March 07, 2024

When you think of Austin unicorns, it’s natural to think of tech startups. This is, after all, the home of companies like WP Engine, Bumble, and Indeed.

But one of our most inspiring local brands is the jewelry company, Kendra Scott, which started in the founder’s spare bedroom, was pedaled door-to-door at downtown boutiques, bootstrapped to seven figures before ever taking investment, and today, is valued at well over $1 billion.

It’s an amazing story, and today we’re gonna look at…

Let’s dive in…

1. Early Days and Her First Business

Kendra Scott, LLC is actually Kendra’s third business. The first was a hat store in Austin that she opened at 19 after moving to Texas to help support her mother and stepfather as he battled aggressive brain cancer.

It was called The Hat Box, and the short version is that it unfortunately didn’t work out. But she kept the doors open for five years – which is impressive for anyone – and if you look closely, you’ll see the fingerprints of her future business, even back then.

For example:

Despite all this, the business struggled to gain a foothold.

Closing was painful. She felt like she was letting her family down. And when it happened, she swore she’d never touch retail again.

2. Becoming Kendra Scott

There were about four years between closing The Hat Box, and starting the business that would become her legacy.

Kendra got a job at a magazine; She traveled; Met a man named John Scott, fell in love, and got married.

While pregnant with her first son, she took a jewelry making class at a local bead shop in Austin. 

And that’s where everything changed…

In interviews, she jokes that the reason she ended up in jewelry design is because she loved fashion, but couldn’t sew to save her life. Hand-making necklaces and earrings gave her a creative outlet that she found incredibly satisfying.

She started giving designs away to friends and family, and three months after the birth of her son, decided to try and sell something…

The First Day…

The now-famous first-day story is that Kendra spent $500 on materials, made her first line of earrings, loaded them into a tea box, and took them door to door at Austin boutiques – baby in tow – hoping to make a sale.

She visited five shops that day. Incredibly, four of them placed orders. The very first to buy was The Garden Room, which opened in 1979 and is still open to this day over on W. 38th street.

And this is where Kendra’s first business, The Hat Box, came back around – because Patty Hoffpauir, owner of The Garden Room and first-ever-purchaser of Kendra Scott jewelry, was one of the clients who installed a Hat Rack satellite display in her shop all those years before.

Funny how things work out.

At her last stop of the day, the owner cut a check for $1,200 to buy her samples on the spot. That was the seed money she needed to fill her other orders. Profitable from day one, she never looked back.

Over the following months, she did everything she could to make her relationships with retailers successful.

She hosted trunk shows, fashion shows, and launch parties for her seasonal lines. She helped with merchandising, and made recommendations for retailers based on their demographics. She even replaced damaged inventory, or pieces that weren’t selling.

In short, she did everything she wished someone had done for her back when she ran The Hat Box, and over time, the brand snowballed.

Her first big order came from Harold’s – “Five thousand units, and can we please have them in eight weeks?” Yes. [Gasp!] At the time, she was still making pieces by hand out of her spare bedroom.

She asked for guidance from a more experienced CEO friend – a lifelong habit, more on which later – and figured out how to source from overseas.

Then she continued to hustle, landing Nordstrom as a client at the same time that she, her mother, and her friends were still packing and shipping orders from the dining room table.

Shortly after that, they moved to their first official office on West Sixth, and from there, to a 2,700 foot facility at Penn Field on South Congress.

Sometime in 2006, her first marriage ended, making her a single mother of two young boys, traveling around the country to retailers, and wrangling a rocketship of a business.

It didn’t stop her.

She brought the kids to work, encouraging her employees to do the same when needed, and forging the “family first” culture that’s a part of the company to this day.

By the end of 2006, they were in Nordstrom, Bloomingdales, and Neiman Marcus, and were selling through more than 500 storefronts nationwide.

They were also doing private-label designs for retailers like Anthropologie, Coldwater Creek, and others, which made up more than half their revenue, according to the Austin-American Statesman.

3. Opportunity Disguised as Disaster

Up to 2008, the company was running on 100% wholesale. It had been incredibly successful, but had no direct relationship with customers.

So when the financial crisis hit, triggering mass layoffs and bankruptcies across the industry, orders dried up at the same time the bank called her line of credit.

The technical term for this is an “oh fuck” moment.

It’s not clear exactly how bad the financial hit was, but sources I found say that in 2006, the company was doing $3m in revenue, and by 2010, after fighting to survive the recession, that was down to $1.7m.

You can imagine what it was like in between.

In any case, Kendra took serious stock of what was happening, and decided that to get to the next level, they needed to own the relationship with their customer directly.

Three things followed, changing the course of the company forever:

1. Birth of The Color Bar: First envisioned in a dream, the Color Bar was a retail experience where women could pick stones and customize jewelry live.

The original Color Bar started as a pop-up in 50 Varick St, one of Manhattan’s premiere accessory boutiques. It opened to lines around the block, lasted three months, and helped keep the company afloat while they pivoted. 

There’s a lesson here about testing ideas before committing and signing leases.

2. Investing In Ecomm: Prior to 2008, they had a website, but it was very limited – just information on the company, and some links to partner sites. But in the wake of the recession, Kendra made the decision to build an ecomm site and sell DTC. 

For my Zoomer readers… It’s hard to overstate just how hard this was in the days before Shopify and widespread social media. 

In addition to completely changing their fulfillment and distribution, they had to build out a CRM, develop customer support playbooks, construct ecommerce features from scratch, and begin running direct-to-consumer marketing, all while the house was essentially on fire.

3. The Shop on South Congress: The last part of the plan required her to do the one thing she swore never to do again after closing The Hat Box – open a retail store. 

According to an interview in the Austin American Statesman, retail had been on her mind since 2006. But the challenges of ‘08 and beyond seemed to make the decision final.

In 2010, they relocated their headquarters to a two-story space on South Congress so that employees had to walk through the showroom every day to get to their offices upstairs.

They worked hard to make the first-floor retail space different from typical fine jewelry stores:

Like the popup in New York, the flagship store opened to lines around the block. Unlike other jewelry stores, Kendra Scott locations become community hubs, where people drop by randomly throughout the week, or make plans to meet friends there.

This is built into the strategy. Like the current South Congress location, which is also home to the Sips & Sweets cafe.

Looking back, Kendra says the company probably would have survived the recession without the pivot to retail. But it would never have become everything that it is now.

In 2023, they did $400 million in revenue across 134 stores, with just 15% coming from wholesale. A full 50% came direct from their stores, with another 35% driven by ecomm.

4. Scaling The Business

So how’d they get there? How’d they go from surviving the recession to being a nationwide DTC powerhouse?

Well, by 2010, the company had survived the worst of the financial recession, bootstrapping its way to $1.7 million in revenue. But it was still a small team, and to get to the next level, Kendra knew some other changes were also needed.

Over the next three years, three very important things happened:

In mid-2014, the PE firm, Norwest Venture Partners, bought 20% of the company at a $100 million valuation.

The deal size was never disclosed, but Kendra was able to take enough off the table that she achieved a sense of financial security – what fellow Austin unicorn founder Jason Cohen might call crossing the freedom line.

She felt she could take bigger swings, and growth in following years shows it.

Seventeen stores became forty, then fifty-plus as they outpaced even their most ambitious projections. Today, it’s 130+ with nearly 3,000 employees.

5. Key Relationships & Hires

It’s tough to take a company with almost 3,000 employees and highlight just a handful pivotal to its success. Kendra would be the first to say that the business is made from the DNA of every person working there.

But there are a few who stand out to me as I review past interviews and stories…

The Super Seven: The first seven employees, several of whom are still at the company, including Denise Chumlea (SVP Customer & Creative), Cheryl Mills Knight (SVP Brand & Culture), Leah Lucus (SVP Design).

Lon Weingart: Kendra Scott’s first COO. He brought a lot of experience to the table, including time spent as director of product development and merchandising at Starbucks, where he helped open hundreds of locations.

Steve Hicks: A long-time member of the Texas business community, Hicks bought his first radio station at 29, and built an empire in broadcast media. Not only was he Kendra Scott’s first investor, but he encouraged her to join EO, which had a major impact. And as a former member of The University of Texas System Board of Regents, he may have played some role in her eventual decision to found the Kendra Scott Women's Entrepreneurial Leadership Institute at UT.

Entrepreneur Organization (EO): As a college dropout, Kendra didn’t have access to the kind of network that typically comes from a business school or MBA program. Joining EO changed that, and she went on to be selected for their Entrepreneurial Masters Program at MIT.

Cameron Herold: Among the instructors she encountered at MIT, Kendra makes special note of Cameron Herold (former COO at 1-800-GOT-JUNK). His VividVision exercise had a formative impact on her company, and she would return to it years later in 2020 when deciding to hand off the CEO role. He wrote a book on it here.

Tom Nolan: Joining the board of directors in 2015, Nolan would go on to serve as CMO,  chief revenue officer, president, and now CEO.

6. Special Sauce

Okay, so that’s a look at how the company got to where it is. But what about why?

Reading her book, and listening to interviews with her, there are a few traits I think made Kendra successful, regardless of the product.

1. Keen Observation: Early on, she had a hard time getting investors to buy into the brand’s potential. Yet she was profitable from day one, and opened new stores and pop-ups with lines around the block. 

How? 

She was a superb observer of both her own desires, and the behaviors of employees and customers.

Case in point: The Color Bar, which laid the foundation for her retail empire, came from observing the way employees would make custom jewelry to match their outfit before a date or important event.

This may be an innate skill. Or it may have come from her years of fashion trend-spotting long before going into business. Either way, it paid off big time.

2. Willingness to Ask For Help: This is a repeating theme in her book, and also a skill that she appears to have developed long before she was running a billion-dollar business.

According to a feature in Entrepreneur, "She approached big names thinking they would say no, including Bill Fields, the former CEO of Walmart, with questions about manufacturing, and Cynthia Harris, the ex-head of Gap North America, for insight on selecting retail locations. Despite their status, both were generous with their time."

Having spent years building founder communities like Hampton, I’ll say that I’ve seen a strong correlation between a founder’s willingness to ask for help quickly, and the level of success they achieve.

3. Employee Retention: I mentioned before that several of the original employees are still with the company after ~20 years. That’s impressive.

It’s even more impressive given that 96% of Kendra Scott employees are female, and to be frank, most employers just don’t offer the kinds of programs or support that can hold onto women throughout their career.

This company’s different though. Their brand values are “Family, Fashion, Philanthropy,” in that order, and the executive team works hard to make sure employees can have both a career and a life.

Personal opinion – this is rooted in two things:

All this manifests in things like 12-week fully paid parental leave, flexible work schedules, nursing rooms and kids’ game room at their offices so that parents can bring their children to work when needed.

4. PR & Storytelling

Reading her book, it strikes me that Kendra’s a wonderful storyteller, and I have to believe that this has had an impact across the business – from marketing, to sales, to winning employees and investors.

Even back in the Hat Box days, she was good at landing media (example, example, example).

Final thing… One more thing that really strikes me as I go back through Kendra’s book, and past interviews, is that there’s a remarkable consistency to her story and vision throughout the years.

That’s unusual.

I’ve been studying successful founders for a long time, and often what you see is that they change a little as they start reaching some level of success.

They get a little more generous. A little more understanding. Often they subtly rewrite the reason for starting their company, with ambitions that are nobler than, “I wanted to make a lot of money and live on the beach.”

But I’ve gone back through thirty years of interviews with Kendra, and everything you see today – the upbeat energy, focus on innovation, commitment to family, and giving back – it’s all there from the beginning.

Even when the stakes were tiny compared to today, it was all still there.

You can’t fake that. Not for thirty years. The only way to do it is to start from a set of values you actually believe in, then let those guide as much of what you do and say as possible over time.

As far as I can tell, that’s exactly what she’s done.

Sources

Big thank-you to the people who’ve done excellent reporting on this, including Sramana Mitra, Amy Anderson, Josie Santi, to name a few.

Here are the sources consulted for data in this piece: