Startup Bug #2
“Just Do It” poster at H.Bloom Production Facility picked by CEO and co-founder Bryan Burkhard when founding the company
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On Friday March 27th, I went with 14 Princeton students on my second NYC #tigertrek trip organized by @princetoneclub with visits to @lererventures, @returnpath, @kapitall, and @hbloom.
A common theme of the visits seem to be the magic power of “subscription commerce” as a disruptive model(think about “Netflix”) - both ReturnPath & H.Bloom are subscription-based business, similar to BirchBox. It reminds me of Daphne @Yext’s talk last Friday at Princeton about Yext’s pivot from pay-per listing to monthly subscription.
———————Visit 1: Lerer Ventures———(SuperAngel)————————-
At @lererventures (NYC equivalent of SV angels, investor of GroupMe, Warby Parker, Bauble Bar, Showme, Birchbox, Venmo etc) , we met Steve (formerly at Microsoft, Massive, Kraft & StickyBits/Turntable.fm) and Princeton alum Blake. The highlights:
1. Steve recommends entrepreneurs to first “bootstrap. be scrappy. and make something out of nothing” before reaching out to VCs/Angels. In other words, ideas are rarely funded without showing the prototype, unless the entrepreneur has a successful track record.
2. Besides “subscription commerce”, Steve and Blake also point out the importance of “Owning the Value Chain, content community” - with examples of ShoeDazzle, Warby parker, Bauber Bar. Warby Parker provides affordable online eye-ware, and it owns the value chain (from design, manufacturing, content etc).
————-Visit 2: ReturnPath———-(Email Service)——-they are hiring———-
At @returnpath, we met with CFO Jack Sinclair, Princeton alums James and Jeff.
(photo credit: Arman Suleimenov)
ReturnPath was founded 12.5 years ago by Princeton alum Matt Blumberg, along with CFO Jack. http://www.returnpath.net/blog/intheknow/author/matt-blumberg/
In one sentence from CrunchBase, ReturnPath is an email marketing solution that works on both the sending and receiving sides of email in order to help commercial email senders get more email delivered to the inbox.
Today, ReturnPath is in 11 countries, with clients such as Groupon, Yahoo, LinkedIn, 340 employees, and works on the largest email performing data (2.2 B/3.4B mailboxes worldwide). It is backed by top VC firms, including Union Square Ventures.
Back in ‘99, Matt(Princeton) and Jack (UPenn) met as ushers of a wedding. Matt has just sold MoviePhone to AOL and Jack left a corporate finance software startup. With the success story of MoviePhone, the pair without technical background was able to sell an “idea” to making sending and receiving email better and raise money from top-line investors. Jack recommends that in today’s environment, it’s better to start a company with a founding CTO.
Jack’s favorite classes at Wharton was entrepreneurial management and after taking another entrepreneurship class, his #startup bug# never stopped. Below are highlights from Jack’s recommendation:
1. deep analytical skills are super valuable
2. when managing a company size bigger than 150, things start to change.
3. if you start a company, go for “subscription model”
4. a successful company needs ” product-market-fit” guys and do it fast
5. culture at ReturnPath: self-starting mentality
Jeff ‘08 also took Prof. Zschau’s high tech entrepreneurship (ELE 491) and rated it as top 2 classes he has taken at Princeton.
———————Visit 3: Kapitall—————-(FinTech)——They are hiring———
(photo credit: Arman Suleimenov)
FinTech startup Kapitall is located in ChinaTown area, and we met with founder & CEO, Gaspar, a French entrepreneur with gaming background. Gaspar moved to NYC 5 years ago and is now building Kapitall, an online brokerage with an aim to democratize investing for non-professionals & next generation, and make trading more intuiting, engaging and fun. Highlights:
1. FinTech startup is unusual in that it requires high upfront cost and financing
2. Focus on design a seamless user interface: use design to make data more visual & interesting
3. Do heavy-lifting for investors to make investing easy.
4. Connecting Twitter feed on stocks to the “Playground” (platform)
I loved Kapitall’s DEMO! Checkout this facebook video:
———————Visit 4: H.Bloom———-(ecommerce)——They are hiring————
co-founder & CEO Bryan Burkhart explains how H.Bloom disrupts $35B highly perishable flower business with cutting edge technology & monthly subscription model (photo credit: Arman Suleimenov)
———
I loved the visit to H.Bloom - a successful example fo the “subscription model” and “owning the value chain” recommended by Lerer Ventures & ReturnPath.
What strikes me most about Bryan(besides his incredible business acumen & sales skills etc) are his passionate energy and humor.
#####Founding Story: the Software Execs turned into “the Florists”#############
Bryan and Sonu Panda met in 1997 @ Penn Tower Hotel as Wharton undergraduates, and have somehow found much career overlap for the last 14 years. They helped grow the same software-as-a service startup to $100 million annual revenue and subsequently IPO-ed in 2004.
In 2010, Bryan and Sonu co-founded H.Bloom ( www.hbloom.com) - which “delivers luxurious blooms right to your home or office on a subscription basis”. H.Bloom has recently raised $10 million led by Shasta Ventures with return investors(TechCrunch).
It’s hard to imagine two post-IPO software entrepreneurs (one ironically to be super allergic to flowers and have to take anti-allergy pills to go to work everyday) to be your next-door florists. However, Bryan and Sanu are your Web 2.0, next-generation “florists”, who are disrupting this $35 Billion “old economy” with massive 30% spoilage headache.
After 10 years at Callidus with strong track record and a glamorous IPO , Bryan and Sonu were looking for their next big gig and to “shoot for the stars”. In late 2009, Bryan and Sanu met up regularly to exchange notes on the ideas to work on. They methodologically researched the big $Billion markets, such as $12B property management business. One important lesson from the pair is their approach to identify their unique market niche:
1. weekly scheduled meeting to exchange and discuss business ideas
2. The business ideas all surround a well-defined thesis: ” identify a massive business in OLD ECONOMY with relatively weak competition & high scalablility, where the product or service bring people JOY.”
After deciding tackling the flower industry, Bryan was a frequent visitor of the Chelsea market in NYC, hanging out around the expresso stand to get caffeinated, and met with every flower owner he could. He noticed that flower retailers did not have much walk-in business and the beautiful flowers were sitting there to be spoiled. The epiphany for subscription model came along after >100 expresso shots.
Bryan and Sonu convinced Mike to join as VP of engineering, who quitted his dream job at the MLB ( Major League Baseball). H.Bloom is positioned as a software company that delivers flowers, thus software platform to ensure the smoothness and excellent user experience is crucial. What can convince a guy to quit his dream job? Referring back to Prof. Lidow’s entrepreneurial leadership class(EGR 495), Bryan must be an entrepreneurial leader who makes people around him feeling successful. He must have a vision that he believes in religiously that others can feel.
Bryan also fondly showed us the 1000 square foot production site next to the office, which used to be the office as well in year 1. Without offline retailers and associated cost, cost per square foot reduced 5 times, from $125 to $25, a huge saving to mark down online price. At the production facility, we see skilled flower experts making different designs with fast speed and great precision. Among the pleasant smell of the room, I can also sense the hardwork and sweat that were covered by the AC in the room. Bryan pointed out a huge poster with “You Can Do It” and he told us that he picked the poster two years ago to motivate the company.
###H.Bloom & RentTheRunway: Amazing Similarities########################
H.Bloom was previously known as the “Netflix of Flowers”, and meeting with Bryan reminds me a lot of RentTheRunway visit with Jenn Hyman, who is democratizing luxury and building the “Netflix of Fashion”. I see several parallels between Bryan & Jenn:
1. Unparalleled passion + Unique ability to motivate: after both the H.Bloom and RTR visits, I kept thinking about the meeting and what stuck with me are the passion, the energy, and the vision conveyed by Bryan and Jenn. They are people who have unique ability to motivate people around them to achieve success together.
2. Own the Value Chain: Both H.Bloom and RTR own the production, delivery etc to ensure the premier experience and quality. Both are logistically more challenging and complex than NetFlix. For H.Bloom, the flower industry suffers from the massive spoilage between 30-40%, but H.Bloom has a 1.2% spoilage rate in 2011 due to the fact of no retailer and knowing the orders ahead of time. From 30% to 1.2% is a huge reduction, which can help bring down the average price to be profitable.
Because the logistics and the software platform are so hard, it creates a defensible business with high barriers to entry. Execution is so important and requires extreme attention to detail and dedication that copycats are hard to survive.
3. Founders Roll up the Sleeves and Do the Ground Work: Just like Jenn & Jenny were packing boxes for 2 months to send to first customers, at early stage of H.Bloom, Bryan and Sanu rented Zipcar for $8/hour and did door-to-door delivery. Just like the first boxes made by Jenn was far from perfect, which made her appreciative of the work by her operations team. Bryan and Sanu, who are software experts and used to deal with bankers, biggest companies, put together the first bouquet to deliver to their first customer -dentist Dr. M, after 100 calls/day. The rationale seems to be that the founders of a company needs to understand each part of the business, especially pertaining user luxurious experience.
The Monday after delivering to Dr. M, Bryan received a call from him - which he thought must be negative given 10 year working at software company where every call is a complaint. Surprisingly, Dr. M said that he was calling to let them know that his wife loved the flowers. This was a strong boost of confidence.
4. Give Customers A Choice. RTR always sends two sizes to the customers, and H.Bloom gives subscriber two choices. In this way, customers are making a choice for themselves, instead of being “imposed” with a decision. This subtle play with psychology is very interesting and powerful.
5. Intensely Focus on Building Talent: Jenn at RTR is a big advocate of thinking like an owner and allowing her employees not afraid to fail and try new things. She wants to build a culture where everyone can be an mini-entrepreneur and taking extra initiative. She wants to attract talents who are appreciative, always positive, and caring ( beyond the core skills required for the position). Bryan launched Startup Education Entrepreneurship Program” (SEED) program to train the talent for the company. Both are consciously making an effort to create a thriving culture to identify and retain the talent.
Bryan told us he is “building a passionate business”. I can’t agree more! H.Bloom is such a happy company with so much scalable potential. Who wouldn’t want to work for a product & service that brings people joy and work for a CEO that is so deeply passionate with contagious energy?
Chenyu
Follow me on Twitter: @chenyuz
(would love to hear your feedback for future improvement. No copy without permission.)
04.28.2012
