#1051 Stephanie McVey On Operating An 8 Figure Photo Business

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. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  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 SmugMug. In this conversation, we talk about how photos are digital assets, their acquisition strategy, including their acquisition of Flickr, and how SmugMug 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

• 0:43Anthony Pompliano?

  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 Mining's "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

• 1:23Anthony Pompliano?

  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/pomp. Again, pipe.com/pomp to start trading today.

• 1:49Speaker 01

  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.

• 2:12Anthony Pompliano?

  Stephanie, how are you?

• 2:13Speaker 02

  Good, how are you?

• 2:15Anthony Pompliano?

  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 it's 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?

• 2:39Speaker 02

  Yes, it really is. And it's a digital asset management to platform.

• 2:45Anthony Pompliano?

  Yeah.

• 2:46Speaker 02

  Yeah.

• 2:47Anthony Pompliano?

  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 you give us a little bit of the background. So I think it was a husband-wife team started the company in 2002?

• 2:58Speaker 02

  Yeah, it was actually a father and son.

• 3:00Anthony Pompliano?

  Father and son, okay.

• 3:02Speaker 02

  Yeah, Dawn and Ben, or Dawn and Christmas Caskill started the business in 2002. They created this platform, as you said, to securely store, organize, and sell photos online.

• 3:18Speaker 02

  In 2002, this is one of the first consumer SaaS-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, all of the above. The business has been bootstrapped from the beginnings. 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.

• 4:01Speaker 02

  Flickr itself is sort of one of the internet's first photography communities. It really encompasses a huge diversity of users, images, and interests, and is also one of the world's greatest and largest collections of open content. So we love Flickr from the beginning, and we're excited to work with them.

• 4:27Anthony Pompliano?

  So when you start to think about this business, bootstrapping it for 20 years, why did they do that? Why did they not raise any money?

• 4:36Speaker 02

  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.

• 4:58Anthony Pompliano?

  What is that certification? Explain that, the evergreen company?

• 5:02Speaker 02

  Yeah, it's part of the tugboat institute. And it's really to build a 100-year company. We want to be forever. These are people's photos. They are safe. We want to protect them. And Flickr is one of the largest historical preservation and digital assets that the world stores for the public use. So, we also take a very... we take that very seriously.

• 5:33Anthony Pompliano?

  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? Or like, what is the relationship there?

• 5:54Speaker 02

  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.

• 6:23Anthony Pompliano?

  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, you know, 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 acquisitions 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.

• 6:53Speaker 02

  Yeah, for us, this really is it a value based business or values aligned as 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.

• 7:10Anthony Pompliano?

  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?

• 7:26Speaker 02

  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, Dawn, we were huge fans of the platform and, and we, 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.

• 8:01Anthony Pompliano?

  Yeah. And then the business today, how fast is it growing? How big is it? Like, what metrics do you all share publicly?

• 8:07Speaker 02

  Yeah, right now, today, both platforms generate about $75 million of revenue annually.

• 8:16Speaker 02

  The first mug mug particularly, our e-commerce sales growth is the strongest we've seen in the decade.

• 8:24Anthony Pompliano?

  Wow.

• 8:24Speaker 02

  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 accrue our revenue probably by 43% and expanded our business internationally.

• 8:43Anthony Pompliano?

  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 SmugMug. 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

• 9:23Anthony Pompliano?

  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?

• 9:39Speaker 02

  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, inconvenient. 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.

• 10:22Anthony Pompliano?

  And when you look at that, talk a little bit about like cash flow. You're CFO, right? So you think about numbers all day. You're smarter than me for sure, when it comes to that stuff. But like, 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 subscription. But what, when there's something seasonality, right? 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, you know, changes for this season? Like, how do you approach that as a CFO?

• 10:52Speaker 02

  Yeah. The most important thing that I've been working to do is making sure we align the company's strategy with the finance strategy.

• 11:01Speaker 02

  And we can make strategic investments when we do that. So for example, taking advantage of marketing opportunities, we can leverage pipe to ramp, 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, you know, 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.

• 11:45Anthony Pompliano?

  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?

• 12:07Speaker 02

  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.

• 12:44Anthony Pompliano?

  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?

• 12:59Speaker 02

  Yeah, it's really interesting. We've had a long history of being early industry adopters for new technologies. We were one of AWS's first clients. 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 early on and they've been performing well.

• 13:25Anthony Pompliano?

  Yeah, it's pretty cool. John, what questions do you have?

• 13:28Speaker 03

  Hi Stephanie, nice to meet you. 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?

• 13:41Speaker 02

  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 don't... We refer people back and forth. We have annual and monthly subscription services. So the cost of capital for Pipe has been great because we can leverage those monthly subscriptions. And it's actually a win-win for both us, the consumer, and Pipe.

• 14:23Anthony Pompliano?

  Gotcha. Yeah, 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?

• 14:34Speaker 02

  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.

• 14:49Speaker 02

  And we think photography is especially a powerful medium for that.

• 14:54Anthony Pompliano?

  The part that you left out is also profitability, 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 hired CEO? Or to have the business sold to somebody else that didn't start it and still keep that same thought process?

• 15:29Speaker 02

  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.

• 15:43Speaker 02

  You know, I can't tell you what the future holds. We will evaluate opportunities as they happen. But right now, our goal is to build for the long term.

• 15:53Anthony Pompliano?

  Yeah, that's awesome. Where can we send people to find more about SmugMug, Flickr, or yourself on the internet?

• 15:58Speaker 02

  SmugMug.com and Flickr.com. Head over there. It's awesome. It's a wonderful community.

• 16:05Anthony Pompliano?

  I love it. All right. Thank you so much for taking the time to join us. Anyone who wants to go check it out, go to SmugMug.com and we'll talk soon.

• 16:13Speaker 02

  Thank you.

• 16:14Anthony Pompliano?

  All right, bye. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe 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 pompscryptocourse.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 pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.