Photo from Bootstrappers
Do you remember your childhood passion? Michael Martocci does. He sold lemonade and traded sports cards, buzzing off an entrepreneurial rush that has stuck with him for life. Since those early hustles, Michael has built a social network, interned at a hedge fund, and in the last four years, scaled an award-winning branded merchandise startup, SwagUp, to over $50 million.
Swag commemorates some of your biggest milestones. Don’t believe me? Cast your mind back to your first bank account, your first week at college, your first job. Remember those free pens, t-shirts, and notebooks? All swag. It’s an industry worth almost $30 billion in which Michael’s SwagUp has prospered, recently winning Inc Magazine’s 23rd Fastest Growing Company.
What’s driving the swag revival? Brand buzz. What used to be something you’d chuck in a drawer after a conference is now a means to declare membership of and loyalty to a community, something to brag about and share on social media. In other words, that free baseball cap is how brands mobilize customers to become advocates – and Michael caught on fast.
“Startups go crazy for swag,” Michael said. “Whether it’s a new hire, onboarding, sending to partners, or attracting customers, there are so many ways you can use swag to build a community around your brand. But it’s also logistically challenging. You’ve got to source and distribute it, which usually involves lots of steps and people. I wanted to make this simple.”
Yogurts to Stocks to Apps: An Entrepreneur Rises
Michael Martocci must’ve been a handful as a child. If he wasn’t pilfering lemonade and yogurts from his parents’ fridge to sell to his friends, he was loitering at the school bus stop to barter sports cards for profit. An enterprising boy, Michael’s earliest memories – going as far back as five years old – are of enjoying the quid pro quo of the transactional relationship.
“I’ve been an entrepreneur for as long as I can remember,” Michael said. “I think I was five years old when I was selling yogurts, lemonade, and other things I could find in the house. That snowballed into things like shoveling driveways for money. I just always liked the whole idea of transacting with people. I’d buy stuff from other kids and then sell it on eBay.”
Tired of hustling for other kids’ pocket money, Michael began trading stocks at 13, becoming enthralled with finance, which he later studied at William and Mary University, Virginia. But his love of entrepreneurship remained, hibernating, waiting for the right moment to reawaken. Five years later, while Michael interned at a hedge fund, it began to stir inside him.
“A buddy of mine from high school said he had this idea for an app,” Michael said. “It was a location-based social network that matched kids based on the activities they want to do. So we decided to work with a development firm overseas and start this app. That was kind of the re-ignition of the startup mentality, you know, being able to start things from scratch.”
As Michael’s inner entrepreneur wiped the sleep from its eyes, a series of promotional events would quickly take its attention. It started with a need for some customized merchandise – simple stuff like flags and t-shirts – they could distribute around campus to promote the app. While researching vendors, Michael noticed something very wrong with the swag market.
“A supplier in the US quoted $130 to $140 for some custom flags,” Michael said. “I then found a supplier overseas through Alibaba who’d do them for $8. My first thought was, okay, we’re going to buy them from overseas. And my second was, why hasn’t anyone in the US figured this out yet? We could buy these custom banners and flags from overseas and resell them.”
From Entrepreneur to Swagpreneur
Michael’s realization appeared simple – buy low, sell high – so why had so few got it right? He’d later learn that the swag industry was a bloated mess of supply chains and dime-a-dozen eCommerce vendors. No one cared about the people doing the ordering: you had too much choice, too much responsibility, or the vendor would be too small to handle the order.
“There are over 30,000 swag distributors in the US alone,” Michael said. “But they’re either these old-fashioned e-commerce sites that give way too many options and leave all the work to you, or they’re little mom-and-pop local companies that don’t really have the scale and technology to support big orders. That’s why we decided to build a company in this space.”
At the time, the campus activities app had cooled off and Michael was working at a VC firm. He credits his first glimpse of SwagUp’s potential to getting closer to the startup community. “While I was at the VC firm,” Michael said, “I saw how rabid startups are about swag. It’s always the cornerstone at the beginning that helps build culture and get the word out there and stuff.”
Michael started small with just a Wix website that cost $29, Trello to manage tasks, and a Typeform to collect orders. Curation was key: instead of presenting thousands of products to review, he’d guide them through questions in the Typeform, only showing a small selection of the best products. This ensured customers got what they wanted without feeling overwhelmed.
“I wanted swag to be simple for people,” Michael said. “If you go to these other sites looking for a notebook, you’ll find thousands of notebooks. And I thought, what if we just show them just ten notebooks? The best ones. So we use Typeform to build this guided form experience. It would ask, Hey, are you interested in mugs? And if yes, you’d see ten to twelve good mugs.”
Taming a Many-Tentacled Logistical Monster
With a little help from Google Ads, Michael’s first orders started rolling in. But how would he fulfill them? Until SwagUp came along, companies suffered an inconsistent, inefficient, and poorly executed process. Different departments would order different things, at different times, from multiple vendors, and with no single person responsible for each order. It was a mess.
Logos or branding would be wrong. Supply closets would overflow with unused swag. People would get incomplete orders, wrong sizes, or extras that shouldn’t have been there. Companies would waste money because there was no technology or person handling this gargantuan task for them. They needed something simple, Michael argues, a unified process.
“We could streamline the entire process from start to finish through one company and platform and use technology to package this up and make it really easy for people,” Michael said. “But the complexity doesn’t go away, we just abstract the complexity out of it. We take it on so all the customer sees is something simple, easy to use, and intuitive.”
While laudable, it was a bold move for a startup in its first year. Michael admits it was a lot of hard work in the beginning, but since then, SwagUp has developed its own technology to help manage orders. What began as a massive pricing spreadsheet is now a custom ERP that has helped SwagUp scale while keeping logistical problems to a minimum.
“We built a custom backend operating system on Salesforce,” Michael said. “This allows us to automate a lot more than other companies because they tend to do everything manually with sales reps. Not every vendor is tech-savvy, but we’ve been able to integrate many of them and pull available inventory, create orders, and get status updates straight from our system.”
Today, SwagUp serves over 3,000 customers and has shipped almost 1 million swag packs across over 10,000 orders. None of that would’ve been possible, Michael argues, had his team not developed a technological layer to eliminate friction in the industry. Michael is keen to share this technology to help other swag startups improve the customer experience.
“We’re digitizing the supply chain layer and then making that accessible to other people to build other experiences on top,” Michael said. “Anybody could build a replica of SwagUp using our APIs, for example. They could solve a different problem or build it better than us. We want to share the technology with distributors, too, so they can become a lot more efficient.”
Winning Over a Jaded Industry
For an industry as complex as swag, it’s little wonder customers were used to getting a raw deal. As is often the case with convoluted or inefficient systems, it’s the customers that suffer, but all it takes is for one person to stop and say, “Hold on, what if we did it this way?” Michael creates great customer experiences by tackling a problem most thought too great to solve.
Michael recalls driving to New York to hand-deliver swag packs to a customer. On another occasion, due to a supply chain delay, he remembers flying to Mexico to ensure a company got their swag in time for their company retreat. It’s these small gestures, Michael argues, that convince customers you care about them. There are some things you can’t automate.
“People are used to a really bad experience in this industry,” Michael said. “We went out of our way to be super helpful, doing a lot more work, and giving away our technology. It’s never been about squeezing out every cent possible. Like our free sample packs, for example – they cost us $55 including shipping. It’s always been more about building the relationship with customers.”
Michael has enthusiastically embraced swag to promote his own business, too. Investing in high-quality sample packs they give away for free has a two-fold effect, Michael argues. Not only does the prospect get the unboxing experience and some valuable goodies, but in wearing and using these goodies, they become SwagUp advocates.
“I was at a softball game in California and somebody was wearing a SwagUp t-shirt,” Michael said. “We ship thousands of free swag packs out there, and then these people become our advocates, but they also get to see how great the experience is. And we overnight them, too. If you come to us at two o’clock in the afternoon, you get a box the next morning at nine am.”
Money Isn’t Everything, But It Helps
Michael faced a few growing pains with SwagUp, mostly due to funding. It’s not a SaaS business (yet?), but it has pivoted towards technology in recent years, producing a dilemma: you need great engineers to build great products, and that kind of talent doesn’t come cheap. But without funding, you can’t afford to let revenue slow, so what did Michael do?
“We looked into raising money, but it was frustrating trying to explain the business to people who either didn’t understand it or where we wanted it to take it,” Michael said. “In the end, we used Google analytics to build forecasting models that helped us manage costs. In the beginning, we could predict to around plus or minus 20% variance but it’s gotten tighter and tighter over time.”
Michael still admits to some tough decisions between hiring engineers or salespeople, but an unexpected lifeline from the bank put many of those worries to bed. “I brought on a partner with established banking relationships who helped us get a loan from the bank,” Michael said. “That helped smooth out the variability in revenue over the year.”
Before the pandemic, SwagUp had 50 employees. Today, it has over 170. As companies scramble to connect with remote teams, it’s easy to see why swag is just as if not more important than before. Michael doesn’t worry so much about funding now but still recognizes its role in accelerating growth – though one that comes at a pretty big price.
“We’re at a point where it’s very clear what the vision for the company and the technology is. Funding would help us execute on everything quickly, but what’s great is we still own 100 percent of the business. If we raise money and dilute 10 percent we still own 90 percent of the business as a group. In that sense, we can be a bit flexible about our options in the future.”
Why It’s Important to Focus on the Right Things
Time is everything, Michael argues. Don’t waste time trying to perfect the product, website, or sales pitch. The market won’t wait, and you need customer input to get product-market fit. “A lot of our best things were the result of putting them out there to see what happens,” Michael said. “Then you just learn and keep reacting, listening to customer issues and then solving them.”
Michael doesn’t waste time worrying about competitors, press, or social media, either. He credits SwagUp’s success to an almost fanatical obsession with customer happiness. Once your focus shifts away from customers, Michael argues, things fall apart. It’s enough to focus on delivering a great customer experience and then be happy when you grow a business out of it.
“Stay focused on customers,” Michael said. “Don’t worry about what people are doing on TechCrunch and Twitter. Don’t worry about investors. Talk to the customer. Solve their problem as best you can. And one day, you’ll realize you’ve built a really big business. Just get things out there and listen to the customer and create these tight feedback loops.”
As New Jersey’s Entrepreneur of the Year, you might think Michael an overachiever. Someone born to succeed. But it seems, to me at least, that Michael’s accomplishments are less to do with a relentless pursuit of accolades and awards, but a vigilant attendance to customer needs. Other entrepreneurs, no matter their industry, would do well following Michael’s example.