SM: So you did not really take that model to market.
RK: When we finally launched I was able to convince Microsoft France to distribute our catalogues in every box of Microsoft Publisher. That gave us a mechanism to reach out to small businesses who were already buying desktop publishing and who we thought would also be interested in the types of products we sold.
SM: What year did that happen?
RK: In November of 1995 we launched the direct marketing catalogue.
SM: What did you experience in the marketplace once the catalogue hit the market through Microsoft?
RK: In November of 1995 there was the worst general strike in France since 1969. All the catalogues were worthless, and we almost went out of business. We restarted again in the spring of 1996. We saw great uptick when we went from zero revenues in 1995 to 21 million francs, or 2.5 million euros, by 1999. It was a tough time due to the strike at first and lack of financing later on, but we were a profitable business. I was hanging on by my fingernails to make sure the company could make it financially. Once we got the distribution contract we grew robustly and we were quite profitable.
SM: Where you still based out of France in 1999?
RK: We were still in France.
SM: You mentioned you had a lack of external financing. Did you ever raise funding?
RK: We did finally raise money in 1997 from Sophie Nova. We raised 8 million francs.
SM: What happened in 1999 after you hit $3 milion in revenue?
RK: By that time we were a 30-person company and we could see a storm brewing with our business model. There were a couple of problems we saw on the horizon. One was that Microsoft had been a great partner, but they only sold a certain number of boxes and they did not want us constantly going out to their base and marketing to their base progressively. When we were trying to market outside of Publisher, the cost to acquire a customer in a direct marketing model was ten times as expensive as it was to acquire them via Microsoft.
We had grown very quickly by sending small businesses that used Windows, Word, or Excel a direct marketing magazine. We would encourage them to buy Microsoft Publisher as well as our products. It allowed us to grow strongly, but once we got through their database and install base we could not grow as fast. [Microsoft] did not want us to advertise to anyone other than their new customers coming in as opposed to their existing install base as we had previously, so our revenue started falling.
Also, we had moved into a lot of areas and we were giving 70% of what we sold to Microsoft. It was a love-hate relationship. Finally, the Internet was happening. It was attractive and frightening. In January of 1999 we developed a business plan to move away from a direct marketing via catalogue to become and Internet-based marketer of small business printing.
We saw the writing on the wall that our revenues were going to fall, so in 1999 we started developing a desktop publishing program that ran in the browser. Today we call it Vista Studio. It was a drag-and-drop functionality. It felt like software you would run on your desktop but it was entirely contained in the browser. You can still see this today if you go to VistaPrint, because you can still do all of the design elements via your web browser.
The idea was to give it away free across the Internet and then utilize the Internet to conduct our direct marketing. We came up with a production technology where we aggregated orders together. Those three changes, in retrospect, were important in changing the trajectory of VistaPrint.
We raised more money the spring of 1999. Since we were an Internet company by then it was not hard to raise that funding, so we picked up another $3 million that year. In 2000 we moved to the US to launch into the US market for Internet-based printing for small businesses. The crash then came, and we got into a lot of trouble. We had to restructure, and we sold off the declining catalogue business to focus exclusively on the Internet business.