Don’t Smugly Dismiss $100M+ Startups

By Joseph Flaherty

When Web 2.0 pioneer Flickr was acquired by SmugMug, most of the coverage was positive, some was wistful, but there was a selection of hot takes that disparaged Flickr for being acquired by a company with so little noterietay in the tech world. This story is a useful illustration:

For the record SmugMug isn’t some obscure brand: 1,493,282 techies follow Gizmodo on Facebook. 1,134,331photo enthusiasts follow SmugMug.

Schadenfreude is a serviceable strategy for journalists seeking clicks, and I’ve written a snarky headline or two in my time as a writer, but it’s a dangerous habit for entrepreneurs to engage in because it conflates possessing a notable brand with being a successful business.

The author of that post is technically correct, SmugMug isn’t widely known in the tech world and has none of the usual signs of success:

• SmugMug doesn’t have a consumer brand like Instagram or Google.
• SmugMug doesn’t have an app that cracks the top 200 in the app store.
• SmugMug doesn’t have the backing of notable VCs or celebrity users.
• SmugMug also lacks a free pricing tier to attract droves of DAUs.

What SmugMug does have, according to Founder/CEO Don MacAskill, is “millions” of paying customers. SmugMug’s founders haven’t shared any revenue data, but arithmetic can help provide a sense of the startup’s scale. SmugMug offers four tiers of pricing with discounts for annualized payment, which I’ve used for the sake of these calculations:

• Basic: $47.88/year
• Power: $71.88/year
• Portfolio: $179.88/year
• Business: $359.88/year

I applied those sums to three conversion scenarios:

• Conservative: 90%, 5%, 4%, 1%
• Moderate: 60%, 25%, 10%, 5%
• Aggressive: 50%, 20%, 20%,10%

Perhaps the most impressive fact is that SmugMug was started in 2002 with just a $500K loan.

Assuming just a million paying customers, SmugMug earns between $57M and $110M in annual revenue. If their customer number is closer to two million or more, and applying modest multiples, they’d be a unicorn. They also have other lines of revenue, like selling physical prints and brokering digital rights, creating more revenue that’s harder to model. SmugMug isn’t a pillar of the internet like Instagram, but it is a substantial business that deserves study, not sass or scoffs!

The startup world is so much bigger than most people think

SmugMug aside, the point of this post is that it’s dangerous to dismiss companies because they’re unknown or have unimpressive vanity metrics. I’ve seen little-known startups sell for sums that set their founders up for life, financially. The products are typically “boring,” in the best possible sense of the word. The founders are gifted leaders, but focused more on promoting their businesses than themselves. These companies are almost never covered in the press, but have ripple effects in the entrepreneurial community for years to come.

It’s natural to focus on positive outliers like billion dollar successes, but adopting a snobbish outlook towards anything that falls short will lead many to overlook important startups that are worth hundreds of millions of dollars, or even billions of dollars.

The fact that someone is unfamiliar with a brand doesn’t mean it’s bad, no matter how “in the know” they think they are. There’s a world of invisible unicorns out there, so don’t let a vainglorious worldview keep you from weird and wonderful ventures!