Case Study: Farmgirl Flowers

I first met Christina Stembel when she was a twenty-something staff member at Stanford, organizing alumni events for the law school. As part of her job, she would buy thousands of dollars’ worth of flower arrangements for events and was dismayed at how expensive they were, how crappy the quality was, and the fact that after the event the flowers all got tossed into the trash. Eventually, she became passionate about creating a better solution for the cut-flower business and quit her job at Stanford to found Farmgirl Flowers.

Excited about her new startup, her plan for the new venture had some specific ideas based on several assumptions:

Most customers would be men buying for women.

Christina assumed most customers would be men buying for women, and so she shaped the offering around an ordering process that would appeal to men, with arrangements that would be loved by the women who received them. 

One featured arrangement each day. 

Her belief was that people (men, especially) didn’t like scrolling through the huge selections of the big floral companies but instead would like the idea of one easy choice that changed daily.

Priced well below competitors. 

Christina wanted to be the low-cost leader in a field filled with expensive floral companies. She believed that the inherent efficiency of one arrangement per day would give her the dramatic cost savings to drive her positioning of offering a lower price point than her competitors.

Strong commitment to environmentalism. 

Combining her personal belief set with what she saw as a positioning opportunity, Christina wanted to be the floral delivery company with the smallest carbon footprint. She’d source only locally-grown flowers, delivery would be by bicycle, and the one-arrangement-per-day model would dramatically reduce the flower industry’s notoriously high wastage.

With those assumptions, she went about the process of getting the business ready to launch. Christina wanted to create a unique brand that was in keeping with her eco-friendly vibe, so she wrapped each flower arrangement in fabric from discarded burlap sacks that had been used to transport foods like potatoes and coffee beans.

With excitement, she launched the initial version of the Farmgirl Flowers website. As orders came in, Christina would build the arrangements in the dining room of her San Francisco apartment and then have them delivered by bicycle. By personally fufilling each other, she was able to keep costs very low as she learned about her customers and tested her assumptions. 

She found out pretty quickly that most of her assumptions were wrong. Nearly three-quarters of her orders were women buying for other women (not men buying for women). Buyers didn’t care as much about her low price point; they cared far more about the quality of the flowers and the aesthetic of the arrangements. While they generally liked the eco-friendly positioning, they really wanted to be able to choose from more options. 

She quickly adjusted the product offerings based on those early learnings, and the business grew fast. Eventually, Christina was able to move the operation out of her apartment and into actual commercial space in San Francisco. She hired employees to help make the arrangements and contracted bicycle messengers to deliver them.

Christina wanted to put her foot on the marketing pedal, but she quickly found that advertising in the flower-delivery sector was very expensive. The big flower companies really drove up the cost of keywords on Google, so a keyword like “flower delivery” was going to cost her $7 per click. If you assume that 9% of the clicks make a purchase (fairly typical), then $7 per click equates to a customer acquisition cost of $78 — way more than she could make on an order.

So Christina switched to guerrilla marketing tactics. She provided San Francisco coffee shops free arrangements to display on their front counters with a stack of her business cards. Instagram’s popularity was just beginning to rise, and flower arrangements are the perfect sort of visual product for Instagram. People were soon taking pictures of arrangements they had received and tagging them with #farmgirlflowers. Her Instagram followers grew to almost half a million people.

With a solid following in the Bay Area, the next logical step was nationwide shipping. It would not be easy to scale from a perishable product delivered locally by hand to a perishable product that could be shipped nationwide and arrive in great condition, but Christina worked closely with a packaging design company and came up with a way to do it.

Having proven-out the business by building it from an initial incarnation run out of her apartment into a nascent national operation, Christina then set out to raise some venture capital. She knew would face challenges – Sand Hill Road held a preconceived idea of a scalable venture-funded business, and it certainly didn’t look like a woman selling flowers. But she set out on the fundraising trail with resolve and a pitch deck full of data. 

Over the next couple years, she pitched to a total of 104 venture capitalists and received 104 rejections. Some of the feedback she received included:

“Sorry, this isn’t a tech business to us.”

“It’s just inherently unscalable.”

“There’s no economic leverage.”

“Team seems weak.”

“Your slides are too pretty.” (Really).  

“Maybe next time you can bring your husband?” (Seriously?)

Frustrated, Christina decided she’d continue to bootstrap the company, growing it organically (pun intended) without outside capital.

Her personal charisma and a great feel-good story got her lots of press attention, from Forbes, the New York Times, Vanity Fair, Vogue, and Inc. to NPR’s Marketplace and The Today Show (Several times. If you go to The Today Show website, you’ll see bunches of videos of her).

A low point in her entrepreneurial journey came when she found out that a new startup called BloomThat, founded by three guys with MBA’s, raised $7.5 million in venture capital to copy pretty much every aspect of Farmgirl Flowers, from the messaging right down to the burlap wrap. The fact that Sand Hill Road investors had turned her down and then invested in men who stole her idea was a pretty hard pill to swallow. 

Happily, the three dudes failed. BloomThat burned through all their money and had to cease operations, selling to FTD at a fire-sale price, while Christina kept building Farmgirl Flowers the old-fashioned way: profitably, with no outside capital.

Her nationwide shipping business did so well that soon she was facing a new problem: she couldn’t source enough flowers to keep up with demand. Her commitment to only using local flowers sourced from the Bay Area had become a constraint on growth. So she bit the bullet and started sourcing internationally, including establishing a new facility in Ecuador. 

Today, Farmgirl Flowers is a very large operation, shipping from twenty-two facilities across North and South America. Originally launched as a one-woman operation in her San Francisco apartment, Farmgirl Flowers now profitably generates more than $35 million dollars per year in revenue.

And here’s the best part: because all those venture capitalists turned her down, Christina and her team still own 100% of the business. 

Key Takeaways:

The Farmgirl Flowers story is one of my favorite case studies because it illustrates several important points:

• Like most entrepreneurs, Christina’s original assumptions turned out to be wrong. Unlike some entrepreneurs, she tested her assumptions early and iterated on her product offering in order to quickly reach product-market fit. By doing an “MVP” of the business out of her dining room, using local bicycle couriers, she was able to learn which of her assumptions were right, which were wrong, and how the offering could be refined while it was still small and agile.
  

• Early testing with ads indicated that her CAC:LTV was out-of-whack. A CAC of $77 was more than she could make back. So she worked on both ends – finding ways of getting customers more efficiently, and also increasing the price in order to get more lifetime value.
  

• As angry as she was at a new competitor copying her model, it ain’t competition that kills startups. By just focusing on making her own business better she got the last laugh as the competitor burned through their venture money and shut down.
  

• Bootstrapping wins. Many entrepreneurs would have quit after receiving 104 rejections from venture capitalists, but Christina didn’t. Now she and her team own one hundred percent of a profitable $35 million a year business.