Without much press hype, the news fluttered into the company’s own newsletter: Cimpress has made a strategic investment in CloudLab AG, it said, in order to make the cooperation even closer in the future. But what is the background to the strategic partnership and what will it change for the software developer’s existing customers? Beyondprint asked CloudLab founder and CEO Marc Horriar.
Beyondprint: A strategic partnership can mean many things. What does that mean in the case of Cimpress and CloudLab? How much is the investment and what shares does Cimpress hold in your company?
Marc Horriar: We have agreed not to disclose the details, so I can’t talk about percentages, shares or conditions. But this is clearly a financial investment.
Beyondprint: How did that come about?
Marc Horriar: We have been working with Cimpress for a very long time. They have been a customer of ours for many years and use our technologies in various products and different markets. So it has evolved. Ultimately, they approached us because they want to rely more centrally on our products in the future – and yes, also save on licensing costs. In the past, and especially during the Corona period, private equity companies have knocked on our door from time to time to ask us whether we would like to sell our company or parts of it, but we were never really convinced. Cimpress was exciting in this respect, precisely because they were already our customer and ideologically it had always been a good match. Even in the first discussions, it became clear that this investment had more to offer than just license savings on the one hand and a long-term commitment with a major customer on the other.
CloudLab has always been self-funded, we haven’t taken out a single loan and in return we’ve had really good growth and built a healthy business. We currently employ over 70 people and have recently had constant growth ranging between 20 and 30 percent per year. But it’s possible to do more, but you have to have the appropriate resources and opportunities, and also other perspectives. And that was something I found very exciting. Ultimately, after nine years, we thought we should try this adventure together with Cimpress.
Beyondprint: You said that the partnership has more to offer than license savings for one and a long-term commitment for the other. What exactly do you mean by that?
Marc Horriar: Ultimately, it was always important – warning, default phrase – to maintain the CloudLab spirit, because I believe it is the reason why we are successful. Also, how the team here ticks as well as how it’s allowed to tick. Cimpress was the first company to credibly assure me that this is not a problem, in fact the opposite, they think it’s cool and it suits them.
Of course, every company tells you that everything will stay the same. Which is, of course, funny in that it makes you wonder why the deal was made in the first place. The answer is: Cimpress primarily wants to rely on our technology in a centralized way – and for this there will be a separate department at CloudLab in the future, where we will serve the Cimpress projects. There will be a separate department so that we can better separate this from the other customer projects and there will be no delays for our other customers either because, for example, programmers could be taken away for Cimpress projects. That was important to Cimpress as well, because they are keen that CloudLab doesn’t lose its standing in the printing industry. At the end of the day, we’re all in a small industry and there’s a lot of opportunity for collaboration, which many printers are already taking advantage of now. If we can now automate this even further via our software, then it will be easier again for all sides. That’s certainly an exciting thing, too.
Beyondprint: What are the other advantages for you?
Marc Horriar: Another key point was that it helps us in the difficult US market. We’ve been operating in the U.S. for five years now, and things are now going well. We’ve been profitable for a good year and a half and are growing strongly. Nevertheless, the market is difficult because it ticks so differently than in Europe, especially in terms of marketing and service. That’s why it’s very convenient that Cimpress is strongly involved in the U.S. market. We’re talking about existing structures, hosting, licensing deals, channels or contacts that we can benefit from locally. I’m still of the opinion that European web-to-print companies are further along than their American counterparts – so it’s not the product that’s a problem, it’s mainly the supporting structure. And that’s where the partnership and exchange with Cimpress will certainly help us enormously.
Finally, there are, of course, very sober, economic reasons for the partnership. Purchasing synergies, for example: In the future, we will be able to save on licenses because a much larger quantity will simply be purchased. That’s practical – and we actually only became aware of it after the fact.
In addition, thanks to Cimpress we now also have the opportunity to test and further develop our own ideas, for which we may not yet have a separate customer project, in a real production environment. In the future, Cimpress will simply be a sparring partner for us.
Beyondprint: Will your structures and decision-making paths change?
Marc Horriar: Not at all. The management will remain the same, the teams will remain the same. We don’t have a Cimpress manager in between. The decision-making channels are also the same as before: technical decisions are made by our CTO, operational decisions that are of a strategic, sales nature are made by me, and operational decisions that affect projects on site are decided by our COO. We coordinate as needed. Projects and customers will continue to be handled with care, confidentiality and diligence. Every customer will remain as important as ever. So, on a day-to-day basis, hardly anything will change.
Beyondprint: To what extent will Cimpress influence the technological development of your software in the future? Doesn’t that make you somewhat dependent on what Cimpress has defined as its goal, because you are now more or less their IT house?
Marc Horriar: Let’s put it this way: We are not their own IT house; they only hold part of it. In addition, there has already been the situation where individual customers have wanted to use a development exclusively and have demanded exclusion from competition, at least for a certain period of time. But what does exclusivity mean? Is it based on the amount, the country or the orientation of other interested parties? There have always been deals like that at CloudLab, but we’re very careful about that. If we make general functions exclusive and withhold them from our competitors, they will go to our competitors and have the function built there. That’s dangerous and has to be well thought out, because the risk of losing customers and at the same time making the competition strong is high.
Beyondprint: Nevertheless, other customers of yours will ask themselves whether all technological developments will be available to them in the future.
Marc Horriar: Absolutely. Nothing will change there. We’ve only been able to develop this well because our customers have, so to speak, developed the software with us; we need feedback from the market. There are only a few areas that have really originated from our own CloudLab development, such as the template gallery, for example. There was no specific customer request, we just developed it and only later were able to win a major customer for it. In the packaging area, we brought four packaging printers on board during development because we needed even more expertise. In this way, all of our customers form a kind of think tank for us, where ideas are developed further.
I would even go so far as to say that the strategic partnership with Cimpress will improve the process of technological development. One reason for this is that it will give us the chance to implement things that perhaps no one in Europe has yet thought of. Moreover, developments cost time and money. In the past, we were often so busy with specific requests that we hardly had any capacity to develop things even without specific customer demand. This is now changing because, thanks to the investment, we can, for example, afford to increase our R&D department.
Beyondprint: Speaking of research and development, what will be your next areas of development after the investment?
Marc Horriar: We were able to learn how cool Cimpress’ MCP platform actually is. It allows us to connect products and productions in our software and exchange them via different online stores and I think that’s what can be interesting for our customers. Many of them already work with Cimpress in one way or another, whether as a customer or as a supplier or both. And we can now simply digitize that and give our customers the option of loading corresponding products into their own store via our software. The question of whether orders can somehow be automatically exchanged and processed among each other will also concern us, since the network idea is also becoming increasingly important in the industry. MCP will certainly help us there.
These are things we are all learning about right now. Shopify will also be a topic that we will now be more aware of, just as we will be focusing even more on the headless approach. There are a lot of possibilities and we’re only now becoming really aware of what a big playground this actually is in which we can now dabble.
Beyondprint: How have your customers reacted to the news that Cimpress is joining you?
Marc Horriar: Positive. But we’re still on vacation, so we won’t be able to say anything definitive until later. Of course, some people have also expressed their concerns about the very points you mentioned: Do we have to worry that we won’t get any more technologies or that CloudLab will soon be taken off the market? These are questions that logically arise, I can understand that. That’s why it was important for us to approach our customers and talk about it openly. You have to explain to the users that it’s something positive and that their concerns are unfounded.
However: Surely one or two will remain skeptical as to whether it will really happen as we say. In other words, it is up to us to convince customers and show them that we will implement exactly what we are talking about now. That’s our job, and we’re up for it because we now have even more manpower than before.
Beyondprint: Then we’ll talk again in a year’s time! Thank you very much for the interview!