The Pomp Podcast - #1051 Stephanie McVey On Operating An 8 Figure Photo Business

Episode Date: July 17, 2022

Stephanie McVey is The CFO of SmugMug. In this conversation, we discuss how photos are digital assets, the acquisition of companies like Flickr, operating as a private family business, navigating difficult economic conditions, and how SmugMug incorporates Pipe for their reoccurring revenue. ======================= Crypto is all about giving the power back to the people and our sponsor, Pipe, is doing that in a big way. Pipe is the world’s first trading platform that allows you to trade recurring revenue streams for up-front capital. And with Pipe’s new API, companies with recurring revenue can build seamless, embedded financing options into their platforms. One of the most interesting uses for Pipe’s new API right now is Compass Mining’s “Mine Now, Pay Later” which powers payment plans on bitcoin mining hardware so more miners can start or scale with a smaller up-front investment. Whether you’re looking for mining hardware or scaling any business with recurring revenue, check out Pipe to access growth capital with: No loans. No dilution. No restrictive covenants or warrants. Just growth on your terms And right now, Pomp Podcast listeners can access tens of thousands of dollars even millions fee-free for 12 months. Whether you are a bitcoin mining company looking to enable financing for your customers or a SaaS, DTC, or any business that has recurring revenue, sign up at http://pipe.com/pomp to start trading today. =======================

what's up everyone this is anthony pompliano most of you know me as pomp you're listening to the pomp podcast simply the best podcast out there now let's kick this thing off stephanie mcveigh is the cfo of smug mug in this conversation we talk about how photos are digital assets their acquisition strategy including their acquisition of flickr and how smug mug has used pipe for alternative financing given that it's a privately held family-owned business that's been profitable for many, many years. I really enjoyed this conversation with Stephanie, and I hope you guys enjoy it as well.

Before we get into this episode, though, I first want to talk about our sponsors. Today's episode is brought to you by Pipe. Crypto is all about giving the power back to the people, and our sponsor, Pipe, is doing that in a big way. Pipe is the world's first trading platform that allows you to trade recurring revenue streams for upfront capital.

And with Pipe's new API, companies with recurring revenue can build seamless embedded financing options into their platforms. One of the most interesting uses for Pipe's new API right now is Compass Minings, mine now, pay later, which powers payment plans on Bitcoin mining hardware

so more miners can start or scale with a smaller upfront investment. Whether you're looking for mining hardware or scaling any business with recurring revenue, check out Pipe to access growth capital with no loans, no dilution, no restrictive covenants or warrants, just growth on your terms.

And right now, Pomp podcast listeners can access tens of thousands of dollars, even millions, fee-free for 12 months. Whether you are a Bitcoin mining company looking to enable financing for your customers, or a SaaS, DTC, or any business that has recurring revenue, sign up at pipe.com slash pomp. Again, pipe.com slash pomp to start trading today. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions. and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement

to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Stephanie, how are you? Good, how are you? I'm very excited to talk to you. Most people who are watching or listening to this

are gonna be like, why are they talking to somebody about photos and the ability to kind of protect, share or sell their photos? But ultimately, is it fair to characterize what you all do as its intellectual property? Like it is a digital good that is the business that you've built? You're helping people do things with those digital goods? Yes, it really is.

And it's a digital asset management too, platform. Yeah. It's crazy to think of it that way. Like most people when they hear photos, it's just, oh, it's a photo. But you all have built this entire business. Maybe give us a little bit of the background. So I think it was a husband-wife team started the company in 2002? Yeah, it was actually a father and son.

Father and son, okay. Yeah, Don and Ben, or Don and Chris McCaskill started the business in 2002. They created this platform, as you said, to securely store, organize, and sell photos online. uh in 2002 this is one of the first consumer sass-based businesses online and really sort of pioneered the subscription-based services that we see today so we have a variety of plans and they serve all photographers client photographers event photographers art personal hobbyists uh all of the above uh the business has been bootstrapped from the beginning. So we are privately held. But despite that, we've made multiple acquisitions

over the years. Most notable is Flickr. And we've also made some crypto investments over the years as well with our own money. Flickr itself is sort of one of the internet's first photography communities. Uh, it really encompasses a huge diversity of users, images, and interests. And it's also one of the world's greatest and largest collections of open content. So, um, we love Flickr from the beginning and, um, we're excited to work with them. So when you start to think about this business, um, bootstrapping it for 20 years, why did they do that? Why did they not raise any money. I know. It's crazy, isn't it? It's a family-owned business. They wanted to remain private and profitable and that's going to go all along and it continues to be. We were

actually certified as an evergreen company last year, which was exciting. And it's the goal really to build for the long term. So purpose-driven, private, profitable, all of those things. What is that certification? Explain that, the evergreen company. yeah it's part of the the tugboat institute and it's it's really to build a hundred year company we want to be forever these are people's photos they are safe we want to protect them and flickers is one of the largest historical preservation and digital assets that the world stores for the public use. So we also take that very seriously. When things like Instagram come along, most people, when they see something, they're like, oh my God, something like SmugMug

or Flickr, like they're in trouble. It's over. There's this new consumer platform. How do you all look at those types of platforms? Is that something that actually provides like a tailwind because people are creating more photos and they're doing more things on the internet with photos? What is the relationship there? Yeah, that's an interesting question. We serve a lot of different things. And again, being private means we take privacy very seriously. We don't sell data. Your stuff is secure and safe over the long term. So that's been an important differential. We don't sell data. And it does provide a long-term solution for your photos. So it's very different. And photographers are running their business off of our platform.

Yeah. When you think about being a privately held company that has raised no capital and profitable, it gives you lots of optionality, obviously. Talk a little bit about the acquisition strategy that you all have pursued. So obviously the Flickr one, everyone will know that company or have heard of it, but you've done other ones as well. And so how do you all think through when should we make an acquisition, which acquisition should we do, and maybe times where, hey, that's an interesting company, but not really the one that we want to go and acquire? Yeah, for us, it's really, is it a value-based business? Are our values aligned? Does it complement our existing portfolio? Our purpose is to build a better world through the power of photography.

So it's all photography-based and surrounded, and we stay true to that. Yeah. And then talk me through the Flickr deal itself. Like how did you all come across that business? Why that one? And any details in terms of like how the deal was structured? I don't know if you can share numbers, but maybe just like how you think about the structure of these acquisitions as well? Yeah, you know, the Flickr acquisition was performed before I joined the company. So I'm not, I can't share details. But I know that Flickr has been loved by the organization from its very beginning, our founders, Don, we were huge fans of the platform. And we have deep expertise in running a profitable online photography community. So we saw the opportunity and thought we could become a refreshed vision and approach to the platform. Yeah. And then the business today, how fast is it growing? How big is it? Like what metrics do you all share publicly? Yeah, right now, today, both platforms generate about $75 million of revenue annually.

For Smug Mugs particularly, our e-commerce sales growth is the strongest we've seen in a decade. Wow. Our photographers are making more money on our platform than ever before, which is really exciting. And the Flickr acquisition is much more of a global community. So we've had to, it grew our revenue probably by 43% and expanded our business internationally. And when you think about a business doing $75 million a year in revenue and is profitable, obviously, you've got cash flow that you can either save, you can invest, you can kind of do different things. You've never raised outside capital. I was introduced to you all through the people over at Pipe, who we do a bunch of work with and are one of the sponsors of the show.

And I asked them, I said, hey, who is somebody who uses Pipe? Explain to me how this works. and they were like, let us tell you about Smug Mug. And I went down this deep rabbit hole and I gotta say, I walked away and at first I was like, a photo site? Like, wait, why are they doing this? And then when I learned more about the profitability

and the revenue numbers and all this, I was even more fascinated. So talk about using something like a pipe, which allows you to kind of access cash on money that you haven't yet been paid or on subscriptions. Like, why do that? Yeah, well, as a technology company, our biggest asset is our recurring revenue and our subscriber

base. We were looking at, we do have a seasonal business or we have seasonality within our business. So treasury management becomes an issue and we want to invest in growth as we see opportunities. And Pipe was just the perfect partner for that. So it aligned with our evergreen principles. Traditional banking was a little too restrictive and convenient. There's extensive reporting requirements. And we really needed a finance strategy that was agile and non-dilutive. So Pipe was a perfect fit for us and it's been a great success. And when you look at that, talk a little bit about like cashflow. You're a CFO, right? So you think about numbers all day. you're smarter than me for sure when it comes to that stuff. But how do you think about managing

cash flow? You have subscriptions, so there is some predictability to it compared to a business maybe that doesn't have a subscription. But when there's something seasonality, there's some seasonality to the business. Do you just look at last year's seasonality? Are there things that you do to try to predict changes for this season? How do you approach that as a CFO? Yeah. The most important thing that I've been working to do is making sure we align the company strategy with the finance strategy. And we can make strategic investments when we do that. So, for example, taking advantage of marketing opportunities, we can leverage pipe to ramp those efforts quickly, despite maybe the seasonality of our business. But we do have seasonality. We have prints and

gift sales. We're not just subscription-based. We also have physical goods moving and selling across the world. So those are seasonal at times and even subscriptions. We have a large chunk of renewals in a specific part of the year. So we leverage Pipe to sort of flatten that out and still allow us to manage that treasury proactively. Yeah. And then what are the big things that you all want to invest in going forward? Obviously, there's many people who are pontificating thinking that we are going to head into a global recession or some sort of bad economic time. I have no clue if you all take macroeconomic views in terms of decisions you make inside your business. But what are you all thinking about from an investment standpoint

moving forward? Yeah, that's really interesting. We're focused on growth. We don't we're not overly focused on macroeconomics. We want to we focus heavily on our customers and making sure we're serving their needs. Photography we've been through, we've been around for 18 years. We've been through multiple cycles of economic growth and contraction. So we have a good history there. These are people's photos and memories. It's pretty stable. And we hope that we can support our photographers in selling more and making more money on our platform during these harder times. And you mentioned earlier that you all have made some crypto investments, which, you know, SmugMug, Flickr, amazing businesses, not exactly what people would think of in the

crypto industry. What were those investments or kind of what is the interest level there? Yeah, it's really interesting. We've had a long history of being early industry adopters for new technologies um we were one of aws's first clients uh we were in one of the first apps in the apple app store and that's why we adopted pipe so early so we did make bitcoin investments um early on and they've been performing well yeah it's uh it's pretty cool john what questions do you have hi stephanie nice to meet you um i am curious your guys cost of customer acquisition, like where do you guys try to move people? Or do you try to send someone to Flickr versus SmugMug? Or like, how does the relationship between the two apps or companies work?

Yeah, that's really interesting. They're two very different platforms, right? SmugMug is to store, organize, sell your photos. Flickr is a community. So Flickr is a community for inspiration, sharing, and connection. So it's based on the individual's interests. And we we don't, um, we, we refer people back and forth. Um, we have annual and, uh, monthly subscription services. So, um, the cost of capital for pipe has been great because we can leverage those monthly subscriptions. And, um, it's actually a win-win for both us, the consumer and pipe. Gotcha. Yeah. It's a, it's pretty cool. Stephanie, when people think about this business, What do you want them to kind of take away in terms of – is it just making a better world through photography?

It really is. It's that simple. I mean we make all of our decisions around that single purpose, and we're builders. We build things. We build platforms. We build teams and businesses. So – and we think photography is especially powerful medium for that. So the the part that you left out is also profitability, which is which seems to be a new idea to some, but also an important idea.

And maybe the last question for you is just like when you think about the business, how important is private family owned in the long term thinking? Like, could it be possible to have a, like, hired CEO or to have the business sold to somebody else that didn't start it and still keep that same thought process? You know, we haven't thought that all the way through. Right now, it is extremely important. And profitability as a private business is also extremely important because that's the fuel to keep us going. You know, I can't tell you what the future holds. We will evaluate opportunities as they happen. So, um, but right now our goal is to build for the longterm.

Yeah. That's, uh, that's awesome. Where can we send people to find more about SmugMug, Flickr or yourself on the internet? Uh, SmugMug.com and Flickr.com. It's awesome. It's a wonderful community. I love it. All right.

Thank you so much for taking the time to, uh, to join us. Anyone who wants to go check it out, go to a SmugMug.com and we'll talk soon. Thank you. All right. Bye. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify,

or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program

with over 50 events packed into that three-week time period. Go to palmscryptocourse.com to learn more and I'll meet you guys for the next episode. Thank you.