Paperless Post: James and Alexa Hirschfeld
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During COVID, we had a lot to lose. The stakes 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 was something that people didn't do for about a year and a half. But it took us back probably

Probably in terms of like our sales volume. I mean, we're probably back to where we were in 2009 in sales. Wow. Yeah. With a staff of how many people? 100 plus. 120. Yeah. So our main concern was to get through it without ruining our company. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

I'm Guy Raz, 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 launch, has sent out over 650 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 marathoners, 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 a

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 $5 and $10 on your invitation alone. So James wondered, what if you could cut that cost down to just $0.10 or $0.25 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 post 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 learned how to speak Greek as well. 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.

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

Yeah. So for the first four years of my life, it was just the two of us. And then our younger brother came along. I think, you know, we had kind of a normal relationship when we were sort of under 10. We, I mean, I was pretty obsessed with my older sister because she was older and, you know, you know, I looked up to her a lot.

Yeah.

But we also, as we developed into individuals, realized that we were friends. We each had great admiration for the other. And as a result of that, we were talking about doing something together work-wise from a very young age. I mean, that's...

We're crazy. Alexa, what were you guys talking about doing together when you were teenagers about a business in the future? What would that have been? I don't know that at the time it was a business. I think I recognized that James was talented. He was always...

doing art projects. 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 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 hang out together?

Yeah, we were two years apart at the same school. So we went to the same parties. We had like similar friends. You know, Alexa was very good with people. She was very popular, more extroverted than I was. I would say we were pretty inseparable, yeah. All right. So Alexa, for college, you end up going to Harvard where I guess you studied classics. And then James, you actually started –

at Harvard a few years after Alexa and you majored, I guess, in comparative literature. But I want to ask you, James, when you were in college, do you remember if any part of you was thinking about, you know, maybe starting a business or not really, like not yet? So I would say at the time when I got to Harvard, I wasn't

Sure that I wanted to be an entrepreneur. Both of our parents are professionals and they're lawyers. They're lawyers. Exactly. And lawyers are risk averse. Let's be honest. Exactly. Exactly. Not knocking lawyers, but they just are risk averse. They believe in educate, you know, go deep on education and get a stable job. You'll always have a career.

The funny thing about Harvard, though, at the time was that, you know, it was sort of it was 2006, 2007.

There was a huge entrepreneurial spirit on campus. You know, Mark Zuckerberg was in Alexa's 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 classwork and their social lives. And I joined a club called

that was full of people who were starting tech companies. And, you know, none of these people really were engineers. They were people who were studying politics or philosophy or economics.

But there was this kind of can-do mentality that, you know, starting a tech company was really possible. So, all right, so let's get to this story. How does this begin? I mean, the sort of the apocryphal story, and I'm sure there's a lot of truth to it, is that you were planning a party, basically, for yourself, right?

Yes. So it was actually, it was 2007 and I turned 21 and I was having a great time in college and I wanted to have a party for my 21st birthday with my best friend at the time who's turning 20.

And I had never really had a big party before. I hadn't had a bar mitzvah. I hadn't had a big 18th birthday party. And I kind of had this vision. 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. It was like a beach themed party. And I kind of, I filled this place with palm trees that I bought and then returned to Home Depot.

In hindsight, they were probably the kind of potted plant that you would just put in an office, but I thought of them as palm trees, and I thought it was really atmospheric. People brought their A-game, and they came dressed up as lifeguards and sailors and pilots.

Beach bums. It was really fun. And when it came time to inviting people, I wanted to send the message that this was going to be a great party. And I wanted to show how much thought and care had gone into the planning of the party. And so what kind of invitations did you decide to send?

So, you know, the options at the time were to print paper, 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 or to use, you know, one of the

first-generation, you know, online RSVP tracking websites. And those were riddled with ads and not very beautiful. And you couldn't really achieve 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. But it got me thinking that

consumers could have another option, which would marry the beauty and the personal feeling and the customization of paper stationery, which can be incredibly expressive and beautiful, but difficult to attain with this 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 in software engineering or web design, but I believe that we could do it. Okay. So, all right. So you have this, so James, you have this idea to, you know, do something around digital invitations and immediately or early on you're thinking, I need to call my sister and get her involved in this thing.

Yeah, exactly. So I had the idea. It was very, very crisp in my mind's eye. I had done some research on kind of the paper stationery industry. And so the first call that I made was my sister. I think she was a little skeptical, but I think she got on board pretty quick. Alexa, I'm curious when your brother called and said, I have this idea. What was your response? I mean, you had a pretty good job in TV at that point. I think you were...

I think you were working on the CBS Evening News with Katie Couric. So what was your reaction when James called you? So we had been talking about some other kind of ideas. And the way that he described this one was very interesting.

and very visual. He was saying, you know, you could see the texture of the paper and we'd use the most beautiful fonts and colors. 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

humble about that, but I was thinking if we had a platform where it was his vision and his eye 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 23, and I understood that I would probably never have less to lose than I did then. You could take the risk. Yeah. James, when you—I mean, you're a student at Harvard at this point, and I guess you convinced your sister to kind of help you start working on this thing. Yeah.

and this is 2007, tell me what you guys started to do. I mean, you had done some research around like

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 what 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, kind of an amateur designer. 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 learned how to use Photoshop. I started creating kind of example invitations. And so we tried to lay it out ourselves. We got kind of far, but it was, it wasn't really actionable. So

we began to bring other people into the project who had deeper expertise around the things that we couldn't do. And how were you financing that? How were you paying for them? So we were very scrappy. We were kind of hard negotiators. But the first people we brought in were a design firm in Boston that kind of helped us create wireframes in a flow. And 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 about, you know, not, not a ton of money. So we use a design firm to kind of create the first wireframes. We use those wireframes, which looked really polished and kind of gave a better picture of where we were going to hire some

back-end 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. 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'll just say it took about two years before you launched, which we'll get to in a bit, but you kept your day job. Yeah, I kind of stopped working.

Seeing friends, not on purpose, but there just wasn't enough time in the day to do both.

You know, it's interesting because I think there are two kinds of entrepreneurs. There are marathon entrepreneurs and 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 set of things that they have to do over a period of time, knowing it's going to take a long time. And then every you know, it's like it's like Candyland. You're kind of following the boxes and then every few boxes you stop, you assess, you adjust everything.

And that's an amazing way to start a business. The other way is a sprint, 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 to you, like during this time, you know, working with contractors and anybody who could help, classmates and software developer, anybody, how

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 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 had each other, which was great because, you know, I had a co-founder that I was very aligned with. But I also, I had a very, very strong conviction in the product. It didn't exist yet, but I could see it. And 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 is very exciting to feel that you're onto something and that if you can just

get it together to get it out there that people are going to realize that they've been waiting for it. 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 casual chatting to business communication, we watched that all move online. And it made sense to us that that was kind of the progress of history was that written communication was going to be digitized. And yet back in 2007, if you can remember, there really was

There were certain types of events where you could not use an online product to communicate. It was not legitimate. And being kind of products of our generation, I think we felt that this type of communication was going to move online and that that was for all the obvious reasons around efficiency and cost efficiency and the environment and that the company to do that just hadn't yet been built.

I want to 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,

During this time, you guys started to seek out outside money, outside financing, because this was a time. I mean, it's so funny. We're 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 kind of, you know,

tried and true Silicon Valley venture investors. I think... At the time that we were going to... that we needed to raise money, we had like very... maybe $4,000 in the bank account. We were kind of...

In a precarious situation. Totally. How did you even get into the door to some of those places? Just kind of like through the network of college, university, and just talking to anybody you could? Yeah, we were such hustlers. I mean, I think I was thinking back on it in advance of this conversation. I think 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 making lists of everyone that we knew that could potentially know someone who was a VC or who could be an advisor. I was coming back and forth from Boston to go to meetings and try to get on the radar of these investors. And, you know, the feedback, VCs often are, they're trained to

recognize patterns 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 going to have advertising, you're just gonna have to, you know, we're going to have these cards, you can make them, but if you want to send them out, you got to pay, you know, a few cents for each one. That was your business model. But

I mean, I'm just curious, like, again, when you went to investors, you're pitching them and I have to imagine them saying to you, no one's going to pay for this. You already have Evite out there. Like it's you can just do this for free. No one's going to pay for this. But the really at the time demoralizing part was.

But I think it fired us up even more. But the really interesting part was that for some people that we were speaking to, it wasn't just that people wouldn't pay for it. It was like, why would people want to use that? What is different about that than just, you know, a web page? And what would you say? What would you say? Because you got that question again and again. You had to repeat the answer again and again.

It's the design. It's the look. It's the self-expression. It's the soft messaging. Not everything needs to be communicated in plain UTF-8 format text. There are ways of communicating that are...

that people have been doing for centuries and they want to continue to do it even if they want to do that online. So there was this really 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 2008, and I say this with a lot of love because in 2009, I believed early on,

My wife and I used Paperless Post for the birth announcement of my son. That's amazing. He was born that year. So like we were early users. That's so nice. I think I would have been skeptical in 2008 if I had the money to, you know, if I was an investor with a bunch of money. Because I would have thought, again, like who – people are going to pay for a card because a card is tactile and it's –

letter pressed and it just looks so impressive and you can see all the money and time somebody invested in it and a digital card like you know people might just think oh they're cheapskates

Now, of course, there was a period of time where you would have to convince people that that was not the case. Yeah. I think that we needed to think hard about the business model. And I wanted it to be a premium product from the outset because the kind of incumbent competitive options were free and ad-supported. And I thought that it was a really bad idea.

to try to monetize an invitation product, which by definition... It just looked chintzy. It looks... You had like ads for your used car dealership on your wedding invitation. But not only that, I think, you know, understanding the way that a lot of, I mean, events by definition are special. I mean, whether it's a backyard barbecue or a wedding, it's a moment when somebody is, you know, generously...

taking time out of their life, putting resources into creating an experience for the people that they care about. They don't happen every day. They are expensive, no matter, I mean, even a casual event, you're spending money. And, you know, 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, 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 guests' data to Carnival Cruises like our competitors were, people would pay a tiny fraction of their budget

$500, you know, summer party budget. Yeah. And we believed that the largely women who were buying paper stationery that was custom printed would be really, really excited to be able to design equally special

invitations and communication and send them out for pennies instead of dollars. And what was interesting was that a lot of 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 we wanted to build this business.

When we come back in just a moment, how James and Alexa finally prove that they're onto something, but then learn a hard lesson about staying in their lane. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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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. At this point, by the fall of 2008, we had 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 were so happy that it existed. Despite, you know, it was early, it was rocky, there were bumps, it wasn't perfect, there were bugs, but they got it. They really understood it. And so on one hand, you'd have this very powerful kind of like internet personality or investor telling you you are wrong. And on the other hand, you'd have real people

mainstream people trying to get into the product, trying to get a login, using it, asking you if you'd seen what they made and don't you think it looks cool. And I think the reason it was energizing was because

It showed we were onto something that was not obvious to everybody else. Yeah, I think that's right. I think 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 seed financing round, this was someone from a fund called Moose Partners. 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 he just never seen anything like it. And he called me and he said, you know, I'd love to give you some feedback on your product. And I was so used to getting feedback on the product. I was like, okay, here we go.

Okay, what are you complaining about? And he did— Your temperament is really—you guys have even keeled temperaments, man. Thank you. Thank you. Yes. Marathon runners here. Okay, keep going. So he's like, you know, so he's giving me—some people were giving some really tough feedback.

his feedback was kind of softball feedback. He was like, well, you know, I think that 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 like, okay, this is softball feedback. I think this person actually really likes the product.

And he had this thick French accent. I was like, okay, maybe it's because he's foreign. Anyway, at the end of the call, I said to him, well, we're trying to raise some money so that we can take this out of beta and really launch the product. And do you know any investors? And he said, I don't know any investors, but I am an investor myself. And maybe you want to come to my office and we can talk about it more. And all of our investors, we're lucky to have...

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...

Like a million? Yeah, we raised about $800,000 the first time. Which was, in 2008, a lot. We thought it was a lot of money. I mean, now you see these pre-launch, like $40 million seed rounds. But back then, we were super proud of raising $800,000, especially in 2008 during the financial crisis. Yeah, we ended up getting great early investors. They're basically angel investors in family offices, but...

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. I think if you really want to succeed and support your company, you don't need to be too picky about, you know,

where the funding is coming from, as long as you trust the investor and you want to partner with them through ups and downs. Yeah. All right. So you were able to raise about $800,000. And 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 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 you would have to adjust. How long was $800,000 going to last? At the time, we were a pretty small team. We were probably like four or five people. And we had a revenue model, but it wasn't. It turned out not to be the revenue model that we have now. And Alexa...

came to me and said, I think, sort of while we were in beta, I think this product should be free for consumers.

And I think that we should have a different business model where we allow, you know, 501c3s 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 by the way, it's a great business model. And obviously Eventbrite is an amazing public company. Yeah, exactly. So it was a good instinct and we built it. Yeah. So we raised 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. 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 there were small charities and stuff like that. Whereas our consumer business was like taking off like wildfire, right?

People were batting down the door to try to get into our private beta. So we had a very difficult conversation. And I look back in hindsight, I can't believe... Who did? You and your sister? Alexa and I, yeah. Okay. And I think our partner, Lucy, who was the first person to join us, the gist of the conversation was that

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 difficult. But it sounds like in order just 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.

But you needed to do that in order to gain the confidence of investors. 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 going to have to figure out a way to charge consumers who are valuing this product. You know, 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 it really set us on the right path. And I remember after that we had to think, okay, so how are we going to get consumers to pay for this product in a way that is palatable to them? And our initial instinct was, or 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 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 2009, in the spring, six months after we raised money,

I was studying for my final exams. I was in Widener Library where I was supposedly studying, but I was refreshing the tracking page that we had to show activity on the site. And I remember we launched this stamp product. We had no idea whether our user base, our tiny user base was going to revolt, whether they were going to hate it. And I just remember refreshing and seeing a $7 purchase within about 30 seconds.

And I just remember thinking, okay, we've got one customer.

So if we've got one customer, we can find more. And I remember going to a party that night and someone saying, oh my God, I love these stamps. What a cute idea. And so I was like, okay, I think we're onto something here with this payment model. So basically, initially, you could design the card, but then to send them out, you would buy these virtual stamps. Correct. Correct.

Like you guys are doing early virtual currency, basically. And it's true. It was an early virtual currency. It was early, you know, digital goods. You know, 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 is 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 not being kind of having a,

But the other thing I wonder is...

You guys are in New York City. I mean, this is like at least the capital of America for parties. Every company has a party, and there's so many events in New York every day. And how important was being in New York?

getting the right kind of influential people to use this early on? I think it probably helped. The way that we grew was through, you know, it was two parties that in the first weekend of September in 2008, one of them was kind of a fashion week jewelry party. It was like a, you know,

And the other one was our friend Halsey who sent her 23rd. Halsey the singer? No, no. Oh, okay. A different friend. Not the Halsey. She was like a baby at that time. Yeah, exactly. Our Halsey, just a friend. And she sent her. She had kind of been...

Yeah, hounding me about when she could get into the site because she needed to send out her 23rd birthday invitation. 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. And actually really quickly, we heard that the outgoing administration in the White House

Somebody had used it and we were people were writing us to see if they could get logins. And it would have sounded so naive when we were telling people that we thought it would grow virally. But it did. I read that in the first full year you had like one hundred and fifty thousand invitations sent out. But I'm wondering, I mean, I can't imagine because, you know, it was not expensive to do it. And it was certainly far less expensive than sending out printed invitations. Right. Like.

You know, you're paying maybe 20 cents per invitation or 25 cents per invitation. So what was the revenue situation like in that first year?

I remember in December of 2009 that we did $100,000 in sales. In one month. In one month, yeah. So we launched around April of 2009. We opened up our beta. We allowed anyone to register online.

And by December of 2009, we were doing $1,000 a month, $100,000 a month, rather. But I remember, you know, I remember when we did $16,000 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 going to give up on this thing? Like, $16,000, like, you know, what the hell are you talking about? That's...

That's a very small business. It's a very small business, yeah. I mean, $100,000 a month is still a small business, but obviously it's showing significant growth. Yeah. Okay, so really, I mean, given that you had this product and a limited amount of money,

How were you? 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. And you essentially don't have to spend money, a whole lot of money on user acquisition because your customers, 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 were really onto product-led growth and kind of these viral growth dynamics very, very, you know, a lot. Yeah. Yeah. And then the other thing is that we decided to try having an envelope where the invitation came out of the envelope. Like the card. And I think most people have experienced this because 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 right.

to his original vision. The design of the invitation was key and the idea that it was a luxury design product was key. But the idea of it coming out of an envelope was something that we decided to try out because we wanted it to be, we wanted it 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 ended up building that in pretty close to the launch.

Because you guys had to be scrappy and you didn't have a whole lot of money, you know, and again, like the model at this time was just get a bunch of users, acquire a bunch of users. But your model is a little different because even if somebody used your product, it didn't mean that – it wasn't like Facebook where they were going back to check the site 17 times a day and you didn't have advertising. So –

You had to hit profitability pretty quickly, right? I mean, that must have been a pretty sort of pressure-filled goal. Well, you know, we've got 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 50%.

15 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 more venture capital financing as the product kind of took hold. And I think, you know, that that took away some of the urgency around achieving profitability early on.

When did you guys first hit profitability for the first time? We had always been running kind of close to profitability, and we would always be profitable in Q4, probably since 2010. Around Christmas. Yeah, since 2010. We'd have a huge surge. But we've been profitable since…

2021 in terms of full years of profitability. Yeah. Right. I mean, again, a marathon. Yeah. Right. It's like it's a marathon. So, all right, let's go back to the timeline for a moment because you launched this thing and I guess, you know, sort of two, two and a half years in, you decide to actually offer up printed cards and not just to offer them up, but I think you

You built your own printing business within Paperless Plus. Tell me about how that came about. So we realized that we had, you know, a couple years in, we'd built up this very passionate user base of early adopters who were people who actually...

actually loved paper. And when we would talk to them, they would say, I used you for my wedding. I wish I could print some for my scrapbook. Or I used you for all of my birthday parties for the past two years, but now I'm getting married. And I want to use you guys for my wedding invitation, but I want to send paper. And I think for me, there was this kind of big vision of being a platform that

could be sort of one-stop shopping for any type of invitation you were sending. And could we be everything to our users, not just digital invitations, but paper as well? And we validated the demand for it, and then we set about building it. And

We launched it in 2012. I think we did $500,000 in sales in the first like 10 weeks of paper. And did you build, did you, you worked with a partner or did you actually like, did you contract with a printing business? Yeah.

So we had two print partners. We worked with Crane Stationery, which is, you know... Which is, I think they make the paper for money. Yeah, like a 350-year-old paper company in Dalton, Massachusetts that did all of our fine printing. And we worked with a state-of-the-art digital printer in Memphis, Tennessee that did our digital printing on these incredible, you know, million-dollar printing machines.

And, you know, maybe there was a bit of 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 we offer a product that was, you know, people would spend hundreds of dollars on instead of 10, you know, 10 or $20. But at the same time, it also pulled us in a different, 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, in 2017, 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

Our engineering team and our product team was being forced to think a lot about this paper product, you know, and how to be more competitive with the people who are doing great things in that space. Yeah, but they were engineers. They were, yes. They didn't have 300 years of stationery. Yeah, exactly, exactly. And, you know, what we really needed them to be doing was focusing on kind of manufacturing

making our product amazing on these iPhones, which were becoming more and more pervasive, you know, and replacing Blackberries. 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, maybe for the second time, the difficult decision to shut down a business that we had built, you know, with blood, sweat and tears. I mean, it sounds like 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. It's another sort of version of saying you were spread a bit too thin. Yeah, exactly. Exactly.

When 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 Guy Raz and you're listening to How I Built This.

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$45 upfront payment equivalent to $15 per month. New customers on first three-month plan only. Taxes and fees extra. Speeds lower above 40 gigabytes each detail. 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, $25 million, which, as it turns out, is 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, you know, building a business, how the things that you think are going to be great can be kind of the kiss of death and things that you think are going to be really bad can be amazing. You know, the thing about having a lot of capital is

when you're a small company is that you can put it behind the wrong strategy and, and, and you don't, you lose, you lose touch with the practical reality of, of, 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 wonder whether, you know, when you raise that amount of money, right. Um, that there's also an expectation that you're going to do something with it, that,

Right. That there's going to be like a shiny new thing. And so one of those shiny 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 mobile first thing.

more casual, less expensive product. And we built it on the back of exiting the paper business. And it's been really, really popular with existing users and with new users. But it's mostly free. It's mostly free. It's about 75% free.

Wasn't there concern that might undercut your core product? Our position was that it was a very different product. You know, flyers today is heavily based around motion and GIFs, and it's much more of the aesthetic of sort of social media, stickers and animated text. And our position was that people who want cards are going to

continue to use cards and people who want flyer want something different. And so that that's that is 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 going to get back in return, especially if you're doing it, if you're trying to build a sustainable business, because 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 a flyer and they're also seeing an ad, right? You're right. We have no advertising ever and we don't sell people's data. Yeah. So what's the return? I think that, you know, you have to remember that our growth has been so heavily driven by this viral dynamic that happens. So when someone sends...

an invitation, their recipients are, you know, clicking to our site. They're engaging with it. If it's, if it's, if it's like a cool looking invite and it feels relevant to them, then we acquire a user who can become a customer. So, you know, yeah, maybe we, we give a lot away for free on flyer. Um,

But there's a return in terms of – and are you able to measure that? Is it possible to know for sure if actually it's generating? We're definitely able to measure that, 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've got this business humming along and growing and obviously –

You know, you launch in 2009 and 10 years in, you've got a product, a business that's really kind of penetrated the culture, you know, 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 and you happen to sell at leisure wear, it was going to be a very good year for you. If you're an events business, we've had Eventbrite on the show, or you are in the business of helping people to organize their events, different story.

Yeah, it was pretty catastrophic. I mean, our mission is to help people gather in real life

in a more meaningful way. And the term social distancing that kind of like entered the lexicon out of nowhere and became the, you know, what the word everyone was talking about. It was pretty much the sort of antithetical to the purpose of our company. Yeah. Every event was a super spreader event. Don't go there, it's a super spreader. Exactly. Every event was a super spreader event. Yeah, I was actually five years

months pregnant at the time. And people were writing saying, oh, how are you? Are you okay? Being pregnant during this pandemic. And I was like, that is not my biggest problem right now. If I'm being honest with you, I think the pregnancy is going to be, hopefully it's going to 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 sales were significantly, significantly higher. So we took about 10-year step backwards in a month. Wow. But it took us back...

Probably in terms of like our sales volume. I mean, we're probably back to where we were in 2009 in sales. Wow. Yeah. With a staff of how many people? 100 plus. 120. Yeah. The difference between 10 years before and that time was that 10 years before we really had very little to lose.

And during COVID, we had a lot to lose. The stakes were inarguably high.

much, much higher. Yeah. And actually, I think when I think about it, what really happened was that sales dropped by 85% in April. And then over the summer, they settled it around 50% 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 for 2020 and 2021, we were down about

But still, you know, very difficult. That's still devastating. Devastating. But what we realized is that our main concern was to get through it without ruining our company. How are you going to do? Tell me how you, I mean, I'm imagining you had to do everything. We had to do everything. But first, I think it started with deciding that we were going to survive it.

and that we were going to respond as shrewdly and as scrappily as possible. So we did a little bit of everything. So we had to kind of work every angle. We started with pay cuts, which was, you know, everyone was a pretty good supporter about that.

And so we kind of heard about PPP loans. We were one of the first companies to get PPP loans. And they were pretty generous. We negotiated with our landlord. We renegotiated our debt. And we ultimately did have to raise some money from our investors who all came together around the company and helped bridge us to the other side. So we were really, we really

pulled every lever to keep the company together and to allow us to preserve the value that we'd built over the previous 10 years. But an idea would eventually emerge from this. I mean, an idea that now is a part of your business, which is actually...

Really interesting. Basically, kind of a products side of your business, like physical products. Yeah, that was definitely, that emerged. Actually, a lot of great ideas emerged during the pandemic. We became very focused on

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

coming out of the pandemic. But I think even more substantially, we started to really look at the business through the lens of which segments were driving the most value. And we noticed that

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 great customers. They have high willingness to pay. They have high repeat rates. They are pretty easy to serve. Maybe we should build for those segments.

I mean, this comes out and you launch this, obviously, you know, this is launched, I think, in 2022. So and again, we forget like there was basically a year and a half of many states 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 sidewalks.

And that really lasted in at least California until like 2023. Yeah, no, it was really, we became like weather people on the TV. I mean, I remember everyone, we were kind of looking at maps of the U.S. and saying, well, this outbreak of this Omicron variant is moving across these states. The next wave would happen and whatever.

we would be battered again. It was like being in a boat that was going through a storm. It was like waves of kind of crashing over a business. And actually, I think when I think about it, a lot of the competencies that we built up and the muscles that we built during COVID that we had to hone 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, so you've fully recovered and more, like now you're back to full strength where you were before COVID in terms of like employee count or what? Yeah, we're a little bit, we're around the size we were before COVID, but we're double the size. We're profitable. We're double the size as a business, yeah. And we're growing at a pretty nice clip. Yeah. Yeah.

You know, back in 2023, Saturday Night Live did a parody of a paperless post commercial. And we'll post a link to this, by the way, in my newsletter for people who haven't seen it because it's so funny. And it's like, basically, it's like a paperless post. You know, if we have a new feature, if, you

you know, your, the people aren't RSVPing, we'll 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, it is so funny. Um,

When you saw that, because when I saw it, I was like, this is amazing. They must love this. This is so good for the... Did you... Is that how you responded initially? Or were you like, ooh, I don't know about this? I think we were pretty... We thought it was pretty amazing. So we just got a Google alert one... I think it was Saturday night. And I think I was probably out at a party. I got this Google alert and I looked at it and I thought...

wow, this is pretty wild. And the skit kind of gets at some of the manic energy behind planning an event. You know, you really care about it. You really want people to RSVP. You want those damn RSVPs. That's so funny. It's really funny. One of your early investors that you mentioned was a French guy, and I think it

He was also like they had invested in Chanel. And I just think about like, you know, all 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 LVMH or you're looking for something like that? I mean, or does 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. So, you know, I think over the years we've explored, we've had different experiences

Companies approach us and, you know, sometimes explore different opportunities that came our way, but the timing, the partner, the deal never really felt right. And we believe that we have more to build and further to grow. And we're, you know, we're still, we think we're still the people to lead that. Yeah.

When you guys think about this journey you've been on and where you are now, and I mean you've had a lot of incredible success and you proved early doubters, right?

including me, I would have been a doubter wrong. And you have a massive crisis, you know, once you were a mature company, and you recover from it. How much of where you guys got to do you attribute to the work you put in the grind? And how much you think has to do with just the luck of the timing and how consumer behavior changed?

I, you know, I think that there are ways that we've been lucky. I think we were lucky to be born as siblings, you know, to have a co-founder that you know so well and, you know, from day one, to have supportive parents that gave us confidence. But when I think about...

luck. I also think there have been a lot of supremely unlucky moments that have happened going out, launching our beta and going out to raise money in the fall of 2008. COVID was extremely unlucky for us. I think it 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 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 COVID 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 Alexa and James Hirschfeld, founders of Paperless Post. By the way, earlier this year, the company celebrated its 15-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 Wintour. I was like, wow, you have like fancy people at your 15-year party. Yeah, that was... It's like the Michael Jordan of the fashion world. That was very nice for her 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 Wintour. 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 guess my wife would be with me so she could talk about theater. 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 GuyRoz.com. This episode was produced by Kerry 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 Willets. Our

Our production staff also includes Alex Chung, Chris Massini, Devin Schwartz, J.C. Howard, Sam Paulson, John Isabella, Catherine Seifer, Carla Estevez, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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