Bootstrapped Farmgirl Flowers Is Taking On The Flower Industry

Christina Stembel, 39, grew up on an Indiana corn and soybean farm and didn't go to college. Now she's building Farmgirl Flowers in San Francisco, which will clock $15 million in revenue this year. When she launched the company in 2010, the $18 billion U.S. flower industry was dominated by four big players who offered huge selections, mostly made up of flowers shipped from overseas to small shops where about 40% of the inventory wound up in the trash because it spoiled before it could be sold. Stembel's strategy: source flowers locally and slash waste by selling a very limited number of arrangements direct to consumers from her website. She wraps her bouquets in distinctive burlap donated by nearby coffee roasters. When she tried to raise money, she was dismissed by VCs, but she managed to bootstrap the business and now has investors approaching her. In this interview, which has been edited and condensed, she explains the impact legal marijuana is having on her business and why she thinks the company could ultimately produce $1 billion in revenue.

Susan Adams: Where did you get the idea for Farmgirl Flowers?

Christina Stembel: I was director of alumni relations at Stanford Law School and during the economic downturn in 2007 and 2008, we were doing a lot of events but the budgets were getting cut. We were spending between $100 and $200 on centerpiece flower arrangements. I started to research why the flowers cost so much, and I found that just four companies did three quarters of the flower business.

Adams: What made you think you could compete with them?

Stembel: I'd send flowers to my mom in Indiana and I was always left dissatisfied with the whole process, not just the product. I spent an hour online looking at options, to find the least ugly one. Then I'd spend $80 to $90 on that, and when she received it, it wouldn't look anything like what I ordered. There's even a hashtag, #flowerfail. My research also showed that younger consumers were purchasing fewer flowers.

Adams: Why would you enter a shrinking market?

Stembel: The most recent innovation was in the '90s with ProFlowers, which started sourcing from South America instead of North America. They didn't do anything to fix the problems I saw.

Adams: What role did waste play in your decision to start a flower company?

Stembel: Flower shops waste between 40% and 60% of their inventory. They have so many options and the owner doesn't know what people are going to order so the flowers go bad. I came up with a model that I thought would solve all the problems. Instead of having 100 choices, we offer only a few curated options. You just get to pick the size you want. We have less than 1% waste.

Adams: How did you know your model would work as a business?

Stembel: I didn't know, but I thought it was a great idea. I did one focus group before I quit my job. I gathered almost 50 people and showed them a bouquet I made versus three or four from the top four florists. Eighty-six percent of the people in the focus group chose my bouquet.

Adams: What are margins like?

Stembel: I think at scale, we can get them to 25%. We're at a 2.9% net profit margin now but that's because we're investing all of our profit back into the company so we can grow. If we weren't doing that we'd have a 10% to 12% net profit. 1800Flowers had a profit margin of 8% last year.

Adams: Was there anything else you considered before starting the business?

Stembel: It had to check four boxes for me. With no college degree and no network, I had to be able to bootstrap. I wanted the ability to scale big if I was going to work that hard at something. It needed to solve a real problem. And I wanted to do something good in the world, which for me was sourcing flowers locally.

Adams: Why did you care about local sourcing?

Stembel: In my research, I learned that 50% of U.S. flower farmers had gone out of business. Growing up in the agricultural industry, it was important to me to support local agriculture.

Adams: How did you fund your launch?

Stembel: I had $49,000 in my bank account. I thought it was a lot of money. It's not. But I'd been at Stanford for seven-and-a-half years and I thought, if it's not now, it's never. I gave myself two years.

Adams: Where did you get your flowers?

Stembel: San Francisco has a great flower market where I could get great prices for flowers in small quantities directly from wholesalers and directly from farmers. But one of the early problems I ran into was that some farmers wouldn't sell to me. They'd only sell to wholesalers.

Adams: Why wouldn't farmers sell to you?

Stembel: Because their dad didn't and their grandpa didn't. A lot of them were like, this Internet thing, I don't know if it's going to be long term.

Adams: How did you market the business?

Stembel:  I would take flower arrangements to coffee shops in San Francisco with little marketing cards on them. Then I'd go back to the shops and see how many cards had been taken to see if it was worth the $20 flower cost.

Adams: How was your first year?

Stembel: I did $56,000 in revenue. The second year was $276,000. The third year I started to be able to spend more money on marketing with Facebook and some with Yelp. That took us to $920,000 the third year.