No Filter: How Hipstamatic Pivoted Into A Flat Spin

The inside story of Hipstamatic’s losing struggle to keep pace with Instagram, Facebook, and others in the white-hot photo-sharing space. In the third and final chapter of the series, Hipstamatic searches unsuccessfully for capital, and founder Lucas Buick and ex-employees ponder the future of the business.

Lucas Buick, the CEO of Hipstamatic, failed to define his startup’s mission over the past year. But several of his ex-employees seem to have no problem nailing precisely what set it apart. “Whereas Instagram was a social network that had a camera, Hipstamatic was the camera that shared to any other social network,” says one former staffer. “It was very clearly distinguished.”

To outsiders, the distinction may seem insignificant, even pointless. But inside the company, some felt it was Hipstamatic’s golden ticket, a chance to become the go-to smartphone camera for sharing with social giants like Facebook, Twitter, and Flickr. Instead, the opportunity was squandered when the company lost its focus.

Since Buick launched Hipstamatic in late 2009, the service, a $1.99 photo app that takes analog-style photographs on your iPhone, has undergone relatively little change. It didn’t need to. The startup attracted millions of users and millions of dollars in revenue by selling in-app digital lenses and films that effectively turn your iPhone into an old-school instant camera.

But the more Hipstamatic grew, the hotter the photo-sharing space became in the social world. By the start of 2012, with mobile photo-sharing service Instagram rocketing in popularity, Buick couldn’t stand to let Hipstamatic remain a third-party camera in a space dominated by first-to-market social applications. He spent much of the year chasing after every hot social competitor, from Instagram and Path to Camera+ and Viddy.

If it’s common wisdom for founders to heed the call of social, then Hipstamatic proves that every founder should be wary of conventional Silicon Valley wisdom. Social for Hipstamatic was a siren song, and its turbulent journey over the last year only demonstrates the oft-overlooked dangers of pivots, especially ill-conceived ones that damage a startup’s core business so deeply that no amount of venture capital can repair it.

Throughout the summer of 2012, Buick says he and his cofounders took meetings with investors, hoping to raise the company's first round of funding. But the team could never find the right terms, Buick says, partly because of Facebook's bungled IPO. "We went down this path one other time, and the term sheets have gotten worse since the Facebook IPO, just from what we've seen," Buick says.

The other issue, ironically, was Hipstamatic's bottom-line, Buick says. While startups with no revenue can often drum up seemingly arbitrarily high valuations, Hipstamatic was plagued by its own market success. Instagram had generated no revenue since it launched, yet sold at a market valuation of roughly $1 billion. Hipstamatic didn't have the same “advantage.” According to Inc. magazine, the self-funded startup pulled in $10 million last year, and was on track to more than double its revenue in 2012. "For us, raising money was always super awkward because we made money," Buick says. "It fucked everything up and we'd get a different valuation. Like, 'Oh you have numbers? Well, I'm going to put the X here and the Y here, and this is what you're worth.' It's like, 'No, no, no, we don't make money! I lied!'"

"They thought raising VC money would be really easy—that they'd basically be picking money off trees," says Jonathan Wight, a former engineer at the company. "Every few weeks we'd get an update, and it would be, 'Oh it's a lot harder than we thought,' or, 'The terms aren't what we want.' Blah blah blah."

Fast Company reached out to a slew of top-tier VCs but was unable to find one who had met with or even looked at the company. Two of the VCs surmised the startup would have a very difficult time raising money after the Instagram acquisition. “Another billion-dollar photo-sharing exit is hard to imagine. The category is over and done with, and I’d be surprised if they can even raise,” says one of the topflight VCs.

The investor agrees that general market sentiment for social media investments is down because of Zynga’s and Facebook’s declining market caps. However, the VC disagrees with Buick’s argument that having revenue would hurt its chances to raise funding. “The real problem is that Hipstamatic is perceived as a copycat that desires to be Instagram, and VCs don’t want to be in a me-too deal,” the investor says. “Having revenue absolutely won’t hurt; if anything, it helps, though the idea and market size matter much more.”

At that point, however, Hipstamatic's biggest problem was finding the right idea, regardless of the size of its market or revenue. And its development team back in San Francisco felt completely disconnected from whatever the founders were planning. "They were gone for weeks and were impossible to reach," says one former employee. "Apparently they were meeting with VCs, but I don't know. We were just trying to ship this new product that was already behind. The original goal was to ship it when the new iPhone came out, but there was no fucking way we could do it. All we had was what we hacked together for them to demo to VCs." (Hipstamatic denies that its cofounders were impossible to reach during this time.)

By the time the “Wolfpack,” the self-appointed nickname for the company founders, decided to offer other members of the team stock in the company, many had already lost faith, multiple sources say. “All of us were like, ‘Dude, you’re never going to IPO,’” recalls Stuart Norrie, then a designer at Hipstamatic.

In late July, Buick and his cofounders went to New York, which Wight says felt like the “last chance to get VC money." (Hipstamatic denies that it was the company’s last chance for VC funding. It’s also worth noting that I had met with the team during their visit, and none of the products herein described were mentioned at that meeting. Buick was focused more then on ways to work Hipstamatic into third-party services.) When the team returned, however, there was no news of a round being raised. "Nothing was said. It was like, 'Well, I guess we didn't get any money,'" Wight recalls. "I confronted Lucas about it and he said, 'Yeah, we didn't find any terms that we liked, but we have something in China.' It was kind of obvious then that they weren't going to get VC funding."

Wight also says he pressed Buick on whether they could still go ahead with the social product without raising capital. "Lucas said, 'Yeah, we're going to mortgage [Hipstamatic's] building if we need to,'" Wight recalls. "He actually said, 'Our backup plan is to mortgage the building.' At that point, all my alarm bells went off. It was obvious that something crazy was going on. As far as I could tell, they were running out of money. That was about a week or two before the layoffs."

Hipstamatic says that it’s simply not true that the company considered mortgaging the building as an option. Hipstamatic also denies that anyone ever indicated the company was prepared to go forward with the social product without raising a round of funding.

If Hipstamatic’s product roadmap seemed slapdash, the rapidly evolving landscape of the photography space was only making its business even more chaotic. By mid-August, Instagram was racing toward 100 million users, in part due to the app’s successful launch on Android. Viddy, arguably the model for CS9, Hipstamatic’s squashed video product, had raised a $30 million round at a reported $370 million valuation. Path, Dave Morin’s private social network, had raised $40 million at a reported $250 million valuation. Camera+, its camera app competitor, was nearing 9 million users, more than double Hipstamatic’s user base, and would soon launch on the iPad. And Tumblr, Pinterest, and any number of other white-hot startups, which arguably served as inspiration for Hipstamatic’s social products, were flying into the upper-echelon of Silicon Valley superstardom.

But even in such a hectic time for the company, Buick was starting consider yet another pivot for Hipstamatic. Pivots, Eric Ries’ term for a change in company direction, are usually reserved to describe companies that have made successful shift in focus: Instagram, for example, is famous for pivoting away from its unsuccessful, complicated earlier iteration, called Burbn, which included a host of random features, such as game mechanics and future check-ins. Pivots are also used to designate startups that have lost focus, as was the case with Color, the proximity based photo-sharing app, which has become a punch line in the Valley for a startup desperately spiraling in all different directions.

But Hipstamatic never truly pivoted. If anything, it lurched. The startup performed a series of missteps throughout 2012 that snowballed and left the company stagnant by the summer’s end.

In further violation of Ries’s revered business principles, Hipstamatic seemed almost incapable of putting out a minimum viable product: most every prototype product was either killed or not given the attention it needed to get to market.

Worse yet, the company was not run like a lean startup. The company's headquarters, for example, a wide brick building on Langton Street in SOMA called the "Haus of Hipstamatic," cost roughly $1 million. Additionally, the cofounders decided to renovate the building's rooftop with deck and minibar, an upgrade that cost at least $800,000, explains Sam Soffes, a former engineer, who says he saw an invoice for the construction. “Lucas told me the stain for the deck had been imported from Belgium, and I was like, 'Dude, there's a Home Depot in Daly City—we could’ve just gotten it for way less than you paid to have that shit imported form Belgium!'" recalls Norrie. (Hipstamatic confirmed the cost of the building, but declined to confirm the cost of rooftop construction.)

Inside the $1 million "Haus of Hipstamatic"

Parties at company headquarters were frequent. As Buick once told me, "Our entire lifestyle is built on the philosophy that work and play are one."

"It felt like a bloody frat house," says Wight, who says he was told the company's alcohol budget was $20,000. "I've never worked at a startup with an alcohol budget. People would be getting drunk at night and end up sleeping on the floor of the company. I think Lucas wanted a certain amount of rock n' roll there."

(Buick denies that the company had an alcohol budget, though he adds, “I mean, if we did have one, I’d be curious what it would be.” Buick also clarifies that, with all parties thrown—for product launches, say, or app updates—he always considered whether they’d generate short-term income or long-term revenue. Molli Sullivan, Hipstamatic's director of communications, says that much of the money spent on parties and other “fun events” was designed for team building.)

"We had a ton of parties—maybe that's what they meant by having a 'lifestyle brand,'" says one former developer, referring to Buick's company motto.

So while Hipstamatic was still generating revenue, it's perhaps no surprise why some employees started to wonder if the company was speeding toward bankruptcy. Employees were not privy to the startup's earnings; they only knew of revenue figures that had been reported by the press. When it became clear the company was not going to raise a round of funding, some started to think the worst. "I inferred that they were running out of money—that they had just gone through money way too quickly," says the former employee. "You've seen the office—it's really expensive. They all have really lavish lifestyles. I figured they were seeking out funding because they needed more runway to keep the ship afloat."

The truth according to Buick is, by mid-August, the company had several different options. Buick could've continued down the path toward social and raised a round of funding at less-than-pleasing terms. He also could've sold the company. ("We can't comment on who [we could’ve sold to], but it just seemed like a shitty option—it felt like giving up to cash in a check and buy a boat," Buick says.) Or he could've pivoted backward, scaled down the company's ambitions, and refocused on Hipstamatic's original photo app.

After much deliberation, Buick says he went with the last option. (Also in early August, one of the company’s iOS developers quit voluntarily, which helped reinforce Buick’s decision, he acknowledges.)

Over dinner in mid-August, Buick presented the plan of scaling back to several other founding members of the startup. "From the time we decided to pull the trigger to the time we executed was about 48 hours," Buick says.

On Aug. 16, the company began laying off employees, either in the office, over the phone, or over coffee. Employees were (not surprisingly) unhappy when they were told the news. "Yeah, I got my pink slip, or plaid slip, whatever hipster term you want to call it," says the former employee.

At the Mondrian Soho in mid-September, over dinner and drinks, Buick appears genuinely unfazed by the internal drama at Hipstamatic and the way it negatively spilled into the press after employees were let go. Later, when I ask Buick whether Hipstamatic is going bankrupt, he immediately responds, “No, we are not.” And even when I press him about the startup’s runway and burn-rate, he retorts with a giggle, “You're using startup terms that we've never internally used. I mean, I've heard burn-rate and runway, but let me say this: I have no idea what our burn rate is. I have no idea how long our runway is.”

Throughout our dinner, Buick’s general nonchalance gave the impression that the layoffs were not a financial decision, regardless of whether they actually were or not. (Molli Sullivan, the company’s spokesperson, says the company is not running out of money, and explains the layoffs had nothing to do with “paying the bills.”)

"The honest truth is I took a lot of bad advice and started building stuff we weren’t passionate about," he says. "That whole product development was all about how to make money and maximize users, and we were focusing on the shit that we didn't really care about. We started focusing on money and talking to a whole different scene, and we started to lose touch with our community—the photographers, for example, who totally got ignored for a year. I don't know what the trigger was but the honest truth was we hadn't shipped anything, and that drove me nuts. And what we were building was still so far away from being available that I didn't even like coming to work.”

Ex-employees can’t speak fast enough to list off the many problems that plagued the company: a lack of transparency, an incoherent product roadmap, and so forth. Almost every source I spoke was offended that Buick would say the layoffs were due to not shipping products—the ex-employees chalk up the dearth of shipped products to the company’s poor leadership. And many sources place the blame on the ever-mounting disconnect between the cofounders and new hires, who say they were not given the agency to push new developments forward. (At least three sources I spoke with said the cofounders had a “death grip” on the original Hipstamatic app, for example, and only gave developers read-only access to the service for much of their time at the company.)

While one could certainly argue Hipstamatic had many original ideas, Hipstamatic’s central problem was execution—and it was a problem that worsened as the team’s cohesion deteriorated. The startup could not act as a functional whole.

When I ask Buick what went wrong, he reflects for a moment, and answers, "I think we totally got caught up in the San Francisco bubble. If you don't leave enough, you forget that not everyone has an iPhone, and not everyone reads TechCrunch. The rest of the world doesn't care about that stuff. The San Francisco bubble is a sounding board for the same idea heard over and over in a thousand different ways. We fell into that, and it led to a lot of frustration and wasted time and resources. So we took a left turn."

Adds Buick, "We should coin this the unpivot."

Stuart Norrie, the former designer, summarizes the company’s issues most eloquently: “In this industry, it’s inevitable that you’re going to pivot. You should be expected to be switching direction at a moment’s notice. But not weekly—not changing direction completely every week. They were trying to become Camera+ and Instagram, and that’s a losing battle. It’s suicide to take them on. And if you focus too much on your competitors, you’re going to lose sight of your own business, and that’s what really happened.”

He continues, “The biggest problem with Hipstamatic is that [Lucas] didn’t focus on Hipstamatic. What did Instagram do when lightning struck? They did nothing but focus on Instagram. What happened when Hipstamatic got successful? They made [separate products such as] Swankolab, Incredibooth, D Series, Family Album, Snap Magazine, and splintered off in so many different directions. They lost sight from the very beginning, and it still makes me sad because it was a golden opportunity to make something really amazing.”

Other members of the team echo Norrie’s sentiment. Says one former employee, "The people I worked with at Hipstamatic were the best people I've ever worked with."

Buick agrees. "It sucked," he says. "We've let people go before but it was always justified because they weren't doing their work. This had nothing to do with that. They were all really awesome and talented. What we did was build a Ferrari and we didn't know how to drive stick. So we had this awesome machine that wasn't able to perform like it should. We built the wrong type of team to solve the wrong kind of problem.”

Finishing up his second or third old-fashioned at the Mondrian Soho, Buick transitions away from the past to talk about Hipstamatic's future. As he takes me through the roadmap, I can't help but be intrigued by what he and the company might have to offer—if the surviving team can even pull it off. All the while, a song by a French pop band blares over the restaurant's sound system. Then, later, another song by the same group. Then a third in the course of an hour. The band is Phoenix, the name for the mythical firebird that rises from its own ashes—not that anyone catches the heavy-handed, trite symbolism. Says Buick, "This fall we're launching a bunch of stuff…"

Read part one of this series.

Read part two of this series.

[Top image: Flickr user Sarah G..., Arrow Image: Flickr user Andrew Malone]

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23 Comments

  • I think another reason for the downfall was a better iPhone camera. I was an avid user of Hipstamatic in 2010, back when I had the original iPhone. The regular built-in camera took pretty bad pictures, so anything that the Hipstamatic produced was much better. It quickly became my go-to. And in fact, I think it was the fact that the built-in camera wasn't that great that made the quality of the Hipstamatics really genuine. When Apple improved their camera, I started wanting to take more regular pictures on my phone instead of my digital camera. It was just so much more convenient, and the pictures actually looked nice. As a result, I stepped away from Hipstamatic. I never thought Instagram was that great; the filters were, and still are, terrible.

  • Tim Bushell

    Really loved these series of articles. An insight into the company which marries with user experience. Thanks.

  • giles

    I really fell in love with Hipstamatic back in 2010 but then noticed how it started releasing really irrelevant and un-fun stuff from 2011 to date. How many black & white lenses/films could customers need? The opportunity to make average Joes feel like amazing photographers was lost as meaningful product lines like fisheye lenses or effects like camera+'s "clarity" weren't followed up on. The product's become diluted and lost so its no surprise to read this catalogue of disaster decision making. Systrom's master move of snagging Hipstamatic onto Instagram was genius. No wonder a lot of whisky was involved...

  • renodave

    I believe I bought Hipstamatic soon after I got my iPhone 4S towards the end of 2011. Frankly, I found the experience confusing and unnecessarily daunting. I tried it a few times, but the whole lens/film combination thing seemed a bit too cutsie for me. And you want me to pay good money for additional "paks"? What the hell? I preferred taking my Instagram photos with the IG camera. I enjoyed keeping the instant in Instagram. Shoot a pic, apply my usual "lo-fi" filter and send it -- boom, I was done.

    But then, I noticed that quite a few of my fellow Instagrammers, whose work I admired, were still using Hipstamatic with great results -- most notably in their black and white work. They had a rich look which the native Instagram app could not come close to. This caused me to go back and revisit the ol' Hipstamatic ga little more than a month ago. I started experimenting with it and liking the results.

    Finally though, with the introduction of the Tintype Pak earlier this month, I was completely floored. What this pak does to a photo is somewhat miraculous, even magical. If this was one of the things that Buick (is that his real name?) showed to the reporter in October I can understand the optimism it might have generated. The use of facial recognition technology is mindblowing. I truly think that if Buick and his team can continue down this road of innovation they won't have a thing to worry about. They just need to keep making our photos look great.

  • Denver Lee

    Nice article! Great insight to my favorite app company. I will buy all the paks even though I dont own an iPhone anymore. But why didn't they release an android version? It such a big market, even though the business model might need a little retweak.

  • Alexis in L.A.

    Can't wait for the "Social Network" version of this movie to come out. This has been excellent reading, Mr. Carr.

  • elaineellis

    Really interesting series. I'm curious how Camera+ has managed to stay so high in the rankings and if it was due to their ability to focus and avoid sky-high alcohol tabs. Either way, the app market is certainly fickle. 

  • Jerry W. Williams

    Someone very close to me worked at Hipstimatic and says the article is "spot on". Bravo Mr. Carr.

  • acarr

    Thanks, Jerry. Much appreciated. Many kudos go to my fantastic editors too, of course!

  • Donald Nordeng

    Hipstahubris.  Nothing like blinders to keep the horse running straight into a tagged wall.

  • Omer Ucer

    thanks for the article, great read!!
    as mentioned by the others, Hipstamatic is still my fav photo app due to the reason I don't like to share photos on social networks and enjoy taking 'cool' pics for myself.. as you said, they need to focus on the current model and make it better and not compete with the other guys.. i still see many opportunities for the product but if the team does not have good execution, they should consider hiring a CEO who can lead them towards success. 
    thanks again!!

  • Dovi Shraga

    This was a fascinating read, all 3 parts of it. It's very educational and the morals of the story are clear, as spoken in the last part. However, it's important to remember that we're only in the middle of the story. The company is still alive and kicking, and it will be interesting to see where they'll go next, just like you wrote. Also worthy of note that just this week a new feature has been introduced by Hipstamatic: the multiple exposure. That's not just another type of film or lens, it brings a new functionality to the "old" app that I find exciting. That and this article made me realize that maybe I should use Hipstamatic more often, because it still could a great tool for taking pictures. I hope the company will find its way.

  • acarr

    Hey Dovi,

    Thanks for the note. And I completely agree that Hipstamatic's journey is far from over -- I think they have some exciting things on the horizon, which I tried to hint at toward the end.

    Stay tuned.

    Best,
    Austin

  • ReyLo

    I am a bit of a Hipstamatic evangelist. Love the product! Aesthetically it's the best out there. I really do hope they can make a comeback. Would hate to see anything otherwise.

  • Allen Dusk

    Awesome series on Hipstamatic. It's still my favorite camera app. Hopefully they rise from the ashes.

  • Lou Perseghin

    Really awesome series. Interesting to see how quickly internal movement happens. Reading this I was thinking to myself 'wow this was only a few weeks ago...'

    Good stuff, thanks for the in-depth reporting!