You can’t be afraid of failing in your career. You can’t be afraid of trying a new technology that could essentially change the way you do business, that could improve the performance of your company. When you’re starting a startup, you fail all the time. There are things you do that will eventually be forgotten and paths you go down that just don’t really make sense and don’t work, but you need to recognize those failures and learn from those mistakes and apply those to your career.
Michael Litt is the Co-founder and CEO of the innovative video marketing platform, Vidyard. Michael’s pretty much been an entrepreneur since a kid and having started a couple of businesses, he and his Co-founder came up with a marketing platform that Paul Graham, founder of Y-Combinator, called ‘YouTube for Business’.
Michael was our guest on The SaaS Revolution show, in what is a must listen to interview for CEO’s, founders, marketing professionals, lovers of SaaS alike. This interview is lightly edited transcript of the podcast for readers of SaaScribe:
HI Michael, for the listeners and readers of SaaScribe that may not have heard of you guys yet, what does Vidyard do?
Vidyard is a video marketing platform. So what that means at a very high level is that our customers upload videos to us. We encode them for playing back on all devices: iOS, Android, BlackBerry, all desktop browsers, Flash, and HTML5.
Then once our users and customers embed them on the websites, on the blog and Facebook and Twitter, we track how every single person views that content second by second. So we know if someone watched the whole thing, if they only watched a certain section, if they only made it 20% on the way through.
Now, that data is very powerful, as I’m sure you can imagine with respect to producing new content, finding out what works and what doesn’t. But we also feed that data into marketing automation platforms and CRM. So your marketing teams can run nurturing campaigns based on how much of a video an individual watched and your sales teams can see exactly how much content was viewed by a prospect. So when they pick up the phone and have that conversation, they already know what the individual they’re talking to is interested in based on that data.
What’s the origin story of Vidyard?
I’ll try to give you the shorter version of that because it’s definitely a story I could talk about for a while. Essentially what happened, my co-founder, Devon and I were in our final year at the University of Waterloo in Systems Design Engineering. The Waterloo program essentially setups that you do 4 months of work and 4 months of school all the way through. So it gives you a great perspective on what you do and don’t want to do when you graduate. And the one thing we knew we both didn’t want to do was work for big companies.
So we started thinking through some options and businesses that we could run. I had started a semiconductor blog that I had sold previously. And my brother and I had attempted to start a biodiesel refinery. So I had a little bit of startup experience.
Through that process we identified that video production was a category that was under-served in the market. There were a lot of companies looking for animated explainer videos and we had the skill sets required to actually build that content. So we started manufacturing these animated explainer videos, essentially animating clip art and selling those assets to Fortune 500s. The general idea was to take a really complex idea and simplify it with a video.
And so we started wondering how our customers were going to put these videos online and we started doing some research on existing platforms. It turns out there wasn’t really anything designed to help a customer develop ROI on their video investments. So I spent $50,000 on this piece of content. How is it performing? How is it impacting my bottom line?
So we started tooling around with our own playback engine and our own analytics platform that would essentially host the video, play it on the website, and then track how people viewed it and we could export that data to our customers and show them how much of the audience made it to the end of the video. And so we’ve got this idea that we could actually sell the video content with a guarantee or a warranty. And we can say if 60% of the audience doesn’t make it to the end of the video, we’ll reproduce it until that number is true.
That worked quite well. Companies liked de-risking their purchases for video. And inevitably what happened was the analytics platform and the demand for that started to supersede the demand for video production services.
So we applied to a program called Y Combinator in Silicon Valley. P.G. interviewed us. called what we were doing ‘YouTube for business’, advised that we shut down the content production company and focus entirely on this video marketing and video intelligence platform. And so that’s really what we focused in on and ended up building.
So as we progressed, the analytics have gotten more robust. The integration suite has certainly gotten broader, and we’ve built lots of cool peripheral technologies on top of that core piece which we built to solve our customers’ problems.
Vidyard Graduated from Y Combinator. What key lessons did you learn from ‘the harvard business school’ of startups?
There’s certainly a combination of both applied skill sets with respect to starting a business but also things in the personal side. I’m a huge believer that most companies fail to launch, fail to get off the ground because of distractions that the founders experience. And those distractions can be as simple as a friend’s birthday party, weddings in the summer, whatever it might be.
It might sound absurd but when we went to Y Combinator, we came from Waterloo, Ontario, and we didn’t really have any roots in Silicon Valley. I had to work there on a few internships but certainly didn’t have family or broader relationships there when we started. So we would basically spend our entire day.
We would work shifts. Devon, my technical co-founder would simply get up at 2:00 or 3:00 in the afternoon, start coding at 4:00, go all the way through to 6:00 or 7:00 a.m. I would get up at 7:00 a.m. and start calling potential prospects and customers. I’d go all the way through to 10:00 working various time zones, go to bed. And we had this like 24-hour shift thing happening. And that focus of removing all distractions from your life and completely applying yourself to solving a problem is really what YC creates.
And Paul Graham’s mentality was if you’ve got a product in market, how do you grow your user base or your revenues by 10% per week because those are the metrics you really need to nail at those early, early stages to get that exponential growth. And eventually that becomes 10% per month. If you really make it big it becomes 10% per quarter. But it’s important to focus on that extreme growth early on and nothing else really, really matters.
So for us, YC provided isolation. They provided focus. They provided drive. One of the best parts of the program is the alumni network and the classmates you have because every Tuesday night you go to a dinner and everybody sounds like they’re doing amazing things. And everybody’s products sounds like it’s fully built. They’re acquiring users. Frankly, it makes you feel a bit shitty about your own progress and so you go back home and you throw yourself into it full swing.
So YC was all about focus and again, removing the distractions of starting a company.
Paul Graham wrote about startups doing things that don’t scale. Did you take that approach and what things did you do to help vidyard grow that didn’t scale?
Great question. So we built this platform that we call Nostradamus. It exists today in the company in a very different version.
But the way Nostradamus worked is it went out and crawled the dmoz and Alexa database for the top 10 million websites on the web. And then as we would crawl the actual sitemap of the website, we would look for video embeds, the number of video embeds, and what technologies were being used. And we’d store that information in a database.
Then we’d go and look at their YouTube channel and see how many videos they have on their YouTube channel. We’d store that number in a database.
Then we’d look at CrunchBase reports and money raised and we’d look at finance reports and we’d look at the size of the organisation.
Then we would store that information in a database. And then we would look for the three individuals that we could potentially sell our product to. And that was the Director of Demand Generation, VP Marketing, CMO in the early days. It’s gotten much more complex since then and we’d store that number in the database.
So we had all this really cool information. Essentially what we did was we ranked companies on a scale of 1 to 10 based on their propensity to buy Vidyard based on those very simple data points and then looked at their revenues, scale, etc.. Kind of targeted the mid-market because SMBs are tough to sell to, and Enterprises are tough to sell to, and exported a list of 85,000 leads. So I ranked and sorted that list and every morning I’d wake up and I would start working through that list.
We also did a bunch of early sign-ups to the product through our beta program. Essentially, when I would get somebody on the phone that was interested, I would put them on a list so that when we actually launched the technology we had 15 people that had already indicated interest in using the tech.
So we did some scalable things there but the part that did not scale was making those calls. I was doing 100-150 dials a day, getting kicked in the shins a lot. It’s not something that the CEO of a company can do in perpetuity but in the very, very beginning you’re the primary salesperson. You’re the champion. And all those conversations that we had basically provided the feedback for the product direction and what you ultimately see today from the business.
So big thing that didn’t scale, tons of learning, and yeah, I’m definitely an apostle of that discipline.
How long did it take Vidyard to product/market fit?
It’s a great question. I would argue that we are still looking for it. I mean, I know Phil Hernandez from Marketo, he recently… or maybe it was their head of product. I think they’re $160 million business now and they don’t feel like they’re fully, quite yet at product/market fit.
We definitely have that flywheel effect. Our product sells a need for a lot of customers, hence the explosive growth in the last little bit here, leading to the Series B, but we’re always looking for new and innovative ways of engaging with our customers. I think companies can assume they’re on product/market fit far too soon and that tends to slow down the pace of their innovation.
How your role as CEO changed from inception to present day? Can you highlight some differences?
That’s a fantastic question. In fact, it’s something that I don’t think there’s a ton of training around and it’s a bit of a sink or swim transition.
Early on, obviously, I could call 100 prospects a day. I can close a $500 deal and move the needle for the business. But as you grow and as you employ people to take over those roles, you can’t move the needle in that way.
So the way Devon and I always kind of look at the company is it’s a gigantic dam with tons of leaks. And he’s good at plugging some leaks and I’m good at plugging other leaks. So when we decided which leaks we’re good at plugging I’ll go and put my finger in one of those holes and then I go look for someone who’s much better at plugging that hole than I am. And that person, coincidentally, can also plug all the holes around that particular leak in the dam.
So I go along and I fill the leaks in a specific part of the dam and then I manage all the people that are essentially filling the leaks in that dam and then eventually I hire someone that manages all the people that fill the leaks in the dam so that you can go and build a bigger dam. Or you can go generate more power or you could do something completely different with your time.
And so that’s the way I see the transition of the CEO role in a startup. And only now at about 100 employees do I think I’m starting to become a bit of a true CEO in that I’m looking at board management, governance of the board itself.
We manage the company based on dashboards. I manage through five executives that have broader teams underneath of them. And it really simplifies my approach to my day, which is nice, but ultimately allows me to look at various projects inside of the company.
And what I like to do is if I see an area of the business that I think could be improved, I’ll jump in. And if the attempt or the method or whatever is put in place is a failure, I’ll assume that failure myself, learn from that, make the change, apply the difference, and move on to something else.
That’s really quite exciting. It’s neat to be able to work with your organisation in that way.
I watched the Tedx talk you gave about failure. The Closing statement was ‘You will fail to have a great career, unless, you fail to have a great career’ explain?
I really appreciate that you watched that. And hopefully it was in some way inspirational.
One of my professors was a gentleman named Larry Smith who’s highly regarded at the University of Waterloo as a leading economist and just a great professor all around. And he gave a talk about how people will fail to have a great career. It just was based on the complexities of corporate life. It was based on the complexities of not identifying your skill sets and doubling down on those things.
I’m an engineer and I like to be a little more practical and so I remember being very inspired by that talk he gave. I just thought about what’s the actual extension of that? I feel like I’ve been able to have a very great, very exciting career and ultimately what’s the reason for that? What drove me to that point? What was my inspirational moment?
And for me it was failing. It was failing to start this biodiesel company which ultimately led me to fail a term in school. But those failures essentially created new opportunities. And based on my age, where I was at in life, I was constantly looking for these new opportunities. So I fully understood that or learned from those experiences and were able to apply them to what I’m currently doing now at Vidyard.
So the point I’m trying to make in that talk for people like big businesses is you can’t be afraid of failing in your career. You can’t be afraid of trying a new technology that could essentially change the way you do business that could improve the performance of your company. When you’re starting a startup, you fail all the time. There are things you do that will eventually be forgotten and paths you go down that just don’t really make sense and don’t work, but you need to recognise those failures and learn from those mistakes and apply those to your career.
So that’s really the message that I was trying to convey in that talk. It was to the University of Waterloo, which is my alma mater so to speak. I just love going back there and speaking to all those innovative and inquisitive minds.
The other video I saw of you giving a talk was entitled “Anatomy of a hustle”. You believe you’re a hustler. But is hustle now a dirty word?
Yeah. I think hustle is misused. And hustle has certainly turned into this concept of like bugging people and pushing people. I’ve met some self-proclaimed hustlers in the startup world. And what the word hustle connotates is a lack of tact.
For me hustle isn’t about hustling somebody for money. It’s not the general connotations. It’s that aspect of the business is a hustler to someone’s technical founder or your building the business, your talking to customers, your talking to investors, your recruiting people and your making sandwiches for your developers, your cleaning the bathrooms in the early days of your company. So it’s much more than just going out and hustling people for money and deals and cycles like that.
Because I think building a business is ultimately very strategic. You always need to look for points of leverage in conversation, you need to have a product that people actually want to buy. It’s much more complicated than just shaking somebody down.
So yeah, I certainly believe it’s become a negative thing. I do think though that there’s certainly a lack of people with strong business acumen that are able to push themselves outside their comfort zone and get deals done. That’s the element of hustle that I really tried to convey to that talk and that I really want, especially Canadian entrepreneurs, to harness and hopefully develop a little bit for themselves.
Vidyard Raised $18 million in series B round Jan 2015. Bessemer Venture Partners and Salesforce Ventures included in that round. Byron Deeter from bessemer venture partners is now on vidyards board, but didnt Byron Call you on your wedding day to give him the news that they should look elsewhere than bessemer? So how did you get him back on the table and then sort of leading that round or involved in it?
Yeah. It’s a fantastic question. It’s all hustle. I’m just kidding. I think the important thing for every entrepreneur to consider is that you often have to, to use a weird analogy, have to kiss a lot of frogs to find your prince. In everything. It comes down to closing your first few customers. It’s about volume. You need to have tons and tons and tons of conversation before you find the people that actually willing to buy.
And the same story goes for investors. So Byron Deeter and BVP, first of all, to their credit, is an absolutely amazing fund. I’ve really enjoyed working with Byron. He’s a fantastic board member. He’s the one that I always wanted to work with.
They looked at the business and the stage we were at wasn’t necessarily well aligned with the type of raise they wanted to put together, and they have limited resources in the fund. It just seemed like if they waited an extra 6 months to a year they would see the type of performance of the business that could more easily justify the investment.
And the only forcing function for a deal is missing that deal. And so inevitably what happened is we went out, because we’d started the conversations with BVP, we started conversations with a bunch of other funds, and one of those funds decided that there was enough information there for them to make a sound decision on investment and they ultimately wrote us a term sheet.
And I met with Byron outside of the Moscone Center at Dreamforce. We had literally just gotten a term sheet and I communicated that to him. The concept was, if we took that other deal he would miss his kick at the can and wouldn’t get a chance to invest. So it happened slightly earlier than they had expected.
It was still probably 4-5 months by the time they closed after that wedding conversation. So there was more data there, more information for the business, and he was able to convince his partnership that it was a deal worth doing. And it’s been a great partnership between Vidyard and BVP ever since.
With startup founders, it’s often said that when you start a business and you get a co-founder you’ve got to look for somebody crazy or as crazy as you to come on board and join you. Do you believe that you have to be crazy to start a business? And what’s the craziest thing that you’ve done at Vidyard?”
I don’t think you need to be crazy to start a business. I think for us, we started this company at a stage in life where we had so much flexibility. We had essentially no expenses. We hadn’t built out fancy lifestyles yet. We could live on ramen. Our early salaries were hundreds of dollars a month. I think it was like $350 per month just to buy the odd bit of groceries and maybe some beer. So you don’t have to be crazy but you have to be in the right stage of life and you have to have the skills required to actually build the technology.
I see a lot of business people who have what would be great ideas for companies but they just can’t seem to find that technical co-founder. As I mentioned in that startup hustle talk, if you truly were a deal maker, if you were someone that could build a business and convince a customer, you’re the type of person that should be able to find a co-founder that can help you write code, that you can build a relationship, split the business down the middle and build something for major success.
So I don’t think you need to be crazy. I just think you need to have a great idea or what you believe to be a great idea and I think you just need to be utterly convicted. And some people might call that crazy.
One of the craziest things I’ve done at Vidyard, there’s certainly been a few of them. I think one of the craziest things we did was when we had our seed round of financing, we were having a hard time getting the earliest wiggles of product/market fit. We were still running all these calls, we were starting to feel a little bit burnt out.
But we had this vision of integrating our technology with Eloqua. And what that would allow us to do is feed our data into the nurturing programs of our customers and it was very viable insight for their marketing teams because, up to that point, video was essentially a black box. They put it in their website and they had no idea if there was an ROI.
And so we decided to spend a good portion of the money we had in reserve sponsoring a conference in Orlando. And we took my co-founder’s car, Devon, and we covered it in Vidyard stickers. I jumped in and literally drove straight from Toronto to Orlando, which is a 20-hour drive. We went for it.
We parked the car on the lawn in front of the conference hall. We had three of us. We basically built a booth on a budget and we just went out and talked to everybody possible and tried to drive business for the company. Inevitably, we closed about $50k in ARR on the show floor and it felt like a crazy thing.
We had no idea what this conference would be like. We had to basically take the whole company on this gigantic road trip to do it and spend a good chunk of our cash reserves. If it didn’t work, we were probably going to be out of money. But it did and it drove volume and that’s ultimately what led to our Series A conversations.
So it was a bit crazy at the time, but definitely felt like the right thing to do and we had tons of conviction that it was going to be effective.
If you weren’t a firecracker dealer as a kid, would you be where you are today?
That’s a good question. I think my wife always laughs because I’m the type of person that always really tries to get a deal. It’s permeated through the Vidyard culture, to the sales culture, the business culture. And that certainly started when I was a young lad and my grandfather was, as you know, bringing me home firecrackers and I was selling them in the schoolyard.
The interesting thing is the pursuit of sales, the pursuit of convincing someone that they need your product or service, closing that deal, seeing the money come into the business or into your pocket, and then ultimately seeing that customer be successful, grow with the business and then buy more technology from you is incredibly addicting. For me, that started at a very young age. And it was ultimately a way to go buy sweets at the corner shop.
So I think it certainly defined who I was. I also had an early paper route and I would have to go door-to-door and collect money. I remember being so uncomfortable about that process, but I had to do it if I wanted my allowance. And I wanted some spending money and I was also already starting to save for university at that time.
So I think it’s really defined who I am today. And definitely there’s a lot of people that are in similar roles that didn’t have experiences selling illegal goods when they were 7 or 8 years old. So I think it was definitely, definitely useful and definitely defined my personality but not necessarily a necessity in this world.