Xero Shoes has launched an equity crowdfunding campaign to raise up to $3 million. According to a filing with the Securities & Exchange Commission, the minimal shoe maker is looking to sell 750,000 shares of its stock at $4 a share.
Xero Shoes owner and co-founder, Lena Phoenix says, “The democratic idea behind crowdfunding made immediate sense to me. Rather than limiting investors to the wealthy, we want to open this opportunity to anyone, especially our customers. They helped put us where we are now, so they should have the opportunity to step into the future with us.”
Echoing the last point, Phoenix’s husband, CEO, and co-founder, Steven Sashen adds, “Imagine having an army of customers who are literally invested in the success of your brand. That’s what crowdfunding can give a company.”
The couple began selling DIY sandal making kits from a corner of a spare bedroom seven years ago. Phoenix adds, “If you’d told me back then that I’d be spearheading an entirely new fundraising model while simultaneously serving as CFO and Chairwoman of the Board of a rapidly growing lifestyle footwear brand, I would have called you crazy.”
The couple thought Xero Shoes would just be a small hobby/business. But as the business grew rapidly, Phoenix’s financial and organizational skills became critical to its continued success, and she found herself stepping into a more active leadership role.
“It’s been a huge stretch to grow into all the various roles running this company requires,” says Phoenix. “I’m an introverted person. I stayed in the background for as long as I could.”
Making the decision to utilize the Regulation A+ exemption of the JOBS Act of 2012 required a lot of advocacy on Phoenix’s part. Many on Xero Shoes’ team, including their legal counsel, tried to talk her out of it. “Fortunately, I’ve gotten good at arguing my point in the last few years,” says Phoenix, “and was able to help people understand the value of equity crowdfunding for both the financial and marketing sides of the business.”
Preparing for equity crowfunding proved more challenging that Phoenix imagined. It took more than eight months for the company prepare its offering and become qualified by the SEC under the Regulation A+.
“It was a mountain of work, and required navigating through laws that were constantly changing,” she says, “but one of marks of an entrepreneur is walking into the unknown every day and solving the problems that present themselves.”
According to the SEC filing, Xero Shoes non-audited statements for 2016 show the company’s sales continuing to grow, with $1.32 million in sales for the six months ending June 30, 2016. Total revenue for 2016 is currently estimated to be $2.73 million, with an estimated EBITDA margin for the year of 8.5 percent. The company noted that despite a “very limited sales staff” in 2016, the company’s wholesale channel sold product in 61 retail accounts (doors), with average sales of $5,280 per door. Expanding the product line from sandals only, sold primarily during spring and summer, to include shoes and boots that can be sold year-round is expected to double annual per door sales to $10,560. The company’s addition of new inside sales staff is expected to help it open new accounts at a faster rate, while also better servicing existing accounts to increase per door sales. Based on these factors, the Company believes it can meet its projected 2017 wholesale target with a total of 200 wholesale accounts.
Xero Shoes’ crowdfunding campaign is at https://invest.xeroshoes.com.
Image courtesy Xero Shoes
