Paperless Post: James and Alexa Hirschfeld

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Dot com. During Covid We had a lot to lose. The stakes were were much, much higher.

Yeah, it was pretty catastrophic. I mean Our mission is to help people gather in real life. And you know, gathering in real life. Um was something that People didn't do

for about a year and a half. But it took us back I probably in terms of like our sales volume. I mean we're probably back to where we were in two thousand nine in sales. Wow Yeah. It was with but with a staff of how many people? Hundred and plus and twenty, yeah. So Our

main concern was to ruining our company. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. The built.

I'm Guy Roz, and on the show today, how James and Alexa Hirschfeld convinced investors that people would pay for virtual paper. and built a brand that, since launched Sent out over six hundred and fifty million invitations. You may have heard the saying that entrepreneurship is a marathon Not a sprint.

And if you consider the journey from start to exit. That is often very true. Just like in a marathon, there are certain mile markers that are painful and brutal. The moments you want to collapse and die, but there are also moments when the wind is at your back. The only thing we can all agree on is that a marathon Is really long.

But when it comes to actually starting a business, getting it off the ground, Yes, there are marathonners, but there are also sprinters. If you've listened to this show long enough to the hundreds of founders we've interviewed over the years, you will have heard both. The sprinters have an idea, start to build it, and work to get it out into the world fast. And if, in a short period of time, the idea isn't gaining traction, They pivot or abandon the idea and start all over.

The marathoners, on the other hand. Have an idea. And then start to spend months and even years carefully building out a plan. Doing all kinds of careful market research, talking to hundreds of people, making incremental progress every day until. Finally

They're ready to launch. Today's story is very much about the latter example. Alexa and James Hirschfeld spent about two years building out a careful plan before they launched Paperless Post in 2008. Now, at the time, the idea, at least to investors, seemed kind of crazy. Get people to send out fancy high-end invitations in digital form. and pay for it. But if you think about it, wedding invitations are really expensive.

If you get one in the mail Just know that the person sending it probably spent between five and ten dollars on your invitation alone. So James wondered, what if you could cut that cost down? twenty five cents per invitation.

It was an idea that came to him during college. And soon he contacted the person who he thought might be the best business partner for him. His older sister, Alexa. It would take many years for the business to gain traction, and there were times, especially during COVID, when paperless posts almost went under. But not only did it survive, the brand is now one of the leading online invitation businesses around. And recently it branched out into custom party supplies as well.

Alexa and James were very close for as long as they can remember. No fights, no rivalries, just really good pals, despite the two year age gap. They grew up in New York City, their parents were both lawyers, and they were raised in a home with both Jewish and Greek traditions. So I think people who diaspora people who Leave their country. Not necessarily

Wanting to But having to Tend to retain their culture. And that is the case with my mom's family. We went to Greek school to learn how to read and write early on and we

We learned how to speak Greek as well. Wow. How's your Greek today? It's good. So you can just like

Go to Greece and talk to people? Yeah. And I can read and write. That's probably way more than the average Greek American kid who went to Greek school. Maybe, yeah, it might be. Yeah.

Um, tell me a little bit about you guys as as brother and sister. I mean, you're two years apart. Um You know, Alexa's your oldest older sister, James. I mean Did you guys? Get along pretty well from from the time you were kids?

Yeah, um, so for the first four years of my life, it was just the two of us. And then our our younger brother came along. Um, I think, you know, we had kind of a normal relationship when we were sort of under ten we

W I mean I was pretty obsessed with my older sister, um Because she was older and you know. I you know, I looked up to her a lot. Yep. But she wasn't as obsessed with me, I think, in those times. You know, we had a common enemy, which was our parents. Um, you know forcing us to go to Greek school, forcing us to you know go to sports practice and do our homework and stuff like that, grounding us. Um

But we also, as we developed into individuals, realized that we We're friends. We each had great admiration for the other. Yeah. As a result of that we

We were talking about doing something together work wise from a very young age. Like I think I mean that's Crazy. Alexa, where were you guys talking about? Doing together. When you were teenagers about about a business in the future, like what what would that have been?

I don't know that at the time it was a business. I think I recognize that James was Talented. He was always Doing Uh

Projects. Uh he was Learning how to Do photography or sculpture and

When I would show my friends paintings or photographs or sculptures that James had done. I would always get a really positive response, like, wow, that's amazing. So so by the time you guys were in high school, I mean Were you sort of inseparable? I mean, did you have the same kind of social, like, groups of friends and and hang out together?

Yeah, and we we were two years apart in at the same school. So we went to the same parties, we had um like similar friends. You know, Alexa was very Good with people. She's very popular. Um m more extroverted than I was. I would say we were pretty inseparable, yeah.

Alright, so Alexa, for for college, you uh end up going to Harvard. Um where I guess I guess you studied um Classics. And then James, you actually started at Harvard a a few years after Alexin, and you majored I guess in in comparative literature, but um But I want to ask you, uh James, when when you were in college, do you remember if

If any part of you was thinking about You know, maybe starting a business or or or not really, like not yet. So I would say at the time, um when I got to Harvard I wasn't Sure that I wanted to be an entrepreneur.

Both of our Our parents are Professionals, um and they're lawyers. They're lawyers. And lawyers are risk averse, let's be honest. Exactly. They believe in educate you know, go deep on education, get a stable job, you'll always have a a a career The funny thing about Harvard, though, at the time was that Um, you know, it was sort of it was

Two thousand six, two thousand seven. There was a huge entrepreneurial spirit on campus. Um, you know, Mark Zuckerberg was in Alexis class. And he had obviously dropped out Because of this tremendous success with Facebook.

And I was surrounded By these incredibly ambitious People who were kind of Weaving business ventures into their kind of

their class work and their social lives and I I joined a club that was full of people who were starting tech companies. And you know, none of these people really were engineers. Um there were people who were

They were studying Politics or philosophy or economics. But there was this kind of can do mentality. that um you know starting a uh a a a tech company.

was was really possible. So all right, so let's Let's get to this story. How how does this begin? I mean I I mean the sort of the uh apocryphal story and I'm sure there's Mm a lot of truth to it is that

You were planning a party, basically. For you for yourself. Yes. Um so it was actually It was two thousand seven and I turned twenty one. And um I was having great time in college.

And I wanted to have a party for my twenty first birthday with my best friend at the time who's Turning twenty. And I had never really had a big party before. Um I hadn't had a bar mitzvah, I hadn't had a big eighteenth birthday party. Um And

And I kind of had this vision. I w It's really cold in Boston in the springtime. My birthday's in March. Everybody's like freezing and I wanted it to feel Like summertime, uh, it was like a beach themed party. Um and I kind of I filled this this This place with palm trees that I that I

bought and then returned to home depot. You know, in hindsight there were probably like The kind of potted plant that you would just put in office, but I I thought of them as palm trees and I thought it was really atmospheric and Um

People like brought their A game and they came dressed up as like lifeguards and sailors and Um you know Beach bums. It was really fun. And when it came time to inviting people I wanted to

send the message that this was gonna be a great party and I wanted to show how much thought and care had gone into the planning of the party. Hm. And so w w what kind of invitations did you did you decide to send? So You know, the options at the time were to Print paper.

um which would have been, you know, out of budget for me and really impractical because, you know, I didn't have my friends' mailing addresses. People didn't really use physical mail. Um or to use, you know One of the First generation, you know.

online RSCP tracking websites, um And those were riddled with ads and um not very beautiful and you couldn't really achieve the the sort of self expression or the design value that I was going for. And I think what I ended up doing was

Sending an email. Um, but it got me thinking that Consumers. Sh you know, could have another option. Which would marry the

the the beauty and the and the personal feeling and the customization of paper stationary, which is like incredibly can be incredibly expressive and beautiful, but Difficult to attain. with the sort of functionality and the practicality of Digital communication.

And you know, no one had done it before, but I believe that we could do it. Not having any background in You know, any formal training and Software.

Engineering or web design, but I I believe that we could do it. Okay, so Alright, so you had this so James, you have this idea. to You know.

Do something around digital limitations and And Immediately or or early on you're thinking I need to call my sister? And and Get her involved in this thing?

Yeah. Exactly. So I had the idea. Um it was very, very crisp in my mind's eye. I I had done some research on kind of the paper stationary industry.

And so the first call that I made was my sister. Um I think she was a little sceptical. But I think she got on board pretty quick. Alexa, I'm I'm curious when when your brother called and said, Uh, I had this idea. Wha what was your response? I mean you had a a pretty good job in T V at that point. I think you were I think you were working on the um the CBS evening news with Katie Couric.

Uh, so w what was your reaction when James called you? So we had been talking about some other Kind of Ideas um And

The way that he described this one was Very specific and very visual. He was saying, you know, you could see the texture of the paper, and we'd use Most beautiful fonts and

colours and And I was thinking back. to those friends of mine and the moms of the friends of mine Responding to the artwork that I would show them, like the paintings and sculptures. James is being very

Um humble about About But I was thinking if we had a platform where It was his

Vision and his High and style. But it was being offered to Many, many, many more

People like my friends I believe him. I actually do think that people would use it. I wasn't sure if they would pay for it, but We had very little to lose, so At the time. I was twenty three.

And I understood that I would probably never have less to lose than I did then. You could take the risk. Yeah. Uh, James, when you you I mean, you're a student at Harvard at this point, and I guess you c you convince your sister

Working on this thing. Um, and this is two thousand seven. Tell me. w how you what you guys started to do. I mean, you had done some research around like

the i the category and the industry and you looked at like stationary and and then there were I mean there was evite was out there and Um you know Facebook events. Facebook events was out there. What did you do? Wha w w how did you start? Yeah, so we we had

Very few tools at our disposal, but we Really needed to try to figure out how to use the ones that we had. So I was a You know, a kind of an amateur designer.

Um and my sister started reading a lot of books around product design and user experience design. So I started designing what I thought the invitations could look like. I was truly I was the first designer and I could see it. So it was it came easy to me. I I learned how to use Photoshop. I started creating kind of example invitations. And so we tr we we tried to lay it out ourselves. We got kind of far. Um, but it w it was it wasn't really actionable. So

Um we began to bring other people into the project who had You know, deeper expertise around the things that we couldn't do. And how did you how were you financing that? How were you paying for them? So we were very scrappy. Um we were kinda hard negotiators. But we you know, the first people we brought in were a design from in Boston that kind of helped us

Create wireframes and a flow. And we we paid for that with The savings that you know, my sister and I had which was A little bit of money that our grandparents had given us or had left us when they died.

Um You know Not not a ton of money. Um so we use a design firm to kind of create the first wireframes. We use those wireframes which look really polished and kind of Gave a better picture of where we were going. to hire some

Uh backend engineers who were CS students at Brown University, who were friends of friends, who had some time over the summer. to work with us on setting up a database and beginning to build this application. And then they were great. And we kind of but then they had to go back to school. Yeah. And I was still at my job. Um so I was able to

take some of the money I was earning from my job and put it into the business and working nights and weekends on the business. So that was another way that we were able to Pay some of the bills. Well, and I and I'll just say it took about two years before you launched, which we'll get to in a a bit, but you kept your You kept your day job. Yeah, we kinda I kinda stopped.

Not on purpose, but There just wasn't enough time in the day to do both. Yeah, it's interesting'cause it it I think there are two kinds of entrepreneurs. They're marathon entrepreneurs and then there are sprinter entrepreneurs, right? And so the marathon entrepreneurs have like a they model out a plan and they come up with a You know, sort of a

a a a set of things that they have to do over a period of time, knowing it's gonna take a long time. And then every you know it's like it's like Candyland. You're kinda following the boxes and then every few boxes you stop, you assess, you adjust. And that's an amazing way to to start a business, the other way is a spread, right? Which is you just go for it and if you don't get momentum quickly, you just drop it and you move on. And both approaches can work really well. You guys are marathon runners. You're doing a marathon here. And I wonder, James First you like

During this time, you know, working with contractors and Anybody who could help classmates and Software developer anybody. How did you keep the passion and the momentum going when There was no product yet, there was no business yet. It was just this thing that you were working on.

It's a really good question. I think, you know, I look back at that time and think about how Uh how how little we were working with In terms of You know, prowess, know how resources.

The one thing well, we had a couple of things. We we had each other, which was great because you know, I had a co-founder that it was very aligned with. But I also I had a very, very strong Conviction. And the Product.

I it didn't exist yet, but I could see it. And I could when I say I could see it, I mean I could literally see it. Yeah, I mean I loved

Having This Goal. That was by the way, secret from almost everybody that we knew.

And What we found as we were doing the research on what was out there Was Making us believe more in the potential. it it's very exciting to feel that you're on to something.

And that if you can just get it together to get it out there. that people are gonna realize that they they've been waiting for it. Th yeah, and I'll just add to that like There was a lot of

Logic. behind this project too. I think You know, we are Millennials, we grew up In

A time in history where we saw Basically, all forms of written communication be digitized from you know casual chatting to business communication. We we watch that all move online. Um and it made sense to us that That was kind of the the progress of history was that Written communication was going to be digitized.

Um and yet Back in two thousand seven, if you can remember There really was a limit to there there were certain types of events where you could not use An online.

product to communicate. It was not legitimate. And being kind of you know products of our generation, I think we felt that this type of communication was gonna move online and that that was the for for all the you know obvious reasons around efficiency and cost efficiency and the environment. And that the company to do that just hadn't yet been built. I wanna d dive into this idea because Just being you know, having instincts around

Your generational perspective. is often right. Sometimes it's not, right? It's not always right. Sometimes it's wrong. And I know that You know. A ra during this time you guys started to seek out f outside money, outside financing, because this was a time

I mean so funny we're talking we're only talking about 2008, like it's ancient history, but it was much more expensive. to build a website and to build the back end than it is today. But I have to imagine there was a lot of skepticism. Around this idea. when you went to them.

There was a lot of skepticism around the idea from investors, especially Um kind of You know Tried and true Silicon Valley venture investors, I think. So we need to raise money. We had like

very f maybe four thousand dollars in the bank account we were um kind of Yeah, precarious. Totally. How did you even get into the door some of those places? Just kinda like through the network of of college, university and just

talking anybody you could or Yeah, when we were such hustlers. I mean we we I think we must I I was thinking back on it in advance of this and you know this conversation. I think Um, I must have been a really annoying person at this time because We were so focused on on bringing this idea to reality. We were so focused on succeeding. I was really working every angle. I don't know, our uncle lives in San Francisco, so we were trying to making lists of everyone that we knew that Could potentially

know someone who was a a V C or who could be an advisor. I was coming back and forth from from Boston to to to go to meetings and try to get on the radar of these investors and You know, the feedback V V Cs often are they trained to uh recognize patterns um and to invest behind patterns that have been successful

And the product that we were building really broke from all of the kind of conventional wisdom of the time. Right. Here you guys are saying Yeah, we're not gonna have advertising. You're just gonna have to you know, you we're gonna have these cards, you can make'em, but if you wanna send'em out, you've got to pay

That was your business model. Um Well I I I mean I I'm just curious, like again, when you went to investors You're pitching them and I ha have to imagine them saying to you, No one's gonna pay for this. You already have E Vite out there. Like it's you can just do this for free. No one's gonna pay for this.

But the the really At the time, um Demoralizing part. Um, but I think it fired us up. Even more, but

The really interesting part was that For some people that we are speaking to It wasn't just that people wouldn't pay for it. It was like why why would people want to use that? What is different about that? Then just you know

A web page. And what would you say? What would you say?'Cause you got that question again and again, you had to repeat the answer again and again. The design. It's the the look, the w it's the the self expression, it's the soft messaging. Not everything needs to be communicated in like Plain.

You know, you U T F it format text, like there are ways of communicating that That are visual that people have been doing for centuries and they wanna continue to do it even if they wanna do that Online, so there was this

really um a lack of value placed in Design. But also an opportunity looking back. So on the one hand you had the so called experts pushing back, and again I think in two thousand eight m and and I say this with a lot of love because in two thousand nine I believed early on

My wife and I used paperless posts. for the birth announcement of my son who's born that year. So like we were early users, but I think I would have been Skeptical? In two thousand eight, if I had the money to, you know, if I was an investor with a bunch of money. Because I would have thought, uh again, like who uh people are gonna pay for a card because a card is tactile and it's

letter pressed and it's it just looks so impressive and you can see all the money and time somebody invested in and a digital card like You know, people might just think oh they're cheapskates. Now, of course, i there was a period of time where you would have to convince people that that was not the case. Yeah. I think I think that um We needed to um

think hard about the business model and I I I wanted it to be a premium product from the outset because The kind of incumbent um competitive options were free and ad supported, and I thought that there was It was a really bad idea. to try to monetize a an invitation product, which by definition It just looked it looked chintsey. It looked like ads for your like for like your used car dealership on your your wedding invitation. But not only that, I think in you know understanding the way that a lot of I mean events by definition are special. I mean whether it's a a a backyard barbecue or a wedding

It's a moment when somebody is You know, generously taking time out of their life, ta putting resources into creating an experience for the people that they care about. Um they don't happen every day. They are expensive, no matter I mean, even a casual event, you're you're spending money

Um and You know it. It felt to me like If we could create a product that was worth paying for That would make this event more special.

people would be willing to spend a tiny fraction of their budget on an invitation, um, even if it was digital. So if that invitation was more private, if it wasn't covered in ads, if we weren't selling your data and your guest data to carnival cruises like our competitors were Um you know, people would pay a tiny fraction of their Five hundred dollar

You know Uh summer party. Budget. Yeah. And we believed that the largely women, um

uh who were buying um paper stationary that was custom printed. Would be really, really excited to be able to Design uh real equally special

invitations and communication and send them out for pennies instead of, you know, dollars. And and what was interesting was that a lot of these the the investors that we were pitching were actually not the target user for the product. And so people really looked at us like we had two heads when we said Wanted to build this business. When we come back in just a moment, have James and Alexa finally prove that they're onto something.

But then learn a hard lesson about stay in their lane. Stay with us, I'm Guy Raz, and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So it's the fall of 2008, and Alexa and James are still trying to convince investors that there's a market for digital invitations. So they roll out a beta version.

To see how it goes. А деспой, бал в твітазине, gotten this what we thought was a beta product. It was probably really like an alpha prototype that was out there in the real world with real users using it and we From the very beginning we saw that real people

Understood the product. And we're so Happy that it existed. Despite you know, it was early it was rocky, there were bumps, it wasn't perfect. Um But

But they got it. They really understood it. And so on one hand you'd have this very powerful Internet personality or investor telling you you are wrong. And on the other hand, you'd have real Mainstream people trying to get into the product, trying to get a log in.

using it asking you if you'd seen what they made and don't you think it looks cool. And You r I real I think the reason it was energizing was because It showed we were on to something that That was not obvious to everybody else.

Yeah, I think that's right. I think I think we we still kept on hitting walls with most investors, but our first investors came to us through the product. Our first the lead investor of our of our seed financing round. This was a uh uh someone from a a fund called Moose Partners. Um and he received an invitation And he just got it. He saw this invitation, he clicked it, it opened up like a card on his desktop and and he just never seen anything like it. And he called me and he said You know, I'd I'd love I'd love to give you some feedback on your product and

I was so used to getting feedback on the product. I I was like, Okay, here we go. You know, okay, what are you complaining about? And he your temperament is really you guys have even keel temperaments. Thank you. Thank you. Yes. Yeah, we're Marathon runners here. Okay, keep going. So he's like you know so he's giving me he's giv some people you were giving some really tough feedback. Yeah, his feedback was kind of softball feedback. He was he was like, Well, you know, I think that

You you you don't have all the fonts that I would like to use or I think you need more options that speak to this type of thing. And I was okay, this is softball feedback. I think this person actually really likes the product. Um and you know, he had this thick French accent. I was okay, maybe it's'cause he's foreign Anyway, the end of the call, I said to him, Well, we're we're trying to raise some money so we can, you know, take this out of beta and really and really launch the product. And do you know any investors? And he said Um, I don't know any investors, but I am an investor myself. Um, and you know, maybe you wanna come to my office and we can talk about it more. And all of our investors

We're we're and we're lucky to have um A lot of supportive investors and they all in their own way, I think, really get it. And what were you looking for? How much? We a million half a we yeah, we raised about eight hundred thousand the first time. Which was in two thousand eight.

A lot. We thought it was a lot of money. I mean now you see these like you know pre launched Like forty million dollars seed rounds. Um but back then we were super proud of raising eight hundred thousand dollars, especially, you know, in two thousand eight during the financial crisis. Yeah. Getting great early.

investors, you know, they're basically angel investors in family offices, but um the truth is that I think every entrepreneur knows A dollar from one place. buys you the same as a dollar from another place. They're not different.

Um, you don't there I I I think if you really wanna succeed and support your company. You don't need to be too picky about You know. Where the the funding is coming from, as long as you trust.

The investor. And um you wanna partner with them through through Ups and downs. Yeah. Alright, so you were able to raise About eight hundred thousand dollars.

How long was I mean Given that I think again and I don't mean to like project something on you that you're not. But I think I think the marathon runner is an apt analogy. Like I think you built a plan and you started to kind of methodically follow it, even though it y you would have to adjust. Right. How long was eight hundred thousand gonna gonna last? At the time we were a pretty small team. We were probably like f four or five people. Um and we had a

revenue model, but it wasn't. It t turned out not to be the revenue model that we have now. And Alexa. So while we were in beta

Think this product should be free for consumers. And I think that we should have a different business model where we allow um Five O one C three's and organizations that are selling tickets to events. to sell tickets through our platform and we'll take a commission on the transaction because that's an interesting idea. Yeah, and um by the way, it's a great business model and obviously Eventbrite is an amazing

public public company. Yeah, exactly. So it w was it was a good instinct and and we built it. Yeah. So we raise money on the back of this revenue stream around ticketing. But the organizations that were using us for ticketed events were harder to acquire

and much harder to serve. um, you know, you would help them, they needed a lot of handholding, they needed a lot of, you know, custom support, and then you'd invoice them after the event and it was hard to get them to pay because they were small charities and stuff like that. Whereas Our consumer business was like Taking off like wildfire.

people were like batting down the door to try to get into our private beta. So we had to we had a a very difficult conversation and and I look back in hindsight I I can't believe Alexa and I, yeah. Okay. And I think our our partner Lucy Um who is, you know, the first person to join us. The the gist of the conversation was that I I felt that we needed to

focus on monetizing the consumer business because these consumers were so much easier to serve and to acquire and they were so passionate. And I thought we should get rid of the paid ticketing business because it was distracting and and and difficult. But it sounds like in order just to to to kind of validate the questions that potential investors had, you had to show some revenue. So you

made the decision to try this thing out. Prove it out. And but you needed to do that in order to gain the confidence of investors. We th I thought it was a good idea at the time. I think I should have listened to James's instinct, which was always originally to actually charge for the product itself. But the truth is that

Because we were able to see the value that the users were getting It gave us this confidence that you know what? We're gonna have to figure out a way to charge consumers who are valuing this product. You know, uh killing this business model pre-launch. Was a massive decision, and it was incredibly disruptive to everything that we had invested in to that point. But it was also as a matter of survival.

Uh it was just such an obvious thing to do and and um and it really set us on the right path. And I remember after that we had to think, okay, so how are we gonna get consumers to pay for this product in a way that i is is palatable to them. Yeah. And and our our initial instinct was or w what we landed on was the idea of People buying stamps. So you would buy like a packet of stamps and you would use one s one stamp would send one invitation, and a stamp was probably like 25 cents or 15 cents or something. And our product has evolved. The credit system has evolved since then. But you know, it was very scary. We thought hard about how to charge. And I remember in two thousand nine in the spring. Six months after we raise money. I was studying for my final exams. I was in Widener Library, where I was supposedly studying, but I was refreshing the the tracking page that we had to show, you know, w activity on the site and

I remember we launched this stamp product. We had no idea, you know, whether our user base, our tiny user base was gonna revolt, you know, whether that they were gonna hate it. And I just remember refreshing and seeing a seven dollar purchase and within about thirty seconds. And I just remember thinking Okay, we've got one customer. So if we've got one customer we can we can find more and And I remember going to a party that night.

And someone saying, Oh my God, I love these steps. They're so it's what a what a cute idea. And so I was like, Okay, I think We're on to something here with this payment model. So that basically initially you could design the card. But then to send them out you would You would

Fight. These virtual stamps. Correct. Like you guys are doing early virtual currency basically. And i it's true, it was an early virtual currency, it was early, you know, digital goods. Um, you know, the

The invitations aren't physical, but The design is real. And the relationships that you have with the people you're inviting to the party is real and the party's real. In fact, it might be the most important thing happening in your life in the next three months. So I also think that we had

This was an area where A typical background. you know, not having been product marketing managers at Facebook or Google, or you know, gone ha not having gone to Stanford Business School or

But the other thing that I wonder Yeah. You guys are New York City. I mean this is like the the at least the capital of America for parties.

You know, every company has a party and There's so many And And how much How important was

Being in New York. To getting the right kind of influential people to use this early on. I think it probably helped. Um, the way that we grew was through, you know, is two parties that

In the first weekend of September in two thousand eight, one of them was kind of a fashion week. jewelry party. It was like a You know Professional event and um the other one was our friend Halsey

Who sent her Twenty thalsey the singer? No, no, a friend a different friend. Not not uh not the Halsey. She was like a baby at that time. Yeah, exactly. Um R Hall's just a friend. And she sent her she had kind of been Yeah, um hounding me about when she could get into the site'cause she needed to send out her twenty

third birthday invitation and and she was so proud of what she'd made afterwards she called me to ask if I'd seen what she made and then that's how we grew is through all the people that were invited to her birthday and to the jewelry party. Um And actually really quickly We heard that The outgoing administration in the White House. Um, somebody had used it and we were people were writing us to see if they could get logins and it would've sounded so naive when we were telling people that we thought it would grow virally, but it it did.

I I I read that in the first y full year you had like a hundred and fifty thousand invitations sent out. But I'm wondering I mean, I can't imagine'cause you know, it was not expensive to do it. I mean if certainly far less expensive than sending out printed invitations, right? Like You know, you're you're paying uh maybe twenty cents per in per invitation, or twenty five cents per invitation. So What was your m the the revenue situation like in that first year?

Um I remember It being Excited I remember in December of two thousand and nine That we did a hundred thousand dollars in sales. So we in one month. In one month, yeah. So we launched we launched around like April of two thousand nine. We opened up

Or beta. We allowed anyone to register And by December of two thousand nine, we were doing a thousand dollars a month. Uh a hundred thousand dollars a month, rather. But I remember, you know, I remember w when we did

Sixteen thousand dollars in sales in a month. I was so excited. And I remember reporting to a family friend and she just rolled her eyes at me like When are you gonna give up on this thing? Like sixteen thousand six thousand thousand dollars like you know, what the hell are you talking about? That's a very small business. Yeah. But I mean a hundred thousand dollars a month is still a small business, but obviously it it's showing significant growth.

Yeah. Um okay. So so Really, I mean, c given that you had this product and and uh and a limited amount of money. Um

How were you w I mean was it I guess this is also the advantage of this product is it's sort of viral by nature, right? Because if somebody's using it And sending it out. Then all the people who get it see it. A a and and you essentially don't have to spend money a whole lot of money on user acquisition because your customers are your your sales force. Totally. And honestly, we didn't really spend much money on marketing until

A few years ago, we kind of thought the marketing was like fake news. We we were really on to product led growth. Um and and kind of you know these viral growth dynamics very, very you know, a lot. Yeah. And then the other thing is that Um

We decided to try having uh an envelope where the the invitation came out of the envelope. Like the card and I think most people have experienced this'cause of probably most people listening have gotten a paperless post, which is when you click it, It's like the envelope opens up, the card pops out. Like you would pull it out.

Yeah, and to be honest, that was James can James can chime in on this, but that wasn't necessarily key to his original vision. But the idea of it coming out of an envelope was something that we decided Because we wanted it to be We wanted to stand out and people to say, Oh yeah, I received your invitation. The one that looked like paper and came out of an

envelope and we, you know, ended up building that in pretty Um pretty close to the the launch. Um Because you guys had had to be scrappy and you didn't have a whole lot of money. Um

You know, and again, like the model at this time was just get a bunch of users, acquire a bunch of users, but your your model's a little different because even if somebody Used your product it didn't mean that Th it wasn't like Facebook where they were going back to check the site seventeen times a day, and you didn't have advertising. So You had to hit profitability pretty quickly. Right? I mean that that that must have been a

Pretty S like sort of pressure filled goal. Well You know,

Two sides of our network. We've got senders and we've got receivers. And it's true that receivers don't come back and check the product. fifteen times a day, but senders actually are very, very, very active for the month leading up to their event. But you're right, we didn't make money by monetizing, you know, engagement in that way. We were lucky to be able to raise Um

more venture capital financing as the product kind of took hold. Um, and I think, you know, that that took away some of the Um urgency around achieving profitability. Early on. When did you guys? First hit profitability for the first time.

We had o we had had we'd we'd always been running kind of close to profitability and we would have court we would always be profitable in Q four. Uh probably since two thousand since two thousand ten. We'd have a huge surge. But we uh we we've been profitable since Um twenty twenty one. In terms of full years of profitability, yeah.

Right. I mean again, a marathon. Yeah. Right. It's like a it's a marathon. So all right, let's go back to the time to the timeline for a moment. I guess uh uh you know, sort of two, two and a half years in You decide to actually offer up printed cards. And and not just to offer them up, but I think you

You be you built your own Printing's like uh business. Like i it within Paperless post. Tell me about How that came about. We

We realized that we had You know, a couple of years in we've built up this very passionate Uh user base of early adopters. Who were People who

Um Actually loved paper. And um when we would talk to them, w you know, they would say, I use you for my wedding Um I wish I could print some for my for my scrapbook, or I used you for all my birthday parties for the past two years, but now I'm getting married.

And I wanna use you guys for my wedding invitation, but I wanna send paper And I think for me, um there was this kind of big vision of Of being a platform that Uh could be sort of one stop shopping for

Any type of invitation you were sending and you know, could we be everything to our users, not just digital invitations, but the you know paper as well. And um We We were we we validated the demand for it.

And then we set about building it. Um and We launched it in twenty twelve Um, I think we did five five hundred thousand dollars in sales in the first like ten weeks of paper

Bill, did you you worked with a partner or did you actually like did you contract with the printing business? So we had two print partners. We had we worked with Crane Stationery, which is which is the I think they make the paper for for Yeah. Like a three hundred and fifty year old paper company in Dalton, Massachusetts. That did all of our fine printing. Um, and we worked with a state of the art digital printer in Memphis, Tennessee, that did our digital printing on these incredible

um you know, million dollar printing machines. And you know, maybe there was a a bit of a a vanity aspect as well where I really I thought we'd you know we'd created a product that people associated with quality so much

That could be Offer a product that was you know, people would spend hundreds of dollars on instead of ten, you know, ten or twenty dollars. But at the same time it it also pulled us in a different m into a different market with different competitors. But there were other companies that had been at it for a long time and gone deep into the product, production, manufacturing, marketing all areas that we were New to And so we were able to get up to speed and we actually grew it to be a pretty big

Business. But you know Uh in twenty seventeen. We we decided to shut down the operation. We would have had to choose like to compromise on one, you know, the quality of one product or another. We also found at the same time that

Hair Our engineering team and our product teams was was being forced to think a lot about this paper product. um, you know, and how to how to be more competitive with the people who are doing great things in in that space. Yeah. But they were engineers. And they were and Yes. Yeah. They were not they were they didn't have three hundred years of stationary. Yeah, exactly. Exactly. And

They you know, what we really needed them to be doing was focusing on kind of making our product amazing on these iPhones, which were becoming more and more pervasive, you know, and replacing Blackberries. And and when we saw these opportunities kind of passing us by with our core digital business, which always remained much bigger and much more profitable. And made again, this for the I gu maybe for the second time.

Um the difficult decision to shut down a business that we had built You know, with with blood, sweat, and tears. I mean it sounds like what what you're saying is which makes a lot of sense to me, you couldn't do both things and be best at both things. That that it was not po like it's another another sort of version of saying

You were spread a bit too thin. Yeah, exactly. Well we come back in just a moment, how James and Alexa get spread even thinner. When 2020 hits, and every event that brings people together? is canceled.

Stay with us. I'm Kai Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2014. Paperless Post has grown to about 45 million users. And after some false starts with its business model,

The company raises a big chunk of cash. Twive million dollars. Which as it turns out. It's both good

And bad. It was kind of problematic for us because we weren't ready to have that much capital and It's so funny how when you look back on the you know, building a business, how the things that you think are gonna be great Can be

Kind of. The kiss of death and things that you think are gonna be really bad. can be amazing. You know the thing about having a lot of capital when you're a small company is that it you can put it behind the wrong strategy and it and and you don't you lose Do you lose touch with the practical reality of the business? And it took us a little longer to realize that it wasn't right for us because of that.

Like, you know, heavy capitalization. Yeah, yeah. I mean I I I wonder whether, you know, w when you raise that amount of money, right? Um Th there's also an expectation that you're gonna do something with it. That Right, that there's gonna be a like a shiny new thing. Um

And and so one of those shining things was the paper business, right? But then another thing you tried was was a less expensive version of the online invitation, I think, which I which I think you called Flyer, right? Yeah, so so Flyer was Conceived as a

Uh mobile first. um, you know, more casual, less expensive product and we we built it on the back of of of kind of exiting the paper business. And um, you know, it's it's been really, really popular with existing users and with new users. So Yeah. But it's main it's mostly free. It's mostly free. It's it's about seventy five percent free. Wasn't a concern that might undercut your corpse? Your core product?

Uh Position. was that it was a very different Product. Um you know, Flyer is uh today is heavily based around motion and gifts, and it's much more of the aesthetic of sort of social media stickers and um animated text.

And our position was that um people who Want cards, um are going to continue to use cards and people who um want flyer want something different. And so that that's that has mostly turned out to be the case. I mean I struggle with this idea even with what we do, which is how much free stuff can you give out? Without understanding

what you're gonna get back in return, especially if you're doing a if you're trying to build a sustainable business.'Cause even making giving free stuff away still costs you money, right? And so And you have no advertising, so it's not like all of a sudden people are getting flyer and they're also seeing an ad, right? You're right. We have no advertising ever and we don't we don't sell people's data. Yeah, so what's the return? I think I think that you know, you have to remember That

Um I Our growth has been so heavily driven by This viral

an invitation, their recipients are, you know, clicking to our side, they're engaging with it. If it's if it's if it's like a cool looking invite. uh and it feels relevant to them, then we acquire a user who can become a customer. So, you know, it um yeah, maybe we We give a lot away for free on Flyer. Um But there's a return in terms of because and are you able to measure that? Is it possible to know for sure if if actually it's generating it? We're definitely we're definitely able to mem to to measure that. Yeah. Yeah. So on balance it works out.

On balance it works out and it's been a very, very popular product. So okay, so you're you know, you've got this business humming along and growing and obviously, you know, You know, you launch in two thousand nine. And ten years in you've got

a a a a product, a business that's really kind of penetrated the culture, you know, and and it seems like There's nowhere else for you to go except up. Except something very significant is about to happen in the world, which is a global pandemic. Good for some businesses if you are an online apparel.

Uh and you happen to sell at leisureware, it was gonna be a very good year for you. Um, if you're in events business, we've had Eventbrite on the show. Um or you are in the business of helping people to organize their events.

Different story. Yeah, it was pretty catastroph it was pretty catastrophic. I mean Our mission is to help people gather in real life. In a more meaningful way. Um and the term social distancing that kind of like entered the lexicon.

um out of nowhere and became the you know what the word everyone was talking about Um it was pretty much the sort of antithetical to the purpose of our comp of our company. Um Every event was a super spreader event. Every event was a super spreader. Exactly. Every event was a super spreader event. Yeah, I was I was actually five months pregnant at the time and people were writing saying, Oh, uh how are you? Are you okay um being pregnant during this pandemic and I was like, that is um not my biggest problem right now, if I'm being honest with you. I think uh

The pregnancy's gonna be Hopefully it's gonna be fine, but I have I have something bigger to deal with. Which is a business that was collapsing. And payroll that was, you know, the same as it was two months before. When our when our you know, when our sales were significantly, significantly higher. Um so we we took about

Ten year step backwards in a month. Um wow. But it took us back. Yeah. Probably in terms of like our sales volume. I mean we were probably back to where we were in two thousand nine in sales. Uh yeah. It was with but with a staff of how many people? A hundred and plus and twenty, yeah. Mm.

I it's just the difference between Ten years before And And that time was that Ten years before we really had very little to lose.

And and during Covid We had a lot of The stakes were were Inarguably. Much, much higher.

Yeah. And actually I think I mean when I think about it What? w what really happened was that sales dropped by eighty five percent in April and then Over the summer they they settled it around fifty percent down to the prior year, as we saw.

People figured out how to have parties. that were outdoor parties or drive by parties or virtual parties. So so so for for twenty twenty and twenty twenty one, we were down about Fifty percent, but still Um, you know, very difficult. That's still devastating. But uh but what we do what we realize is that our our Our

main concern was to ruining our company. How are you gonna do tell me how you I mean I imagining you had to do everything. We had to do everything. I think it started with um deciding that we were

Going to survive it. And that we were going to respond. as shrewdly and As scrappy As possible. So we had to

We had to kind of work every angle. We we we started with pay cuts. Um, which was, you know, everyone was a pretty good support about that. And And so we we kind of heard we heard about PPP loans. We were one of the first companies to get PPP loans. Um, and we the they were pretty generous. We negotiated with our landlords, we renegotiated our debt, and we ultimately did have to raise some money from our investors who who all came together around the company and and helped bridge us to the other side. So we were really we really

Pulled every lever. Um to keep the company together and to allow us to preserve the value that we built. Over the previous ten years. But uh but an idea would eventually emerge from this. I mean an idea that now is a part of your business which is actually

Um really interesting. Side of your business. Like physical products. Yeah, that was that was definitely um that that emerged. Actually a lot of a lot of great ideas emerged during the pandemic We became

very focused on Profitability for obvious reasons. Um And once we you know, we came up with the idea of of starting a physical product shop, which has been very cool we all This is called just to for people to know, it's called party shop. It's called party shop. The paper blows post party shop. Yeah. You know, if your kid's having a dinosaur birthday party, we can create matching dinosaur products, et cetera. So that that was uh that sort of started as a test.

coming out of the pandemic, but I think even more substantially, um We s we we started to really look at the business f through the lens of You know, Which segments were driving the most value. And we we notice that

Um The two segments were kind of standing apart from the rest. Professional events and wedding events. And we were thinking about the fact that These customers, these business customers are really appealing. Like they're they're great customers. They

They have high willingness to pay, they have high repeat rates. Um they are Pretty easy to serve. Maybe we should build for those segments. I mean this comes out and and you launch this obviously. you know, this is launched I think in in twenty twenty two. So

And again, we we forget like There were b there's basically a year and a half of or in many states in the in in the United States of just people not going out. And then there was another year and a half of like outdoor eating and masked eating and going to hotels masked and um sidewalk. Cafes. And that and that really lasted in c at least California until like twenty twenty three. Yeah, no, it it was um it was really we became like Like weather people on the TV. I mean, I remember everyone we were kind of looking at maps of the US and saying, Well, th this outbreak of this Omicron variant is moving across these states and the next wave would happen and we would be battered again. It was like being in a boat that was going through a storm. It was like waves of

of uh kind of crashing over a business. Yeah. And actually I think when I think about it, a lot of the competencies that we built up and the muscles that we built um during Covid that we we had to hone um for survival as the kind of the cloud lifted, it was like we'd been training at altitude. Tell me a little bit about what where the I mean are so you you've fully recovered and more like now you're you're back to full strength where you were before COVID in terms of like employee count or or or what? Yeah, we're a little bit we're we're around the size we were before COVID, but we're double the size. Um we're

Profitable. We're double the size adds in business, yeah. And we're growing Yeah. You know, back in in twenty twenty three, um Saturday Night Live had a did a parody.

Uh. Paperless post commercial. And and we'll post a link to this by the way, in my newsletter for people who haven't seen it,'cause it's so funny. And um it's like It basically it's like paperless post, you know, if if uh uh we've a new feature. Um if if the you know you're

But people aren't RSVP throw a brick through their window and it just gets more and more crazy and like eventually like wild dogs are sent after people who aren't responding to the paperless post invitation and then to the one person who writes in and is like, I don't really want to celebrate the war it is so funny. Um When you saw that'cause when I saw it, I was like, This is amazing. They must love this. This is so good for the br Did you w is that how you responded initially, or were were you like, Ooh, I don't know about this. I think we were pretty We were pretty um We thought it was pretty amazing. So we just

got a Google alert one I think it was Saturday night. Um and I think I was probably out at a party and I got this Google alert and I looked at it and I thought, wow, this is pretty pretty wild. Um and The skit kind of gets at Some of the manic energy behind planning an event, um, you know, you really care about it.

You really want people to RSUP. You you want those damn RSPs. Mm-hmm. It's really funny. Um, one of your early investors that you mentioned was uh a French guy and I think w the he was an also like they had invested invest in Chanel and and I just think about like, you know, all the the the the brand partnerships you do with some of these designers. And I wonder

What is the Like what is is there an exit, so to speak? I mean, is there a world where you're acquired by L VMH or you're you're looking to f for something like that? I mean Or is it go public like some other companies do or or Or neither of those. I think that we didn't build the company to sell it.

We built it because we have a personal passion for it and we're inspired by it and it's all around us. Um, so you know, I think over the years we've explored we've had Different. Companies approach us and and, you know, sometimes explore different opportunities to camera way, but to the timing, the partner, the deal never really felt right and we believe that we have

More to build and further to grow. Um, and we're s you know, we're still We're s we think we're still the people to lead that. Yeah. Um, when you guys think about uh th this this journey you've you've been on and w and where where where you are now, and I mean there've a lot of incredible success and you proved early doubters.

Including me, I would have been a doubter, wrong. And you had a a a massive crisis. You know uh once you are a mature in it company. And he recover from it.

Um, how much of of where you guys got to do you attribute to the the work you put in the grind and how much do you think ha has to do with just the luck of the timing and and how consumer behavior changed? I You know, I I think that there are ways that we've been lucky. Um I think we were lucky to be born as siblings, you know, to have a co founder that you know so well and s you know, um from from day one, um to have Supportive parents that give us confidence. But

When I think about Luck. I also think there have been a lot of You know, supremely unlucky moments that have happened. going out launching our beta and going out to raise money. in the fall of two thousand eight.

You know, COVID was extremely unlucky for us. I think it kind of kind of washes out in the end. I think the part that doesn't wash out. Is the incredible hustle and desire to succeed that I think Alexa and I share and our team shares. I agree with Everything that James said.

But I think that You know, I I do think that really horrible and difficult things happen. To everybody. In their lives.

And you can't stop those things from happening. So how you respond to these unlucky situations like people quitting or covet or Death or sickness, that's the biggest freedom that you have. That's one of the biggest powers that you have as a person and as an entrepreneur. That's how you respond.

And oftentimes those really really hard moments. are where you you can perform the best That's Alexa and James Hirschfeld, founders of Paperless Post. By the way, earlier this year, the company celebrated its fifteen year anniversary with a big party. And the invitations were, of course.

Sent by Paperless Post. I saw a photo of you with like Anna Winter, I was like, Wow. You have like fancy people at your fi fifty fifteen year party. Yeah, that was like the Michael Jordan of the fashion world. It was very nice for it to come, yeah.

By the way. How do you have a conversation with her? I would be so intimidated. I don't she's got her sunglasses on, she's Anna Winter, like She's surprisingly nice. I'm sure she's nice, but I would still be like I don't know what I'd say to her, I'd be so nervous. Talk about the theater, talk about tennis. I don't know anything about tennis. I don't know anything about theater. I expect my wife would be with me so she could talk about theater. I'm a

I'm like a caveman. She's great. Hey thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyros.com. This episode was produced by Carrie Thompson with music composed by Ramteen Arablui. It was edited by Neva Grant with research help from JC Howard. Our audio engineers were Robert Rodriguez and James Willitz. Our production staff also includes Alex Chung, Chris Massini, Devin Schwartz, JC Howard, Sam Paulsen, John Isabella, Katherine Seifer, Carla Esteves, and Elaine Coates. I'm Guy Raz and you've been listening.

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