What is the business model of Lunacy?

Hi,

I learned about Lunacy when it first came out. It was positioned as a (much needed!) “Sketch for Windows” back then. It looked pretty interesting but was a bit raw. I ended up forgetting about it because Figma came along and bulldozed this niche of the market (UI design) so quickly.

Now that Adobe has acquired Figma, it’s time to look around for alternatives.

Lunacy looks excellent – it has come a long way. But I am worried about it being “free”. No software is free to make, so there has to be a business model. It’s clear Figma’s was to burn through VC, build something competitive quickly, and cash-out. They never came close to making a profit, but that’s fine – fair enough – the goal was to get acquired. But users feel conned and let down, especially those of us previously so badly burned by Adobe. So, anything being marketed as “free” without a clearly communicated business model or being open source is a big worry. As the saying goes, if the product is free, then you’re the product. After you’ve been victim of software bait-and-switch a few times, you rightly get a bit cautious.

So, a big part in deciding to invest time with Lunacy is the business model. Are you able to share any plans around that, please?

Some background

I’m old enough to remember what Adobe did to my preferred graphics apps: Macromedia Freehand and Macromedia Fireworks (history tldr: Adobe acquired and killed them). I started my design journey pre-web using tools like Serif PagePlus and Corel Draw and eventually ended up using a combination of Macromedia Freehand and Fireworks, QuarkXPress, and Adobe Photoshop. Then Adobe flexed and we all got sucked into their products for over 20 years, like it or not. There was no real competition in the pro creative software space. But their gradual evolution to an exploitative and suffocating subscription model meant, after two decades, I switched to Affinity for my Photoshop and Illustrator alternatives. Thank goodness for good old Serif who I started with back in the early 90s still making and selling straightforward, high-quality, fairly-priced, non-exploitative software under the Affinity banner all these years later.

Then Sketch came along for Mac. This was the perfect and long-overdue replacement for the dead killed Fireworks – a tool dedicated to screen-based UI design. But the team behind Sketch were (are?) doggedly uninterested in producing a Windows version. Many of us need to use Windows for assorted reasons (mine is that I use Windows-only GIS software as a major part of my job). So, when cross-platform Figma suddenly burst on the scene, I jumped on it.

Now Adobe is flexing again. :frowning:

What I have learned in my time as both a pro and hobbyist is this: if you invest time and effort mastering a particular app or platform, it is extremely painful and disruptive (and quite emotionally upsetting, if I’m honest) when a big company comes and destroys that thing you’ve invested yourself in. So, it is important to have at least some idea of what the future holds. Serif do a great job of this with Affinity – and they are reassuringly profitable. Sketch is overpriced for the hobbyist making its reach and potential limited, and the single-platform model leaves it vulnerable to competition (e.g., Figma). Adobe is WAY overpriced – I don’t know a single person who believes Adobe is good value. I’d love to be able to use Lunacy with confidence, but without a clear business model, it seems risky. Will I have to depend on my employer making a purchase, or will I be able to safely purchase for myself at a reasonable price so I can use it at home? Will there be a generous, workable free offering but with “enterprise” upsells as with Figma’s old model or something like GitHub, Netlify, Cloudflare, etc? Or will you introduce tight restrictions on the free version, like with Miro and Lucidchart, making them effectively trial versions?

Many thanks!

2 Likes

Hi Charles.

I’m Ivan, the founder.

That’s a fair question. Before investing your time, you deserve to know our plans with all honesty. “Free” is not the answer.

I’ll show what forces companies to betray and exploit their users, then show where we are and share our plans.

Meantime, I’ll challenge myself to write an even longer post than yours!

Cause
I agree with you about the cause of evil acquisitions resulting in:

  • product killings
  • predatory pricing
  • exploitative techniques such as a closed ecosystem.

VC
VC infrastructure pushes companies like Figma toward rapid growth. They have to:

  1. Burn through capital and give away equity
  2. Exit.

Wasteful architecture
Obviously, web apps need servers. Besides that, Figma:

  • Hosts on Amazon AWS. As you know, any cloud provider is nothing more than hardware + price markup.
  • Has a heavy document structure
  • Stores everything in the cloud. Users are encouraged to store the documents in the cloud, not locally.

A Ponzi scheme?
I don’t know how it is, but from our perspective, the AWS bills must be outrageous. It’s a Ponzi scheme of data storage.

  1. To keep paying AWS storage bills, they have to recruit new users.
  2. For that, they have to grow.
  3. For that, they need venture capital.
  4. Venture capital needs an exit.

What do we do differently?
We didn’t raise, to start with. Call us old-fashioned, but Icons8 began as a design agency and financed its MVP with service work.

After selling icons, we invested profits into our following products. We find it relaxing to think about the bottom line, not valuation. We think about product value rather than traction.

We don’t have any exit strategy. I wrote the will when I had COVID; call it my exit strategy.

What if they offer you 20B?
I think nobody offers anything comparable for Icons8 ever. But, here’s what I know for sure.

  • I was offered multiple times to sell Icons8. We always had a pleasant conversation, but it never came to ask about the price. Not a single time I’ve asked or called a valuation.
  • I’ve got dozens of calls from VCs. I respect their time and warn them that we’re not raising, but I’d love to chat. We had a friendly conversation each time but never discussed a round.
  • Icons8 has been profitable each year since 2012.

How can we live without hundreds of millions of external financing? By being c̶a̶p̶i̶t̶a̶l̶ ̶e̶f̶f̶e̶c̶t̶i̶v̶e̶ brutally frugal.

Lean infrastructure
It’s a desktop app, so users download it from the app stores and execute it on their laptops—no server bills.

  • Lunacy works with offline files. We just introduced cloud in the latest versions, and it’s frugal too.
  • Our cloud is super optimized regarding the amount of data stored and the servers we use for storage.
  • We store super lean incremental changes
  • Instead of Amazon S3, we use modest VPS’ + cheap backups for that.

Does it hurt performance? Quite contrary. We have multiple nodes close to your location, even in Africa. And because we transfer less data, performance is even better.

Small team
We’re still a small team that moves fast. The core Lunacy team is 11 people. We also share support, marketing, and finance with the rest of Icons8.

Saying that we’re not burning through cash fast. However, we need to earn something to sustain ourselves. Here’s how.

How Lunacy earns

  • Lunacy earns by selling the assets from the left pane.
  • We charge for upscaling the images.

We need more than that for our sustainability, however. At least, not until our user base grows 50x.

  • We’ve introduced our cloud plans in a recent version. Our team users pay for unlimited cloud documents.
  • We don’t plan to charge individual users.
  • Neither do we plan to monetize offline use.

Why should you believe me?

  • As I showed, we’re in no rush to get money
  • Also, we have modest expenses
  • We finance ourselves
  • We have no pressure from investors
  • We have a track record of refusing buyouts

Finally, we have a track record of generously freemium products. The whole Icons8 is freemium. Here’s Icons8’s business model.

3 Likes

Thank you for this @Ivan8 - wow, such an open, honest, and clear response. This is exactly what I needed. I’m feeling really positive and confident about being a Lunacy user now (and hopefully customer, eventually).

Thanks again - I and I’m sure others here really appreciate your frank response.

Cheers!

Charles

3 Likes

Don’t worry. Adobe will not acquire Lunacy for the time being.
Can be determined. Adobe will not have another commercial action against other companies and organizations in a short period of time