Why I Started A Sock Company To Follow My Passion
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NicSocks was a side hustle for me. It stayed that way for nearly two years. I was building a consulting firm that was earning me significantly more money but was becoming increasingly more complicated with new partners.
The business began to grow nicely. I focused on expanding our subscriber base. Initially I wanted to meet our customers so I set up a pick-up point in Woodstock, Cape Town.
Every week between 10am and 2pm I would sit at a tea shop with customers’ orders and wait for them to come and pick them up. I’d meet the customers, get an understanding of exactly why they purchased a subscription, who it was for, how they heard about us, what they thought about our socks and so on.
It was a fantastic way for me to gain insights into my customer base, but ultimately that kind of engagement is unsustainable as you scale. Our ecommerce sales were really starting to take off.
This was mostly driven by traditional media, if you can believe that. I discovered that the more exposure I received in magazines and on radio and TV shows, the better our website did. There was a direct correlation. So, I started to work my way into as many shows and publications as possible.
I was interviewed on 5FM, 702 and Cape Talk, tons of local radio stations; I appeared on Top Billing and did interviews for countless magazines (online and offline). The Top Billing feature just about made our sales numbers for that year.
The incredible response was surprising because I honestly believed that TV was dead. It is not dead in South Africa.
I was getting recognised at the airport when I was travelling within the country. I am a dark skinned, heavily bearded and heavily tattooed man. When people stare at me at the airport I begin to worry. I start to get twitchy.
Eventually after a group of people had been staring at me in the check-in queue for about ten minutes I asked them what the hell was up. They kindly explained that they had seen me on Top Billing the week before.
I stopped panicking that someone was about to arrest me and decided to bask in the hype for the time being. That TV spot boosted our online sales by more than 200%. Traditional media isn’t dead, it just needs to be used in the right way.
I was desperate to change the status of NicSocks from side hustle to full-time focus, but like many entrepreneurs I was unsure about when to make the full-time leap. There was a very consistent feeling that kept nagging at me.
The feeling that I was neglecting the most important thing that I was building. I would be sitting with Resolve Mobile clients in Kenya and sneaking in work on NicSocks.
I would be talking to the biggest mobile networks on the continent and thinking about the customer support request I had left unanswered for too long about how to wash bamboo socks. My focus was always on NicSocks. That was the feeling.
That was the indication that it was time to devote my attention to my tiny sock start-up. Even as I write these words, I completely understand how nuts this is.
I left a consulting firm that I started and that was paying me a six figure salary to build a sock company in Cape Town. What could I do? I was dreaming about socks.
Surely that’s motivation enough to dedicate your waking hours to your next adventure?
My answer to the question ‘When do I focus on my side project?’ is that you focus when you can think of nothing else but your side project.
RAISING MONEY AGAIN
Raising money for NicSocks.com was the right decision for the business when I started to look for funding. I put my feelers out to my network of investors and high-wealth individuals who might be interested.
I met with angel investors and VC funds locally and abroad and realised that there was interest. This fund-raise was a bit different. The key to raising money this time round was my track record as an entrepreneur, the traction that NicSocks had and the story of how we hustled to build out version 1 of the business.
My network played a key role in helping me find the investors I needed. Never underestimate the value of your network.
I’m not talking about your Facebook feed or your LinkedIn connections. These are false networks that make you feel good but don’t have any material effect on your life. I’m talking about the network of people that you groom over many years. People you trust, people who trust you and people who you believe you can call on when you need help, advice or, in my case, funding.
Nurturing this network of people has probably been my single biggest accomplishment over the past 15 years of building businesses. I have made a lot of enemies but I believe that creating enemies has led me to find the people who I would lie in a foxhole with.
In my experience, you cannot build a meaningful network if everyone is your buddy. Sometimes you have to break a few connections to create new and more important ones. Never underestimate the value of the people you surround yourself with and how you treat them.
With absolute certainty, I can say that you will need to call on this network as you progress in your life so don’t abuse people, don’t use people, be genuine and offer up value as much as you ask for it. I wanted to raise funding for NicSocks because I wanted to focus.
I was getting increasingly frustrated that I was working part-time on my start-up, and in my experience the way to focus is to raise funding. After a few months of continued growth and building our customer base and range, a few things started to click into place. Jen, my co-founder and partner was an ever-present force in the growth of NicSocks.com.
She kept me focused, kept me on strategy and really helped the business become what it is today. At this stage NicSocks.com was operating out of the spare bedroom in our house in Cape Town. We were both working fiercely to keep up with growth and scale things effectively.
We were busting out of the spare room at a rapid rate. Every wall was lined top to bottom with socks. We needed to move out of our house and into a bigger place with more space. We needed more space because we were ordering much more stock for the website and had to start planning for scale and the next phase of the business.
Not only were we starting to think about the business but we decided that it was time that we became a couple who works together. That was a big decision, but one that I think defined the success of the coming years.
Without Jen managing operations, NicSocks.com would never have grown the way it did. The first thing that clicked in relation to funding was a conversation with an old friend of mine, Adii. Adii had just exited his business and was keen to start investing in local start-ups.
He and I began discussing what that might look like and how he could be involved. Adii and I met when I was building my blog, SA Rocks. I had built the site using WordPress (WP) and Adii was quickly establishing himself as a rockstar in the WP community.
I approached him cold to see if he’d help me redesign the SA Rocks theme. He and I struck up a relationship that would last over a decade. Adii did not end up building the new theme for SA Rocks but, funnily enough, Adii’s future business partner Mark did help me with the SA Rocks redesign.
The two of them would go on to build one of the world’s leading ecommerce platforms, WooCommerce. It’s incredible to me that I met both of these guys more than ten years ago and I’m still great friends with both of them. It’s incredible how quickly a chance meeting can turn into a ten-year friendship and how those chance meetings help to grow your network. Adii agreed to become the very first NicSocks investor.
I wish it was more complicated than that, but it wasn’t. Adii and I had a good relationship; he knew me as an entrepreneur and trusted that I would do everything I could to turn his initial investment into more money. My network would again play an integral part in helping me find my next investor for the business.
Danillo is a friend of mine. He’s a fantastic photographer who was starting up his own side hustle ecommerce company. Danillo’s dad Ricky had been to hotel school many years ago and met a guy named Rolf. Rolf had moved from South Africa to Australia and had success investing in, and assisting, an ecommerce company there, so Danillo and Ricky met up with Rolf to talk about their ecommerce project.
Rolf did not end up investing in Danillo’s business, but Danillo had mentioned that they were stocking socks from NicSocks.com. Rolf was interested in what I was doing and we were introduced. I met Rolf for the first time at the Cape Grace Hotel.
This kind of investor meeting is my favourite kind. It’s where I shine. I know my business. I know the pressure points, our analytics and have a good memory for numbers and figures that can really show that I am paying attention to my industry, competitors and my own business.
After just one tea (Rolf rarely drinks coffee at our meetings) I had cemented a relationship with Rolf that led to him investing in NicSocks.com. If you’ve ever gone into an investor meeting wondering what you should prepare beforehand, here are some quick-fire tips:
- Know your subject matter. It’s imperative to know what your business is about and to understand the intricacies of what you do and how you do it.
- Understand the competitive landscape. Don’t go into a meeting with a potential investor thinking you’re the only company in the world doing what you do. That’s naive and very rarely true.
- Be honest. You will not have all the answers and the investors don’t expect you to. They expect you to be willing to admit you don’t know and to learn as fast as you can.
- Know what you need. Do you need funding? A network? Dealflow? A mentor? Pick something. If it is funding that you need then it’s probably a good idea to know how much you are looking to raise and what you plan to do with that money. ‘Salaries’ is not a good reason to raise money. ‘Growth’ might be but even this is too broad and vague. Where are you spending the money to grow? How much growth do you need? Is the growth sustainable or backed by the investment? It’s complex so don’t oversimplify this part.
- Do not expect it to go well. The chances of walking away from a first meeting with a handshake deal is probably less than 5%. My meeting with Rolf was an absolutely stunning exception to the rule that you need to have 500 meetings to close a single deal.
The intended use for the money that I raised was for ecommerce growth, product expansion, marketing and hiring of a team. In my experience, it is very rare for money to be used exactly as you plan. The nature of a business is that it’s tumultuous and ever-changing.
You have to be able to adapt. Our money would end up being used to open physical retail stores. Let me ask you a simple question: What are the things that you love about your business?
While you think about the answer, let me ask a follow-up question: do you think that raising funding is going to enhance the things you love, or detract from them? This is a key question that I have learnt to consider after raising money for NicSocks.com, Motribe and StudentWire.
Raising funding changes everything. You think it doesn’t. You hope you’re different. You believe your investors are not like everyone else’s investors. You can hold your breath and believe this stuff until you are blue in the face but you’d probably be wrong and out of breath.
Do you want a slow burn business or a fast growth business? You cannot be both. You can’t take on investment and then decide that you want to take 20 years to give your investors a return on their money. It just doesn’t work like that. Not for most of us, anyway.
If you’re Jeff Bezos then maybe you’re different. But even Facebook had to give their investors a return and to do this they listed on the stock exchange. Raising money is not an achievement. It is not a goal to aspire towards or aim for.
Raising money is a strategic move to help you reach your next goal or grow your business or achieve the next milestone. Raising money is not something to be proud of. You might feel like it is.
I felt like that each time I’ve raised funding in the past but ultimately when you raise money you enter an entirely different business. Your business becomes very focused on administration and operations. You focus on returns and managing a board and your investor relationships.
At NicSocks.com we instituted a board of directors, formalised our accounting practices, had monthly report back sessions and things became very serious very quickly. I was definitely not prepared for these things, but at the time it all felt right so I ploughed ahead.
Rolf came on board and joined the funding round with Adii. NicSocks was rocking and ready to go. We had some traction in a difficult market and went from selling 4 000 pairs of socks in year one to selling nearly 100 000 in a year. The growth was banging on and we had our sights set on global sock domination!
Keep in mind, we’re still just a sock company selling online in South Africa out of the spare room in my house.
This article is an excerpt from Nicholas Haralambous' book, Do. Fail. Learn. Repeat.: The Truth Behind Building Businesses