Skeptical Speculators Swoon for SocksIssue 10-09-17 |
David Hornik, Howard Hartenbaum, and Tripp Jones, partners at the Silicon Valley venture firm August Capital, knew a good opportunity when they saw it. “The sock category is massive, and no one had bothered to think about it for decades,” Hornik says, “and that’s a huge opportunity for disruption.” “Disrupt” isn’t a word usually associated with footwear, particularly the comfy, cozy knitted kind. And yet, Stance Inc. has managed to amass $110 million in funding from the types of investors who typically try to move fast and break things.
Stance has achieved the kind of prestige that hipper companies fall over themselves to achieve. Veteran entrepreneur Jeff Kearl started the business in 2009 in San Clemente, Calif., on the premise that the hosiery industry was a sleeper behemoth. Kearl had already helped reinvent a moribund product category—headphones—as a board director at Skullcandy Inc., a predecessor to Beats Electronics LLC. The goal with Stance was to create socks that would be eye-catching on the street but also perform in athletic situations.
Not everyone shared Kearl’s early confidence in the sock idea. Socks are essentially a commodity market, although a big one: Sales to U.S. adults total $4.8 billion annually. Kearl appreciates that it’s slightly ridiculous to ask people who normally invest in artificial intelligence and drones to put their money into a sock company. The joke’s on those who get hung up on the silliness: Much of the cash they’ve gotten from investors is still in the bank, Kearl says, meaning that sales revenue is covering most of the costs of their day-to-day business.