Platform Complementary Products

Andrew shares his experience with Pixel Union, a business that created premium themes for emerging platforms like Tumblr and Shopify, demonstrating the opportunity in building complementary products for growing platforms.

Key Points:

• Initial Platform Opportunity:

  • Started by creating a custom Tumblr theme
  • Tumblr CEO invited them to create more themes for their premium marketplace
  • Began generating automatic revenue (~$10k/month)

• Business Evolution:

  • Expanded from Tumblr to Shopify themes when Shopify noticed their work
  • Shopify was small at the time (around 15 people)
  • Successfully leveraged early platform relationships

• Business Structure:

  • Incubated within MetaLab
  • No outside capital raised
  • Spun out as independent company
  • Sold for $14M in 2014 (at ~500k net profit)
  • Later bought back for $26M
  • Took public at $260M valuation

• Key Learning:

  • Early platform partnerships can lead to significant growth
  • Automatic revenue model (passive income from theme sales)
  • Business was undervalued at first sale due to lack of investment knowledge
  • Growing business (50% yearly growth at time of first sale)