John Gilroy: Welcome to Students vs. Startups Showdown in the Potomac. My name is John Gilroy. I'll be your moderator today.
Big round of applause. Show number 57. Yay. Yay. Thank you, Al Gore, for inventing the internet and giving us 57 shows without shutting us down.
If you've heard this podcast before, you know the drill. We are sitting in the offices of Eastern Foundry. We took over a conference room. We've got a big old table here, a couple of students on one side of the table, and we've got a startup on the other. What we do is we provoke a discussion, go back and forth for about a half hour. Everyone walks out of here fast friends.
On this side of the table, we have my students. The first student we'll introduce is Christopher Smith. Tell me a bit about your background, please, Christopher.
Christopher : Well, thanks, John. I currently work at the School of Continuing Studies as an IT support specialist. And I'm going there, as well, pursuing my degree in technology management. My background is in customer relations and sales.
John Gilroy: And Taiwo, your background, please.
Taiwo: Thank you, John. I started off as a network engineer, network and security engineer, and I did that for about four years, and I went into doing master's degree in computer and information security, after which I picked up a job as a security engineer for about three years. And I'm currently a full-time student at Georgetown University doing technology management with a concentration in information security, and I also work for University Information Security Service. I'm a security analyst for the University at the moment, part-time, though, like student's job.
John Gilroy: And you almost found a job about a half hour ago. We think you did. And it off starts kind of a fast starting startup. We're kind of nerdy and technical around here, but the name of the startup company is UrbanStems, and they deliver flowers all over the place, just got into ... it's a wonderful model. I went online and saw a very simple, easy to use website, not confused about the message at all, and the company's called UrbanStems. And representing UrbanStems is Ajay Kori. Ajay. How are you?
Ajay Kori: I'm great. Thanks for having me.
John Gilroy: So tell us about your background and how you wound up “deliverin’ flowers” in Washington, D.C.
Ajay Kori: Sure, absolutely. I've been a startup person for a while. So I actually started my first company back in high school, was not the most popular guy, and decided to learn how to code instead of talking with human beings, and started my first website during the dot com boom, ended up becoming really, really, popular, had millions of visitors, didn't know anything about venture capital, brought on other teenagers who were creating great content, and basically did a rev share with them, and built a big website that way, built an email service, built a start page, which was a thing back then. You guys probably don't remember that. I ended up building one of the most visited entertainment sites in the world for teenagers, sold the website to the wrong company.
So there were two companies trying to buy me. One was offering more stock during the dot com boom, stock only went up, so, you know, sold to that company. They went bust six months later during the crash. The other company that I didn't sell to started a site called My Space. I don't know if you guys have heard of that, eventually sold to News Corp, very different story.
But after that, I really discovered my love of creating things and I, ever since, have been lucky to be part of some pretty amazing startups, including starting UrbanStems.
John Gilroy: You're very humble. You have a master's degree in business administration from Harvard. So you must know something about running a business. I mean, you're very humble here, aren't you? I mean, come on, let's put our cards on the table. Well, yeah, yeah.
So let's say we're sitting in the Metro, I turn to you, and I go, oh, UrbanStems, what problem, what business problem does UrbanStems solve?
Ajay Kori: Yeah. It was a problem that I acutely had, actually. So, when I was living in New York, I was dating someone at the time in Philadelphia, and I sent her a lot of bouquets, because we were both really busy, and time after time, just had bad experience after bad experience. And I thought I was just getting really unlucky. And it kind of crescendoed on her birthday. I sent her a bouquet to surprise her. I didn't call because I was waiting for the bouquet to surprise her.
John Gilroy: Oh, I can hear what's coming.
Ajay Kori: Yeah.
John Gilroy: Oh, huh-uh.
Ajay Kori: I mean, the not calling part was my fault. All right? It's not all on ...
John Gilroy: This isn't going to ... this doesn't end well.
Ajay Kori: ... the big flower company. But, yeah. I kept going on into the night, and I kept calling this flower company saying, you know, where's the order. And they kept saying it's coming, it's coming, it's coming, and never came, ended up with a really angry girlfriend.
After that, I called up one of my college classmates who I've built websites with before in the past, and one of my best friends, and said, "I think there's something wrong with this industry. Let's look deeper into it."
And when we did, we realized it's completely true. It's a 100-year-old system that essentially, to make a really long story short, you have order aggregators, who are all the big players that you know of. They take your order, they pass it on something called a flower wire, then it goes to a local florist who actually fulfilled the order.
Because there all these parties involved, you end up paying a really high price. But when you actually look at it from the person fulfilling your order, they have two types of customers. They have the people who walk in their front door, pay full price, and can become a repeat customer. And then they have these online orders where they're getting 80 cents on the dollar, and it's fully branded as someone else's product. So they essentially take care of online orders last. They use the inventory that's about to expire typically, and they deliver it after they've delivered their current customers.
And so, when you put it all together, you end up, as a consumer, paying a higher price and getting a lower quality of product. And when you think about e-commerce, it's made everything better, faster, cheaper, but with online floral, it's actually done the opposite. It's made it more expensive and a worse quality experience.
And so we saw a huge opportunity to come in and create a better experience. And it wasn't easy. We had to rebuild an entire supply chain.
John Gilroy: Wow. Christopher, this is a fun one.
Christopher S.: So, I had a question. How did you get the name UrbanStems? How did you come up with that?
Ajay Kori: Yeah, yeah. You know, I think what we ... we wanted to bring the joy back to gifting. And so, for us, we wanted a name that was quirky, but also relayed that this is done differently.
You know, one of the hardest things that we predicted and we were right about, one of the few things, is people were very cynical about flower companies when we came into this market because every ... if you Google "flower delivery" today, you'll get thousands and thousands of results, and thousands and thousands of companies. They all overlay over the exact same system. And it's why they'll, in fact, advertise with $19.99 flowers, and by the time you check out, it's 50 or $60. And that just happens over and over again because it's the exact same system.
And so we wanted a name that conveyed, hey, this is totally different. This is hand-delivery from couriers that we employ, that ... with flowers that are better. It's an experience that's more urban, more fun. And ...
John Gilroy: Taiwo, it sounds like a classic building a better mousetrap, huh?
Taiwo: You went from starting up a very tech company to ...
Ajay Kori: Delivering flowers.
Taiwo: ... having a company doing flowers. Has a lot to do with emotions. Right?
Ajay Kori: Yeah.
Taiwo: So tech to emotions. How? Why?
Ajay Kori: Yeah. Well ...
John Gilroy: Oh, good question.
Ajay Kori: It's a great question. I don't know how many of you guys have read the book "Love Languages." My love language ... and this, I promise, relates ... is gift-giving. I think it's one of the best ways to show someone an emotion, to tell someone how you feel, to convey anything that you want to convey to another person.
So, you know, when you think about kind of our grandparents' generation, the way that they did that was Hallmark cards. That was a new innovation generations ago. Any time someone, you know, our grandparents' generation wanted to say "Thank you," or say, "Happy birthday," or whatever the communication expressing that emotion was, they just dropped a Hallmark card in the mail, no questions asked. And you don't see that in our generation. And it's not because we're less thoughtful. It's because there isn't an easy way to gift.
And so what we ended up doing is using technology, leveraging a lot of advances in technology to create a system where people can do that again. And what that looks like today is hitting a couple of buttons on your phone, and then an hour later, having a bouquet with your message on a handwritten note at that person's office or at that person's house.
John Gilroy: You know, I've been at trade shows in San Francisco. One is RSA. Another one, believe it or not, is called Subscribe. I've been to that show in San Francisco, Subscribe. It's a really a big movement.
And when I went to your website, I saw the word "subscription" right there, and I said to myself, "This is genius level." I mean, my wife has the same birthday every year, doesn't she? Right. Am I going to forget next year? Yes. But subscribe, it's ... is that your concept? What a great idea.
Ajay Kori: Yeah, yeah. That's exactly what it's for.
John Gilroy: It's for dumb people like me.
Ajay Kori: It's not dumb. It's just that we all have a lot going on in our lives, and we try to make it as easy as possible because it's good for us, also.
John Gilroy: Yeah, yeah. The subscription economy is a big deal.
Christopher S.: Okay. So how did you guys get funding for the business?
Ajay Kori: Sure. So we are a D.C.-based company, and D.C. is ... actually used to be a huge tech hub, but in recent times, is not exactly known for being a big consumer tech hub. That being said, we have wonderful investors in the area, you know, obviously smaller group of people than in Silicon Valley, or even New York. But the investors that we do have here are really, really strong, and really, really care, not only about the companies that are incubated here, but about growing the ecosystem.
And so we've been lucky to have some great investors from this region. Midland Capital based here in D.C. led our seed round. SWaN & Legend, out in Leesburg, led our series A. Both, could not ask for better partners. I mean, we're lucky we have Mark Katz, the founder of Custom Ink, as one of our earliest investors. And one of the biggest pieces of advice he gave us early on was don't just take any capital, take the right capital. It will absolutely impact your trajectory moving forward, especially the ones that early ... you know, join your board early.
So we've optimized for the best capital partners, and they're here, and we're lucky to have them here in D.C.
John Gilroy: Capitol is capital.
Taiwo: Yeah. A lot of companies use their website to generate leads.
Ajay Kori: Yep.
Taiwo: So how do you use your website to generate leads?
Ajay Kori: Yeah. So, I mean, our website is everything. All right? We don't even have an offline presence. We don't have a brick and mortar store. We don't have ... you know, we have a phone number, but we don't ... we only take orders from it if people really are having an error with the website. Or there are some adorable grandmas who call us, and we'll take their order.
But, no, the website is 99.8 percent of all orders. And so we're a true e-commerce player, and we use ... rely heavily on digital channels, Facebook, Instagram, Google AdWords, pushing into Pinterest, as well, to drive customers to the site.
John Gilroy: I'm about to give a lecture on LinkedIn to this class, and I couldn't find you on LinkedIn. Is it intentional? Are you on LinkedIn? Maybe I couldn't find you.
Ajay Kori: I am on LinkedIn, yeah. I'm just not very ... I'm not an avid social media guy.
John Gilroy: Yeah. I guess I didn't know that.
Christopher S.: How are you becoming more innovative in the space? Because, I mean, we have our days, we have birthdays, Valentine's Day. How are you guys trying to disrupt that, or trying to garner more business?
Ajay Kori: Yeah, great question. So, typically, when you order from one of the big players, you know, with "800" in their name or whoever, you end up spending 60 or $70 after all the fees, and getting something that's not great. And so, because of that, people don't do it that often. They do it when they have to. In fact, those big sites get the majority of their revenue on a couple holidays, the days when you have to send.
We actually look nothing like a traditional flower company. Our customers send ... our repeat customers send four times a year. Our number one send reason is happy birthday, instead of happy Mother's Day, or happy Valentine's Day, which is what the biggest reason is for the traditional companies in this space. And after happy birthday, it's actually a pretty long tail of everyday reasons. And the reason why we see that is because we've made it better, faster, cheaper, to send a gift. And the way that we've been able to do that is through technology.
So we've completely reinvented the supply chain. We work directly with farms. We dictate what's being grown at the farms months ahead of time. They grow those ingredients. They put together the bouquets at the farm level. They come up daily from the farms to distribution centers that we operate, and then the couriers who are our employees walk in with an app that tells them exactly what to pick up. They pick those up, they go out on their route, they drop it off, they come back. Everything is purely online, and we've cut out so many steps from the supply chain and own everything.
John Gilroy: You know, when I think about the flower business internationally, I think a lot of them are grown in Colombia, and I would think a company like yours would be based in Miami, not in Washington, D.C., or maybe Atlanta or something. Is that true, most of them are grown outside the United States, or how does that whole ecosystem work?
Ajay Kori: Yeah. Hey, you know more about the flower industry than most people do. I'm pretty impressed, John.
Most people don't know this. Eighty percent of all the flowers in the U.S., almost all the flowers you see on the East Coast, they come from Colombia and Ecuador. The U.S. farm flower-growing sector has shrunk drastically in the past 30 years.
John Gilroy: Because Colombia has whooped them. They're just faster and better.
Ajay Kori: The land in California, actually, is being turned into strip malls and ...
John Gilroy: Wow.
Ajay Kori: ... a lot of marijuana farms, to be actually completely honest.
John Gilroy: While they grow flowers, we grow the marijuana?
Ajay Kori: It's a pretty big flip, actually. I never thought about it like that.
John Gilroy: Oh, wow.
Ajay Kori: But, yeah.
John Gilroy: Turning the tables.
Ajay Kori: Yeah, completely. So Colombia and Ecuador have really picked up the mantle, and they made it so efficient that it's cheaper and easier to get the flowers from out there. The planes, every single day, multiple planeloads of flowers coming in, land all in Miami, so ... which is the port of call for the majority of flowers in the U.S. And then they're trucked from Miami to the end destination.
We do some pretty cool things with our supply chain, and we actually are able to eliminate the airplane trip from a lot of trips of our flowers, which increases the life of the flowers, and decreases the cost. So it goes, again, back to our kind of secret sauce of how we reinvented the supply chain.
John Gilroy: Taiwo, please.
Taiwo: Let me play the devil's advocate here.
Ajay Kori: Of course.
Taiwo: How big do you think you can grow?
Ajay Kori: Yeah.
Taiwo: The reason I ask that is, there's a limit to the number of flowers individuals buy in a year.
Ajay Kori: Yeah.
Taiwo: Let's say, we can say they buy flowers for birthdays, for weddings, for Valentine's Day, and stuff like that. Now, if we calculate everyone in America and say, yeah, they're going to buy flowers three times or four times a year, then there's a limit to your income. Right?
Ajay Kori: Yeah.
Taiwo: So based on that, if you want to grow really, really big, how do you plan to overcome that situation?
Ajay Kori: Yeah, great question. There are a couple of answers to your question. A, the flower market is much bigger than most people expect. It's about 8 billion in the U.S., cut flowers. And that is, with our per capita consumption of flowers, at nearly half that of Mexico, and I think about a fourth out of Europe.
John Gilroy: Wow. That's a good Jeopardy question. I wouldn't get that. Listen to that. Yeah. I'm in your classroom. Really?
Ajay Kori: Yeah. The U.S. consumes far less flowers that even countries that have far less GDP. And the reason for that, we believe, is because sending flowers is just really inefficient here in the U.S. And part of what we're doing is increasing the efficiency of the entire market, which, as we've seen with our customers, they increase their per capita consumption of flowers.
So we think that there's a big floral market, but the actual ... what we say internally, it goes back to what I was saying about the Hallmark ... you know, being like the Hallmark. What we say internally is that we're building the Hallmark of our generation. It's not just about flowers. It's about communicating something to someone else. And that's a massive market.
Another thing that a lot of people don't guess is that gifts are one out of every five non-consumable purchases in the U.S. so one out of every five non-food, non-diapers, non-consumables bought in the U.S., one out of every five of those purchases is a gift. It's close to 300 billion in gifts bought in the U.S.
John Gilroy: Well, I don't want to be a downer here, but because I'm an old guy, I've been to funerals, and I've been to weddings, and these would be targets, also, I think for flowers, aren't they? Or is this just something that's ...
Ajay Kori: Yeah. No, no, no. Absolutely. We have a lot of brides who actually choose us because it's ... yeah, I mean, even though you can't customize your bouquet because we only have six or seven bouquets at any given time ...
John Gilroy: But they'll be happy, won't they?
Ajay Kori: It's much more ... versus spending 10,000 on floral? If you spend a thousand with us, it will ... you'll get much, much more.
John Gilroy: Wow.
Christopher S.: Are you guys developing any products that you're going to release in the future, or ...
Ajay Kori: Yeah. I think a lot of the innovations are going to be around how you're able to order, so making it easier, pushing more into subscriptions, having ... you know, even basic things I think we should be doing and don't do right now, which is just reminders on your big holiday, like on your anniversary, on your girlfriend's, or wife's, or partner's birthday, having all those really automatic, and it just being about hitting a couple of buttons and having a gift out there.
There's a real opportunity for us, even more forward thinking with our product. I think one thing you're going to really see is I think there is a lot of app fatigue in this country right now. Average new users, I think, downloaded 1.5 apps in the past year. You know, our power users use our app, which is essentially we've taken away resources from it because our mobile experience is better. But I think what we are really going to push into is ordering via text. And so being able to leave a meeting, text our concierge, which is augmented by AI, and say, like, "1100 Wilson Boulevard, Floor 9, send flowers," and it will be done.
John Gilroy: AI again, huh?
Taiwo: Not again. So if you were to advise a new startup on how to get funding, what would you tell them?
John Gilroy: Let's say the startup was owned by Taiwo, let's just say, theoretically.
Ajay Kori: Theoretical startup. There's a lot of advice. I don't know if I can roll it into just a couple of things, but be passionate about what you're doing, and I think ... and try. Just get off of ... I think a lot of people will spend a lot of time creating a business plan and building up infrastructure well ahead of understanding how their customers are going to interact with that infrastructure, and that's the absolutely wrong way to do things.
I think when Jeff and I started this company, we literally loaded up his car with flowers from Costco, drove around, and delivered the flowers ourselves to our friends. You know, we had a website up, but as soon as the order went in, it went to Jeff's car. And that's how we discovered what the demand was going to be like and what infrastructure needed to be built.
John Gilroy: You know, I teach about calls to action, calls to action. I also teach Twitter. What's fascinating, again, about this guy is that his Twitter handle is @sendurbanstems. Its call to action is right in the Twitter handle, isn't it? @sendurbanstems, it's right there.
Ajay Kori: Yeah.
John Gilroy: You put some thought into this.
Ajay Kori: Well, you just have to go do it. It translates well, I think, your point, John, to your question. You know, to raise funding, there's no magic formula for raising funding. You know, investors are going to invest in good businesses. And to build a good business, you have to go out there, do, and learn, and iterate.
Christopher S.: So what if we just heard today Google just bought out 1-800 Flowers or ... like, what would you do?
John Gilroy: Would you take air out?
Christopher S.: What would you do?
John Gilroy: Some 500-pound elephant steps on you.
Ajay Kori: I think this is one of the lessons we've learned through this entire thing. Very early on, we were very concerned about our competitors. You know, we were always watching what our startup competitors are doing, always trying to just make sure that we're differentiated, and that we're paranoid about what markets they move into. And we put way more thought into our competitors than we ever should have.
Eventually, we got to a really good point where we just said, if we put our heads down and create the best possible customer experience, we're going to win, no matter what our competitors are doing. That's essentially what's happened. A lot of our startup competitors have shaken out because they were worrying about jostling, and positioning, and that kind of thing. Whereas we literally just created the best experience for our customers, and that's all we worried about, because customers are going to go towards what the best experience is. It's the lesson I learned.
I was lucky enough to be at Quidzi, which ran diapers.com, soap.com, wag.com, and I learned from the founders, Mark and Vinny. Mark went on to start jet.com, sold it to Walmart for 3-and-a-half billion, and they sold Quidzi for 600 million to Amazon. The entire premise of all of these sites was you create the best experience, you'll win at the end of the day. It's that simple.
And so we stopped worrying about . . , inventory space. Amazon sells flowers today. Walmart sends flowers, sells flowers. These players are going to be there. But if you're better than them, that's how you create a valuable business.
John Gilroy: So it sounds like the business problem you solve is keeping that end-user happy, understanding the customer in a thorough, detailed manner.
Ajay Kori: Right. Absolutely.
John Gilroy: I wonder who teaches that? That's crazy.
Taiwo, do you want to jump in? Please.
Taiwo: Yeah. Do you have any challenges right now? And if so ...
Ajay Kori: Lots.
Taiwo: Okay. So do you want to talk about some of them?
Ajay Kori: Yeah. I think ...
John Gilroy: We don't have to name names. Just I'm not going to give anyone else any air time here.
Ajay Kori: If we don't have any challenges, then we're not doing something ... we will absolutely have one big challenge, which is we won't be in business. Like, if you don't have any challenges, you're not doing anything hard. If you're not doing anything hard, you're not beating companies with thousands of times of more resources than you.
You know, I think the constant balance for us is pushing more into some of what I was talking about earlier, the innovations that we need to do, pushing into new cities, pushing into new markets, at the same time, balancing our capital efficiency, you know, or the money that we have in the bank, frankly.
We are a startup. We are trying to do a lot of things at once to create that best possible customer experience, and we're trying to do it on a really bootstrap budget. And so that is always going to be the tension, and continuing to fund-raise, and continuing to build a consumer brand with millions of dollars, instead of hundreds of millions of dollars, is a huge challenge. But it's one that we take on with gusto.
John Gilroy: When I first heard about the company, I figured it was geographically focused on urban areas, UrbanStems.
Ajay Kori: Yeah.
John Gilroy: What about folks that live in more rural areas? You just ignore those, or keep ... we'll take your money, as well? Or what about the folks in the middle of nowhere?
Ajay Kori: Yeah, so another great question. About three weeks ago, we actually announced that we ship nationwide now. So we've partnered with a couple of people, namely Fed Ex, but also Vogue magazine, who have designed really amazing bouquets, and we are shipping those nationally now anywhere in the country via multiple distribution centers that we have located across the country, hand-delivered to the end recipient via Fed Ex.
John Gilroy: Well, Taiwo, the class is going to be Vogue magazine and digital marketing. Connect the dots here. I couldn't connect those dots at all.
You got a final question, Taiwo?
Taiwo: Yeah. Where do you see yourself in five years?
Ajay Kori: Yeah. I think, at the end of the day, if we are kind of what I was referring to earlier as the way that people express any kind of emotion to each other, if we are the Hallmark of our generation, I think that we will consider that a success, the ubiquitous way that people send ... say, you know, communicate with each other through gifts.
Christopher S.: What kind of marketing plan do you have? Like, do you use cases or personas to kind of build on who's that going to ... who you're going to target?
Ajay Kori: We do. We do. But we actually look at our cohorts based on their entry point and how much they're spending. So what we've realized is that our cohorts, you know zero to $50 spending on your first purchase, versus 50 to 80, versus 80 plus, all those cohorts behave differently. And so we're able to segment our marketing and really smartly target people based on where they think they're ... you know, what level they're going to purchase at, and how often they're going to repeat. And our entire marketing plan is very just data-driven, I mean, without using the buzz phrase "big data." I mean, it is a very data-intensive activity. Marketing is probably less sexy than people think it is.
John Gilroy: As long as you didn't say that the flower business is growing. I've been waiting for that. As long as you didn't say that.
Ajay Kori: Yeah. We've seen it all.
John Gilroy: So we are running out of time here. If someone wants to find more information about UrbanStems, where should they go?
Ajay Kori: UrbanStems.com.
John Gilroy: That's really good.
If you would like show notes, links, and transcript, please visit the OakmontGroupLLC.com.
I'd like to thank our founding sponsor, Radiant Solutions. If you are interested in getting involved in geospatial projects, contact Radiant Solutions.
We are hosted by Eastern Foundry, a community of government contractors who are bringing innovative solutions to the government marketplace. For more information, go to Eastern-Foundry.com.
If you would like to participate as a student or startup, contact me, John Gilroy, at the OakmontGroupLLC.com. And thanks for listening to Students versus Startups Showdown in the Potomac.