Like many great businesses, Houzz was born from a personal need. Houzz co-founders Alon and Adi Tatarko were remodeling their home and found the process was much more frustrating than they had thought it would be. Through talking to their friends, they realized their experience wasn't out of the ordinary.
"Everybody in the community said, 'Oh, don't even start. It's such a pain,'" Adi Tatarko remembers. "We felt it shouldn't be that way. If we had technology and the ability to communicate with other people and see what's out there and learn more, maybe it will be much more fun."
Operating from their kitchen table at first, Adi and Alon launched Houzz, a website and online community dedicated to home remodeling and do-it-yourself projects. For 18 months, the company operated in bootstrap mode before they finally began to seek funding. The couple grew the business over nights and weekends while still holding day jobs and raising two children. They realized funding would allow them to devote more time to the rapidly growing business.
"At some point we just met the right people who told us, 'You're crazy,'" Adi says. "'If you want to bring great people on board to help you and scale it, you have to get some money from investors.'"
Through her experience in successfully seeking funding, Adi learned that every business needs two things to attract the attention of top-tier venture capitalists: proof that an idea is good and people are actually going to use it and proof you can execute that idea. By bootstrapping their business for so long, the Tatarkos were able to demonstrate both of these things because they already had a growing product with a strong community.
"Sequioa promised us--and they kept their promise--that they're going to keep [Houzz] exactly the way it is," Adi says. "I think that the product was pretty clear what it is, why we're doing what we're doing, how we're planning to do it, what is the path to get there, and they were so supportive."
Building a Culture
Using the money provided by Sequoia Capital, the Tatarkos hired some of the best engineers, product people, designers, editors, and community people in Silicon Valley. The couple built a fun culture that they were proud to be a part of, where they could work alongside great partners. Through their shared passion for the community they'd created, the Tatarkos were able to see their community grow rapidly.
"We just kept doing it and the community kept growing, growing, growing," Adi recalls. "In 2013, we looked at our traffic and users and professionals and we actually have professionals and users from all over the world. 35 percent of our users were coming from outside the U.S."
In response to community demand, Houzz decided its next step would be to localize its service. Adi realized this meant more than simply providing the service in different languages. They wanted to create a global design language where people could sit in Russia, Japan, Australia, or the U.S. and get inspiration from each other. Houzz has already launched its localized services in U.K., Australia, Germany, and France and has plans to launch in 15 other countries later this year.
The Tatarkos have always focused on providing a strong product and user experience, knowing monetization would follow. In 2014, Houzz launched three revenue channels: brand advertising, local channels for professionals, and click-to-buy options.
Even in its monetization, the Houzz is very protective of its community. Every new move it makes is designed to keep the site as user-friendly as possible. The Houzz team continues to turn to its community members with each new change it makes.
The Future of User-Focused Businesses
By bootstrapping the company for the first 18 months and focusing on users first, Adi Tatarko has been able to build a successful business with loyal users. The focus on users instead of on profit is becoming a popular strategic move for many new companies. Do you see this changing the way people spend their money?