A Product Market Fit Show | Startup Podcast for Founders
00:12:29 · Pablo Srugo, Nazim Ahmed
[00:12:29] S0: What was CanvasPop at the end of the day? I guess, did you shut down DNA11 and then go all in just on CanvasPop, or did they merge and become part of the same thing? [00:12:40] S1: Yeah, great question. First, I always kept it under the same corporation. These were just product lines, but they're on different websites. Second is, as CanvasPop started to grow, we knew DNA11 didn't have as much growth potential, so we slowly started moving marketing resources towards CanvasPop and trying to grow that while keeping DNA11 on autopilot and not growing but using the cash flow to drive the larger potential business. Then, over time, DNA11 was dropping in revenue, but CanvasPop was accelerating much more. By the time I sold the whole thing, which we can get to, DNA11 was doing maybe 50 grand a year in the background just leveraging all the existing SEO we had, and CanvasPop was doing 15 million a year in revenue. It's a process, but you got to manage the resources very carefully and do everything at the right time. If you put everything on this – the new thing right away and the old thing that's generating cash dies too quickly, then you get yourself into trouble. [00:13:45] S0: Just in simple terms, what was CanvasPop? How did that product work?
00:13:45 · Pablo Srugo, Nazim Ahmed
[00:13:45] S0: Just in simple terms, what was CanvasPop? How did that product work? [00:13:50] S1: Yeah, so you come to our website. It was super simple: upload your photograph, choose your sizing, choose your frame options. Then, once the order is placed, we would print the photograph on canvas, frame it, ship it to you. First we started just in North America. Then we opened up Europe. Then, at the end of it, we were selling in over 50 countries. Before we started outsourcing our stuff, when manufacturing companies got to scale, we actually were doing all of our printing and fulfillment in-house, so I have a 30,000 square foot facility in Las Vegas. We’d ship hundreds of pieces a day out of there, and then, Europe, there was more partnerships. [00:14:29] S0: Was it a competitive space? I’m curious, again, really the beginning when – to get that first million or two in revenue from CanvasPop, just what was that like, and what sort of tactics and strategies did you use to grow demand?
00:14:42 · Nazim Ahmed
[00:14:42] S1: Yeah, great question. The first couple of years it was not very competitive, and we were early movers in the space. We were the only design players in the space, and we focus very much on user experience. We got a head start. Then, over time, then Shutterfly got into the space, and Costco got in the space. Then Walmart got in the space. Then, if you were to look at Walmart and Costco, they didn't look at these as profit centers. They looked at this as an opportunity to drive people into their store. They would sell it online, and then you had the ability to go pick up the canvas or the photo products in store. Then, hopefully, they go there, and they buy other products in store. They could really undercut you, so now it's a race to the bottom. What ended up happening, a lot of our competitors went down that race to the bottom. We took the opposite approach where we invested in innovation and technology and created all of these unique products. For example, we were the first company in the space for you to log in to your Instagram and take directly from your Instagram and have those printed as art shipped to you, and this is early on when Instagram first launched. That was something unique that differentiated us in the space. Over time, we even launched a product that used artificial intelligence to scan your image, and we called these things – called pet portraits. It would recognize if there was a pet in there. It would remove the background. It would add different filters on it. Then, all of a sudden, you have your pet stylized as a piece of artwork, but it was using all this complex technology in the background differentiating us. We focused on innovation, design, user experience, customer service while they focused on a commodity, and that's what allowed us to continue to grow but, more importantly, charge for products at a higher price. It was not a race to the bottom, and we continue to drive profits that way.
00:16:29 · Pablo Srugo, Nazim Ahmed
[00:16:29] S0: What made you bring in things like fulfillment, things that I think most entrepreneurs would think just keep outsourcing them? Is that really somewhere where you can have an edge? You brought all that in-house. A, was it a good idea, and B, why did you decide to go that way? [00:16:43] S1: When we first started, I was actually outsourcing to these printing companies, and then I was trying to find a large fulfillment partner to handle our volume. There was no partner out there at that time. Keep in mind, this is super early, right? I was able to do it at scale so just slowly, one printer. One printer turned into two. First it started in my apartment. Then it started in a larger space. Then we went to the US and kept going from there, but then, over time, these larger manufacturers finally got to the point where they can handle large, large volumes. Finally, when it got to a point where we didn't have to compromise, A, on quality and, B, we found a good partner that could offer quality at scale, that's when we started looking for outsourced partners, and one of those outsourced partners that did the manufacturing was actually one of our largest competitors. They own one of the largest competitors in our space. They ended up buying us three years later, but I ended up shutting down all of our printing and fulfillments, sending all orders to them.
00:17:52 · Pablo Srugo, Nazim Ahmed
[00:17:52] S0: Let me ask you a question a bit out of left field. I think, one of the things, you obviously bootstrapped this business until you raised about three million, but that was way later. That was 2018 so more than 10 years into the entrepreneurship journey. One of the benefits of raising early on is you get to pay yourself a salary. Maybe that salary is not a 100% market, but honestly, it's pretty close. What you give up on salary is not huge. How long did it take you from deciding to take this entrepreneurship path until you got to a point where you were like, oh, I'm – I actually didn't give anything up? From a how much you're taking in perspective, you're just as comfortable making just as much money as you would've been had you just gone down that other path. Was it quick, or did it take a long time? [00:18:37] S1: We were very, very fortunate because DNA11 was such a cash efficient type of business. For example, we'd sell an $800 portrait. We'd get the money in the bank. We would ship a $5 collection kit to you. Many of those kits never ended up coming back to us or ever ended up getting fulfilled, and it was all prepaid. There was no inventory, right? We ended up not really having to sacrifice much because we were able to pay ourselves just with cash flow, and then, once we got to CanvasPop, the volumes got to a point where we were able to raise quarter million debt. We had large lines of credit. Non-equity, diluted type of capital were opened up to us, and then we're able to put ourselves on decent salaries. We really didn't give up much.
00:18:37 · Nazim Ahmed, Pablo Srugo
[00:18:37] S1: We were very, very fortunate because DNA11 was such a cash efficient type of business. For example, we'd sell an $800 portrait. We'd get the money in the bank. We would ship a $5 collection kit to you. Many of those kits never ended up coming back to us or ever ended up getting fulfilled, and it was all prepaid. There was no inventory, right? We ended up not really having to sacrifice much because we were able to pay ourselves just with cash flow, and then, once we got to CanvasPop, the volumes got to a point where we were able to raise quarter million debt. We had large lines of credit. Non-equity, diluted type of capital were opened up to us, and then we're able to put ourselves on decent salaries. We really didn't give up much. [00:19:27] S0: By the way, I do have to mention just because it popped into my head. Do you remember the time Lee and I, my co-founder at Gymtrack, came into your office when you were running CanvasPop? This was what, 2013, and we were 21, 22 at the time? You remember that meeting? [00:19:38] S1: A hundred percent. I remember that very, very well.