previous round, yes, everyone was going down. Everyone was we still had a a not a huge, you know, increase, but definitely somewhat of an increase. And it was enough that we're like, it's enough money to make sure that we have the next two years if we ever had challenges. We weren't burning a lot of money because we're making a lot of sales.

Pandemic Impact on Monthly Sales

Jeremy Parker

12:22>> And just to put it in our perspective, we were doing about 800,000 or so before a month, right before the pandemic hit. Pandemic hits our sales drop off to 300,000. So you can imagine being in a space where every trade show, every event, all offices are being closed. Like, how can you survive doing 300,000 when the team is built for, like, breakeven at 800,000? So we had to do that. We got about five months later, our

12:44>> sales started to incrementally grow. November, December, we're doing 3 to 4,000,000 a month in sales. So it really picked up at the end of the year.

Nathan Latka

12:51Yep. Fair to say that 1,200,000 round during COVID, you're selling what 15 to 20% of the business, something in that range?

Jeremy Parker

12:59>> Yep. Okay. Yes.

Nathan Latka

13:00Yeah. So look, dilutive, but not the end of the world.

Jeremy Parker

13:04>> Yep. A little bit less than that. Exactly.

Nathan Latka

13:06A little bit less than 15%. Yeah. That's great. That's great. So okay. So now take me through a big decision, biggest maybe moment of your life. What Custom Ink approaches you, you approach them, how did the deal go down?

Custom Ink Acquisition: How the Deal Happened

Jeremy Parker

13:16>> Yeah. Custom Ink approached us. We had a just friendly conversations because obviously we know of Custom Ink from the very beginning. They're the leader. They're the kind of preeminent company in our industry. And they're very focused on the consumer space, organizations, charities, etcetera. And we're only exclusively focused on the B2B space. So we always had We knew that we weren't doing exactly the same thing, but we could learn a lot from them. And we had a

13:42>> lot of conversations we met with their team. Frankly, we really started to like their team. They're really great people. They're unbelievably smart. They're dedicated. Many of their employees have been there for twenty plus years. It's one of these kinds of cultures that really, it's an amazing company culture and the people are just really great. So when we start getting to know them even more and seeing all the similarities and synergies and what we could do together,

14:04>> we thought, what if we could combine forces? What can we build together versus independently? And it just made a lot of sense.

Nathan Latka

14:11If I'm guessing acquisition I mean, it was it public? What they No.

Jeremy Parker

14:14>> No. We're No. Not we're not the number.

Nathan Latka

14:17Yeah. So if I take the closest comp I have, which would be December 2020, where you're doing 15,500,000 revenue that year, you raised a 1,250,000 seat at around a 10,000,000 valuation. Right? And then we extrapolate that to 33,000,000 run rate, which is right around where we were when the acquisition happened. You could argue is definitely north of it should have been definitely north of a $20,000,000 sort of valuation. Are you able to confirm that or no?

Jeremy Parker

14:39>> Yeah. I think it's I think it's safe to say that.

Nathan Latka

14:41Okay. Fair. There we go. There you go.

Jeremy Parker

14:42>> There you have it, guys. A little bit of juice you're not gonna get in the press release.

Nathan Latka

14:45More than 20,000,000. So what are you doing now? I mean, obviously, you're growing internally like crazy, doubling up to 60,000,000. That's that's not easy to do. Are you sticking around for a couple more years or working on a new idea?

Jeremy Parker

14:54>> No. No. I'm I'm a 100% running swag.com. You know, we are our whole team joined. Everybody on the team is really excited. We feel like there's just so much opportunity. It's an amazing it's a huge industry. I mean, the the promotional product industry is about $23,000,000,000 industry, but the gifting space is over $100,000,000,000 There's just so much kind of room for us to grow and we're just scratching the surface. We are a very small player in

15:19>> the scheme of this, but we're not gonna be that way in a few years. And we really feel like there's so much opportunity. So we're heads down, guns blazing. We're not slowing down anytime soon.

Nathan Latka

15:28How does Custom Ink keep you so motivated? I mean, it sounds like you made some personally, something like 5 to 8,000,000, you know, whatever pre post tax on this deal alone. I mean, what is there, big handcuffs here, big earn out stock in Custom Ink or what?

Post-Acquisition Motivation and Stock in Custom Ink

Jeremy Parker

15:41>> Definitely stock in Custom Ink. No handcuffs, no earn out. It's really just about us believing in the vision and that we feel like we can make a lot more personally. And also the business can do a lot better and we could affect a lot more customers and we could give customers a great experience. Just feel like there's just a lot of room personally, professionally for everybody involved.

Nathan Latka

16:02I'm gonna go on a weird tangent here for a second. Web three point and Swag. I'd love to, obviously, we're sponsoring events to give people that visit our booth something that they can virtually activate in our, you know, Web three point world after the event. Would you guys even are you even thinking about virtual goods yet at this point or no?

Jeremy Parker

16:18>> Yeah. We are definitely thinking about it and we're trying to figure out what makes sense without having to be so gimmicky or just trying to be like a me too kind of company. We want to make sure that we're offering is actually a value. So yeah, we're definitely thinking about it. And we have some ideas, but you never know with every idea. You throw it out there, you see what works, you know, being okay with failure,

16:36>> and then ultimately, hopefully landing on it. And if it doesn't work, then you move on.

Famous Five: Lessons Learned and Advice for Founders

Nathan Latka

16:39Yep. Alright, man. Let's wrap up with the famous five. Number one, favorite book.

Jeremy Parker

16:44>> Favorite book, Living With a SEAL, Jesse Itzler.

Nathan Latka

16:46Living With a Seal? Oh, Living Like a Seal. Yeah. Living Living With a Seal. Yep. Oh, with a seal. Okay. It. Number two, is there a CEO you're following or studying?

Jeremy Parker

16:55>> CEO studying? Not really. No. But I I've you know, I work under Marc Katz, who's an amazing CEO of Custom Ink. And, you know, I feel like I'm getting a lot of knowledge that otherwise I probably couldn't get seeing how somebody operates a 2,000 plus person company and does it with, you know, humility and grace. And I feel like I feel like I'm learning a lot just being involved in the business.

Nathan Latka

17:17Is Custom Ink public?

Jeremy Parker

17:19>> No. Private.

Nathan Latka

17:19Ah, okay. Okay. Number three. What's your favorite online tool for building Swag?

Jeremy Parker

17:25>> Favorite online tool. We use HubSpot. I think HubSpot is obviously a huge impact for us. Intercom, being able to connect directly with our customers, live chat, Figma for design user experience. So it's a lot of different tools.

Nathan Latka

17:37Number four. How many hours of sleep do get every night?

Jeremy Parker

17:39>> I try to get close to seven. I have a 20 almost a 24 old baby. So Oh, wow. Little less maybe these days.

Nathan Latka

17:46Okay. So married how many kids?

Jeremy Parker

17:48>> Married one kid and Oh, one. Okay. And and one on the way.

Nathan Latka

17:52Oh, very good. That's very exciting. Congratulations, Jeremy. How old are you?

Jeremy Parker

17:57>> 36.

Nathan Latka

17:5736. Last question.

Jeremy Parker

17:58>> Something you wish you knew when you were 20.

18:03>> Yeah. Well, I learned a lot over the course of my career, but I think the main thing for my younger self would be just launch, learn on the way. Don't be too nervous about launching or being afraid because that was definitely was a big issue early on in my career. You know, wanting things to be perfect before you launched. And once you launch, you realize that all the things you care about, your customers don't really care

18:23>> about. So trying to, you know, just get yourself out of the way and trying to learn from customers.

Nathan Latka

18:27Guys launched swag.com in 2017, paid $200,000 for the domain name, split equity with his partner fifty fifty. Fast forward a couple of years, they did $33,000,000 survive COVID last year, on track to do 60,000,000 this year across over 10,000 businesses that are purchasing at least one piece of Swag. We'll have over 5,000 SKUs, 300 are the most popular, but again, scaling quick here. Now, of Custom Ink, Custom Ink acquired the business for, call it, more than

18:52$20,000,000. That's great economics. Jeremy only raised under $4,000,000 to grow the business pre acquisition. So now building inside of Custom Ink, learning a ton. Team of eighty, twenty five engineers, six on the sales team.

Jeremy Parker

19:02>> We'll see what happens next.

Nathan Latka

19:03Jeremy, thanks for taking us to the top.

Jeremy Parker

19:05>> Thank you so much for having me.

Nathan Latka

19:08One more thing before you go. Have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM Central.

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