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Farbod Shoraka: Company is on track to hit a $10M gross revenue run-rate by yearend
One year after raising its seed round, BloomNation has closed its Series A for $5.5 million, led by Ronny Conway's investment firm, with participation from early investors, such as Andreessen Horowitz, Spark Capital and Chicago Ventures.
BloomNation, based in Santa Monica, Ca., is a floral marketplace, where consumers can find flowers from thousands of artisanal florists across the country. Today, BloomNation has 3,000 florists, up from 2,000 last year, this time, when we wrote about its seed round.
"Most of the Series A is going to hiring more engineers, and building the platform," said Farbod Shoraka, co-founder and CEO of BloomNation, "...and launching a weddings and events section." The company also plans to step it up on marketing, with potential TV ads, and traditional online marketing efforts, such as SEO (search engine marketing).
Its recent reviews of florists should help this as well, said Shoraka, since reviews are great content that show up in Google searches.
While BloomNation is doing well for a young startup, it does have its marketing challenges facing incumbents, such as publicly-traded 1800Flowers, which is generating roughly $800 million in sales a year, and Telefora. But based on 1800Flowers price-to-sales multiple, at roughly less than, to one times sales, there clearly could be room for improvement in this category. Companies get valued on future growth. In its case, 1800Flowers's multiple reflects a company that isn't growing fast enough or doesn't have enough innovation in the pipeline.
Enter BloomNation. Its big disruption is that it takes a smaller fee (10%) than the larger florists (roughly 50%) and it connects local florists with consumers, unlike 1800Flowers, which hides the florists behind its massive brand.
"In my opinion, it’s the future of commerce," said Shoraka. "As technology allows us to have more data around what is happening in real-time, we will continue to see platforms that enable the exchange of that information grow while “broker” model businesses get dismantled."
By year end, the company should be at a revenue run-rate of $10 million, said Shoraka. This is based on an average order of $85 and 120,000 orders for the full year, or roughly 2300 a week. BloomNation takes 10% of the sale, and out of that fee pays out the credit card fees of roughly 3%.
Some of those sales comes through Bitcoin via the company's integration of Coinbase, said Shoraka. Bitcoin is a software-based online payment system whose big proponent is Andreessen Horowitz. Coinbase is also invested in by Andreessen Horowitz. Asked why the site takes Bitcoin, Shoraka said that firstly Coinbase is free. So unlike the 3% in credit card fees BloomNation has to pay, for now, it pays zero.
Additionally, by using Coinbase, the company was able to tap into a new group of buyers embracing this new currency. "It allows us to tap into this new user base," said Shoraka. "We also saw a ton of usage of people using this currency and we're happy to support it."
But in order to get the the flywheel to accelerate, Shoraka knows his job is to drive more sales per florist and exapnd its army of florists. To that end, BloomNation has its own payment gateway to help power the backend of many florists who don't own their own websites or who don't spend much time with their online presence.
There are about 20,000 bricks-and-mortar florists, he said. But there are about 50,000 florists who handle events and weddings who don't have shops. BloomNation hopes these one-person or two-person florists operations will start using BloomNation's backend to power all their transactions, and attract new customers. Some two-thirds of the 3,000 florists in the marketplace opt to post an item or two on the platform. But roughly a third of are fully integrated with BloomNation, said Shoraka. That means BloomNation handles all transactions.By being fully integrated with the BloomNation platform, some florists have seen significant improvement, he said. One florist saw a 200% sales pop from the year prior, Shoraka said.
Getting the flywheel going
While marketplaces can be huge, getting the flywheel going is the biggest challenge. So I asked Shoraka to share with me how he got his going. Here's what he said:
"It was the supply side. We had to connect with some of the top floral designers in the country. All the best ones didn’t want to work with 1800Flowers and Teleflora because they were [in effect] forcing florists to fill recipes. They're like a McDonalds for florists, by telling florists to make flowers this way. They stripped away their creativity.
"The No.1 thing we had going was we allowed the florist to be creative. They want to be creative and be artists. They could take photos of their own original work and post them. [In this respect], a national brand was willing to bring down the wall and highlight the individual florist. By purchasing from Jan from Jan’s flower shop, there was accountability and transparency."
Below is the team: (From L to R). David Daneshgar (in the white shirt), co-founder and Head of Business Development and Sales and former World Series of Poker Champion; Farbod Shoraka (in the light pink shirt), co-founder and CEO and Gregg Weisstein (in the light blue shirt), co-founder and COO.
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Known as the "Etsy for Flowers," BloomNation.com lets you shop directly with over 3,000 local artisan florists nationwide. Florists display and sell their own personal creations, bringing the local shopping experience online. Customers even receive a "BloomSnap," which is a photo of their completed arrangement before anything is hand-delivered to ensure "what you see is what you get."