Collar Free’s Patrick Dillon, left, and Jimmy Hendricks run their startup out of a three-bedroom apartment in North Park. | Photo by Stephen Whalen

Up until recently, Collar Free, a one-year-old, e-commerce firm founded on the notion that consumers will enter competitions and buy T-shirts and other apparel emblazoned with their own designs, survived primarily on investment capital. Then a phone call came, and its financial forecast is looking much brighter.

In November, when partners Jimmy Hendricks and Patrick Dillon were winding down from an online contest that focused on T-shirt designs featuring presidential contenders Barack Obama and John McCain, Sports Illustrated Kids called to ask if they could develop a similar program to engage the magazine’s readers.

The pair immediately started building such an application even though they didn’t land the 12-month contract until February.

Collar Free then set up a division called Artistic Hub, which is devoted to virtual design platforms. The magazine launched its T-shirt design contest March 23, and the first two winners will be featured in its May edition.

As of April 13, the SIKids contest had generated 315,000 votes on 102 approved designs. The winners will receive prizes, including a T-shirt with their own design printed for free.

Although Hendricks and Dillon did not charge to build the application, they will make from 10 percent to 40 percent of the revenue from the shirt sales, depending on volume.

“We need to sell 300 T-shirts a month to reach the 40 percent range,” Hendricks said.

Under an informal partnership with manufacturer Zazzle of Redwood City, the shirts will be made on demand for $16 and up, the same price range that one might expect to pay at a retail store, he added.

Using a standard silk-screen method, the prototype for a custom designed T-shirt would run $75, and a manufacturer would require a minimum order of 500. But Zazzle, a multimillion dollar facility that handles thousands of orders daily, has no set minimum, he said.

Employee Count Rising

With $250,000 in seed money from equity partners consisting of friends and family, the company is run out of a three-bedroom apartment in North Park where Hendricks lives. In the beginning he and Dillon handled the entire operation, but they’ve since added eight employees.

“I live here so I live with nine people during the day,” Hendricks said.

During its first year in business, Collar Free had revenue of $100,000.