Throughout the year, Lalawag will be interviewing some of the most innovative and exciting startups from the LA area in our ongoing feature series, “LA Startup Spotlight.”
Anderson Schoenrock (@AndersonSD) hails from a family of entrepreneurs so it was only a matter of time before he set out on his own business ventures. After a career stop at Lehman Brothers, Anderson founded a boutique real estate firm which he sold before co-founding ScanDigital, a media digitization service based out of El Segundo, with Mike Mothner.
Pitch us your service in three sentences or less.
Like most people, you probably have a box of old photos or home movies somewhere in your house. ScanDigital will scan and digitize those memories so you can preserve, share and enjoy them forever. Our customer-centric service is makes this daunting process easy for consumers and we have quickly grown to be the industry leader.
What made you decide to focus your company on the service?
I founded ScanDigital with Mike Mothner, a friend of mine from college. He and I were constantly looking a different business opportunities and generating new ideas. Whenever we came up with an idea we both felt had potential, we would do a little additional research to see if they were viable. After we had the initial idea for the ScanDigital’s services, there were three factors that were key in our decision to take this from idea to actually starting the company:
- Everyone we talked to seemed to have a need for this service and we felt it had mass appeal across consumer groups with significant disposable income.
- No large companies were providing these services; it lacked that “800 lbs Gorilla”. We were excited that with the mass potential we could become that industry leader.
- As we looked at the competition, none of the services made this process really easy for consumers. We felt there was opportunity to improve on existing services and we actually went to great lengths as we developed our services to focus on the consumer and their needs. This can be seen today, from way we provide very hands on customer service to the simple design of our website and order form.
On first glance, ScanDigital may seem like a service that duplicates what one could do by themselves at home with some spare time. How would you pitch the service to those who say that they could just digitize media themselves?
For most consumers with a single flat-bed photo scanner, a typical photo collection digitizing job would consist of 10 hour weekends for multiple months, so the process tends to be more time consuming than it may seem at first. Additionally, we not only scan, but also edit each and every image so the quality we can achieve is simply better than what most people are able to achieve on their own at home. I should also mention that this really only applies to printed images. About 80% of our business is digitizing other media formats that are really difficult for the do-it-yourself consumer. This would include slides, negatives and all formats of home movies.
How big is your team? Can you describe your company’s culture?
We are at 41 employees today and have been adding about 1-2 people a week this year. As a result, the office dynamics and culture have evolved along the way. As we scale the business, the only constant for us has been change. I have been amazed at everyone’s willingness to pitch in and deliver for our customers. Growth requires a ton of hard work and a team effort. I attribute so much of our success to the amazing employees we have here. We certainly are focused on growing the business, but that’s not to say it is all work. We try to keep a more relaxed atmosphere and a couple of times a year we will do a company event like group bowling.
How did your company get its initial funding? Do you have any advice for emerging startups on how to deal with funding?
We initially incubated ScanDigital through Wpromote (a search engine marketing company that Mike owns). Once we spun ScanDigital out on its own, Mike and I each contributed additional funds as needed. We were committed to remaining self-funded, so from day one we focused on operating efficiently and controlling costs. It took us about twice as much money to become self-sustaining. Fortunately, between Mike and I, we had additional funds from other profitable investments that were contributed to help fund ScanDigital’s growth.
If you’re able to generate revenue early and have a shot at remaining self-funded I strongly encourage entrepreneurs to maintain control. Our “board” meetings consist of Mike and I simply having lunch, which results in us able to make big decisions and execute them quickly. Strategically, speed tends to be huge competitive advantage. That said, we were WAY off in our calculation of how much it would take to push the business to being self-sustaining. We were fortunate in that we both had additional capital to invest. So my second piece of advice is to take the funding number you think it will take and double it. That should provide runway and will save you a lot of the financial stress that we endured to remain self-funded.
We interviewed Mike Mothner the other week, he’s definitely a very bright entrepreneur and provided some great insights. We know that he had a big role in founding ScanDigital. Is he still involved in the day-to-day operations with the company?
By design, Mike and I worked closely to take the business to our initial launch, but he was never heavily involved in the day-to-day operations. We are in close communication and he is aware of day-to-day changes in a very active way. His role sits uniquely between a relatively passive strategic investor and a heavily involved day-to-day partner, which has worked amazingly well for both of us. It means that his time is not burdened with many of the operational parts of the business that the team can handle, but at the same time when I want a second opinion and set of eyes for any major strategic decision, I have one from someone who understands the complex pieces of our business. One of the best things we did prior to deciding to start the company was spend a lot of time discussing roles and expectations and that has paid dividends for us.
Has your company ever had to pivot? If so, what was that like?
I’ve worked closely with our management team to instill a mindset that nothing about our service or work flow should ever be simply accepted. Basically, I believe that we should constantly question everything. This means we’re making a TON of small pivots as we grow and change as a company, but at the same time we’ve been able to avoid the need for any major pivots. We try to take a methodical, logical and data driven approach to each and every one of our smaller pivots. Overall, I think this has helped us stay on course.
With everyone using digital cameras for photos and video now, it looks like there may be a ceiling in the future on the amount of customers who can utilize your service. Do you have any plans on how to steer the company when that happens? In other words, what happens when everyone’s old photos and videos are all digitized?
There are trillions of images in non-digital formats in the world and billions of video cassettes out there, so even if a small percentage are converted we believe this industry has at least 15-20 years before we run out of materials to digitize, but there is little doubt that we will need to grow and adapt our business model. There are a number of directions we have discussed and numerous opportunities. Everything we digitize goes online which opens up a ton of additional potential revenue streams. We’ve decided to stay focused on our core business for the time being and continue to scale our core business, but there will absolutely be additional opportunities for us to explore at the right time.
How do you deal with competition? Do you keep tabs on other companies that are doing similar things?
When we first started, I spent a lot of time watching our competition and fairly quickly I realized that this was a huge distraction. The insight I gained rarely justified the time spent and there was little benefit to monitoring the competitors. I am of the mindset that far more often companies falter due to internal factors than external competition. You do not want to have your head in the sand, but I spend little to no time at this point keeping tab on other companies. I like to think that we’re growing and innovating faster than our competitors. We’re trying to provide a unique experience so we’re much more focused on ourselves, our customers and making our service better rather than our competition.
Tell us a little about your background? What made you want to start your own company?
I come from a family of entrepreneurs – my parents have started a few companies and my brother is the founder of a company called LTLPrints. Starting my own company was a matter of when, not if for me. Growing up my brother and I were fortunate to see first hand the level of work required to run your own business.
The first time I realized I wanted my own company was when I was about 10 years old. Looking back, it is funny how randomly it congealed for me. The cable provider in my hometown had expanded its service from 13 networks to about 35 cable channels. One of these channels was QVC and I convinced my parents that they should let me put an old black and white TV in the room I shared with my brother. I would pretend to go asleep and then shortly after I thought I was in the clear, I would turn on QVC and stay up late watching them sell a variety of items. It was the first time I was exposed to the idea that a relatively small company could sell something on a national scale. I was totally hooked and fascinated by the whole thing. Of course, that was just a precursor to the Internet which even more dramatically expanded the reach of small businesses.
In high school, I realized that I could make $10 an hour mowing grass when my friends were working for less than $7 per hour. When I had more lawns than time in the day, I recruited a friend to help me and with my first “employee” had a nice little summer business. After high school, I attended Dartmouth College and upon graduation accepted a job at Lehman Brothers in New York. I worked with Lehman for about 2.5 years in NYC before relocating to the L.A. office. In 2004, I left Lehman with a couple of colleagues and founded a boutique firm focused on structured commercial real estate deals. We operated that business from 2004 until late 2006. After generating fees off nearly $600 million in transaction volume, we sold the business to Jones Lang LaSalle. Around the same time, Mike had developed the idea for ScanDigital. The thought of going back to work for a large company, like Jones Lang LaSalle, just was not exciting. So after numerous sleepless nights, I decided to forgo my share of a potential upside earn-out and turned down a nice salary package to start ScanDigital.
Both when I left Lehman and when I left the boutique firm as we sold, I had numerous people tell me I was nuts, but the decision came down to asking myself: “What will you regret more?” That made the decision fairly easy. During my time at Lehman and at the boutique firm, we acted as an intermediary. Every time that I sat across from these entrepreneurial business owners that we represented, I felt this urge to be on the other side of the table. I think it was just in my DNA to follow the entrepreneurial path.
What are your thoughts on the LA entrepreneurial scene?
There are some amazing companies being started here and I hope that trend that continues. There is a convergence of the Internet and entertainment industry that makes L.A. a very logical location for many businesses. Additionally, as the cost to start a business has declined it has been easier for companies to locate outside the big VC world of Silicon Valley. Plus the weather is awesome here and who wouldn’t want to live in Southern California?
Who are your three most influential entrepreneurs?
My parents are absolutely at the top of the list. Not only did they show me firsthand what it takes to run a business, they also provided constant support for me and my brother as we became entrepreneurs ourselves. They always told us we could do anything if we worked hard and set our mind to it. Instilling that confidence was important because there is no set path or guidebook to running a company. Each day is different and sometimes you just have to look at all the factors, make the best decision and dive in.
I was a history major in college and I have always been fascinated by the founding fathers. Those guys were the ultimate entrepreneurs, leaving everything behind to build something new and totally different than anything the world had seen before.
Finally, and perhaps most predictably, I would add entrepreneurs like Richard Branson, Steve Jobs or Jeff Bezos – I’m incredibly impressed with entrepreneurs that create revolutionary products and services as opposed to simply evolving existing businesses.
What’s one of your most successful decisions? Can you share something that’s worked really well for you that you think other entrepreneurs could learn from?
My best decision was to put on the blinders and throw myself into a new venture. You will always be able to find people that will tell you a particular business idea will not work, but if you believe in an idea, go for it. I would pass on a few lessons – First, be aware that the “safe” decision may not be as safe as it appears. When I left Lehman and then when I left the commercial real estate industry I cannot count the number of people that told me I was leaving a “sure thing” in exchange for something risky. As it turns out, staying at Lehman or in commercial real estate would have been far riskier. Economic circumstances and markets can change rapidly. Second, once you decide to dive in headfirst, get out of the spreadsheet and start building your company. Excel is an amazing program and tool, but so many new entrepreneurs are bitten by “analysis paralysis”. Go for it, work hard and don’t hold back. Finally, take risks early. When you’re young, you have a unique ability to recover from failure due to a lack of significant responsibilities (e.g. wife, children, mortgage…etc.) that enables you to put all of your energy into a new business without needing to hedge your bets.
What are your next goals? (Either for the current venture or for the company as a whole)
I have a few goals for 2011. First, to continue scaling our operations to handle several rapidly growing customer acquisition channels. Our business is labor intensive so scaling means not only adding equipment, but also hiring and training new team members.
I am also heavily focused on taking our marketing efforts to the next level and growing smaller customer acquisition channels into a larger percentage of our business. We know that if we deliver an exceptional customer experience we will typically receive additional orders from that customer and significant word of mouth referral business. The more new customers we can entice, the more repeat and referral business we can create.
Finally, on a personal note, I want to continue cultivating our management team and contributing to developing our team professionally. As we have rapidly grown from a 10 to 20 to 40 employees, each stage has been different and demanded our team be nimble. They have risen to the challenge and our customer has been our undying focus. Our projection for 2011 will take us past 50 employees. As we do this we will need to continue to expand our leadership team and maintain that focus on the customer experience.
You can follow Anderson on Twitter (@AndersonSD) and ScanDigital on Facebook here
