This week we’re adding some big recent IPOs:
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Despite the flurry of media interest in Uber (of course), there’s an interesting, untold story in that group. Pinterest: the ‘silent unicorn’.
What’s a Silent Unicorn?
You may not have used it yet but Pinterest is home to over 250 million users.
Pinterest is built around content boards, which users curate by ‘pinning’ searchable content and links as images. You can build scrapbooks for recipes, home decor, art, design and much more.
Pinterest launched in 2010, the same year Facebook biopic ‘The Social Network’ premiered. But for founder, former Google employee (we have a few of those) Ben Silbermann, success was much less immediate. The company went through serious struggles looking for the right audience and scale.
A Yale graduate rather than a Stanford dropout, he joined the Silicon Valley gold rush in 2006 and got a job at Google in advertising. Meanwhile his wife Divya followed a similar path and joined an exciting, pre-IPO startup called Facebook as an early HR hire. Pretty great day jobs, right?
But Ben’s real dream was launching his own startup. After two years of grousing and pitching ideas to Divya, she basically told him to just do it or shut up.
So in 2008 he took the plunge, leaving Google and starting to work on a medical tech idea. A week later, Lehmann collapsed and the financial crash begun. It was the worst possible time to take a risk or raise money.
Ben had no technical track record, no co-founders and no VC interest.
However, there was one glimmer of hope: the iPhone had just launched. Ben believed the big Web 2.0 opportunities had already passed, but the App Store looked like a fresh new oil field.
So Ben teamed up with Paul Sciarra, a friend with VC experience, to form an app design company, which they named Cold Brew Labs. It sounded cool at the time!
The mission was just to ship an app, any app, that would catch fire.
Initially, they pinned their hopes on a retail fashion app called Tote. The idea was to create a kind of shopping catalogue on your smartphone. They had some success and investor interest, but the lack of mobile payment infrastructure made it difficult to really deliver as a catalogue. The main way users engaged was by creating collections and shopping lists of items.
Meanwhile, Ben was talking to a mutual friend Evan Sharp, an architecture student and aspiring product designer. Evan, a serious design enthusiast, and Ben, who’d collected insects as a childhood hobby, were both intrigued by the collection aspect of Tote.
They realised that collecting, building a repository of ideas, was still kinda difficult online.
After exploring the idea, Ben decided to fully pivot to create an online service built for visual collections.
And so Pinterest, newly named by Divya, was born.
Evan, who was just about to start a job at Facebook, couldn’t cash that opportunity in for an untested startup, but he agreed to assist the team on the side.
Paul, who’d assumed the CEO role of Cold Brew over Ben as the more connected and business savvy of the pair, was to be the first CEO.
And Ben would dream up the ideas and find the users.
So that was the trio: Ben, the mild-mannered, curious creator, Paul, the businessman and Evan, the arty designer. Though Evan was still at Facebook, he created the innovative grid layout of the site, as well as coding it.
Finally, they had a product they believed in and, with much excitement, they launched in private beta at the start of 2010.
And then… not much happened.
After three months live, they had only 3000 users. They reckoned they had a decent product but they certainly didn’t have product/market fit (PMF) i.e. a product that resonates with a meaningful number of people.
As far as they were concerned, the product was useful to anyone so they had no sense of who their target customer would be.
Achieving PMF is one of the hardest problems for a startup to face. Thousands of neat ideas die on the vine because they never had or never discover a real market.
At one stage, Ben and the team were so desperate for traction, they headed into the Palo Alto Apple Store to change all of the browser homepages to Pinterest (it didn’t work).
They even tried to push for an early acquisition by a New York publisher, but the execs refused to meet the team.
Initial product/market fit
While they didn’t have a lot of users, the ones who used it, loved it. And there they started to get hints of where their market rested.
Some were home decorators or artists. Some were simply family contacts, including patients of Ben’s mother, a small-town doctor. Trends began to emerge: these were creative people, aspirational people with a definite slant to women.
One particular catalyst was a design blogger conference in Salt Lake City. There he met and befriended with Victoria Smith, a San Francisco-based lifestyle blogger. Ben and Victoria decided to collaborate on the ‘pin it forward’ campaign, their first big viral success. The idea was for Victoria to build a Pinterest board around ‘memories of home’, then challenge fellow bloggers to create theirs and pass the challenge on.
Bloggers became one of the most important early parts of Pinterest. It was hugely beneficial to them to be able to catalogue content from across the web for their readers.
Ben and co kept focusing on these super-users, meeting with them personally and building a real community. At these meetups, the main thing that struck Ben was how each pinner’s catalogue was inspiring others in the network to achieve something themselves. This, he decided, was the real use case. Compelling, defined and benign.
This audience and Silbermann’s mild-mannered personality were reflected in the company culture. Famously friendly as a company and a product, Pinterest stands apart from the rest of Silicon Valley: less bro-ish and boastful, more humble and wholesome. Hence the nickname ‘the Silent Unicorn’.
In fact, humility is part of why this origin story is relatively unknown, compared to Facebook or Uber.
Pinterest nails it
Through a combination of this influential core audience, some luck and simple momentum, Pinterest really started to take off both in growth and VC interest. In mid-2011, they hit the fabled 10% weekly user growth rate. Still in private beta, they hit 1m users by July 2011.
By the end of 2011 they’d raised a Series A and B funding round, bringing in investors like Bessemer Venture Partners and Andreessen Horowitz and hitting a $200m valuation.
Soon after, in 2012, Paul left on friendly terms and Ben assumed the CEO role. By now, Pinterest was hot. In the runup to Obama’s re-election, both Michelle Obama and Ann Romney joined the site. Amazingly, the site still didn’t officially open to the public until August 2012.
More venture rounds followed, as well as launching on iPhone and Android. From 2013 onwards, Pinterest was making acquisitions itself, usually buying competing or complementary services and absorbing their engineering teams.
Users to customers
Along the way, Pinterest also started to figure out how they’d make money. Their model - advertising - wasn’t unusual, but the smooth implementation was.
Many internet companies struggle with monetisation.
Even Facebook, whose commercial grit has led them to billions in profits, are locked in constant conflict with users and regulators who fundamentally resent and mistrust the ads. Twitter have struggled for a long-time between making money by providing better ad tools and maintaining their service’s non-commercial integrity.
In contrast, Pinterest introduced and iterated sophisticated monetisation and ad services without much fuss at all.
A lot of that was down to the nature of Pinterest. Products and services had a natural space among the aspirations people catalogued on their boards. If you’re looking at an interior design board to plan a home design project, it’s probably quite helpful to see a promoted pin for furniture.
As a testament to their commercial strategy, user growth kept on rising along with revenue. Hitting an $11b Series G round in 2015, the company now had a clear path to IPO: keep growing users, keep shipping ad features, keep increasing revenue.
It wasn’t all plain sailing from there. One venture fund later marked the value of their Series G investment down and two years later in 2017, investors injected more capital at a $12.3b valuation - an extremely modest rise.
Nonetheless, by 2018, that IPO was coming and the date was set for April 2019.
In the final quarter of 2018, just before their IPO monthly users hit 265m.
What Pinterest’s audience looks like now:
- Still around 80% female
- Median age of 40
- Around 30% American
However, Pinterest has a lot of younger users too, with most active pinners under 40.
In April 2019, Pinterest went public with a $10.3b valuation. This actually represented a loss for its latest VC backers; for Ben, Paul and Evan, it still must have been pretty extraordinary,
Despite its starting price, Pinterest had an impressive first day, rising 28%. Since then the stock has pulled back a little and investors are holding their breath to see where it goes. Now its future rests partly in the hands of public investors, which will include Freetrade users later this week.
So that’s Pinterest, the friendly startup that defied nearly every trope of the valley and still reached the public markets. It’s a remarkable tale and one that deserves more attention.
I’m interested in what everyone thinks of the company as a stock investment too, but wanted to shed a little light on one of the more unusual companies in the unicorn pack.
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