[03:56] So for the folks in my audience who maybe aren’t familiar with you or your company, let’s start there. What does your company sell?
- So we are The Bouqs Co. and bouqs is short for bouquet. It’s a simplified version of bouquet.
[04:11] I was wondering about that.
- Yeah, it’s sort of representative of the way we approach the floral category. We are an online retailer of flowers, but our entire thesis, our reason for being, is to simplify the way the industry works, primarily on the supply chain side. So what we do is we ship flowers directly from sustainable farms around the world to the customer, eliminating what is typically four or five middlemen players, and providing therefore a fresher, higher quality, better value product.
[04:39] And you’ve raised 75 million bucks for this thing so far. Is that right?
- Yeah, $75 million, which is kind of, kind of hard to believe when we started off with $13,000.
[04:49] Yeah, no kidding. When did you start the company?
- So we officially launched on November 6, 2012. So we’re creeping up now on eight years of Bouqs’ life, which has been, you know, crazy. It’s the longest job I’ve ever had at this point.
[05:04] Yeah, so you’ve been at it a while. Are you able to disclose revenue?
- We don’t share revenue, but we’ve shipped hundreds of thousands to millions of boxes per year sort of since the beginning. So, it’s a large business. We have 90 something people, we operate, you know, in now four continents. So we’re really all over the all over the world at this point.
[05:29] Okay, and how did you get this? Because you’re the founder, right?
[5:33] How did you come up with this idea?
- Um, it was a little bit of serendipity and just sort of seeing the way the world was evolving. So my background, really quickly, is that I was at Bain & Company doing strategy consulting and then six years in Disney’s Corporate Strategy Group working on sort of technology changes, consumer behavior—so what do we do? And that was kind of my worldview. At the time, I jumped into the startup world from Disney and worked at an e-commerce company called ShoeDazzle, which was Kim Kardashian’s subscription shoe service, which was growing like crazy at the time.
And so that sort of formed my lens for, “oh, there’s this world in which you no longer need to go from a manufacturer to an export or to an importer to a wholesaler to a retailer to a customer.” I got that sort of education there, and at the time, maybe like two or three months after I started and started learning about this direct-to-consumer business model, my co-founder and I started talking. He’s a good buddy of mine from undergrad at Notre Dame. And he grew up, his family owned a dairy farm, and a good family friend owned a flower farm, and so he spent a lot of time in the floral industry, just you know, on the land with the product, and he fell in love with it. And even as sophomores in college, he was like, I’m gonna run a flower farm someday, which at the time, we thought was super weird. We’re like, let’s just, you know, let’s just try to sneak into a bar or something, you know, we weren’t focused on our long-term careers, we were 19, but he was because he had this strong passion for the category.
You know, fast forward a decade plus, he’s running a flower farm in South America, and he starts talking to me about a lot of the challenges that he had as a farmer. They’re last in the value chain so it took a long time to get paid. They didn’t have a lot of power. It’s a challenging business to operate in floral in general, you have a perishable product, you know, seasonal business, just a challenging business. And so we just started talking about ways to make it better for the farmer, and he wanted to go more direct to the customer. And on the other side, as a consumer, I was looking at it and saying, you know, these brands out there, these big brands in floral don’t really speak to me. They don’t merchandise or design in a way that I or my loved ones would love. They don’t price in the way I would like, there’s a lot of this $19.99 bait and switch to $84 kind of pricing. It didn’t look like a brand I was excited about, and so I thought, “Huh, you know, if I’m representative of the customer at all, and I’m this frustrated with this category, and my co-founder is at the time and my friend is representative of the way farmers view the category, what’s going on in between that’s really making it a challenge?
And when you took sort of what I learned from my time at ShoeDazzle and researching direct-to-consumer, I was like, this makes complete sense to eliminate these in-between steps that are really making it harder on both of the most important parts of the value chain, which is the customer and the farmer. And so that was sort of the initial conversations and from there, we kind of built this thesis and off we went.
[08:25] So when you had, you came up with this idea, and you go we’re gonna build this thing, and you got 13 grand, how did you go about validating that anybody was gonna sign up for or pay for your service? And how does the economic model work? How do you make money by the way?
- Yeah, so we’re a direct-to-consumer retailer, so customers comes in, is going to find, you know, hey, these flowers can arrive on the date that I care about, you know, and that could be coming from anywhere in the world, Ecuador, Colombia, Chile, Peru.
[08:55] So, you just like, margin on the product?
- So, yeah, we’re selling at a retail price, and we’re buying from, from our farmers direct. and then we’re also covering the cost of shipping, which is when you’re shipping, you know, internationally, relatively substantial. But essentially, that’s the, that’s the business model.
And, you know, the way that we first started off was we just wanted to validate the concept, do people even care about the things we care about—transparency of sourcing, sustainability, quality, freshness, etc. So we went around, just had conversations. I sort of did very cheap—meaning, free—market research—meaning, me running around just talking to people. I would see people on the line at the grocery store with a bundle of flowers, and I’d start talking about the concept. I’d be at a business meeting, and I’d raised the concept sort of on a lark, like, you know, and I got some feedback from people and there was generally a validating sort of concept that, “Yeah, as a consumer, I don’t see that any of these brands speak to me.”
It wasn’t scientific. Again, we didn’t do, like, sophisticated focus groups or have quantitative research, it was just conversations—but enough conversations, where over time we said, “Hey, this is real on the consumer side.” And my co-founder knew from his time in the industry, and his family’s time in the industry, that this was a real problem for the farmer. So we sort of validated the concept. And then it became about okay, how do we launch something, we didn’t have access to a lot of money, but even if we did, how do you launch something to get that validation from the real marketplace? How do you put it out there without, you know, spending tons of money and giving up tons of ownership, etc, etc?
[10:24] Yeah, you got to get that, what I like to call the vote of a credit card.
- There you go. Exactly. Sales proves all, right? And so, we sort of cobbled together a team, very, very part-time. Everyone, including myself, at the beginning was working nights and weekends. We would meet up at a diner in Santa Monica called Izzy’s Diner, which is the best. And you know, I’d buy everyone dinner, and from 7 to 11 PM, we’d just sit around this big circular table and would work. And I had an intern from UCLA who was doing my development, the coding, I had a graphic designer, I had my buddy who was creative director, my co-founder was down in Ecuador, and so we were on WhatsApp just, you know, communicating all the time. And we were all just sort of moving together our pieces.
This started in, you know, the summer of 2012. We didn’t launch until November 6. And so we had four-ish months of sort of prep and development work, with everyone working just for equity just the chance to try to build something cool. And, you know, that team, all but one person sort of made it all the way through to at some point becoming a full-time member of the team, salaries, etc, as the business grew. But in the beginning, we kept it extremely lean, very simple, very low cost to get it to that point where we launched. And then we said, “Hey world, we’re here,” you know, “who’s going to shop?” And you know, in the first month, we did $8,000 with our revenue, which lighting the world on fire, but it was a lot more than we thought we would get.
[11:48] It’s a hell of a first month, and what did you, how did you get the traffic to generate that $8,000 in sales?
- Yeah, so I have a, what I call a schtick I do for business schools and for undergrad schools where I speak about entrepreneurship. And what we did was we told a good story, and we hustled it. And that’s really all we did.
So our story was we started with this, you know, the sort of tangible benefits—fresher, higher quality, those types of things. And, and people liked that, they cared about it to an extent, but no one got super excited. And so we kept iterating on this story and one of the things that was very unique about us, at that time, are all of our flowers were coming from one region. It’s the Khayyam Bay region of Ecuador, which is where a lot of the best roses in Ecuador are grown. And it’s an active volcano system. And so, at one point in the evolution of the story, we started talking about, oh, we get our flowers from an active volcano in South America, and people got really excited about that. And so we found this nugget.
And what our tagline became was “We drop-ship flowers from an active volcano in South America for $40 flat.” And I would run around town saying that and everyone got excited about that. So we built that story. We reflected it on our website, there’s a big picture of the volcano, when you first came to the website—not even flowers, just a big volcano. And it triggers people’s imagination when you tell a good story that you know, in their heads, Indiana Jones was swinging through the volcano to save the flowers from liquid hot magma. When the reality is, you know, the flowers were on the volcano, but the volcano only erupts like once every five years, and you pretty much just get ash. You get some liquid hot volcano magma on the backside, but not the side where the farms are.
So it painted a picture, and it got people excited. So then we just started telling that story. And I started with telling that story just to people I knew directly. The very first month, almost all of our marketing exclusively was me personally emailing about 2700 people that we started this business, this is what we do, this is my dream, please support it. And I sent it to everyone. I sent it to my mom, my sisters, my friends, their friends, ex-girlfriends, people I hadn’t talked to in 20 years. I had no shame; I was like, “Hey, Sally, we dated back in the day. The last time we talked, you were unhappy with me, but you should buy flowers from me and here’s why.” You know, just hustle the story. And that led to $8,000 of the sales. And I probably knew directly, personally 50% of the people that bought that month, but it was still $8,000. The next month it was 12, the next month it was 25. And so, that story really grabs people and then we started telling it, you know, in sort of wider and wider concentric circles. So we started with the personal relationships, then went to the networks, you know, alumni lists and social media networks. And those are the things—we kind of crawled our way out.
[14:32] So no paid ads at this, in the first three months, no paid ads?
- No, zero paid ads. I mean, in the first year, I bet we spent less than $5,000 on paid ads.
[14:43] So it was all just entrepreneurial hustle.
- Well, I would say it was hustle and then the story getting bigger. So you know, I hustled my way to an editor at Daily Candy, which at the time was very influential list amongst women consumers. And we got a story in there where they said, like, we want to be the one to break the story, we want to write about you exclusively, we want a feature. We were like, oh, gosh, that’s amazing. All of a sudden that 20,000 becomes 50,000 a month in revenue. And then Oprah Magazine, someone at Oprah Magazine reads Daily Candy, and Oprah Magazine puts us in her Wow List.
[15:18] No way.
- Yeah, and then the Price Is Right calls, and the Price Is Right is like, we want to make you a prize. And I was like, I love the Price Is Right! And the sort of PR gravy train starts to roll because the story is so different, unique, and the pictures are so beautiful. And so what I say to any entrepreneur that doesn’t have a lot of sales, they’re like, “I need to raise money for paid marketing.” I’m like, no, you don’t. You need a great story, you need to hustle the heck out of that story.
[16:12] I like it. So let’s dive into that a little bit. How, so, for someone who— we’ll leave the storytelling aside, because I think that I don’t know that we could share anything here that would be directly applicable, however, so let’s assume we all have a great story, but now we need to get attention on our story from the press. So what are some of the tactics that you used to make that happen?
- Well, and I’ll start off with how you get a great story, by the way, because I do think there’s, there’s a way to get there. And the way is just testing. You may not be the best storyteller in the world, but you’re a human being, anyone’s a human being. As a founder, you can go out and tell someone a story and see if they care about it or not. You can see it in their eyes. You can tell if they lean in; you can tell if they get excited and say, “When can I buy that?” Or, “Where can I buy that?” If instead they’re gonna go, “Yeah, that’s nice,” which was what I got. Until we got to the volcano, what I got from people was, “That’s nice. It’s nice that you care about sustainability.” “Hmm.” You know, a little bit of shoulder shrug. No one was asking, when, where can I buy? How can I buy? So, get out there with— just create a list of ideas about how you can tell your story. There’s a million of them, and then just start talking to people about them. Get reactions, and I always, I called the HSM. Can I curse on your podcast? Or is that not allowed?
[17:05] Sure, I don’t care.
- Okay. So I call it the “holy shit moment,” the HSM. You know, and I always use Uber as my example. The first time anybody ever ordered an Uber, you press the button, and it said, you’re calling a car. And then you saw the little car on the map and you saw it getting closer, right? And then it pulled up, and as the map showed up, and you were like, “Holy shit,” like, “We’re living the future.” And that’s why Uber did this. It had, the utility was great, but the story and the way it made you feel in that moment was amazing. That was a product-driven story. Not everyone has that kind of experience. So the question is, how do you build the same feeling?
So I recommend highly just people just test their way into it. And stories can come from your founding story, from where you’re from, a product feature, you know, where your product is sourced from, how it’s sourced, how it’s made, and those tend to grab the imagination of the user, so do that. Tactically, then you have a story, right? Now, it’s like, how do you get that story out there? And the reason why we went in these concentric circles by the way, is that when you start with really close relationships, you get feedback that is more honest and more open than you will get from a regular customer. Regular customer sees your story, and then they’ll like it, what do they do? They just roll right by it. They don’t call you to say, “Hey, cousin, I like what you’re trying to do, but (insert feedback here).”
[18:23] Because there’s no reason for them to do that.
- Exactly. So you start with those people that care about you because they’re gonna give you that feedback that you can ask for, you can bother them, and say, “Hey, you know, sis, come on, like, what’d you really think?” And so you start small for that reason. And the great thing about, you know, the networking world today is that we all have these networks to get broader and bigger. And so you start out smaller and then you build on that. Like I said, you start with direct one to one interactions with people you know the best, and you go to alumni lists where you have a connection, but maybe it’s not as tight, then you go to your social media. After you do that, if you don’t see sales growing, then there’s a problem. Either your product is wrong, your website is wrong, your marketing is wrong, your story is wrong. If you go through those and you’re not seeing revenue growing, you have an issue with— if you’re trying to sell, sophisticated automotive parts and you’re calling your mom well, okay, maybe that’s not the right, the right approach. I’m thinking about this mostly consumer basis.
[19:25] Let’s use me as a guinea pig for a minute here. So I have this software company that is workflow management software for e-commerce. So technically speaking, you’re my target customer.
[19:40] I, the, my story is that, you know, I created this for my own needs. Our company ranked there on the INC 5000 now two years in a row. I spoke at a…
- 36,680%, that’s pretty crazy.
[19:53] Well, our rank was number 254. So our three-year growth was 1693%.
[19:59] So it’s pretty good. I spoke at a con— so I had no software company. I spoke at a conference about how I achieved this, there was 500 other Amazon resellers in the audience, and they all, a large portion of them, almost a third, ended up wanting to buy— or did buy copies of my playbooks for like 2500 bucks. So we generated a couple million dollars in revenue, and out of that was born my software company. So we live, obviously, I’m a huge advocate of the software, I use it every single day, everybody on my team uses it every single day, but I don’t have a volcano in my story is where I’m going with this. How would you like, again, you’re my target audience, at this point, you’re probably going, that’s nice. but I don’t have a volcano. So how do I figure out what my volcano is?
- Yeah. I mean, and I know it sounds repetitive, but you just have to come up with a lot of great ideas and you have to test them. So, you know who your audience is, e-commerce companies or startups or whatever it might be. You and your team, sit down and talk through what the sort of nuggets of your story are. So step one is just brainstorm, right? Get the people that know it, that have lived it, and has seen the impact it has and even talk to current customers, right? And it’s an exploration. It’s spending time just trying to figure out what part of this gets people excited? You know, first time you and I met, I remember we talked a little bit about your software. I was like, “That’s amazing like, how did you even build that? I wish I could automate my life in that way.” You’re like, “You can. Just use the software; you could do it.”
Right? So I got a moment of a volcano there for me. And that was in a quick, you know, 15-minute conversation that we had had. And so it’s just sort of rolling through what do we think these angles could be? And then coming up with each angle, and you might be talking about a product feature, a moment in the company history, like I don’t know what those things would be because I don’t know the story. And then, and then you come up with the most compelling version of whatever that is, right? And that is, now you’re doing wordplay, this essentially copywriting, right? Okay, our nugget here is going to be around, “Automate your life.” Okay, what is it that we can do to bring to life to the customer the story of automating your life? Well, we can tell a story about what your morning is like, your personal morning is like, or we can show a day in the life of what it’s like to work at our company, with everything being automated, or, or, or, or—there’s 25 different ways to tell the story of automating in your life.
And then you take the top two or three of those, and you start testing on people. Hey, if, if I had this thing that did this for you, and you tell the story, and you get people leaning in, and going like, “No way! I can do that? How do I do that?” Then you know you’re onto something and you sort of go down that path, you tweak that one, if you get like a, “That’s nice,” and the shoulder shrug, cross it off the list. And so you have five buckets with three different versions of each, that’s 15 things you’re testing, you’re going to narrow down pretty quickly to maybe one or two or three that really get people kind of going. And then you’re going to refine those so you get to your answer, which for us was the dropship from a volcano for 40 bucks.
[22:59] Okay, so that now all makes sense to me. What I’m not super clear on is the process of testing, you are in checkout lines asking people who are holding flowers. I, my target, I wouldn’t know my target market if they were standing in front of me in a grocery store because they don’t wear hats that say I’m in e-commerce. So what would be your recommendations for the process of actually testing the various versions of our volcano story?
- Yeah, that was the nice thing about floral is that kind of everyone’s a flower customer, right? At some point in the year someone sends flowers somewhere. So we had a nice, big broad group of people we can talk to. So that did make it easier. I mean, my suggestions would be if you’d have no idea who your target audience is to make a hypothesis and find those people. If you already have clientele, which you do, you can…
[23:46] I know who they are. They are brands that are selling products on Amazon now, but they might not be operating their own Seller Central account. They might be using third party sellers, or are going through Vendor Central, and they’re not happy with either of those options for whatever reason I can think of because I have a third party seller. I know what lots of the reasons are, but what I don’t have is, aside from the podcast interviews that I do like this, which I always bring it up in the pre interview, and I get feedback, but I don’t have easy access to enough of those people to test six different versions of the volcano story in 30 days.
- Right, right, right. So you have current clients, that’s a place you can start. You know, whatever your current, I’m talking about not probably about your business, just for anyone. You have current clients or potential clients that you know directly, right, you have that, or anyone else who has been on the podcast. And so that gives you a group of people. You start with the hypotheses that you think you’re going to be best, right? So if you have 15, and you rank order them from 1 to 15, you’re gonna start with number one. If that one, after a couple conversations, is not getting you the responses, you just cross off the list and get number two. So I don’t think you need like hundreds upon hundreds of people, you need to get some kind of reaction. And by the way, you can test more than one on the same person. Hey, I have this thing, what do you think about it? How about if I say it this way? What do you think of that? And then it’s a challenge for that point to go out and find prospective customers wherever they may be. And so, you know, in any industry, that’s just going to require the hustle part, which is, you know, do research, find people, network, go to events, stand up a booth at some Amazon reseller conference, get the speaking gigs.
[25:35] There’s no events these days.
- That’s true. But you know, I did the e-tail event the other day, where I was a speaker at an e-tail. E-tail’s fully virtual, but if you sign up as a sponsor, or as a speaker, or whatever it might be, they’re going to give you access to their entire list. Now you have access to everyone that attended that e-tail and most of those people sell things online. So find your way to those audiences and then iterate, iterate, test, test, test. It may not be fast. I mean, for us, we were nights and weekends, I did this over the course of that, call it six-ish months from sort of initial ideation to launch. And so it took time, it absolutely took time. And, but you know, what was interesting was in my journey with that story, the first three months, we were all talking feature, benefit, feature, benefit, feature, benefit, and I wasn’t getting the reaction.
We were in a meeting with my creative director who was working full time at an amazing ad agency here in town, and they’re talking to him, and some of his colleagues doing these conversations, and one of his colleagues was the one who said, “Woah, woah, woah, you just mentioned volcano, what’s the volcano have to do with it?” And I was like, “Oh, it’s just Khayyam Bay, it’s where my co-founder lives.” And he’s like, “We’ve been here for a half hour, this is the first time you’re mentioning volcano. That’s the coolest thing you got.” I was like, “Huh? He’s right. It is the coolest thing we have.” He’s like, “Flowers are nice. Sustainability is nice. Freshness is nice, but volcano is epic.” And that was, that was the moment where we go, “Ah!” And so it’s just a nugget. Somebody’s gonna say something, somebody gonna react in a way. You’re gonna feel it, you’re gonna get chills where you’re like, oh, we just hit it. And all of a sudden, you’re gonna be like, “Here’s our direction. Let’s go.”
[27:13] So there’s no volcano on your homepage anymore.
- There’s no volcano on our homepage anymore.
[27:17] Is this because now, the critical mass you’ve achieved is the story really in itself and you don’t need the volcano anymore? Is that right?
- That’s right, your story will evolve by definition. And I say this a lot, too, that story, in the beginning, should be, not needlessly, with purpose more narrow, right? Because it’s so hard to stand out nowadays. If you try to stand for a lot of things, you stand for nothing. And we went out and said, we’re a good quality flower company, we’re the same as everyone else. No one’s gonna pay attention to us, no one’s gonna care. So if I launched a new line of hand lotion, I’m one of literally a billion brands in the world that are selling hand lotion. I have good hand lotion. No one cares, right? I come out with a story that my hand lotion comes from a volcano, some people care.
At some point later, maybe not everything’s gonna come from that volcano, which is the case for us. Our flowers now come from all over the world. Saying our flowers come with a volcano would still be true, but it’s not all of our flowers. It’s probably 30 or 40% of our flowers. So we still tell that story in places. That hasn’t gone away, but it’s gotten broader. Now, we talked about where our flowers come from, who our farmers are as individuals, what they do to cultivate the land and their people, how they protect the environment. And so the story has gotten broader. And it’s because we no longer need that strong hook for that niche audience because now we’re playing to a much larger.
[28:43] Yeah, okay, makes sense. So let’s talk a little bit about the sales channels. Do you sell on Amazon? Or is it all from your website?
- We are 100% direct-to-consumer, we will do, you know, partnership deals on sort of a seasonal basis through like, you know, we’ve done partnerships with T-Mobile or Fandango, large brands like that. But everything ends up directly transacting through bouqs.com.
[29:11] Okay. What is the largest source of your traffic currently? SEO, paid partnerships, what does it look like?
- The biggest channels for us tend to be sort of organic slash direct, so SEO and just direct, you know, typing in the URL, which is coming from brand awareness.
[29:29] So press coverage?
- Yeah, exactly. Search engine marketing is really big in floral in general. It’s a very intent-driven category, right? I need to send my mom birthday flowers so I type in birthday flowers, and up comes the ads. So SEM is a big one and then, you know, call it a big bucket of, I call it affiliate, but it sort of broader, more partnership driven traffic, so we do sort of traditional affiliate marketing, we have partnerships with big brands, we have partnerships with smaller brands, those types of things.
[29:58] Okay, so let’s talk a little bit about— because I’ve talked about in other episodes a lot about paid traffic. I’ve talked a lot about SEO and organic traffic, but haven’t done an episode in a while where we talked a lot about partnerships. Is that something that you think we can go down that rabbit hole a bit?
- Sure, sure. And it actually dovetails nicely with what we talked about earlier because once we got past the story and hustle part, the next part of growth was all partnership-driven.
[30:22] And it’s something that’s also important for my software company because we have a partner program. So, before you have your first wind that you can point to potential prospect number two and number three and say, look what we did with them, here’s the benefits to them, etc, what are some of the pieces of advice that you would give in terms of how you identify partners and then how you initiate conversation with those partners who are strangers to you at this point in time? Or maybe maybe your first few partners weren’t strangers, but either way.
- Yeah, we definitely worked the personal relationship angle as much as we possibly could, you know, leverage the network, find similar brands, similar audiences, and try to exchange favors essentially. Right, and, and we do that today for smaller brands, and larger brands did it for us back in the day.
And so sort of a swap of brand equity is a great way to start using the network. It’s gonna sound lame and repetitive, but it’s how things worked for us. A lot of it came back to the story in the hustle, right? We actually got one of our largest partnerships, in the very beginning it was with a platform that no longer exists called Google Offers, which was essentially Google’s competitor to Groupon. And the woman who, who reached out to us from Google Offers had seen us in Oprah Magazine or in whatever press and so storytelling leads to the hustle leads to the press leads the partnerships. And, and what’s great about it is rather than you going out and trying to knock down doors, people are coming to you. And they’re saying, “Hey, I’m very excited about what you’re doing. I see it benefiting my business in this way, can we please work together?”
And that’s great for two reasons. One is you’re not having to go do the work to build the pipeline, all that kind of stuff, but two is you get better economics because they’re the ones coming to you. If you go in and Google Offers, this is an example, was on a platform, and we were tiny at the time, we were so small, and we said, hey, we want, please let us in. They’d be like, first, they’d probably be like, “No, you’re so small.” And second, they’d probably be like, “Well, okay, we’ll let you in, but here’s some terrible economics for you, and some great economics for us because you have to prove to us that you can do anything.” So the power is, you know, all in their court. When it turns around, and it’s them saying, “Hey, bringing this brand into our ecosystem, or this product into our ecosystem will help make us better.” Now, you just have a much better negotiating position.
So, we leveraged a lot of that story and hustle to get those partnerships, and then we, just as you mentioned, we used the partnerships to get partnerships. You know, once you’re on Google Offers, then Groupon comes calling. Once you’re on Groupon, then Living Social—now they’re merged, but at the time weren’t—comes calling, and so you know, this sort of, the gravy train of PR continues to pay off. And so I can’t say enough, like, it’s not about hiring a great PR agency, it’s not about having a lot of money. It’s the hustle and the flywheel.
[33:00] Yeah, flywheel effect.
- Now if you don’t have all of that going, and you’re just starting somewhere, I would, I would recommend doing something very similar to what I said earlier about the sort of direct-to-consumer marketing, which is concentric circles, you know, find your list of whatever 500, 300, 200 top partners that you want to have. Rank them 1 through 200 with closeness to you, meaning relationship wise, I have a direct connection in these first 10, I have a secondary connection in the next 50, and work those relationships to get your way in. It’s gonna take time. But it’s a lot easier if you’re reaching out to somebody who’s two degrees separated. If you have an amazing story and the person that’s in between you two loves that story, and they’re telling that story with enthusiasm, you’re going to get into that partnership so much more easily than if it’s kind of like, sure, I’ll do it because I’m your friend. Right? And so that it always comes back to having that great story.
[34:02] At what point in the evolution of the company, did you start to raise money?
- I actually tried right away. We like launched, we did that $12,000 second month, and I was out on the phone pitching whoever I could pitch. And it didn’t go well at all. I was pretty much roundly rejected, and there were two reasons for it. One was I hadn’t learned how to pitch. I hadn’t done my research, I hadn’t practiced. I just sort of ran out there and started telling anyone to listen like “Hey, this is gonna be a big and amazing thing.” And not surprisingly, it wasn’t a great pitch. And so that hurt me. And then the second…
[34:39] You didn’t have a pitch deck, as they’re formally defined today?
- We did, but I had no idea how to build a compelling one. It was too long. There was way too many words. My quick two seconds on a pitch deck is 10 page max, and just cover the basics. What’s the problem? How do you solve it? Who’s your team? Why do you have a right to win? Total market, addressable market, financials. Out. Right? Super simple, super quick. My deck was like 25 slides, it was super long, I got all kinds of pictures.
[35:07] They were falling asleep.
- Yeah, it was not. It was not the right pitch. So I didn’t know what I was doing, which was a problem. I should have spent my time preparing. And then second, it was just too early, you know, in late 2012, at least the LA tech community was in a bit of an e-commerce hangover, sort of like, there’d been a big rush, lots of money raised, and the company sort of grew very fast and then plateaued. And so there wasn’t a lot of folks itching to put money into e-commerce, I didn’t do that research. I just ran out and started pitching. I didn’t know what people were looking for. And so the bar had been raised, you know, went from being like, hey, an idea and a website with some small sales can get you funded. Now, it was an idea with a website, but you need rapidly growing revenue to really get people to pay attention.
So after a couple weeks of call it you know, late November, early December, oh, that was the other part is, VCs, they go on vacation like December 7, and they’re not back till January 15. So I was trying to pitch them right before vacation time. Like no one was diving into diligence right before the holiday. Wrong time to approach again, just pure ignorance on my part. So the first time didn’t go great. We said we sort of retrenched, we focused on the business, we said let’s get this thing growing. And then we got to about $100,000 in revenue a month. And I went back out this time with a nice succinct deck, I asked some friends to review the deck who had been through this and got some advice from angel investors, and went back out, and went much better the second time.
So, call it, we got through Valentine’s Day. So call it March of 2013, went out and started banging the pavement and very quickly got a lot more traction. I had an accelerator in town amplify, expressed strong interest in bringing us into their program. I had a preferred sort of a micro VC in town, you know, soft verbal $150,000 seed check. And then sort of those start the same way that the brand momentum started, the fundraising momentum started, you know, you get somebody on the cap table that people respect. And that gives, it makes it a lot easier to approach somebody else. This person is on board.
And so getting the first couple was, you know, I got Andy Dunn. Andy Dunn is founder of Bonobos. And Andy was my roommate back in Chicago, just happenstance. And I reached out to Andy pretty early and said, “Hey, would you be an advisor to the company, I’ll give you a small chunk of equity.” He’s like, “Sure. He’s like, sounds like a cool idea.” You know, “Whatever I can help.” And he’s been a mentor ever since. But when I go to Amplify and I say, hey, I’m doing $100,000 a month and Andy Dunn’s on the cap table, they go, whoa, whoa, whoa, Andy Dunn’s on the cap table. That’s amazing. Why? “Well, he’s my roommate, but he also believes in the business.” “Oh, cool.” And then you get Amplify onboard and Amplify in LA is, you know, one of the premier accelerators. So then I go to the micro VCs and say, Amplify is an investor. They say, “Oh, now I want to take a look.” And so it’s about building proof points. And that’s not just the beginning. That’s the entire journey—milestone, proof point, milestone, proof point, tell someone you’re going to do something, then go do it. Money comes when there’s believability because there’s proof.
At the beginning, you have very little proof. And you know, the businesses that are very high on R&D is I think the hardest because you need $3 million just to build your product, right? That’s all about vision. It’s hard to get the milestones. But businesses like e-commerce, even B2B, SaaS stuff where you can build your product up to an extent, without raising money, you can get that proof point and users and revenue and renewals and data. It’s not long-term data, right? When we raised our seed round, which was kind of the big bulk of it sort of came in, in April of 2013. We’ve only been around for roughly six months, but people were seeing what was happening with both the investor base and the consumer base, and so it gave them comfort level to invest. So we closed all in, that’d be about $1.7 million. It was sort of three tranches a half million dollars and kind of the March-April timeframe, half million dollars in the June timeframe and another point seven in the summertime. But that seed round took us about eight, nine months in total to raise. Call it six months of real focused effort and results.
[39:06] What was the pre-money valuation back then?
- Can’t share that, but it was small. I wish it was a lot higher. Let’s put it that way.
[39:15] Yeah, so you got diluted.
- I got diluted pretty good. But again, at the same time, that was the market we were in, you know, and this is something I think too many founders focus on too much as well. Like, looking back on it, that round cost me a lot in terms of ownership. But without that round, we don’t exist. And even with a lot of dilution, I’ve raised $75 million. You know, when I look at what I own on the cap table, I’m pretty darn happy with it. Right? It’s life-changing value if we can get it to exit at some point. And so, with, you know, with dilution, it’s important to fight for valuation, but too often I see founders fighting over what a relatively small short term dilution impacts, and they’re losing really big long term opportunity because of it. What people don’t understand is, let’s say you want 100%, right? 50% dilution is 50% of the company, that’s massive. In 10 years, if you’re gonna raise money, you’re not gonna own 100%. Let’s say you’re gonna own 15%. 50% dilution is only seven and a half percent. It’s all relative, and it can put you to a place where you can raise 150 to 200 or 300 million dollar valuation. Trust me, you’re not going to mind that early dilution. It doesn’t mean you should be willy nilly, you shouldn’t just give away equity, but people get overly focused on sort of, oh, you know, I’m at $5 million pre money, I really want to be at five and a half million. Eight years later, when you’re an exit that delta means literally nothing. And too often we get hung up on those small deltas.
[40:44] Could you have bootstrapped the business to become a reasonably fast growing business that was producing profits or was that simply not an option?
- You know, it’s a great question. And I think the answer is I think we could have. I think it would have been hard in a couple ways. And I think founders are faced with sort of two extremes” you either raise a lot of money, or you raise as little as possible, right? There’s kind of not much of a middle ground. Once you get on this sort of hamster wheel of venture backed financing, you’re raising the bar every time you raise, you have to go really big. At some point, your investors’ alignment is not around a $50 million exit or a $25 million exit, which in the early days, you’d think, wow, that would be amazing. But that is just off the table, that’s not compelling for them. And so I think you kind of have to pick— when we started off, we said, we’re going to bootstrap this thing, we’re gonna raise money, but maybe like a little bit like 100, or $200,000, that’ll be enough. And what I found was, it was kind of, okay for the first six months. But very quickly, two problems arose.
One was, on such a small budget, we weren’t able to delight the customer in the way that we needed to. We were falling down for the customer, which was going to impact growth. We couldn’t be good enough for customer service, we couldn’t be good enough at logistics, we couldn’t be good enough at the technology side of things. And so, I saw pretty quickly like, yeah, maybe we can keep it going, but growth was going to slow because we weren’t going to delight the customer long term. So we needed to invest in that.
And then personally, I just ran out of, out of energy, you know, being a solopreneur at the time, with all of my team being part time, and me being you know, the only one full time was just it was, you know, 100 hours a week, I was sort of on an island by myself, and essentially nothing. And at some point, it was kind of like, you know, this is not sustainable personally. And so when those two sort of came together, it was like, all right, we’re gonna, we’re not gonna be able to do this raising a small amount of capital. Now, what we did do was, in those early days, raise $1.7 million, that’s sizable, but it’s not so much that you’re kind of over the cliff. We always tried to keep profitability in reach. So we weren’t getting too far over our skis in case the funding dried up, in case we hit, you know, that economic event ended. Exactly. So we always kept it kind of in reach, and there was a period where we had to go away from it and say, we have to jump off a cliff. Right, we weren’t going to stitch this parachute in the air while we’re falling towards the ground, and then you come out the other side, or you don’t and luckily, we did. And we were able to sort of get over that hump where now we’re no longer at the mercy of the financing markets, we can chart our own course. So we thought about it, but it just got too painful, I think, painful for the customer and painful for me as an individual.
[43:39] So the reason I’m asking so much about this, I’m sure my audience is interested, but it’s also a very real issue for me in the software company. I’m fortunate in that my other businesses generate a pretty substantial amount of cash on an annual basis, so I’ve not gone to the investor well at all. And I’m sitting on, again, a pretty substantial amount, relatively speaking, not multi-millions, but enough that I think that we could spend— I just hired a VP of Marketing, my first six figure hire, we’re going to spend probably 10,000 a month over the next couple of months, all figuring out, dialing in our unit economics, what’s our CAC, what’s our AOV, LTV, with the goal of coming out of that experiment knowing what they are and then looking at my word chest and looking at how much income I produce and thinking okay, can I get to where we want to get to internally funding because I’d be pretty much the source of it all. Or, do we have to go out and raise money because it’s a race, we want to get there faster, etc.
And so I’m not at that place yet, but it’s definitely rattling around in my head, and then if we’re gonna raise money, what kind of money are we going to raise? Like, I’ve got friends that own hospitals and a Learjet. They got lots of money. Maybe I just go get some from them. I’ve got a partner who’s, we have inside the software business, we have these things called content partnerships where someone, they’ll have expertise that we then can package into a playbook. We make the content available on the Flowster platform, and it ends up generating lots of leads for their business so I don’t actually have to pay them for the content, but it adds content to the platform, which is very valuable for me and very valuable for the customers. And so one of these guys on the call literally this morning, he’s like, “Yeah, I’ve got 200 grand, and I want to put it, I want to invest in your company. So there’s it, those conversations are starting to happen. I just haven’t sussed out what is the best path forward because I haven’t got through my 90 days, what are my unit economics looking like, and, and is this thing going to produce cash, bleed cash? You know, I don’t know yet.
- Yeah, well, I think you’re going about it exactly the right way, which is testing and learning. You know, that’s sort of what we did for that first six months, you figure out, you know, the hard thing about CAC and LTV is that they’re your CAC and LTV today. Right, they’re not your CAC and LTV in two years or at scale. But getting the learning gives you a directional understanding, you can understand, hey, is self funding this reasonable or not? And then you have gradations of raising, right? You can raise from individual angels, you can raise from strategic partners who are going to own a chunk of the business, but not sort of demand that you grow at a certain rate or whatever it might be, and then you can go the venture route. And I think similar for a lot of things I’ve said an iterative approach is the best approach. Try to do it on your own to get to a place where like, can’t raise those individual investors, you know, folks you trust, folks you know, bring in relatively small amounts of capital, see where you get. If you get to a place where the only place left to either make the company survive or thrive is a big VC check, then go there. But the more optionality you retain, which is non VC, because once you get the VC hamster wheel again, like the optionality goes away, I think the better and more control you’ll have, and that gives you chances to say, “Hey, look, we don’t have to be 100 million dollars to make this work, we can be $20 million, we could be $15 million, and actually build a real really nice business.” And so it feels like you’re on the right roadmap, as far as you know, my limited expertise would say it feels like you’re hitting the right approach.
[47:12] Well, it’s good to hear because that is, I mean, I’m not trying to build a unicorn, you know, if we had a 50 million, at 10 million in ARR, my company’s worth $50, $60 million. That’d be a hell of an exit. That’s, that’s life changing, and that’s all accomplished, achievable within five years, if not sooner, depending upon how, you know, how fast we can make it grow. That’s enough. I don’t need any more than that.
- Yeah. Yeah, I think I think and that’s where I go back to either raise as little as possible, or it sounds like you already know where you land on this, you’re not trying to build a unicorn, you don’t want to get on that hamster wheel. And so, you know, raise as little as possible from sort of the most controllable, and I don’t mean that in a bad way, but manageable capital as you possibly can. And then if you get to a place where your, whatever your— let’s say you’re doing $20, $25 million a year, but you’re burning five, you don’t have a choice at that point. But that’s a financial business by the VC community. Right? So you get there when you get there. But you don’t have to preemptively go that direction. I would urge most people to not, unless you know that the only way it’s going to work is if you’re getting a raise $75, $80 million, in which case you absolutely go that route as fast as possible.
[48:23] Yeah and we don’t, I don’t think that we have to do that. Well, this, this has been— we didn’t talk about a bunch of the stuff that I had intended to, but we’ve smoked through the better part of an hour here really quickly. And I do think that we’ll have delivered a great deal of value for the audience so we can probably adjourn here. I do want to make sure for anyone listening, if they want to go buy some great flowers, you will want to go to bouqs.com like bouqs like, “bouquet. John, you and I didn’t talk about it earlier but if you have any coupon code or anything you want me to put in the show notes, just send it to me afterwards and we’ll put a link right in the show notes. So, people, if you have any special offers for them.
- The best deals are actually available on the site to everyone. It’s when you become a subscriber, just 30% off plus free delivery, which is effectively 50% off but the subscription is flexible. You can skip every month if you want; you can only send flowers twice a year. You can send them to your mom, your sister, or you can have them delivered to your own home. So it’s a wildly flexible program. But out the door, you’re talking about a dozen roses delivered for 36 bucks flat— 38 bucks flat, and that’s a place that no one really touches, and that’s nationwide delivery. You can double the flowers for 44. You can double them again for 60. And so it’s a pretty nice value and a really easy platform to use for gifting your friends or family.
[49:41] So when Valentine’s Day comes and everybody’s gouging the hell out of people’s roses, is that still going to be the price?
- Still 38 bucks, guaranteed.
[49:50] You’ve been through a few Valentine’s Days now, which is a massive surge probably like Mother’s Day in capacity. And I said, we’re going to stop the interview but I’m just curious about this, how on earth do you manage such a huge spike, what I perceive to be such a huge spike in demand over a short period of time? And we’ll finish off with that.
- Yeah, it is really, really hard. You will get that price by the way, everyone locks in as a subscriber. We don’t change it on the holidays for you. So even just use it twice a year, easily worth it. You’re getting like 60–70% off of typical holiday prices. But it’s two things; one is that we built the technology platform and the business model, which we have access to all these farms, 140 farms around the world. The average farm that we work with has a hundred farmhands on a holiday. So that’s access to a lot of labor, none of which we’ll manage or are responsible for. So that business model scales up nicely. And then we have a team that just works really darn hard for about three weeks, twice a year. It is a tough thing to go through. It is really hard to scale that quickly but we luckily have an amazing group of people, a great culture, and a set of folks who believe in the mission so much that they really triple down and give it their all over that timeframe. And then we try to give folks a nice, you know, week or so afterwards to recuperate.
[51:10] Yeah, yeah, absolutely. All right. Well, thank you so much for being on the show. John, this has been a fascinating interview. I do hope that the audience has gotten a lot as much out of it as I have. Folks, if you have questions that you want John to answer, just send them to me, you can record. I’ve got a little recording system set up if you go to brightideas.co/askTrent, you can record whatever your question is. I’ll send them over to John and then we’ll share it on social or we’ll put it in the show notes or some way somehow, we’ll make sure you get the answers. And again John, thank you so much for making the time.
- Thanks so much. Have a great one.
[51:46] Thank you so much for listening. Please subscribe, rate, and review on your favorite podcast listening app. And to get to the show notes for today’s episode, go to brightideas.co/336.