A Product Market Fit Show | Startup Podcast for Founders
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.
00:19:38 · Nazim Ahmed, Pablo Srugo
[00:19:38] S1: A hundred percent. I remember that very, very well. [00:19:43] S0: I don't know how we got introduced to Naz. Hey, here's a successful entrepreneur in Ottawa. You should talk with him. What I remember from that meeting, we went in, and we told you what we were trying to build at Gymtrack and just everything we were trying to do. You were certainly nice about it, but realistically, these are two business guys that have no idea what they're doing. Your advice was be so sick they can't deny you. That was you that, if you guys want to raise money, you have to be so sick they can't deny you. That's what you said to us. Funny enough, Lee actually gifted me maybe a year or so later a thing for business cards we’re using at the time to hold your business cards with that imprinted inside it. Be so sick they can't deny you. Anyways, that stuck. I mean, what is it now, 10 years later? Clearly, advice that resonated. [00:20:33] S1: We’re still in touch. Lee and I are still in touch. I followed your guys' careers, and I think more entrepreneurs and more founders should always just try to support each other in any way we can. I think we had a really great tight-knit of – a group of early founders at that time, and yeah, it was a great community back in the day that we were building. Yeah, I remember that time fondly.
00:20:33 · Nazim Ahmed, Pablo Srugo
[00:20:33] S1: We’re still in touch. Lee and I are still in touch. I followed your guys' careers, and I think more entrepreneurs and more founders should always just try to support each other in any way we can. I think we had a really great tight-knit of – a group of early founders at that time, and yeah, it was a great community back in the day that we were building. Yeah, I remember that time fondly. [00:20:59] S0: Going back to the story and getting towards maybe the exit outcome, just walk me through the growth from, let's say, 2009 until you exit 2021. Was it just steady 30, 40% per year, or did you have some exceptional years and then some flat years? What did that look like? [00:21:21] S1: It was very quick growth initially from when we first launched CanvasPop on top of DNA11. Then it gets to a point where the type of business that you have starts coming in in terms of dynamics, and it starts putting these types of ceilings on top of you. You need to figure out how to break through the ceiling. Once we got to about eight million in revenue, things really started slowing down. I remember a few years of flat eight million in revenue. To make matters worse at the time, we had launched an app in the GIF space within the company at the same time with a little small team internally, and that GIF app got to a hundred thousand daily actives very, very quickly. It was the first GIF Keyboard when IOS... [00:22:19] S0: This was when GIPHY was out, right, something like that?
00:22:19 · Pablo Srugo, Nazim Ahmed
[00:22:19] S0: This was when GIPHY was out, right, something like that? [00:22:21] S1: Yeah. GIPHY was out, and then iOS allowed you to swap your keyboards out back in 2014. Steve McKenzie, who is awesome designer and founder as well, had this idea of creating a GIF Keyboard, so we ended up building that internally with one of our developers. A co-founder, Adrian, did all the marketing, ended up taking off. Now I got this two-headed beast, this one business that is…. [00:22:41] S0: What was it called? [00:22:41] S1: PopKey. [00:22:46] S0: PopKey, I do remember that, yes. [00:22:48] S1: Yeah. That took off like a rocket very quickly, and we ended up trying to build both the same time. We extracted PopKey into its other core, raise some money. That was just two years of absolute insanity, and I learned even more than I'd ever learned before, especially raising capital and going after that type of play. GIPHY owned the infrastructure and GIPHY was building the platform, and all these other apps had no chance. I needed to go through it to understand that, and then that was the time when CanvasPop started slowing down and flatlining and actually decreasing.
00:22:48 · Nazim Ahmed, Pablo Srugo
[00:22:48] S1: Yeah. That took off like a rocket very quickly, and we ended up trying to build both the same time. We extracted PopKey into its other core, raise some money. That was just two years of absolute insanity, and I learned even more than I'd ever learned before, especially raising capital and going after that type of play. GIPHY owned the infrastructure and GIPHY was building the platform, and all these other apps had no chance. I needed to go through it to understand that, and then that was the time when CanvasPop started slowing down and flatlining and actually decreasing. [00:23:28] S0: Yeah, maybe if you could dig deeper there. One thing I've noticed about growth, there's something just – that feels great about growth. I mean that like it – kind of obvious, but at the same time, it's like, if you go from one to three million, you're growing and it feels great. If you're stuck at five million, you’re actually better than when you were at three, but if you're stuck there, it's not going to feel that good because you just want that growth, right? Maybe just take me through what that period was like where you were either flat or declining and then, maybe most importantly, what you ended up doing that worked to turn things, let's say, back around. [00:24:08] S1: Yeah, sure. The first thing we had to do was press reset. I ended up sunsetting PopKey, ended up reducing our team significantly to – I went from 30 employees to 8. [00:24:19] S0: Oh, wow!