How Serena Dugan reinvented herself after Serena & Lily

0:02This is Business of Home. I'm your host, Dennis Scully. Every week I'll be speaking to leaders and innovators from all corners of the home industry. My guest this week is Serena Dugan. Working as an artist and designer in the Bay Area, Serena's chance meeting with entrepreneur Lily Cantor led to the creation of Serena and Lily in 2003. What started as a design-driven nursery bedding company grew bigger and bigger with each passing year, eventually becoming the lifestyle giant it is today. In 2017, Serena left the brand, but she re-emerged in 2020 with a boutique textile line under her own name.

0:51Now she works primarily with the trade. I spoke with her about reinventing herself after Serena and Lily, a problem with trend forecasting, and why she'll always choose self-expression over sales every time.

1:51And now, on with the show. So I met Lily in 2003. I, at the time, was a decorative painter and primarily a freelance decorative painter working with a big retail company on set. And I had come to specialize in children's rooms. And so in an effort to market myself to fill my time when I was off season working freelance, I walked into a local exquisite children's store in downtown Mill Valley called Mill Valley Baby and Kids. And I left behind a packet as the owner of the store was not there. I left behind a packet showing all that I could do and all that I was about. And the manager said, this is something I'm going to pass on to Lily.

2:48She's out having a baby as we speak, but I'm sure she will want to get back to you. And I left it and thought, okay, I'll never hear. She's having a baby. She's going this direction. I'm going that direction. And sure enough, I heard from her the very next day. She was in true Lily fashion already out of the hospital because she had work to do. And so I said, wait, aren't you out having a baby? And she said, I already had my baby. I love your work. I really want to get together. When can we meet? So that was my introduction to Lily Cantor. And we met a couple of weeks later and she went one by one through each of my portfolios.

3:36The first one being decorative painting, which was where I was focused. And she said, I really love your work. We can have you take over part of the store and I can represent you to my clients. They'll love what you do. And then she got to the second portfolio, which was artwork. And she said, oh, I have a Gicle art business. We can reproduce this. People can put them in their nursery. We'll include that in your section. And I thought, this is going great. Terrific. And then she gets to my third portfolio, which were textiles. I had started hand block printing my own textiles that I was selling through the interior design trade.

4:24And she said, I could really see these patterns on crib linens. And I said, yeah, I could see that, not as block prints, but as green prints. And she said, huh, have you thought about designing crib linens? And I said, actually, I have what I would like to see. If I had a baby, there's nothing for me to buy. The market doesn't represent my tastes. There's nothing on the market for me. And she said, really, there's so much on the market. Describe what you're looking for. And I described it to her. She said, well, that's not what crib linens look like. I said, that's exactly what I'm saying. She said, do you think that this is what your friends are looking for?

5:08I said, my job is to be a bellwether. My friends don't know what they're looking for until they're delivered what they're looking for. And that's not what Crip Lenin's look like today. And she said, huh, let's partner. And that was our first meeting. So that was in the fall of 2003. She said, let's partner and meet back in December. You present your ideas to me and we'll take it from there. And I remember walking out of there thinking, what just happened? And sure enough, we met back in December and I sat down with her and I was really proud of the storyboards and the collections I put together.

5:52I think that they really fully articulated the vision that I had. And I was convinced that she was immediately going to love them. And what I experienced instead was blank stare. So I sat down with her and one by one, I showed each one. It was blank stare and she was blinking a lot. And I thought, huh, she hates them. Now what? I thought this was all going so well. I thought this was all going so well. I saw our future. And she smiled and nodded politely and said that we would talk the next day. And I walked out thinking, okay, she doesn't get it. I understand. This is a new look. But if she's not my partner, someone else will be because this is something I need to get to market.

6:46So she called me the next day. She apologized. She said she had her very first migraine that she's ever had. She said, this is a completely new look. And I said, yes, it is. That's the point. And she said, I love it, but I need to know that other people love it as well. And so she came around very quickly and said, I want to get behind it. Let's partner. Let's do this. And so that was still 2003. Neither of us had any background in cut and sew or manufacturing. We had no business plan. She was very experienced on the finance accounting side. She was a great merchant. She knew the market. Neither of us knew the industry necessarily.

7:41Did you know at the time what her career had been up until then? I mean - Yes. She was very upfront in pitching her credentials so that I understood why I would want to partner with her. And she was also very upfront about the arrangement. She said, 50-50 partners. I just had a second baby. You don't have children. You've got time. I don't. you'll put in sweat equity, we'll be partners. And as a 30-year-old young designer, that's music to your ears. So I had every reason to believe that she would be a great partner. I could read her drive. It sparked my drive. There was a really dynamic interplay between us where just felt like, okay, this is the journey that we're supposed to go on.

8:38And so I didn't do any recon. I didn't better. I just went with my gut. And fortunately for both of us, we both really operate from a strong gut and it worked. It worked out. And so Lily and I, let's see, that was December that I showed her the designs and she said, let's do it. a few months of learning about manufacturing and finding adequate partners, which arguably took a lot longer than a few months. But we managed to cobble it together down in Southern California and produce samples that we photographed beautifully given my prior retail connections. We had a great photographer, a great stylist, and in those days we called it smoke and mirrors.

9:32Let's make it look like we've got a big, great brand behind us and put it forward and see if we can get the wholesale channel to rally around it, buy into it in the form of opening orders, and fund production. so we initially launched with a wholesale channel that kind of looked and felt a lot like Lily's store and we had her store as an incubator to gauge customer response and you know be a secret shopper and watch how this client responded to the product and we were off to the races we We had an immediate, there was an immediate appetite for the product and the look. And I think what we did right in those days was by acknowledging what to me felt obvious.

10:25The industry felt saccharine. It didn't speak to me. There was a gigantic hole for a look for the nursery that did not exist, where that client, that customer felt aligned with and spoken to in a way that felt respectful. And so we not only had happy customers, they were fanatic because they felt like we got them and we felt a kinship. And once those babies grew out of cribs, they still wanted more from us. And it's a really, you know, we weren't deliberate about this, but in retrospect, it's a really great way to grow a business. You already have their attention and their wallet share. They asked for next.

11:22And we grew up the collection based on what our existing customer base was asking for and wanting. So it went from the cribs and the baby furniture. So then the child is starting to grow up. And so you're creating product for this ever-growing child, basically? Well, we were textiles focused. And so initially it was nursery bedding and then it was big kids bedding. And then I found out that the big kids bedding was being used in actual bedrooms. And I said, time out. if I had to express what our look is for a grown-ups room, an adult bedroom, this wouldn't be it. Let me design into that product category.

12:12And once I did, naturally that needed funding and Lily was off to the races and her job became fundraising. And we just started elevating and And growing up the product, it went from crib bedding to big kids bedding to guest room bedding to adult bedding to upholstery fabrics to the actual sofas and creating partnerships for those, rugs, lamps, decorative accessories. And, you know, for me as a designer, it was incredibly exciting because I wasn't a nursery designer. I wasn't a children's designer. I was a designer who started in a category that desperately needed reinvention. And in effectively shifting the paradigm of what nurseries look like, you're given license to think about that same opportunity as though it's a mandate where other categories are concerned.

13:18So I had a blast. I could not have invented a more exciting opportunity for me at that stage in my life. Tell me, you mentioned about Lily finally has to go out and raise some money for all of this. Tell me about the early days of that and what that looked like a little bit. Yeah, we have experienced every version of investor. And the earliest investment round was friends and family, which still to this day, that was the best money we've ever taken. It sobers you and focuses you like nothing can. You are suddenly partners with all of your friends and all of your family. And all of those early investors have had an opportunity to sell their shares.

14:09And they hated to get off the ride, honestly. But we did some really great things for them by them supporting us at a time that we needed it. So that was the best money we've ever raised. And then our first significant investor, Forerunner Ventures, who, you know, they really do know how to pick them. It's an honor in retrospect that they saw what we were capable of. They were fantastic partners. It can be very tantalizing to have someone say, I want to invest in you. And suddenly you imagine all of your worries being gone and being able to do what you want to do and the money's in the bank. And there are a lot of strings attached.

15:01And slowly making plan became the priority. Not tripping covenants in the way you're doing your business, in the way your business is functioning. Explain briefly what that means for listeners who might not understand. Covenants are just rules that are built into the contract. And if you do not meet the rules as they are written, investors have the ability to take over the company. Right. Right. And so you're always walking on a razor's edge of we as a culture were risk takers. And I think that we built the attention and the brand loyalty because we said something different. And we were point of view forward.

15:54We were design driven. And what that essentially means is that we are putting product out there that is not proven either in the marketplace or within our own business. And risk-taking is great when you don't have far to fall, but the bigger you get and the more backing you have, the fewer risks you can really take because the ramifications for it not working get more and more extreme. And so, I think that we slowly peeled back some of the risk-taking and the daring and the point of view, which if I were to look back on my exit and the gradual building of the brand and the business, I think that I see the arc now where I didn't fully see the arc then and and the arc being the arc being a design driven brand that had a distinct point of view that really led with wit and whimsy and delight kind of shaving off a bit of our edges uh by chasing what worked last season chasing what the market is asking for right right and uh slowly starting to define the brand as a business, where it is business first, brand second.

17:29And we grew because we were brand first, business second. We were all enabling one another to do both things and to put our personality forward. And that slowly just kind of gets, I don't want to say watered down, but it gets a little safer bit by bit. And the bigger you grow, the more you need more customers. You found all of the customers who loved that you were unknown and then loved that they felt like part of the club because they knew about you and then loved that you were doing it differently. And that's only a small market segment, keep in mind. And then once you have captured all of them, how do you capture the next market segment, which is essentially the mass market?

18:28You do that by speaking directly to them, by giving them a version of what they already knew that they already wanted. And we really prided ourselves in this, when it was brand forward, we really prided ourselves on presenting a look that they didn't know that they already wanted and warming them up to something that was different even though they might not buy it they wanted to buy what was familiar because you showed them something that surprised them and they respected your point of view and bought into your point of view even when they were not buying into the point of view product. So all of that is to say that I think a great brand and business is made up of both parts.

19:17I think it's made up of distinct point of view and the essentials. And you have to deliver the essentials in a way that is consistent. It's consistently great. but the reason they want to buy the essentials from you is because they're aligned with you because they respect your point of view. And you might not sell point of view, you sell the basics, but you only sell the basics because of point of view. And I'm sorry, that sounds like a riddle, but I really firmly believe that that was the secret to the success of that brand and that business. And was there a moment when you knew you really had a hit on your hands, when you knew that you were really onto something and the audience was enthusiastic and growing and you could see really building this?

20:21I don't know that you ever imagined it becoming as big as it did, but I wonder if there were moments along the way that made you realize, yes, this is really working. We're doing something really special here. I'm very thankful that right out of the gates, there was pickup. And in those days, I was watching, I don't remember, was it NetSuite? Some system that allowed me to see what was selling when and what the reorders looked like. And I watched it like a hawk. You're just looking for validation. And I remember how nerve wracking it was the moment we launched. And then we just kind of sat there and we waited for faxes to come through.

21:07True story. 2004, Dennis. 2004. And so who would the faxes be from? So who would be faxing orders? They would be from the show, not showrooms. They would be from our wholesale partners. So we were not DTC at this point. There was no such thing as DTC. We were wholesale only. So it would be in the form of reorders or new opening orders from new wholesale or existing wholesale partners. And at that point, when we launched, we had about 150 wholesale partners. So right away, we got validation. And we knew we were on the right track. But we were just at that point, trying to open as many wholesale doors as we could.

21:50And that's where our focus was. And it was going so well. We were then adding new product categories as these babies grew into children, and we were having a blast. And it was always a hockey stick going this direction. So we had no reason to think that what we were doing wasn't working. And then 2008 happened, the economic downturn. And slowly our wholesale channel, they started closing their doors. All the mom and pop stores started shutting and we realized, okay, we've got to take control of our destiny. And either we let their business impact our business or we look at our business a different way.

22:40And at that point in that period of time, we had started to conceive the whole home. What does Serena and Lily for the whole home look like? and we had gone out and gotten funding. And that funding had not closed yet when the S hit the fan. And they came back to us and said, sorry, we've got to lower our price. Your channel is closing down. The world is crumbling. And for some odd reason, Lily and I, we were so bullish. We were so confident in this vision. We just said no. We said, there is no, we are not under threat. And they said, I don't think you're watching the news. And we said, yes, we are.

23:27And so we came back at them very strongly. And we managed to kind of ride through that doubt and push through to get what we needed to expand our vision. And not only did we at that time expand our vision into whole home, we also expanded into DTC as a way of taking control of our destiny. And we loved our wholesale partners, but we also acknowledged that there was this whole new channel that we were interested in exploring, which meant that we would have to create our own website, which at the time was not the norm, that would sell directly. And we would create a catalog that we circulated throughout the country.

24:16And that was really hard for our wholesale partners. We held on to that channel as long as we could, but then realized D2C was kind of the wave of the future. And so that is when Serena and Lily, the brand and business that most people are familiar with, that's when that brand really launched, was in and recovering from the downturn. And was it always Serena and Lily? Was it always going to be that in the early days? Did you and Lily, did you have other ideas or was it just always going to be that? I remember brainstorming the name and we tried everything. It was our names. It was Lily and Serena, Serena and Lily.

24:59It was, you know, something esoteric. It was, you know, the name of a plant. I don't know. We tried everything. and finally a very dear friend who is in branding um we were talking to her and she's like just do serena and lily and we weighed out lily and serena and it was kind of a mouthful and so we just we landed on it and move forward there were so many decisions being made at that time we didn't labor over anything honestly and we moved on to the next thing it's pretty simple yeah no no and and great that you had somebody who knew branding and could say, yes, just go with that and off you go.

25:41But the significance of it being your name and that store in East Hampton opening, and I remember that so well, and it was huge fanfare around it all. And I can only imagine what it felt like in that moment. And then it was really off to the races after that. Yes, it was. So we were able to articulate our vision in such a complete way. It was visual, it was experiential. There was the architecture and events and third-party product, other people's product to round out the story. and you know we were really able to enter our world in a more um complete and in in-depth way and that gave rise to an expansion of our product assortment and an expansion on retail because that store uh worked from the day it opened and so yeah we grew and grew and grew and then And, you know, I think that it was so significant year after year after year.

27:00And then it starts to kind of that hockey stick becomes more of a plateau that's continually raising. But it was always a nice, healthy business that showed promise and opportunity for new and better and different. And with that success came the attention of bigger investors and that at some point becomes a significant turning point for you and for Lily. Yeah. So with bigger numbers and a better performance and more attention comes more investors, different investors, bigger investors. And the expectations get a little bit more real and more numbers-based versus I'm going to go on my gut and I'm really excited about this product and let's keep surprising and delighting.

28:01The appetite for surprise really starts to get whittled down. And at that point, I would say that to that point that we're talking about, it had been very much a design-driven organization. And then in those years, we brought in merchandising as a function within the organization in a more robust way. We did bring a merchant in earlier, but we also had kind of a directive internally that we weren't going to do it the way they had done it before. To take everything they had learned and throw it out and we're building a new kind of organization, which is not what any professional really wants to hear.

28:48But the ones who stayed on were really enlivened by that challenge and that opportunity. And so merchandising became a more significant force in the company. And I would say that we always described it as a healthy tension between design and merchandising. But there is definitely an inherent struggle between the two because merchants, they are numbers driven. They are market driven. It is their job to know what people want out in the marketplace and ask for that from the design team. And I, on the other hand, said, I don't want to hear any of that earmuffs. I don't want to know what other people are doing.

29:37I don't want to know what the prevailing look is. I do not want to look to my peers or the market to take direction. And that is, I recognize now probably very difficult. It's difficult for a merchant to do their job with that kind of resistance. And I wouldn't say that I was resistant. I understood the challenge. I understood that we had to make our numbers. And I understood that we had to represent some core and some basics with their permission for me to explore and try new things and really push the look and push the industry. And we really did, I think, a really great job of combining both interests and delivering an assortment that was sellable and delivering an aspect to the assortment that was pure point of view.

30:38And we learned to order light on point of view and order deep on basics. And we figured out the ratio and we were able to build a really strong, healthy, exciting business as a result. And at that point, as we were kind of going through this next inflection point, I would say that our business started leveling off and we knew that we were at this point where something needed to change. And Lily raised her hand and said, I don't know how to run a business this large. We're going to need some experience at the helm. And Lily was our CEO at that point. And we started searching for a new CEO. We ended up hiring a CEO that had big retail experience.

31:34That CEO was installed by our investors. And it became pretty clear at that point what merchant-driven organization was and needed from my seat. they didn't at the time I was chief creative officer. So I directed design and creative for the company and I was lead designer. So I would conceive of the seasons and design the textiles for that season. And that was very natural to me that it felt like once you've conceived it, all you have to do is get it out. I had tried hiring textile designers to do it. and it's much harder to get from them what I could go in and deliver. And that in a growing organization is too big a job.

32:29And I was asked to split those in two and choose. And that required some pretty heavy soul searching. And I chose design because that's my truth. I couldn't fathom simply being an executive that didn't create. And I felt what it was like to live a role where I am taking direction and executing on someone else's direction. And it didn't align with my purpose, honestly. I have something to say and it doesn't have to be a huge brand or business or audience. I just have to get it out, even if it's one person as the audience, even if it's myself. And so the feeling of just merely being hands that execute was really soul sucking.

33:28and I knew that is what they need for the seat. I love this company too much. I am too invested in its success to not allow for the right person to be sitting here that can deliver on the new direction as it is being set forth. I want them to be successful. I am not the right person for this job and it is not the right job for this person. And so that's when we parted ways. And it was the, in retrospect, it was absolutely the right decision at the right time. I have nothing but positive feelings when I look back on what I built and what we created as a team. There was so much thrill and joy and satisfaction in taking that ride.

34:25But it taught me, I learned about the organism of a retail brand. And I developed a skill set that really matters to me that I take away and I parlay into doing exactly what I want to do at the scale and size and shape that I'm doing now.

34:51We're taking a quick break from the show to remind you about Ernesta. Designers know that proportions make all the difference. And that difference starts with Ernesta. Find a custom-sized rug that elevates your vision when you join Ernesta's trade program. You'll receive dedicated one-on-one support, preferred pricing, and unlimited samples curated for your project. To apply for membership to Ernesta's trade program or to learn more, visit ernesta.com slash boh. And now, back to the show.