Burning through $550k a month, BloomThat only had four months of cash left to live - then turned it around
The "oh s---" moment came in July when David Bladow was 3,000 miles away from his startup.
In New York to expand into another market, the co-founder and CEO of flower delivery startup BloomThat learned his company had been burning through more than $550, 000 in cash every month.
At that rate, his startup would be dead in four months.
It's hard to imagine a founder not knowing that a company could be losing that much. Yet, it snuck up on Bladow. His accounting was a "convoluted mess" and by the time it was untangled, the company was in jeopardy.
But Bladow turned it around. He believed in his idea and his team, and made the hard decisions to tighten and transform the company.
It's a pressure plaguing big tech companies and startups alike, and it's only going to get worse now that the tech boom is deflating. BloomThat is likely on the early side of it.
Now instead of shutting its doors in November, its self-diagnosed death date, the startup launched nationally on February 3. The company that was burning through half a million a month is now down to $15,000 a month.
"The Flower Guys"
In 2012, Bladow was following in the family footsteps. His dad was driving around southern California with a "Jack N Box" license plate, and Bladow had joined the family businesses of franchising the Jack In The Box burger chain, in charge of development and market expansion.
It wasn't enough. He wanted to be an entrepreneur himself, and convinced his friends to leave San Diego and move to Silicon Valley.
It seemed like a great idea as subscription boxes like Ipsy and Birchbox took off. The only problem came when women found out their significant other was using it.
"You signed up for an autopilot thoughtfulness platform? That's no good," Bladow jokes now about the idea.
So he started looking at the idea like he used to compare Jack In The Box restaurants to the In-N-Out burger chain. Bladow loved how In-N-Out focused on a limited number of items, did them well, and sold them at a low price. Comparing burgers to "thoughtfulness platforms," Bladow realized he should focus on one thing: flowers.
"Why is it OK that what you see is never what you get? It's a terrible experience. We set out to close that gap," Bladow said.
Bladow and his co-founder Matt Schwab joined the prestigious startup accelerator Y Combinator. Amidst the hard science and enterprise companies, the duo got the nickname, "The Flower Guys."
They launched selling flowers off the patio of Bladow's apartment, promising on-demand delivery of high quality flowers at great prices - akin to In-N-Out. Its other promise would come back to haunt it: no delivery fees.
For the first couple of years, everything was fine. The company hit the 10 percent week-over-week goal that YC companies are told to aim for. The promised one-hour delivery times in cities was reliable. It expanded out of San Francisco and into the Bay Area, then down to Los Angeles. Next came New York.
Then it all unraveled.
When he and Schwab graduated from Y Combinator, they followed some poor advice on choosing an accounting partner, and ended up with a patchwork of accounting systems. It was taking Bladow 90 days before he could see accurate profit and loss numbers.
"We didn't know how serious it had gotten until it was serious."
By then, the company was in jeopardy. "Before we knew it, the unit economics that we had in San Francisco, a tiny 7X7, had totally eroded," Bladow said.
How they fixed it
The company also added the dreaded delivery fee (there's a reason those exist, Bladow concedes) and changed the delivery times in some neighborhoods, broadening the window from one hour to two.
Some of the employee perks that make Silicon Valley companies legendary, like the free food and posh snacks, were taken away or scaled down. There's now filtered water instead of flavored. Lunch is served only on Tuesdays and Thursdays.
"You look around and compare yourselves to the Joneses, but you have no idea what's happening inside their organization," Bladow said. "It's easy to lose track of."
The worst part was laying employees. Changing the delivery time meant scaling down operations. The company laid off one set of workers, then had to come back a few weeks with more.
"It's a really tough time and a dangerous situation to do two cuts, and maintain morale on your team," Bladow said. "I think we were thought we were good enough on the first pass."
With this much leaner team, BloomThat is going to go for a big national launch. It's a head-scratcher on the surface that a company that was on the brink of death months ago has decided to scale to the nation instead of conquering it city by city, but Bladow is confident that the budgeting can work.
He's only selling profitable bouquets at a national scale, and that money will be reinvested to acquire more customers.
"It makes sense when you have $20 contributing margin on a product, that you can spend $20 to go acquire a customer," Bladow said.
Most importantly, it's a shift in the company's destiny. Bladow isn't operating blindly and losing himself in the momentum. He's looking ahead to more partnerships, and using the national shipping program to indicate where he should set up on-demand delivery next.
"We're in the driver's seat," Bladow said. "I want to give myself enough time to build a good business."