A Product Market Fit Show | Startup Podcast for Founders
00:05:47 · Pablo Srugo, Nazim Ahmed
[00:05:47] S0: What was your thinking, by the way? Just how did you make that decision? It's not easy decision to just go all in. What gave you that push? What gave you that shove to just do it? [00:05:58] S1: I looked at the two options. Number one, option one – I was in my 20s at the time, so option one, I could take a lot of risk. Option one, burn through my $20 in savings. Worst case scenario, DNA11 doesn't work and then go back to option two, which was go back to the world of biotech. Then the other option was not even give it a try, still have $20,000 in the bank, and then go right into my job, which at that time, $20,000 could mean I could take a lot of risk. For me, it was a no-brainer to just carry this through. [00:06:32] S0: I think that's true. I think, especially when you're young, you really can't lose. Worst case scenario, you just go back to what you were doing anyways, and your experience, especially at that age, is going to be seriously valued by most employers. That makes sense to me. [00:06:46] S1: Yeah, correct. Even if it ends up failing, I think people on exterior, especially today, are going to respect the fact that you took risks. You tried something interesting. Even if it didn't work, exactly, you learn a lot, and then you just move on to the next milestone. [00:07:02] S0: Was it like you go all in? You obviously experienced some serious growth. You get to a million in revenue two years in. Everything's good at that point, I mean, high margin? Everything's going well, or what are the main challenges that happened around 2007, 2008?
00:07:02 · Pablo Srugo, Nazim Ahmed
[00:07:02] S0: Was it like you go all in? You obviously experienced some serious growth. You get to a million in revenue two years in. Everything's good at that point, I mean, high margin? Everything's going well, or what are the main challenges that happened around 2007, 2008? [00:07:17] S1: No. Things were going very, very well at the time, and we just had a lot of fun. We got our portraits in the Museum of Modern Art through all their design stores in New York, so it’d be a sample portrait and a DNA collection kit. They would pay for the portrait, take the kit, send it back to us. We are running dozens of samples a day. I had a partnership with a biotech company that was doing the lab processing. I remember Alexis Ohanian from Reddit bought the – one of the first portraits and ended up – after he got it, ended up in a bunch of venture capitalist offices all throughout the Valley and in New York, which is awesome. [00:07:50] S0: That’s sick.
00:07:50 · Pablo Srugo, Nazim Ahmed
[00:07:50] S0: That’s sick. [00:07:50] S1: It became like a big Christmas gift. I remember Marissa Mayer, former CEO of Yahoo; before that, early Google, ended up buying all of her friends DNA portraits for Christmas. She spent 30, $40,000 at a time, and they were just a super fun business. It was super niche, number one, and you knew it was never going to turn into a really big thing. Number two, we just looked at it as a source of cash flow. What we did is we used that cash to develop infrastructure, develop customer service, bring our web development in-house, and really just learn the craft of e-commerce. Then, once you're in the market, you can then start seeing other opportunities where you can leverage what you built and get into something bigger, and then that's what allowed us, once we were in the market, to see in 2007 the iPhone launch. Then we saw the growth of that, so we thought mobile photographs were going to be ubiquitous. They could be everywhere, or people are going to want to do things with mobile photographs. Instead of putting your DNAs there, we did a sister company as your photos on our focus on mobile. We launched that in 2009, and then that went from a million DNA11, then 1.8, three, five, seven. It just started growing like crazy, which gave us a ton more resources to continuously do other things. [00:09:14] S0: Yeah. Before we do, I mean, you mentioned between 2007, when you're doing well in 2009, there's a period where you almost go bankrupt. What’s that story?
00:09:14 · Pablo Srugo, Nazim Ahmed
[00:09:14] S0: Yeah. Before we do, I mean, you mentioned between 2007, when you're doing well in 2009, there's a period where you almost go bankrupt. What’s that story? [00:09:24] S1: There’s various periods where you have to take some sort of leap of faith into something that'll get you to that next level, but you're going to risk your existence. There was a period where DNA11 and CanvasPop were starting to go. The back-end infrastructure was completely collapsing, and we couldn't really run a sustainable business. The only way to do it was – there was nothing, no back-end ERPs for mass customization companies at the time, and to build our own, we had to bring a solid engineering team in-house. Overhead got really expensive, and it took twice as long to build it. We ended up going through any cash that we had accumulated, and then I got to a point where I either needed to take a step back and fire the engineering team and say, geez, this is a horrible mistake, or put a line of credit on my home, bridge us until we can launch the new ERP. I ended up taking the line of credit on my house, which was ridiculous, but anyway, bridged it. We ended up launching ERP, and then, as soon as that happened, we rebuilt the sites. Conversion went up. Speed of the site went up. Efficiency went up. Profitability went up. Then we were able to quickly launch a new product, which drove revenue, but in the back end, it was profitable revenue. That allowed us to continue to build, but there was just periods where you're on your deathbed if you don't take that leap of faith, right?
00:10:46 · Pablo Srugo
[00:10:46] S0: One of the things you mentioned earlier, you have to be in the market to see opportunities. What we say on the show quite often is you have to be in the market to win the market, right? You just don't know where things are going to lead, but until you're there doing things, you just will not be close enough to the opportunities to be able to actually seize them. Maybe walk us through the iPhone comes out. You're doing the DNA printing. It's like an evolution, a pivot, whatever you want to call it, to CanvasPop. Just walk us through how that happens.
00:11:14 · Nazim Ahmed, Pablo Srugo
[00:11:14] S1: I always just looked at each business as a source of cash flow to, A, capitalize on other opportunities, or B, use it to solve my own problems that I was facing, that there was no solution out on the market. My idea was always, okay, if we could create something that would solve our own problems software based, then we can always open it up and give it to other people that are experiencing other – similar problems, and that would drive all sorts of growth and open up new opportunities. One of those examples was the back-end ERP, so once that was built and it was running everything efficiently, then we opened up an API. Then mobile and web applications plugged into us to leverage all of our infrastructure in the back end, both digitally as well as our physical infrastructure of printing and fulfillment. If you look at all of our other competitors that were just putting photos on Canvas and selling through Groupon, they never looked at their businesses that way, and they all ended up dying. It was a way of looking at our business as a source of cash to solve our own problems and then using the solutions that we solve and open it up and leverage it to create more revenue and more opportunities for ourselves. It was a unique way to look at the business, but it ended up paying off in the long run. [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?