545: In Retrospect - How Kendra Scott turned $500 Into a $1 BILLION Jewellery Empire

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Hey, founder fam, today we're diving back into the archives to bring you our episode with Kendra Scott, the self-made entrepreneur behind one of the most successful jewelry brands in the world. I saw one of her stores when I just come back from LA actually. So Kendra takes us through her journey from launching her first business, a hat company that ultimately ended up failing, to building an empire that has redefined affordable luxury. We dive into the highs and lows from navigating recessions and rejection to securing her first retail store and using adversity to fuel innovation.

1:25All right, let's dive in. Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan. How did you get your job, aka how did you find yourself doing the work you're doing today? You know, it's been a journey that really started when I was a kid. My aunt Joanne was a fashion director at a department store in Milwaukee, Wisconsin. And I grew up in a little town, Kenosha, which is about 35 minutes away from Milwaukee. And going to her apartment and being in her closet and seeing all of her slideshows from her being in Milan and Paris and London and New York.

2:13places that have been so far away as a little girl from Wisconsin really just brought me into this world of fashion that I felt like was magical. You could be anybody you wanted to be. It really just transformed you, right? Fashion could, you could create whoever you wanted to be. And I think I was just drawn to it from a very early age of that magical sense of it. And here we are, right? Starting my first company was a hat company and really wanting to utilize that love, that passion for design, for fashion, and really for making people smile. I just remember how I felt when I'd put on her clothes in her closet and just the smile on my face, how I would just feel more confident and all of those amazing things that can happen, right?

3:01And I knew I wanted to be a part of that industry. And so just really led me to finding that and continuing to just reach for it and strive for it from the very beginning. Yeah. And I'd love to talk about the hat shop. Like it was your first business. What did you learn during that process? Because it didn't work out, right? No, it did not work out. And I think that's so important is because if you talk to any successful entrepreneur, they are going to have at least one failure story for you. And there's probably way more that they can talk about as well. But that one for me was honestly the greatest gift.

3:40And I'm sure you hear that a lot. Like these failures that happen in so many ways for me was my MBA, right? That I didn't get. I dropped out of college. I started the hat box at age 19. I was inspired to start it because my stepfather was undergoing chemotherapy for brain cancer. And I met so many women that were going through those same struggles of hair loss and just their journey was so hard. And I thought, well, God, if there was some way I could make headwear for them that made them feel beautiful and that also was comfortable. So I was lining past with cotton linings that were soft and comfortable on their heads.

4:17And really at first, just as a need of wanting to bring fashion to them and make them smile and realize why aren't there more hat stores out there? Why aren't people wearing hats again? Like it's 1940. We need to start hats. And so dropped out of school with this, you know, ready to change the world, an idealist at age 19 and opened my first business and started thinking again, hoping the world was going to change with me in this great idea. And after five years of trying to get the world to want to wear hats like it was 1940 and realizing that just was not happening, I had to close that business.

4:57And not only did I have to go through the failure of closing this business and being so humiliated because now I'm a college dropout. All of my friends have graduated from college and are getting their jobs in these new places. I'm now a failure of business. I can no college degree. Now what am I going to do? But what I didn't realize at that moment when that store closed is that those five years of running this retail business, of learning about margin, learning about overhead, understanding how to really run a retail business was the framework, the foundation for my next thing that was going to work, which was my jewelry company.

5:39And the answer to my future was in that little store. I was making jewelry kind of on the side because it was something I loved to do. And I'd put it in the case at the register and it would sell the day I put it in the case. But I had it in my head that hats were the thing. It had to be hats. And I wasn't seeing what was actually working. So sometimes I think as an entrepreneur, we get, especially in those early stages, we have an idea, like this is what it has to be. But we sometimes have to step ourselves away from that and get that 360 approach because it may be something a little different is actually working that could be your future opportunity.

6:18So after I shuttered that store, like devastated, I would still get calls from some of my best customers. And I would be so excited to hear from them. And Nathan, they were not calling me because they wanted more hats. They were calling me because they wanted a pair of earrings to make the necklace that they bought. Or their sister loved the necklace so much that she wanted to buy her one. Could you make one, Kendra? And so I found myself going, huh, this is weird. Maybe there's something to this jewelry thing. And so it really was the entry into the next thing that I started to do. But really, again, it had to be like bang on my doorstep, phones ringing for me to actually see it.

6:59What were the challenges when you started the jewelry company in the first few years? Well, you know, there's, I mean, so many, right? I know this is an only hour that we have, so we could meet, you know, we need about 10 hours, but you know, it was right after the recession. So, you know, I had my, my first son was born 11, 11, 2001, which is exactly, you know, just a few months after 9-11. And here I am a new mom in a very scary time in our history, right? I mean, here we are, you know, right after the recession. And to think about starting a business after I've already had a failure, a failed business under my belt was terrifying.

7:41And I didn't want to tell the world I was starting another business. And quite honestly, I didn't have the financial ability to, you know, do anything big. So I started small. I had$500. I bought, you know, some materials, stones, wire. I made a tiny collection and I went store to store in Austin, Texas with my little baby son in a baby carrier and my jewelry in a tea box I had gotten for my wedding. And again, very quietly, I wasn't out in this time to change the world and have everybody see Kendra Scott and I wasn't going to open hat stores like I wanted to all over the country. I was going to just try to be a great mom to my new little baby, be in fashion again, which I loved and try to help, you know, bring in income for our family to be able to, you know, have a life that would provide us, you know, some extra, extra money in the household, never writing a big business plan to build a over billion dollar brand in those early days.

8:40And as I started to see the success, again, it took me a little while to actually want to tell people that I was in business again, because I was afraid of what they would think. And I think knowing that, you know, here I was, and I started to kind of prove myself, and it wasn't myself that started telling people. It was my customers. It was my best friends. It was my family. All of these people just came supporting me and loving what I was doing and helped me have the strength to say, okay, I'm really doing this. I really have a business and I'm going to not be afraid to tell people about it anymore.

9:19Actually, I'm going to start screaming it from the rooftops. And I think, you know, having confidence after a failure is one of the biggest challenges for any entrepreneur. It's that not just dust yourself up and get up, you know, dust yourself off and get up again mentality. It really is that own of going, you know what? I can do this. And I'm going to figure out what I just learned from what that obstacle was that I'm going to overcome it. And I'm not going to give up. I'm going to do it again. And I'm going to do it better this time and smarter this time and not be afraid. And can you tell us about, you talk about that grit going through it.

9:57I know that you experienced a lot of rejection, trying to raise capital. Can you talk us through that process? That would be the understatement of the year, Nathan. I would go into so many boardrooms where it looked like me. My dad used to say, well, don't be intimidated by the men in suits. But I was intimidated by the men in suits. And I would walk in. And in Austin, when I was starting my company, it was very tech heavy industries, all about tech, tech, tech. And they wanted me to be a tech company. And here I was, this Southern girl who was in fashion and trying to explain what I was doing.

10:35And even after having success of getting some major department stores and really starting to grow the business, it would still be like, I felt like they were just laughing at me in the face and I'd walk out and it was just every time it was like, okay, you know what? Just keep trying. And I got great advice from one of my mentors. And he said, Kendra, you know, I wrote, well, this was funny. He first, I had somebody tell me, well, you need an angel investor. And I said, yeah, I need an angel. Where do these angels hang out? I need an angel. But they don't just hang out. Like you just, you know, it was different time, 2003, 2004.

11:13We didn't have access to people via social media and these different platforms as we do today. And so I would try to go into these meetings and just kept getting shut down, shut down, shut down. And one of my mentors told me, Kendra, if you build it, they will come and they're going to come aggressively. Focus on building the absolute best business you can build. And I know that's hard. And I was doing it through lines of credit, credit card debt, putting every single thing I owned up for collateral. Within a short period of time, I had a one and three-year-old and was going through a divorce.

11:48So now I was a single mom on top of all of this with basically a baby and a just toddler. And it was hard because I needed help and support, but having to put everything I had at risk. But again, just focusing on the business, focusing on building the best business I could. And he was right because people started to take notice and I wasn't calling them anymore. I started getting calls from investment bankers and interested investors. And it was a really eye-opening experience for me to be able to then go, oh, wow, now they want me. But I had to prove myself a little bit. Yeah. Wow. And in 2008, the world had changed.

12:33Recession has hit. How did that affect the business? And was that around the time you were trying to raise capital, everything you had going on, lines of credit, everything you owned, going through the divorce? Was it around that time? So I was divorced in 2005. And so was already divorced. In 2008, I can't even explain to you. So we were just a wholesale company. So I was just selling to other retailers. I was not direct to consumer. After the hat box and that failure of running a retail store, I said that I am never going to be in retail again. I am never going to do that. That is scary stuff.

13:11I don't want to have any part of it. If you have a retail. So this is safer. I think, you know, a store writes an order, boop, boop, boop. I pack it up. I mail it to them. They deal with it. You know, it's great. Beautiful business. 2008 hit and all of my eggs were in that one basket. Nathan, I had the power that I didn't have was in the power of the buyers that were writing the orders for the department stores who are now getting laid off with the recession relationships that I had built just, you know, going away overnight, boutiques and stores that I had worked with across the country shuddering left and right, big companies filing for bankruptcy that I had just shipped orders to.

13:54You know, it was devastating time. And I only had a line of credit. I had no investors. And to try to even think about getting an investor to invest in you at this period, I mean, that was not even, there was no conversation starters there with, hey, what do you think about investing? I know we're going through an economic collapse financially, but maybe they're like, absolutely not. Then my bank, big bank, calls and says, we feel that jewelry, fashion, these are high risk areas for us. And we'd like you to pay off your line of credit within the next six months. Are you hesitating to take the next step in your e-commerce journey?

14:35Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs, and weekly live mentorship sessions, Founder Plus is your key to success. Try Founder Plus today for just$1 for seven days and start building your dream business with confidence. You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. Wow. Yeah. And I said, well, I don't, I can't, I can't pay off the line of credit and I've paid my interest. I've done all the things I'm supposed to do.

15:11I've never been laid on a payment. Uh, and I'd call and try to talk somebody and they'd be like, uh, what's your loan number? And I'd be like, Hey, seven, blah, blah, blah. You know, all these aren't, they didn't care that I was Kendra Scott. They didn't care that I was a person, you know, they just were like, what's your loan number? And you'd get shifted around. And I remember sitting on my kitchen floor and just crying and thinking, this is it. I'm going to lose my business like so many of the businesses around me. And I thought, okay, what am I going to do? And I started to go to some local Texas banks.

15:43And I went to one local Texas bank and the president was female and she wears my jewelry. She knows my brand well. I'm very well known in Austin. And I sat across from her. And I remember saying, Carrie, you know, can you please consider taking on this line of credit? And I promise you with everything I have, if I have to sell everything I own, I will not only just pay it back, but I'm going to crush it. And here's my new business plan and how we're going to get out of this. We are not going to just focus on wholesale anymore because I need to have a direct connection with my consumer. I need her to say, I want Kendra Scott when she walks into every department store, where is the Kendra Scott?

16:22And the only way I can do that is if I have a direct connection, meaning I need to get back into retail. I need to get back and have an e-commerce website. And I need to start to communicate with her directly, not through middlemen anymore. And you're thinking, you know, all these stores are shuttering here. I'm going in and I'm opening a store, you know, I'm doing kind of the crazy thing, but it actually, that was when the magic happened. And if it wasn't for that recession, if it, which I say was the greatest gift wrapped in a yellow bow that Kendra Scott could have ever gotten as a company, we would not be sitting here talking today because that shift, that shake the snow globe moment forced me and my team to have to think differently on how we are going to run the business.

17:08Wholesale is now 18 % of my overall business. Direct to consumer through our retail stores and online makes up the rest. So it was a complete business shift, but the one that gave us lightning in a bottle growth. When was it that you knew, like what was the breakthrough moment that you knew that things were going to work, you were going to be okay? So obviously you went to that local bank, you got the line of credit, you started to shift the model, but when did you know, how long did it take? That's a great question. I mean, people sometimes ask me, I remember even just a few years ago and saying, I don't know if we're quite there yet, because you're always, I'm always, you know, I'm never complacent, right?

17:50I always see the possibility and what we can do. But I think, you know, her taking on that line gave me, she had confidence in me, right? And she believed in me. And sometimes just having the belief of other people around you gives you strength that you don't even know you have. And not only did I want to keep my word to her that I was going to do right by her taking this loan, but I wanted, I really wanted to win. I wanted to succeed and I wanted to be able to keep this beautiful little company that we had created together and alive. When we opened our first retail store, we knew we had to be disruptive and we had had our offices.

18:26We moved offices to right above the store. So all of us would walk through the store in the morning to go up to our offices that were above the store. And we all wanted to engage with the customer. We wanted to find out what she loved, what she didn't like, what she wanted more of. And we wanted it to be an experience where she could touch and feel the jewelry without having to ask somebody to take it out of a case. We created Color Bar where she could sit in an actual bar and drink mimosas and have cupcakes and watch her jewelry be made in front of her while she picked out the stone she wanted in the settings.

19:01It was unlike any jewelry shopping experience that had ever existed. And what I craved myself as a consumer, when I would go and shop for jewelry prior to this. So we were very disruptive in what we were doing. And I remember so many people saying, this isn't going to work. You're going to have so many people stealing things, Kendra. You know, what are you, you're crazy. This is, you know, you're going to be just spending all your money on champagne and cupcakes and you're going to, this is never going to work. And I think when you hear things like that, sometimes that gets me excited because I'm like, that's when you're doing something that's scary to somebody else could be magic.

19:37Right. Right. And sure enough, we had customers lining up around the store. It was like it was like a big nightclub like we in stanchions. We had to let certain people out to let certain people in. I mean, it was an absolutely insane. And if you go to stores across the country of ours today, you still see this like unbelievable fever of excitement outside of our stores. that's when I knew that's when I knew I would go down there and I just this hear this roar of people and laughter and community and I thought this is working this was that moment of okay Kendra maybe you got to think about going back into retail because this is working and then when we opened in Dallas and we saw the same success in Houston that's when everything changed and my first investor after a decade finally came to me and said, Kendra, I want, it was a mentor of mine, an advisor who said, what you're doing is absolutely amazing.

20:35You could start to see the results in these stores, the enthusiasm in the community. And he's like, I want to be a part of it. And so when it was the first time I ever had a partner, I actually had somebody and it was a very small 5%, right? And I had at that point still a hundred percent equity and nobody would invest in me. So I still had the whole business, but 5%, I finally felt like I had somebody that I could talk with and really have give me great insight and advice. And we could figure things out together. And I also was to take a small bit of money off the table. I never had money in my bank account that was sustainable.

21:14Like that. I felt like I was always living paycheck to paycheck or invoice coming into invoice, paying my employees first. It was the first time I had something where I felt like I had a little bit of a nest egg and that gave me peace. It gave me a way to just take a breath, which you can see for me is hard to do, right? I took a breath and I was like, holy cow, okay, just focus now. We can focus on keep growing this business and I don't have to lay awake at night sick in my stomach wondering if we're going to be able to pay our rent, you know? And that was the first time. And then it just kept going from there.

21:55Fast forward to today, you have over 100 locations around the US. You've built quite the empire. How has your role in the business changed as the business has scaled? You know, it's funny because I am so customer driven. From day one, I mean, you would see me in my office was right above that first store. And when I'd hear the store busy, I would race down because I love being on the sales floor. I love talking to our customers. And what's been fun over the years is, you know, obviously as CEO and growing as fast as we were growing, 5 million to 25 million to 75 million, you know, to 90 million to 150.

22:37I mean, it was just like hiring, how we were managing all of this, bringing on amazing leadership within our organization, building our team out, I didn't get to have as much of that time in the stores that I loved to have. I was still involved in all the design, but I love to touch anything the customer touches, but I wanted to connect with her more. And it's been really great over the last, I'd say, five years. Now that I've got this phenomenal team around me, I've been able to do some of those things that allows me to really reconnect with our customer and really see her and meet her firsthand.

23:15And so my first and only job here is to make sure that she's the boss, she's my boss, and I got to check in with her regularly. And I got to find out what she needs, what she wants, what she's happy about, whatever it might be. And that's my first priority every day is surprising and delighting our customer and really working with our teams on thinking increasingly on how we can do that. When you have a great deal of success, that's not when it ends. That's when it begins. The pressure really is on then because you have to keep exceeding those expectations for your customer. And then in addition to that, keeping your culture alive.

23:58We talk a lot about, you know, people go, why culture, culture, especially in the early stages of business, when you're starting a business, well, is culture really that important? Your Culture is everything. It's the heart of a great company. And so our culture for me initially was that I was a mom. So family was everything. And I wanted to create an organization that felt like family, that supported each other's families, and that treated our customer like family. So family was the heart. Giving back to our community was at the very start of this. This was my purpose, was I wanted to create a fashion brand that helped change the world for the better.

24:35and hiring people that have that like mindset. So understanding what your core values are, then you start to hire people that share those core values and that becomes your culture. And for me, I am the head of that, the light of all of that to make sure that we keep that at the forefront because that's what shines through when you walk into one of our stores. That's what you feel with any interaction with our customer service teams. So those are the things that I like to focus on. and I think now get to really spend the most time in. Yeah, and you've got something exciting up and coming. New book, Born to Shine.

25:15Can you tell us how that came about? Oh my gosh. You know, I had been wanting to do a book. I love speaking. I love speaking to entrepreneurs. I started the Women's Entrepreneurial and Leadership Institute at the University of Texas in 2019. really wanting to be able to have the ability for all women and major, able to learn the entrepreneurial mindset and be able to understand how that works and get a little bit of what being an entrepreneur could be like. Even if you're in school of education, you know, giving those tools of an entrepreneurial mindset can be so important. And everybody was like, Kendra, I need, you need a book.

25:55You need a book. I need, or they're, you know, they're writing notes when I'm talking and he put some of these things down. And when 2020 hit, it was such a kick in the gut for all of us. I mean, it was such a hard time. And I was going through a lot of personal struggle at the time as well. But to the outside world, I was this founder of a billion dollar brand. Everything was great. And I felt like it was so important now more than ever to share the struggles, to share, be vulnerable, to be open about the peaks, but more important, the valleys that I've experienced over the last 20 years building this business and sharing those.

26:38Because I think we can be vulnerable. There's real power in that. There's so much power in that. And I think this is a book, not just for business owners or entrepreneurs, but for people that are going through a transition in their life, that there's something that is changing that's big. Maybe it is going into a new career or getting back into the career world. It could be a graduate who is going through this next big life change in their life. So I think there's just a lot of lessons in this book about helping to kind of find your own light, but in addition to that, helping other people see the light within themselves.