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Envato: turning irritations into success

It’s one of the biggest tech biz clichés: incubating in a garage or spare room with little more than schematics, a couple of computers and your best mates for company. Microsoft did it in 1975, Apple in 1976 and Google more recently in 1996.

In 2006, five young Aussies launched an online educational powerhouse now known as Envato in a converted garage/living room beneath an old shoe factory. Celebrating its fourth birthday this month, Envato now quietly claims multimillion-dollar revenues, 20 million-plus monthly webpage views, 45 full-time staff, hundreds of contractors and around half a million website members. This is the first time all the founders have spoken to the media.

“We don’t do much offline marketing,” Collis Ta’eed, Envato’s 30-year-old CEO, admits. “This is the first real press coverage in our home country, which I think speaks volumes about our skill in offline PR.” Mind you, when your business is focused on building online communities to help creative people all over the world ‘earn and learn’, perhaps it’s better to be championed by the likes of Digg, TechCrunch and The Blog Herald rather than the mainstream press.

As Envato demonstrates, ‘pure play’ online businesses – those exclusively operating online – mostly rely on targeted search, cross linking, web forums and yes, blogs, to build traffic and convert that into revenue. Online is faster than mainstream media at connecting you with the people most likely to buy what you’re offering. The trick is to have something your target audiences actually want to pay for.

A new market for digital content

“There’s a lot of material out there for start-ups that says you should just build something amazing and you’ll figure out a way to make money later,” Collis muses. “In some ways that’s true. I like the idea of different strategies to monetise the product but you do have to think about how you’ll ask for money.”

Cyan Ta’eed, cofounder and Collis’ wife, says the ‘ship then test’ concept is one way to work out revenue models when you’re starting out. There’s a temptation to hold onto an idea for as long as possible until you’ve executed it perfectly, though as Cyan explains, you can’t wait until you have every possible bell and whistle because “you don’t really know what the market wants until you’re in it”.

The first revenue concept was a simple royalty payment per download, based on Collis’ experience selling Flash files in a subsection of the massive istockphoto.com marketplace. “On the sales page of iStock it was all about selling photos but I was like, ‘I’m selling Flash!’ That was problematic. I knew that if I could make money on a not-focused-on-Flash system, then we should be able to do it in a much better way.”

Cyan adds that it was this early hint at the potential to sell code in a digital marketplace, and perhaps take a commission, that inspired the business: “I would have been terrified if we’d just set out to build something simply because it was awesome. We didn’t have the skills to build the site and its backend ourselves, so we hired a developer, Ryan. We were very young and didn’t have much money in the bank, so if we didn’t have a way of knowing there was some kind of return on investment, things would have been scary!”

Something on the side

Early in 2006, Collis and Cyan began investing their spare time and money creating an online marketplace that would be totally devoted to Adobe Flash, selling animations, code and know-how to the burgeoning digital creative scene. Ryan Allen, who was 23 at the time, was hired on an eight-week contract to develop the software for what would become the legendary Flash Den (more on that later). It was bootstrapping at its best – and gnarliest.

The site build was delayed by a combination of needing to do freelance work to earn money and tinkering at night, which Cyan suggests might have been avoided if they hadn’t tried to be such perfectionists: “If you can take a shortcut for building your online product, then take it and get your site out there; you can iterate afterwards.” Instead of eight weeks, the launch didn’t happen for nine months.

“At the time, the site had dragged on, and we weren’t sure if we were going to ever launch it,” Collis reminisces. “In hindsight, we were pretty close but there were still so many features left to build and we had no money. We hit the bottom when a client asked us to pay for a print job and we ended up borrowing money from my parents. That was bad.” After deciding that some features of the site could wait, the fledgling company went live with Flash Den in August 2006.

Hundreds of people began turning up each week, which was promising, but thousands would have been better. Sometime in November 2006, three months after launching, and still freelancing to generate an income, the team made a bold decision: “We had a really good product, we just needed people to try it out,” Collis explains. “A lot of start-up entrepreneurs would feel this way. In the real world, you’d walk around in the street with free samples. We gave away $10,000 worth of credits to use on the site, and jumpstarted the Flash Den economy.”

Flash Den was soon on the map for anyone looking to buy and sell Flash-related content and soon after, earnings from sales commissions hit $1,000 a week.

“It was amazing, we were out of the hundreds and into the thousands!” Collis grins. “It was enough to pay someone to work on the site, kind of. The whole day I was walking around going: ‘One. Thousand. Dollars!’ We realised we could actually pay ourselves.”

With weekly revenues climbing towards the tens of thousands and a rapidly expanding membership demanding their attention, Jun, Collis and Cyan pulled away from their freelancing gigs to push harder with Flash Den.

“It was very liberating,” Cyan sighs. “We had lovely clients as designers but to know that you were the master or mistress of your destiny was very nice. We knew it had even more potential and it was making money for other people too. The people who became members really liked it and wanted it to succeed. We’ve got authors from all over the place and they’re coming back to us and saying, ‘Oh, I suddenly realised I was earning three times my annual salary, so I’ve quit my job and I’m just functioning on making files.’”

Redefining success

Like many small businesses, Envato’s early growth was fuelled by the founders’ expert creation of saleable products and services: “Our entire focus was on the product – we weren’t too worried about the structures of business,” Collis admits. Now there are offices in Melbourne and Sydney to run, plus an army of content developers to manage. “We realised last year a lot of people’s livelihoods were involved, so we had to think about HR and doing all those things that level up a company into the next phase.”

In early 2010 Envato hired an internal accountant and added an early supporter to the board of directors: Mr Ta’eed Senior (Collis and Vahid’s dad). He’s an experienced businessperson and mentors the founders in areas where they need to be more careful, like choosing the right law and accounting firms, and keeping a close eye on their operations infrastructure.

Cyan notes that for her, “success is about doing something you enjoy, that is of genuine value to people and that you can make money out of – it’s the trifecta”.

Collis agrees. “Success is the freedom to work on things I love, as much as I want. Some people love rock-climbing. I just love working. The only thing I can imagine myself doing is switching to building something else. I’d need to figure out how to get great people to run the existing project so I can run new ones. There’s definitely no golf on the horizon.” #

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