How Not to Work for The Man: Jonathan Sposato on Life at Picnik, Microsoft, and Google
Every once in a while, you meet an entrepreneur who rocks your world. I mean, most of them are impressive, but as they say on ESPN, Jonathan Sposato is ridiculous. And so is the rest of his team at Picnik, an online photo-editing startup based near Pike Place Market in Seattle.
A lot has been made of Picnik’s being bootstrapped and cash-flow positive since late last year, as well as its high-profile partnerships with companies like Facebook, MySpace, Flickr, and Seattle’s own Wetpaint. It’s one of the most talked about startups in town. But the broader story of Sposato’s tech career is full of so many insights, I’m not sure where to begin. (I won’t even get to the bars, restaurants, and other properties he owns around town, even though, for all I know, my rent check goes to him every month.)
The founders of Picnik all come from the gaming world. So that’s where this story begins, back in the mid-1980s. Growing up in the Seattle area, Sposato got to know two guys named Darrin Massena and Mike Harrington when they were all in their late teens. Massena was his officemate at Synergistic Software in Renton, and Harrington worked at another game company called Dynamix in Oregon. “Nobody thought it was going to be a career—computers?!” Sposato says.
Massena and Harrington, both self-taught hackers, went on to work at Microsoft for 10-plus years. “Back then, Bill Gates would hire old-school dudes, right out of high school,” Sposato recalls. “Darrin and Mike were one of those stories.” Meanwhile, Sposato went on to undergraduate studies—owing to his traditional Chinese-American upbringing, he says—at Whitman College in eastern Washington. But he kept track of his old buddies. “Every time I saw Darrin, he’d show up in a nicer and nicer sports car,” he says.
After college, Sposato says, he “got cold feet about being an attorney,” scrapped his plans for law school, and helped start Manley Games, which grew to 39 employees and made video games for big players like Nintendo, Sega, and Electronic Arts. “That was my business school. We grew it in three years’ time,” Sposato says. In 1992, he joined Microsoft and worked there for 12 years, becoming a senior manager in the consumer division, where he drove efforts in software applications, video games, and social communications.
He left Microsoft to pursue other business interests in the Seattle area. One of those was starting the software firm Phatbits in early 2004. Phatbits was bought by Google in 2005, and became Google Gadgets, the search giant’s desktop application. Sposato stayed on and worked from Google’s offices in Kirkland, WA, for just under a year, commuting to company headquarters in Silicon Valley almost every week.
Having worked at two tech giants and two startups, Sposato emerged with some strong lessons in corporate culture. “No two companies are the same,” he says. “Its way of doing things—designing products, business practices, employee benefits—all of that is a function of the culture. What Microsoft and Google have in common is they both hire really, really smart people. Microsoft always self-selected for more of a Type A, aggressive, competitive type of smart person. Google self-selected for an equally smart but more genteel, collegial, ‘nice’ type of person. Consequently, the corporate cultures are really, really different.” He points out that at Google, they always ask, “How do we make this an open platform?” (Though it’s something Microsoft does more of these days too.)
But he was ready for something new and different. By 2005, his old friends had long since left Microsoft and had already established their own gaming companies. Massena had started Spiffcode, makers of Warfare Incorporated (“Handheld Game of the Year” in 2003), and Harrington had co-founded Valve Software, the maker of Half-Life and Counter-Strike. (Harrington left Valve in 2000 and was pursuing other interests like sailing and working as a forest ranger.) One day, while Sposato was still at Google, the three of them got to talking about starting a company of their own. The result was Picnik, which was founded in late 2005, with Sposato coming onboard the following year.
But why Picnik, and why online photo editing? “Darrin felt that there was going to be a sea change. More and more of computing would be in the cloud, less on the desktop. It began with that insight,” Sposato recalls. “We thought, whatever we do, we should do it in the cloud. Should we become something like [online] Office-type applications, or an online PowerPoint? Let’s do something that we ourselves can get passionate about, and can be really broad—something everyone can use. Photos emerged as, ‘Ah that’s the thing.'”
And the reason seems particularly befitting to a group of self-made hacker-entrepreneurs. “We thought, ‘What’s the hardest thing to do in the cloud?'” Sposato says. “Photos. Because it requires image manipulations, which are very computationally intensive. How do you match things up, how do you make it run fast?” It was also a bold strategic move. “It’s important for startups to consider keeping our barriers high,” Sposato adds. “Make it hard for others to copy you and compete with you in the first six months to a year.”
Picnik’s software allows you to create all sorts of cool effects with your digital photos—make collages, greeting cards, and scrapbooks, design composites, layering, and soft-focus effects, adjust the position and spacing of pictures—all in a way that seems like easy entertainment, with just a few clicks. It’s much simpler to use than Adobe Photoshop, and it connects to social sites like Flickr, Photobucket, Facebook, and MySpace, as well as Yahoo Search.
The startup competes with other photo sites like FotoFlexer and Shutterfly. Without getting into too many technical details, what seems to set Picnik apart is the speed of the site and its ease of use. Its patented technology under the hood involves figuring out which parts of the code to run on the “client” side versus the “server” side, and how to break the software application into modules so as to minimize waiting times.
Another thing that sets Picnik apart, at least among its startup peers, is that it has taken no outside financing. “We’re completely self-funded,” Sposato says. “The most important thing you have to have is not the killer app idea, it’s the killer team. No. 1 was to make sure we feel good about what we can accomplish, and attract people who are fun to work with. No. 2 was, once we identified the photo area, to do it in thoughtful and scrappy ways so we wouldn’t require outside funding.”
As Sposato puts it, “What is the point of having your own startup if you have to work for The Man again? When you have VCs, outside investors, there’s a lot more pressure to justify your decisions. Sometimes it’s a lot easier to grow a startup if you can be free to have a very short decision loop, and you just move quickly, based on your own product sensibilities and business strategies, versus what a board member is telling you.” (And besides, what’s the point of having successful startups and acquisitions under your belt if it doesn’t give you the resources to start your next company without having to dilute it with VC money?)
In order to operate that way, Picnik placed an emphasis on making money “as soon as humanly possible,” Sposato says. The company rolled out its photo-editing site in mid-2007, and began to charge for a premium service that November, in addition to its free site for casual customers. For the next few months, the team tried out a mix of free versus paid services, and by August 2008, the “revenue line started going up,” he says. Picnik has been cash-flow positive since last November, and the site now boasts 30 million-plus visits (9 million unique visitors) per month.
What was the key to gaining traction and boosting revenues? “We didn’t change the business model, but we got much more aggressive about communicating the value proposition for why you should pay $25 a year. We also made the payment process easier,” says Sposato. “Today’s Internet marketplace is incredibly efficient, it responds almost instantaneously.” And key partnerships, like the one with Flickr, were “a giant vote of confidence” and helped drive traffic that could be monetized.
From here, he says, “Our mission statement is to make ‘Picnik’ an Internet verb. Apparently that’s [already] happened. I think of it as the first thing you think of when you want to do anything to a photo—edit, create a scrapbook, share, e-mail, print a photo onto something, or upload to Facebook or Flickr…I want you to think of Picnik. Think of it as the Google of photos.”
The company now has about 16 employees—and a unique culture born from its founding team’s experience. “We hire for very, very smart, really great engineers and designers. People have to be a little zany and fun-loving to be here,” says Sposato, who’s a young-looking 42. “We don’t take ourselves too seriously. We are in fact competitive, but there’s a delightfulness about us.”
They may not be teenagers anymore, but they remember where they came from. “In the games industry, the top 10 games make 95 percent of the revenues. I think it’s the same thing for traffic on the Internet. If you can be the top photo experience on the Internet, you’re going to win by a very wide margin,” Sposato says. “Because we’re ex-gamers, we can’t help but make it fun to use.”