Smiga: Hi, this is Brian Smiga with the Alpha Venture Podcast. I’m here with Jeff Parkinson of KEC Ventures. Hi, Jeff.
Jeff Parkinson: Hello, thanks for having me.
Smiga: Great. So, in this podcast we interview VC’s about category leading companies that they discovered and helped grow. Jeff has got a great story here today — a company called Bouqs. But, starting off, Jeff … Do you want to tell us about the mission and the mandate of KEC.
Jeff Parkinson: Sure. KEC is a thematic seed stage fund in New York City. We generally write $750,000 to $1,000,000 checks into one and a half to three million dollar seed rounds. We will be the investor of record and tend to lead those rounds. We try to work very closely with the companies to help them build up to their short term goals of becoming a series A company, and then a much longer vision of becoming a large enterprise.
Our themes and sectors are ever evolving. Out of this fund, we have been pretty heavy in retail, media and FinTech.
Smiga: Great. As for me, I’m Brian Smiga from Alpha Venture Partners. We invest, typically, in later stage companies. We partner with over 220 early stage funds like KEC to be their opportunity fund in the larger, later stage rounds, where they may not be able to participate because the rounds get too big. We’ve done that 12 times in the last four years, and we’re really loving it. We share the up side with the source VC.
So, let’s talk about Bouqs. Bouqs is a great E-commerce company. First of all, how did you discover it? Tell us about the origin story of the company and how you found it.
Jeff Parkinson: Absolutely. As a Seed fund, much of your deal flow is sourced via your collective networks; groups that invest before you – Angels and Pre-Seed funds are a great source of flow for us, so we spend a lot of time in front of those groups letting them know what we’re interested in.
The Bouqs introduction came via an LA based pre-seed fund. They had a really unique story. The flower space is tough for many reasons and investors have shied away from it, but their business model was truly different.
There has been no shortage of high profile failures, and the margins in the business have traditionally been underwhelming. You’re also starting to see consolidation amongst the legacy players. Looking at it, at the surface, it’s not necessarily the most sexy industry for Venture Capitalists to jump into.
But, there was something really different about this company. One was the founding team, which has a very unique story. One founder who grew up in the flower business in Ecuador and the other from industrial Pennsylvania that became good friends at Notre Dame. After building separate careers post college at the likes of Bain, Disney and others, they reunited a decade later to start this company. Their skill sets were complementary and it was one of the best founder/market fits that I had seen.
The other key differentiator was the business model. JP’s (founder from Ecuador) relationships in South America enabled them to build a supply chain that sources flowers directly from the farms. The margin compression in this industry stems from how many “middlemen” are taking a cut in the process of a flower going from farm to consumer. The model the Bouqs has built strips away the middlemen and in turn, both they and the farmers make significantly more money off each sale. Not to mention it’s all sustainably sourced and has a positive environmental and social impact.
In the end, this all leads to a vastly improved customer experience – fresh, sustainably sourced flowers that look better and last longer at a what you see is what you get price.
The combination of these things is what we got excited about, and why we ultimately made the investment.
Smiga: That’s great. So, this company had these complementary founders with complementary skills, and who had a deep bond. That was part of the story. Where do they inflect early in their life to be able to crush it in the flower business?
Jeff Parkinson: It’s actually a funny story there. Very early on they were able to get some really solid user adoption. But, John would probably tell you the first inflection point in this business was their participation on Shark Tank.
They went on the show and received no funding from any of the “Sharks.” Cuban has since publicly stated that the biggest mistake he’s made as a Shark was not investing in this company. In fact, later on, one of the “Sharks”, Robert Herjavec, came back and invested in the series C round.
However, just being on the show generated a ton of eyeballs and they ended up with more demand than they could ever fulfill, and went out pretty shortly after that and raised a round of financing. It’s been a pretty big rocket ship ever since that point in time.
Smiga: That’s great. I love that you were the Sharks biggest regret. The one that got away.
Jeff Parkinson: Exactly.
Smiga: Were any key people added to the team in that time frame that really made a difference?
Jeff Parkinson: Naturally as they’ve grown, they’ve added a number of senior people within the functional areas of the business. As we have all seen with startups, as a company scales, its talent needs are constantly evolving and being reevaluated. There have been many great people at each stage of the company’s lifecycle and they currently have a number of talented team members that are geared to get the business across the finish line.
The hardest transition for any founder, in my experience, is going from running a scrappy, five person organization, to having to become the CEO of a growth company. It’s imperative that the company has the right people at the right stage and we try and help out there as much as possible.
Smiga: Has the company continued to make a difference to the farmers?
Jeff Parkinson: Absolutely. The core business model remains the same and is far more profitable for the farmers than the traditional flower supply chain. The volume today is several orders of magnitude greater than it was in the early days so the farmers are getting to maximize their throughput within this profitable channel.
Furthermore, the company now does a great job of telling each farmers unique
story. This is an amazing opportunity for the farmer to appeal directly to the end consumer and humanizes the entire buying process which is great.
Smiga: As to KEC’s role, I know it was critical in being an early funder in governance, and getting the company to that series B round. What would you describe as the big value adds from KEC that you feel most good about?
Jeff Parkinson: As a fund we have significant eCommerce experience both as investors and as operators, so we bring a wealth of data and a deep network. We’ve leveraged that to help with everything from critical strategic decisions, to helping source senior talent and to introductions to investors in subsequent rounds.
However, the thing that the founders would say about us that I’m most proud of because it’s the ethos of the fund, is we’ve had their back every step of the way, whether things were going great or there were challenges that needed to be overcome.
Smiga: The women in your life have been a beneficiary too, I bet.
Jeff Parkinson: Absolutely. The best product feature ever is the “just because” flowers. So, I go in and set up my subscription at the beginning of the year to ensure my wife and mother get flowers on the important days of the year – Valentines, birthday, etc. But, I can also do the “just because” flower where on some random day during the year they receive an unexpected bouquet and I look like the thoughtful man I strive to be.
There’s a strong correlation between the number of mistakes I make with the women in my life and how many “just because” flowers I send!
Smiga: I hope everybody listening is going to go and set up a subscription. I know I am. That’s great. What’s the exit for a company like this? What’s the harvest, do you think? Not that you can talk about the ultimate exit, but what’s your expectation as an investor?
Jeff Parkinson: It’s no secret that eCommerce companies have seen multiple compression over the years. That said, the larger, legacy retailers are looking to acquire the best brands. You’ve seen that with Casper, Dollar Shave and others. Unit economics are important and the business has to be able to scale, but retailers know how to create efficiencies there, what they can’t do is build a best in class brand – they’ll pay a substantial premium to those companies that do. The Bouqs has a fantastic brand and has the unit economics to go with it. If they continue on this path, I think the exit will take care of itself.
Smiga: As an investor, you must have taken something away from this investment, a key learning that you, Jeff, personally acquired. What would you say that is?
Jeff Parkinson: The most important job of any direct to consumer business is to sell a product and experience that consumers love. Everyone focuses on acquisition cost, viral coefficients, NPS, customer retention, and other data that provides insight into how customers view the product. Clearly, these are all important metrics, but technology CANNOT be an afterthought. If your customers love you and can’t get enough of your product, you have to be able to deliver the same great experience as volume increases – often dramatically. The learning is spend the extra time and money to build the technology to scale from the beginning, your return on that investment in the long run will be enormous.
Smiga: Do you have some other emerging digitally native E-commerce companies in your holdings?
Jeff Parkinson: We do. We have five companies. The Bouqs would be the second largest in scale, only behind TechStyle, which has the JustFab and Fabletics brands.
Rocksbox, a jewelry company, is getting pretty large as well. The other two are a little earlier.
Smiga: So, it becomes a theme and you guys get deeper and deeper expertise and then you probably attract the best deals. I hope you’ll keep us in mind when those companies raise their series C and D rounds. Really nice story. I think we’ll leave it there.
And just in closing, what level of subscription or what’s the best product on The Bouqs for our listeners?
Jeff Parkinson: The “Let Us Make it Great” option is awesome, you don’t have to worry about picking the flowers, arrangement, etc they just send your recipient an amazing bouquet.
Smiga: All right, so there we go. Go to The Bouqs, order “Let Us Make it Great”, and get out of the dog house, or celebrate the holidays.
Jeff Parkinson: Exactly.
Smiga: Jeff, it was great having you today. And thanks so much for your time.
Jeff Parkinson: Thank you Brian. I enjoyed it.