Friday, October 19, 2018
How Catalog Is Helping SMBs Compete Against Big Brands
Earlier this month, Los Angeles-based Catalog (www.catalog.cc), a startup developing artificial intelligence software to help independent visual artists scale their content production efforts, announced it raised $1.5M in a seed funding round. The funding was led by Moonshots Capital, and also included Techstars and Luma Launch. We caught up with Catalog's co-founder and CEO Patrick Ip, along with co-founder Jacobo Lumbreras, to learn more about the startup.
What's your background?
Patrick Ip: My background is I spent the last three years at Google, working on advertiser retention for small and medium businesses. There, I learned that there is a lot of top level churn from small businesses because Google ads cost too much. Lots of those businesses wanted to get display banners, but had no content to do so. Google had something called the Google Agency Program, but agencies charge $5,000 or more to get content, and that's way too expensive for those small businesses. I was trying to figure that out at Google, but they didn't want to work on anything in that area, so I decided to leave and start Catalog. Fortunately, the Director of Global Customer Experience at Google, became our first investor, so we could start and figure out the content problem for small and medium businesses.
, Yoy, for the last three years on the technical side. One of the keys to solving the content problem, is to be able to find an approach to service customers, without dedicating a ton of account management resources. For us, we looked into the mechanics of how content is created, and what is required, and we found that one of the largest expense of content is the setup. If you think about traditional content production, for a studio photographer to be able to produce content for a single customer, they have to charge very high fees. An agency has lots of overhead from account management, in addition to a large margin. If we can take those two things away, the inefficiency of an agency and the setup cost, and divide up those costs by bundling multiple customers into those shoots, what you have left is just a logistics challenge. Basically, you have all the photographers, product stylists, lighting experts, and all sorts of creative talent required to create content, to coordinate those individuals, to put together content for all of those customers at the same time. We've build a process which allows us to tap into the small and medium sized business segment, something no other competitor has been able to do.
How do those small and medium sized businesses connect with you?
Jacobo Lumbreras: The journey is pretty simple. Unlike working with an agency, which involves lots of emails and phone calls, they just come to our website, sign up, and submit some information on their brand, how they want us to create content, as well as some brand guidelines. Those guidelines include creative information, such as what shades and colors to use and colors to avoid, creative references, and similar, which we prepackage to create a brand profile. That allows us to understand their creative guidelines and needs. Then, they go and select what content they want, including what kind of shots, whether that's a lifestyle or other shot, if it should include a model, if it should in a studio, and so on. We put all of that into our system, and distribute it among our network through our logistics platform. That system allows us to arrange shoots and coordinate with contracted talent to produce that content. To bundle all of these components requires you to have customers with similar needs. If you can bundle those customers and shoot for ten customers for a photo shoot or content production, that means that each customers only takes a tenth of the cost, versus the entirely of costs.
What's the incentive for creative folks to do business this way, versus the usual agency model?
Jacobo Lumbreras: The interesting thing, if you look at the economics of agencies, their margins are 60 percent. If they charge a company $10,000 for content, they take off $6,000 for that margin, which means they only have $4,000 for the operational expense to run a photo shoot. It's a much smaller percentage going to creatives than most people think. We typically work in a greater density, which guarantees them a higher number of deals. Even if the price per deal might be lower, they have a greater amount of them, and more predictability of projects. How they work now, either contracted or on a per project basis with a customer, agency, or different customers for different agencies, creates a lot of stress on them. We've got our eye on them, helping them with their micro enterprise, allowing them to be creative, and focus on creating beautiful content, because we're bringing business to them in a much more predictable way.
How did you guys connect with Moonshots?
Jacobo Lumbreras: Kelly was a previous investor in a company I was involved in before, in the enterprise software area. We had a good relationship with the team, and they are at the sweet spot where they understand media, small and medium-sized businesses, and it was a great fit. They wanted to lead our round, so we relocated to Los Angeles. Patrick was in San Francisco, and moved to Los Angeles for Techstars LA. Because they led our round, we felt it was beneficial for the team to be closer to Kelly.
What were some of the things you thought about before deciding to set up your headquarters in LA?
Jacobo Lumbreras: Techstars LA was a huge driver for us. If you look at the micro reasons, LA is a good place to be. It's got a very fast growing ecosystem. We're a company at the intersection of media and technology, so this is a very fertile place for us to grow. It was that, together with the fact that our network here is very strong, our lead investor is here as is his network, and it's a great place for our employees, who love being here, and the good quality of life. Besides being a fast growing startup environment, in the long run, the idea for the company is to be a bridge between the technology and media world, so that those two worlds can really live together. We think we can grow and build a huge company that way.
Patrick Ip: I was in San Francisco for the last five years at Google. One of the issues with the Bay Area is it's so tech focused. Before that, I was in New York. One of the qualities of New York and Los Angeles, is there is a greater diversity of backgrounds, and greater diversity of perspectives. That reflects heavily in our hiring. We're hiring our team to be more diverse, so we an get opinions not just from the tech elites, but from people who have been at agencies, who have been in entertainment, who have been in music, or are from the arts. We have the opportunity in LA to be an enabler and connector, as opposed to what I feel like San Francisco can be, which is more elitist. We want to shepherd in a new era of technology, and be part of that process.
Where's the service now?
Patrick Ip: As we mentioned, we raised $1.5M from Moonshots. We're a tech heavy company. Our team is 16 people, and 12 of us are engineers. The big thing with our raise is we've been investing pretty heavily on predictive content. What that means, is for our customer, we take social and transaction data, and help with posting features and product line, and determine and predict the content they will need next. This goes back to two things. One, is it helps our customers get that content instantaneously, when they need it. For our photographers, one of the thing we've seen in the agency world, is they often only get one-off deals. That makes it difficult for freelancers to leave their part time jobs and do this full time. With predictive content, they get a month-over-month deal flow, which ends up being a win-win for both the creatives and businesses we work with.
Patrick, having been at Google, anything you took from that experience that particularly relates to this new startup?
Patrick Ip: As I think as it relates to this business, and the startup ecosystem, too, is that Google prioritizes what it does on enterprises and big businesses. I spent some time working there and I saw that there really is an opportunity to serve small and medium-sized businesses. They're underserved, and there are not a lot of technological solutions helping those small and medium-sized businesses compete. We really want to act as an equalizer, so that small brands can compete against the Mabellines of the world, who are able to spend millions on creative agencies, PR agencies, and social media agencies. Those big brands will post four times a week on Instagram, three times on Facebook, something the SMBs just can't afford to do. Essentially, we're getting those SMBs a more affordable option, so they can be just as competitive as the big brands. One example we like to use is NakedPoppy, a new clean beauty company. Before they found us, they had found that it would cost them $7,000 for just 15 product photos, even knowing a photographer who would give them a sweetheart deal. Luckily, they signed up with us, and we were able to create all of the images for their website and Instagram. All they had to do was tell us about their product, ship their product to us, and we took care of everything else. That allowed them to focus on building the best product they cook, and we took care of all the content, and they're doing extremely well. That's where we want to play, helping small and medium sized business compete. At Google, I saw what kind of disadvantage they had, and where there was an opportunity to do good for those businesses, and the photographers, at the same time.
Thanks!