Dmitry Sergeev, Depositphotos: If there is a need to fly to Mars that will bring money, I’ll do it
In 2015 you attracted investments from EBRD tell us about this deal. What did you spend the investments on? How has your Company been developing since that moment?
We met at IDCEE in 2012. Since we delivered our speech, a number of investors stood in line to approach us. Representatives of venture department of EBRD were among these investors. Then we had 2013, and everyone had other important things in mind. However, in 2014 EBRD representatives contacted us once again. This time, the dialog was more constructive. For the second time, our current investor TMT Investments brought us together. I am very grateful to them for that commitment. Apart from growth and development by means of the raised funds that all VC-funds strive for, our Company was expected to follow the best practices in future. Briefly speaking, it means that since this partnership is established, there cannot be and ambiguity, mediocre reports and opaqueness. Whenever possible, everything should correspond to the best practices, common for international business, and, of course, a business itself should be developed harmoniously. As for transparency we are 100% audited. For the fourth year Depositphotos are audited in the USA as well as in Ukraine and whenever we are present by «Big 4» company. As for business development here we try to do everything in our power to win, remaining within the established network and avoiding defocusing. It is not always that we are good at doing it, but most often we succeed. As of today, I am satisfied with finding such investor and will make every effort to ensure that everyone involved could benefit from the investments.
Since raising the round A we have opened one of the largest studio-hub in Europe, expanded our content database up to 67 million files (the database has almost doubled) this collection is growing by 1.2 million files per month. This year a number of logged-in users of photobank is expected to exceed 5 million. We are growing by 30-35% annually. Depositphotos, as our core project, has become a sustainable business. Now it is not a startup, which has to grow by 300% annually. We are happy to see what is going on.
Would you, please, tell us what you launched the studio for and what the commercial advantage of this project is for your Company?
It is rather an image-building project for us, proceeding from the fact that in the structure of total income the income from Lightfield is quite low. For today, the studio is a startup that will strengthen the core business in future. The launch cost us about 30 million UAH. We are also going to invest about 150 million UAH in the studio. We believe that at the height of success it is possible to earn up to 300 million per year in this sector as far as for Ukrainian market the photographs are quite impressive gains. Besides Ukrainian market, for sure, we will try to enter European market. Since September we will launch advertisement campaign in Poland, the Czech Republic and Hungary. For the time being, we focus on the Eastern Europe. We’ll see how it goes. We assume that by the end of the year the studio will be able to reach a breakeven point. All our projects, including media, are self-sustaining. All projects are paid off more or less. A synergy of everything that we launch yields good results. For instance, running media project in order to make money out of banners with Google is not our path. However, it is our approach to create media products in order to draw attention of major content producers. We have one of the largest photostudios in Europe, and sooner or later this is going to work.
Depositphotos background information
- Year of foundation: 2009
- Number of employees: 400 people
- Collection: 67 million photos
- Monthly growth: 1.2 million photos
- Content suppliers: 45 000 people
- Buyer: about 4.8 million people
- Investment amount: $8 mi8llion Dollars in two rounds
- Location of offices: Kyiv (headquarter), New York, Moscow, London, Berlin, Milan, Warsaw
- Subsidiaries: Lightfield studio, Bird in Flight and WAS media, Crello online editor
Now we have 15 opened pavilions, thematic halls, decorated as kitchens, lofts, bars, hospital, and laboratory. These premises are quite easily transformed. There are also lecture halls, capable of hosting the audience up to 200 people. There are wardrobe and scene shops. In spring we started leasing the halls as TV-channels, agencies and production studios visit us to make video shooting. Among the Clients that we host there are very famous ones and all of them are satisfied. Although it’s just the very beginning and we continue to learn and improve our skills in this field.
You say that the studio occupies a tiny fraction of the total income. What does the structure of Depositphotos incomes looks like at the moment?
The most significant part of the structure incomes from sale of stock photos. It is our primary business. We are quite a huge photobank.
We create content and sell it not just via Depositphotos, but also through other photobanks it is the second place by proportion of the income. About 20% of the studio income is covered by leasing and local market. This proportion will decrease on account of growth of the key source of studio income creation of our own content. Enterprise-clients from Ukraine and throughout the world start cooperating with the studio: it is often that someone needs photos, which are unavailable even in the stock list.
From the point of view of foreign investors your first business, DepositFiles, could be called risky. It didn’t stop EBRD, did it?
We have never discussed this issue with them. Probably, you mean that DepositFiles was a «shadow business». Murky business. Â However, there is a nuance: when we started DepositFiles it was absolutely «white business». We had no problems with copyrights. It was just an undertaking and that’s it. This model worked in the network along with the other ones. All well-known file exchangers were created in the USA, Europe and later throughout the rest of the world. Although, when the problems started and the governments of powerful states began regulating the process, and, on the other hand, political parties (e.g., the Pirate Party) began to emerge and powerful attorneys became engaged, it became clear that it is a shitty business and I went out of it. Most probably, investors did not care about it.
Even if they were curious about it, it would look like a story of an entrepreneur who timely managed to understand the situation on the market and managed to go out of one controversial project and launch the second project, which is being successfully developed. You, probably, remember that from time to time the sellers of alcohol are declared illegal. So, the file exchanging business also faces dry law today. I don’t know what is going to happen next. Actually, I don’t want to know it. I enjoy working within the model, which I use now.
Why the model of file exchangers failed? If we look at the fate of Ukrainian file exchangers, starting from Infostore, it is quite a sad picture.
Yes, you are right. When we just started dealing with it, this could be made a global story. Investors, who were in this business, intended to invest hundreds of millions of dollars and offer these projects at IPO. In our case, when we encountered continuous influx of complaints from copyright holders (which we tried to delete millions of files daily), the negative gathered like snowball and it became just impossible to work. A story with file exchangers had bad consequences: the movie and music business have taken different path, preferring not to negotiate with file exchangers for monetization of content, but to close such services.
In my opinion, the breaking point came in 2011, when they closed Megaupload of Kim Dotcom and American government indicted him. I left this business in two years before these events. It was a final evidence of the fact that it is impossible to bring these projects into legitimate business. Copyright holders hire very powerful lobbyists and Hollywood companies spend colossal money on combating such services. Just a few world leaders, like Apple, succeed to reach an agreement with monsters from music industry. Kim Dotcom is a serious and brave guy. He made attempts to promote idea of file exchangers one way or another. He was supported by Steve Wozniak and other famous guys all over the world. Nevertheless, they just crashed him. Now I don’t even want to hear about file exchangers. At present, it is illegal, and that’s it. We have to accept this fact and find something else to do.
So, from the perspective of the hypothetical copyright holder, you moved from the dark side to the bright one.
It’s all nonsense! Both kinds of business are legal. When I dealt with it, both businesses were on the bright side. However, over the time the claims were raised against DepositFiles. That is why we left the market of file exchangers to close this chapter once and for all. Sean Parker, that probably Facebook exists owing to, created file exchanger Napster and the whole music industry of the USA fought against this service. It does not mean that Facebook is occupied only by pirates. Time changes and priorities also change.
What is the attitude of foreign investors to the companies from Ukraine?
It seems to me that the last progress in our life for example, visa waiver is a strong trigger for investors, including those from the USA. It is a signal that we have chosen the right path. I mean that we meet proper requirements of the civilized world and obtain visa waiver for that. It is a signal. However, you can troll me here as much as you like. Nevertheless, I believe that Ukraine will succeed. It is a strong country. Although, I would like Ukrainians to be on our own, instead of acting in the interests of someone else. We should undergo through some kind of self-identification. We should treat other parties as partners that we need, without stooping to the level of madness and malice. Under any scenario, we should adhere to the European values, preserving Ukrainian dignity. It would be a very strong cocktail if we raise our country to a new level in a unique way.
In 2014-2015 we really faced the problem of investors fear to enter our market. They saw a nightmare picture, provided by foreign Mass Media. Even now the picture is almost the same. At least, for ordinary people. Probably you have noticed that Ukrainian news agenda is always the same, the same picture. They do not show faces of happy people, top-level companies that we are trying to build here. Instead, they demonstrate blood and tears. Political trolls fuel this picture. We need to find alternative ways to inform foreign investors on our potential and intentions. It is hard, but not hopeless.
When we contacted about a thousand of investors in 2014, many of them feared to work with unstable region and offered relocation. As for now, I think that their mind has been shifted. We should start contacting them and not to be afraid of it.
Your post about refusal from relocation. That is why we stay went viral in its time. Have you changed your point of view on business relocation and moving abroad since that time?
A position to reside and work in Ukraine is the same. I would like to build the company de facto here. We operate under the American, European and Ukrainian jurisdiction. Our story is American holding, but de facto Ukrainian company with offices throughout the world, with big R&D office and brains in Ukraine. Of course, 90% of our employees work in Ukraine and we bring capital to Ukraine, and not vice versa. This is a kind of our mission at this hard time for our country. We are not going to take our belongings and relocate, unless we have flying jets above our heads or gunners in masks shake down our office. In this case, our mission will differ.
One of the reasons of regular time-to-shove-off discussions are searches of IT companies. If previously IT community was unanimous in this respect, now searches and seizures are executed on suspicion of dealing with the separatists. That’s why it is difficult for IT community to understand whether this is a real reason or just a pretext for grabbing the assets. Now a part of the community, while discussing such news, supports law-enforcement agencies.
Are you afraid, staying in Ukraine, that somebody could show up with a search warrant?
What could they seize from us? What to search for? I think that, in most of the cases, the declared reasons for searches of IT companies, consisting in their links with terrorists, is a bullshit. As far as I am familiar with the inner functioning of Ukrainian IT, it seems very unlikely.
The most important thing is that this hysteria should not contribute to impunity of the authorities. After all, we are in Europe, and here we should put an end to this issue. We should keep it in mind. In Europe no one seizes IT offices in masks. We should also prevent artificial fueling of this issue. It should not be a political project on the threshold of something horrible. I remember revolutions of 2004 and 2013. Many of my friends were nearby. Now a chill creeps from what is happening. It all didn’t happen the way we expected it to be. Although, I blame this anxiety on lack of information on actual processes and, at the same time, excessive network awareness. I still believe in something better. Even very educated people let’s say, the cream of nation, are going a little bit crazy on the issues, related to disdain. As for pseudo-patriots, sitting in front of monitors and enjoying the fact that someone’s servers are seized they are just pig-filthy humans, who need to face up the real situation. However, it is impossible, because that’s how humans are built. I understand this.
If we hold a course for Europe, we can’t let our IT community live in fear of repressive or illegal sources of influence. Although, most probably, I greatly overestimate Ukrainian IT community. It is not so meaningful for the society and politicians.
Concerning searches, it seems to me that most of these stories have no actual terroristic background. Maximum, some crazy employee with different views can flood or post something and Security Service of Ukraine visits the company to clarify the situation. Or, in the old manner, they want to receive something in exchange for the appropriate settlement of the issue. I still believe that it’s ending. Actually, I am very naive in this sense, I know it for sure. However, I would better be naive than expect illegal actions and be afraid of lawbreakers. I will always be sure that they are able to handle the situation.
I hope this will not happen to us. Even if it happens, we are ready to cooperate and provide all information in compliance with the Law of the country where we work. We are ready to tackle the situation until its complete settlement. We adhere to all rules, laws and orders, not only Ukrainian, but also American and European. We are being watched not just in Ukraine, but also overseas. One more thing: we have nothing to seize, apart from gumshoes from the scene shop.
Since you started talking about sanctions: if someone downloads a photo where the Crimea is Russian, what measures do you usually take?
We work with 192 countries of the world. So, very different situations can happen. The Crimea is not the only problematic region of the world, and complaints always arise. We follow the rules, established by the Law. The same approach is applied to the Crimea: we filter the pictures with Russian version of the Crimea. However, there is a strange situation. For instance, you wish to illustrate fully pro-Ukrainian article with a map of the world, where you yourself describe position of the enemy and his/her vision. What will you do? Will you delete the Crimea from Ukrainian version? Here is another example: you need to find fascist symbols in the stock list. Some kind of arrows with crosses and the Nazi salutes to illustrate Hitler’s Vision of Europe. What should be done? In this case we are just a service, where you can take everything, which complies with the Law. Plus DMCA. We do not always have time to track disputable issues, but immediately response to complaints. Concerning the Crimea, the matter is closed.
At iForum you spoke about entry to the global markets. Have there been any changes in the rules for entry to the global markets since the moment when you launched the Company?
In general, nothing has changed. If you create an excellent product, it is not important where you are sitting, the product will be in high demand anyway. In the later stages of business the question is no longer about maximum market expansion. You always calculate whether, for instance, you need China and how much money you are willing to invest in this launch, etc.
At the initial stage, startup stage, do, at least, something a version in English, let it be even Broken English, launch it, adapt it, and you will get some traffic. It is quite simple. If your idea is worth any attention, you will not have even to think about entering other markets: sole market will just limit your growth. For example, a story with Prisma, developed by our friends. They entered Russian market. Users, being on the wave of hype, crashed their servers. Nevertheless, they tested out the technology and entered other markets. It is called controlled growth. The same story is with Nimses as far as I’ve seen, they are closed for American ID yet.
What do you think about Nimses, since you have already mentioned them?
While it was still not launched, journalists, who got this application in their hands, asked me to express my opinion about it. It seems that this article has never been published. I am not aware of the reasons. I think that it is a lost cause due to project economics. I would like to believe that they succeeded. However, I feel that the whole thing with social networks is closed for the nearest decades or even hundreds of years. If we invest serious money in redistribution of capital within social media, it will rapidly be concentrated in a group of people with giant capital. It would work in case if we involve, for instance, cryptocurrencies, which grow alongside with the project. Though, I have to acknowledge that I haven’ studied them enough and I am not their user. I might be wrong.
We had a similar story with Clashot content is paid by likes. It is very quickly understood that you wouldn’t have enough money to convert it in real money and no advertisement would redeem that loss. By the way, this is the reason why we derailed this project.
In brief, it seems to me that, for today, social media is a dead issue.
What are the niches beyond the dead issue?
It is artificial intelligence, e-commerce and content production. It can be complementary to social media. It can also become the strongest segment of social media. For example, it can cost more that the social media.
With regard to your niche of photo stocks, would you, please, voice your forecast for 5-10 years?
In our niche we have a lot of outstanding issues. For instance, it is a problem of search over visual content. Even Google has not addressed it ideally. An answer to the question: «How to find what you need in 100 million photo database?» has a lot of prospects for development of our market. However, if we are speaking at macroscale level, our market is not that big: 2 billion and quite moderate growth. We do not expect miracles, but are continuously looking for models to create adjacent markets. We will just continue fighting for a share of this small but sustainable market. Someone, who is smarter, will stay afloat.
Can artificial intelligence be engaged in solving this problem?
This is what I am telling: the future will come when you as a user are able to ask Siri or Alexa to find the photo, which personally you consider cool, and these services will be able to do it. Let’s assume that 10 employees in a department are searching for illustrations for a huge enterprise-client. This client asks to find a photo of yellow shoes on a sunny background. Now these photos are found manually and the employees know the client’s context and needs. They spend a lot of time on searching. In future the artificial intelligence will replace thousands of such employees and will be able immediately to find the most relevant photos.
The problem is that, for today, artificial intelligence is confined to existence within the framework of huge corporations like Amazon or Google, which have available resources. For instance, in order to arrange our experimental neural network learning at Amazon, we would need to spend about $60,000 $200,000 monthly.
Are you now involved in any R&D works in the area of machine learning and neural networks?
Our whole department is working on this subject, making experiments to improve search results, ranking, etc. Our neural networks are working on systems for selection of similar images, these networks are continuously learning and we invest huge amounts of money in this process. We have hosting partners. We carry out a great deal of work in this area. This is the future.
How do you plan to develop Depositphotos?
As a market place. However, supplementary projects are also possible. I am a serial entrepreneur and I don’t see myself as only photobank builder. If tomorrow there is a need to fly to Mars that will bring money, I’ll do it, provided that I have enough energy and time.
Now we are logically developing in the field of content. We have a photobank with colossal number of images. Adobe penetrated our territory of photostocks, having bought Fotolia with a bank of 60 million images for $800 million. Photobanks responded to this by launching online editors photoshops in browsers. Shutterstock was the first to create online editor in return. We have recently launched Crello editor.
By the way, when they say that in Crello we partially copied Canva it is cool, and I don’t see anything wrong here. It is, in principle, impossible on the market of similar solutions to create something totally new. All online browsers are alike. Any modern phone will remind iPhone. The same is with online editors. We have taken the best of the existing solutions and added our tricks. In our case it is an access to 60 million images. Our right choice is evidenced by numbers: at the day of launch there was a fantastic hype and about 60,000 new users logged in. We correct bugs and move forward. It will be a large project. The strongest team is working on it under the leadership of Luda Nebozhak a real professional.
The market that Crello is functioning on is a very promising as, probably, 90% of people do not know how to use photoshop. In order to create advertisement, they buy photos, go to designer, and pay him for photo ruches and filters. If they are not satisfied with the result, they go to another designer and pay more. As for our editor, by pushing a couple of buttons you are able to launch advertisement campaign in Facebook.
How are you going to develop media projects? Besides, what photobank needs media for?
We do not move towards political Mass Media. We are producing media materials, related to visual culture. Bird in Flight is considered the best in this field. And we want to be something more than the market place, selling photos. We would like to progress and educate, to bring the high-class media professionals, photographers and designers together as a community as well as everyone, working in the field of visual culture. After all, it brings money. We have launched WAS.media and since September we are going to enter the niche of education segment on Youtube in the USA and Ukraine.
How many people are now employed by Depositphotos? Do you have any plans to expand and open new offices?
Now we have almost 400 employees. This year we would like to expand in Europe and Ukraine and to grow by 20% for the next 2 years.
How do you hire employees?
Now I personally communicate in the Company with 4-5 people, who have professionally grown in Depositphotos and are TOP managers. We take principal decisions. I cannot say that I am actively involved in recruiting process. We hire employees according to their professional skills.
Lightfield office studio of Depositphotos
Of course, when it comes to recruitment and work with technical specialists, it has its own specifics. Once we were even mentioned on the website ebanoe.it. It is only from this website that I’ve got to know about existence of our problems with HR activities, which should be fixed.
Did you feel any disappointment, having appeared on ebanoe?
That’s ok until it is not dirty and filthy. A sort of WikiLeaks, but related to IT. In our case those, who come as our employees, see the whole story from inside. We really do our best to meet the requirements, established by labor market. It’s not a big deal if one of 400 employees writes something negative. Of course, we have some staff turnover and disgruntled employees. However, we use our best endeavors to address these problems. I was disappointed just because someone gets things out without making an effort to solve the problem in-house. At the same time, it is very easy to solve it in-house. We have all tools for this purpose. To sum it up, we take every effort to improve ourselves and thanks for criticizing us.
What can interest you to work on, apart from photobank?
We just don’t have enough time to encompass all things. I’d love to launch other projects. I am interested in e-commerce. If I had time and resources, I would launch something like that on Chinese market. This is a very interesting market. However, it is quite closed due to language barrier and political issues. Although, it is a market of big money and huge opportunities.
It would be curious to get involved into artificial intelligence. We, especially Ukrainians, need to move towards this sector. We have a low number of projects in this sphere. Medical technologies are also of great interest. For example, not so long ago I saw a cool startup. Its idea was to measure your pressure, to send measurement results for analysis in order to forecast state of your health for tomorrow.
What would be your ideal startup if you had no limits of time and resources?
You say: devise a startup that would be interesting to work on. However, it is not devised in a moment. We launch something all the time, make experiments. There are failures and successes. Sometimes we waste money, sometimes we make successful investments. If I had an idea of ideal startup, I would be fully involved in its implementation.
In entrepreneurial business, ideas often emerge spontaneously. Therefore, I cannot tell you what I will be engaged in in future. The main thing here is an impetus. For instance, I have never opened photoshop. Nevertheless, it will not stop me from creating the best photoshop in browser in the world.
Business for me is rather a thing of intuition, even if it sounds trivial and like a cliche. You will not find information how to start business in business literature. It’s a bluff. In fact, such literature is business itself, as someone who writes it makes money on it. As a matter of principle, I don’t read a lot of business books, in order to stay unbiased. I read just the most necessary literature, which helps not to look as an idiot. We have so many versions of the Art to Win that there’s no enough time in one life to read all of them. After Steve Jobs’s death I read his biography, written by Walter Isaacson. I remember the moment when farther tells his son: Sit down into the car. Let’s go to see how business is built. You won’t read about it in any book. I am waiting for a signal, whatever crazy it may sound. And I will go towards the direction that this signal sounds from. And the project will either succeed or not. That’s because my life, like everybody else’s, is based on the principle of probability theory. There are some moments in life, when you flip a coin ten times in a row and it comes up tails each time. Of course, tomorrow I can be unlucky with great probability. But today we have a period of tails.