Recorded live at our Female Founders Conference in New York, Mariya Nurislamova shares the story of building Scentbird.

If you’d like to learn more about the Female Founders Conference, head over to femalefoundersconference.org

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Transcript

Really bright and sunny today, I cannot see the slides, but I guess that’s okay. Hi everyone. My name is Mariya. For the past four and a half years, I’ve been building a company called Scentbird. Scentbird is a fragrance subscription service and we help people date fragrances before marrying them. I’m really happy to be here today because Scentbird you know, is probably one of the hardest things that I had to do in my life. But it’s also one of the most rewarding and the YC community has been instrumental in helping me get to this point. So, I’m really happy to be here today. Now we would like to take you, I guess, behind the scenes of how we built the company and some of the early mistakes we’ve made and God knows there were plenty. So chapter one of our story, it’s called the year of misery.

I kid you not. That’s how I refer to that time. It was the year where I think we read every book under the sun about building an MVP yet we didn’t talk to a single customer. I’m a huge fragrance junkie. So let me set the story straight. The company was built out of my passion for the category, right. I love fragrances. I hate shopping for them. Now, when you walk into a store like a thousand fragrances in the air. The lady is pressing something in your face, the pushy sales assistant. I hated that. The coffee beans don’t work. Long story short is, I had a dream. And that dream was, what if I could discover my next fragrance from the comfort of my couch. The one thing that was missing was a really good fragrance recommender or scent recommendation system. So, my co-founders and I set out to build one. It took us about… So the first landing page was very quick and I was the original person who recommended fragrances. I doubt I was really good at that. Then we brought technology on board and I think we built like six different ways for you to discover fragrances online. This one feature, we call it smart search, but basically, you can say, okay, like, I want a fragrance for a workout that smells like oranges and we basically got your back.

The problem was, we all decided as founders to quit our jobs and this was the business model. Wait a second, you can’t really monetize the recommender, can you? Because people are not going to pay you. I think it took us about six months to realize again, it really monetizes the recommendation platform. And then we had to figure out what is it that we can build that we can actually charge people money for. And so, the first idea was, well, why don’t we build a discovery kit. Scent discovery kit. So, it was basically, it looked like this, if you can see. Basically, six small little samples, people would pay us $9 for that. And the idea was that if they liked a scent, they would purchase a full-size bottle from us. Long story short, they purchased the kit, they never really purchased the bottle. So while all we made was $9 off of like a 100 people. Not really a billion dollar business. So, we went back to the drawing board and mind you, we still haven’t talked to one single customer about what is it that they really truly wanted. So we’re all still living in our heads. So, and this wasn’t a fun time for me because we’re operating on a shoestring budget. I basically don’t have a job. My savings are dwindling down.

So, I found this really fun hack. You know, when you go to Sephora, they gave you three samples for free. You know, when you go twice that’s six samples, so you can sell them for $9. It’s an amazing business model or not. So, I feel like I literally went to all 12 Sephoras in Manhattan a few times a day. I asked my friends to do that. Not fun. They knew… I felt like sales clerks literally recognized my face. Like, what, is she drinking the fragrances? I don’t know. Long story short, we moved onto the new business model. So, we were like, okay, well maybe the problem with our first business model is that it takes an additional step for people to buy the full-size bottle. So why don’t we ship them the full-size bottles right away? So, we came up with this try-before-you-buy model for fragrances. Three full-size bottles of fragrances and little samples attached to them.

We would just ship to people for free. Obviously, we would recommend them the scents based on our algorithm and data and they had five days to try the fragrances and ship the full bottles back if they didn’t want any of them. So, that was a really fun experience because we saw a 30% fraud rate on that business model. So, we would ship a box and more often than not it would not come back and we would then not be able to charge somebody’s card. So, at the time, we were able to get into an accelerator program out here in New York called ERA, and they give us $40,000. So basically, that’s all the money that we had to play with. And I think we wasted about $20,000, which is half on trying to make this work and got very much in the red. Got very upset.

I think, I mean, saying that this was blood, sweat and tears is really not saying much. So, I think we came to a point where…let me skip that. We came to a point where I think we really wanted to give up, and that’s where we come to chapter two, the glimmer of hope. So you know, when the going gets really hard, you call this one person who you hope is going to support you. So for me, that person was Michael Seibel. Michael is currently now the CEO of the accelerator program at YC. At the time he was just a successful entrepreneur, sold his company to Autodesk. I wanted to call Michael to cry on his shoulder basically. I was like, “Michael, you know, fragrances really suck. I don’t think we can make them work. I think we’re gonna build the makeup company.” And he goes like, “Wait, what? Mariya, you spend the last year failing at fragrances. You’re telling me that you’re gonna go and build a makeup startup and spend another year failing at makeup? Because like, it makes no sense. No, no. If I were to put my money into someone or back a team that I think has the best potential to make fragrances work, it would be Scentbird.”

Something shifted for me. And I think sometimes we all need that one mentor to kind of, like, hold their hand through something when the going gets really tough. Michael also shifted my thinking a little bit because he said, “Mariya, what if people are not looking for a signature fragrance? What if they would like to change fragrances like they change clothing?” I was like, “Huh. Interesting idea.” I hung up the phone two hours later we had the winning business model. And, it was a fragrance rental, basically. So we said, okay, full bottles are not really working for us. We keep just losing money every time we try to sell full fragrance bottles of perfume. So, we decided that we are gonna “rent” or ship people a 30-day supply of a designer fragrance of their choice for under $15.

So basically, instead of committing to one full bottle, you can kind of, get it in increments and build your collection. And we decided to make it a subscription. So, we basically turned off all the fancy features on our site. It was a one-pager, really ugly looking with this ugly picture. That’s why I have it up on the slide. And basically, it worked like magic. People paid us money first, you know. We shipped them products later. Amazing. We got…you cannot really see the picture, but we got 105 orders in the span of a week. And for us that was like, I’ve never felt this successful in my life. We’re finally making it, Oh my God. Now, we had our nine to five as startup founders. If you can tell from the picture, that’s me on the left. Two of my co-founders. After hours, we would spritz perfumes. Like, literally trying to get them from a big bottle, into our little guy until 2 a.m every day. That’s how we fulfilled our first orders. These are the little guys all packed up and ready to go. All 105 of them, I counted. I took them to the post office myself.

And then we get to the real fun part, the darkest hour…and that’s chapter three. The darkest hour is just before dawn. As our business was scaling, scaling 100 customers is not really scaling. It’s really early on. And you know, we went through an experience of pitching a demo day at the first accelerator here in New York. Nobody really wanted to give us money. And I was looking at our bank account, I think out of the $40,000 that the first accelerator gave us, we had about $5,000. And e-commerce is a business that requires a lot of working capital. It requires a lot of cash. So, I realized I would have to raise. And for the longest time, it was like the biggest disconnect because we were looking at this. And this is the rendition of like, our first version of a Scentbird dashboard. You can hardly tell, but they’re like literally three KPIs on here. And the most important one is how many orders a day we’re getting. So we’re getting 10 orders a day. For me it’s huge. It’s like I’m making it, but the rest of the world does not really catch up. You know, caught up to that. They’re looking at my product. They’re like, “Hey, it’s kind of, ugly. Would anybody want this?” You know, and a lot of investors are like, you know what, my wife doesn’t use fragrance, I don’t think you’ll ever be successful. I’m like, “okay.”

So, I go ahead and I pitch people. I pitched, I didn’t count maybe 40 people, everybody told me no, but the nos never really upset me. What upset me were the crappy yeses. And I’ll tell you what those are. So I was pitching this one investor couple. There were angels and I told them, hey, I’m raising $250,000 to get this company off the ground, look at scaling it, clearly 500 orders. Yeah. And they basically took me for a spin. It was like eight meetings, send us this due diligence, send us that. Like, build a financial model for us. So, I was legitimately thinking they were going to give me $250,000 after all of this work. And then we get to the “close” to that last meeting when I asked them for the check and they’re like, “Okay, Mariya, we’re gonna give you $25,000.”

And they promised me a valuation that was three times lower than the lowest that I could accept at the time. And they said that, they would also want 5% advisory shares in my company because they didn’t think I was qualified to run this business. I walked out of that meeting and walked into another meeting and it was probably even worse, although, I don’t know, it depends. But it was a real estate investor. And he said, “Mariya, Scentbird is awesome. I love your idea. How about you giving me a 10% of your company for free office space for a year for you and your three co-founders? I walked out of that meeting. I told both of them no, obviously, although at the time I was pretty close to actually saying yes to some of those deals. And then, I went back to the only person who I thought would listen.

His name is John. He’s an angel investor, he does invest in e-commerce, but for me, he was a mentor and I was always afraid to ask him for money. I would always ask him for advice. I’m like, “John, how do you do this? How’d you do that?” And that was also the time when we applied for YC. By the way, it was the second time that we applied for YC. The first time we got rejected. It was fine. It was the wrong business model anyway. I would have rejected myself many times over. And basically, I came to John and I said, “John, Scentbird is raising $100k, I want you to put all of it and I’m gonna give you a good deal and the reason you should do it is A, we’re growing like crazy, B, I’m gonna get into Y Combinator in three weeks and our valuation is gonna triple. So now is the perfect timing for you to invest.

So John wrote us a check for $100,000 and then that brings me to our next chapter Y Combinator. Well, we applied to Y Combinator for the second time and we didn’t get in. So I had to call John back and say, “John, so now the company’s valuation is now 3X but by the way, and we have another 500 customers so you should be really happy because we’re basically a rocket ship. And then, I had to go back to the drawing board and keep raising money basically because we needed more working capital to build inventory. And one thing though, I think I discovered with that experience with John is the rule of scarcity. Because all I said was, hey, I have $100K and I want you to fill that whole $100K. There’s no room for anybody left in that round.

So what I ended up doing afterward, is every investor pitch that I had, I would come in and say, “Hey, so Scentbird’s round is $150,000. I already have 100 in my bank. So, all I have left in the round is $50K, do you want to be the last $50K in?” So I pitched six people in like, funds and I think I got five yeses out of that. So that kind of really gets you over that like 150 real quick. And so, I think that the big lesson learned there is, you know, if you’re going for like a million, say you’re really going for one-quarter of that and then just keep oversubscribing, eventually you’ll get to that million. But, you know, again, a lot of my mentors, a lot of my friends are, you know, Y Combinator alums and although the business was growing, I still didn’t feel about the DNA of the company was there and we truly had the product market fit on some level.

And so, a lot of my friends were like, “Mariya, are you applying to YC? ” And I’m like, “What, a third time, to get rejected a third time?” I did apply to YC and long story short, we got in. Hence they invited me to speak here because, you know, if I didn’t get in for a third time, I probably wouldn’t make it to this stage. But basically, it was the best experience of our life. We moved out to California and I really think it changed the DNA of our company. So hyper-focused on growth, not like yearly growth and quarterly growth. Week over week over week over week. And when you get to go through that experience, you always feel like in your batch, every company is growing faster than you and everybody’s smarter than you. But by the way, you walk out with like, the best peers and the best friends out of this.

And the one thing that YC also taught us is to have true user interviews to really try to understand what people think. And then this one funny one that stuck with me, it was probably one of the first ones. Somewhere in the Palo Alto area. We met with this lady in a coffee shop. She was a user of the product. And we’re like, “Hey, we wanted to meet with you, see what you think about our product.” She goes like, “Are you dying? Is Scentbird going out of business? Is that what you’re talking to me? I bet you’re dying. Don’t die, please don’t die. I’m gonna buy 10 subscriptions.” I’m like, “What?” She clearly cared. That was probably the first time when it truly realized we might just make it. Because when people are willing to just pay your 10x, just like don’t die, please you know, you kind of, know that you’re building something that people want.

And now, chapter five, life after YC. You know, for most companies that kind of, like, end up making it, the bigger chunk of their life would be post-YC, not prior. I kind of wanted to leave you with a couple of last thoughts. Some of the things that, you know, I wish I knew or I just need to remind myself. So, the first one is, surround yourself with 10x people. And what I mean by 10x, it’s not like 10 times more people. So there is this basically, you know, concepts like in more traditional industries, somebody who is really top of their game is just about maybe two times better than your average person. In startups, because it’s like, really out of the box thinking, really creative, top people, the crème de la crème, like, the smartest people are 10 times better than your average person. And I wish I knew that when I started hiring my team because I would always go for the cheapest person. Like, you know, “You’re cheap and you’re kind of, hard working. Welcome to Scentbird.” You know.

And I was like, well, I could have hired probably three times less people, just hired the 10x people and we would have probably gone further ahead. So that’s the one. Two, and it’s actually has been said before here today, have an audacious dream. And not just have an audacious dream, communicate it. Kind of, like, come out. Tell the world that it is your dream because when you do, your helpable, right, so, and you know, the world actually can get onboard with you. I think as women we do tend to be very shy and that sentiment has been shared here today. You know, pronouncing the billion word is really hard. But I think we have to. I mean I’ve heard pitches from men who were like, we’re going to be 50% of this industry, like in three years. And I’m like, yeah, you’re really bombed. But you know, as women we kind of, prefer to get there first and then say that we really wanted to hit that target. I think we have to start reversing our thinking and first kind of, like, setting that audacious goal, communicating it to the team, to the partners, to everyone. And then hitting it.

Then last but not least, which is also a big lesson learned for me, don’t take advice from people that don’t have what you want. I don’t know how many of you are building your companies. I certainly, when I got started I felt everybody wanted to give me advice from my mom and I do welcome her advice, to everybody else, you know, friends and family and everybody. And one of the conversations really stuck with me. So, it was my successful friend. She has built a business like a hedge fund, very rich. And so I told her, “Hey, you know, I kind of, want to build this tech startup in the fragrance world. And she goes, like, “Have you ever worked for a fragrance company? Do you even know what, like, you know. I’m like, “No, I have not worked for a fragrance company, but I think I might just make it.

Basically, she was very discouraging and I’m really happy I didn’t listen because in that moment I was this close to going like, you know, maybe I should apply to L’Oreal and like spend my next 10 years working for like $60,000 a year or something and being really miserable at my desk. I’m really happy I didn’t. So in other words, only take advice from people who have what you want in life. Just you know, to like, wrap this up, Scentbird has come a really long way. We’re now a team of about 100 people. We’re shipping fragrances to about 250,000 people in the United States. We are eventually gonna expand international. We’ve raised about 25 million people, but $25 million not people, luckily. Yeah, and I think that a lot of what we accomplished is definitely thanks to YC. So if you guys are running companies and you haven’t applied yet, I strongly encourage you to do so. It’ll change your life. Thank you so much for your attention.