In our search for that rare beast – the profitable VC backed venture – I interviewed Eileen Gittins, the CEO of Blurb. Blurb does Print On Demand publishing for both consumer and professional markets. They compete with Lulu, which announced today that it is “laying off 24 workers at its North Carolina plant because of the slowing economy”. That is 25% of their workforce and includes their President. Eileen and I both had the same reaction: “you mean you only just learned that hard times are coming?!”.
Where Were The Alarm Bells When We Needed Them?
Seeing the Blogosphere afire with tales of crisis in start-up land, with emails going from the wise investors to their portfolio companies, makes me think: no duh! Driving with your eye only on the rear view mirror is not smart. I hate to say “I told you so” but some times I cannot help myself. We have been banging this drum for a year. Not that it took a genius to see that a downturn was coming, it was bleeding obvious! We followed up with perspective here and here. When the sky started to fall a few weeks ago we started to look on the positive side.
Of course companies should keep their costs as low as possible. That has been the obvious for centuries. So last week the advice was “spend like drunken sailors?”. Seriously, this kind of boom one day, gloom the next reminds me of the crazy behavior that got us into this mess and which, if you want a good laugh, you can watch here or embedded below. By the way, that video was from a year ago!
Blurb Is Just An Old Fashioned Story
The key points that came from Eileen Gittins don’t sound terribly interesting, except that in today’s world they are so unusual:
1. A “seasoned” management team. Like somebody at the helm who has sailed through a storm before.
2. Aligned with their VC. Some VCs push the “shoot for the moon at all costs” approach. Blurb’s backer, Canaan Partners, was aligned with the push to profitability before that was fashionable.
3. Willingness to make trade offs. Sure we all want profits asap. But in the real world there are decisions and trade-offs. These may involve deferring features, leaving a market until later, being more niche than generalist. It is almost always a growth vs profit trade-off (“revenues are vanity, profits are sanity”). The Blurb story is full of those. Now Blurb are in a position to do the things they delayed earlier, while their competition is retrenching.
4. Being contrarian to some degree. Blurb got funded in 2005. They had nothing to do with advertising and you would have to be a spinmeister to call Blurb “Web 2.0”. Blurb uses Internet technology (er, who doesn’t) to deliver a different value proposition to satisfy a demand that has not changed since Gutenberg. Canaan was clearly ready to be Real VC and back an unfashionable concept.
And, What About The Impact Of The Financial Crisis?
We ask that question to everybody. Eileen Gittins said “we watch the economy like a hawk, because that is what we have always done, it is in our DNA”. But so far, so good, they grew in September and the last quarter looks very strong. At least they don’t need to go to (more) VCs, who are spending all their time with their problem companies, to ask for more capital. With all the talk of revenue vs profits trade-offs, Blurb grew revenues this year around 3x – not shabby.
