Finance

349: 1 Billion Downloads, Kim Kardashian, and The Future Of AI: PicsArt’s Hovhannes Avoyan

When his 10 year old daughter was upset by negative comments posted about her artwork, Hovhannes Avoyan decided to do something about it. Almost a decade later, over 1 billion app downloads and 150 million active monthly, PicsArt has become a global movement.

Before founding PicsArt, Hovhannes Avoyan was already a successful entrepreneur with five startups that he sold to Lycos, Bertelsmann, GFI, TeamViewer, and HelpSystems. With a strong understanding of the market, scaling, and what it takes to build a viable business, it’s no wonder that PicsArt raised over $45m capital and now boasts partnerships with the world’s biggest influencers like Kim Kardashian.

In this inspiring interview hosted by Nathan Chan, Avoyan discusses the importance of creating a safe space for creative expression, why community matters for a business, the future of AI and its place in design and art, and why he believes failure is part of success.

Nathan: The first question that I ask everyone that comes on is how did you get your job?

Hovhannes: That’s a good question. I don’t see it as a job, it’s more part job, part life for me. PicsArt is a part of my life, it’s not a job. I don’t see it as a job anymore. It started 10 years ago. Before PicsArt, I built several other companies and sold them, so PicsArt is my fifth company. More so, the companies before PicsArt, I start as a business because I want to build a product or technology to solve people’s problem. And this time, I start solving my own problem, my own family problem so to say.

What happened, the story is that I was selling one of my previous companies and walk home and see my daughter crying, and she was 10 years old. What happened, she shared one of her pictures, drawings, on the internet and get nasty, combative comments, people were criticising her work. She was pretty shocked and she lost her confidence and was questioning, “Is it really that bad? Is that why people are really criticising my work?” As a father, I feel a pain and I want to create an encouragement for her not to give up, and stay creative, and do this artist work. Because I have my own story, I missed this opportunity where I didn’t get enough encouragement when I was 14 and I applied to art school and got rejected. I don’t want her to be in the same kind of situation. I was thinking what a father can do, and an entrepreneur father would build a company around that.

So my response was to build a product which allows people like her to be creative and not only create on the go using the device which is always with you, but also be in a positive environment where you could talk with other creatives, people similar like you, you get encouragement, you get inspiration and you share with other people. It’s a community where you not only create, but also you share as you create and that’s an important part of the mission we are on.

That’s why I see it’s no more like a job, I see it’s more like a mission for me. And, building a product which is helping people, especially the new artists, to gain more confidence and gain more skills, and ultimately build the confidence to call themself a creator or artist. That’s how it started, and I really enjoy every minute of this mission.

Nathan: From my research here, it says you have over 150 million users. When did you start PicsArt?

Hovhannes: Yeah, the PicsArt start in 2011, 2012 to be precise. Late 2011, but more correct 2012 when it started, we went with the first version of product launched around that time. Yeah, it’s nine years, or eight years.

Nathan: Wow. I’m curious, you started five companies before, all successful acquisitions. One of them TeamViewer?

Hovhannes: Well, TeamViewer acquired my company, it’s not my company. TeamViewer acquired, I sold to TeamViewer.

Nathan: Ah, gotcha, you sold to TeamViewer. I’m curious, when you created PicsArt, you said that you were solving your daughter’s problem. But, how did you know that you could turn this into a viable business model?

Hovhannes: Yeah. When you are solving your problem, or a problem for people you know, and I know that my daughter is not alone. I think she’s not unique, there are many people like her, a new generation of people which draw with mobile and could [inaudible] their hand, it’s very common for people to tell their visual story. I really realised it’s a really huge market, and there’s a huge need for those kind of things. If we have this problem in our family, I believed there are other fathers or parents that feel the same pain, and they want their kids to be creative, and they want their kids to be designers, photographers, artists. It’s a very common and universal need. That’s what gives me the confidence that we are on something.

And then, we see in our initial [inaudible], when we launched the products and we see how quickly we start getting our users, and how loyal those users became over a year, that gives us even more confidence.

Nathan: I see. And, when it comes to the future of social media, where do you see it going? And, artificial intelligence?

Hovhannes: Yeah, we didn’t think about PicsArt as a social media platform, we are more like a creation platform. We do have a social element, we do have a community and content created by our users, but it’s all about how we can empower users to create, how we can empower everyone to create, how we can lower barriers to entry for everyone. The era is playing a really important role here. The [inaudible], it’s making the creativity much easier because it’s automatic, it’s replacing a technique. You don’t ever spend years to run different techniques because AI can really do these kinds of things for you, but there you can play with your imagination and you can create more designs without even skills for working, without drawing skills or painting skills. With AI, all these things, your design may look as something that was done by a professional artist or designer, and we can even make your portrait to look like a Van Gogh painting by using AI.

This is the things which enable people to express themselves and don’t be scared of lacking the skills or lacking the technique of the usual creation.

Nathan: I see. When it comes to your user base, 150 million active users every month, that’s a lot. What has been the key to growing that size user base?

Hovhannes: First of all, you need to build a good product, of course, and a product that people love and use almost on a daily basis. It’s important not only to just to bring users to the product, but also to retain these users, so make a product which will … sticky. It’s required. It’s a daily use product. It’s not just in a … you make and big lots of users, and tomorrow they stop using your product and go somewhere else. It’s not only just bringing in users, but keeping these users, so retaining these users. That’s why you provide enough depth that you have so people can find even new things and are going to use it for a very long time. They still can use new features, new tools, new interesting use case they never thought.

Second thing is the network effect we are creating within the app. Because of your community element and the [inaudible] of our community, users are coming to PicsArt not just because of tools but also because of the community and because of the confidence they can find only within PicsArt and build this confidence to create their own design. That create a viral kind of group, and people start bringing their friends and families to PicsArt and [inaudible] is a big driver for our growth.

Most of our …, those are happening organically. We are not really paying for paid marketing to get these users.

Nathan: You talk about paid marketing; Kim Kardashian is one of your main influencers that you work with.

Hovhannes: I wouldn’t call it main influencers. She’s probably one of the biggest influencers, yes. …the main influencer. We see we are working with many influencers and micro influencers, and it’s even more efficient in the long run because with working with one big celebrity, you can …, but in our scale it doesn’t make huge difference. When you are small it makes a difference, but we are big. It’s not something which is a huge [inaudible] for us.

It’s more like working across different channels, like more… It’s sometimes more efficient to work with many micro influencers or a mid-level influencer than with one big celebrity. Of course, it doesn’t hurt to have the big celebrities, of course, but we are seeing for our marketing, it’s better to really think about scale, not a single spike.

Nathan: Interesting. How many influencers do you work with?

Hovhannes: It’s hard to say, but I would say there are probably in thousands. We have 1,000 also influencers within PicsArt that are working with us. We call the VIP programme before, and now we are changing it. We have 1,000 influencers within PicsArt that have already influence within PicsArt. They have [inaudible], etc., and we’re working with them as a part of our community effort, but we are working with other influencers in other countries. In different countries we have different influencers.

In many cases we are not really paying anyone. We do either collaborations or partnerships and we cross promote. We do drawing instruction or something. Most of their classes are doing this organically because they love our product and they just spread the word without being financially rewarded. There are relationships.

Nathan: Wow, that’s interesting. You said you’ve been working with thousands, over 1,000. It is not often… Would you guys consider yourself, yeah, you guys are a tech product, right? It’s not often. Usually influencers are best used from a direct to consumer physical product, brand. I’d love to hear. Usually when it comes to software, people don’t really use influencers that much.

Hovhannes: There are a category of influences which are providing two points, the first about, okay, how to use, for example, PicsArt to create a sneaker or how to make whatever, dipping effect on PicsArt or some trendy stuff. Then they can then get a viral campaign around a certain picture or trend, so on [inaudible] there are many influencer which are sharing for us about how to do this with PicsArt, how to create a logo with PicsArt, how to create a business card with PicsArt, how to create a greeting card, how to create a selfie effect, how to create a sketch with PicsArt.

You can go and see in TikTok. We have millions of people, followers. Of course the hashtag PicsArt has millions and millions of views, and millions of millions of people are really liking and using this content and creating this content. It very beautiful. There are lots of [inaudible] created by our users, millions of views about how to do this, cool things using PicsArt.

It’s very organic. We’re discovering certainly one and another influencer using PicsArt. Then she’s posting her tutorial. Then we’re approaching her and offering some collaborations, things like that. As I said, it’s very organic. It’s not like going out or something and paying.

They’re also using PicsArt for their posts, many of them, using PicsArt for their posts, so basically the only other product. It’s not like a random software nobody use. It’s the brand of the software influencers use. More and more these days they create very attractive videos or pictures for their Instagram or … or other accounts.

Nathan: I see. It sounds like one of the biggest drivers, number one drivers for growth and the user base is the network effects and just building a really, really great product that’s inherently sharable. If we delve a bit deeper, a lot of people that would be listening, watching, they want to build a great product. They want to build something that people care about. They want to build a product that solves a really strong problem. What did the first year of product development look like for PicsArt? Has the product changed a lot and evolved over time? Or did you get lucky? What did that look like?

Hovhannes: Of course, when you start building product, building good product is not enough. You need to figure out what’s your channel, how you’re going to get your users, and how you can get your users to care. Often you should think about what kind of unfair advantage you can gain one way or another. It could be an unfair advantage of access to technology, like nobody can have this technology, or access to the channel, which nobody can get the same access like you. Finding the unfair advantage is a big part of business startup.

For us, I can just give you an example of how we started and one of the good [inaudible] we have. When we started in early 2010-11-12, it still is just as essential today. Most of the developers think iPhone first and they start building something for iPhone and ignoring Android. You end up with top competition on iPhone, and Android is a leftover place where people, really they have resources. They really don’t care about Android.

We started Android first, and for first couple of years we’ve only been doing Android for other reasons as well, not necessarily just [inaudible], but it gives us and advantage of being strong in a market where no definitely competitors existed in that space, and also we also implemented some growth hiking techniques, because exploit early and opportunity in the platform.

For example, Android has a feature called recent apps. It existed back at that time, but not now. They closed this loop. They passed it into the apps, which are just recently launched or [inaudible], and we figure out it will launch our update on Friday midnight. We will get on top of the chart, and it will stay there for at least a week. It created a rule. Whenever a release, every week, midnight, and just get to the top of this chart and get lots of new users.

It has created another effect. We were working hard and stay here 24 hours to make this deadline, but with this cadence, we created expectations with our users, so our users start expecting what is happening next week. Every week we just give them another enhancement or tool or feature. Basically this stuff they’re expecting brought it next, and that create another loyalty. People start becoming more loyal to our app and started it more frequently, and then started inviting their friends to use the app as well.

That really helped us get initial traction on Android. When we switched to iPhone, then the outgrowth was much faster because there are people in family using, also in a half iPhone and Android, or people switching from Android to iPhone. Actually we could bring the … over to iPhone just using Android as a base. That was really a good strategy for us.

If you’re really building a startup, you can think about how you can find this kind of unfair advantage one way or another to do something differently than the rest of the market or the rest of the competition.

Nathan: I see. That was some great advice. You guys have raised over 45 million in venture capital?

Hovhannes: Yeah, probably a little bit more than that, but yes, large monies.

Nathan: When did you raise your first round?

Hovhannes: We raised first round in 2015, and it was Sequoia first, and main investor is Sequoia. This is one of the best investors I had. We get tremendous value from this company, from this firm. It’s more than money. We get first of all when we’re sharing our numbers to the press and nobody is believing our numbers, we are young company at that time and we already have a significant growth, but nobody was believing us. When we got Sequoia as investor, it was like … like a standup group of success, and then we instantly get more interest from journalists, other investors, partners, etc. That was a very important investment for us, but more important, I think, the quality of partners, the quality of employees, the atmosphere, the very pro-founder …. culture of the firm. It’s really helping to grow and mature as an organisation. Yeah, I was pretty lucky to get Sequoia as my first investor.

Nathan: Awesome. When it comes to raising capital, if you have previously five exits beforehand, I’m curious why not self-fund?

Hovhannes: We do self-fund. We started, we raised from Sequoia when we were profitable. In a self-fund, you boost up the company for three or four years before we get Sequoia. We were already profitable and we were on a fast growth trajectory. That’s why we’re not raising money, but we’re… My goal was to get a quality partner, not just an investor. That’s why the borrow is pretty high, and that’s why we get… We’re only talking with tier one investors at that stage, and as soon as we get the Sequoia, I couldn’t really discuss the term sheet because that was my goal, to get Sequoia on my board. That was the goal, and as I said, it’s more than money.

Nathan: I see. It’s more around advice, access to networks, access to, yeah, I guess playing at a whole nother level and a form of validity of the product and the growth and stuff like that, right?

Hovhannes: Right. Sequoia’s investing. They’re are [inaudible] that they believe this company is going to be a billion dollar company in time. Then everybody understands and is taking us seriously. Basically it’s helping us to get more reputation and influence and it helps when you [inaudible] negotiations and costs.

Nathan: I see. You guys have offices in over five countries. Where are your offices?

Hovhannes: We have offices in Europe and we have office in San Francisco. Our headquarters is in San Francisco where I’m located now. We have a significant business management here, but also we have office in Beijing, China. We have office in Tokyo.

Nathan: I see. I’m always curious. How come you set up offices in certain locations? Was that because of talent? Was that because you need people on the ground? I would think a company like PicsArt, you could run just out of San Fran, right?

Hovhannes: Yes, absolutely, especially these days with the COVID and everybody remote. People are remote these days so it doesn’t really matter where they are. Also they have good connection and they are in a good time zone. That really change our entire process. We start looking globally. Still we are interested to find people in similar time zones because time zone could be a big issue, but location became less and less important.

We just hire very senior person in Scotland. Maybe we can build some office there if we can find talent. We actually hire talent where we can find the talent. It’s less about location and it’s more about where we can find the talent. We need to keep growing. We need to hire more engineers, more AI probably, more product people, design, content, whatever. That’s why we are looking for more opportunities to expand in different locations, and also doing other hiring too. We also are acquiring other companies. We did a small acquire in ……, but not …… acquiring, acquisition. We’re looking at all of this.

Nathan: I’d love to understand when it come to, I guess, building the first version, the MVP of the PicsArt product, how big was the team? What did the founding team look like? What was the structure? How did you know you were onto something in the early days?

Hovhannes: We were kind of big, not small. Maybe I think the initial group were roughly five to seven people. We were building other things, not just the PicsArt when we started, so we also were trying to do other apps. I believe that group was seven, maybe then became 10, 12, and just keep growing. Now we are 600.

Nathan: Crazy. There was about seven people mainly developers?

Hovhannes: Yeah, it was mainly developers. We don’t have anyone like even graphic designer, or maybe we find some ultimately, but initially it was maybe part time designer and mostly engineers, so only developers and no product management, no marketing, purely engineering. It’s still very much an engineering driven company.

Nathan: What is your skillset? What is your superpower?

Hovhannes: They’re overlapping, but I would think AI back in the ’90s, and I drop my PhD, start my [inaudible], the startup at that time. It was an interesting experience doing AI on a mainframe, a big, big computer, the size of the computer was the size of three bedroom apartment. The process occurred, maybe it was less than my [inaudible] that I have today, or [inaudible] stupid device that you have, probably this device, a toy you have or whatever, is… The storage was like 10 megabyte. It was size of this, as big as this table, with 10 megabyte storage. You could only keep maybe two or three images to these iPhones.

With the challenge with all these hardware and storage limitations, [inaudible] we were attracted to AI. My math project was doing a algorithm which could let us play chess, and obviously that failed. For years it was considered a dead science, kind of like purely academic, all kind of research without any practical implementation, almost like ancient languages kind of research. For years it was very unpopular thing. You know the last five years is a renaissance of AI. Everything is AI these days. If you want to impress someone, you say AI. Students go to AI. They want to do AI project. They want to do machine learning, deep learning, these kind of things.

All of a sudden it became from a completely dead science to the hottest thing now. The reason is because the hardware and the CPUs and the storage reached the level to make it very practical. Today you can build in important features and put in a device like this, and it works like a charm. You don’t need to have big computers to do this sort of thing.

This is revolutionary. It’s totally revolutionary, and my background in AI really helps me to understand how we can use this technology, what else we can do if we keep leading the edge of AI and AI research.

Nathan: I see. So your passion for machine learning, deep learning, that is one of the unfair advantages you guys have. It allows you to stay on the cutting edge.

Hovhannes: Absolutely. I love research because I was coming from research. Research gave me lots of skills which were very useful for my startups and in [inaudible], especially doing all the experimental things. I would do a lot of experimental things in startups as well. I would feel almost like a researcher, but yeah, absolutely. The love for AI and building these important skills and knowhow within PicsArt is one of our core differentiators.

Nathan: I see. Do you still code Python?

Hovhannes: Unfortunately, no, just do a couple of paths in JavaScript. I studied programming languages nobody uses these days. My first language was [inaudible]. I don’t think that people even heard about this language. It was popular for some period of time, but it’s done. Then we do some assembler as well, so my early days. I do some Prologue programming. Prologue is an AI language. It’s not well known language anymore. It used to be.

Things really changed somewhere in the past 20, 25 years.

Nathan: You’re off the tools, really.

Hovhannes: Yeah. Yes, I cannot spend any time on engineering. I’d love to. I really enjoy that. I really have a passion of building something myself. Unfortunately, I’m, or fortunately, I spend my time on bigger thing. I’m leading group of engineers. My engineering background is still an important part of why we are succeeding because I can understand technology and I can appreciate what people are doing and how we can build [inaudible] technology side.

Nathan: I see. Do you have a co-founder or co-founders?

Hovhannes: Yeah, I do have co-founders. I work with them with my previous companies as well. They actually were my former students. I used to lecture at the university as well. Not anymore, but they were, some of them, my former students. Many people in the company …….are also my former students.

Nathan: When it comes to the leadership, you’re leading the engineering team and you’re the CEO.

Hovhannes: Yes, I’m leading… I wouldn’t say I’m leading the engineering team anymore, but I’m product team more. I really like to think about product, features, etc. I’m an addicted user of PicsArt. I’m using PicsArt every day, and as a user, I really see which features are needed, which features are important. That really helps to be in a position where you understand your user. I would say many PicsArt engineers and other people also are PicsArt users. They use PicsArt regularly, so that’s also important for them to understand why they are doing … important to the user.

By the way, I should mention 50% of our PicsArt staff are female. In engineering, about 30% female. It is pretty unusual.

Nathan: Why is this?

Hovhannes: I don’t know. It just organically happened. Especially in New York we have far more female engineers and that really helps to… Because I also now … on more female because they are also using more and deeper our product, so this is also helps to have more affinity with our users and better understand their needs and psychology and ….

It’s very organic. We have many female engineers, managers, on all levels.

Nathan: Yeah, I see. Interesting. You’re product visionary. When it comes to the product, how often do you speak to customers?

Hovhannes: We have a user research where they speak quite regularly, and they run some surveys and they speak directly. We have community management. We also work closely with our best users and our influencers. We have different groups. There’s a customer support group which are working with users on a regular basis, especially dealing with complaints and issues. Also we are looking at our data all the time. It’s another source of our understanding, so we have … analytics. They’re charting millions of … every day, and [inaudible] to help us to understand what people are doing and how they are using, to help all that and the work we can do to make their experience even better on PicsArt.

Nathan: I see. Then using all of that collectively, that’s how, and you being a power user of the tool yourself, that’s how you would form product roadmap?

Hovhannes: Right. We have multiple sources for ideas and ideation. We do speak with our customers and users who use our product and our stuff. We have a strategic vision of what we want to do in the long run. We’re looking at our data to find all the friction points for users. Yes, I’m looking for [inaudible] competing product as well. There’s another source for ideas and some inspiration. Yes, we do this, and then ultimately we put these ideas into discussion with a larger group. Later on, we ask our users, and then prioritise based on what we’ve heard, what we’ve seen, what we’ve analysed. Even if we cannot run full scale, we run [inaudible] or test smaller scale features to see if the hypothesis are right. If we see there’s a good [inaudible] a strong need or something, then we put more resources behind this feature.

Nathan: Okay. That makes sense. Interesting. Look, we have to work towards wrapping up, mindful of your time, but was there any kind of final words of wisdom that you would like to share with our audience around, I guess, building successful startups. You’ve done it six times now. What do you think it takes?

Hovhannes: I would say my important advice and learning I have is be patient and not to be stressed. Startup requires a lot of [inaudible] and things are going to be going up and down all the time, all the time. I’m never in a position of smooth growth. No, no. Crises, and all the kinds of crises happen. You need to be resilient and not to be distressed too much, but think long term. That’s my thinking. This is long-term, not short-term, thinking strategically about the value. Then an understanding of all the ups and down are just part of the business. Never get stressed. Never get too depressed about the business is a failure. Failure is a part of success, not a … of success.

Nathan: Love it. Where’s the best place people can find out more about your cell phone PicsArt?

Hovhannes: I believe there’s a Wikipedia page about it. There are a number of articles on background about PicsArt and LinkedIn. I would recommend if people really want to follow, there’s my page on LinkedIn and there’s a PicsArt page on LinkedIn where we really post news and updates. We are always interested in people, and they are welcome to follow us on social media platforms or Twitter. Then we’re already active on other social media because they’re really about news and updates. That would be the best source.

Nathan: Awesome. Well look, thank you so much for your time, Hovhannes. I really appreciate it.

Hovhannes: Thank you very much.

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