In 2013, the creators of the application VSCO, Joel Flory and Greg lutze met for dinner in a luxury restaurant Park Tavern in San Francisco with co-founder and at that time the CEO of Instagram Kevin Sistermom. He was impressed by the success VSCO: during the year development of the project in Instagram appeared more than 2 million photos with the hashtag #vscocam. Users edited the photos using VSCO, and then publish them to Instagram without using built-in filters for processing images.
SISTROM was ready to absorb popular within the ecosystem of its product technology, but to discuss the details of the case came — Flory and lutze understood that the conversion into an appendage Instagram VSCO threatens the loss of independence and the cessation of existence as a separate application. Besides, at that time, the transaction amount would be a maximum of eight-digit — founders of VSCO was thinking more globally. “We were pursuing very different goals and formed a different vision of our application. VSCO is more than just a tool for processing images”, says in an interview with Forbes 39-year-old Flory, VSCO CEO.
The entrepreneurs were right: six years later the number of publications in Instagram with the hashtag #vscocam increased to 200 million Income VSCO also has grown rapidly: in 2018, the revenues jumped by half to $50 million from the Oakland Startup has raised $90 million from venture capital funds Accel, Glynn Capital and other investors who appreciate the company of $550 million he and his partner Lutz, “Director of impressions” VSCO, each owned approximately 21% of the shares VSCO, or $115 million
Since the launch of the first version of the app in 2012 VSCO downloaded over 150 million users on Android and iPhone. In 2017, the developers have introduced a paid subscription, which since then has acquired about 2 million people — mostly younger than 25. For $19.99 a year, they get 130 exclusive filters, the ability to process videos, and GIF files, as well as tools for correcting skin tone and overlay frames on the photo. “The creators of VSCO very early to believe that beautiful photos do not have to shoot on an expensive camera just a smartphone. They predicted the choice of the next generation — five to seven years ago it was not so obvious,” says Ryan Sweeney, managing partner of venture Fund Accel.
Users VSCO are a mixture of Teens from Snap and the mass audience Instagram. But can the app to grow into a complete ecosystem, ready to compete with global giants? Flory and lutze are trying to answer this question, experimenting with a paid subscription and new features. But they do not forget about the fundamental idea of the application. “Instagram is a platform where you can share photos, and to assert themselves in society. VSCO is a platform for creative people,” explains Emily white, President of investment company Anthos Capital and Manager of Instagram and Snap in the past, is now advising the founders of VSCO.
Jimmy Eat World unites
Flory and lutze are really from the beginning wanted to build a product for creative people — such as professionals as they are. In 2006, Flory, a photographer from San Francisco, went to the site of your favorite emo band Jimmy Eat World and had a great impression of the page design. He contacted the Creator of the portal Lutz, another fan of Jimmy Eat World from Seattle, and ordered him to develop a website for her father’s construction company. Four years later, he rehired future business partner — this time that he created a website for his wife, who worked as a wedding photographer.
Soon both started looking for ideas for a business together. “I literally every week offered him a new business idea. I think I just hated it. But we wanted to create a product that is valuable for creative people, such that they would be willing to pay,” says Flory.
In March 2011, the partners founded the company Visual Supply Company (thus was born the acronym VSCO), and in November of the same year has launched a website to sell filters for Adobe Lightroom and Photoshop. Each filter kit cost $119. With their help it was possible to significantly reduce the processing time of the photos. The product was a real boon for many professionals such as wedding photographers who need to process hundreds of images at a time. 48 hours since the launch of the website Flory and lutze earned about $250 000.
In April of next year, entrepreneurs launched for users of the iPhone app VSCO Cam cost 99 cents. Their goal was to promote the first product of the company. But just a week VSCO Cam installed over 1 million times. After that, he and Lutz stopped working on filters for Photoshop and focused on the mobile app.
A year later they released a version of VSCO Cam for Android. The app was free, but it has an option of in-app purchases. Each set of filters cost from 99 cents to $20. Soon, the developers have launched a social network VSCO Grid, where users could subscribe to each other. However, Flory and lutze deliberately refused the indicators of popularity in VSCO Grid is not visible the number of subscribers and no comments. “We just wanted to create a platform for creativity, where people could share their work and to try something new. Our objective is to help everyone to fall in love with your own creativity,” explains 40-year-old Lutz.
Revenue from mobile apps was enough for the first three years of development VSCO. Flory initially skeptical about the idea of bringing external capital, and refused to negotiate with investors. However, in 2014, the owner still made an exception for the partner of venture Fund Accel Kuat of N. — they met in a bar Prizefighter near the VSCO office in Emeryville, California.
Soon Accel led the first round of financing VSCO, during which the company Flory and Lutz raised $40 million “Many people come to the VSCO app to create content, share it and be part of a community of creative people. This is its identity. You can copy technology and filters, but you can’t copy identity,” smiles for your portfolio project N..
After receiving funding, he and Lutz quickly expanded staff VSCO to 100 people and moved to Auckland, where she rented a spacious office area of over 2000 sq. m. They also opened a Studio in new York, where it was free to use professional photographic equipment for non-commercial projects (later the Studio moved to Auckland).
In 2015, entrepreneurs have attracted additional financing of $35 million and acquired two startups — developer visual Sciences and technologies Moving the website Artifact Uprising with the help of which you can order photo prints and photo books. The investment was partially useful: the developers VSCO use technology Sciences is Moving to create a tape of recommendations and sharing of photos by categories. But Artifact Uprising had to be sold back to the founders: the users of VSCO idea to print the pictures had no taste.
After this difficult decision VSCO has made a leap in development due to the fact that Apple and Google have made changes to the model distribution of income between the online stores and developers. Both companies have significantly reduced the fee for posting apps in AppStore or Google Play and let the developers get 85% of the royalties from the users who take out a paid subscription over a year ago. Apple has also introduced an automatic renewal of subscriptions. As a result, in 2017 the income VSCO has almost doubled to $20.8 million
Filters on Wes Anderson
In the tape application VSCO has never been advertising. Flory and lutze and today is not going to make money on its sale. “When appears in the app advertising, it becomes harder to keep the audience. I believe that they adhere to correct policies,” says consultant entrepreneurs Emily white.
But the leadership VSCO does not preclude the establishment of collaborations. For example, last year, the company in the framework of the promotion of the film “Isle of dogs” released a set of filters inspired by the works of Director Wes Anderson. However, the program VSCO Connect, which helped to find photographers such brands as Nike and PowerBar, not a product priority to the founders. “Presently the whole company and every single employee focused on creating additional features for people who take out a paid subscription to our app”, — accents Flory.
Entrepreneurs can assure that they do not intend to sell the company, although the business has a number of potential buyers. Perhaps talking about a smartphone manufacturer that can implement the technology VSCO Cam to your device (VSCO adapts technologies for specific smartphones and last fall helps Samsung in the creation of exclusive filters). And perhaps, the technology is still dreaming one of the major social networks.
Target audience VSCO, consisting mostly of creative people, is more niche than the audience of competitors. This means that companies have trouble to keep the app’s popularity. In the oversaturated market full of competitors. Among them — the company with the popular Lightricks Facetune app where you can whiten teeth and change the skin tone, as well as startup PicsArt, which has attracted funding from the investment company Sequoia Capital. However, the Accel partner Ryan Sweeney is optimistic: “VSCO Developers can focus solely on creating filters, and people still will to use it”.
VSCO priority remains the expansion functions for owners of the paid subscription. To attract more users, the company conducts workshops in new York city and Oakland, as well as in Tokyo and London. Flory and lutze are considering how to add graphic design elements and special features to create illustrations. Lutz heard from users, especially from teenagers, that they don’t want to be seen as just photographers. “We want to help them to create something more,” concludes the entrepreneur.
Translation Of Pauline Sanaevoj
The most successful venture capitalists of the world — 2019: Forbes ranking
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10 out of 10
1. Neil Shen, founding and managing partner Sequoia Capital China
A reputable investor from one of the world’s leading venture capital funds the second year in a row is on the top of the “Midas list” by going public at the end of 2017 his “ward” of the project — operator of the Chinese financial marketplace Ppdai Group. Shen, whose fortune Forbes estimates at $1.6 billion, not just helps the Sequoia portfolio companies in China, he previously a successful entrepreneur who founded several now public companies, for example, a travel site Ctrip.com. In addition, Shen has extensive experience in the investment departments of banks Deutsche Bank, Hong Kong Chemical Bank, Lehman Brothers and Citibank.
2. Peter Fenton, General partner Benchmark
One of the most experienced investors in Silicon valley and is a licensed helicopter pilot, Peter Fenton is proud of the fact that, even when companies in its portfolio go public, they asked their mentor to remain on the Board of Directors. It happened with the Analytics platform New Relic, which went public in 2014, and with software developers Cloudera, Elastic and Zuora. The last two held an IPO in 2018, and provided that partner Benchmark high position in the ranking. Among past well-known investments Fenton — Twitter and Yelp. He also serves on the boards of Directors of eight private startups, which are not yet public.
3. Bill Hourly, General partner Benchmark
Another representative Benchmark in the top-3 ranking, bill Gurly remains at the top of the “Midas list” thanks to Uber, which has already reached $76 billion For a service on call taxi investor led the round And in 2011. However, he later fell out with the founder and the first CEO of Uber Travis Kalanick and participated in lengthy squabbles on the Board of Directors. However, Uber already has brought Benchmark $900 million profit, and if, as planned, will hold an IPO in 2019, the Fund will earn billions of dollars. Among other successful transactions Hurly — purchase company Recruit Holdings its portfolio investments Glassdoor for $1.2 billion in may 2018.
4. Jim Goetz, partner at Sequoia Capital
Star of the venture capital market, Nissan continues by inertia to remain in the top 5 ranking thanks to investment in WhatsApp messenger, which Facebook in 2014 posted a record $19 billion Last successful “exit” Sequoia partner repository to store code on GitHub, which was acquired by Microsoft for $7.5 billion in 2018. Cumulatively, Getz sits on the boards of Directors of five companies, valued by the market at more than $1 billion each. Recently, he’s a few years away from operational management Sequoia to focus on strategic projects.
5. J. P. Geng, managing partner Qiming Venture Partners
J. P. Geng in the top of the “list of Midas” IPO thanks to three “wards” of the past year: the exchange out website for video sharing site BiliBili, delivery service Meituan-Dianping and trading platform Mogu. These “outs” have improved the portfolio, which was already editing app for selfie Meitu, Chinese travel site Ctrip and video service PPS, which was acquired by Baidu in 2013.
6. Kathy Xu, founder and partner of Capital Today
Company Debs rating Capital Today is barely a year old when she made a bid for a Chinese startup JD.com as the sole investor A. When the giant e-Commerce IPOs in 2015, Xu has achieved success that defined her career: investing $18 million brought the firm $2.9 billion Xu invested in other Chinese success stories like Meituan, Yifeng Pharmacy, and Three Squirrels Snack Food.
7. Hans Tung, managing partner, GGV Capital
Hans Tung headed the American division of GGV Capital, a venture Fund with three offices in China. Known for his intuition in the field of electronic Commerce, now the investor has a portfolio of 13 companies with a market capitalization of $1 billion, including the shopping app Wish, platform for the resale of things OfferUp, Chinese social and trading network Xiaohongshu and service for workflow Slack, who in February filed a registration statement on the stock exchange. The two companies, in which Tung invested, held an IPO in 2018 — electronics manufacturer Xiaomi in July and trading platform Mogu in December.
8. Mary Meeker, managing partner of Bond Capital
Legendary prophetess technology trends Mary Meeker — top-10 “list of Midas” thanks to the IPO in 2018, the music streaming service Spotify, and DocuSign, a company engaged in electronic signatures and contracts. The success of Meeker followed her to a new venture Capital firm Bond, separated from the Kleiner Perkins Digital Growth Fund, which she founded in January 2019 together with Mudo Rouhani, Noah Knowfrom and Juliet de Bobigny.
9. Niraj Agrawal, General partner Battery Ventures
In the portfolio of Niraj On from Battery Ventures is dominated by three segments: companies that help other businesses to modify their own software (InVision design; Pendo at product management; OpsGenie in development), a new generation of marketing technology companies (Braze, Sprinklr, Tealium) and companies that help others to move to the cloud (Coupa, Marketo and Nutanix). The last three have gone public in recent years, which ensured the place the investor in the top 10.
10. Eric Paley, managing partner, Founder Collective
Eric Paley successfully invested early on in Uber, but this is not the only successful deal. In September 2016, he participated in the IPO of the company The Trade Desk, and in three recent exits (Integral Ad Science, Moat and Hotel Tonight), which helped him to get into the top-10 “list of Midas”. He is a partner of the Founder Collective, a seed Fund with headquarters in Cambridge, Massachusetts.
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