How 'Shark Tank' investor Kendra Scott went from 'broke' to building a $1 billion brand

Shark Tank investor Kendra Scott made a jewelry side hustle into an empire. Here’s what she learned.

Fashion and accessories designer Kendra Scott arrives at the Mack, Jack & McConaughey charity gala at ACL Live on April 25, 2019 in Austin, Texas.
Rick Kern | WireImage | Getty Images

Kendra Scott started her namesake jewelry brand in her spare bedroom. Today, the brand is valued at over $1 billion but for a while, as she worked to get her business going, she was struggling and, she says, "broke."

Grow caught up with the CEO, philanthropist, and occasional guest shark on the ABC show "Shark Tank" in the runup to the inaugural Women's Summit held by the Kendra Scott Women's Entrepreneurial Leadership Institute at the University of Texas.

Below, Scott shares stories from her journey as an entrepreneur, and the lessons aspiring business-owners can learn as they seek to turn their side hustles into full-time gigs.

On leaving school to start a business as a teen

I started my first business when I was 19, because my stepfather had brain cancer. I created headwear for women undergoing chemotherapy and really was like, "Why aren't there more hat stores?" So at 19, I opened a hat store, and did headwear, not just for women undergoing chemotherapy. I realized I would need to sell every kind of hat, so I visited different hat makers all over and had them teach me how they made hats and what they did.

And I told my parents, "I'm dropping out of school right now to open a hat store. Can I get a loan?"

And Dad, you are so cool for saying, "OK, here, I saved this amount for you for school," which was enough to get this little store going. So I started that at 19, and it was really hard. I had no idea what I was doing. I had no idea how hard retail would be, especially running retail on keystone margins.

I ran that store for five years, until I finally realized this was not sustainable anymore. I was living on Top Ramen and barely able to pay rent. So I knew I had to close that door, but in retrospect, and I say this all the time, I look back at that as the greatest gift. It was my MBA in business and in retail. I really learned everything you should and more importantly shouldn't do, and the things that you need to be successful.

The 'aha' moment when a side hustle becomes viable

I went back to work and then I started making jewelry out of my extra bedroom. I was a new mom, and I thought I would just get a few orders here and there to help provide for my family, get back into fashion, and allow me to be able to be there for my little baby.

For that first collection, I spent $500 getting supplies, and when I went out and sold that I day I got three orders. Then I sold my samples back to the last store for $1,200. And that check was a defining moment for me. Bringing home that check, walking into the door, telling my husband, "We've got a business!"

I more than doubled our money. And I had three orders in hand, to produce. I really felt like maybe this could be something.

Shortly thereafter, I had a Dallas showroom contact me wanting to rep my line. And I went to that first market, and a lot of the designers don't actually go. They let the rep rep their lines. I said, "No, I'm going to go and talk to everybody."

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Harold's stores wrote an order for $75,000. Up until then, all my little boutique orders were around $600, $1,000. When the buyer called me on the phone to say that we had actually gotten the order, I started to cry on the phone to her. It's so embarrassing now, but she and I are still really great friends. And I told her, "You just changed somebody's life today."

I thought, "Now I had to put the big girl pants on." I was able to actually take that order and get a small line of credit from a bank so that I could be able to go and get this manufactured. That was a big moment.

Managing personal finances while building a business

I would look at my monthly budget, obviously for my family, but also the business. I really kept those things separate. The business was a business and I really tried to focus on what the business was going to need to be cash-flow positive. How are we going to make our obligations to the bank? I knew exactly what our float was, when money was coming in through wholesale accounts so we could pay bills.

Then I always changed my salary. It was never high. It was enough that I knew that this was what I would need to be able to pay for my kids' school, pay for our rent, pay for groceries — really basic things, quite honestly. Food, shelter, all the things we needed.

On finally feeling financially secure

I honestly can't tell you that I felt financially secure until about 2012, which seems crazy to think about. I started my business in 2002, and during those 10 years I was going through a divorce, trying to put two kids through private school, I had my sister move in with me. I mean, I was broke.

It was a very difficult time for me just because I was trying to keep this business going. Fortunately we had good enough margins that I was able to take money and reinvest it in the business and grow it that way.

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People told me, "Go get an angel." I'm like, "Yeah, that's a great idea. Where do all the angels hang out? Where do these people just give you money?" And it was a different time. Now there's just so much access via social media and the internet. It wasn't like that when I was trying to figure it out.

A lot of private equity firms, especially here in Austin, wanted tech companies, and they really didn't want female-owned companies. And a fashion company? They wouldn't even look at me. It was like, "Are you out of your mind?" So I really had to bootstrap it: Credit card debt, lines of credit, putting everything I owned up for collateral, personally guaranteeing the lease on our office.

And then we opened our first store in 2010 after the recession, and that really is when the business started to change. The shopping experience was so well-received that there would be lines around the block. At that point, I had set up an advisory board. I didn't have a typically board because I was the only investor. But I really wanted to have that discipline of having quarterly meetings. I wanted to have the discipline of getting great feedback from diverse people that I trusted and really respected. And one of those mentors was my first investor in 2013. He bought 5% of the company at a very fair valuation at the time. And that was the first time I took any money off the table.

And that was really the first time I felt like, "OK, I can breathe now for a little bit." It was a huge relief.

In 2014 I brought on my first PE investor, and they came in for about a 20% equity position, and the valuation at that point was $100 million. We had really grown: From 2010 to 2013, it just skyrocketed. I think having those great mentors and people around me really helped us do that. They weren't afraid to take some crazy risks and do things a little differently. And that check was really for me game-changing. It was, "Oh my god! I can buy a house and not rent!"

This interview has been lightly edited for clarity and concision.

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