When same-day flower delivery company BloomThat launched in San Francisco in 2013, it seemed on a fast track for success: The Y Combinator alum had $7.6 million in funding and a quickly growing customer base. But just two years later, the startup was racing toward bankruptcy. Cofounder and CEO David Bladow explains what went wrong, and the remedies that saved his now-thriving business.
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The error: Overexpansion
“We were intoxicated by what was going on with Uber -- on-demand everything, expand really fast and off to the races. Once we had the mechanics of same-day delivery figured out in San Francisco, we expanded too quickly without realizing that we couldn’t copy and paste the mechanics of what worked in San Francisco to Los Angeles and New York.”
The fix
With the company burning nearly $500,000 per month, it decided to shutter same-day delivery in L.A. in August 2015. “We had stretched our footprint so wide, it spun our whole economic model sideways.” The switch took their burn rate to just $15,000 a month, giving BloomThat time to retool for L.A. (It’s now back, and profitable.)
The error: Moving too fast, literally
“We promised delivery within a one-hour window, and in San Francisco alone we had seven distribution points to make that happen. That’s a lot of touchpoints -- and every time someone touches the product, it’s a cost.”
The fix
Do we really need to do this in an hour? Bladow recalls thinking. Or would two be efficient for our customers? His company got rid of four distribution points and tested a two-hour delivery window instead. No customers complained; delivery costs dropped 25 percent.
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The error: Competing with giants
“We’re here in the Bay Area with Google, Facebook and all these companies that provide, like, three meals a day to employees, and, oh, here’s a masseuse! You’re under all this pressure to take care of your team, which we want to do, but we set up a structure that didn’t work for us economically.”
The fix
BloomThat reeled in its perks -- providing snacks all the time, but only lunch a few times a week. “We’re taking care of our team, but we’re not sending them to a spa. Though on Mother’s Day and Valentine’s Day, we bring in two people and have them do chair massages.”
This story appears in the November 2016 issue of Entrepreneur. Subscribe »
