Company Profile

COMPANY:Paint Nite

2017 INC. 5000 RANK: 220

HEADQUARTERS: Somerville, MA

YEAR FOUNDED: 2012

2016 REVENUE: $65 million

3-YEAR GROWTH: 1,970%

TWITTER: @PAINTNITE

WEBSITE: www.paintnite.com

On a recent Wednesday evening, about a dozen women and two men sat in pairs and trios in a musty little room in the basement of a pub, just off the busy retail thoroughfare of Steinway Street in Queens, New York.

They were young professionals in their 20s and 30s, hunkered around small tables with 16-by-20-inch canvases propped in front of each, on easels. With synchronized brush strokes, the amateur painters set out to form a moonlit evening sky, the background of a painting titled Calm Night 2.

These renditions--replete with dozens of dark, spindly trees behind a lake and, somewhat inexplicably, seven yellow butterflies in the foreground--will go home with their creators, who have paid $65 for the basement-of-a-bar lesson through a company called  Paint Nite. Many have discovered the class through friends. Or they've been invited to one before for a bachelorette party or school fundraiser. Or maybe they learned of the session by browsing Groupon.

They are among 200,000 individuals who participate in a Paint Nite event every month. That means, yes, there are 200,000 renditions of Calm Nite 2 and other assorted works created by local artists who host these gatherings. Over the past four years of Paint Nite's existence, its CEO estimates that more than three million of these paintings have been created, and now hang in homes across the country.

"Maybe they aren't in the living room, but they are in the bathroom or a bedroom," said Daniel Hermann, a serial entrepreneur and Paint Nite's CEO. "People are proud of their creations."

And that's translating into monumental growth. Since 2012, the company's revenue has grown 36,555 percent, to $55 million. That whopping pace earned it the No. 2 spot on this year's Inc. 5000 list.

Buzzy origin

Hermann founded Paint Nite in 2012 along with his buddy Sean McGrail--both were high-energy guys living in the Boston area who loved to attend trivia nights at bars--and they'd both attended a friend's casual painting event, where wine was served. "We both fell in love with it--and realized that there were some hidden gems in it--where people were actually doing something instead of just sitting there."

Hermann hesitated, though, when it came time to design a national business model. His previous business, a laundry and storage service called Lazybones, which he founded directly out of college, had stumbled when he attempted to convert its business model into a franchise. "It was a big failure--and I learned a lot," he said.

Lazybones survived the stumble; it's still around today. But rather than franchise Paint Nite, the founders opted to license their idea. That way they could avoid the rigors of franchising and still keep their vision of people painting in unison in cities across the country.

Scaling "social art" 

Today, Paint Nite employs 110 people at its headquarters in Somerville, Massachusetts. Around the country, there are 250 "creative entrepreneurs," who work with networks of local artists--there are about 1,100 of them nationally--who host painting events at local bars, restaurants, and nightclubs. The licensing model means that Paint Nite's online platform and marketing efforts collect ticket sales, while taking a 30 percent cut of most tickets sold. (The "creative entrepreneurs" determine compensation for artists within their own local networks.)

As its network of creative entrepreneurs and local artists has scaled quickly, profit growth has been brisk. That doesn't mean there aren't challenges. Its audience is 20- and 30-something women--Paint Nite admits it neither caters to nor targets men with its online marketing--and they are novel-entertainment seekers. And while the company still uses Groupon to advertise its events, it also receives regular boosts in word-of-mouth from social media; participants often post their creations on Instagram and Facebook, Hermann says.

There is competition: Some are local operations, such as the Boston area studio called the Paint Bar, and a chain called the Muse Paintbar, which has more than a dozen New England locations. There are a few competitors with similar business models elsewhere in the United States, too. One is called Paint Social Art and operates in a similar, event-at-bar based fashion in New York, Massachusetts, and Connecticut. Creativity Uncorked operates in the upper Midwest.

"Tiger by the tail"

Hermann McGrail had built up their national licensee model, and were full-speed into scaling the company in 2014, when they began looking for outside investment and mentorship. According to Hermann, Paint Nite's revenue was already approaching $25 million--but he knew to get beyond it, they'd need outside advice.

"We were smart enough and mature enough to recognize our own shortcomings," Hermann says. "We had the tiger by the tail--but needed a little push."

In 2015, the company got a cash infusion from Highland Consumer Fund, which joined a $13 million investment, along with a few smaller investors. Smaiyra Million, the Highland partner who managed the investment and now sits on Paint Nite's board, said the unique business model was appealing to her.

"Their vision to own girls night out was very smart, and they did it in a very capital-light way, doing it in a licensee model," Million said. She added: "We also loved the entrepreneurial opportunities that the platform had--the ripple effect was also very appealing to us," she said. 

A new wave of artists and entrepreneurs may soon join the fray. Paint Nite is diversifying its offerings. The only other event that's ready for public consumption is called Plant Nite (instead of painting, customers assemble a terrarium while drinking).

It won't be long before we see what else pairs well with a nice cabernet for a ladies' night out.

Published on: Aug 17, 2016