Eric Zhang dropped out of school to pursue his startup, got accepted to Y Combinator, and found traction in the open source community. But when he found himself no longer excited to show up to the office, he realized something crucial was missing with his business: a workable business model. In this episode Eric and I discuss his decision to quit his startup and how he ended up helping grow a bootstrapped business to over $100MM in revenue in an industry rife with well-funded competitors.
Eric Zhang, you are the CTO of a company called Scalable Press. Welcome to the Indie Hackers podcast.
Glad to have you on here. So Scalable Press, super impressive company. You guys are entirely bootstrapped and you’re doing over $100 million in revenue. Is that right?
Tell us about the company. What is Scalable Press? What do you guys do and who uses you, and why do they use you?
Scalable Press is a printing company. We started off in apparel so think about your screen-printed t-shirts, garments, that sort of thing, your local t-shirt shop. Since then we’ve expanded to a lot more print types.
We actually do all of the printing ourselves at our facilities in the US, and we build eCommerce websites on top of that. Our customers are actually across the board, different markets in B to C, B to B, whoever needs printing. I think they use us because we developed technology that makes that printing more efficient, which means lower cost for our customers, better quality, and better turnaround times.
Sounds like a super complex company. On one hand you guys are a t-shirt shop, but on the other hand, you have a bunch of eCommerce sites and an API and different actual physical processes for printing stuff. Give me a sense of your role at the company as the CTO. What does that entail on a day-to-day basis?
I’m in charge of the engineering team, first and foremost, where we are building all of the software that powers our actual facilities, the software that’s integrating with the printers and other equipment. Then on top of that we built, of course, the API which is how you get orders and volume into the facilities. And then on top of that, the engineering team builds a bunch of different eCommerce products, different brands that target different markets.
How big is your engineering team?
We have about 50 in a couple offices right now.
Wow. How big is the entire company?
If you look at the offices, we have maybe close to 150 people now, and then we have a couple hundred more that work in our facilities.
Okay. So you’re one of the biggest bootstrapped companies that I’ve ever had on the podcast. I really want to dive into all sorts of specifics here, including how did you get so big, and how does a t-shirt company ramp up to over $100 million in revenue?
But first, I want to talk about your back story, Eric, because we have kind of similar back stories. We both came from I guess a high-growth, venture-funded Silicon Valley mindset, and now we’re both here working on bootstrapped companies, promoting and evangelizing the bootstrapped business lifestyle.
We actually were in Y Combinator together in 2011 as I’m sure you remember. But I want to go back even further than that. What got you into tech to begin with, and what got you into entrepreneurship?
When I was in college, I was studying computer science, and a couple friends of mine, we got together, and we would basically build apps and websites after we finished our problem sets. I guess at that point I already knew I wanted to be in tech startups, just going up in the Bay area, it was always in the air, I suppose.
We applied to Y Combinator for the winter 2011 batch, and we got in. That was an amazing experience for somebody that was dropping out of college and 19 years old. We raised a seed round. We did that whole Silicon Valley thing, and that was super cool, but I was never really satisfied.
I remember distinctly about two years after Y Combinator, there was a day when I woke up and I felt like, I don’t want to go to work today. I just didn’t feel right. I went on vacation for two weeks to relax a bit and deal with that burnout and I realized what was causing me to feel so depressed about things.
This is where I had to look back to my history to understand. To give you guys all some context, I started doing entrepreneurship when I was high school. The first thing I did was I used to build a lot of freelance websites, so I would literally go on Craigslist and I’d say, “Here, I’ll build your website for a hundred bucks.”
I built a lot of websites until school got busy. I was studying for the SATs and whatnot. At that point I actually started contracting out my work. I found these guys in China who could build websites and I kind of managed them while I was in high school.
They started doing the freelance work and I just was the guy that fixed the English and stuff like that. As I continued into high school, at some point I realized well now that I have more time, I started building other businesses. It was very empowering knowing that I could make my own money.
At one point I was one of the largest drop shippers on eBay of fake mustaches, of all things, and later I discovered that you could fix Blackberries real easily. You remember back then, they had the Blackberries with the track ball.
I bought all these Blackberry parts, and I would buy all the broken Blackberries I could find. I would get together with my classmates. I trained them. We just swapped out the parts. We’d then resell them as refurbished.
So I did all these little small businesses when I was in high school. Fast forward again to my Y Combinator startup. We raised $1.4 million dollars from SV Angel and Dresit (ph) and all of the brand names. We had our TechCrunch article. All that was done, and I woke up depressed because I realized that I made more money in high school selling fake mustaches and training a bunch of kids to fix phones than we had as this properly built, Silicon Valley type of startup. That just felt wrong to me.
We were at a point where I guess we could have raised the Series A because we had some traction in the open source community, but it just didn’t feel right because we never figured out the actual business model. I ended up leaving that startup. In a lot of ways I see that as the start of my current career.
How much money were you making as a high school kid selling fake moustaches and repairing Blackberries, if you remember?
It wasn’t a ton. I did some other stuff on the side, too. I was also fixing computers locally. I trained my classmates to literally go door to door and we’d see who had computer problems, like popup ads and spyware and things and we fixed that. I think in total I was making somewhere in the like mid five figures so nothing crazy, but for a high school kid it was enough to have a lot of fun.
Yeah. It’s a lot. I don’t know any high school kids, at least in my high school, who had this entrepreneurial drive. Did you come from a family of business owners? Were you inspired by anything in particular, or was it just all internal?
You know, I’ve thought about this a lot, and there were two things that I think formed my entrepreneurial spirit, if you will. The first one happened when I was very young, when I was 8 years old. The internet was just beginning to become a thing. Everybody was still on dialup
I remember one day I was looking for an internet service provider because our previous one through my dad’s university where he was studying at that time had been shut down. I found a free dialup ISP and I was so excited. I got the setup on our family computer and it was great. It was free dialup internet. I used it for a month, and then one day the phone bill came. It turns out this ISP was free, but it was in the UK, and I was in Canada at the time. So every minute I was on the internet was an international phone call from Canada to the UK. We ended up with like a $1200.00 phone bill.
My dad was furious. This was when I was 8 years old, so I actually felt a lot of guilt from that. Basically after that I never had an allowance. My parents didn’t buy me a lot of stuff. There was definitely a lot of -- I don't know, I just didn’t have access to the things I wanted.
I remember distinctly I wanted to buy some video games. There was a girl I liked. That’s what it was. There was a girl I liked. This was actually in middle school. There was a girl I liked, and she said she wanted some video game. I was like, “I’m going to buy her this video game.” I had no money. That’s when I started going on Craigslist to do freelance work.
That didn’t work out. Turns out you can’t just buy people stuff to get them to like you, but I did discover that I could do work, I could make my own money, and I could do what I wanted with that money.
Well that’s a great way to discover it, and it seems to have set you on a path that led to where you are today. One of the things you mentioned, and you just brushed right over it, was that you dropped out of college to pursue your first startup idea with your friends from college, and you got onto Y Combinator.
What was that decision like? Cause I considered making the same decision probably a dozen times in college, and I never pulled the trigger. I never actually dropped out, even though I knew I had the skill set needed to build my own thing. What was going through your head when you made that decision, and why were you so confident that it was going to be okay?
I think because of all that stuff I did in high school, going into college I knew I wanted to do entrepreneurship in some form. I thought, maybe this is something that I can do after I graduate, but especially being in Silicon Valley it’s difficult to say no to things like Y Combinator and say no to things like term sheets or C ground (ph). It feels like you’ve accomplished something just getting to that point. I was excited. I was super excited to drop out of college. My parents were definitely less excited.
At least I wasn’t dropping out to pursue just a passion. It seemed like a textbook correct way to build a startup.
Tell us about the startup that you were confident enough to drop out of school for.
The company was called Flotype. I wouldn’t say I was confident enough in it because we pivoted immediately. Paul Graham, right before we got into Y Combinator, actually sent us a message saying, “We’ll accept you guys into YC if you change your idea.”
I definitely wasn’t confident per se, but what we ended up building which I think was the right choice, was basically networking software that optimized the network connections between different clients and servers. We released it open source, and we got a lot of open source traction, Twitter, and we were speaking at conferences and that whole type of thing. But open source traction, unfortunately, did not equal business.
Basically they liked you. They didn’t like your idea, and you pivoted to another idea that didn’t have any sort of business model, which basically was the norm back then. In 2011 I also was working on a company that didn’t have a business model.
I remember people coming to talk to us at YC and they were always founders of companies that didn’t generate any revenue whatsoever. That was just how you did things back then. Nowadays, it’s different. There are a lot of VC funded companies that make money from day one, but back then it was the norm to just grow as big as you possibly could, and then revenue would appear later.
Why do you think it bothered you so much later to the point where you actually quit, but it didn’t bother you up front when you first got started with Flotype?
I think being young and a college dropout, as much as I think entrepreneurs are expected to be visionaries, in reality we were just kids. Sure, we were smart and we knew our way around computers and programming, but I don't think we were able to see beyond -- we couldn’t argue against what seemed so correct, the TechCrunch article, the 30 Under 30, what the seed investors were telling us.
Everybody was telling us, “Look, all you have to worry about is building crazy new technology. Don’t think about anything else. We’re going to give you money to do it, and you’re great and you guys are smart because you’re doing it that way.” It’s hard to say no to that. It’s hard to argue against that.
Yeah. It’s pretty powerful. That’s the kind of stuff that makes us human, right? Getting status and respect from the leaders in your community, the investors who have the money, who’ve been around the block a few times telling you that you’re on the right path. It’s pretty hard to argue against, but in the world of business anyone who’s not a customer giving you money, does their vote really count?
Absolutely. In the end, the consumer doesn’t care. Like you said, the customer that will make or break your business, they don’t necessarily care about that status, or they may not even know about it. Either you created a product that can create a profitably business or you haven’t.
So what was it like, burning out from your business Flotype and deciding to quit? I imagine that can’t have been an easy bit of news to deliver to your cofounders.
Yeah, absolutely. It is hard, because these were my best friends. These were the guys that I had been working close with, living together with for years. There was a moment when I knew that something was very wrong.
This is going to sound so ridiculous in retrospect, but I remember going to work. We had a nice office. We had fancy monitors and MacBooks and all of that good stuff, and all us were basically watching Netflix at work. Not every minute, just we ended up watching hours of Netflix at work.
I remember thinking, “What are we doing? Sure, maybe we’re all a little bit burned out. We’re all working very long hours, but we’re just here watching Netflix at work. Our business is not making money.” It just seemed fundamentally wrong. I think that’s the moment when I started questioning whether this was the right direction to keep going in.
With the benefit of hindsight, this was I think five, six years ago that all of this happened, is there anything you would do differently if you could go back in time to save the company or set it in the right direction?
Yeah. I think the biggest thing I realized after years have passed and thinking about the whole situation, I think the reason why none of stopped and said, “Hey, are we doing this the right way? Maybe we need to be pivoting. Maybe we need to rethink our business plan,” was were still moving in the right direction, at least according to the Silicon Valley standard, meaning our traction open source was there.
We were building an interesting technical product, and we were getting to the point where if we wanted to go back to investors and say, “Hey, let’s get an A. Look at all this traction. People love what we’re building,” maybe we could have gotten something. But it just seems like nobody cared. Nobody outside our boundaries really cared that we would be making money. That way there was no pressure to do so.
Okay. So you quit. You make a clean break. You’re now Eric Zhang, a free man, no job, no responsibilities. How did you figure out where to go from there, because you could really go in any direction?
No, it was crazy. I had no idea where to go. I did nothing. I quit in May. That whole summer, I didn’t do much of anything. I just worked out and read stuff, read books. That’s basically all I did that summer.
I think one thing that doesn’t get talked about enough is what happens when your startup fails. It’s depressing, because it’s your identity. For a lot of people, a lot of their network maybe, or their friends that they see frequently, may just know them then as the guy who did whichever startup, and suddenly you're removed from that.
I ended up going back to school. I finished my degree. After I finished my degree, funny enough I started building more open source software. I got a bunch of smart friends together and we were developing this open source software. It got to the point where I was about to raise.
I talked with some old angels that I had contact with before, and it felt like I was about to raise a C ground (ph). I remember talking with them about that, and suddenly I realized, “Holy crap. I’m about to make the same mistake where I build some cool technology with no particular market.” So I had a second reckoning of, what am I doing? Why do I keep going back to doing this?
Why do you think you keep going back to doing that?
You know, I just like networking software. I still do today. Even today, being at Scalable Press I think one of the reasons I’m here is because I get to build really cool networking technology to power our facility.
So it’s just a matter of doing the thing that you like and falling into the thing that you like doing, which is funny as a founder and a developer because that’s the most common story in the world, right?
Build this thing, really fun to build. Look up six months later, turns out nobody wants it. Nobody wants to pay for it. It’s a hard lesson that I’ve learned myself as well through the school of hard knocks.
So at the same time you’re going through this whole learning process, Scalable Press already existed as a business. The original founder, Raymond, had gotten started. What’s the story of what he was up to while you were in Silicon Valley making these mistakes and learning from them?
Raymond -- actually, both of us went to Cal. We knew each other while we were in school. While I was working on these side projects, getting ready to apply to Y Combinator, Raymond was building out Scalable Press. We actually dropped out at the same time.
He dropped out to keep working on the business, which we called Ooshirts at the time, and I dropped out to work on my startup. We ended up in the same office building so we grabbed sushi and stuff for dinner. So that’s how I met Raymond, actually.
What was he doing with Ooshirts, and what kind of business was it?
Ooshirts which is still there today, we’re actually on rebuilding it finally today, but Ooshirts is a t-shirt website. It’s the type of website you might go to buy shirts for your club or for your family reunion or team. He was scaling it up gradually. Raymond, when he started Ooshirts, was actually building the website himself. He taught himself PHP and built out this website. He had contract printers doing the actual printing work.
Did you ever consider joining him at any point in this process before you actually joined, when you were working on these venture funded companies and this open source software?
No, the opposite, because it was like, oh, here’s a guy who’s building a dinky-looking website selling t-shirts, but here I am at the Angel box suite at AT&T Park and eating Tuesday dinners at YC. I thought I was doing things right.
Do you know how well Raymond was doing while you were eating at these box suites and he was working on his dinky website?
We dropped out at the same time and at that point, when I was enjoying my Silicon Valley persona, he dropped out because Ooshirts had hit a $1 million run rate.
Geez, selling t-shirts online.
What are the margins like in the t-shirt business anyway? Cause a million dollars is a ton of revenue but unlike a pure SaaS company, it’s not like you’re selling code here. You’re selling actual physical goods. What kind of margins can you expect on a million dollars of revenue?
You’re definitely right, it’s not the same as SaaS. It depends on the market and where you position the product, but Ooshirts at the time was somewhere like 30% margin, which is I guess more typical for eCommerce business.
It’s interesting, because you can have products that are more premium, that deliver a very high-end customer experience and have more margin, and you can also have, say, B to B products, where it’s very low margins. That’s what we look more like today at Scalable Press. We have a diversity of products that have higher and lower margins to accommodate different markets.
Walk me through some of the early milestones of Ooshirts and who it turned into Scalable Press, up until the point that you joined.
Raymond founded the business in 2008 when he was in high school, so this guy’s also a high school entrepreneur. He founded the business to get shirts printed for his high school tennis club. He saw what was available out there. He saw the local stores and they weren’t good options. They were either slow or expensive or both.
He decided to go about it himself, and he actually found contract printers in China who would do shirt printing for an incredibly low price, as you would imagine. He started selling that to local high school clubs, and that’s how Ooshirts got started.
He gradually built more and more, more and more features on the website and won more and more customers. When he got close to that $1 million mark when Raymond was dropping out of school, there was a moment when he realized, “Hey, we can’t keep using these Chinese contract printers. The quality’s not there. The speed is not really there.” He wanted to make the experience better, but he didn’t want to raise the prices.
This is a pivotal moment in company history when he decided, look, we have to do better than what these contract printers can deliver us. At the time, the company didn’t really have the capital to build their own facilities. Any sort of manufacturing is very capital-intensive and being a bootstrap business just meant that we had to take more steps in between.
So Raymond went down a phone book and he just called every local small screen print shop in the US that he could get the phone number for, and he basically took his price sheet from China and said, “Look, these are the prices I’m paying now. If you can match these prices the business is yours.” Most of the people were like, “No, that’s ridiculous. This is an insulting price,” slammed the phone on him.
But there were a few printers after much effort that would match those prices, and that’s how Ooshirts finally got the printing to be done at US printers and we were still being contacted at that time. So that’s what it was looking like up until 2013, which is near when I joined and when we started building out our own manufacturing.
That’s pretty cool. It was nothing but pure hustle and hoping that people would take a chance on you to get from outsourcing the labor, basically, to having a low-quality product shipped from overseas to having the same prices but higher quality items shipped from the US.
You can never underestimate the power of asking a lot of people and accepting that many will say no, but you just need a couple to say yes.
I’m curious about how the business got to the point where a lot of people were buying t-shirts from Ooshirts, because as far as I can remember, the online t-shirt selling industry has always been super competitive.
I’m sure this is a topic we’re going to come back to later on the episode, but there are a lot of people selling t-shirts online. How does somebody, especially an 18-year-old, go from nothing to having a business that people are paying millions of dollars a year to get t-shirts for?
I have an anecdote that will offer some insight to this. Going back, again, when I was in high school, I actually did screen printing for a while, one of the reasons why Raymond and I clicked in printing.
I was doing screen printing myself and I realized very quickly that the cost of screen printing does not have to be high. Really, you could get something down to just a few dollars per shirt and you could still be profitable that way. A lot of what people saw as the normal prices were actually very high. This is what got Raymond into Ooshirts in the first place.
When Ooshirts started becoming a larger eCommerce website, we were the price leader in that space. In a lot of ways we still are now through our different brands, but if you looked at, especially in the late 2010’s, the pricing was not even close. We were consistently 40% cheaper than the next real competitor.
Even when we were able to bring that printing to the US, the reason why so many people were insulted is the pricing that we were offering our customers, the pricing that we were paying our contact printers, is something that made sense in China but really didn’t make sense for the US.
I suspect that the real reason that we got any contract printers in the US at that price level was because, you know, it was barely any margin for those contract printers, but it was still business and some of them were happy to have any volume.
Purely through low prices, you think that was enough for consumers to discover Ooshirts and say this is where I’m going to buy from, as opposed to the other sites?
Yeah. That was the beginning of it. As with any market, it gets competitive over time. If you lead in any area, somebody will catch up so that’s what we’ve been up to for the last five years.
Tell me about what conversations led to you joining the team after you decided not to repeat your first mistake in Silicon Valley and fundraise for these new open source tools you were working on?
I realized that I can't keep building open source software because that does not a startup make, not automatically. So I went in the opposite direction. Going back to how I did screen printing in high school, I realized printing is a business where I know that the costs online are high, but the cost to produce can be low.
I was trying to go back into building a printing business, and then I remembered okay, back when I was doing Flotype, in the same office building there was this guy Raymond and they ran a t-shirt startup. He was in the space and I would seek them out for a mentorship. I went out to Raymond’s office. I took him out to McDonald’s.
At first, he was like, “Eric, why are you brining to McDonald’s? This is not a good restaurant.” I explained to him, “Look, this is not the best burger you could have today, but if you look at the fact that McDonald’s and its hundreds of thousands of restaurants can deliver this exact same burger experience at this extremely low price, very quickly, millions and millions of times, that is something admirable.”
That is what I wanted to do to the printing industry. I wanted to make printing something more accessible, lower cost and efficient. And that’s what Raymond realized that we had pretty much the exact same vision for what we wanted to happen, and that’s how we got started working together.
What was the state of Scalable Press at that time? How big was the company? Did you come in immediately as CTO? Was there a game plan for what you would do once you joined?
It’s something I give Raymond a lot of credit for. A lot of entrepreneurs may not have taken this step. When I joined, this was in early 2014, it was still Ooshirts. Scalable Press didn’t exist yet and the company was just the Ooshirts website.
It was doing very well. It had continued to grow. We were in the low teens in revenue. Raymond paid himself a very low salary and he was deadest on reinvesting the company’s profits into the business. That was the point when the company really had enough profits to reinvest, that we could start our own facilities and build a real engineering team.
Before that, all of the website development and technical stuff was done by a series of contractors, so the quality was low. Raymond realized it, too. He had taught himself PHP, which -- I give him grief about this all the time -- does not lead to high-quality code.
He knew that the business’s potential was being limited by its ability to build higher-quality software faster. I joined, and I started building out the engineering team, hired my friends, and that was the first step.
I was just talking to a buddy of mine last night who was talking about starting a company. He got onto this topic if how the way that you get started at something doesn’t necessarily need to be the way that it ends up.
I realized that there’s a consistent theme of people who have taught themselves to code or have outsourced a lot of the code to contractors for their startups, where of course the initial product is pretty crappy. It’s very low quality. It doesn’t do all the things you’d like it to do, and even the things that it does do, it doesn’t do very well.
Yet, the people I talk to have these situations have still built successful companies. Scalable Press, like we said earlier, over $100 million dollars a year in revenue. I talked to Christy Lawrence. She’s got a company called Plan. She basically contracted out her initial app. It got to the point where it didn’t even work. It fell over and she was super stressed about it until she got another team to rebuild it. But she still built a million-dollar business.
What are your thoughts on this? Do you think it’s important to start with a really high-quality code base, or do you think it’s better to start scrappy without paying that much attention and get the fundamentals down?
That’s great question. My smartest friends, the best engineers, my friends that are working on the self-driving cars, they come to me sometimes. They’re like, “Eric, how can you live with a crappy code base? How can you live with any type of debt?” I’m completely with you. I have the opposite view, that I think it’s very important that people recognize when a code base needs to be high-quality and when it doesn’t. Especially for us as engineers, it’s very tempting to discount any low-quality code base as just being a problem or being bad, but that’s just not true.
I think it’s pivotal that software is developed quickly, at least until you have product market fit, at least until you have some real traction, especially for bootstrap businesses. Building software is expensive.
If Raymond, day one when he was starting ooShirts, tried to hire a software engineering team, he never would have made it anywhere, because all of the money would have gone into payroll. It’s just a fact of what the market looks like today, which means you have to figure out another way to build out that MVP and build out that first success.
Yeah. Totally agree. It’s difficult to see as an individual contributor to a company whether you’re a software engineer or a marketer or you’re in sales or customer service or whatever, your world is your world. Whatever you’re spending your time on, that’s everything.
It’s hard to step back and realize that it’s just one part of what makes the company work. You can’t over focus on any one part of it and try to take it to perfection, cause you're very quickly going to run into the point of diminishing returns or run into the point where whatever you’re working on is coming at the sacrifice of other parts of your business. You’re probably not going to grow quite as quickly if you over focus on the code or your over focus on whatever part it is that you’re competent in.
Yeah. The idea that doing things one way is somehow better I think is overblown, because especially as a bootstrap startup, as a product that’s new, the only thing that matters is, are you getting traction? Are you able to make it profitable or at least a fundamentally sound business in some way?
Even today, at the scale we’re at today, which is much larger, we have all these resources, when we start a new experiment or a new project, the first thing we ask is, “Okay. What part of this project needs to be high quality, and what part just needs to be cranked out quickly because chances are, we’re going to throw it away once we learn more about our customer?”
Okay. So you have joined Ooshirts at this point, and you guys are going to turn it into Scalable Press. You’re going to start reinvesting your resources and your profits in to actually growing the company more ambitiously and actually build out the software team. What’s the first thing that you do?
I started off by building an API, which may sound like a very engineering thing to do, but at that point, I was looking at, how are we going to look three years from now, five years from now? And I knew that we had to expand beyond Ooshirts. The API was the platform upon which we were going to build. That’s when Scalable Press was born. Scalable Press originally was just the name of the API.
Was this an API that you guys were going to use for internal purposes? Sounds like something you planned on using to extend your business into the future. What was the purpose of the API? Who was using it, and what were they using it for?
It’s pretty interesting. We got customers for the API before we built anything internal on top of it. We built it and almost immediately we had people asking us to use it. One of the fun things we did during those early days, we had a hackathon. I built a prototype of API. It did not work, as in you could connect to it and it responded to requests, however it didn’t actually get your shirts printed.
But we pretended that it did a little bit of growth hacking in that sense. We had a hackathon and that’s where we got our first customers. People showed up and they were like, “Wow, a printing API.” And that holiday season -- this was about six months into my time at SP -- people started sending of volume.
Give me a sense of some of the things this API can do. What kind of request can I send? What kind of things can it make come out on the other side?
It allows you to do anything that our facilities are capable of doing. Basically, you give us a piece of artwork, like a PNG file. You choose a blank garment from our catalog. You have the shipping address, send a post request and we will print and ship it to you very quickly.
Cool. At the same time, you talked about how the other part of your profits you were reinvesting were going into the manufacturing process. What was going on that side of things?
During this same time, we were trying to move away from those contract printers into our facility. We started leasing these facilities and started buying equipment and getting our own printing presses set up. The goal there was, okay, we know we’re getting these very low prices from these contract printers. Let’s hold ourselves to that standard. Let’s see if we can do better.
We started building a lot of software, a lot of integration for the workstations that power these facilities and honestly, every step of the decision was made very frugally. We had to, because we just didn’t have that much capital to work with compared to a company that might have raised a ton of money.
How do you even know how to build a screen-printing facility?
Good question. Many would argue that we didn’t. We hired people who had run small shops to help us, but it’s bizarre because in the custom printing world, there’s not a lot of technology. What is standard, what most of the graphic tees being printed today is not done with automation and technology that you would imagine.
There was this world where I came in knowing how to build software and we were working with operations people who had experience running screen print shops. We had to educate each other as we went along. We made tons of mistakes along the way, but through that experimentation, that’s where I think we got a lot of our most interesting innovations.
Give me a sense of some of these innovations, cause I’m intensely curious. What does it look like to build a screen-printing facility and what kinds of modifications were you making through the power of software?
I’ll give you one of the most fundamental ones that I think is a huge part of what the industry is today. If you go into a local screen print shop or printing shop of any sort, what often happens is the person who’s going to do the printing is also processing the artwork in some way. They’re prepping it for press.
Oftentimes what that means is there’s a computer and they load the customer’s artwork file, and they might tweak it a little bit in photoshop or something, and then they send it to the press. This is great, but it doesn’t scale. In an efficient manufacturing pipeline, you can’t have somebody who both is going to be at the computer, interacting with the screen, and downloading the customer artwork from the emails, and then also operating the press.
So one of the first things we did is we set up cloud servers to handle all of the artwork preprocessing, which meant that in the facility, the press operator didn’t have to do anything other than operate the press. Very fundamental principle, but the technology to do that in the cloud as opposed to in a computer next to the press was something new at the time.
How much were you learning from your competitors? Other have built, I’m sure, automated printing facilities before. How much of this was you guys innovating, and how much of it was you guys figuring out how others were doing what you aimed to do?
I think the interesting thing is, at the same time we were building our manufacturing facilities, the actual printing technology was changing a ton. One thing that’s interesting to know about Scalable Press today is that all of our printing processes allow a minimum quantity of one, and we’ve designed it that way.
Right around this time in 2014, printers themselves, and we’re talking about printers made by companies like Epson, Brother, et cetera, were getting to the point where you could do apparel printing, one-off, at a reasonable cost without a huge amount of setup.
A lot of what we were doing on the eCommerce side and in the facility was enabling this. How can we make a profit selling one t-shirt at a time, one custom t-shirt? I think that’s what was new and that’s what’s really changed the market since. There really weren’t many companies doing that type of printing.
We’re talking a lot about the product side of things, what you guys were doing to build a product that it sounds like no one else had at the time or at least wasn’t very common. How did you go to market with this? How did you convince customers to use this printing API, which I’m going to assume didn’t exist before you guys built one?
They signed up for it. The printing API idea was new. We actually had a brand called Shirts.io that we’ve long sunsetted, that we tried to build before Scalable Press with contractors. Basically, the technology never worked. We got a bunch of followers on Hacker News. It was pretty much the first printing API, didn’t work very well, and that’s what Scalable Press was an evolution of.
From that early set of contacts that we made, we had a lot of customers. To be honest, even to this day, I don't know where some of those people were getting their sales. I don't know what they were doing, but the point is, they needed shirts printed and they were willing to pay for it, so we were happy to do it.
That’s very cool. How do you recover from a failure and go on to do essentially the same thing but a little bit better? You said you started Shirts.io and it wasn’t the best API and you guys sunsetted it. What did you do differently to make it better?
That’s a great question. I think a lot of it is, again, going into the investment in doing things the right way, because when you’re making things that are different, like for us that was building an API that allows you to print things, and we have to make sure that it integrates well with how you actually get it printed, whether it’s through a contractor or a manufacturer.
It takes investment, and it took time. That’s really what it was. For us, as a bootstrap company, that meant we had to wait patiently until we could grow the business to the point where we had the capital to build these things the right way, to enable us to achieve the vision.
Okay. So you guys are reinvesting your profits. You’re building this API, rebuilding it. It works. People are using it. You don't know where they’re selling their t-shirts but they’re certainly paying you to make these t-shirts. What do you guys do with this newfound success and this breakthrough of having an API?
Of course everything we build and every sale we make helps to the coffers, if you will, to the war chest. We realized, okay, well the logical next step is to build our own eCommerce products on top of the API. We saw one of our competitors, but at the time they were also customers of us -- they were using us for printing -- Teespring have a lot of success in the custom t-shirt market. We realized, okay, I think we can do a better job than them, and we went after that.
That’s an interesting transition to make, because you guys are a bootstrap company. You have to fund everything you do with your profits, literally pulling yourself up by the bootstraps. The next step you identify was, okay, we don’t just want to make t-shirts, we want to sell t-shirts directly to consumer. Were there any other options that you guys considered? Why was that the obvious, most-profitable thing you could do?
I think it all comes down to the company’s vision. Our goal is not just to print t-shirts. Our goal, really, is to make printing more accessible. It all goes back to that first feeling that Raymond had that I had of why are these t-shirts so expensive? Why can’t it be done more efficiently, more quickly and still have high quality? Why does it have to be that way?
We knew that it wouldn’t be enough just to make money as a business. If the goal is just to build a reasonably profitable business, Raymond could have taken the profits when the company was at just $1 million and had an excellent lifestyle business.
The goal was to change what custom printing meant to people. We didn’t want custom printing to be a big deal. We wanted it to just be normal eCommerce. To achieve that vision, we have to build an eCommerce experience that will allow people access to the low cost and to the speed that will make printing more accessible.
Second question as part of this transition, you’re going up against Teespring and you’re core competency was basically printing t-shirts. I guess with Ooshirts you’d done a little bit of direct-to-consumer type stuff. But Teespring, that was their core competency, and they were venture funded. What made you so confident that you could do a better job selling t-shirts to consumers than they could?
I was absolutely not confident. Teespring’s a YC company. I had been a YC founder. I knew how much support that they had, how many smart people that they could work with. And here we are, Raymond and I, sitting in our dinky office and not having that millions and millions of dollars of venture funding.
I remember thinking very distinctly, “Raymond, I don't know if this is going to work. We’ll build it. We’ll try, but this is going to be a big challenge.” But Raymond convinced me, and he was resolute in one fact. The fact was very simple.
I guess what Raymond realized was, at least for that market, the customer was the creator of the t-shirt being offered for sale. By making them happy, Raymond felt that we could capture the creators. And if we capture the creators, then the customers will come along with them.
That was the real insight. And beyond that, what we could offer the creators that Teespring was not offering was better printing at a lower cost, so that the creators would be able to earn more of a commission against their art than they would on other platforms.
And that’s always been fundamental. ooShirts was first successful because it offered lower prices, and what we were doing was using the manufacturing capability we were starting to develop in-house, pass on those savings to the actual customers.
Explain to me and the audience what your business model was, what Teespring’s business model was and how it actually worked. Because this wasn’t just a very simple, “Hey, come to this website and buy a t-shirt.” You actually have different parties involved, as you’re saying, the creators, the customers, the manufacturers. What’s the bigger picture?
Absolutely. It’s very interesting and I give Teespring a lot of credit for, in my mind, founding this market. The idea of Kickstarter for t-shirts. If enough people are interested in some design, they actually get printed and shipped to the customer.
Somebody, an artist, or a creator, would create a design, upload it to the website, and then share the link or pay for ads for the link in order to attract customers. If enough people bought it, it would get printed and shipped. So that’s the fundamental idea. I think the key realization was the customer in this case, in this scenario, is the person who has created the t-shirt design, not the person actually buying it.
So a good example is, I do this exact same thing for Indie Hackers. I worked with some artists to get a couple t-shirts designed, and then I used my own distribution channels, the Indie Hackers podcast, Indie Hackers website and mailing list, to sell these t-shirts to Indie Hackers users who want to wear Indie Hackers.
What you’re saying is that basically I am your customer. It’s not the people that I’m selling my t-shirts to, but I’m the person that you need to serve and make happy because I’m the one who chooses to use your business.
What are some of the things that you did to serve your customers better than Teespring was doing?
As with any time when you’re trying to find product market fit, it’s about giving your customer that you’ve identified everything they could want. It’s counterintuitive, because if you’re the creator of the design, we’re paying you. You’re not paying us. The customers who are entering their credit card number, we’re saying that, “Oh, we’re going to pay a little bit less attention to them and we’re going to pay more attention to the person we’re paying commissions to.”
That really informed how we built the software. The functionality, the feature set was much more rich on the creator side. We hired marketing people that just focused on community and social media for the creator side, and we focused on making sure that the creators got as much of a cut of the sale as possible at all.
How did all of this turn out? It sounds like you’re doing everything right. You’re going up against this 200-pound gorilla who owns the room. What was the result?
You know, it’s crazy. The first thing that happened was Teespring stopped using us for contract printing. I think they realized pretty quickly that we had become a competitor. Over the next three to four years, an amazing thing happened.
The first thing was, when this whole on-demand t-shirt market started existing, it was a lot of US creators, US stay at home parents and stuff just uploading cool designs, doing a little bit of graphics, and trying to sell it.
But over time, it became an international thing, and you started seeing, all over the world, internet users uploading designs and offering them up for sale. A lot of them were terrible designs that nobody would buy, but they were uploading them by the millions. Some of them were amazing designs that turned out to become viral or got tons of interest.
That’s really where we are today. We now have a large international community, and a lot of that is in Southeast Asia, a lot of that is in the Middle East. They will upload millions of designs. Some of it is generated, some of it is done by artists. Anything you can imagine exists somewhere in our database. They try to get it to sell, and 95% of the things get zero sales, but 5% of them get tons of sales.
That’s where we’re at today with the t-shirt market, and I think our strategy with our website TeeChip, that really target those creators and provide tooling for them to be successful and to allow them to experiment is what made us very successful.
It’s ridiculous, because we started TeeChip with one engineer assigned to that project, and this was when Teespring was already at its heyday. But I think with the correct identification of the customer, we were able to get very far very quickly.
This is a cool model overall. You’ve got basically one business, but you’ve really gotten multiple businesses. I talked to a lot of founders whose dream it is to own a whole constellation of different businesses, because they don’t want to work on just one thing, they want to work on a bunch of different things.
At this point you’ve got your API that anybody who’s a developer can send requests to and pay some money and get t-shirts coming out the other end. You’ve got Ooshirts which is your original t-shirt website, where you’re selling t-shirts directly to customers and all sorts of other apparel.
And now you’ve got TeeChip, which is a sort a Kickstarter for t-shirts thing, where people will design t-shirts and if they get enough orders, you’ll print them and ship them. What else did you design, or what other businesses did you create besides those three?
We tried a lot of different things, and some of them got more traction, some of them got less traction. But I think you hit the nail on the head. The idea is, we want to create multiple businesses, because it’s aligned with our vision.
One of the things that has done well for us is we created the Shopify app. Shopify store owners can get their merch printed through our facilities. We’ve done some licensing deals, basically to help other businesses who have licensed merch that they want printed at a low cost. We’ve done that.
One of the more different ones is Scalable Press itself. Scalable Press, although it was just the name of an API, also became the name of our B to B business. We do B to B printing for all sorts of odd things. There was a gas station in the Midwest, a gas station chain, that wanted their uniforms embroidered. We do embroidery now, one of our newer processes, and we did a couple hundred thousand embroidered polos for them.
We had a partnership with Adidas for a while. Anything they didn’t want to print because the unit quantity was too low for that design -- think smaller schools and sports teams that had less of a following -- they would send our way because we had gotten so efficient at doing those low-quantity runs because we designed our process to have a minimum quantity of one. We sucked up a lot of that B to B business as well. In the end, it’s all about creating that more-efficient manufacturing pipeline so we can fill that need for as many markets as possible.
Do you ever worry about losing focus as a company? There’s an argument to me made that one or two of your businesses are extremely efficient, at least in comparison to the others, and maybe if you double down there, things will be better for you overall?
Yeah. That’s a great question. I think that’s something Raymond and I speak about a lot. The challenge there is, can you effectively delegate? I think the dream for a lot of business owners, and this is kind of what Jeff Bezos has created at Amazon, is create a bunch of general managers, basically mini CEOs who can execute on their own business.
Yes, I worry about focus all the time, but I think we’re trying to figure that out now. We’re trying to see, okay, who can take ownership and be delegated the growth of a business, because we want to create a system where if it’s a business in the customer printing area, we have the resources and the people to give it a good shot.
It’s a hard thing to do. You’re basically hiring miniature CEOs.
It is very difficult. You have to consider it both from the product standpoint, marketing, engineering, and all of it. It goes back to the early decisions we made. We knew this was what was going to happen, what we wanted to happen, and that’s why the API was the first thing we built. It’s about creating platform.
So even today, the credit card processing module, the accounting reporting module that we use across our different eCommerce products is shared code. It’s an internal API for billing eCommerce products.
You guys are located in San Francisco still, right?
Yes. Our headquarters is right here in SF.
It’s not common to hear of such a huge bootstrap business in SF. I’m sure most of the people you talk to, the other founders you know around here, have all raised money.
Let’s talk about the bootstrapping angle a little bit. I’m curious how this changes the equation for you guys. Broadly speaking, what are some of the different decisions you’ve had to make because you’re a bootstrapped company?
It’s really pervasive. It has been there every step of the way. I think a lot of people might look at us and think, “Oh, well you guys are profitable. You’re doing over $100 million. You’re fine. You’re past the hump.”
The reality is that’s just not the case. Thy way we spend money today still is a hundred percent influenced by our bootstrapping, by the fact that this money is from the sale of a t-shirt. Every single cent you can trace back to some customer who decided to buy a t-shirt or mug or whatever we print now. It just makes it that much harder to spend money in a way that may not help deliver growth of the business.
I’ve got so many examples of things that I guess were uncommon. I remember when we were setting up our manufacturing facilities, I took some of the engineers on the team and we would go run the ethernet wiring in the facility because the cost of paying somebody to install ethernet is really expensive, and because all of our software was networked in the cloud, we had to make sure we had good networking.
So we were installing Wi-Fi access points with screwdrivers and everything. It was really about everybody understanding that, look, we have to get these things and we cannot default to just paying somebody. We have to look at the tradeoff of if we spend time on it and get it done, maybe that’s worth the savings.
Are there any unique advantages you think you have because you’re bootstrapped that a well-funded competitor might not have?
That’s a great question, and I get asked this by engineers on my team, because a lot of them have worked at venture funded companies being in SF. They’re like, “Well, Eric, why don’t we just raise money? I want a TechCrunch article. I want to be cool.”
But first I tell them, “No, we are cool,” but what is interesting is when you a bootstrap company at scale, it gives you the ability to work with economy and speed in a way that is I think very unique. Even when I was at Flotype, when we were just a C stage company, or at the startups I’ve worked at just as a software engineer before, the need to raise funding, first your seed, then your Series A, then your Series B et cetera, controls to an extent how much ownership you have of the product vision. It controls how fast you can move. It controls the direction you have to go in.
That’s something we don’t have to do. It sounds like a scary thing, but also a kind of incredible thing. There are times when Raymond and I are in the room and we decide, “Hey, you know what, this would be a really cool idea,” and then a week later it’s fully in action. The ability to be bigger but also move that quickly is definitely one of the distinct advantages.
I think another one of the advantages that a lot of people don’t realize is, our number one duty is to our employees as opposed to investors, if that makes sense. There is no investor we have to satisfy with our decision making, which means really it is ourselves and our employees that need to be happy with what happens at the business. I think that’s also influenced a lot of our thinking.
Give me some examples of how that’s led to you making different decisions. I think it’s a good point. Any company, you have to prioritize your employees, but if you have investors, it suddenly kicks your employees down a notch. They’re number two on your priority list.
Yeah, and that’s the unspoken thing of Silicon Valley, that hey, well, everybody’s secondary to your VCs on your board, because if they don’t give you that money for the next round -
Yeah, that’s the end, so good luck. I think it’s something that is subtle, but it touches a lot of different decisions. One example, to give you something basic, let’s say we wanted to create a product roadmap. We can really create the timeline for the development of a product based on what we think is the best long-term vision or what our product owner for that product believes is the best thing in the long term.
There are no results that we must demonstrate by a certain timeline so that we can raise our series whatever. That’s not a consider we have to make. We can truly think at the time scale that we choose to. That both allows our employees to deliver on the vision that they may have for a product, as well as let the business ultimately make a more independent third decision.
There’s a lot of stuff you can innovate on a business. There are a million different directions you can go in. There’s also a lot of accepted wisdom, best practices that you can just follow. What do you think the line is that you guys draw? What are some of the areas that you guys innovate and do things differently? What are some of the areas where you guys just stick to the best practices?
One of the innovations that I think is interesting, and this is innovative in some circles and not innovative in other circles, is trying to create that platform early and trying to scale the business horizontally early.
When we had success with Ooshirts, when we had success with the API and success with TeeChip, I think we absolutely could have just chosen to focus on one of those products and make that continue to grow. We do try and do that.
However, the overall vison of the company is more towards, let’s go horizontally. Let’s cover more markets. That’s another example of the type of decision that a VC may disagree with. A VC might say, “You know what, why don’t you make this one product completely dominant in its market so that we can have our nice exit and call it a day?” I think that’s something that we try and do differently. To answer the other part of your question, the side on which we make decisions perhaps more conventionally is -
There’s no conventional side.
Gosh, every business is very different, so there’s only some -- No, I only have more answers on the different side.
Give me some more of the different answers.
I think a lot of the actions we’ve already taken to grow our eCommerce properties like TeeChip are quite different and unexpected, especially when I explain it even to some of our own employees who don’t work on TeeChip.
So much of our creator bases in Asia, we’ve even opened coworking spaces in Vietnam. We own two coworking spaces where our creators can come, have classes, grab drinks and hang out, basically. It’s just one of those things that is very unexpected, how international some of the products are.
One of the things that I strongly believe in, is don’t build products just for Silicon Valley. I think this is something, overall, companies are getting better at. But even today, I use a Windows laptop. Everyone else on the team uses Macs. But I go to a lot of websites and they look terrible on Windows because every designer is on Mac and they’re not thinking about the rest of the world that’s still on Windows. That’s something that I work with the team to make sure we avoid.
Another big decision that I made early on was I didn’t want our engineering team to just be in San Francisco. Our headquarters is here. We have a bit of every team here. But we also have our engineering team in Indianapolis, Dallas where we have facilities, and also in Guadalajara, Mexico.
I really believe that today, if you’re going to be building a product and you need to hire engineers, you need to start with a distributed team, because the cost of building just in San Francisco is just not something that you can easily handle, unless you have those millions of dollars from VCs. If you’re bootstrapped like us, the reality is it’s just not the right financial decision to only have engineers in one place
You have to take advantage of the international talents, so in the same way that we do so for our product, TeeChip, and we look for customers everywhere, for our engineering team itself, we look for engineers everywhere.
What do you think the future holds for you and for Scalable Press as a business? You’ve made it so far, and you still have a lot of room to grow. But do you see yourself ever starting another startup? Do you see Scalable Press ever becoming something extremely different than it is today?
I do. I know exactly what I want to do. One thing people tell me all the time is, “Oh, you’re in printing. Printing is dying, newspapers,” blah, blah, blah, which is true. Newspapers may be dying, but the thing about printing is, a lot of our customers today don’t even know they’re getting a custom printed product. It’s less about, “Oh, let’s get a custom printed phone case,” or whatever, and it’s much more about manufacturing on demand.
Step one, we want to build efficient manufacturing in the print types we do today -- t-shirts, phone cases, mugs, embroidery, et cetera. Step two is to continue expanding that until much of the custom printed market is something where something that is happening efficiently, where technology has truly arrived for the manufacturing process.
Step three is to go beyond printing and really look at manufacturing. My overall belief, whether this is Scalable Press in the next couple years or ten years or another business, my overall belief is that the idea of, “Let’s manufacture things by building a million of them in Asia, putting them in a cargo container, sending them in a boat to the US, putting them in a warehouse and then picking and shipping them when somebody buys it,” is a ridiculous idea that one day we’ll look back on and think, “I can’t believe people used to do things that way, it took that many steps.”
I think there will be a day when a lot of what we purchase on a day-to-day basis is created on demand from the raw materials. It will be done quickly and at a low cost. That’s what Scalable Press is going towards, starting with custom printing. That’s really what I’m passionate about.
What do you think people listening in who want to start their own companies should take away from your story and your experiences, especially people who want to bootstrap, who aren’t interested in raising money and who really want to build a business to help make their lives better.
I think the biggest lesson that I learned about bootstrapping working here is, you cannot compare yourself to the same timelines as your traditional venture funded business. We all know the stories of the Facebooks and the Twitters of the world who grew extremely quickly, raised round after round in an IPO and then everybody’s happy more or less.
Scooter companies work a billion dollars after a year and a half.
Exactly. If you look back in the history of Scalable Press, Raymond took a very long time by our tech entrepreneurship standards to build the business. He was very patient. It took him basically six years before it got to the point where he was ready to build an engineering team.
That’s crazy. Who even runs a company for six years anymore? But that patience is what allows us to be large and successful and bootstrapped to this day. That’s still affecting us today. When we look at our product growth, we don’t always look at it as, unless it’s a rocket ship trajectory this product is not working, and we need to nix it.
Instead, we think long term and think about, strategically are we doing the right thing? And as long as, long term, we’re making the right decision and we believe in it, we’ll keep doing it even when the growth is not there.
We have dips, and that’s okay, because there’s no VC telling us that it’s game over because something dips. I think what’s really magical about bootstrapping. You get to make those decisions for yourself. But that can mean the timeline is long, and that’s okay, too.
That’s great advice. I think one of the biggest pitfalls for people bootstrapping their own business is that 98% of the information out there is intended at high growth, venture funded startups and it will lead you down the wrong path if you’re not careful who you’re getting advice from.
Eric, thanks so much for coming on the show. It’s been great listening to your story, listening to how Scalable Press got started and your role in it. Can you tell listeners where they can go to learn more about what you guys are up to and about what you’re up to personally if you share that sort of thing online as well?
Absolutely. You can check ScalablePress.com. That gives you a little bit more information about the company. I have very little social media presence these days. Not enough time, I suppose, or I’m just lazy. But definitely learn more about Scalable Press.
If anybody’s in the market for a job we’re hiring across tons of roles. There’s a nice careers page on our website so do check us out. If you want API for printing, feel free to reach out to me and I’ll throw some credits your way. You can always email me at [email protected]
Thanks so much, Eric.
Thank you, Courtland.
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