UP006: Swannies // creating an apparel brand for the modern golfer (feat. Web Smith of 2PM)

Adam Iversen: 00:00:00

And after about $2,500 and Tlc from the custom cowboy boot manufacturer, we had about three prototypes up and running. I mean those are ultimately what we ended up bringing two to the Minnesota golf shop. So you could imagine how those looks.

Jay Clouse: 00:00:17

Startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung: 00:00:45

Hello. Hello. Hello. And welcome to the upside podcast where we’re finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my cohost, Mr. Blue man group himself. Jay Clouse, How’s it going man?

Jay Clouse: 00:01:00

It’s going well. As anyone who follows me on instagram, we’ll know the bar outside of my apartment recently installed new blue lights on the tree that is right outside my bedroom window. So it’s like that episode of Seinfeld. Do you watch Seinfeld

Eric Hornung: 00:01:00

I Love Seinfeld, Yeah.

Jay Clouse: 00:01:17

That episode of Seinfeld where Kramer comes out of his apartment and there’s a bright red light shining into Jerry’s apartment. It’s like that in my apartment except blue. Good news is blue is the color of light that keeps you from being able to sleep. So. Oh perfect. Perfect. So they’re really bad for you. They really, they really t’d it up well for me.

Eric Hornung: 00:01:36

Speaking of teeing it up to, hey, what are we doing here man? Why are we here?

Jay Clouse: 00:01:41

Well, on upside, we talked to founders outside of Silicon Valley who were building world class companies with high upside, high growth investible worthy companies, uh, with entrepreneurs who are not in the valet people who you may think would be at a geographical disadvantage, but we think our resilient capital efficient, intelligent in solving major problems.

Eric Hornung: 00:02:01

Yeah. And we’re going to do that in a really unique, interesting way. And today we have a little bit of a twist to that. So I’m gonna let you get into that in a second. But our standard format is one, we’re going to do a little bit of research. Uh, I’m a company looking externally in the Internet sources, databases, talking with people. There’s the hint. And then two, we are going to actually interview a founder and finally we’re going to wrap up with a deal memo or a debrief and we’ll talk a little bit more about that later. Jay, do you want to tell people what we’re going to be doing?

Jay Clouse: 00:02:36

I do. We have an exciting episode today. We’re talking with Adam Iversen, the Co founder of swannies. Swannies is a lifestyle golf apparel and footwear brand. So the unique thing about swannies, they’re focused on creating golf wear for anywhere. It’s, it’s a brand play and their flagship product is this cleated Sandal, which is not something I’ve seen before. I’m not a major golfer, but I’ve never seen this out on the links. Eric, do you golf much?

Eric Hornung: 00:03:06

So up until about eighth grade I golf a lot and then I realized I was not very good at golf and my time was better spent elsewhere.

Jay Clouse: 00:03:17

That’s how I feel about a lot of things that I tried for the first time. But yeah, swannies comes to us from the generator accelerator. They ran a kickstarter in 2015 where they raise about $22,000. They were founded in 2015 in Minneapolis, Minnesota and they’ve taken on about $200,000 in total funding to this point, but eric, we don’t know a whole lot about retail and ecommerce ourselves, do we?

Eric Hornung: 00:03:44

No, we do not.

Jay Clouse: 00:03:45

We do not. So instead of going deep and doing sort of half baked research, we decided to bring in someone who knows ecommerce and retail much better than we do. A good friend of mine, Web Smith Web is an investor and consultant based here in Columbus, Ohio. He’s currently the director of partnerships for cotton bureau, which creates custom tees from the world’s greatest graphic designers and he’s the founder of 2:00 PM. Two PM is this newsletter that he’s been working on for over a year that is red and regarded by folks in the industry. The ecommerce and retail industry has the authority for trends and things that are coming into ecommerce and retail web, cofounded, Mizzen and main in 2012. And he led marketing there. Mizzen and Maine has since gone on to be a major apparel company and so I really respect his insight and I knew that he would help us learn a lot more and have educated questions going into this interview with Adam of swannies.

Eric Hornung: 00:04:42

Absolutely. And as we’re about to jump in, it’s of note that Mizzen and Maine actually just sponsored Rickie Fowler, uh, so he’s wearing their stuff at whatever golf event is coming in,

Jay Clouse: 00:04:54

Mizzen and Maine getting into the golf apparel business themselves. So this’ll be a really good way for us to quickly download a lot of incredible information. Really excited to have web on the show and to get into it. So you ready to talk to him?

Eric Hornung: 00:05:03

Yeah, let’s jump into it.

Jay Clouse: 00:05:09

Web, welcome to the show. Thanks for joining us,

Web Smith: 00:05:12

Eric and Jay. Thanks for having me.

Jay Clouse: 00:05:14

I feel a little bit like rick from Pawn Stars calling in my guy to come look at this thing and give me some insight into it. You are one of the guys to talk to an ecommerce. Can you give a little bit about your background and how you came to be one of the guys in ecommerce, how you fell in love with this area in general?

Web Smith: 00:05:34

Yes. I can give you the short story. I was in Austin, Texas. Crossfit was really big, especially in Austin. We started a media company around making essentially film, photo and audio for the crossfit community, the crossfit games community specifically. We both need commerce component around that and that early on we had $150,000 seed investment by an executive at Dell. That really got us up and running, allowed us to go across the country making great media. We had an international ecommerce presence like low seven figures in ecommerce sales in year one. We sold that company. A lot of those guys ended up working for crossfit HQ as the geographies and media personalities and moved to Columbus, so I was walking through short. I was the head of marketing at rogue here in town where I credit my learning of the nuts and bolts of real ecommerce. I mean, they are huge. It’s high intensity. You have to be on your game. I learned a lot about sem and Seo. That was my job, so I was there for a while learning from bill heidegger and a few others. Katie Henneger who owned the company and uh, I left, ended up starting Mizzen+Main a with Kevin that’s still going strong, the company consolidate and in Dallas and I’m still here. I didn’t want to move back to Texas. So here I am still in Columbus. Fast forward a few years, ended up working for UNCRATE, establishing ecommerce. There are at least beginning to their ecommerce program right now is amazing. Say it’s probably leading the industry and then that brings me to your patrol, which I still love and sometimes I regret leaving. We build ecommerce there and they are doing well. He just had a minority investment from hearst magazines last week they announced that I made the tough decision to leave your patrol and take over as director of partnerships for cotton bureau and that’s where I am today. So like it’s been sort of a waxing over the last 10 years. I’ve probably moved around a little too much, but I saw it as a way to educate myself on the finer points of commerce and media and that sort of the apex of where I stand now, uh, both in two PM, which is about two and a half years old and my day to day Con Bureau where I focused on bringing media companies and commerce together.

Jay Clouse: 00:07:57

And can you talk about little bit about 2PM, we mentioned that in the Intro, but we’d love to hear in your standpoint what 2:00 PM is why you started it. I think at one point it was a finite number of issues you’re trying to put out, right?

Web Smith: 00:08:10

It was. So I started 2 pm because I felt like my skills are going stale and I wanted to find a way to stay on top of all the current developments. Like you can’t lead unless you know what’s going on. So I was like I’m going to start this newsletter or myself or anyone else wants to read it. Cool. So it goes up to 20 people, you know, after a little bit of Promo, long story short, that was two and a half years ago. We’re on I think issue 268 now and a member brief number 11 is the next one coming out. It’s a way for everyone in the industry to essentially crosspollinate to better understand how media and data in commerce and branding work together so that each of those separate industries can benefit from the total. I guess the of the knowledge, for lack of a better phrase. And it’s been great. I’ve met a lot of wonderful people. It’s profitable and it’s probably gonna be around for a long time.

Eric Hornung: 00:09:05

Jumping back into something you mentioned earlier about uncrate, you said that they were one of the leading players in the ecommerce space. As we look into this interview that we’re going to have, what makes someone a leading player in the ecommerce space? What are some of the deliverables are the items you look at?

Web Smith: 00:09:24

So specifically I said when it comes to independent publishing, they are probably at the top of the list as far as who does it right. They’ve done a great job of synthesizing display ads, native ads, and essentially native product features, but they are housing themselves to sell directly to consumer, right? These are affiliate sales. These are. There’s a warehouse that shipping this out in the name of uncrate. That’s amazing and not enough media companies do that mainly because a lot of media companies are afraid to test what they’re real influences. Right? Like you can put up a digital ad and explain it a way to that business and when it doesn’t convert as well as you hoped it converted, but when you’re selling things, you’re measured by how well you sell things that the influence of your audience or how easily your audience is influenced. This is the determining factor of how well you are, how well you’re doing as a product based public or there aren’t many that are doing better than them.

Jay Clouse: 00:10:19

That’s super good context and going down from like a brand, what is a brand that is doing really well in this Wednesday post Amazon world? We’re very much in the thick of an Amazon world. What is a brand that does really well in what makes it possible for them to succeed in in modern day?

Web Smith: 00:10:39

So I’m just gonna go ahead and use Mizzen+Main. I think it’s the best example. I’m not parcel at all. Over the years we obviously started off as a bootstrapped ecommerce company, you know, bare nuts. It was very difficult to generate interest and to gen up national prominence in the first three years, but we did it. One thing that I credit Kevin for is that he did a great job of hedging ecommerce retail online retail with brick and mortar sales. So today if you look at Mizzen+Main, I just got a call today from the guy that sold me my car last week. He said, oh my gosh, I bought four shirts from Nordstrom. I didn’t think that you guys were serious when you said that you guys are everywhere. So there’s all the nordstrom around the country. And then there’s like 500 independent boutiques around the country that follow Mizzen+Main So when you go to Naples with your better half, you know, you walk down the street on the main drag. We’re going to see one or two stores that have mizzen in the, in the, in the window. So not only are you achieving like a base level of monthly sales that you can count on, it’s like free advertising nationwide for these types of reputable retailers. This to bolster your brand very publicly. And that’s what I think it takes right now. Uh, it takes the personal nature of a brand, not something that seems like it’s just for the money, like there’s, there’s a purpose in why mizzen operates and I think that it’s one of the, it’s going to be remembered as one of the companies that got through this very pivotal time unscathed,

Jay Clouse: 00:12:05

hedging the online sales with these brick and mortar stores. There are some companies that don’t do that, right? Like, like a Chubby, Chubbies doesn’t have brick and mortar, right?

Web Smith: 00:12:18

They do not. I may have seen a glimpse of a chubbies in store presence and it’s for a few days ago, but I might be wrong.

Jay Clouse: 00:12:25

So what does it take for a chubbies or a Benobos to have success and build their brands and not get squashed by an Amazon? And maybe that’s not even the threat that these companies face.

Web Smith: 00:12:39

Can’t say anything bad about Andy because hes like the Godfather. I don’t know. i dont know if bonobos is the best example because they raised a ton of money. 100, $150 million dollars to do if you’re under a million dollars a year. Not the best example chubbies though is is by all accounts. Amazing. They just figured out the viral nature of using comedy to sell products using just like slapstick and just good humor to move products and they are a well oiled machine. I don’t know as much about them as I used to. They are a machine and I wish more people realized how serious their business was because they are online only. It’s hard to. It’s hard to sort of account for their level of sales, which I had to guess is probably upwards of 40, $50 million a year online.

Eric Hornung: 00:13:26

As someone who has seen a lot across the ecommerce space. If you were evaluating, and I’m not saying you are, but if you were evaluating a potential job offer at a pre series a type company, what would be some of the kpis or things that you would look for before seriously considering that offer?

Web Smith: 00:13:49

That’s a great question because I get it a lot. It’s a great question. I don’t know if I’m the right person to answer it. I am terrified of being a founder or being a founder level employee at this point in my life just because it’s been so hard. You know, it’s. It’s so mentally exhausting, so emotionally exhausting that I think I need more time off, but there are some great companies in Columbus. I’ll just say that without getting into specifics that that I would certainly consider working with because I believe in that, in that lead founder and I believe that they can achieve market penetration. I guess the number one KPI that look for is not technical. It’s more like how relentless yet balanced is the founder, right? Like, is there a level of tenacity that they have, but I know I will be able to count on when things get rough and that’s hard to find, you know, going back to Kevin. Uh, I would say with all due respect, Kevin is a grew up as a well off kid, but I’d never met someone that worked harder despite relative wealth like he did and like without that, especially the early stages where everyone’s against you and everyone doesn’t want you to fail, but there are so indifferent that it feels that way. Like you gotta have that. That’s where I sort of see it.

Jay Clouse: 00:15:01

Let’s say a founder came to you and says, Web, I’ve got this great ecommerce brand. We can even put it in the context of our guest today. Swannie’s, what types of questions are you going to ask that founder to learn more about their business or understand what type of chance they have at making it through the noise?

Web Smith: 00:15:21

I would hope for a few things. Number one, that they have some momentum when it comes to the ability to fundraise a. I’m not saying let’s raise $30,000,000, but if you can’t raise that first $2 million, then that’s what separates the businesses that last from the businesses that don’t. Number two, I would say that you’re willing to be sort of a blue collar salesman when it comes to getting your product out there, getting your products in other doors. I was super averse to the whole hybrid model of online slash brick and mortar, but it’s a winner because it all comes down to cash flow and predictability and that’s a source of that. If you’re not willing to go there as a as an ecommerce brand, but we’re talking about actual like vertical brand and if you’re not willing to accomplish those two things, being branching out to brick and mortar and number two, having some success with fundraising, then I don’t see how you can do it.

Eric Hornung: 00:16:15

What makes a company successful and raising that first $2,000,000? Is it the founder? Is it some underlying growth metrics? What is it, the ecosystem they’re in? What do you see there?

Web Smith: 00:16:29

I believe that it lacks all meritocracy. It’s not the product because I can tell you that when we raised that first few hundreds of thousands of dollars for mizzen, I would say that our version one was awful. I don’t think I wore the version one. I think Kevin Ward, because it was so near and dear to him that you felt like it was part of him. It’s more about like who you know, how well you present maintaining as few strikes against you as possible and being able to handle the no’s emotionally without cracking at the very rear package.

Jay Clouse: 00:17:01

Do you see more companies competing from the standpoint of let’s say ms dot and Ms Dot had unique almost technology that is their product, right? Whereas some companies, the product is good, it’s comfortable, it’s a good product, but they’re not necessarily innovating. They’re betting more on the brand. Do you think there is more opportunity in one or the other of those things or is it all about the founder’s ability to sell?

Web Smith: 00:17:26

I mean, you certainly need a differentiator. I’m A. I’m a huge brand guy. I believe in the power of it, but if you don’t have some sort of gimmick but some sort of advantage, it can be hard. So let’s, let’s talk about. Let’s talk about like my first impression of Swannies for instance. What’s the tool that they have that’s going to help them rise above all the other brands that they’re going to be competing against? Is it a partnership with the Chive and Bill Murray and I think that’s right. I think that’s what they did like Bill Murray’s brand. Is it some partnership with creative arts agency or img where they can get these shirts on certain athletes. Like what is it? Is this a country club guy that is so well in tune with our country’s system of clubs that he can walk in and convinced a few clubhouses the carry the products like without those tools, it’s hard to do. I mean those are all things that Mizzen had to do and we’re heavily in the golf space now. Phil Mickelson wore shirt before the master’s, so like you know, again in that space it can be difficult if you’re depending on the brand alone and without like a bill murray sort of tie in or you know, I don’t know, licensing the rights to use Ip from caddy shack like it’s. I don’t bet against anyone. I’m just saying I would find ways to better your odds.

Eric Hornung: 00:18:49

It sounds like you’re saying that in a space that is so cutthroat and competitive, it’s even more important to have a really deep competitive advantage. Whatever that is. It has to be synergistic with your brand and mission, but it has to be deep.

Web Smith: 00:19:07

It does.

Jay Clouse: 00:19:08

All right. We’re running a little bit long here. My last question for you web before we talked to the founder of swannies here. Is there anything that we’re not asking that we should be asking?

Web Smith: 00:19:18

That’s a tough question if we’re going to talk about ecommerce. Yep. Where ecommerce is going. Right? So I think a good question would be how will the companies that are starting today compete in five years? If I have to answer that question, I would say that we can’t see Amazon as an enemy at the same time. Amazon is knocking out new private label brands every month, so there will be their golf polo shirt brand on the site if it isn’t already, then the next business quarter, so one thing that you have to manage over the next several years is your ability to understand inventory and logistics and how are you going to spread your resources amongst the different tentacles within the space. Well, marketplaces like Amazon and jet and so on and so forth, to your own native platform, to other retail vendors that have their own ecommerce/storefront hybrid, that person, you need to have a good operation to research person on staff. Again, industrial engineering person that can manage the numbers behind what that looks like so that you don’t have any dead weight and that’s probably one of the most important advantages when it comes to what I think ecommerce look like for certain brands in five years. Web

Jay Clouse: 00:20:30

thanks so much for your time today. Where can people learn more about you or follow you or 2 pm?

Web Smith: 00:20:37

Oh, great question. So I’m just @Web on twitter. My pet project, my baby is 2PML. That’s just 2PML.com You can find me on Linkedin at Web Smith and a on instagram at the same name.

Jay Clouse: 00:20:52

Great. Thank you so much.

Web Smith: 00:20:52

Thanks guys.

Jay Clouse: 00:20:57

Okay, Eric. So that was super helpful to get that insight from web. That’s going to really help drive the questions that we ask Adam in this interview. Before we jump into it, wanted to touch on a couple other quick research related questions. What did you find in terms of the market size for the golf apparel industry?

Eric Hornung: 00:21:15

So it’s, it’s tough to find the golf apparel industry total number, but the flagship product for swannies and the product it’s going to make them successful is the soft spikes Sandal, which I believe falls into the athletic footwear market and the size of that market in general is about 65 billion. So it’s a. it’s a pretty sizable market. Now, what’s interesting is that within that market we found that there is a four percent annual growth projected in the golf apparel section through 20, 25, so the market is fairly large and growing, which is a great thing. Did you have any feedback from people who play golf by chance?

Jay Clouse: 00:22:00

Yeah. I reached out to some friends of ours who I would’ve thought would be ideal customers for something like this. People who play golf. I’m not a huge goal for myself, so my opinion is not super valid, but the feedback that we got almost immediately was twofold. One being sort of questioning the structural integrity of these shoes. Is this something that with the Torque of the golf swing, you’re going to have enough heel support that. It’s worth the extra comfort if it’s not going to support your heel in such a way that’s going to help you with the drive that you need. That was one piece of feedback that we got. The other being more nuanced and interesting, I think, which is looking at the culture of golf. We talked to a friend of ours who says, you know, golf is this old sport with a lot of respect and it’s sort of a formal sport instead of casual and I think the bet that swannies is making is that that is a trend that is going to change over time and instead of seeing all of this super formal apparel and hats and golf cleats, the younger generation, which is going to be what needs to drive golf forward if it happens, which is something that’s sort of hotly debated, if that happens, they’re probably going to reinvent the sport and the culture around the sport into a more casual form.

Eric Hornung: 00:23:22

Yeah, and I think you see that when you look at potential competitors, so if you go to google and you search soft Spike Sandal, what you’re going to find is nine of the top 10 results and all of the Google shop tiles are what I will call dad sandals, dandals, dandals. There. Dandals of course, and those, those dandals they have, they’re the ones that you see when you’re at seaworld and there’s that dad and he’s carrying five different kids and you don’t know how he’s making it through the day, but he’s got these sandals on the have nine different Velcro straps. That’s what they look like and then they have soft spikes on

Jay Clouse: 00:24:07

your foot’s moving nowhere in these things.

Eric Hornung: 00:24:08

Right. And swannies is bringing more of a casual feel to the sandal with one single strap that plays much more like what I would call a basketball slide. So I’m really interested to hear about how swannies is going to attack this market and what the feedback they’ve seen us.

Jay Clouse: 00:24:29

Alright, great. Well, time to talk to Adam. You Ready?

Eric Hornung: 00:24:29

Let’s do it.

Jay Clouse: 00:24:35

Adam, welcome to the show.

Adam Iversen: 00:24:37

Thanks for having me guys.

Eric Hornung: 00:24:39

It’s going to be really cool to hear from swannies, which is the first product company that we’re having on the podcast, but before we jump in to the history of swannies, I’d love to jump into the history of Adam,

Adam Iversen: 00:24:51

the history of Adam. Yeah. Had a conventional path into the apparel business. Started out as a environmental engineering student that took me sort of throughout Asia. After graduating from college at a project in India, took up Grad school. I found myself at a project doing wetland restoration in Malaysia. And actually one of my old buddies from college, um, when I was back for the holidays, had, you know, we had golfed talked about what we were about doing. He was in kind of a corporate consulting Gig, something that he wasn’t absolutely sold on. Kind of a common narrative of a young professional and corporate consulting for my understanding. And we both were casual golfers played around. He had literally was playing in a Air Jordan, like flip flop sandals that he had superglued an echo golf shoe bottom to you to give it some traction. And we were just joking about it and you know, nothing like that really existed in golf. And we were talking about how, you know, we had both played less than last after graduating from college and how that was kind of a common problem in the young professional postgrad scene. And you know, what we could do to maybe bolster some of that interest again amongst ourselves and our peers and so we thought it’d be cool to to create what he was wearing and like a true sense. Then we started prototyping different models of a sandal for golf that had soft spikes on the bottom that led us to a prototype that we were comfortable with launching on. Kickstarter did about one of those classic two minute kickstarter videos that looking back on it was incredibly cringeworthy and are surprised anyone gave us money with what we were working with at that point. But yeah, we’re successful on kickstarter. Hit about I think 25 grand, which was enough to open the molds for now in the, in the shoe game you got to do eight sizes and was enough to open the molds for that and do our initial inventory purchase. And that was really the catalyst for our brand and our brand philosophy and a lot of ways. We debuted that product at the Minnesota golf show. It was still just about as hideous as is our video portrayed at that time in what people really got excited about was our vibe and our story and admittedly a lot of it was just our logo but us, you know, taking a more casual, less stuffy, less pretentious approach to the game. Then that resonated with a lot of people and from there we realized we had something more than, you know, a silly flip flop sandal.

Jay Clouse: 00:27:34

So something you just said was that after college you had played less and less and that seems to be a common thread among young professionals. Can you dive into why you think that is? Or if you’ve talked to a lot of people in that demographic, what they say is the issue kind of holding them back?

Adam Iversen: 00:27:50

Yeah. Generally speaking across the board, but I think um, especially so with young professionals, it’s time and money, right? You’re a generally moving for a new job and a lot of cases are overworked and underpaid and it’s that kind of common narrative. Those are generally speaking, the top two reasons people cite for not taking up the game or for, for playing last, after being relatively serious offers and that was definitely the case for both Matt and myself. Me More so geography and money and I think, uh, on mats end time for sure.

Eric Hornung: 00:28:30

Geography and money. You were in India and Malaysia working in some sort of environmental engineer capacity and then you decided that, you know, you know, it sounds good. I’m going to go start a golf apparel sandal company in Minnesota. Can you walk me through that bridge?

Adam Iversen: 00:28:50

Sort of skimmed over that transition. Then I took up a swannies as, as really a side product to help Matt, you know, in college we had worked in a project capacity together. So knew how each other operated and he a sort of reached out to me and somebody he felt, you know, comfortable in a helping start something with. And so it was a side project for about 18 months before it got to the point where it was really growing and it was too much where I couldn’t be in Malaysia treating this as a side project. So at that point, uh, I made the decision to move back to Minnesota and take up swannies full time.

Jay Clouse: 00:29:29

Can you help me with the timeline of that? When did it start? When you say side project for 18 months, was that leading up to the kickstarter? Was that after the kickstarter? What year are we talking about?

Adam Iversen: 00:29:39

Yeah. So that was mid to late 2015. And then at the end of 2016. I moved back to Minnesota. So been back and full time for about a year and a half.

Jay Clouse: 00:29:48

Okay. So in that kickstarter was in July of Twenty 15, correct?

Adam Iversen: 00:29:48

Correct.

Jay Clouse: 00:29:54

Okay. And so when that started taking off, what was, what was the feedback you’re getting from the market? I’d love to hear more about what people, other people are saying about these sandals. I’m not a huge golfer myself, but I’ve never seen any of the guys that I go out with wearing sandals before. So I’m curious what the market had to say about that.

Adam Iversen: 00:30:11

Interesting. What type, what type of demographic do you golf with? It was actually a fairly common amongst, I guess our peer group to play either barefoot or in sandals. I think everyone transitioned to a, a pretty casual take. Matt and myself were actually both caddies that nice country clubs locally and we’re playing it. You’re dumpy $5 municipal track. So kind of had that approach to the game, but it wasn’t something necessarily new to the market. It wasn’t like we were introducing something, you know, we’re not really at the end of the day reinventing the wheel, we put soft spikes on the bottom of a flip flop. Um, so people who like flip flops and liked to walk around in them, we’re interested in that. And a fair amount of the people who were, I would say early adopters were people who would play barefoot or in sandals. And we’re just like, obviously some extra traction would be a great thing. You know, I’m going to take a leap on these guys.

Jay Clouse: 00:31:07

And so with that Sandal, do you walk on like hard surfaces or do you wait until you get onto the golf course to put those things on?

Adam Iversen: 00:31:15

Uh, both. It’s totally fun. So they’re just rubber soft spikes on the bottom, so hard surfaces, asphalt, whatever. But yeah, you know, people, people make up their own use cases for them. We have people who walk a dean and then people who just wear them from their car into the clubhouse where they change into their actual golf shoes. People wear them around the putting green, you know, we’ve had people who have in home golf simulators who just buy a couple of pairs for that. So when you’re in your house you can just slip them on and take a few swings. A So, so different use cases for different people. And in a variety of use cases, I don’t think we had really thought about or identified prior to the creating the Sandal.

Jay Clouse: 00:31:56

Could you walk us through what that process looks like? The process of actually creating and prototyping a sandal?

Adam Iversen: 00:32:02

Yeah. Yeah, that’s a long winded story. I’ll try to keep it short. Actually, immediately after that interaction, Matt and I had where we were like, yeah, let’s, let’s take a shot at this thing. We googled shoe repair stores, found one within a couple of miles and went and talked to this guy, you know, this is a couple hours after our initial conversation who directed us to somebody who he only knew by his first name in Chicago and said, just go to Chicago and some stores ask around for, you know, Lou and he’ll tell you what to do. And that was literally our first lead. We through like better means ended up actually finding that guy had a connection with a 3d printing company locally is actually one of the biggest companies in the nation who allowed us to 3d print prototypes for free. So we, from from Lou identified somebody who could create a, you know, cad models and grade them out based on the sizes. 3d printed, our initial prototypes. That led us down to road trips, which matt and I took day long road trips down to Houston on multiple occasions from Minneapolis at one point for literally a three hour meeting and turned back around and drove back up to cowboy boot manufacturer who would of course be in Houston, which was really the only place we could find in the US who, uh, do you know, one off prototypes for us. That was kind of the next step from the three d printed model. And after about $2,500 and Tlc from the custom cowboy boot manufacturer, we had about three prototypes up and running. I mean, those are ultimately what we ended up bringing two to the Minnesota golf shop. So you could imagine how those looks.

Jay Clouse: 00:33:57

Something you just kind of glossed over. So you did find Lou, you went to Chicago and you found this guy?

Adam Iversen: 00:34:03

Yeah, we found him through through more research and better means it took surprisingly more than his first name and location to track him down.

Jay Clouse: 00:34:12

You just googled Lou Shoemaker, Chicago, and all of a sudden

Adam Iversen: 00:34:18

it was just his face. It was one, one results. And it was just lou’s face.

Jay Clouse: 00:34:24

So Adam, I’m curious to hear from you, where do you think the golf industry is going is, is this something that, you know, you mentioned young professionals are slower to get out on the course after they kind of go into, into their professional lives. Is it on the upswing? Is it on the downswing? Is it Kinda staying static? What’s the future of the golf industry with people coming up our age,

Adam Iversen: 00:34:45

you know, looking at the stats. The National Golf Foundation actually released a really great study about a year and a half ago now looking at specifically millennial golf numbers throughout the US and then a little bit of a look globally and what they’re finding is more and more millennials are actually expressing an interest in the game of golf but aren’t necessarily playing as many rounds as they have historically. And in industry it’s kind of referred to as the tiger woods era of the nineties and early thousands where everybody was playing because tiger finally made golf cool. Right? And so that did see a little bit of a, a dropoff in what is now the post tiger era, but in a lot of ways with some of the up coming and now sort of more mainstream professional golfers. Golf is becoming cool again in a way that in kind of a new way thanks to social media really you see a lot in these top professionals having incredibly active social media lives that they’re willing to, you know, share the ups and downs of the tour with their fans in that. They’ve also done it in a way that does show you can just have fun with the game and it’s not all serious and stuffy and pretentious. You have four of the top probably 15 players in the world to do a spring break together and they instagram at all and they play shirtless and just have a good time out there. And it’s that type of thing that’s in a lot of ways making golf seem cooler than it ever has. And that’s attracting a lot of people to the game. But they’re not playing necessarily as much in these traditional ways. So you’re not seeing them go out on a Saturday morning at 9:00 to the country club and play 18 holes and five hours and you know, make a full day of it, but they want it more so like seamless in their lifestyle. So you’ll see people, you know, take up work leagues, top golf, if you are not familiar with it, is essentially a bar with a driving range. It’s kind of the new Boeing people have said, but I guess cooler than that where it’s, yeah, it’s bar first, driving range second, but it’s getting people into the game in a way that’s not at all intimidating or pretentious, you know, they, they advocate you can be bad and be accepted at their driving ranges and it’s just that sort of fun loving environment there that in a lot of ways our market is sitting on top of that. That’s an overlapping demographic with us for sure. So you’ve already seen these cool things happening with a top golf. You have these golf skate caddies, they’re called, which are essentially like skateboards that hold your clubs that some courses are taking up instead of carts. So there are a lot of, of these things happening that are making the game a little bit less stuffy, pretentious, intimidating, accepting or market of people who, you know, maybe felt like alienated by the game or felt like they weren’t good enough or didn’t have the time or money to play, but are now taking up the game in these, in these new ways or because of these new things in the industry that are allowing them to not feel, um, you know, sort of those restrictions or prohibitions.

Jay Clouse: 00:38:02

Let me just make sure that I’m reading between the lines correctly here. It sounds like your market is specifically these millennials who are maybe previously disenfranchised from the game of golf, and now you’re saying it doesn’t have to be kind of the old pretentious cultural way. This is a new way to experience golf. Is that correct?

Adam Iversen: 00:38:19

Correct. Yeah. I appreciate you articulating that better than I did. Uh, yeah, you’re absolutely right. It’s a young casual golfers who felt like they either weren’t accepted or invited to the game because yeah, maybe they were not good enough or didn’t know the lingo or didn’t have the right dress. Things like that.

Jay Clouse: 00:38:42

So do you find that individuals who are wearing swannies apparel out to the golf course and going to these clubs, are they going to specific clubs that also sort of have that mantra, that mantra of we aren’t this pretentious club or they going into and I don’t. I don’t know if there are clubs like that. Are they going into the traditional clubs in this gear and saying we’re going to kind of live this life and take this over for ourselves?

Adam Iversen: 00:39:07

A little bit of both. You know, you do have pockets of members or regulars at these traditional clubs now who do have that philosophy who are trying to move their club away from stodgy and traditionally you could say, but there are also a lot of courses who just don’t have that traditional vibe anymore. And that’s really a shift that you’ve seen courses take. You know, we’ve seen that shift in the span of our company, even with some of the courses that we work with, so it is a really drastic shift that you maybe didn’t even see five years ago were these, these institutions are recognizing that catering to an older, stodgy, traditional demographic is what’s driving their membership or a number of rounds down and they’re open sort of in survival mode to attract this different demographic. In a lot of ways. That’s been a huge strength for us because you know, we’ve been able to say that having our products in their shop, which is the primary revenue channel we have right now is selling into golf courses, will attract this demographic that they’re historically haven’t done a great job of, but that they’re now more open and receptive to attracting because of. Because of that, a decrease in traditional golfers.

Eric Hornung: 00:40:27

So having swannies in their shop is one of the ways that they’re kind of migrating from to kind of new. What are some of the other trends that you see through the work that you’re doing with swannies in the, in the golf industry and in these kinds of clubs?

Adam Iversen: 00:40:43

We’re actually creating one of the trends, which is pretty exciting. Last year we did for the first time what we’ve now dubbed the swannies party scramble in. What we did is we took a look at what sort of an ideal golf experience would look like for somebody in our demographic and if they said, you know what, I want to spend my Saturday golfing. Like how would that look? It probably wouldn’t look like what I said earlier, the 18 holes at nine in the morning, all buttoned up at your country club. Like what would it actually look like? And so we came up with some key points and we created this goal format that didn’t previously exist and had this huge, you know, full field tournament here in Minneapolis with that format. And what we did was we started at a brewery in Minneapolis. Had everyone have a couple drinks. We had three party buses take us down to the course, you know when they got there, we have the music blaring from the club house. We add our big inflatable swans, which have become kind of our informal mascot and the pond just had a real fund, sort of lively atmosphere. So you’re greeted with that sort of non intimidating, not stuffy, really fun, jovial atmosphere as soon as you get there. And then we did a nine hole scramble format where every three games you had a different party game. So we did things like flip cup in the middle of, you know, your nine holes and if you beat the team you were playing against in those party games, you got a stroke off that following holes. So it was a fun way to incorporate your performance in drinking games essentially into your golf score. And so at the end we did a for this specific event. We did a slip and slide flip cup tournament that we had going down the 10th fairway to determine the winter that we had the top two teams, you know, the, the side, the winter, and then bused. Everyone back up to the brewery, so it was this really cool way to really create this experience around the game of golf that didn’t exist before, but hit on everything, you know, our demographic was looking for out of the game for it to be fun, just hanging out with your buddies, having a few drinks and not being intimidated by being out there. It’s okay if you missed the ball or make a fool of yourself. Right. And so we actually were fortunate to have one of the biggest managemet groups in golf identify this is a really big opportunity and so we’ve rolled out a 16 events schedule all over the US that were about four tournaments through now this year and it attracted other courses all over the U. s who’ve said, you know, how do I get one of these events and are on pace to do over 20 events here in 2018. That I think is a perfect example of course is who would have never said, you know, you’re talking one of the most traditional golf management institutions that have said, this sounds like an awesome idea. This is exactly the demographic we’re looking to appeal to. We want to align our brand and really give you the resources to make this happen. So things like that are awesome indications that industry is picking up on, on this trend and in a lot of ways trying to capitalize on some of those things. There are some of the golf institutions in bureaucracy that are, I think in industry people are saying are doing as much as they could or should be doing and without naming names, just some of the big hair governing bodies in golf. But yeah, there, there are promising signs like the scrambles that I mentioned.

Jay Clouse: 00:44:18

So it sounds like to do those scrambles, the clubhouse is probably shutting down or closing the course to other players. Is that true or are they playing alongside these, these parties scrambles,

Adam Iversen: 00:44:28

correct. They’re, they’re shutting it down. So it’s, it’s, I mean it in that sense. It’s not unique, you know, for these events you have what they call a shotgun start. So you have a person, a team starting on each hole. So yeah, they are, they are shutting down the course for, for these events.

Jay Clouse: 00:44:45

And what does the model look like for you guys as swannies to bring that there? Are they paying you guys a fee to kind of do the logistics and the marketing or are you just hoping that drive sales of the apparel at the clubhouse?

Adam Iversen: 00:44:56

Yes. So we host registration for these events on our site and we’ll participants are paying us directly, which is, you know, a cool way to get payment upfront as well as capture the information of each of the participants and people who are just driving traffic to that site. And then we pay the course generally speaking about half of that registration fee and the rest goes to mostly covering our logistics costs. Correct. So we have sort of started out with these events saying that they’re purely kind of a breakeven marketing lever for us and if they are, you know, a good conduit for us to sell our apparel, that’s kind of the goal.

Eric Hornung: 00:45:35

Who Do you guys look at as you’re kind of creating almost a new attitude in an old industry? Who are you guys looking at as like role models out in the space that may have done this elsewhere? Or who do you guys look to to say they just did something really cool. Can we do something like that at swannies?

Adam Iversen: 00:45:54

The more traditional example, we have a company called Travis Matthew. We don’t really mind giving plugs to anymore. We uh, follow in their footsteps pretty pretty well. Uh, they started in 2007 and actually just got acquired by Calloway last year for $125,000,000, which was really awesome validation that, you know, some of the bigger players are recognizing this sort of trend in the industry. Um, and they were kind of the first to pioneer golf attire for work and play. So on and off the course younger kind of cooler demographic still ended up in a market that was catered a little bit older than us. So their primary demographic is about 40 year old guys who weren’t cool casual apparel. And I think one of the best examples of how our markets differ last holiday season and they ran a promo on their site partnering with an Electric Bike Company selling like $3,500 electric bikes, so like a little bit older, little bit more expensive stuff than we have in clientele that thereafter, so they’re one that we follow pretty closely, but try to differentiate ourselves in some of those ways by being a little bit less expensive catering again to a little bit younger demographic and then also having styles that sort of resonate with that group a little bit more and pushing the envelope a bit more than they traditionally have. And I think goes party scrambles is a great example of that.

Eric Hornung: 00:47:31

Apparel is something we kind of haven’t dove into yet. You have the sandal side of things and that kind of kicked everything off at swannies you have the events and that seems to be the new marketing kind of push, exciting thing happening. Then there’s also like some sort of apparel play here. Can you talk a little bit about what you guys are doing in that space?

Adam Iversen: 00:47:50

Yeah, absolutely. So our apparel is our primary business right now. I think the sandals were the brand catalyst, but makeup, you know, no more than 15 percent of our revenue right now. So we, you know, use that philosophy that the sandal really like grew around itself to create a full apparel line. And that was really because we sold these sandals in the golf courses and recognize that there was a need and a desire not only in the footwear space but also in apparel more generally for something that had attracted this demographic. Something that was for younger people who are taking the game more casually and wanting something at a price point that wasn’t, you know, a lot of these companies are selling a polo for 80 to $110. And so we developed our apparel kind of around that same brand niche that the sandals represented.

Jay Clouse: 00:48:44

Can you talk a little bit more about what you just said as far as the sandals are about 15 percent of your revenue apparel is a little bit more. Can you talk about the traction you’ve had to this point and what that looks like for you guys?

Adam Iversen: 00:48:55

Yeah, absolutely. So we were in about 15 to 20 golf courses primarily with the sandals in 2016 as well as, you know, with some crappy tee shirts and hats that we had made up. And the response was actually fantastic. We got reorders from every one of those courses and we took that as a huge sign that we needed to invest more into growing are really product portfolio. And so at that point, given that I was living in Malaysia at that time, got a contact with a really good manufacturer actually through one of our mentors there who married into a Taiwanese family who happened to have a athletic apparel manufacturing facility in Taiwan. So I ended up bouncing over there a couple of times establishing a pretty good rapid tour with them and they took us on, you know, kind of as a family friend favor at the time and ended up, you know, we have so much gratitude for that, uh, because we, I think we have them to thank for, for making that step from sandals and crappy vendor apparel to a real full fledge apparel company. So once we had a full line, we introduced that really last year was our first true line of apparel in spring of 2017 into about a 125 courses to date. Uh, you know, and now 13 and 14 months later we just hit our 350th golf course account.

Jay Clouse: 00:50:21

That’s really interesting. What we didn’t know coming into this interview is that you guys were selling in golf courses I had, I had sort of erroneously assumed it was all online sales. So can you talk about the importance of brick and mortar to your, your strategy, how much of your sales are online versus in these golf courses?

Adam Iversen: 00:50:40

Yeah, we do. About 80 percent of our revenue through these golf courses, so it’s a hugely important channel for us. It was something we identified pretty quickly as a scalable model. We can basically, you know, with error bars of course, but identify a region, find out just by looking at the course demographics in that region, you know, maybe 30 to 50 courses in that area that we think would be a demographic fit and essentially from there it’s just a sales funnel. Hounding them on cold calls, getting meetings with a decision maker and then meeting with them and introducing them to the line and in a fair amount of these instances, courses will buy on the spot. One of the biggest growing pains we’ve had in that channel is that their buying patterns are incredibly seasonal and obviously vary and differ by region. So identifying the correct time to hit up these buyers and to make these calls is something that’s still kind of a learning process but is probably the best thing we’ve done to increase our conversion in that sales funnel, And it’s got to the point where we do have a really, really good understanding of identifying or region and identifying those courses and knowing how many of those will make a purchase from us in any given area. And what isn’t.

Eric Hornung: 00:52:03

What does an average purchase look like when you go out to a golf course?

Adam Iversen: 00:52:08

Yeah. Generally speaking there between 24 and 48 pieces. Um, so they’ll do a run of, you know, shirts, hats, polos and outerwear, sometimes sandals. We do sell more sandals through our direct consumer as opposed to golf courses. And then from there, that’s kind of the initial order. So we have specific packages that we call like par three, part four and part five packages that are just really easy introductions for these courses to the brand. And you know, we’ve had talks with courses who have taken us up on a 24 piece order who have doubled up their order the next year. And now kind of our first example of that happening where they doubled up their order and our second year and then I’ve put in a reorder early in that second year for about what they ordered already, which is a tremendously cool data point for us to have. One core specifically told us that they were also the kind of early adopter in their area of Travis. Matthew started out with uh, with the same 24 piece order and had put in like a $10,000 order with them that season. So there is a lot of, you know, growth opportunity within each specific course to, yeah, go from, as Travis did in six years at that cores from a 24 piece initial order to them doing $10,000 annually.

Jay Clouse: 00:53:32

And so they’re buying a product, this isn’t a consignment deal. They’re buying the pieces outright and then marketing them up to sell them on their own.

Adam Iversen: 00:53:39

Correct. Yup. We’ve done consignment in rare cases, generally speaking courses that we just know will be a home run and maybe the buyer doesn’t necessarily feel the same way. So if there’s some disconnect between how strongly we feel about the course and what they’re saying to us, uh, we’ll say, you know, try it out, take a dozen pieces on consignment, you call us back when they fly off the shelves and we’ve had pretty good success with that because we only do it in cases where we know that course as a pretty good demographic fit.

Eric Hornung: 00:54:11

So when you look at your business, seems like number of courses, number of accounts is a, is a KPI that you guys use. What other KPI’s are you tracking in a regular course?

Adam Iversen: 00:54:26

Those are kind of the top ones. Yeah, it’s, it’s initial order size and then reorder rate, which is a huge one. So that’s something that we tracked probably most diligently from 2017 through this year. So how many of those 125 accounts from last year reordered for this year, we were just shy of 90 percent from our understanding, especially for smaller brands. Industry average is around half. So that was a hugely, hugely important KPI for us. And then yeah, order and reorder size obviously. So how much you’re doing annually with each course and then frequency of kind of that reorder turn around.

Jay Clouse: 00:55:06

you guys went through generator and outside of generator and the kickstarter you’ve raised somewhere in the realm of 180 to $200,000. Are you guys in a position where with these courses ordering you’re in a good cashflow spot to just continue going course by course? Or are you looking at how do we go bigger nationally with a raise or something?

Adam Iversen: 00:55:29

Yeah, we’re not really looking to do anything. Yeah, like a bigger national raise for the time being. Sort of the dirty secret of the industry is that a lot of these courses are purchasing anywhere from four to six months outside of when they actually want the product in their store. Definitely in more seasonal climates, like up here in the Midwest, you’re having these conversations with buyers in the fall, fall to winter and they want product that their door in April and so you’re kind of having, excuse me, a supply chain conversation along those same lines. So you’re putting in your order for the spring with your suppliers around that same time when you’re trying to feel out how many orders you you’ll realistically yet and so that makes cash flow a little bit of a headache. We’re kind of at a position where we do have the capital and a enough of a churn where we can grow about two to two and a half times annually without needing an influx of capital. If we feel like we’re in a position where we have some strong compelling reason where we feel like we can grow quicker than that through some other channel, we would need an influx of capital to sort of mitigate that cashflow and seasonality issue.

Jay Clouse: 00:56:52

Real quick, this wasn’t something I asked directly. Are you guys full time on this?

Adam Iversen: 00:56:56

We are, yeah. So Matt, myself or full time and we have three full time sales reps as well who are obviously hugely important to our, to our early growth and in the process of hiring sort of a back end inventory warehouse manager. We actually haven’t announced this officially yet, but are moving into our own warehouse space, which is exciting. We have currently warehoused out of Matt’s parent’s basement, which we have thankfully outgrown, which is, which is a huge sign.

Jay Clouse: 00:56:56

Congrats.

Adam Iversen: 00:57:31

so, yeah, appreciate it. Moving into about a 2,500 square foot warehouse in Minneapolis, which we’re really excited about.

Eric Hornung: 00:57:38

I love when we get fresh announcements here on upside. Just a little leak that’s kind of just makes its way out.

Adam Iversen: 00:57:43

Tell it to the press

Jay Clouse: 00:57:46

Love it, heard it here first. So Adam, how many golf courses are there in the United States that you think are potential customers for this? Is Golf even available in all states? Are you geographically constrained to how many states you can sell to?

Adam Iversen: 00:58:00

There are hardly any geographic constraints globally for the game of golf, you know, most of the active golf projects right now in the world are in Asia. The number of golf courses in the U S is relatively stagnant, stagnant, or just about as many closing as there are opening. There are about 17,000 in the US. Not Evenly distributed by state, but there I don’t think are any states with under, you know, 75 courses to my knowledge. And so yeah, not a lot of geographic limitation, it’s just finding those pockets where you feel your brand will be best represented in those pockets where there are also sort of golf influencer markets where there were people go to, to find the newest and the best things I would say from there it’s kind of identifying which are in our, like true target market and in the periphery of our market, I would say easily three to 4,000 of those courses in the u.s specifically are right in the bread and butter, bread and butter of our market. So a quarter of the courses and then you know, there are 10 to 12,000 who have apparel in their shop who are probably all. And that’s peripheries, uh, in our market as well. And then not even speaking globally for golf apparel specifically, Japan’s market is actually just as big, if not bigger than the U. S is. And you have a lot of growth in east Asia and really all over Asia in the game. So there, there are a lot of global opportunities as well.

Eric Hornung: 00:59:39

And Are you selling internationally now?

Adam Iversen: 00:59:43

Canada is The first country we just expanded into internationally actually just shipped out our first order for Canada last week, which was exciting path expansion internationally for now. You know, there’s plenty of opportunity here in the US that we’re trying not to get too ahead of ourselves with international expansion, but I think we’re going to take sort of maybe a more active approach into Canada, but uh, that would be it for now.

Eric Hornung: 01:00:09

I kind of want to step back a little bit because in the apparel business, brand is so important and we’ve kind of talked about the swannies brand and about some of the things you’re doing, but I’d love to hear how you personally define the swannies brand. Like what does it stand for?

Adam Iversen: 01:00:26

Oh, tough question. Yeah. Put me on the spot like that. We like to define the swannies brand as an apparel brand for the young and casual golfer that breaks down sort of the stuffy, elitist perceptions of the game. We like to say if somebody is wearing something with a swan on it and they get up to the first tee and they hit a duck hook into the pond and that’s not a person who’s going to be ridiculed. That isn’t a person who’s playing with people who had ridiculed them. Right. So we kind of have this internal chart that’s evolved I think in a really cool way that sort of articulate some of these prohibitions to acceptance in the game and all of those things that are making the game intimidating and stuffy and it’s things like. I mentioned a few of them earlier, but like down to the lingo of the game, not knowing how to talk about the game of golf, not knowing what a handicap is, not knowing what your round handicap is. You know, even down to what car you drive into the golf course parking lot. There are just so many of these stereotypes within golf where you have to be so buttoned up. You have to know the lingo. You have to know your handicap. You have to drive your beamer into the golf course and pop your trunk automatically and have somebody take your bags and, you know, there are all these things that we’ve started articulating and sort of categorizing and we say, you know, anything that breaks down one of these prohibitions or goes against one of these sort of norms or stereotypes is something that in some ways we want to be involved with or our brand associated with.

Jay Clouse: 01:02:11

I like it. To your point, I’m not a golfer because the few times that I did go golfing, it did feel a little elitist and I was uh, I did not play well. I did duck hook or whatever you call it, something into. I did hook it into the duck pond. That’s a duck duck. Duck Hook was not. Yeah. Did Not play well and I don’t, I don’t like being in a situation where I’m not doing well. And then also, you know, feeling judged for not doing well. So I, I relate to the story that you’re telling right now.

Adam Iversen: 01:02:40

Yeah. Nobody wants to pay a bunch of money and spend a lot of time to feel embarrassed and intimidated. It’s just when it’s not a comfortable experience. You get people who are, you know, young professionals like we talked about no longer wanting to play.

Jay Clouse: 01:02:57

Eric, if you didn’t have any more questions on the brand front and something that I wanted to step into is our question of building a company in the Midwest. What has that experience been like for you guys building this in Midwest, in the midwest versus. I don’t know if there are any ecommerce or retail hubs. The United States, obviously Minneapolis has the target accelerator and you guys are right there, but is this a strategic decision or one of you guys were just born and raised there?

Adam Iversen: 01:03:26

Admittedly, it’s the latter. I think it has been relatively cool for us in a few different ways. Our competitors, Travis Matthews, one I spoke to, a link soul is another one who we don’t mind giving a shout to are both southern California based and sort of have this ingrained cool cash surfer culture into them, you know, and so we’ve been able to take kind of the Minnesota Lake life culture that hasn’t gone as you now mainstream, if you will, in integrated into our products in a way that does feel more genuine than us trying to, you know, set up based in southern California and say that were this hip new surfer, skater type brand. So we have played off of that, you know, with a Swaney Swan logo that’s helped us out quite a bit. Having these sort of midwest lake roots on the more business, not industry side of things with raising capital. I do think it’s, it’s still a little bit of a nascent capital market for, you know, things that aren’t traditional to Minneapolis or the Midwest. Minneapolis is, you know, if you have a med tech company, probably the best place to try to raise capital for golf apparel. Maybe not so much. That said, there are a lot of industry folks in the Midwest and in Minneapolis specifically around golf. The founders actually have golf galaxy, which is one of the biggest goal for retail companies that sold to Dick’s sporting goods, uh, probably four or five years ago now for about $250 million dollars. They both are on our, on our advisory board and close contacts of ours and one of them lives two miles away from where I grew up here. So you know, I think it, it really is industry specific still here in the Midwest, but thanks to organizations like generator, there is a little bit more or a growing number of institutions or angels that are coalescing around these, these organizations that is helping to make that link between these angel and fund that do exist out there and some of the startups who are looking for capital. I think that more so than a lack of angels of funds was really the missing link.

Jay Clouse: 01:05:59

So you have the founders of golf galaxy on your advisory board. That sounds super helpful. From a retail or apparel standpoint, who do you have as mentors or someone that helps you navigate that world?

Adam Iversen: 01:06:11

Yeah, the golf galaxy guys are great than then we draw heavily off of, you know, for product and product design. It’s what we see happening in the industry and how we can aggregate stuff that we really do like and how we can iterate it on a way that’s truly unique to us. More in line with our brand. So we do draw a lot of inspiration off of what’s happening in industry and you know, we like to say are our closest mentors and advisors on the product space or the catalogs and some of our competitors and drawing, drawing that inspiration and seeing what we like and don’t like and how we can do it better. We have met close mentors who have been sales reps for some of the bigger brands. One of the national sales accounts for our managers rather for callaway. As someone who’s incredibly close to us and one of those, you know, daily call type of advisors for anything that comes up so that the closer we get to finding mentors and advisors who are intimately involved in the golf space and sort of the channel that were most actively playing in where now, which is the golf courses, the better we’ve, we’ve been able to take their wisdom and run with it.

Jay Clouse: 01:07:30

I want to do a little looking towards the future unless you have any questions on that, Eric, but I wanted to look and see. Let’s, let’s go five years from now. Where do you see swannies going? Where do you see yourselves in five years? What does success look like and how do you continue to compete in an evolving ecommerce market?

Adam Iversen: 01:07:49

I think traditional golf as it sits is going to sort of bend to some of these industry things that we’ve talked about. And so I think, you know, you might be looking at the demographic of swannies golfers as you know, that might be the mainstream golf demographic in five years. And so that’s really what we’re striving towards and why we have sort spent a lot of time articulating these things that are holding back progression of the game and are more traditional and trying to latch onto anything that sort of going against those. And so I think in that respect you would hopefully see swannies and our demographic being the mainstream brand because that’s what mainstream golf will look like in five years. And I think there’s a lot of potential for that to happen. And from some of the stuff we’ve talked about, there are promising trends in that direction that it could that could be there in five, seven years. And so that’s, that’s really what we would like to see it. And we would like to looking back on it, say that swannies was a brand that aided in this progression of golf in a way that helped save or a vitalize the game. And so anything that we can do that’s attracting people who once played but dont anymore to the game or attracting people who have always felt too intimidated by it. Getting people like yourself, Jay back into the course who are saying, you know, I paid a bunch of money to hook a ball into a duck pond and feel embarrassed to say, hey, I feel like I have the resources in the interest to go back out there and take up the game and enjoy the game. I think the more we can align our brand with those initiatives and have people looking back on it, say swannies was a catalyst for this revitalization and progression of the game is ultimately what we would like to see.

Jay Clouse: 01:09:55

And do you see yourself at that point in these 3000 stores that are in your demographic? Do you see yourself outside of that? Are you in Asia? Are you in Japan? What is your growth strategy really look like?

Adam Iversen: 01:10:07

I think there’s a lot of promise in Asia as I spoke to a even not necessarily Japan, which already has a really established market. You’re seeing it in some of these developing countries in Southeast Asia. Even so being, you know, one of the first brands taking that up and I think, I think that grow into those types of markets hits on exactly what we’ve been talking about it, about being behind some of these growing the game initiatives in those countries and a lot of ways you’re getting people who are being first introduced to the game or had never really played before or stop playing, giving them an opportunity really to play. So I think our, our growth strategy is just really going to be in that fold. If, uh, we’re seeing that happening a bunch more in Asia, we’re going to proactively expand to Asia. Sure.

Eric Hornung: 01:11:00

So you’re the first one of the first movers in this, in this space, in this growing demographic and if in five years it is, is kind of a main golf demographic as said earlier, there’s also gonna be a lot more competitors. So what do you see as kind of swannies competitive advantage in the space and how are you building up that competitive advantage or digging that moat a to use a term we use a lot on here

Adam Iversen: 01:11:31

digging the moat, Uh, I just read a really funny quote, it’s from mosque on their last Tesla, like shareholder, I think it was like the q one report and he just said, you know, if a, if a moat is the only thing keeping us from our competitors, we’re doing something wrong or something. Moats are overrated, but no, obviously there’s a lot of validity to that. I think we’ve shown and proven through our product portfolio and these things that we’re introducing that we have been able to recognize opportunities or trends and to capitalize on them in a way that maybe our competitors haven’t yet. Or obviously yes, there will be competitors out there that don’t exist today. You know, with starting with a golf sandal I think was a huge key differentiator immediately, uh, where people, you know, you see that and you understand exactly what our market is. It’s isn’t something we need to be better at articulating and saying, oh, this polo, that’s a different shade of blue. Then your polo represents this because we say it does, you know, it’s, it’s tied into the products that we do have. And then, you know, one of the things we had a lot of success with last year we did, we did a heavy push of selling mesh back hats and the golf courses, which obviously like everyone in our demographic is wearing, but traditional golf companies don’t really do that because they’re not really golf. So huge success with that had probably our highest reorder numbers from courses and all of 2017 from mash back hats and then introducing these parties, scrambles that we talked about. That’s something that we identified as a format that is perfectly in line with what our customers are looking for and that nobody has done before. It’s a format that we made up in just the traction that that scene and how many participants have said it was the most fun they’ve had playing golf before. And how many courses have expressed interest in, you know, taking us on board to run one of these events. We started doing something. I don’t think it could be considered proprietary, but kind of new and unique with the events as a sort of customer acquisition strategy. We’ve said for new courses, taking up these events that they have to put in a minimum of 32 piece of parallel order into their shop as a way to sort of align, you know, our brand and introduce it into their customer base for these events. So we, I think have a history of doing things that are new and unique, uh, that other brands you know, haven’t done or haven’t capitalized on that we’re going to continue to do it to be that, that brand that is differentiated and yeah, I think those things speak to us being able to do that in the past. And it’s something that’s always top of mind for us. So confident we can continue to find those, those trends and capitalize on them.

Eric Hornung: 01:14:33

It’s funny that you mentioned Elon and his little dig at Berkshire because your answer to that was essentially innovation is our moat and that’s almost exactly what he said in that conference. That’s really funny. That’s really fun that it was all together.

Adam Iversen: 01:14:48

Yeah. That’s probably where the parallels between Mesh back hats and you know, rockets tesler rockets, but yeah, crypto candy.

Jay Clouse: 01:14:59

Yeah. That’s great. That gives me a lot of context because one of the other things I was going to ask was if a course wants to take up this party scramble, but they don’t go directly through you, how do you protect that format as something that creates a brand recognition for swannies? Is it, is it a proprietary game on the third hole that you can only play if you have some swannies product to do? You know, as I was wondering how you guys would protect that or if it’s even a priority.

Adam Iversen: 01:15:25

Right. It hasn’t come up like that yet and there’s really nothing stopping. Write a chorus from saying, hey, they sent us essentially the playbook and the format on how to do this. Why don’t we just run it ourselves? So it’s something that hasn’t come up as a priority and I think it goes back to, goes back to the musk thing and a lot of ways it’s like if other courses are taking that up and if it’s allowing people of stealing it and replicating it, if that’s allowing 500 party scrambles to happen next year, we’re only 100 of them are ours. I think in a lot of way that’s opening up our market and that’s, that’s sparking the innovation that we’re looking for. So it’s not necessarily a priority or something. We’re super concerned about it, but I mean it’s not to say that thought hasn’t crossed our mind of how do we make sure that we have a very explicit value add that we can articulate to these courses on why a swannies party scramble is better than you taking this format and trying to do it yourselves.

Jay Clouse: 01:16:27

Great. Adam, thanks for taking the time. If anyone wants to find out more about you or swannies, where should they go after the show?

Adam Iversen: 01:16:33

Yeah, you can find us at swannies.co and we’re also fairly active on instagram and our tag is
swannies apparel.

Jay Clouse: 01:16:41

Alright, Adam, thanks again for giving us your time. I will look forward to checking back in with you and six, 12 months. see how you guys are doing.

Adam Iversen: 01:16:48

Sounds great. Thanks for having me guys.

Jay Clouse: 01:16:54

All right, Eric, we just got done talking to Adam Iversen, the cofounder of Wwannies. Can you tell the listeners what we’re about to do here for this last segment?

Eric Hornung: 01:17:02

So if you’ll remember from the upfront there are three parts of our show, one research two the interview in three a debrief. We debrief in a way that we call a verbal hypothetical deal memo. What that is is it’s looking at this opportunity as if Jay and I had an investment fund and we wanted to communicate a potential investment to investors. So what’s the upside? What’s the downside? What are some other things to kind of think about? Jay, did I miss anything there?

Jay Clouse: 01:17:35

No, I think you’re right. This is something that we use as an internal note taking tool and sort of calibration, if you will, of our own thoughts. We’re going to check back against swannies and all the companies that we talked to, six to 12 months down the line and see how we’re doing, where we on point with our thoughts. Did they blow us out of the water? You know, somethings that we can start to hone in and Polish the way that we look at these companies.

Eric Hornung: 01:17:58

So when we look at these companies, there are four questions that we want to indirectly or directly answer. Jay, do you have those four questions?

Jay Clouse: 01:18:07

I do. The first question is how committed is this founder? Second question is, what are the founders chances of success in this business and in life? What does winning look like in terms of revenue? In my return is the third question and the fourth question, why has this founder chosen this business? We probably won’t speak to those things completely explicitly, but those are implicitly the four questions that we’re asking ourselves as were evaluating this opportunity. So Eric, do you want to start with any one of those?

Eric Hornung: 01:18:38

I’d actually kind of like to start more thematically here. So if I think about a potential investment in something like swannies, the thesis to me is that you are investing in the changing of an industry, right? So the pie is getting redistributed, it might be growing a bit as well, but it’s, it’s essentially a redistribution of the type of apparel that’s out there right now. So I think that that’s a fascinating model that we really haven’t talked to as much on upside where it’s closer to a zero sum game than maybe a new marketplace would be. Would you agree with that?

Jay Clouse: 01:19:20

I had’nt thought about it that way, but that does make some sense to me. Something that stuck out to me from Webbs intro with us was he, he said something along the lines of if you can’t raise the first $2,000,000 or so you’re gonna have a tough time as an apparel brand. And we said okay, so what does it take for an apparel brand to raise that $2,000,000? And he basically said it’s, well, I don’t know, it’s not a meritocracy, it’s, it’s being able to tell the story and being able to be compelling. So you know, this is, that’s the reason why we brought web on is this is kind of a wild west to us. This is a totally different thing that we’re talking about. But something that you told me yesterday that I thought was a really good way to think about this. It was the long shorts in basketball comparison that you made. Can you speak to that a little bit more for the listeners?

Eric Hornung: 01:20:04

Yeah, so I was pretty young in nineties when I think it was the fab five in Michigan who started wearing long shorts and basketball before that everyone had kind of a high shorts that are coming back in now, which is funny that we’re bringing it up now. But by the time Allen Iverson joined the league, which is funny because this is Adam Iversen making an Allen Iverson comparison. Things are getting a little mixed up here. But Allen Iverson, he came into the league, he had the big baggy shorts, the corn rows. And that was like moving away from the traditional John Stockton’s of the world who had short shorts, crew cuts, or really just like this old guard of guards and now that you have Allen Iverson come in. So it’s, I think it’s kind of like that where it’s like reinventing and making something cool that it has been historically traditional

Jay Clouse: 01:20:54

old guard of guards. I love that, Well done. Yeah, it’s really interesting to me because, you know, when we were doing our research and we call it some of our friends who were golfers, the ones that pushed back were the ones that we’re speaking to the culture of golf as something that needed to be protected and needed to maintain that way and would stay that way. And he spoke to, you know, the slow amount of progress as far as culture change goes. And swannies and Adam are basically saying we want to help fuel that change, which is, uh, this, this becomes almost just, what do you believe? What do you believe will happen if you’re, if you’re looking at this as an opportunity, do you believe that it’s practical for that culture to change? Because if you believe, yes, then I think you look at swannies and say this is a compelling direct move in that direction

Eric Hornung: 01:21:44

and I’m not going to make a call on one way or the other. I think the facts speak for themselves and their growth speaks for itself. So obviously something is happening. Uh, will it be as big as it needs to be? I’m not sure, but one anecdote. I used to play a lot of golf before eighth grade and we were once golfing out on our municipal course, terrible course, but we left a bunch of divots in the green and all of this stuff that’s like super against etiquette. We were like running on the Greens because we were 10 year olds or whatever and we had this guy come up to us who was probably in his fifties or sixties and just like lay down the law in terms of etiquette and as you go up to nicer and nicer courses like that is so ingrained you’ll get the rules are really, really strict. So it’s, it is interesting to me that there are courses that need kind of this younger demographic and are willing to break with traditionalist ties because I’ve been to courses were like everything is like super, super, super strict. So

Jay Clouse: 01:22:50

and he mentioned that there were about 3000 to 4,000 courses of the 17,000 us courses that he thinks are their wheelhouse and I’m assuming implicitly and him saying that is he thinks that’s their wheelhouse. Now. It’s hard to say five years from now that those 10 to 14,000 courses don’t also move that direction. If that old guard of guards is moving on or not getting out to the links, you know those courses are going to be incentivized to bring people in and whatever fashion it is and if that culture naturally shifts away and I think we’re seeing that culture shift and a lot of places in the United States and a lot of different industries and ways of thinking, but if things are really changing then that opens up the market even even bigger. So Eric, what I want to kind of talk to is try to do some of our back of the Napkin math here, which you took lead on. Can you walk us through some of the assumptions you made and what you’re coming up with?

Eric Hornung: 01:23:48

Yeah, so I think it would just look at this revenue side of things. We have a couple of numbers that we can play with and kind of get an understanding of how big swannies currently is in terms of revenue and looking forward we can kind of assume some growth. So if we think that swannies is in approximately 300 to 350 golf clubs right now, that’s the number of accounts they have. And their average order size is 24 to 48 items and that average order size is about 60 to $70. What that really breaks down to is on the low end of 24 items. That’s about a $600 at 50 percent wholesale discount, $600 average order size. And then on the 48 items side, 1200. So I think you did some math there, Jay, using a calculator that guided us to a bigger number. That makes a lot more sense to people.

Jay Clouse: 01:24:46

Yes. Use the calculator. So if we’re looking at non sandal apparel at 600 to $1,200 per order and we’re looking at 350 courses at somewhere between $210,000 in $420,000 for non Sandal Apparel. If you add on the sandals on top of that, which he noted was about 15 percent, no more than 15 percent of their revenue maybe said as 20. Somewhere between the realm of their, so

Eric Hornung: 01:25:13

their online retail was 20 percent of revenue and then sandals makeup about it seems like three fourths of that.

Jay Clouse: 01:25:20

That’s right. Sorry, my mistake. So the 80 percent that I was calculating there was in store revenue, which we calculated somewhere between 210,000, 420,000 and if you take the 20 percent of online on top of that, you land at 260,000 to $525,000. And that’s, you know, we’re, we’re baking a lot of assumptions into that and we’re doing that because we missed some questions to ask Adam. But if that’s the revenues that are happening now, and this is, this is a young company, what did we calculate or did we calculate if they go to the full 3000 courses where that hits

Eric Hornung: 01:25:54

well, it’s assuming that they keep everything the same as approximately 10 X. right? So if their order size stays the same, if everything else stays the same, then just 10 x those numbers. So approximately $3 million a year with a little bit of variation for different types of growth. I think that that’s. That’s about right, but that’s also assuming everything’s flat line or Ceteris paribus for the economists out there. And the thesis behind this, which is why I kind of opened up the segment, is that it’s not going to be flatlined, right? This is going to be more of a parabolic curve and net 3000 number is as of current, but there’s so much opportunity for that 3000 number to become 8,000 or 10,000 in that average order size to go from 600 to 800 to 900. That’s more of the interesting. I think facet here is if things don’t change it, it looks like an okay opportunity, but if things are going to change the way that Adam kind of relayed to us, then I think it looks like a fantastic opportunity and the numbers are going to get really big really fast.

Jay Clouse: 01:27:01

Something that really stood out to me was in the intro with Webb, he was talking about how on pure online isn’t what people thought it was going to be in that brick and mortar was something that was necessary and I saw a quote yesterday that something like 60 to 80 percent of online orders, we’re still impacted by a brick and mortar experience for some retailers and I didn’t realize until we talked to Adam that swannies was selling in these clubs and in fact it seems like that is their primary focus. All of their kpis that he talked to were related to the sales in clubs. But assuming that those clubs do a good job of selling and they get into those clubs. That’s not to say that they can’t also really ramp up their online sales and distribution straight to the consumer. My guess is at their, at their stage and having only raised In the ballpark of $200,000. Going pure B to c online can be an expensive proposition. So they’re probably seeing this as we can sell 24 to 48 pieces to a club and we’ve already prospect out where there’s those are and we can sometimes sell on the spot. So to me that sounds like that’s a revenue first approach, which is something we see in the midwest a lot, but if that’s 80 percent of their sales right now and the size that we know ecommerce is online to the, to the consumers, you’re right. I think this could be a really big opportunity if, if that brand really hits. I thought a lot when I look at their stuff, I thought about chubbies a lot.

Eric Hornung: 01:28:28

Same, That’s why I asked that question about who do you look to because it feels like almost a chubbies business model.

Jay Clouse: 01:28:34

Right. And so I was surprised that we didn’t hear that brought up at all, which is what it is, but it Chubbies obviously pretty successful online brand from, as we talked to web about just kind of having that voice and having that same almost stance that they’re putting forward in trying to put into the swannies brand and knocked down that, that stuffiness that elite is. Um, so yeah, this is a tough one to evaluate.

Eric Hornung: 01:29:00

Yeah. And I think that as we look at the revenue and return question, right, we said 3 million looks like it could be something, but that doesn’t seem, that seems like a very low kind of worst case scenario based case given the thesis of this investment and it would be something much higher. So I think we can look at maybe more of a comps model instead of a bottom up analysis. And look at what a Travis Matthews sold for, I don’t know what their multiple was on revenue, but they sold for 120 million golf galaxy sold for $100 million. So that seems to be kind of the, at least historically the market for this and if the pie grows and you would expect an exit to be larger than either of those two

Jay Clouse: 01:29:42

in that number, that three to $5 million that we’re talking about is assuming only clubs and only domestically and only the 3000 to $4,000, you know. So He’s already talking internationally. They’re in Canada. He talked about Asia and eastern Asia alot. He talked about Japan. So if they’re already thinking globally and this, this really hits and this becomes a brand, you know, it can be pretty big.

Eric Hornung: 01:30:06

Yeah. Are we going to see you and some swannies gear out there, duck hook in or whatever.

Jay Clouse: 01:30:11

Uh, I would say one of the leading reasons that I’ve chosen and entrepreneurial and location independent life is so that I don’t have to wear anything formal at all. It’s been so long since I’ve worn a suit or a polo shirt. That being said, if I did have to wear a polo shirt, I’m looking for something that’s comfortable and casual and I’m looking at something like a swan or maybe a in Maine. As we talked to a Web, I’ve actually been coveting mizzen and main gear for awhile. Have you heard that word web if you’re listening, but again, since I don’t wear formal clothing, it just seems like I’m not going to get my money’s worth out of it and it’s, you know, it’s a. it’s a high priced premium item.

Eric Hornung: 01:30:53

So let’s, let’s transition away from Jay Clouse and into Adam Iversen. What were your thoughts on him as a founder and let’s kind of dig into their founding process.

Jay Clouse: 01:31:05

The biggest thing that stood out to me about Adam in their team in general from what we learned about Matt as well was resourcefulness. The fact that they were driving all over the country, trying to find the shortest distance between two points to find a prototyper to put these things together and then go to the golf show and then raising their initial money on kickstarter shows some scrappiness. Also, Adam, being in Malaysia at the time, getting connected to a Taiwanese family that could help them get into apparel. It just screamed resourcefulness, you know, a lot of times people have an idea and they just think, okay, I have to throw money at this to get it done, and that wasn’t the way they’re going about things. Even even their sales strategy going through the clubs I think is pointing to their resourcefulness and so to me that’s a really good sign for a founder. I think that, you know, when times get tough, you have to be resourceful. It seemed to me from the golf side of things, Matt was the one that really had the pure passion for golf. Adam obviously likes to golf. Obviously it feels very strongly about golf, but I don’t know that I got the. I live for golf vibe, but that doesn’t mean that he’s not committed to the business in any way. That’s just my hot take. How about you?

Eric Hornung: 01:32:19

Yeah, I think that there was definitely commitment. I mean, you don’t just quit your job and go start a company without especially. It sounds like they both had decent jobs, right? He was traveling to Malaysia and India and Matt was a corporate consultant, so they were probably both doing fairly well.

Jay Clouse: 01:32:37

Man. I got the, uh, got the consulting job that neither of US could get.

Eric Hornung: 01:32:41

Yeah. And so they were both doing fairly well and they decided that this idea had enough of a capital m meaning behind it to actually go out and do it. And for Adam’s specifically, I would have loved to hear more because he was an environmental engineer and he was out there doing environmental engineering. And it seems like when you do set, when you study something and then you get to actually go do it. I wanted to know, like I think I lost a little bit in that trans transition that I wish I would’ve known. I wish I’m a sucker for the narrative fallacy and I wish I would’ve had a better narrative for getting me from Malaysia back to Minneapolis from Adam.

Jay Clouse: 01:33:21

Yeah. Sounded like it was a case of we were good friends and we worked on projects together in college and we had a project idea and we went after it and did it something else that stuck out to me, you know, even in doing the research, you and I were looking at swannies last night. We’re saying what is, what is the play here, what’s the uniqueness? And it took us a while to really drill down on, oh, it’s the sandal. The Sandal is their flagship product and it’s what’s really unique about them or get an interview and it’s the same hotel we broke in, but that’s less than 15 percent of our sales really. We’re focused on apparel, which makes sense given that it took us so long to kind of find that origin story in that thread. So to me, you know, the shadows as we’ll call them, of concern going into the interview and wondering, you know, why are things this way were immediately addressed and spoken to directly. So I felt I felt good. You know, at the end of the day this seems like something you’ve got to believe that it’s going to be huge or you don’t, and that’s what’s gonna move the needle for you and what’s going to move you to act as a potential investor is, do you think this can really first follow a trend of culture change, B can it help, empower and you know, fuel that culture change is that culture change? Is gonna Happen? Those are things that you just have to believe if you’re looking at this as a high, high growth type of deal.

Eric Hornung: 01:34:41

Did you just say first and then B like, what kind of number system is that?

Jay Clouse: 01:34:46

Yeah, I mixed up the uh, the uh, you’re right, you’re right. But is that the door over there? Should I go?

Eric Hornung: 01:34:55

So where do you see swannies in six to 18 months?

Jay Clouse: 01:35:00

I feel like this is a trap because I know you did some of those math too. So if they’re growing two to two and a half times per year, they can be. Just tell me, just do the math from Eric, six to 18 months from now. How many stores do you think, how many clubs do you think they’ll be in?

Eric Hornung: 01:35:15

I think it’s just easier to annualized numbers if they’re growing at two x, so if they’re at 300 now there’ll be 600 in 12 months and then in 24 months they’ll be in 1200. So they’re a third of the way to complete market penetration for how they see the market. Now if that growth is the same, if they go to two point five x, they’re probably closer to halfway there.

Jay Clouse: 01:35:39

Okay. So we’re looking to see what is their market penetration. Is that reorder rate sticking around? You know, they said they had a 90 percent reorder rate from the clubs there and now that’s great. Is the average order size increasing? That would be good. I’m still really curious in online sales, are they starting to see more online sales? That’s something I want to see from this business because it would stand to reason that if it is having success in brick and mortar that slowly, you know, creating brand awareness and brand presence and that would move people to order online potentially. Unless there’s some pricing difference between the two, but to me I’m looking at those two factors. How, how many stores do they in, is that reorder rate, staying at the same rate? Is the size of the order increasing and how’s the online channel doing? How about you?

Eric Hornung: 01:36:29

So I’m a little bit more interested on the cost side of things because it doesn’t sound like right now there is a need to raise additional capital or to leverage investor money to expand and I believe that is because they have low overhead though. They just increased it based on a upside release. I don’t know if you guys heard that in the interview. Well you’d all the good news here at upside, you heard it here first warehouse warehouse. So now they have a little bit more overhead with a warehouse. They have five full team members are full time employees and their customer acquisition costs to date seems like it’s been pretty low. I don’t know what the sales funnel looks like. Z, there’s some questions we probably should have dug into a little bit more, but what I’m really interested in in six to 18 months is did they just chop off the easy fruit, kind of the low hanging fruit and they really are concentrated around because Minnesota has probably hundreds of golf clubs, so as you expand out of your home territory, the cost and sales lead time to bring on a new club. Does that increase or decrease? So I’m really interested in kind of the six to 12 to 18 month trend that we would see in terms of their golf club acquisition cost because that is their main reoccurring revenue stream

Jay Clouse: 01:37:49

and it would be interesting to see six to 18 months from now, what does their funding look like? Maybe get somewhere six months from now and they’ll say actually we needed to raise because even if it’s not necessary to go at the growth rate they’re doing now and to get into more shops, it would stand to reason that capital, a capital infusion would help help with the cashflow that Adam mentioned and be be an accelerant for growth. Which if this is a big opportunity, which we’re saying is the potential upside of this, there’ll be more competitors that come out of the woodwork and if there are more competitors, chances are one or more of them or is it going to be more highly capitalized? So be interesting to see 18 months from now where, where they are on the fundraising mind and how that’s affecting the growth.

Eric Hornung: 01:38:33

Awesome. Well great interview and I love that we had our first product company on. I’m looking forward to having more product companies on.

Jay Clouse: 01:38:40

Yup. I’m with you. Thanks again to Web Smith for joining us. If you want to follow web, you can find him on twitter @web. You can also find his newsletter, 2PM at 2PML.com. If you guys have thoughts for us, we would love to hear your thoughts on swannies and the opportunity presented here. Tweet at us @upsidefm or email us Hello@upsideFM. We’d really love to hear your thoughts on this one. It’s pretty complex. I think that’s it. Eric. Am I missing anything?

Eric Hornung: 01:39:08

Well, I think we got to get out to the links

Jay Clouse: 01:39:10

Lets get out to the links. Let’s do it. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email at hello@upside.FM, or find us on twitter @upsideFM. will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast, and so here we go. Eric Hornung and Jay Clouse are the founding parties of the episode podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of Deaf Phelps Llc and its affiliates on your collective llc and its affiliates for any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week.