This is a Q&A with Jeff Butterworth (pictured below), Queen Bee (CEO when speaking to suits) of Alien Skin Software. This is part of our “Bootstrapped, Profitable, & Proud” series which profiles companies that have $1MM+ in revenues, didn’t take VC, and are profitable.
What does Alien Skin Software make?
We make Photoshop plug-ins for photography and graphic design. Our graphic design plug-ins tend to be glitzy effects like fire and lightning. Most of our photography plug-ins are more practical tools for things like resizing, but there are some cool photo effects too, such as film simulation and oil painting. Our strength is making research level image processing easy to use.
Unlike many of the other companies highlighted here, our software is on the desktop rather than on a web server. As a result, we deal with some old fashioned issues like piracy, resellers, and physical disks. Another difference is that we have been around for 17 years.
What’s your evolution been like with the company?
The early years were exciting because I was experiencing completely new things like travel, leading a team, and handling what, to me, were large amounts of money. On the negative side, we worked very long hours and there was a lot of chaos. These days we don’t experience quite as much novelty, but there is always something new to learn. Now we coordinate our efforts and get much more done in less time. I love our calm efficiency and would not trade it for extra excitement.
You dropped out of computer science graduate school to start the company. What was that situation like? How did you make the decision to jump ship?
I enjoyed computer graphics research, but I didn’t like the unfinished state of most software created in academia. When I figured out that I wanted to make bug free finished tools, it was an easy decision to move into commercial software.
My friend George Browning and I left school together to start Alien Skin Software. I have to admit that we partly did it because we thought we would get rich quickly. I’ll never forget a conversation we had with a friend who was an experienced software CEO. He laughed when he heard our predictions of easy success and said, “I promise that if you ever get rich, you will have earned every penny.” So true! We are successful, but it has been 17 years of challenging work.
An experienced software CEO laughed when he heard our predictions of easy success and said, “I promise that if you ever get rich, you will have earned every penny.” So true! We are successful, but it has been 17 years of challenging work.
How much cash did you need to get up and running? How did you get that money?
I don’t recommend starting a business the way we did. We quit our day jobs, had almost no savings, and I was borrowing my roommate’s computer to work on our products. When our first project was severely delayed by our publisher, we had no financial cushion.
George left for saner pastures and years later founded Zengobi, maker of Curio. I asked my parents for money, but they thought I was being irresponsible (correct at the time), so I got a $2000 bank loan to buy a low end Mac. It’s amazing what fear of starvation will do for your work ethic. I quickly made my first set of Photoshop plug-ins called The Black Box. It started to support me pretty soon, which was easy since I was just living off of burritos in a cheap apartment.
A few years later, I sold my father 1% of the company for $2000. I didn’t need the money by then, but it made Dad feel better about not loaning me money in the beginning. Also, North Carolina law at the time required at least two partners to form an LLC. Since then I’ve never received any type of investment or loan for the company.
How successful is the business?
The company became profitable in 1994 and has been profitable every year since then. We passed the $1M revenue mark in 1996 and have remained well above that ever since. The most important measure of success to me is whether everyone in the company enjoys their work. Money feeds into that, but so does the quality of our products, the competence of coworkers, and happiness of customers. By those measures, I think we kick ass.
The most important measure of success to me is whether everyone in the company enjoys their work. Money feeds into that, but so does the quality of our products, the competence of coworkers, and happiness of customers.
What is your culture and work environment like?
In the early years we cared a lot about fighting the “corporate suits” and showing how alternative we were. It was fun, but it was chaotic like a software hippy commune.
Now we are organized, calm, and professional. The office is quiet and tastefully decorated. Decisions are no longer made by unanimous consent. We work pretty independently and avoid unnecessary meetings. However, I think regular communication is healthy. Everyone has a weekly meeting with their manager, mostly just to get advice and make sure projects are on track. We have a company lunch once a week for social bonding and for a brief state of the company talk.
I think that working long hours in the end does not result in more productivity. We rarely put in extra time and we take breaks (there is a nap room). Our work week is 39 hours because we leave an hour early on Friday for drinks and food that the company pays for. With that said, when we are working we are really working. Those 39 hours are very productive.
Any examples of a time you ignored the advice/opinions of others and went your own way?
One area where I am glad I went my own way is in reigning in head count. People inside and outside the company kept saying, “If you aren’t growing, you’re dying,” or similar accepted wisdom. I hate that saying and believe it is ridiculous. Since 2001 we have purposely shrunk from 20 people to 11. It has been wonderful. In that time our products have become better, we get them done faster, and our profit is up. It is unlikely we will ever grow beyond 15 people again.
Why do you think a smaller team is the way to go?
Partly it is just my personal preference to have a company I can understand. I like to get to know everyone, understand their challenges, and see how their work fits into the overall effort. I think that gets hard to do with more than about 15 people. Also, the smaller a team, the less effort is needed for coordination. It is just more fun for us to spend our time creating things rather than in meetings.
The Alien Skin team taking a break.
What’s been the biggest challenge you’ve had to overcome as a company?
Hiring lots of friends in the early days was fun and cheap at first. In later years that became a huge problem. I spent far too many years letting dysfunctional situations continue because I didn’t want to deal with the social fallout. These days the company is a very professional, productive, and collegial place, but it took many years and many lost friendships to achieve it.
The smaller a team, the less effort is needed for coordination. It is just more fun for us to spend our time creating things rather than in meetings.
If you had it to do over again, what would you have done differently? Or is it just as simple as you should never work with friends?
I think it is ok to work with a friend, but only if you are willing to treat them like other employees. Only hire a friend if they are really well qualified for the position. And most important, be an involved manager. That means that you stay aware of what they are doing, give them regular feedback, and if they ignore feedback or can’t improve then you fire them. This is really how you should be treating everyone. If you can’t do that with your friends then don’t hire them.
What else is interesting about your story?
The name Alien Skin came from the odd patterns created by our first product which you can see here. That product died quickly, but it is fun to keep such an odd name.
According to your site, “fast, friendly tech support” has helped create loyal customers. What’s your advice to others when it comes to offering support? Were there any initial support hurdles you had to overcome?
We have always had a full time person devoted to tech support. Until recently, this person actually answered the phone. Now we use techniques similar to 37signals for keeping tech support under control. I was nodding my head the whole way through the recent 37signals podcast on tech support. All tech support requests start through a web form. That gives us information up front that helps us get to the heart of the problem faster.
You offer these things to all employees: private offices, 100% coverage of family health insurance, profit sharing, IRA contribution matching. Why?
Yes, everyone gets those benefits. In my opinion, the silence of a private office is necessary for most intellectual pursuits. I think the productivity gains far outweigh the savings of an open plan office. Profit sharing is crucial for keeping everyone’s interests aligned. The other benefits keep us competitive with other employers. We used to have free junk food until everyone got fat. Now we have free health club memberships.
Your site says, “Profit is only sustainable if everyone involved is thrilled with the enterprise.” What do you mean by that?
Obviously the customers have to be thrilled, but I think that the employees do too. If an employee is bored, grumpy, or exhausted, then they aren’t going to make a great product or provide great service. They will bring down their coworkers too. That is the really deadly part, because the people least willing to stick around with lame coworkers are the smart, productive, creative ones.
Obviously the customers have to be thrilled, but I think that the employees do too.
What advice do you have for someone considering starting a business?
Here are a few lessons I’ve learned.
1) Don’t undercharge. Once you are confident that your product is great, don’t be shy with your price. The smart people will pay for it. The whiners will leave. We had a product for a while that was much cheaper than our other products. Those customers required far more tech support than the professionals who use our other products. It was a relief when we discontinued it.
2) Beware of entanglements with other companies. Don’t let someone else publish your product. Don’t publish someone else’s product. Don’t do any cooperative product development. You have enough problems coordinating the efforts of your own team. No one else is going to make you rich. Do it yourself.
3) A little management is a good thing. For years we had a flat organization without any management. The result was a herd of cats that wandered off in different directions making messes. Now everyone has a manager who they meet with once a week. The manager doesn’t give many orders. He is there to advise and point out when the employee is losing sight of the goal. In my experience, productive people like to have a manager to discuss their challenges with.
Visit Alien Skin Software
More “Bootstrapped, Profitable, & Proud” posts [Signal vs. Noise]
Jack
on 26 Aug 10Great read. Jeff, I have two questions:
1. How do you deal with piracy? Is it a lost cause?
2. How do you deal with fatigue? Do you have non-plug-in development sideprojects? Sometimes I lose so much motivation after a lot of time on a project and subsequently a lot of my faith in it.
-Jack (soon-to-be CS grad starting my own business)
Jeff Butterworth
on 26 Aug 10Jack, those are tough issues we wrestle with.
These days we use a call home activation system similar to what Photoshop uses. That stops regular people from pirating our products. You can’t stop hackers and it is a waste of time to try. Our current system is actually too strict and is causing a lot of tech support problems, so we are rapidly developing a new one that will be more forgiving.
Oh man, talk about fatigue, I’ve been working on Eye Candy for 17 years! There have been times when we have all become bored of a long lived product. One solution is to have multiple products so you get some variety. Another is to shorten your development cycle. We used to take 1 to 2 years to finish a major revision. The programmers wanted to gouge their eyes out by the end. The problem was that we were cramming way too many features in to each revision. Now we keep revisions small enough that the programming takes more like 6 to 9 months. We are trying to make it even shorter. Put less into your product! Your customers will be happier to get something small soon rather than something big later.
-Jeff (Queen Bee)
mb
on 26 Aug 10Woo! I bought a Xenofex t-shirt back in like 1997 or 1998 I think. Says “Saturate the industry with freaks” on the back. How many t-shirts are there for photoshop plug-ins, really?
Jeff Butterworth
on 26 Aug 10Hehe, in the .com years it seemed like we spent as much time selling t-shirts as software. At one point we had about 8 different designs including my favorite that simply read “I’m from fucking outer space.” We stopped selling shirts so we could focus on the software, but I think we will start again soon. We will just keep it to 1 design rather than 8 this time.
Jack
on 26 Aug 10Thanks Jeff! Good stuff to know. I appreciate it.
Pat
on 26 Aug 10Hey Jeff, Thanks for sharing your story. As a young freelancer/entrepreneur, it is inspiring to hear stories of companies who started simple and have lasted through the long haul. You must be very proud to think that in a mere three years you will begin your third decade as a company.
Kudos for your accomplishments thus far, and all the best in the years to come.
Andrés Mejía
on 26 Aug 10Your average product price is $258.5. That means you have to sell nearly ~4000 copies to cross the $1MM threshold. That sounds like a lot to me for a software that has a relatively small niche market like yours.
What strategies do you use to get that number of sales? How do you get new clients?
Kel
on 26 Aug 10Jeff, this is great stuff. Thanks for sharing. (I love this series)
I was wondering if you could elaborate on how it was in the very early stages. More specifically, when you were building your first product, was there ever a time when you thought you needed help even to get the first version of your product out? For me, I can build stuff on my own to a certain extent, but I worry that I’ll miss important things like security and performance.
How did you deal with this or how would you have dealt with this?
Thanks!! Kel
paul
on 26 Aug 10Jeff, very cool to see Alien Skin featured here, I’m a raleigh native who went to ncsu, and have always thought highly of you and alien skin software (my sister is a designer and uses your plugins).
Jeff Butterworth
on 26 Aug 10Andrés, I think it is best to focus on great products and marketing first and then just see how much money results. Setting financial goals first can result in desperate product/marketing decisions.
Our marketing consists of frequent communication with the press, print advertising, our monthly newsletter, and our web site. There is always more we should be doing on the marketing side. However, beware of projects that are expensive, time consuming, and whose benefits can’t be measured. Print advertising is in that category and it is an area we have been scaling back on.
Keep in mind that good marketing can’t make up for bad products. If your products aren’t great then give up.
Jeff Butterworth
on 26 Aug 10Kel, that first Photoshop plug-in (Eye Candy) was very scary. I knew math/graphics, but I didn’t know anything about the Mac. I did get a little advice from some Mac programmer friends, but mostly I just used books and experimented to figure things out. Not the safest approach.
The wise approach is to build something that you already have the skills for. But if you are smart and determined then you can learn anything. The web and a community of skilled friends helps.
A partner with the necessary skills is another good solution. It’s nice to not be figuring it all out yourself. Just make sure you are compatible, your arrangement is clearly spelled out, and that your partner has complementary skills.
Weston Aiken
on 26 Aug 10Jeff – awesome!! Congrats on this great recognition and – of course – on building such a cool company and doing what you love. There is no other option. Wes
Jodo Kast
on 26 Aug 10Eye Candy is great, thanks for doing that. Team JASC Software representing!
I still carry a copy of Eye Candy 4000 around with me. Thanks for the quality software!
Jimmy Chan
on 27 Aug 10Jeff,
Seems you more like one-man-show especially when George left you. It was remind me about Google, Microsoft, Oracle, Facebook which needs one person who had powerful vision to control the company (success).
Any ideas?
Heath
on 27 Aug 10Jeff, how crucial has it been to your success to have a conference table that intimidates newcomers? ;)
Wyatt
on 27 Aug 10@Jack in response to “1. How do you deal with piracy? Is it a lost cause?”
There are a couple of ways. By far the most common is online activation (our company actually makes LimeLM, a licensing and online activation solution with entrepreneur friendly pricing).
However, if you’re designing your own system you need to keep a few things in mind:
1. It must be easy for the customer to use. (One or 2 clicks, handle proxies, have a grace period if your users have spotty internet connections, etc.).
2. You have to use proper encryption. I recommend 2048-bit Public / Private Key encryption. That is, don’t use MD5—that will be broken in half a second by any half-wit cracker.
3. You must have the ability to retroactively revoke product keys. Some people pay with stolen credit cards, it’s a fact of life. If scammers know you revoke illegally purchased licenses, then the scammers will stop buying your products with stolen credit cards.
This has the added benefit of improving the rates you get with your credit card processor.
There’s more to proper licensing and anti-piracy, but that’s the basics. It’s not a lost cause – you just need to either buy a decent “off the shelf” solution (e.g. LimeLM) or build your own.
Jeff Butterworth
on 27 Aug 10@Jimmy Chan It is important to have the owner(s) actively involved to set the tone, but our success is due to the work of many people. Hire great people, give them the tools they need, and then you don’t need a superman leader.
Joel Mueller
on 27 Aug 10Hey Jeff. Good to see you highlighted on 37signals. Those were great days pushing Eye Candy and your other filters on MacUpdate years ago. :)
Zylun Staffing
on 27 Aug 10Great inspiration. 37signals thanks for the highlight on a great company.
Andi
on 28 Aug 10Jeff, thanks a lot for this, I really like your model and approach. One question – your existence seems to be related to Adobe, why did you guys get caught by surprise with such a major release as the 64-bit Mac version? It seems like you should be cooperating with Adobe on such an update early into the process and be ready right away. Do they give you much trouble?
SiewShuen
on 30 Aug 10Thanks a lot for sharing. I had learned some stuff while reading this. Keep up the good work
Jeff Butterworth
on 30 Aug 10Andi, good question. I admit that we’ve been slow to release 64-bit versions of our products. Exposure and Bokeh are out now. The rest will be done within the next two months.
We have a good relationship with Adobe and have been talking to them about this transition for quite a while. One problem is that Adobe didn’t finalize the technical specs for Mac 64-bit plug-ins until pretty close to the release of Photoshop CS5.
However, we need to take most of the blame. We thought our customers would happily run CS5 in 32-bit mode for a long time because the benefits of 64-bit aren’t significant. I know, in retrospect that was wishful thinking. Customers always want to be using the latest technology and the benefits of 64-bit are more impressive than we expected (speed and the ability to use more memory). Lesson learned and we are burning the midnight oil to get these updates done!
Benjamin
on 30 Aug 10Where does social media play? What are you thoughts on Social media being the end all to get all solution? (I think its a 2nd coming of a dot com blow up)(e.g. foursquare)
Pick one marketing venue you would say a startup could not do with out….which would it be?
Thanks Jeff! Food For Health
Benjamin
Margaret Poor
on 30 Aug 10Hey Jeff,
Great to see this article – I remain a big fan!
Margaret (of Graham and Margaret)
Dave G
on 01 Sep 10Hey Jeff…
I, as many I am certain, appreciate your openness and honesty without the big corporate spin.
I have been a fan of your software for more years than digits on my hands (and no, I didn’t lose any in a tragic bass fishing accident)...
Also, glad to see you don’t fret the pirating (while I am sure it causes some mental anguish) as it only would get in the way of the goal. But, I am curious, what do you estimate is the pirated percentage? I would hope it is under 1% but I could never guess.
Anyway.. office vid rocks, article above rocks, AS rocks!!
Peace Dave
This discussion is closed.