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EPISODE SUMMARY

When Michael Martocci dropped out of college, he had a new direction: entrepreneurship. Obsessed with learning and building things, Michael founded SwagUp in 2017, which has since grown to dominate the market for corporate and promotional swag. They now have over 200 employees and are eyeing a booming $30 billion market. They’ve succeeded by finding ways to streamline the swag process, eliminating friction for customers at every turn. In this episode, learn why Michael is laser-focused on design, data, and existing customers.

EPISODE NOTES

4:47 - When goals make sense

Goals can be a waste of time at a young company. But once you grow, you need to figure out what to prioritize.

I think to start off a company where you're at zero and come up with this master plan and all these OKRs and goals, I think it's just a huge waste of time. You should just spend more of that time talking to customers and figuring out building something that they need enough. Because if you don't have product-market fit, what's the point of goals? The point of goals for us was just, you have a lot of people. There's a lot of demand. How do we prioritize our time on the things that are most important? And how do you coordinate? Last year we had maybe seven director-above people, and now we have like 22. So if you have all those types of people leading different initiatives, how do you make sure that they know what's important at any given time? How are we measuring the success of that? How are the things that they're doing gonna impact other teams? What are the dependencies? If they say, Hey, we want to build X, Y, and Z. But if the engineering team doesn't have the people they need to do that, there's just so much more coordination as you get bigger. And without having clear goals, it's just really tough.

9:57 - The forecasting breakthrough

As a bootstrapped business, SwagUp felt like it was starting each month as a blank slate. Michael took on the job of building a model that could accurately predict business.

Every month, I would build out the model for that next month and the next quarter and stuff. And then I’d track like, what was the variance? What was the actual revenue? What did we end up doing? What is it looking like for the next few months? And it started to be very accurate. In the beginning it was like, plus or minus 20%, which was still really helpful. And then it started to get into like the plus or minus like 5%, 6%, 7%. So in the past we went from not knowing anything to now like, oh, we'll do $2.2 million next month. And then that was super helpful with the pandemic because when the world was kind of melting down, we weren't sure are people going to buy swag, or this or that? By like April and May, we saw enough early signals that would say, Hey, actually we're going to have our best month ever in this next month. So we just started to think much more from a machine standpoint, like, okay. What are all these inputs, and what's the output going to be? And that kind of changed my thinking around this stuff in general and try to find other areas of the business that have the same dynamic.

13:32 - Pursuing a SaaS look & feel

There’s no doubt that SaaS tools are very intuitive to use. Michael wanted that same look and feel for SwagUp, so that tough tasks and decisions could become simple.

I wanted it to feel like a SaaS tool. Because if you were like Twilio or Plaid or Stripe or any of these interesting software or platform-type companies, the people at those companies who are buying swag, they're going to these websites that feel very 2000s, very 1990s. And I was like, I want them to feel the same buying experience that they would feel buying some piece of software that they're using, and have a brand and positioning and design that resonates. So design was super, super important to me from the very beginning. Because one, it gives you credibility, and it tells you right away like, Hey, they take pride in what they're doing. It looks really legit. They've probably been around for a while. And we had to appear bigger than we were, but also wanted it to feel natural to them. Like, oh, if we're going to buy swag, this would be the type of company we would buy it from. So we've always been thinking about how do you productize the experiences as well, and make it really, really simple and eliminate decision fatigue…and it became like this mouse trap for us, where we were able to acquire so many customers because we just do this one thing very specifically.

17:18 - The benefit of swag

Swag is a big business for a reason. Many companies want swag to build a relationship with employees. When you don’t have a good resource, this can take a lot of time and energy.

The whole idea of like a swag pack is first off, whether it's your new hires or you have community members or your new customers or partners, building a bond and a connection between you and them is super important for companies now. There's so many more companies that you can work at or buy from. And the people that choose to work at your company or buy from you, they have a deeper sense of connection. And that's what I kind of saw happening. I saw that if you do swag well, it does a great job of kind of solidifying that connection and kind of physically embodying it. But how do you easily get something into those people's hands? And if you're hiring people remote all around the world, how do you easily get a consistent experience as well? That was one of the issues I saw in the beginning is you have people that start at a company, in the office, and they have one experience. And they have people that start remote, and they have one experience. So it's like, if you can make the process of creating one of these kits and distributing it really simple, then everybody will have a really consistent, scalable experience.

24:55 - Learn what you will & won’t do

Saying “no'' seems like a foregin concept at a startup. But as you solidify demand, you have to start articulating what you will and won’t do for customers.

In the beginning, it's just like, do whatever the customer wants. Just say yes to every single opportunity, make money. And then eventually if you're lucky enough to be successful, then you have the option to be like, oh, I'll be picky. But when you're just starting, I don't think you can really be super picky. Because you don't even know what the business is going to be, or what parts are going to be successful or where are you going to really scale it. But then over time, it starts to get to a point where that “just say yes” attitude comes back around to haunt you, because that becomes the mentality that people are used to, and they're just like, oh, we just want to do whatever's in the best interest of the customer at all times. Which is noble in a way. But at the same time, it means you're inherently not providing a good experience to other customers, because you're spending too much time on this other stuff. Or we have to hire too many people to maintain those levels. So we started to do some things the SwagUp way, and really articulating to people and documenting what are the things that we do or the things that we don't do.

27:59 - The right time for capital

So far, SwagUp has never raised money. But Michael thinks bringing on capital soon will help them grow much quicker, faster.

We've never raised money. We still own 100% of the business. We have very minimal debt, just some little lines of credit that we have access to. But I'm definitely at a point where I think we're ready to start bringing on capital. Because it's just too clear, the opportunity and how big it is and the different areas that we want to build out, and get the team that we need and stuff. We’re just wasting time by sitting, because there's too many tradeoff decisions on a daily basis. It's like, well, Anthony wants this person on his team. Well, this person wants that. So we have to say, oh no, you're not going to get that person right now. We're going to get this person. Or this is revenue-generating, so that gets priority.

40:02 - Focusing on customers over marketing

SwagUp only spends about 1% of their budget on marketing. That low number is due to the fact that repeat business is huge.

70% of our traffic is direct and organic. And the majority of that is people just going to SwagUp.com right in their browser. So that's the most valuable thing you could ever have, is just people that know the brand itself and go straight to it. So that's why we don't need to spend too much on marketing…The bigger we get, the more vitality there is, because more of our products are in people's hands around the world. Our growth is really a function of how many customers we have. Because 70% of our revenue comes from our repeat customers. So we think of it as like, okay, we want to get as much of our traffic and leads to turn into new customers, because new customers turn into our customer base. And then a certain percentage of our customer base is going to order on a given month. So that's like a whole kind of growth flow. How do we optimize that? How do we get as many people going from lead to conversion? How do we get as much percentage of our customers ordering on a regular basis? How do we get them reordering, the time between reorders lower? So we spend a lot of time on our existing customer base.

42:52 - Seeking out good data

Data can be your friend, but Michael says that it can also be your enemy when used improperly. That’s why he learned how to crunch the numbers on his own before trusting others with the job.

The worst thing you can do is start making decisions off of bad data. Because I'm all for being data-driven, but I'm also very annoying to people about making sure that the data that they have is actually correct at its root, and like that they dive into the raw data and check manually, like, is this right? Check some assumptions. Because ideally if you set up the infrastructure right, then you just go with it. Then you start making decisions and you adapt and stuff and you trust it and you can move quick. But I've also seen horror stories where people think they know what they're talking about or they have data and then it's really saying something totally opposite, and they don't understand the business or why. And that's why it was really valuable for me to do all of the data modeling myself in spreadsheets before, because I could manually go in there and really understand the data. So now when somebody comes to me with a report, I can usually gut feel and say hey, there's something wrong with that. You gotta dig into the data and really look at it before starting to build strategies and plans from this information.

51:02 - Building in automation

The process of ordering SwagUp items is already easy, and Michael’s team is making it even easier to preview item designs thanks to AI mock-ups.

You upload your logos. You say, okay, I'm going to want 100. Here's what I need it by, and submit it. And then on the backend that goes into our system. It alerts our design teams that they have a new project they need to work on. And then the customer then gets invited to the dashboard. So they make their account. And then once the design team, probably within plus or minus like six hours, you'll get your fully branded mock-ups done for your brand, with those products that you picked. We even have a little bit of lightweight AI that we built. If you go to grab one of our sample packs, that's like another lead channel that we have. At the end of it, we'll use your email to then showcase your custom mock-ups of what it's going to look like. So we'll pull your domain, and then we have some APIs that run to look at what branding you have, what color. And then we'll show you what that could actually look like in real-time. But when you're picking all these custom items, for now we have a design team that does all that. Eventually, we'll probably use AI to automate all the mockup processes.

57:18 - Selecting the right swag products

The best way to decide what to sell? Ask yourself if you and your team members would buy it. Michael goes for a mix of brand name items and high quality generic goods.

The first thing was like, one of the philosophies was pick products that people would actually use themselves. Like if I was going to get a hat, which hat would I want? I always use myself as the barometer of like, is this a good product? And then we'll buy them and hang out and use them and see if people like them and stuff. But there's like a 70-30 kind of rule of like 30% of our products are brand retail names. And we try to find interesting companies that people at startups are using anyway. Like there's a drinkware company called Fellow that makes really cool stuff. And a lot of times our customers will suggest brands. They'll be like, Hey, I love these mugs that my wife just bought me, would you guys ever offer them or something? And we'll reach out. So I try to strike the balance between having cool brands that people know that they would want themselves, but then layering in these generic items that are of higher quality.

Full video interview:

Michael Martocci - CEO of Swagup

Ramon Berrios -CEO of Trend.io

Blaine Bolus - COO of Omnipanel

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