Q&A with Dan Baum, founder of Shutterfly

Dan Baum, co-founder of Shutterfly, a Redwood City-based online photo service, recognized early on the power of digital photography.

During a vacation from work at Silicon Graphics, where he had been an engineer and engineering manager in the late 1980s to 1999, he began testing photo image enhancement technology with a friend, developing a strategy to form a startup company that would allow people to upload digital images and print from an Internet site.

“In a rather uncharacteristic move for me, I returned from vacation, quit my job the next day and started the company in our guest bedroom with nothing more than some technology demos and a PowerPoint presentation,” he said.

Shutterfly was born in 1999, and years later, continues as a leader in the personal publishing business, helping customers to share, organize, store their photos and create photo books.

Baum moved to the North County with his family five years ago and left Shutterfly in 2002, taking an executive position at Adobe Systems, leading its internal entrepreneurial and new product innovation efforts. He retired from Adobe in 2010.

Baum, who declined to give his age, recently discussed his role in the company, future plans and why he likes living here.

How did your corporate background in Silicon Valley prepare you to found Shutterfly?

My formal background is in engineering and computer science. In graduate school (Cornell University), I specialized in the then-nascent field of 3-D computer graphics. After graduate school, I joined SGI, which at the time was a young company, developing advanced computer workstations with breakthrough 3-D graphics capabilities. I initially worked as an engineer, and then over time, ended up running engineering for the company’s flagship graphics products. SGI became a Silicon Valley powerhouse whose equipment first enabled the application of computer graphics for Hollywood movie special effects, computer visualization for auto design and scientific research, and interactive mapping (e.g. Google Earth).

I’m not sure I would have historically considered myself as an entrepreneur. Earlier in my life, I wasn’t a big risk taker, and while I had lots of experience leading teams to deliver highly technical products on tight schedules, I had no business background or experience. But by the late 1990s, Silicon Valley was engulfed by the Internet craze, and I decided I wanted to get involved with a startup.

I initially investigated some ideas in other areas but eventually started exploring concepts in digital photography. This was at a time when the first consumer digital cameras were coming on the market. I’d been a passionate photographer since high school, and my technical background in digital imaging and computer graphics gave me a strong foundation to predict where the technology was going and what the gaps were.

What were some of the challenges of getting an Internet company like Shutterfly off the ground, and how did your team overcome those initial challenges?

Initially, it was raising money and putting together a team. Fortunately, venture capital was reasonably accessible at the time, and I had connections with former colleagues who were working as venture capitalists. Also, the founder of SGI (who also co-founded Netscape) was interested in the project and decided to back me. Although pulling together a team took work because there were lots of startups competing for talent, I was fortunate that many outstanding past colleagues wanted to join the venture.

We really were hit with new challenges every day. Remember, we were putting together a service, an automated digital printing facility, and website that supported interactive photo features that had never been done before. What equipment to use? How to integrate it? How to process and store millions of images? How to make the interface usable for consumers? How to automatically improve consumers’ digital images so they looked good in print?

Basically, you had to have a dedicated team that was focused, not daunted by obstacles, and willing to work seven days a week.

What competition existed at the time and how did you handle it?

There wasn’t much at the beginning. Kodak had a strategy that they were publicizing but didn’t have implemented. However, there was lots of competition soon enough. oFoto was our toughest competitor, launching their service the same day as ours.

To beat the competition, you have to keep your focus, make sure you are continually refining your product to meet the needs of your target market, and always be paranoid about the competition even if you think you are in front.

When did you know Shutterfly was going to be a success?

The first critical indicator was would digital cameras be adopted by the mass market? It was clear that they would be after our first year or so. When the Internet bubble crashed in 2001, there was a big shakeout and much of the competition went away.

Fortunately, Shutterfly pulled through and started to grow. When speaking with people about digital photography, most seemed familiar with or had used Shutterfly. When you frequently hear how much they enjoyed using the service or how passionate they were about it, that’s when I knew it was going to be a success.

What were some of the highlights during your tenure with Shutterfly? What was the company culture like?

The culture was similar to many startups in Silicon Valley. We believed in what we were doing; we had a common goal, and we were dedicated and willing to work hard. Most of us considered it a passion rather than a job.

The first six months, while a blur, were definitely a highlight. We went from having a concept, raising venture capital and launching the service to the public in six months. Given the amount of physical infrastructure we had to build with our digital printing operation, it was really incredible.

Looking back, it’s interesting to see what an impact we had on a major industry and market: photography and photo finishing. At Shutterfly, I was the primary interface with the photo industry trade groups. Many industry veterans felt that film would remain as the mainstay for many years. Digital photography practically replaced film in the U.S. within five or so years, leaving many of the traditional companies off guard and unable to adapt. It reshaped that entire industry, altering the work flow, business models, and players.

Do you have any plans to start a local company?

I get asked that a lot. Anyone who knows me will tell you that I can’t sit still. I’m always dabbling, and my mind is frequently thinking about opportunities.

The trick is how to start a company and still be able to do all the other things I’m fortunate to be able to enjoy now. I’ll leave it at that.

What advice would you give to others who are considering starting a similar enterprise?

First, it’s rare these days to come up with an idea that’s completely unique.

If it’s a good idea, there will be many others working on it, so it comes down to how well you execute. You have to be dedicated and be willing to work very, very hard. You need to have the ability to balance blowing through obstacles that you encounter while also knowing when you need to alter your direction to serve a market. Starting a company that is intended to be a significant player is all consuming.

The pace here is inherently slower, and if you want to compete against companies from Silicon Valley or other technology hubs, you need to be prepared to work at a different level of intensity. Fortunately, with the advancement of the Internet and associated communication tools, it’s easier now to have geographically disparate teams.

Recently, I’ve been mentoring students through Cal Poly’s Center for Innovation and Entrepreneurship. Hopefully, I’ll be able to contribute some useful guidance and tips to our community’s younger entrepreneurs.

If there is anything you could change about your life/career trajectory, what would it be?

I feel pretty fortunate to have worked on a number of projects that have either defined a market or changed how people do things. I’ve also learned from a number of excellent colleagues and mentors. If I were to do it again, I would have started my entrepreneurial activities a little earlier in my career.

How did you end up in San Luis Obispo County?

I was introduced to the area by my wife. She attended Cal Poly, and her family has a ranch in the county. After a couple of visits, I fell in love with the area. I’m an outdoors-oriented person. I am an avid cyclist as well as a photographer. I also don’t like standing in lines or sitting in traffic. Having spent most of my life in Silicon Valley, we felt SLO was a perfect place to retire and raise our family while still being able to maintain connections to Silicon Valley. About 10 years ago, we started putting plans in place to make that happen.

What are some things you like most about living in SLO County?

What’s not to like? I can go for a beautiful bike ride from my door in the morning and take our kids to the beach in the afternoon. Life is more balanced here. In Silicon Valley, so many people live to work, but I’m at a point in my life where I want to pursue other activities as well. Since we moved here, the restaurant scene has really evolved, too.

I used to get so frustrated by all of the traffic and congestion in the Bay Area; it wasted so much time. The other day I was driving over the Grade and surprisingly the traffic came to a stop; there was a peacock crossing the 101. That put my life in perspective. Oh, and did I mention the olallieberry pies?

This story was originally published August 27, 2012 at 4:36 PM with the headline "Q&A with Dan Baum, founder of Shutterfly."