A Product Market Fit Show | Startup Podcast for Founders
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!
00:24:19 · Nazim Ahmed
[00:24:19] S1: It was like a small group of eight employees, and the reason I did that was I was like, okay, number one, I got to reduce all my [unclear], my overhead, my burn. I need to get laser focused, and I need to just press reset. It was a really sobering time, and what it did was two things. Number one, it made you appreciate that growth was driven by the stuff that you did a year before, a couple of years before, and it was driven by focus and positive action, so on. Then, once the growth starts happening, you start maybe taking it for granted. Then we start seeing bigger and bigger opportunities, and then we lost focus looking back on it in retrospect. The first thing was to get focused, number one, and then, number two, to get trust within the small group of employees we had. Then, number three, it was, okay, let's stabilize the existing thing that we had that was working. Then how are we going to stimulate growth? It was a process of a lot of off-site meetings. It was a lot of let's get back to what made CanvasPop special, which was innovation; launching new, innovative, different products; differentiating ourselves from the competition. We went back to that magic sauce, really leveraging technology to be able to create more unique products, and it just started taking one step at a time and putting that plan to execution. Then we started seeing growth again, so as soon as we start seeing growth again, at that time, I was like, okay, I'm not going to make the same mistake before. We're going to go and raise capital from institutional investors, some quality people. We're going to create a board. We're going to create governance. We're going to create discipline. I'm going to have a board that I'm going to report to every quarter, and we are going to make sure to run this in the most disciplined way. That was a huge, huge change. That happened in 2017.
00:26:14 · Pablo Srugo, Nazim Ahmed
[00:26:14] S0: It's funny. Most founders, at least in the early stages, want, let's say, more control, less oversight, less board. You actually went out and sought a board. How do you think about that? What drove that?? [00:26:26] S1: I don't know. If we are ever going to have an exit in a sophisticated manner, that acquirer is going to open up the curtains, and they're going to do their due diligence. If everything is not very, very tight with not only your technology stack but with your HR processes and how you're running the company in a disciplined way, all of your financials are reported in a specific way with – in a sophisticated manner, they're never – you're never going to pass a due diligence. At that time, we were like, okay, I think it's time to start thinking about an exit and get this company prepared, so for me, as part of that disciplinary process, bringing on other investors that could bring that discipline and that knowledge in-house was very important. Also, having a 50/50 co-founder ownership is usually not the best at that point. You need a third party to come in to break ties and so on, and it just formalized the hell out of the business. In summer of 2021, when we went through our due diligence, everything was just so perfect, clean, meticulous that we just blew through the due diligence, ended up getting a great offer. [00:27:53] S0: You mentioned the 50/50 partnership. Do you guys run this as co-CEO for the first while?
00:27:53 · Pablo Srugo, Nazim Ahmed
[00:27:53] S0: You mentioned the 50/50 partnership. Do you guys run this as co-CEO for the first while? [00:27:58] S1: I mean, we first started as co-founders. Back in 2005, Adrian had more entrepreneurial experience, so he was taking a lead. We were friends, so it was really messy. No one wanted to take the CEO role. This is a lesson to all founders that over time we discovered that you need to have one CEO at the end. Someone needs to say this is the direction. They're not choosing, making all the decisions, but the tricky decisions that are the 2% of decisions that really make a difference, it ends up on the CEO plate. Everybody in the company needs to know, well, that person had the final say. It took us years to get to that point, but once we took the venture, it was pretty obvious that I was going to be CEO. He was going to take care of some of the marketing activities. We finally made that formal decision, but bringing outside capital onboard made us make that decision. Looking back before, it was a lot of immaturity and – not to make that decision sooner, but I’m glad we finally made it because it gave a lot of clarity within the business.