''You've Been Gone Too Long''

Aron Burton



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Announcement: From the campus of the Wharton School in San Francisco, this is Startup School Radio. Here is Y Combinator partner Aaron Harris. Aaron: Hello and welcome to Startup School Radio live from Wharton San Francisco campus on SiriusXM's business radio powered by the Wharton School. I'm your host, Aaron Harris. I'm a partner at Y Combinator where we fund early stage companies and work with them to build billion dollar businesses. Every year at Y Combinator, we throw a conference we call Startup School where we bring amazing founders to tell their stories about what they've learned building their companies the screw ups the successes and everything in between. Here on Startup School Radio we'll be bringing those founders to you on a weekly basis, broadcasting every Wednesday at 1 p.m. Eastern, 10 a.m. Pacific with the goal of helping anyone thinking about starting a company, learn how to do it better. Coming up on today's show I'll be joined by my partner from Y Combinator Geoff Ralston. Geoff is also the founder and a partner at Imagine K12. We'll talk about his experience in startups and talk about his decision to start a startup accelerator focused exclusively on companies that work to improve K-12 education. Later on the show will have CEO and co-founder of BloomThat David Bladow, come talk to us about how he went from developing restaurants and real estate to trying to disrupt the flower delivery industry with BloomThat and how he managed to draw the attention of investors like Ashton Kutcher and Joe Montana. If you're thinking about starting a company or you're an entrepreneur in the early stages of running a startup and have a question for us, you should e-mail us at business radio at SiriusXM.com and be sure to follow us on Twitter @BizRadio111 and follow me @Harris. I'm really happy to welcome my first guest today and someone with whom I work very closely on a daily basis, Geoff Ralston. Geoff is a founder and partner at Y Combinator and at Imagine K12. He's an investor and advisor to over a hundred startup companies. Geoff joins me today to talk about his experience, his long experience here in Silicon Valley as well from his work at Yahoo, to his current work reinvigorating the edtech space. Geoff thanks so much for joining me. Geoff: Hey Aaron, it's great to be here. Aaron: So Geoff you have worked with a lot of different companies. But I want to go back to the beginning of how you actually got involved in startups themselves. Your master's in Computer Science and you also have an MBA which is a fairly rare combo these days here. Is working in startups the thing that you always knew you wanted to do? Geoff: Yes and no. When I started my career was actually as an engineer at Hewlett Packard. I had gotten my degree in the East Coast and was flown out to California. I thought really understanding the startup scene, the Silicon Valley scene, but fell in love, I think more with the greenery. Aaron: Where were you coming from? Geoff: I went to school in New Hampshire, at Dartmouth and I grew up in Buffalo, New York so it's easy to imagine why California was attractive. And so I started working at HP and almost immediately I was sort of infected by a startup ethos. I remember for years we would go out drinking at night and just talk about the startups we were going to start. But I think the issue was that most people at HP didn't do that, most people did what I did which was just to talk about it but it definitely got in my head and infected me, and I always assumed that I would do a startup and people all around me were leaving HP. HP was in so many ways the genesis of much of Silicon Valley, so many companies came out of... Aaron: Going back to the founding of the company itself, it's one of the original startups. Geoff: Yeah, absolutely but the alumni from HP, the aspirants that created very much of what we know of Silicon Valley today. And so it was really in everyone's blood but at the same time it was a very big company and people got very comfortable there, and I was never that comfortable with being comfortable. So after a while I left and I did some different things. I went back to school and while I was at HP I got my Master's in Computer Science and then later an MBA but I always had in my mind that I would do a startup and when I lived in France for five years and when I got back, I did my MBA there, when I got back I knew I was going to do a startup. I just knew that that was the time. I actually think I waited way too long which wasn't that unusual back in that day. It was much more normal to have for older people and I was in my thirties so I was just thirty when I got that. Aaron: At thirty, so you've been in France for five years. How did you still know that you actually wanted to work in startups? Like you said, you've been doing something for a long time. What brought you back to saying, "No, actually this is the time"? Geoff: I never felt like I had been doing something for a long time. I'd done a bunch of different things and once I was infected it never left me. I think ironically have always been a startup person who spent a good portion of my career at big company and working my butt off pretending like I was at a startup but not really getting some of the real payback, both economically and emotionally from the results you get of the startup because I've absolutely come to the conclusion that the most exciting rewarding unbelievably great thing you can do with your life in your career is to work at a startup. Aaron: Right, I think we've talked about this, that it is the single best way to have the largest impact on the most people in the shortest span of time. Geoff: Yeah, there's no question that if you want to change the world, if you want to have an impact on the world, a startup is an especially great way to do that. It's not that you can't have an impact on the world working in a big company but it's hard to really sense it and feel it. You feel it when you're at a startup, you can see what you're doing and you can see the impact of the things you're doing on your customers, on your employees, on everything you do and I think that's part of the attraction to a lot of us who go into startups but I also think it's a way where you own your destiny. And I think you know as we're all struggling through entering little paths in life, getting that modicum of control and owning that and creating our own futures is extremely powerful and I think the people who go through startups and work at small companies and get that feeling find it rather addictive. Aaron: Yeah, this path thing is super interesting to me. We're talking about it last week with Kat about how more and more people are seeing starting a company as a viable path. And it's always a funny thing to me. Because I started out my career on a very defined path. I went to work in investment banking. That was a path. I did that for two years and then I'd go to business school and come out and maybe work on a hedge fund or something like that. It was defined and I was following it up to a point. It didn't last very long as a banker but I went to the hedge fund for a while and then at some point I was like, "I got to do something different," and starting a startup for me wasn't a path thing. It was more this idea of what you just said. I wanted to control my destiny. I wanted to be the person responsible for setting up what it was I did every day and a startup for me was the way that it made sense to do it. And it also came with all these other amazing things of, "Hey, if I want to have a huge impact, this is the way to do it." And I wonder about that because there is an increasingly large number of people who can do that but I think it takes a very specific mindset and an appetite for risk that I think is kind of tough to find and tough to nurture. Do you think it can be nurtured in people? Geoff: I definitely think it can be nurtured in people. I also think that the idea of a startup has shifted and changed pretty radically over time and I would also say spread. I think Silicon Valley was built by startups and I think when you come out here I think it's why it's the greatest place still in the world to start a startup, is because you're infected with the dream of startups. You hear about it all the time. And that certainly happened to me when I came out here. If you had asked me before I came to Silicon Valley, what a startup was I would have looked at you blankly. Aaron: Right. Geoff: But once I got out here it was what everyone thought about. I think throughout the rest of the country and the world doing a startup was perceived as an incredibly risky thing to do and not just difficult but just like wow, if that doesn't go well you could screw up your whole life. I think that idea has changed and I think the idea of a startup maybe is a little bit less of a dream, it's more, as you said, more of an alternative path that's completely reasonable to take, and one which if you go after shortly after getting out of college, your parents won't necessarily say anymore, "Oh my God, what are you thinking?" By the way if for most of the last decade, if you left school and it's still even true now and you tell your parents, "Yeah, I turned down the job at Google. I'm starting a company with my friend Joey, accompanied with my friend Joey, and we're going to take over the world, they would say "Oh no, get a real job. Make some money. What are you thinking?" Aaron: So my parents told me when I told them I was starting a startup. Geoff: A lot of kids still hear that but I think that's changing and shifting and the stories are out, the ideas are out. People know that it is a viable alternative and the other thing that's happened is that in the world of the 21st century most people are going to hold lots of jobs. Aaron: Yeah. you no longer go to IBM for 40 years and that's your career. Geoff: It's not realistic in any way. If you find an IBM, the probability that that company is still around in 40 years seems fairly low. So most people understand that being entrepreneurial is part of the way you ought to think. If you look at the 21st century schools that people identify entrepreneurial thinking is one of them. So in fact by doing a startup fail or succeed you are creating for your future. Aaron: It's funny when you put in that framework because if you look at sort of the I won't say the entire course of western civilization but certainly if you look over the last couple hundred years in terms of what people did. This idea that you go to work at a single company for your entire life isn't a very long term concept. It's kind of the 20th century where you had these large corporations rise and industrial companies and technology companies where that ability existed. I think a lot of it, the auto industry stuff, people worked there their entire lives. But 1800s, people went west. So many people went west because there simply weren't jobs and that was a pioneering thing. There was no safety there, there was a massive risk. Geoff: I'm not sure, I completely agree with that. I think one way to look at is a little differently which is in the past people got a profession and stuck with it for their life. Aaron: That's true. Geoff: So if you're a blacksmith, you were a blacksmith and if you apprenticed to be a blacksmith, you were going to be a blacksmith your entire life. Aaron: Even though you might open your own Smithy. Geoff: You might open your own smithy. But you had one profession, one set of skills and I think that more than anything has changed. I think the evolution to getting a job as an auto worker at G.M. and staying at G.M. for 40 years was an outgrowth of that. Aaron: Yeah. Geoff: It is also true however that the job security was much better. If you're working, perhaps another example, if you're a farmer you stayed on your farm forever and it was very unlikely that you would do anything else in your career. The realities of a lifetime where you will be forced to have multiple careers and multiple expertise, learn multiple things sort of goes to the heart of why I am interested in education, at least a piece of that which is you can't do that unless learning is something that becomes a part of how you do your job and how you think about your life. Aaron: I guess when you think about being a founder it isn't a single skill set. There is no thing that you go and say, "Oh, you've learned this, therefore you can start a company." It's actually an amalgamation of lots of different skills and I think a lot of it is a mindset, the determination that you're going to go do all of those things necessary to make your company succeed. Geoff: I've always been so impressed with people, you see them around you in life and in the workplace where something comes up that's necessary to do, you would say okay, someone's got to do it, and they say, "Okay, I'll do it" and then it gets done. They figure out how to make things happen. How to pull together the different threads of creation or whatever they're doing and make it so and that's what a startup is. If you're an engineer when you start a startup you might actually have to be the head communications officer where they have to do radio shows like this even if you're kind of a geeky guy like I am or you know I hesitate to say it but like you are. And here we are talking on the radio. You better be able to learn how to do things. But one of the things we've noticed at Y Combinator is that some of the very best enterprise companies that are created by kind of really super smart, super competent kind of geeky guys who understand how to build software is when they actually learn how to do enterprise sales all on their own. Aaron: Right, which isn't a skill that you think they'd have. The classic idea here is someone who doesn't want to talk to people. Geoff: Exactly, they seldom have it. But the best ones gain it. It's really impressive and once they do that make for the very very best founders. Aaron: If you're just joining us I'm Aaron Harris and you're listening to Startup School Radio. I'm speaking with my partner from Y Combinator Geoff Ralston and we're talking about sort of these underlying concepts and these underlying abilities and learn skills that actually make people what you call founders and start companies and something that Geoff mentioned just a minute ago is kind of sticking in my head which is this idea around education where there are certain learned skills, I think, that you can get and the one you just mentioned was this concept of learning to sell, learning to sell your software. But I know education is something that sort of sits on your mind in a lot of different ways and that's why I started Imagine K12. The purpose of which is kind of find great startups to help change the way K-12 education actually works. Where did that part of your passion come from? Geoff: Well, I've been interested in education as, this is a particularly awkward way to put it but it's sort of a major leverage point in how you can impact people's lives. My dad was a lifelong educator. He's retired now but he was a professor of mathematics and computer science forever and I used to talk to him about math education in the United States which he was very active and I'm very interested in, and what struck me after going through, you know, I went to a public high school in Buffalo, New York and I went to a very good private university as well. But it always struck me as "Wow, education is awesome here in the United States. Good teachers and everyone goes to class every day and it's really great," and the discussions we would have about math education were about how awful it was in the United States and... Aaron: Right, and you were kind of in a local I mean socket when it was great. Geoff: Yeah. When you're fortunate enough to have a great educational experience that's kind of your world. It sort of raised my consciousness that education for the rest of the world wasn't exactly the way I'd experienced it. And so I thought more and more about that and I left Yahoo in the mid 2006 and I really wanted to give back in a way to a world in which I had been very fortunate and I said to myself, how can I be most impactful. How can I positively change the course of as many people's lives as possible? And education was an obvious answer and it was also obvious to me as I learned a lot more about education in intervening years that there are some major issues with not just how educated people in United States were hit we have this pernicious achievement gap but also a decline in standards that has had allowed the United States from an educational perspective to the extent that we can measure that to fall behind most of our, shall we say competitors, in the first world, in the industrialized world. But even worse than that that here we were in the 21st century where there was over a billion children and only a staggeringly small percentage of those children are educated to the point where they can achieve their potential. Aaron: Right, this kind of for me unites two different things of what you said, so here's this big problem and then here's your experience and looking at technology, looking at startups and I think one way you could have approached this and said, "I'm going to start a foundation. And I'm going to be a foundation. I'm going to fund some number of programs." But you can't merge these two ideas. Geoff: Right. Well there was one more idea that I should add in which is that I had been involved in the very early days of bringing the Internet with the World Wide Web to the to the entire world. And if you think about it but that was really about was bringing knowledge information and the power of knowledge information in real time to everyone and not just knowledge and information but all knowledge, all information. Essentially everything that humans have ever or will ever think is available to anyone at any time and yet it had almost no effect on how we educate our kids. Aaron: It's kind of funny when we think about the Internet today we almost don't think about it, right? It's kind of a background buzz in our lives that a lot of things sit on, and I think the way most people interact with it, you know you interact with Twitter, you interact with one website or another website, I think we often lose sight of the power of the underlying thing of what we're talking about and when you were first building products on the Internet, it looks very different. It hit a very different group of people and the promise which is yet to be realized I think in a lot of ways is this idea of and I remember news reports and I was pretty young to about the World Wide Web, the information superhighway. When was the last time you heard the term information superhighway? And this concept of delivering knowledge to people and access to people is I think still foundational but it's not something we consciously think of very much anymore. Geoff: No that's really true and I think that the key point there is that children who grow up in this world. For them, they're sometimes called digital natives, it's the backdrop of their lives. It's woven into every part of their lives and they do learn differently even if the school shows to ignore what's happening and I have three children and they have grown up in this world where they assume that knowledge and information is available to them. And so my belief was it is impossible that this does not have a massive impact in how we teach our children. But more so or additionally how we ought to teach our children to live in the 21st century. So all these things came together to say wow, maybe it's a good opportunity to take what I've learned with startups, with the technology and apply that to education in a way that can have a bigger impact than just trying to spend money. I did think of doing my very own targeted startup to try to create some sort of specific educational technology. And I had two partners and we sat around talking about what we should do. But in the end we decided we could have the most impact maybe because we were a little beyond our, let's be honest, best startup years. But we came to the conclusion that we could do a startup that's leveraged our knowledge and experience with growing companies and with starting companies to help as many disruptive ideas in the space of education get out there because we firmly believed that it was new ideas that were going to help teachers in the end teach kids to be prepared for the 21st century. Aaron: Yeah. When you talk about, I hesitate to say a typical startup, but maybe a startup not focused on education. I think people have a pretty good framework for understanding whether or not it succeeds or fails. Usually boils down these for the public markets as to whether or not it produces a lot of money for people. And going back to something you were saying earlier about sort of the level of impact that a startup can have, part of how people measure that is how many people they reach and how much money they make. But with someone focused on education, I think there's a third metric and a third sort of dimension that you have to consider which is what impact does it have. How does it produce outcomes and I know it's something you're focused on. How do you think about measuring that relative to other pieces. Is that the only thing that matters or is it part of a larger story? Geoff: I think it's part of a larger story. I think that trying to measure the impact that a specific company has on educational outcomes is very difficult. But here's what we know. Just as an example, imagine K-12 companies have created tools that are used in something like half the schools in the United States today, in millions of classrooms by tens of millions of students. We actually trust teachers who have chosen to use those tools to make accurate judgments as to whether their tools are useful to kids, to help those kids achieve the education they're trying to get across to them. So we think the best proxy for outcomes wouldn't be increased scores in the next six months or year. But will be the fact that teachers themselves choose to add those tools to their arsenal that they're using to try to prepare kids. Aaron: Right. Ultimately they're the ones who see whether or not things work or fail and I think various testing regimes rise and fall, different standards rise and fall, and it's an incredibly hard thing to measure and something I thought a lot about. I worked in education for a bit. My wife thinks a lot about it as well and it's such a hard and important problem and it's these things like well if you can't measure it, how do you know, right? Geoff: Right. To a certain extent the answer that I often give there is the answer I give to anyone who has a dream and wants to start a startup is you have an intuition, a gut that you're going to change the world. And we had a magic K-12 and most of the founders of edtech startups I know have this very strong belief system that technology can help transform education into a form which is not only more effective and more useful for children growing up in today's era but it has the potential to take that billion plus children and bring them all up to a level where they can achieve their potential and actually transform the world because if you think about the effect of hundreds of millions of children not being educated in countries around the world and you compare that to what would happen if they were educated. You know... Aaron: It's certainly a goal worth chasing and... Geoff: It's the ultimate goal worth chasing. Aaron: Right, that I mean is not as effective. I mean that's how you change the world. I'm Aaron Harris and my guest has been Geoff Ralston, just ahead David Bladow stops by to talk about how he went from developing restaurants and real estate to disrupting the flower delivery space with his on demand service BloomThat. You're listening to Startup School Radio on Business Radio powered by the Wharton School SiriusXM, channel 111. Announcement: You're listening to Startup School radio powered by the Wharton School, here again is Aaron Harris. Aaron: Welcome back to Startup School Radio on Business Radio powered by the Wharton School SiriusXM Channel 111. I'm your host Aaron Harris a partner at Y Combinator. I'm happy to welcome my next guest David Bladow. David is the co-founder and CEO of BloomThat, an on demand delivery company specializing in, as they say on their website, curating awesome bouquets and delivering them faster than it's ever done before. They're a service that gets flowers wherever they need to go and I can attest they have some of the best customer service and some of the most beautiful flowers I've ever seen. David, thanks so much for being here and thank you for helping make my wife very happy on numerous occasions. David: Well, thank you Aaron for the dynamite introduction. Aaron: You know what, you build a dynamite service, you get a dynamite introduction. David: I'll remember that one. Aaron: I have bought a lot of flowers and I've bought them in person. I've ordered them online. I've ordered them over the phone and I like doing it, I like going to a flower store. But the experience of buying them from a website like F.T.D or 1-1800 Flowers or whatever is pretty crappy. And so it is clear to me why someone would want to break that which is what you're trying to do. What I got to get a better understanding of is how you ended up building this company coming from where you were to doing this. Where did this come from? David: None of my co-founders or myself are like farmers. We didn't have this association with flowers really in any way shape or form. It was more so obsession around an experience that we thought was really poor and we thought this needs to be better. We were kicking around ideas around being thoughtful where in long term relationships all three of myself and my two co-founders and flowers was a piece of a bigger idea and then I think this is something that early on I recognized. I came from the food industry and I was in Jack in the box as one of the franchise restaurants that I was developing and I was in and out. I was like, in and out is awesome. And if I could do this again I'd simplify it and just do a couple things that everyone loves really well and so when we look at flowers you like, it's not that hard to put a smile on someone's face but you really just have to obsess over the experience of it and we just thought, "Hey, faster, convenient, and a product that actually looks like something you want to send and the recipient sees it, gets it, and hopefully that activation as well." Aaron: That seems pretty simple, right? But I think a lot of people would say, "Oh, that was the goal of existing players." David: Right. Aaron: So you went out there and you said, "Okay, I want to do this thing." But again, why specifically flowers when there are so many players? There's florists everywhere. It's pretty easy theoretically to get flowers. David: Yeah, I mean for us it was about... We just thought there was a massive gap in the experience. Part of it is speed and convenience. You either go local and you have to dial around who knows what you're going to get, the cost of delivery is fairly expensive and then, in addition, you don't know when you can actually get it delivered. Maybe they can deliver it tomorrow, maybe it's 3 p.m., maybe it's 6 p.m. and the control and trust aspect isn't there. Go with one of the incumbents, the big one 1-1800 flower types. There's no trust in what you're actually sending is going to be worth receiving and we just looked at that and said this is an experience that should be amazing but it's been sterilized through, I think really what we identified was the disconnect between the sender and the recipient. And so we thought, let's erase that and let's simplify it and make it fun to send gifts and flowers again. Aaron: Okay. I mean that makes a fair amount of sense to me. Were there other models out there that you looked at and said, "These guys do this piece of delivery or this piece of making people happy right, that is the model that we want to use." David: In an out. Aaron: It really was that. I know you said it before. David: Conceptually what allows us to eventually make this happen at a high level consistency it's not a super wide product range. If we're going to do this consistently at a high volume, it's got to be a narrow product range. So for us it's like, let's cut away, let's start with 50 products, let's cut it down to 5 that we all feel like this is an awesome product and we're only going to present you awesome products, and then let's just execute at a really high volume and so that's kind of, for us that is our secret sauce versus 1-1800 flowers it has like two hundred skews, how do you execute two hundred skews and millions of bouquets. It doesn't happen. Aaron: That's actually a really interesting thing that I think applies to a lot of what makes the difference between a good startup and a bad startup. It's this idea of actually limiting options and limiting choice which as you know kind of goes against this, it's America, we have all the choices, we want choice all the time, but in reality too much choice does a couple things. One, like you said, it makes operations incredibly difficult. It also creates sort of this analysis paralysis problem for people where I go to the F.T.D. website and it's like, I have no idea. And so you guys have how many products available in a given day? David: We have six to nine. Aaron: Six to nine and I'm guessing that means that the quality control on those is significantly higher. Do you make your own bouquets in-house or you're also using other florists? David: So we're all vertically integrated. So that is a key piece, controlling that, that piece. We started out working with local florists and it quickly became very apparent to us that that wasn't going to scale with A the consistency and then B just the amount of volume that we're cranking out is just like that our windows was like hundreds and hundreds and hundreds of bouquets going out of one small territory. That wasn't going to happen out of a small floral shop in the corner of Spear and Folsom. Aaron: Right. Yeah, and that's another thing where you often get pulled or people would often think that, "Oh, it's a bad idea to build up your own warehouse or labor force or whatever. Hey, this is the modern world. You can just outsource." Things like that but when it comes to this kind of problem and this sort of space where you actually have to put together a bouquet using very high quality control 'cuz someone delivers you dead flowers. David: No. Aaron: You don't. You ruin the experience. So that makes sense but then how did you get the word out there? This is a super competitive business and there's flower stores on every street, there is all these ads on TV. Do you just say, "We're going to put someone in every street corner or we're going to buy a lot of TV ads? How did people find out about you? David: For us, we hit the pavement. So it was all guerrilla get the product into people's hands and you know it's kind of like that Y.C. mantra, do things that don't scale very early on. We said, okay, who's our target customer? How do we get in front of them and we did this thing where it was basically like standing in the picture with brands that were larger than us. So we do things with Uber and we were on the receiving side of like that was not a great deal for us but we were associating ourselves with companies like Uber, like Nike or just like cooler brands than us or bigger brands than us. We got elevated every time we did that so we try to partner with bigger brands, cooler brands that are within our target demographic and then we just went out and like handed out flowers. There are probably pictures, there are pictures very early on like myself just walking around San Francisco with a flower drama around my neck and I'm just like, "Hey, have you heard of our startup? Have you heard of our startup? Aaron: Who doesn't love getting hit free flowers? David: Oh it's like the best door opener in the world because no one rejects a free flower. It makes people's days. Aaron: Well it's kind of this interesting twist on something you hate to see because you're out on a date or you're out for the night and a guy comes over a girl and tries to sell you roses for like five dollars a piece, like, "Hey, how come you don't buy? What? You don't like this person? David: You don't love her? It's my first day, bro. Aaron: Yeah, it's like well if you don't buy flowers now. So you took this new flip it on its head like no, here is a completely free flower. Look we're already improving what you're used to. David: You know what's funny about that, is I was relatively bad at giving away free flowers when I first started. There is a strategy or there is I would say a swag that you kind of have to take into handing out free stuff, because people are so, wow, not in this world. This is not the world we live in where people just give away free things. What's the string attached and so you have to go in with like 110% confidence, be like how's your day going? Here's a free flower. This is absolutely on the house. Just check out our startup. I hope you have a fantastic day. And it's more about just bestowing like an improvement to someone's day. Aaron: But I mean I guess if you do that a little wrong someone's going to kind of take the flower with two fingers and hold it away from them, convinced there's anthrax on it or something like that. David: It's all about the smile. Aaron: Yeah, You got a great smile, you can't see that on the radio but I promise. David: I got a face for radio, you've got to be honest. Aaron: You know I didn't want to say it but if you do it that's fine. So you're walking around the streets of San Francisco and basically handing out flowers to people and then they come to the site? When do people actually want to buy flowers? When does that actually happen? Is that so predictable? David: Typically I guess the industry usually is made up of like two cents a year, Valentine's Day and Mother's Day. Valentine's Day and an anniversary. Aaron: That's when most people send flowers. That makes sense. David: That is incredibly seasonal and so what we're doing through who we are selling to, how we are selling, what we're selling. We're flattening it out. And so generally we tell, "Hey, it starts at $35, it's delivered in 90 minutes. You can make someone's day amazing and it's so easy like there's no downside. Just try once." And once we get them in, it flips a switch. You start looking for these opportunities that you can use sort of BloomThat as a tool to make someone's day better. Just like send a message and it's a vehicle for a message. And so it has sort of morphed itself into words not about the flowers. Flowers are an important piece but it really is about people sending a representation of themselves and there's so many more opportunities to send that message once that switch is flipped. Aaron: Interesting. So it's actually not necessarily or maybe not primarily about people in relationships sending them to one another or sending them to family. David: I've got notes that have been basically like a neighbor sending to the next door neighbor saying like I'm really sorry that my dog pooped on your lawn. There are notes that are... Aaron: Do you have a custom note for that now? Like hey, push this. David: Oh yeah it's a macro now. It's like so frequent. But there are notes that I'm just blown away that people are like we're giving them the tool and they're using it in ways like you would never imagine. And so I think that is the coolest thing actually about sort of where we are today is that our customers are sort of driving this behavior and we're just the tool that allows them to express themselves. Aaron: So that idea of listening to customers, doing what your customers want is kind of a core concept of what we talk about at Y.C., what changes has that driven in the business? David: It's driven. I think that one of our superpowers, like we have kryptonite and superpowers, but as a company one of our superpowers has been being super tied into what the customers want from the very beginning. In terms of what changes have been made. I think it's really what things we haven't added into the mix as a result of keeping the focus on what the customers actually want. I would say a heightened focus on customer service and having empathy. We're not going to get it right 100% of the time. We try our best but understanding that every flower that we send is really important to the person that sent it. And so maybe investing more resources in making it right every time. I guess investing in the relationship rather than the transaction has been a thing that our customers have told us through their behavior that they like and if we do that, they're going to be forgiving for the few and far between that we screw up. Aaron: If you're just joining us, I'm Aaron Harris and you're listening to Startup School Radio. I'm speaking with BloomThat's David Bladow about flower delivery of all things and how it's they have turned it from something that maybe you just did twice a year to someone you're in a relationship with, to something that's actually a more natural and regular part of daily life, just a kind of, I think you guys say, delivering happiness. You deliver happiness to someone which is a crazy concept. So what's the most surprising reason... You gave the dog pooping on someone's lawn. Is there anything else that sticks out in your mind as, I cannot believe someone delivered flowers for this reason or on the other side of things like, holy cow, this is something that everyone's living flowers for this thing we didn't expect and there's a lot of them. We need to focus on that and build towards it. David: Yeah. There are so many notes. It is fantastic that we get context for why people are sending. Aaron: Oh, 'cuz you see the notes on the why we send it. David: We have context and so that is like... Aaron: That's so smart. David: It's cool. There have been like a couple words like someone sent a rap lyric to somebody else and it's like, I don't want to curse on air. But there definitely was curse words in that note but it was like quoting Drake and sends it via like BloomThat and it was like, why and how. But that moment clicked for me and be like this is something different. It is kind of what's happening with SnapChat or like people are using... Aaron: Did you follow-up with that customer to find out what was going on? David: I didn't. I didn't but I think the epiphany here was that this is a vehicle for a message and the message is adapting for this different generation of people that wouldn't normally send flowers and I think that that is the coolest piece and the biggest opportunity for us, is that the incumbents are like my mom would use 1-1800 flowers but 25 year olds, young working professional. She's not using 1-1800 Flowers and she may not be sending flowers at all. But now they're using it for sending messages that you're like, that's a rap lyric, why did you send that attached to flowers and just sort of flipping that switch that this is the medium for communication, just opens it up for us. Aaron: It's one of these things that I think comes as an outgrowth of something that Geoff and I had been talking about at the top of the hour which is that the Internet and sort of the power of the Internet is kind of this hum underneath everything. It's something we don't even think about anymore, just connective tissue and when you talk about this idea of being able to deliver flowers or happiness in ways that people didn't think of before, it's something that, "Hey, I have my phone and I want to send something to someone else. So, oh, wow, I can send flowers." Like push a button, flowers show up. That's kind of a superpower. David: Yeah, absolutely. And eventually, at its roots, it's empowering thoughtfulness. And we are the thoughtfulness button. And so we're flowers right now but we also layer in very specific promotions and there are experiments but they're also fun things to get people engaged with sending things to people frequently. And so for us it is like flowers is the target but it's not the market. It is a piece of what we think is a bigger human behavior that we're enabling. We want to be that button when you think of, "Oh, I should send something to someone." You should Bloom That. We want to become a verb basically. Aaron: You know it's funny. Flowers are something that I think people don't think about that much and there's an episode of Planet Money recently talking about flowers and roses specifically and how the entire rose business is basically built around Valentine's Day and roses are a Valentine's Day thing since they started cultivating roses in South America and can ship them up and they only bloom for like a certain number of days and I think when I initially thought about this business, it was all around that piece of it, the inefficiencies in producing and the cost inefficiency there. And I think what's one of the things that I find super interesting about what you guys are doing is that's part of it. The idea that there's probably efficiencies to be gained in the supply chain which is why the vertically integrated flower delivery thing makes sense. But it's this other side of it that you're talking about which is enabling new behaviors that takes it from maybe just this logistical thing into something that's more. David: Absolutely. That's a huge challenge for the industry as a whole. I speak with a lot of people that have been in this industry for generations, their parents, their parents parents, you know, growing flowers and I see the existing infrastructure support the way that the sort of natural peaks and valleys of this industry and it's amazing. You'll see someone will carry 100,000 square foot cold storage warehouse 12 months of the year to utilize it for 2 weeks. Aaron: Just around Valentine's Day and Mother's Day. David: Just around Valentine's Day and Mother's Day. Aaron: Holy cow, that is a large facility. David: Oh and we're talking about there are a lot of those facilities and they really are there simply for this maximum volume in Valentine's and Mother's Day and then it's like, what do we do with this. We're carrying it and there's a part of the reason why like Mother's Day and Valentine's Day go way up in price. They have to make their margins. But this is massive bottleneck that occurs. So for us, our position is this shouldn't be Mother's Day and Valentine's Day. We're going to capture that but we're going to flatten it out. Aaron: So when you think about making a vertical supply chain or a vertical product, do you have to think about buying your own cold storage facilities in warehouses and all these things? David: Yeah, yeah. You do but for us we're looking at existing infrastructure that is underutilized and how can piggyback on that so that we're not having to make the capital investments to put those in. So, like I said, there are people with massive warehouses that are underutilized. Aaron: That aren't being used for anything, any money you bring them. That makes a ton of sense. So then let's play that out. How much of this sort of infrastructure do you have to build for yourself? You said, okay, you put your own flowers together, a crew working on that, and you have to have that everywhere you go, and you also need your own delivery teams or can you sit on top of existing delivery platforms to get things out? David: It's something that we have debated and we've gone through sort of cycles of thought so that what our position is on the matter and it goes into again focus as a startup. What are our resources? What are we really good at and what are we probably not going to win at? And so for us delivery is one of the things that we do some but it is not our core competency and so as a result instead of taking 20% of my time devoting to developing our delivery app and management of a delivery program, we view like, "Hey, someone's going to get there. We have to figure out the rest." Aaron: Yeah. So as that happens, some companies when they want to expand into another market they don't really have to do anything like a software product. You don't have to do anything to move into a new product. You have to do a lot. David: Yeah. Aaron: Any time you move into a new market, you basically have to build out flower infrastructure and all these things. How do you decide what market to go after and what happens once you've made that decision. David: Sure. So we try to take the sort of lean approach. We always do. Aaron: Could you explain that? David: I'll get into that. We basically have a website that gathers email addresses like what market would you send to, we gather zip codes where you're trying to send. And so we have a pretty good idea of sort of leading indicators of where is the interest currently and then secondarily, for us, where is business done? We're trying to create this wormhole between city to city, 90 minutes flowers bam, L.A. Aaron: 'Cuz it's not just about sending it to someone who's nearby me. It's actually, I'm in San Francisco, I want to send flowers to someone in New York rather than having to A find a local flower store or B go on existing crummy websites, push a button. David: Right, exactly. Aaron: Okay. David: So that is what we're trying to enable in the behavior between the major I guess the affairs of where business is done is something that we have our eye on. So if you look at the major metros, we want New York, we want Chicago, we want L.A, we want San Francisco so it's fairly obvious where to go next with that. And then in terms of the approach that we take for supplying just getting supply to the market, we launched this thing off of my back patio. That's how this went. And so thinking about new market launches, our team knows that we have to go in lean and so team of like three or four people, cranking out a couple of hundred bouquet and just like hop on existing infrastructure and do it as lean as possible. Aaron: Right. You still going to walk around a new market handing flowers out to people? David: There is some of that that is happening, absolutely. And then there's a little bit more sophistication around the SEO and SEM side of things that... Aaron: So people go on Google and search, you'll show up in the organic results for flower delivery or something like that. David: Right, absolutely. Aaron: Got it. What is the bigger piece of your demand? Is it coming from people searching on Google or is it coming direct or social channels? David: Yes. So actually we have a huge amount that comes direct which for us I point to a lot of the general awareness that we sort of drive in San Francisco. We have a really strong Instagram following and just like socially, our social presence is pretty strong, so that piece of discovery and then a ton of SEO. So we rank really high in San Francisco as an example, we're like number one or number two organically. And so... Aaron: I think a lot of people don't really understand what it means to rank on Google and how important it is. That's not something that you can buy. How do you get that to happen? How do you get to the point where people could just hop on Google and find you? David: Well, we invested a little bit in sort of the infrastructure of our site to make sure that it was optimized for the right keywords that we were creating sort of a network of landing pages that sort of funnel traffic in the right way, and then it definitely helps that over time we've got a lot of credible traffic pointing right to BloomThat. We got TechCrunch pointing to it and we got CNN pointing to it and that definitely gives some credibility and it helps us move up the rankings and in addition, who are we, who are we going against and it's generally like a local florist website which isn't necessarily as sophisticated, and so on a market by market basis, it's not too bad to get up there pretty quickly. Aaron: I think fundamentally the thing that this comes down to is making something that people actually want and love and that they want to tell people about because that's how it spreads. So just one last thing in just unfortunately 30 seconds, is all we got for it. Next, what happens? what's the biggest thing on your mind? David: What's the biggest thing? Well, for me it is expanding responsibly and by that I mean making sure that we stay disciplined with how expand, doing things that make sense, but expanding at a speed that allows us to grow at the expectation of what our investors expect, and morphing this thing into a business. Aaron: David, thank you so much for joining me. I'm looking forward to ordering a lot more flowers off BloomThat and delivering happiness mostly to my wife. To find out more about BloomThat, check out www.bloomthat.com and follow them on Twitter and Instagram @BloomThat. Startup School Radio airs live every Wednesday at 1 p.m. Eastern, 10 a.m. Pacific, right here on Business Radio Channel 111. If you have questions about something you heard on today's show, e-mail us at businessradio@siriusxm.com or follow me @Harris. Thank you for joining us today and a special thank you to senior producer Lisa Mantineo and associate producer and engineer Dion Simpkins. Be sure to tune in again next week when I'll be joined by co-founder of Science Exchange, Elizabeth Iorns. I'm Aaron Harris and you've been listening to Startup School Radio on Business Radio powered by the Wharton School SiriusXM Channel 111.