This is a new category on the site. In my book Nike’s Consumer Direct Offense, Amazon and StockX: The Disruption of Sneaker Retail, I discuss why 3rd Party Platforms like GOAT and StockX were able to slide into the market and gain a considerable share of sneaker sales (hint-returns). In that section I discuss my Seller Central Marketplace experience and compared it to a year on StockX. In the book I also discussed that the only way brands and retailers could survive the DTC war was to begin acquiring tech or creating private label to offset the encroachment by brands on retail. This new category is in response to recent investments by Foot Locker into footwear and apparel start-ups. It’s also a response to the investments made by Nike and adidas into start-ups. In the NBA Draft when a player is being selected the phrase for the team making the pick is, “On the Clock”. The companies I discuss here are my picks for acquisition or major investments in the near future.
FootFact is an app I think is ‘on the clock’. The Germany based company founded by Markus Piebrock recently opened an office in the U.S. In one section of my book I discuss that return rates on Amazon grew to 30%. I chose FootFact because the company has the best rating on the app store and they are solving a problem that could inherently disrupt the 3rd party platforms if a retailer acquires the tech. Here is our discussion and Q&A.
I just took a moment to browse for the keywords “Foot Measurements” on Google Play and right now FootFact is the highest rated measurement tool within 15 finger flicks; lol, Finger Flicks is how I measure if I feel like actually counting the number of apps in a segment on the App Store. I tend to stop flicking after 5 or 6 finger flicks. There are about 6-8 apps per finger flick. In other words there are too many apps.
- Q: How has FootFact distinguished itself from an extremely crowded market, especially when brands have their own apps?
Answer: That´s easy to answer. The market is not that crowded – contrary it is very one-sided. There is not any tech available that is able to measure feet exactly except FootFact. I don´t even know one brand that has its own app – of course they have shopping-apps but no app to find the right shoe-size except using a pencil to draw your foot contour on a paper and than measure it by ruler…lol…of course by measuring this way the error rate is extremely high – I would even say it is impossible to measure like this!
Then there are some that claim they could find the right shoe-size by using AI (like True Fit). That is definitely not true. It is not possible to compare shoe-sizes between two brands and even not between two different shoe-models of different shoe brands. That´s pretty logical because there is no existing standardized shoe-size. We are in conversation with 2 online-shops that used AI systems. The first one stopped it because the return rates were only reduced by 1.9% in real terms (they had a return rate because of the wrong shoe-size of 38% and a reduction of 5%). The second had even higher return rates than before using the AI technology. So it is pretty clear that this kind of “shoe-sizing” is just a random generator.
- Q: Let’s backtrack… how long have you been working on FootFact? How many people are on your team?
Answer: The first idea came up when I recognized (as Co-Founder of tennis-point.com and jogging-point.com) that returns of shoes caused by choosing the wrong size are a very big problem for all online-shops in 2012. But the hardware respectively the cameras were not good enough to get exact measurements at this time. So we started to develop a PoC at the end of 2013/beginning 2014. Then it became a really long road because it wasn´t that easy to develop the perfect algorithm – that´s the reason why no-one could measure to date! The first marketable app in android was ready end of 2017, the first iOS Version in the middle of 2018. We have only 5 people on our team.
- Q: I watch Shark Tank just like everyone else. I also read about investment rounds. Have you been through any investment rounds?
Answer: No – and btw I don´t like Shark Tank (in Germany it is called “Höhle der Löwen”) because most of the guys presenting there are going home with a bad deal. The only thing I like is the marketing factor ;-). To your question: No, we didn´t have any investment round. It is all bootstrap and the company is completely in private hands. That means we did the complete seed stage on our own but now we are looking for a strategic investor (series A funding). I strongly believe that this will be the one and only investment round.
- Q: Can you explain what an investment round is and what steps you had/are taking to garner an investment? Did you have to get a board, create an LLC, etc?
Answer: For FootFact an investment round would be very valuable at this time because we could grow much more faster with a little bit of money in the back. An investment round in common is that you take an investor on board – in best case a strategic investor that can give you input beyond only money – he gets shares for money. Usually a VC is planning an Exit after 3-7 years. That means the company will be sold completely or only a part of it so the investors get an expected ROI of 3 to several times of the invested money (in best case) – worst case is that everyone is losing his money. We (FootFact) had to take the usual steps every startup has to fulfill, i.e. develop a pitchdeck, financeplan, vision, usp´s, etc. Then you need a great network respectively some investors – in best case you know them personally. I would say in Germany/Europe it is essentially to build an LLC (here it is called GmbH) because the VC´s/Investors want to see that founders put their own money into the risk. You need minimum 25K€ to create an LLC in Germany. The second point is, that the shareholder structure has to be very clear before and after the deal (dilution). We founded the FootFact.com GmbH in January 2016.
- Q: If you don’t mind me asking what is your valuation?
Answer: That´s a really good question because our business is very well scalable. Due to our negotiations with investors a well-known (in Germany) professor of economics called Prof. Dr. Ralf Beck evaluated our company some weeks ago. It is 16,3 million € or 18,6 million US$. Of course this valuation increases with every additional customer/online-shop integrating our technology. At the moment we are in deep conversations with two of the biggest European brands/shoe-manufacturers.
- Q: Is there an exit strategy in place? Are you looking to either license the tech or sell it?
Answer: The FootFact technology could be interesting for every player in the shoe industry. That means: Of course it is interesting for the big players like Nike, Adidas, Under Armour, Asics, Birkenstock, Skechers etc. etc. Furthermore of course for third party online-shops like Zappos, Zalando, Amazon etc. At the moment the participating online-shops pay a monthly license fee. It is in relation to the returns of the online-shop because of the wrong shoe-size (usually between 30-45% of the revenue). So we always have a Win-Win-Win situation (Customer, Online-Shop, FootFact). As always in life of course it is even possible to sell the company – it depends on the price ;-). But… FootFact is about to revolutionize the world´s sizing system. Today we have 5-7 different shoe-sizes, i.e. US, EUR, FR, UK, JP, CN etc. We want oneglobalsize – that´s even our slogan. But if someone comes along with a great offer who knows… ;-).
Your entire business is built on the idea that people will take the time to follow your directions to measure their feet. I tend to think people are so used to free returns that they will just order stuff and then return it if it doesn’t fit.
- Q: Do you think there is a shift in the retail industry that will make FootFact a more utilized tool?
Answer: Of course. First: It is only necessary to download our App one time. If you have measured your foot one time you have the right measurments always on your smartphone so you can buy shoes in the right size everywhere you want, i.e. at the subway station… Second: We are able to implement a seamless integration. That means that it wouldn´t be necessary to download an app. But/Third: Our experiences with the online-shops already integrated our tech tells us another story. It is a new shopping experience for the customers and it feels like “magic” for them that an app is able to measure feet exactly. They can do it at home without any stress and in peace but it feels like they are trying their shoes at a stationary store. And last but not least: Our technology leads to very new customers because it generates trust! A lot of people are afraid to buy shoes online bc of choosing the wrong size. FootFact will eliminate this fear.
- Q: Can you give me a little insider’s info on which brands and retailers are wooing you right now?
Answer: That´s a difficult question because we are wooing with nearly every big player right now. They all understand that it costs billions every year – only because customers chose the wrong shoe-size. One returned pair of shoes costs average 14€ / 16US$. But ok: We are wooing with GEOX, Birkenstock, Skechers, Adidas, Asics, LOWA, Tamaris (Wortmann Group), Undandy, ARKK, Lloyd, Puma etc. etc. – I guess it´s easier to say on which brands we are not wooing ;-).
- Q: How many people did it initially take to build the app?
Answer: It is still the same team like in the beginning plus two more developing guys. But: We are working together with the Fraunhofer Institute. They told us that they fall back on developments they did before. To develop these algorithms it would take about 120 man years. It is the same team that invented the mp3 format ;-).
- Q: Last question, I do a series called From Sneakerhead to Boss on my YouTube. I started it because I launched two companies by myself and I didn’t really have a mentor and it killed me financially and I had to learn alone which ultimately hurt my ventures. How can people who want to work in this industry work with someone without worrying about losing intellectual property? How can you build a trustworthy team?
Answer: Well in common it is and always will be difficult to find trust in this industry because when it comes to money trust is trampled! I don´t care about intellectual property because I know that our tool is unique at this time and it will be the same for some time. Of course we have a great patent on our IP but in my eyes the paper is not worth it. What we did is to give shares or options for shares to everybody in the company – so everyone is satisfied and highly motivated. Of course our algorithm is protected like Fort Knox ;-). But I think it is impossible to build something really big without trust at least.
Markus Piebrock, thanks for giving me a few minutes of your time to both introduce and discuss FootFact. How can everyone learn more about what you do and connect with the company?
Ok – everyone has many options to learn about and connect with our company:
- Webiste: https://www.footfact.com/home-eng
- Telephone: +49 2381 3388-798
- Contact form for Brands/Online-Shops: https://www.footfact.com/shoe-manufacturer
- Facebook: https://www.facebook.com/Footfact/
- LinkedIn: https://www.linkedin.com/company/footfact/
- Instagram: https://www.instagram.com/footfact_oneglobalsize/
- Youtube: https://www.youtube.com/channel/UCMNCnKxw4XI9ipA-arHbyNg?view_as=subscriber
