How This Swag Startup Made $3.3 Million in Year One

Welcome to Trends, a weekly newsletter with the zestiest business trends and actionable insights for entrepreneurs. This story was originally published in 2021 and updated with new data.

Trendster Michael Martocci went to school to study finance. Instead, he ended up with a side project that would eventually make him millions.

“My buddy and I wanted to get custom flags and shirts made to promote a location-based social media network that we were building on campus, and it just seemed super expensive,” he told Trends in 2021.

Custom flags cost ~$130, but Michael found them on Alibaba for ~$8. So he started a custom printing website on the side selling flags for half the price. 

It was a good bet — The global custom printing market is expected to reach $11B by 2032, and search interest remains high. 

Source: Google Trends, six-month rolling average

After working for a VC firm in New York, Michael soon found himself back in the merch game.

“Surrounded by startups, I saw how much they care about swag. It’s one of the first things startups buy when they get funding.”

He also knew that the swag market was (and still is) fragmented.

It’s a $26B+ industry in which only one company is making $1B+. The rest is made up of “a ton of small companies that can probably only handle under 50 clients at a time.” 

So in May 2017 he started SwagUp, which focused on providing high-quality branded swag packs to startups for employee welcoming, client gifting, event attendees, and more. 

The business scaled quickly, from ~$5k in sales in their first month to ~$3.3m in their first full year. 

SwagUp now employs 200+ people, has hit $160m in aggregate sales, and raised its first funding after 5 years of bootstrapped success.

They also provide a white-label swag platform for others to build their own swag businesses, leveraging SwagUp’s packing, warehousing, and distribution infrastructure. 

Oh, and did we mention that Michael is not even 30? Yeah.

An entrepreneur from the start…  (picture stolen from Michael’s Facebook — with his permission)

There are two rules Michael thought about when scaling his business:

1. Eliminate Friction

SwagUp’s strategy has always been to eliminate friction by giving people the tools and technology they need to purchase and distribute as much swag as possible. 

While it might be attractive to charge clients a subscription fee to use their software, if it means decreasing the number of customers they can acquire, or how fast they can grow revenue, they won’t do it.

“Don’t put artificial friction in the way of letting people get started,” Michael says. “The hardest thing is to acquire customers. Once you’ve acquired customers, then you can probably open up the scale and scope of what else you want to do with them.”

SwagUp offers 3rd-party swag storage as an upsell after getting clients in the door. Source: SwagUp website

2. Hire Entrepreneurs for Key Functions

According to Michael, most founders take too long to develop an experienced team of leaders that can “take an important piece of the business and build it 2/3/4/5x faster than you could, because it’s only one of 10 other things that you’re doing.”

They started lean, using no-code software for $100/month. But in 2020, SwagUp stopped using “hacky bootstrappy stuff like Wix and Zapier integrations” and brought on a CTO to scale their tech infrastructure.

Since then, the company has grown annual revenue from ~$6m to $50m+. (Revenue took a hit during the pandemic, but they’re back at it and projected to reach back to $50m next year.)

To Michael, the key is to first identify the most important pillars of your business, which will be different for every company — it might be customer success, sourcing, marketing, product development, or design, for example. 

Once you’ve done that, “find people who are basically the entrepreneurs of each of those pieces of the business, who can take them and run with them… The sooner you can find those people, the more progress you’re going to start making.”