SM: The catalogue business was at $3 million dollars. What level had it declined to when you sold it, and who did you sell it to?
RK: It had declined to $2 million and it was only in Europe. We sold it to the management team in February of 2001. We then put all of our eggs in the Internet basket. Today, our guidance to Wall Street is that we should do between $500 million and $510 million for the year. We essentially went from $0 in June of 2000 to $500 million in June of 2009 with 100% organic growth. There has been no merger or acquisition growth.
SM: If you look back at 2000–2002, what were some of the milestones that stand out in your mind? What strategic moves really made it work?
RK: In retrospect, although I would never have said it at the time, the fact that we could not raise money because of the crash saved us. A lot of companies were raising $10 million – $30 million at the time, and because they had that money they were able to live until 2002–2003. They did not have to face reality.
The money we had raised was really considered small dollars compared to Internet bubble companies. By the time we came to the US and tried to raise money, the crash had already happened. We just could not raise money. We ended up having to cut our way to profitability and force ourselves to be very lean because we had to survive on our own cash flows or go out of business.
In 2000 and 2001 that was an unusual method of operating. So many companies had $20 million of venture capital money so they did not have to do that. As much as I would like to say we were brilliant, I really think success is hard work combined with talent from a lot of different people, and some luck. We were lucky to not get venture capital because it forced us to work harder to get to profitability.
The three visions I mentioned that we conceived in 1999 turned out to be hugely successful. Desktop publishing programs that run in the browser are now called web applications and are much more common. At the time it was a huge technological advance in desktop publishing and it allowed us to give away desktop publishing programs free. The aggregation methodology I mentioned, which is the ability to take thousands of orders a day and put them into batches, was tremendously effective.
SM: How did you manage to aggregate that? Did they need to be on the same design at some level?
RK: That was the big trick. Traditionally it would have required the same design. We built software that only required cards to have the same physical format, which means they were the same size and paper type. Our software would then lay the appropriate designs over the large, table-sized, print paper. We would print a thousand sheets deep and cut them into 143 stacks. That gave us one stack per customer. That would allow us to print 143 individual designs 1,000 pages deep. That is equivalent to printing 143,000 business cards in one fell swoop.
The front end design of our desktop publishing web application let the customers design. The backend of that software aggregated that software together. It placed them into PDFs, managed the color aggregation, and handled all the other things we had to control. When we had a production run cut into 143 different stacks, the software also let us know which stack went to which customer. That is really one of the early secret sauces of VistaPrint. We applied for patents on that in 1999, and it was an area that even today is one of our great strengths.
SM: What was the competitive landscape that you came upon?
RK: Today we are the biggest, by far, in a very fragmented market. Between 1998 and early 2000, in the US alone, there was $750 million raised in the form of venture capital or IPOs in the space of e-printing. There were 75 startups just in the United States. A company called iPrint that had gone public in 1999 and raised $100 million. Kleiner Perkins, Atlas and other huge venture capitals had put a lot of money into e-printing. The world of e-printing at the time got a huge amount of financing. The competitive market was extremely crowded and remains so today.