The hard start | Christina Stembel

So first, I'm going to tell you a little bit about my company. And then I'm going to tell you about my biggest learning that I think will affect you guys— or I hope will. And then I'm going to take questions and answers. But you can feel free to ask questions along the way too. OK? So I started Farmgirl Flowers about 6 years ago almost, end of 2010, from my dining room in San Francisco. And those of you that have seen San Francisco apartments know how tiny that is. It was about 100 square feet in my dining room. And it was just myself. I came up with this idea of how to disrupt— the word that everybody uses— the flower industry. It's a pretty big industry. It's about $7 billion in the gifting space, $35 billion overall. And e-commerce makes up about $3.5 billion of that. And 4 companies make up 3/4 of that. The ones that you probably think of when you think of flowers— ProFlowers, 1-800-Flowers, FTD, and Teleflora. And I don't know if you guys are familiar with those companies, but what comes to my mind when I think of them is very stale, outdated, grocery store-looking bouquets. And so I thought, well, I can do better. Let's do something better. Also, when researching the industry, I found a lot of bigger issues, environmental issues, social issues that I thought I could solve, waste being one of them. 40% of the flowers grown are never sold. They get thrown away. And that's what drives up the price, because when you go to a flower shop, they don't know what flowers you're gonna wanna buy. So they have to buy 50 different options to throw away 25 and to jack the prices up on the other 25 that you're gonna buy to cover the ones they had to throw away. Another issue was 80% of the flowers grown in the US now are imported from other countries. And because of that, it put out about 60% of all the local American flower farmers went out of business in the last 25 years. And then the third reason was just what I said. I, as a kind of a little design snob, I didn't like what was out there and I thought younger consumers When I started it, I was much younger than I am now. But younger consumers didn't want to buy the flowers that were out there and available. And I was one of those. When I would send my mom flowers in Indiana, where I grew up, I would have to use one of the leading ecommerce companies because there wasn't a flower shop near her. And I would have to spend $100 on an arrangement that looked like it was like $8 from Safeway. And I thought, we can do better. And also because of our cell phones that we all have now that have camera capabilities. Capabilities. It's really important now, I think, for companies and brands to make sure that what you see is what you get. And the leading ecommerce companies didn't do that very well. So I knew that they were on the brink of probably declining sales because the recipients would know what the senders were sending based on taking a picture. So I set out to change all of those things. And I created a model that was different. It's called Farm Girl Flowers. And we do one daily arrangement. Using 100% American-grown flowers right now. And we wrap them up. We came up with really cute packaging that uses reused coffee bags donated from local roasters to wrap our bouquets instead of cellophane. And then in San Francisco, we deliver by bicycle courier, which is really great free marketing as well for us. And so I thought, well, I had $49,000 in my bank account. I had a really kind of cushy, stable job at Stanford University. And did what everybody thought was gonna be crazy and quit my job in the economic downturn to start this company from my dining room. And I just had one goal, basically, and that was to not run out of money. I gave myself 2 years to beta test it in San Francisco to see if it would work. I had zero money for marketing, so my entire marketing budget was to go to coffee shops around San Francisco and take bouquets and beg them to let me put 'em out with marketing cards that I made myself through learning InDesign from YouTube. I did it all myself to start. I would use the ubiquitous we to make it sound like we were a company, but it was really just me in my dining room. And just worked really hard. I went to 5 networking events a week minimum to get the name out there. It was a lot harder than I thought. I think every entrepreneur thinks that if you have this great revolutionary idea, it's just gonna go viral. Nothing really goes viral. It really doesn't. Viral is paid for, just so you know. It's usually big PR and marketing agencies that are doing that. It's not just free. So I learned that very quickly. But thankfully, through perseverance and just a lot of hard work, it did grow slowly. Everybody keeps calling us an overnight success, which I find hilarious. Today Show recently, and they kept saying that. And I was like, I just— can we stop? Because it hasn't been an overnight success. It's been a lot of overnights, a lot of 20-hour days. And we grew. I mean, it wasn't like we went from zero to— we're now this year going to hit probably $11 million in sales. It wasn't overnight. We started at $56,000 the whole first year to $276,000 to $920,000 to $1.9 million to $4.4 million, and then this year to $11 million. So, it definitely— it's like building blocks and it grows to that. But you have to be really strategic about your growth and make sure that your operation can also manage it. So, I'm here to talk a little bit— the biggest learning that I've learned. So, everybody asks me, what's the biggest thing that I've learned since starting Farm Girl? typical things. It's not anything that I read in a business book beforehand. I read a lot of business books. I have no college education, just to put that out there. I learned everything from YouTube and from Google and learned how to arrange flowers. I knew nothing about flowers. I did— my job at Stanford didn't have anything to do with flowers other than I managed a department that oversaw the events for the law school. And I saw that we were spending a lot of money on flowers. But I didn't— it wasn't— the story that every— we've gotten a lot of amazing press lately that I'm very thankful for. But they all come in and they expect to hear the story of how I grew up playing in my grandmother's garden and I love flowers. And that was never a thing. I grew up on a farm in Indiana, which is how Farmgirl got its name. That and the fact that I couldn't find anything else open on GoDaddy. And I spent a lot of time looking. But it wasn't ever that. I grew up on a corn and soybean farm, not nearly as pretty as flowers. And I just wanted to start a business. And I wanted it to do something good in the world. And those were my 2 things that I wanted. And I had a different idea every week. Literally, I would drive all of my friends and family nuts with— every girlfriend night would turn into a mini focus group beta test for me where I'd be like, hey girls, what do you think of these iron-on pockets? I need you to take them home and sew them, iron them into all of your suits and try them out for me. That's awesome. 'Cause I thought that every idea was a brilliant one. But of the ideas that I came up with, they either would fulfill one or the other goal that I had. They would be what I thought to be a brilliant idea that, of course, would scale to billions of dollars. But it didn't really do anything good. I mean, diapers.com did a really great job, but I didn't really wanna sell diapers, right? I mean, I didn't— it wasn't a passion. I wanted to also do something good in the world. If my idea had this social bent to it, it usually had no way of ever making money. And I didn't wanna be a nonprofit. Not that there's anything wrong with it, but that wasn't my dream. And so, when I had this idea for Farm Girl Flowers, it was the first idea that I had that fulfilled both. I could do some environmental good in the world. I could create really good jobs here. Non-tech jobs in the Bay Area are very hard to build and grow. And so, that was one big area that I thought I could make a difference in. And it also could scale. I mean, FTD does $1.3 billion a year of product that I wouldn't want to buy. So that shows me that there is a big gap in this industry that I could fill. And so those were the 2 things that I wanted to do. And then the second thing that I could do with Farm Girl Flowers was I could self-fund it. So a lot of my ideas, I actually did a pitch contest at Stanford that won. But I needed $3 million of capital to start it. And not for this— it wasn't Farm Girl Flowers. It was a different one. And this was back in 2010. We're still in the economic downturn then. And it wasn't very easy to raise capital. And I didn't have the pedigree. No college education. Very ironic that I worked at Stanford. But no college education. And I didn't have 3 founders, one of which was from Google or Facebook or Apple or one of the ubiquitous that you kind of have to have one from to go raise a bunch of capital immediately in the economic downturn climate. So I knew that I wasn't gonna be able to be successful. First company, no pedigree, never have done anything like this before, and I don't know anybody. It's not like I have 5 VCs in my back pocket that are best friends that I go hang out with. So I knew I needed to do something different, and so I knew I needed to self-fund it to start. So I did that and grew it. As I talked about, I grew it. And then I got really scared because a bunch of other companies popped up with that pedigree that I just talked about. Tech guys, 100% of them tech guys started. And they looked surprisingly similar to Farm Girl Flowers right down to the burlap wrap, trademark burlap wrap, bike courier deliveries, down to the recipe with ornamental kale and the edibles that we use in our arrangements. Everything looked surprisingly similar, which is the only language I can use legally to say surprisingly similar to us. Not saying that they copied us, just they looked very similar. And I got scared because these companies were able to go raise a significant amount of capital out of the gate, pre-revenue. $5 to $10 million seed rounds. going through all the incubators and Y Combinator and all these things. And I'm like, whoa, wait a second. I'm going to be the Friendster to their Facebook. This sucks. I'm going to be nonexistent in 12 months because I'm having to grow pretty slowly. I have $1 per unit to spend on marketing. True story. $1.09 we spent even last year on a $4.4 million year. So we have no marketing dollars to spend. We're in a perishable product that's also a service category, which we're gonna be lucky to get a 10% net profit margin. And I mean, 1-800-Flowers did 6.8% net profit margin. So it's not like I can go to VCs and tout that I'm gonna get a 50% software-type margin. But I tried to raise. So I thought, okay, well, all of these other companies have been so successful at raising capital immediately with no numbers. We have numbers. I was under this delusional, thought process that it was gonna be super easy then for me to go raise capital in 2014, early '15. So, I tried, and I pitched to 26 different VC companies on Sand Hill Road, and in Boston, and in New York. I mean, I— every— all of these firms used us then. We had grown pretty quickly. We were the highest-rated, most-reviewed flower company in San Francisco, in the Bay Area. We had 14th fastest-growing private company in San Francisco. We have been growing pretty quickly for a bootstrap startup. And so I was a little delusional in thinking that this was not gonna be that difficult. And I worked really hard on this really pretty pitch deck, really fancy, amazing pitch deck, and I started pitching. And, well, the first thing was, the first pitch I did was the worst pitch of my life. So if that happens to you— That's okay. Don't worry. It happens to all of us. Because what happens is you go in and you realize, oh crap, I don't have the answers to like 80% of these questions. And you go to your car and you cry. Okay, you do. It's okay. And then you go get to work. And you do— you answer every single question that they have that you didn't have the answer to. And so by the end of it, I had a partner at Andreessen Horowitz saying I had the best pitch deck they've ever seen. So you have 27 pages of appendixes. You have every single answer to every question. that they could ask. And I still wasn't successful.