Brittany Hodak’s and Kim Kaupe’s favorite number is 100. That’s because it’s the percentage they own of ‘ZinePak, the business they started in 2011 with $60,000 from their personal savings. The company, which creates memorabilia for entertainment “superfans,” usually consisting of a custom CD, magazine and merchandise, exceeded $1 million in revenue its first year and is projected to bring in $5 to $7 million in 2014. Today, their clients include some of the most popular entertainers in the world, such as Katy Perry, KISS, Justin Bieber, Taylor Swift and Mary J. Blige.
Despite their seemingly overnight success, being young female entrepreneurs in the music and entertainment business hasn’t always been smooth sailing. “It’s kind of a double-edged sword,” Kaupe says. The first time Hodak, now 30, and Kaupe, 28, met in person with the execs of a certain Fortune 500 company — one they’d just run a successful sponsorship program for — one man interrupted five minutes into their presentation to say, “I’m sorry, I just have to ask, whose dad let you in here?” The two replied, “No one, unfortunately. It would have been a lot easier that way!” — and finished their presentation.
Perhaps they were able to take it in stride because, aside from stray incidents like that, they’d be the first to agree that youth has its benefits. It’s landed them on Forbes’s 30 Under 30 list for music 2014, Advertising Age’s 40 Under 40, and a nod as Startup of the Month in Entrepreneur’s “Young Entrepreneur” series.
We talked to them about what it’s like to scale a business so quickly.
You both spent time working in entertainment and advertising before starting ‘ZinePak. How did you know you were ready to go out on your own?
Kaupe: We always tell people you're never going to be fully ready. If you're waiting to feel warm and fuzzy, it's never going to happen. You're always going to have a little pit in your stomach because you're quitting a full-time job that's a guaranteed paycheck with a 401(k) and [maybe] a pension, and all those wonderful, cushy things that corporate life offers you.
For us it was definitely intimidating and scary, but we were also confident in what we thought we could accomplish. I worked at Condé Nast for a couple years in their marketing and events departments, and Brittany worked at Sony Records in marketing and retail distribution. Both of us have a real love and passion for entertainment, so it wasn't that big of a leap to go into this kind of industry, but it was a leap to go out on our own.
Pictured: Brittany Hodak (left) and Kim Kaupe
How much were you able to draw on existing contacts versus drumming up entirely new business?
Hodak: It was a mix. Luckily, because of my job in retail entertainment then working for an advertising agency, I knew a lot of people in the entertainment space, so I was calling a lot of people saying, “Oh I’m thinking of starting this company; are you interested?” So I lined up some interest from record labels and brand associates before we decided to make the leap.
Then one of my strongest partners from my days at Sony was Walmart, and I had called and said, “Listen, I'm thinking of doing this thing. Would you be interested in selling it in your stores if we created it?” And they said “Yes, absolutely.” And we said, “Okay, but are you sure? Because we're about to quit our jobs and create this company and do this for real.” And they said, “Yes, you absolutely have our support.”
When the largest retailer in the world says, “Hey, you should do this!” that's about as clear-cut as it gets in terms of [having] a chance of being successful. So right out of the gate, Walmart was a huge partner for us, and in addition to being our main point of distribution for our ‘ZinePak products, they've always been very helpful in making introductions. It's very easy to pick up the phone and say, “Hey, Justin Bieber, you should do a ‘ZinePak,” when the end of that sentence is, “and Walmart asked us to reach out to you.”
What kind of problems have come with growing so fast?
Kaupe: One we found very quickly was needing a bookkeeper and proper CPA. It was something we tried to do on our own with Quickbooks, then we had some unfortunate experiences with people who just weren't used to working with a startup. With startups, things like cash flow are very important [and] being able to plan not only for the next year but in very small increments — the next three months, the next six months, sometimes even month to month. We were lucky that we found a great CPA now who specializes in growing startups. He's been essential in helping us grow our business in a way that's most effective for us. Everything from lines of credit to specialized savings.
Cash flow was a problem from the beginning. As you can imagine, when you're starting a magazine, it requires a lot of paper. And you have to buy that paper upfront. A lot of times those upfront costs can range anywhere from $20,000 to $100,000. Learning about American Express and charge cards, which are different from credit cards, was extremely helpful. They allow you to put any amount, from $10,000 $60,000 on the card; you just have to make sure you pay it within 30 days.
Growing so quickly, did you ever have a client or gig that was so big you weren’t actually sure you could handle it?
Hodak: I wouldn't say there have been any moments where we stressed out [that we couldn’t handle it], but we've definitely learned as we've been going a few times. Our second project ever was for the Academy of Country Music Awards, and it was a compilation. So we were going to be licensing music for the first time for this release for Walmart and working with about 15 different record labels for the Academy of Country Music. So we said OK, no pressure or anything, we just have to interview the biggest country superstars in the world and get music from all of them. That was definitely a learn-by-doing experience. Fortunately we had so many great partners in place, everybody from record companies, to people at the Academy, to Walmart, to our brand partners on that release. And now we do it every year; we’re now working on our fourth annual ACM awards ‘ZinePak that'll be out in March. So that was probably our earliest example.
I think as a business you have those growing pains every time you do something new. So when we did our first ticketing project last year [to create custom, commemorative tickets with editorial about the artist, host city and local businesses], Mumford & Sons’ management came to us and said, “We want you to do our first custom ticket for us, for our Gentlemen of the Road tour.” We had to do 137,000 individual names on these passports with variable data that had to match up to the wristband inside. We knew nothing at all about custom data and ticketing, but we were very honest with the client and said, “Hey, this is something that we've never done before, but you're in good hands and I promise that we will not let you down.”