How Issuu Reached Profitability in 2016 and Built a Sustainable Pro-Grow Business (Talk by CEO Joe Hyrkin)

Joe Hyrkin Introduces Issuu and the Talk's Theme

Joe Hyrkin

00:00Hi everybody. I'm Joe Hyrkin. I'm the CEO of Issuu. We're this massive digital publishing platform that enables marketers, content creators, businesses to take all of their marketing materials, brochures, catalogs, all the kinds of content that they're using to tell their story to their audience, turn it into the right set of digital assets that they need, and then share and distribute it wherever they need that content to be seen by their audience. And I'm going to talk

Why Profitability in 2016 Was Unconventional

Joe Hyrkin

00:27today about how we got Issuu, we're venture backed, how we got Issuu to be profitable in 2016 and lessons that we can all be learning from that hopefully right now in the midst of looking at profitability as well.

00:43So I'm going to talk a little bit about what was happening in the tech economy and ecosystem at the time, how we were working on lining up investors to raise some additional money, and then how we started to look at moving into a profitability world and then how we started communicating to our customers and to our employees as well throughout that process.

01:11So I'll start off with sort of how we began to unlock this idea of what I like to call a pro grow, profitable and growing. And back in 2015, 2016, the notion of profitability for a tech company was not all that popular. Certainly, in the last few years, it's been it hasn't been popular at all. There's been this focus on growth at all costs. And yet, I think if we look at businesses, particularly in the tech

The 2015 Fundraising Environment and VC Interest

Joe Hyrkin

01:41world that we most admire, we tend to think about, we tend to sort of dismiss and ignore the fact that they're all profitable. If you look at the big companies that we most respect and that have had the greatest impact on society, on the world, around products and how people are using them and engaging with them, these are all profitable companies or in the case of Amazon could be profitable if they manage things a little bit

02:07differently. So the truth is the sort of secret of of successful tech companies actually is profitability, but often it's ignored and it's it's not always as fun as just sort of reckless growth at all costs mentality and especially right now as we move into kind of a new environment, the notion of profitability becomes increasingly important and really a necessity. So in 2015, Issuu — we were in the midst of the second half of 2015, we were looking at raising

02:41some additional capital to sort of power additional growth and innovation

02:48in our business. And we had some really great conversations with VCs, significant serious interest particularly in Q4 of 2015, and we were getting to the point where we had multiple VCs lined up to invest significant money into Issuu in a growth round. We were in those discussions in December, the holidays hit and we agreed we'll revisit this in Q1. And for those of you who remember at the time, Q1 of 2016, we began to

03:22get scared around the economy. There were indications that the economy might start to have challenges. It was nine months prior to the election and we were in one of those times when, particularly, investors started to caution their companies around getting more profitable and investors themselves started to get cold feet around actually making deeper investments. And we started to see articles come out and proclamations come out from the venture community that were

How Q1 2016 Changed the Fundraising Landscape

Joe Hyrkin

03:58similar to the Sequoia memo of 2008 and the Sequoia memo of 2020 and the Sequoia memo of 2022, but in 2016, we started to see the beginnings of some of that communication. So for us what happened is again in December, we had really strong interest from multiple VCs. We had really good discussions around valuation, a nice plan to use that money to power growth, and not much of an emphasis on the need to get to profitability.

04:30We had promised term sheets that we expect to come in. As these articles came out and as people started looking at the economic environment and the concerns,

04:39and the calendar turned to early 2016, I went to revisit some of these conversations with the VCs that were ready to start giving us term sheets. And in early January, all of them actually started to change their tune. And they were saying things like, well, we really like your business, but actually we're concerned about the economy right now and we're we're putting a halt on any investments for the next six weeks while we

05:06start to reevaluate things. And as we started talking to them more, they the companies, the investors that were looking to invest in companies that were doing in the

05:19$10,000,000 to $20,000,000 in revenue were now looking for $20,000,000 to $30,000,000. Companies that were looking for a particular growth trajectory were now looking for more growth trajectory. The VCs were starting to look for more sort of more a deeper understanding of the growth opportunity that existed and they were also starting to emphasize profitability. And so we began to look at how do we actually turn Issuu into a profitable company. How do we start to move

05:54the business rather than rely on this sort of growth-at-all-costs trajectory for the business and having to constantly rely

06:05on VCs,

Three Months of Business Analysis Before the Pivot

Joe Hyrkin

06:07we wanted to control our own destiny. So we spent three months really digging into the business. What were the core things that we needed

06:17to be looking at? What were the ways in which we needed to innovate around the product? What were the areas that we needed to streamline around our initiatives and around innovation? And we put all those pieces together and in June 2016, we decided to communicate very clearly to the whole company, we are moving Issuu into a business that is what we like to refer to as a pro grow, profitable and growing. Not just profitable, it's not

Announcing the Pro-Grow Strategy to the Company in June 2016

Joe Hyrkin

06:48profitability at all costs or growth at all costs, it's this combination that actually creates long term sustainability for the business. So we made sure that we were really transparent with the team, with what we were doing, got really clear on revenue that we're making every single month so that everyone in the company understood where we were and what we needed to be doing moving forward. We got really clear on what this means in terms of what

07:17we're going to be focusing on, products that we're going to focus on, what the teams are going to be looking like. And the other thing that we started to do,

07:27the other thing that we made really clear for everybody was make sure that everyone understood here's what it means for you. Here are the areas that you're gonna be focused on. We had a very small number of people. This was not a late-2022 sort of tech-oriented layoff situation. We had a very few people that left the company most for performance reasons. We had a couple of others that were part of that as well, made

07:54it really clear we were thanking them for the work that they had done. We got really clear for everybody on what the new cost structure means in terms of what we could be doing, what we were looking for from a revenue perspective, and that profitability gives us much more flexibility and much more opportunity to both control our own destiny and make sure that we're delivering the best products for our customers.

08:20I think every company always has moments where we want to be innovating, we want to be coming up with new ideas, but there's often this conflict between innovation and efficiency and sometimes we're putting too much energy into new ideas that actually aren't going to pan out and so we spent time looking at how do we make sure that we can continue to innovate in a way that's efficient so that we're not wasting time and wasting energy.

08:46We reoriented the teams into more flexible teams that that could execute against really specific goals that were oriented around again the pro grow idea, profitable and growing, not just profitability, but growing. And growing of course was referring to

09:06engaging our customers more fully, rolling out more effective products. And highlighted for everybody exactly how we are sitting in a really big opportunity and in an ecosystem that's continuing to grow, we just needed to make sure that we're aligned from a business perspective with how that growth can be happening. And we started to show at this meeting in June and then moving forward exactly how we were doing, how much we were spending, how much revenue is

Hitting Profitability: August Burn and September Profit

Joe Hyrkin

09:36coming in, what the projections were looking like, sort of gave that level of accountability to the whole company and got buy in from everybody. This wasn't Joe's chart, it was everybody in the company's chart so that we all started to understand. We planned on getting to profitability in September. We burned $22,000 in August. We were, you know, just about there, and in September we made $16,000. The difference between burning

10:06that last $22,000 and actually starting to make money itself began to show us that we could actually do this and that the changes we had made, many of which were challenging when we first made them, people thinking we're not going to be able to be as innovative, we're not going to be able to do the kinds of things that we're able to do. By organizing ourselves effectively, we were both able to get ourselves into profitability and establish

Sustaining Pro-Grow Through Focused Priorities

Joe Hyrkin

10:30it in a way that was sustainable. So that essentially got us set up to become what I like to call a pro grow. And

10:42what we did on an ongoing basis and continue to do is really reinforce this notion of profitability and growth. And the way that we did that is we made sure we were focused sort of on two key areas. The first were the set of priorities that we had around making sure that we were serving our customers effectively, making sure that we were reinforcing the core aspects of the product and the way in which we were interacting

11:09with our customers. And the second was really refining the innovation that we wanted to do rather than have a whole set of new ideas that we were experimenting with, we got really specific. We're gonna do this one or two projects around innovation and then we will incorporate that into the product and move on. So it made us be much more efficient with how we were operating. The next piece that we looked at really was around pricing

Pricing Realignment and Freemium Strategy

Joe Hyrkin

11:37and we started, I think one of the key things that we did and that it is important as you're moving into this notion of pro grow again, profitability and growth is to start to really align particularly for freemium companies like us. Freemium companies often give away too much and always trying to test what are the right things to include in the free product as opposed to the paid product. And so we started to really align the

12:03value that we're delivering with what we were charging for and began to identify a couple of aspects in the product that we had been giving away for free and we began to experiment with how to incorporate those into the paid plan. So that our pricing now started to align with the value we delivered increasingly which enabled us to grow in ways that we hadn't been doing before.

12:28And then continuing to streamline this notion of innovation and new initiatives. How do we make sure that we're picking the right pieces to do over the course of the time that we're rolling things out, and one of the key pieces of course to that is testing. Really quick iterative testing around new pricing plans, new elements to incorporate into the paid tiers, looking at new tiers. We rolled out a couple of new tiers of pricing along the

Iterative Testing and New Pricing Tiers

Joe Hyrkin

12:59way, looking at the journey of how do we move our customers from one tier to the next.

13:08So along the way as we were moving into this structure of profitability and growth, we were constantly reinforcing this notion with the company and with the employees. At the end of the day, as I talked about earlier in the session here, the tech companies we most admire either are profitable or are getting there, right?

Reinforcing Profitability Culture with Employees

Joe Hyrkin

13:33Reinforcing that as a way to take responsibility for our future. It's a way to make sure that our customers know that we're gonna be around. We're not just a company that is gonna be making huge growth investments and then we won't be here in a couple years. They know that they can rely on us and build their business around the tools and services that we're providing. And it's a way to take care of our employees. Our

13:58employees know that they're working for a company that emphasizes profitability and growth and we're not going to be in a position where we're unstable, so they and their families understand that they have a good home with us at Issuu. And then constantly reinforcing of the goals, how we're doing, how we're performing, and really build that into the culture and communication with the team and how the teams are working with us. So again, I think one of

14:29the key pieces and this became so important to us, I've put together an e book around it sort of looking at the key things that you most wanna be looking at. But, you know, what are the key questions to be asking in particular, how are you adjusting your pricing strategies? How are you adjusting what you're including for free if you're a freemium business and and what tiers you're making available? How do

Profitability as a Proxy for Customer Value

Joe Hyrkin

14:52you start to create new tiers in the business and move your customers along that path? How do you start to leverage the scale that you do have to expand into new markets or expand deeper into customers that you already have. And most importantly, at the end of the day profitability and revenue in general is really a proxy for the value that you're delivering. If you're able to think about this from a perspective of

15:23delivering value, then of course you ought to be profitable because the businesses that you're providing tools and services to are finding so much use and so much value from what you're doing that they're willing to pay and they wanna be in a position where you have an ongoing profitable concern. So those are the key lessons that I've learned along the way and I think right now as we're in this crazy economic environment, all of

15:50us should be looking at how do we establish a profitable and growing company.

Key Lessons for Building a Profitable and Growing Company

Joe Hyrkin

15:56There hasn't been a lot of emphasis around profitability over the last three to five years, and now all of a sudden investors are demanding it. And getting there quickly can be really challenging, but if you pull together the key three or four components that go into that and and incorporate it into your culture, into how you're communicating and you're getting the team on board, then you have an opportunity again to to

16:24really manage your own future in ways that provide sustainability for your business and sustainability for the employees and the team that you're working with. Thank you very much.