He Almost Went Bankrupt TWICE...Then exited for $30M. w/ Canvaspop CEO Nazim Ahmed

Pablo 0:00 So Nazim's story isn't like the classic unicorn fairytale. This is a real example of what it takes to build a solid business that does over $10 million in revenue and ultimately gets acquired, in his case, for $30 million, but it was not easygoing. It's like the real roller coaster that you can expect to ride if you decide to go through this. Actually, when Nazim started, he started as a side hustle, and that same year, his boss find out that he was doing a side hustle and fired him. That's how things got started. Luckily, two years later, he was doing a million dollars in revenue, but then just when he thought he had it, once again, things changed on him, and he goes super close to bankruptcy another time, flips it around, comes back. This is a 14-year journey, a 14-year roller coaster to ultimately bring his business to $15 million in top line revenue and, like I said, a $30 million exit. It's an amazing story, full ups and downs, and you're going to just learn some real lessons from what Nazim went through. Welcome to The Product Market Fit Show, brought to you by Mistral, a seed stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early-stage founders like you find product-market fit. Naz, welcome to the show. Nazim 1:13 Thanks for having me. Pablo 1:14 You went on a pretty incredible journey. I mean, we're talking a 16-year journey from beginning to – well, end is not really – you're still going on, let's say, a different journey but at least in terms of what we'll cover on this episode, and that's normal, I would say. In the world of startups, it's – you don't flip these quickly. These always take longer than you expect, and you started in a – I would say a humble way, right? I mean, 2005 was a crazy year for you. Just to maybe sum it up, you start a side hustle. You get fired from your full-time job, and you manage to almost go bankrupt all in the span of 12 months. Let's start there. I mean, take us back to that time and how you started what I guess was DNA11 and just maybe some context, and we can go from there. The first startup Nazim 2:03 Yeah, absolutely. Yeah. My journey is definitely a little bit atypical in the startup world. My background was actually molecular genetics, so I finished my honors degree in genetics from the University of Western Ontario. I decided a life of academia was not the path, so I took a couple years of software engineering and ended up working at a Bay Area biotech company for about four years. My nights and weekends were all working on side hustle, side projects. For me, it was a creative outlet, number one, and number two, I had just a bunch of entrepreneurial friends. It was just a great opportunity to just work on ideas. After a bunch of ideas did not work, there was one idea that was never supposed to be a business, and my best friend and I at the time, Adrian Salamunovic, came up with an idea of taking people's DNA, so that was my world, and turning it into personalized pieces of artwork, and digital marketing was his world. We put our two worlds together, and we put up a website called DNA11.com, which we can get into the details in a moment. That business ended up miraculously turning into a million dollar a year e-commerce store with 75% gross margins and became my source of cash to start other companies. I can get into a little bit more of the details, if you want, on how that actually happened. Pablo 3:24 Yeah, maybe just the specifics around how you come up with that idea. I mean, it's kind of – it's out there. I know you can rationalize it because it is your world and his world. I'm just curious how did that actually happen? Hey, let's take people's DNA, take swabs of DNA, and then blow them up into art. Nazim 3:39 Sure. First it was, Adrian and I, we’re always talking about ideas, and we tried to start a couple of things that didn't quite work out initially. Then we saw this trend of personalization happening. I think, at the time, M&M’s, for example, were personalizing their M&M’s, and that was starting to become a thing in 2005, I think. I think, at that time, Nike started personalizing their shoes. My whole world of DNA and Adrian's worlds of digital marketing, he looked at his DNA images on some of my technical documents, and to him, it looked like artwork, looked like really cool design. The first idea was actually taking people's DNA and putting it on t-shirts, but the DNA processing was so expensive that no one would spend 2, $300 on a T-shirt. Then we came up with this idea of printing it on artwork so your DNA from a mouth swab, brought to a lab, extracted, fingerprinted, brought into a photo shop, colorized, printed on large, four pieces of canvases, artwork. Pablo 4:47 Did that just grow organically, or did you start running paid ads against it? How did you get it from – I guess, you started 2005. Couple years later, you’re doing a million in revenue, which is not trivial. Nazim 4:58 When we launched a website, ended up doing this launch party, and Fashion Television actually covered the launch event. The first thing that happened was we got traffic through regular PR. Adrian, his whole background was muttering up PR, and then we started seeing people come to the website. Sales started trickling in, and at the same time, my manager for biotech company saw me on Fashion Television promoting DNA11, ended up firing me. He's like, “Okay, you can't run these two things at once.” At that moment, I had a decision to make: stop working on DNA11 and go back to the world of biotech, get another job, or cash in. I think I had $20,000 in savings, try to make a go of this DNA art thing. I ended up cashing out my savings, and we just start continuously working on the site. Pablo 5:47 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? Going All In Nazim 5:58 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. Pablo 6:32 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. Nazim 6:46 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. Pablo 7:02 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? Nazim 7:17 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. Pablo 7:50 That’s sick. Nazim 7:50 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. Pablo 9:14 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? Leap of Faiths Nazim 9:24 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? Pablo 10:46 One of The pivot Pablo 10:47 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. Nazim 11:14 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. Pablo 12:29 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? Nazim 12:40 Yeah, great question. First, I always kept it under the same corporation. These were just product lines, but they're on different websites. Second is, as CanvasPop started to grow, we knew DNA11 didn't have as much growth potential, so we slowly started moving marketing resources towards CanvasPop and trying to grow that while keeping DNA11 on autopilot and not growing but using the cash flow to drive the larger potential business. Then, over time, DNA11 was dropping in revenue, but CanvasPop was accelerating much more. By the time I sold the whole thing, which we can get to, DNA11 was doing maybe 50 grand a year in the background just leveraging all the existing SEO we had, and CanvasPop was doing 15 million a year in revenue. It's a process, but you got to manage the resources very carefully and do everything at the right time. If you put everything on this – the new thing right away and the old thing that's generating cash dies too quickly, then you get yourself into trouble. Pablo 13:45 Just in simple terms, what was CanvasPop? How did that product work? What is Canvaspop and its Market Nazim 13:50 Yeah, so you come to our website. It was super simple: upload your photograph, choose your sizing, choose your frame options. Then, once the order is placed, we would print the photograph on canvas, frame it, ship it to you. First we started just in North America. Then we opened up Europe. Then, at the end of it, we were selling in over 50 countries. Before we started outsourcing our stuff, when manufacturing companies got to scale, we actually were doing all of our printing and fulfillment in-house, so I have a 30,000 square foot facility in Las Vegas. We’d ship hundreds of pieces a day out of there, and then, Europe, there was more partnerships. Pablo 14:29 Was it a competitive space? I’m curious, again, really the beginning when – to get that first million or two in revenue from CanvasPop, just what was that like, and what sort of tactics and strategies did you use to grow demand? Nazim 14:42 Yeah, great question. The first couple of years it was not very competitive, and we were early movers in the space. We were the only design players in the space, and we focus very much on user experience. We got a head start. Then, over time, then Shutterfly got into the space, and Costco got in the space. Then Walmart got in the space. Then, if you were to look at Walmart and Costco, they didn't look at these as profit centers. They looked at this as an opportunity to drive people into their store. They would sell it online, and then you had the ability to go pick up the canvas or the photo products in store. Then, hopefully, they go there, and they buy other products in store. They could really undercut you, so now it's a race to the bottom. What ended up happening, a lot of our competitors went down that race to the bottom. We took the opposite approach where we invested in innovation and technology and created all of these unique products. For example, we were the first company in the space for you to log in to your Instagram and take directly from your Instagram and have those printed as art shipped to you, and this is early on when Instagram first launched. That was something unique that differentiated us in the space. Over time, we even launched a product that used artificial intelligence to scan your image, and we called these things – called pet portraits. It would recognize if there was a pet in there. It would remove the background. It would add different filters on it. Then, all of a sudden, you have your pet stylized as a piece of artwork, but it was using all this complex technology in the background differentiating us. We focused on innovation, design, user experience, customer service while they focused on a commodity, and that's what allowed us to continue to grow but, more importantly, charge for products at a higher price. It was not a race to the bottom, and we continue to drive profits that way. Pablo 16:29 What made you bring in things like fulfillment, things that I think most entrepreneurs would think just keep outsourcing them? Is that really somewhere where you can have an edge? You brought all that in-house. A, was it a good idea, and B, why did you decide to go that way? Nazim 16:43 When we first started, I was actually outsourcing to these printing companies, and then I was trying to find a large fulfillment partner to handle our volume. There was no partner out there at that time. Keep in mind, this is super early, right? I was able to do it at scale so just slowly, one printer. One printer turned into two. First it started in my apartment. Then it started in a larger space. Then we went to the US and kept going from there, but then, over time, these larger manufacturers finally got to the point where they can handle large, large volumes. Finally, when it got to a point where we didn't have to compromise, A, on quality and, B, we found a good partner that could offer quality at scale, that's when we started looking for outsourced partners, and one of those outsourced partners that did the manufacturing was actually one of our largest competitors. They own one of the largest competitors in our space. They ended up buying us three years later, but I ended up shutting down all of our printing and fulfillments, sending all orders to them. Pablo 17:52 Let me ask you a question a bit out of left field. I think, one of the things, you obviously bootstrapped this business until you raised about three million, but that was way later. That was 2018 so more than 10 years into the entrepreneurship journey. One of the benefits of raising early on is you get to pay yourself a salary. Maybe that salary is not a 100% market, but honestly, it's pretty close. What you give up on salary is not huge. How long did it take you from deciding to take this entrepreneurship path until you got to a point where you were like, oh, I'm – I actually didn't give anything up? From a how much you're taking in perspective, you're just as comfortable making just as much money as you would've been had you just gone down that other path. Was it quick, or did it take a long time? Nazim 18:37 We were very, very fortunate because DNA11 was such a cash efficient type of business. For example, we'd sell an $800 portrait. We'd get the money in the bank. We would ship a $5 collection kit to you. Many of those kits never ended up coming back to us or ever ended up getting fulfilled, and it was all prepaid. There was no inventory, right? We ended up not really having to sacrifice much because we were able to pay ourselves just with cash flow, and then, once we got to CanvasPop, the volumes got to a point where we were able to raise quarter million debt. We had large lines of credit. Non-equity, diluted type of capital were opened up to us, and then we're able to put ourselves on decent salaries. We really didn't give up much. Nazim's Startup Advice Pablo 19:27 By the way, I do have to mention just because it popped into my head. Do you remember the time Lee and I, my co-founder at Gymtrack, came into your office when you were running CanvasPop? This was what, 2013, and we were 21, 22 at the time? You remember that meeting? Nazim 19:38 A hundred percent. I remember that very, very well. Pablo 19:43 I don't know how we got introduced to Naz. Hey, here's a successful entrepreneur in Ottawa. You should talk with him. What I remember from that meeting, we went in, and we told you what we were trying to build at Gymtrack and just everything we were trying to do. You were certainly nice about it, but realistically, these are two business guys that have no idea what they're doing. Your advice was be so sick they can't deny you. That was you that, if you guys want to raise money, you have to be so sick they can't deny you. That's what you said to us. Funny enough, Lee actually gifted me maybe a year or so later a thing for business cards we’re using at the time to hold your business cards with that imprinted inside it. Be so sick they can't deny you. Anyways, that stuck. I mean, what is it now, 10 years later? Clearly, advice that resonated. Nazim 20:33 We’re still in touch. Lee and I are still in touch. I followed your guys' careers, and I think more entrepreneurs and more founders should always just try to support each other in any way we can. I think we had a really great tight-knit of – a group of early founders at that time, and yeah, it was a great community back in the day that we were building. Yeah, I remember that time fondly. Pablo 20:59 Going back to the story and getting towards maybe the exit outcome, just walk me through the growth from, let's say, 2009 until you exit 2021. Was it just steady 30, 40% per year, or did you have some exceptional years and then some flat years? What did that look like? Nazim 21:21 It was very quick growth initially from when we first launched CanvasPop on top of DNA11. Then it gets to a point where the type of business that you have starts coming in in terms of dynamics, and it starts putting these types of ceilings on top of you. You need to figure out how to break through the ceiling. Once we got to about eight million in revenue, things really started slowing down. I remember a few years of flat eight million in revenue. To make matters worse at the time, we had launched an app in the GIF space within the company at the same time with a little small team internally, and that GIF app got to a hundred thousand daily actives very, very quickly. It was the first GIF Keyboard when IOS... Pablo 22:19 This was when GIPHY was out, right, something like that? Nazim 22:21 Yeah. GIPHY was out, and then iOS allowed you to swap your keyboards out back in 2014. Steve McKenzie, who is awesome designer and founder as well, had this idea of creating a GIF Keyboard, so we ended up building that internally with one of our developers. A co-founder, Adrian, did all the marketing, ended up taking off. Now I got this two-headed beast, this one business that is…. Pablo 22:41 What was it called? Nazim 22:41 PopKey. Pablo 22:46 PopKey, I do remember that, yes. Nazim 22:48 Yeah. That took off like a rocket very quickly, and we ended up trying to build both the same time. We extracted PopKey into its other core, raise some money. That was just two years of absolute insanity, and I learned even more than I'd ever learned before, especially raising capital and going after that type of play. GIPHY owned the infrastructure and GIPHY was building the platform, and all these other apps had no chance. I needed to go through it to understand that, and then that was the time when CanvasPop started slowing down and flatlining and actually decreasing. Pablo 23:28 Yeah, maybe if you could dig deeper there. One thing I've noticed about growth, there's something just – that feels great about growth. I mean that like it – kind of obvious, but at the same time, it's like, if you go from one to three million, you're growing and it feels great. If you're stuck at five million, you’re actually better than when you were at three, but if you're stuck there, it's not going to feel that good because you just want that growth, right? Maybe just take me through what that period was like where you were either flat or declining and then, maybe most importantly, what you ended up doing that worked to turn things, let's say, back around. Resetting Focus To Regain Growth Nazim 24:08 Yeah, sure. The first thing we had to do was press reset. I ended up sunsetting PopKey, ended up reducing our team significantly to – I went from 30 employees to 8. Pablo 24:19 Oh, wow! Nazim 24:19 It was like a small group of eight employees, and the reason I did that was I was like, okay, number one, I got to reduce all my [unclear], my overhead, my burn. I need to get laser focused, and I need to just press reset. It was a really sobering time, and what it did was two things. Number one, it made you appreciate that growth was driven by the stuff that you did a year before, a couple of years before, and it was driven by focus and positive action, so on. Then, once the growth starts happening, you start maybe taking it for granted. Then we start seeing bigger and bigger opportunities, and then we lost focus looking back on it in retrospect. The first thing was to get focused, number one, and then, number two, to get trust within the small group of employees we had. Then, number three, it was, okay, let's stabilize the existing thing that we had that was working. Then how are we going to stimulate growth? It was a process of a lot of off-site meetings. It was a lot of let's get back to what made CanvasPop special, which was innovation; launching new, innovative, different products; differentiating ourselves from the competition. We went back to that magic sauce, really leveraging technology to be able to create more unique products, and it just started taking one step at a time and putting that plan to execution. Then we started seeing growth again, so as soon as we start seeing growth again, at that time, I was like, okay, I'm not going to make the same mistake before. We're going to go and raise capital from institutional investors, some quality people. We're going to create a board. We're going to create governance. We're going to create discipline. I'm going to have a board that I'm going to report to every quarter, and we are going to make sure to run this in the most disciplined way. That was a huge, huge change. That happened in 2017. Pablo 26:14 It's funny. Most founders, at least in the early stages, want, let's say, more control, less oversight, less board. You actually went out and sought a board. How do you think about that? What drove that?? Nazim 26:26 I don't know. If we are ever going to have an exit in a sophisticated manner, that acquirer is going to open up the curtains, and they're going to do their due diligence. If everything is not very, very tight with not only your technology stack but with your HR processes and how you're running the company in a disciplined way, all of your financials are reported in a specific way with – in a sophisticated manner, they're never – you're never going to pass a due diligence. At that time, we were like, okay, I think it's time to start thinking about an exit and get this company prepared, so for me, as part of that disciplinary process, bringing on other investors that could bring that discipline and that knowledge in-house was very important. Also, having a 50/50 co-founder ownership is usually not the best at that point. You need a third party to come in to break ties and so on, and it just formalized the hell out of the business. In summer of 2021, when we went through our due diligence, everything was just so perfect, clean, meticulous that we just blew through the due diligence, ended up getting a great offer. Pablo 27:53 You mentioned the 50/50 partnership. Do you guys run this as co-CEO for the first while? 50/50 Partnership Nazim 27:58 I mean, we first started as co-founders. Back in 2005, Adrian had more entrepreneurial experience, so he was taking a lead. We were friends, so it was really messy. No one wanted to take the CEO role. This is a lesson to all founders that over time we discovered that you need to have one CEO at the end. Someone needs to say this is the direction. They're not choosing, making all the decisions, but the tricky decisions that are the 2% of decisions that really make a difference, it ends up on the CEO plate. Everybody in the company needs to know, well, that person had the final say. It took us years to get to that point, but once we took the venture, it was pretty obvious that I was going to be CEO. He was going to take care of some of the marketing activities. We finally made that formal decision, but bringing outside capital onboard made us make that decision. Looking back before, it was a lot of immaturity and – not to make that decision sooner, but I’m glad we finally made it because it gave a lot of clarity within the business. Pablo 29:15 It’s funny you mentioned it, right? Lee and I did the exact same thing at the beginning. We were actually formally co-CEO, and it was amazing until it was terrible. That's really the best way to describe. At the beginning, it's both of us. We're talking through everything. There's no staff. There's no employees or maybe there's one. Maybe there's two. The number of decisions, the velocity of decisions, how many people are impacted by decisions, all that stuff is more manageable, and it just makes sense to just debate things, hash things out, and agree on something. Then things start to grow up, and you have, in our case, 30, 35 different, employees, a bunch of different things going on. Literally, it's just impossible to agree on everything, and so now what you have is a bad system for decision-making, exactly as you point out, where every decision gets way over debated. It takes way too long to make decisions. You're in a world of unknown, so even if you debate something, it doesn't mean you're actually that much closer to the right answer. At some point, you're spinning in circles, and then everybody else doesn't know who's the ultimate decision-maker. You have a cultural problem and an actual decision-making problem, so there's a reason why, I don't know, 99% of companies have just one CEO. Some things some things are just best to copy rather than try and reinvent the wheel. Nazim 30:33 Yeah, absolutely. Then it formalizes the relationship, especially if, your co-founder, you have a long friendship history with them, so it formalizes it. Then I think it was 2018, and then Adrian realized that it was time for him to move on from the company. That also created a lot of clarity where I firmly had the CEO role. He was like, okay, it's ready for me to exit myself and let me bring it to the next level. It was very a formal process, and it was able to be done in a way where there was a framework. It was not too emotionally charged, right? The governance and the clarity is very important Pablo 31:17 As we get closer and closer to this exit, just going back to the storyline, you refocus. You rebalance. You press reset, and then you start putting things into place that should drive growth. My guess is, correct me if I'm wrong, that it wasn't one big thing but a bunch of little things. To the extent that's true, do you remember some of the more meaningful things that impacted your return to growth and got you from ultimately, I guess, 8 to 15 million, right, which is a pretty big jump? Discipline and Execution to Grow Nazim 31:46 Focus, that was the first step. Second was, okay, we've got the governance piece. We got the discipline. We've got quarterly targets. We put in OKRs, so now the company understands the execution plan. We have the right metrics in place to see if we're on track or off track, so we've got that process really, really tight. We started seeing the core business, existing business started to grow again just by discipline and execution, and then we brought in capital so that we could have a little bit of freedom to start the innovation process. Once you stabilize the core business, we're like, okay, now we need to innovate again. Then we created a small, little innovation team within the business, but this time it wasn't, hey, let's come up with a different app, like a GIF app and go totally off direction. It was let's create unique technologies that could fuel CanvasPop to have unique products in the marketplace. It was my co-founder now for my new startup, Mike Montgomery, led design. Paul Spencer, my CTO of my new startup, he led engineering and then Zak James, who was dealing with all the AI stuff. They made a small, little Navy SEAL team, and they started developing all these amazing technologies that were implementing our new products in CanvasPop. That ended up opening up all these new revenue streams, gave us new SEO terms to start racking for – ranking for, and then it really started elevating sales and creating new channels and everything. That discipline and the team inside were executing in military fashion, and it was all those series of things over the course of years put into play that got us from 8 million to 15 million. By the time the – our number one competitor, a half million-dollar company owned by H.I.G Capital, were doing all of our printing. They saw our volume go up consistently year after year, and then they started knocking on the door because they wanted to buy a consumer application to put on top of their infrastructure under printing infrastructure. They opened up our financials in they’re… Pablo 33:45 Just to back up there, they were handling your printing? Is that what you said? Nazim 33:47 Yeah. Pablo 33:47 Okay, got it. That’s how they came – that's how the partnership started. Acquisition Nazim 33:53 Yeah. When they shut down all the facilities in 2018, we put all of our – they took care of all fulfillment printing, but they were owned by a private equity firm. They also owned our number one competitor, so it was really weird. The funny thing is, in 2018, when I was looking for partners, I ended up getting in contact with the CEO of that company, Andrew Cousin. There's a lesson to be told to reach out to your competition that are much bigger for you because my competition ended up purchasing us at the end. We built a relationship and built the trust over several year, and then, finally, it just made sense. They saw our volume. They saw our numbers. They're like, okay, if we just buy you for X dollars, then we'll increase profit by this much because we're taking care of all the manufacturing. We'll take your profit, so it just is – was math at the end of the day at how much we are worth. Building relationships in the industry, even if they are your competitors, is actually a good thing, and I didn't realize that in my younger years. Pablo 34:49 Was that by design? You did mention, when you raised this round, you did start thinking about maybe at some point you want to exit. Did you think, okay, these are – this is one potential acquirer, or was that much later in the journey that they just came knocking and you were surprised by it? Nazim 35:02 Yeah. I thought at the time that they were a potential acquirer, and they started rolling up several of the companies in our space. Then, the fact that they were owned by H.I.G Capital, they had several competitors that were not as well funded. I had something to offer, which is our volume, so they could drive their revenues. I really focused on the player that was owned by the large private equity firm because I – and were doing rollups and acquisitions. I said let's align myself with this group because eventually this could end up turning into something more. I made that relationship about a year before pushing all the volume over to them, and that conversation, the CEO at the time gave me something to focus on. He said, “If you have a company growing 20% top line in our space and then leaving 20% net profit after everything, then you've got something special.” I actually focused all of our metrics to get those two goals, and then part of that process was outsourcing our manufacturing, increasing our gross margin to keep getting to those metrics. Then it was obvious that I was going to call Andrew and the guys at Circle Graphics to be our partner. Pablo 36:18 What did that feel like? First of all, just negotiating the price, getting to something super interesting, $30 million all cash for a company that wasn't fully bootstrapped but you still owned a serious amount – it's not like you own 5%. Then getting that across the line and getting the wire coming in, walk me through all that. I mean, that just must be such a – stressful but then, ultimately, magical moment. The Negotiations for Being Acquired Nazim 36:41 Oh man, Pablo, we're talking at that time 17 years, and then, during the entire time, we sold over $100 million worth of art over the course of all those years, right? We built something great, but it was a long haul. It was a long haul. You can never sell something on the way down. The only time you're going to get an offer for anything is it – it's when things are flying up into the right. When I was on my deathbed after PopKey, I actually tried to – I started looking for acquirers when growth was flat, and I was getting one to $2 million offers for the whole effing business. I'm sitting there like, wow, after all those years. Then I just cover the debt, and then I got another million to distribute. This is brutal. When you take that off the table and you start cleaning up the thing that you have and then we started turning the business around, by 2021, it was flying, high margin, super profitable, all this innovation coming out, new products, growth is going up direction. Then that's the time where you either got to raise money and keep going the next level, or you have options, optionality. I remember speaking to the CEO of our manufacturing company, Circle Graphics, and we just used to jam every few months. I told him, “Hey, we have this innovation team internally. We came up with some really interesting technology, and I think I can have some really interesting products using this tech. I'm thinking of maybe doubling down on that part of the business and creating some new purely digital products.” Then he said, “Well, you could just focus on that and sell CanvasPop.” I didn't even know that was – it wasn't even part of the conversation. As soon as he said that, I was like, huh, interesting. It's like, well, let's explore that. It was very natural and organic, and by that time, we were friendly, right? Then we did a mutual NDA. Then we started sharing some financials. One part is they knew what the volume was or growth volume on their end, but they didn't know what our financials were because we could be blowing all the money on marketing and being very unprofitable. When they looked at the financials at first glance, they were like, okay, these are looking very, very good because we focused on innovation. It wasn't a race to the bottom. We are highly profitable. They had all the metrics of all these other companies out there, so they knew that they found a diamond the way we were building products. Then it went from there, and they put in some initial numbers together. Then they went through that first term sheet, but then you got to go through due diligence. That due diligence was we tried to get it done in six weeks, but it ended up taking two months. It was actually a really positive experience. At that point, everything was so clean and so perfect that we blew through the process. Now, that last call, when all the lawyers are on the call and then they all approve the acquisition, it's just really interesting process, and it was during COVID. I never shook hands with Andrew. I never went down, and he said, “This is a – one of the unique times.” I'm doing this all through Zoom, and then he had a few words to say. Then I had a few words to say, and at that moment, you hang up. Then the money all gets wired to everyone. Pablo 40:14 Incredible. Nazim 40:14 When I hung up – and I owned 35% of the company at that point, right? Seventeen years, everything, I hung up, and I felt like I was on the battlefield. Was it a billion-dollar exit? No. Was it a 100 X for my investors? No, but it was a four X for all my investors within three and a half years. It created a ton of trust with us. I finally got some cash off the table. When the money came out, funny thing is everybody got their money in their account within hours, and my check was the only one – my wire was the only one that got stuck. It ended up going into some ether, and I knew what it was. Not to get into the details, but it was my name is Nazim. I mean, I won't say anything, but it was across border, very large eight-figure check into a personal account that never had that much money before. It disappeared, and no one could find it for 10 days. Obviously, there was some heavy due diligence happening like who is he? What’s this all about? Anyway, to make a long story short, it finally showed up, and then I just thanked my wife for dealing with me for all those year and the line – and signing on the line of credit and getting me through all those moments and at the same time, I raised $3 million for a new startup from all just the investors because I built that trust, and then I was off. I took three days off and I was off [unclear] because I looked at it as okay, the job's not done. I went on to build a really big company, but I looked at it as the next milestone. Man, it was a great feeling. Pablo 41:30 How much time from that first conversation where you opened this idea of selling until Wire lands in your account? Nazim 41:30 I think the whole process took about two and a half months because once a conversation happened, very quickly, within a couple of weeks, we got to an initial term sheet. Then it went through two months of due diligence. Of course, like I mentioned, it was three years of relationship-building, then really getting comfortable with us as a brand and so on. So it always starts much, much earlier. Pablo 41:30 Did you manage to keep yourself grounded during those, let's say, three months, or were you counting dollars? It's hard not to. You got this big, life-changing amount of dollars coming to your bank account. I remember when I -- I've told the story many times -- almost got acquired. I was much younger than you were at the time, so probably much dumber. But combine stuff in my head but wow, blah, blah, blah. What was that like? Nazim 41:30 I think during at that moment, I think it happened to me at the right age at that point. I'm 45 years old. I've got two kids at that point where were 9 and 11. I was still sobered up by that point that it was a very different focus. It was get this over the line, do good by my investors, do good by my employees. Okay, what's next? What am I building next? So it was a little bit of a different thing than if i had done it in my 20s, which I probably wouldn't have had the maturity to get it there. Then as soon as the money came in, it was really paying off mortgages and then talking to wealth advisors and doing all the nerdy stuff but had a little bit of fun. I won't get into it, but I had a little fun for the first few months with family. I got some major, fun purchases. My brain was like okay, what can I build now that I don't have a noose around my neck of mortgages and always on the edge? I could take some more risk and swing bigger. That's what the freedom was. That's the best feeling on earth. Now I'm a year and a half into the new startup and crazy first year. That will be the next show, but we're starting to see product market fit now, so it's exciting times again. Just went right back into the fire. Okay, what can I build now? Pablo 41:30 Okay, let's stop it there. I'll ask the last two questions that we always end on. Looking back now at DNA11 or CanvasPop, when was the first time you felt like you had true product market fit? Nazim 41:30 For DNA11, it was the first news article where USA Today wrote an article on it, drove a significant amount of traffic on the website, and the conversion completely matched the conversion that we're seeing when we had low volumes and we started seeing sales after that daily. Network effects started growing in terms of our existing customers sharing with their friends. It was at that point that I knew okay, this is something that is still niche but we can at least scale. For CanvasPop, it was we're building DNA11, and we had all these printers going. Then two things happened; one, my friend was working for Sleiman's at the time, and he came to me and he said, "Hey, I have $30,000 budget for artwork all throughout all of these bars all across Canada. Can you make these Sleiman's art portraits for me?" Here I am selling DNA portraits and then in one go, I get a $30,000 check. The second thing that happened to me is everyone started coming and asking, can I get my photos printed as artwork? Then at that point, we're like okay, now there's a demand. Launch the website so we can do it at scale. Then from day one, we had DNA11 customers we seeded with, and then we started seeing sales immediately, so you know. Pablo 41:30 Then the last question, now you started a new company called Remix. What's one of the biggest -- taking everything you've learned over the last 15-plus years, what's one of the biggest lessons or pieces of advice that you've ingrained in yourself as you start this new venture? Nazim 41:30 Number one, be ready for a 20-year commitment. It's a marathon, not a sprint. Number two, collaboration over competition. You don't do it alone. You look for ways to collaborate with other entities that can help you keep getting to the next level if you can bring the valley also. Number three, focus, focus, focus, focus as much as you possibly can on one problem and solve that problem the best you can, but it could be in different ways; really laser-focus on that problem. Then finally, last but not least, don't take any sort of finaicial transactions, sale online, getting your first customers for granted. That is magic when that happens. Get even more focused and really double down as to what drove that transaction so you can do more of it. That's it. Pablo 41:30 Perfect. Nas, thanks so much for taking us through all that. That was awesome. I think founders are going to love it. Nazim 41:30 Thanks, Pablo. Can't wait to come back in a couple of years for the next one. Pablo 41:30 If you listened to this episode and this show and you like it, I have a huge favor to ask of you. Well, it's actually a really small favor but has huge impact. Whichever app you're listening to this app on, take it out. Go to Product Market Fit Show and leave a review, please. It's going to help -- it's not just going to help me, to be clear. It's going to help other founders discover this show becuase the algorithms, whether it's Spotify, whether it's Apple, whether it's any other podcast player, one of the big things they look at is frequency of reviews. It's quantity of reviews and the reality is, if all of you listening right now left reviews, we would have thousands of reviews. So please, take literally a minute, even if you're just writing, "Great podcast," or "I love this podcast," whatever it is, just write a few words. Obviously, the longer, the better. The more detailed, the better, but write anything. Leave five stars and you will be helping me but most importantly, many other founders just like you discover this show. Thank you.