How 1 Company Went From Zero To 22M Users With $0 In Venture Capital
Organic growth is a wonderful thing. So are partnerships with YouTube, Adobe, Microsoft, and Salesforce.
PHOTO CREDIT: Getty Images
How do you start a company and run it to tens of millions of users without accepting venture capital?
The answer, for Powtoon, is viral growth.
The tough three in growing a company are product-market fit, scalability, and growth, but often growth is the one that consumes the most cash. And after achieving product-marketing fit and building a scalable model, gobs of spare cash are just what most founders don't have if they haven't accepted VC.
Powtoon is a web-based video creation platform that just signed deals with YouTube, Adobe, Microsoft, and Salesforce. In addition, it's launching a new enterprise solution to capitalize on the fact that its customer base includes marketers at brands like Virgin, Metlife, Unilever, and Verizon. 25 million people have created short promo videos with the platform, according to its founder and CEO, Ilya Spitalnik.
Currently, the company is working on a way to creative videos via voice ... just like you ask Siri or Google or Alexa to do things for you. That sounds insane, but apparently there's already some demo technology working with IBM's Watson artificial intelligence platform.
When a friend with his ear to the ground in the Israeli tech scene recently told me about this growth engine, I asked to interview Spitalnik.
The result was a entrepreneur's how-to on finding a problem to solve, build a solution, and scaling it to millions of users.
Including, of course, the art of the pivot. And, equally important, of finding great co-founders.
Here's our conversation. (Note: Spitalnik's answers have been edited for brevity and clarity.)
John Koetsier: How did you start the company? What was your motivation?
Spitalnik: I was living in Berlin, Germany when the 2008 financial crisis hit my then four-year-old real estate business like a freight train. I was forced to decide whether I wanted to wait seven years for the markets to recover, or "refocus my efforts."
I refocused by helping various startups build their businesses with the help of my "Rapid Validation" methodology I had developed over the previous years. My secret hope was that by exposing myself to all these startup companies, I would fall in love with at least one of them...
As I was delving deeper into the startup world, I observed a glaring gap in the market: Startups desperately needed a short video to engage customers or explain and advertise their services. I researched the problem thoroughly and discovered not only that any available solution was prohibitively expensive, but that the need for video was far beyond the scope of just the startup world. It seemed like everyone was crying out for a low-cost tool that would enable them to make these attention-grabbing short videos themselves.
Having had no expertise in the video production business, and no team to execute on this finding, I shelved the idea onto my "someone will surely create this product soon" shelf.
A little while later, my friend (and future Powtoon co-founder) Daniel Zaturansky came to me for advice about a new venture he was planning. He had teamed up with Oren Mashkovski (Powtoon's soon-to-be third co-founder), a veteran of the animation world, and top contributor to MTV's incredible interval logo designs. They were planning to start an animation studio to create the same kind of short videos. Daniel would run the business side, while Oren would design and animate the projects.
My response was: Great idea, but a production studio is not scalable. You can only produce what your workforce allows you to. Instead, I suggested: Why don't we take this movie-making skill, bottle it into a SaaS product, and make it available for the world to use?
So we reached up to my "someone will surely create this product soon" shelf, and did it ourselves -- that's how Powtoon was born. We wanted to democratize video making, and I think with over 60 million Powtoons created to date, we're well on our way.
Koetsier: What have been your key growth drivers?
Spitalnik: From Powtoon's very outset, we asked ourselves if we could infuse our product with some sort of engine that could fuel itself. In other words, can we design the product in such a way that once a creator finishes making a video, the viewing audience is inspired to say to themselves, "Wow -- I also want one of these for my business."
For me, this was an important validation marker, and if we couldn't crack this, it wouldn't be worthwhile to continue the project.
The way we approached this problem was by embedding a logo in the bottom right corner of the screen. Now, every time a creator makes a Powtoon, all their viewers will be exposed to our brand. This viral seed, coupled with a lovable brand, a close relationship with our user base and a freemium model, set off an avalanche that has helped us grow the business to over 22 million users.
The next boost to our growth came when the corporate world discovered Powtoon as an incredibly effective way to express their internal communications. Everyone working in a large organization is watching more video in their daily life. If they want to know how to do something, they don't go to the library, they look it up on YouTube. Why should it be any different for work-related topics? Until recently, only the biggest budgets had the time, talent, and money to create the types of videos that can effectively engage employees. But with Powtoon, even the smallest of budgets could finally afford to create these videos too.
Koetsier: You've recently launched a new product for enterprise. Tell me about it.
Spitalnik: From the very beginning of Powtoon, we've involved our customer base -- our tribe -- in every decision we made. They've never steered us wrong... and they were the ones asking for enterprise capabilities.
Employees in large organizations were using Powtoon for internal communications, training, explaining and presenting. The feedback we were getting was: "I presented a 90-second Powtoon to my team and they couldn't get enough of it. Now everyone is asking me to make Powtoons for them...I feel a bit like a superstar." But we were also hearing that they needed to be able to meet their internal compliance standards, conform with enterprise security, use company-specific logins, and have team management and brand and media sharing capabilities -- requests we never received from SMB and startup customers.
After hundreds of requests for an enterprise offering, we cautiously released a validation version of Powtoon for Enterprise in May 2018, restricting the number of enterprises we would accept for trial to 500. The trial was oversubscribed on the first day.
It's no small feat to go from a self-serve, click-and-buy product to servicing an enterprise, but seeing the demand, we accelerated the growth of our enterprise team to be able to service the space in full force in 2019.
Koetsier: Why video? What's unique about video for emotional impact?
Spitalnik: Video is uniquely powerful at capturing attention and delivering a message. In a recent study, Dr James McQuivey of Forrester Research, suggests that one minute of video is worth 1.8 million words -- that's roughly three times Leo Tolstoy's "War and Peace". Whether you subscribe to this idea or not, it's undeniable that when we engage the three modes of learning: visual, auditory and kinesthetic (movement), they have a significantly higher impact than any of the individual modes alone. Video happens to be the medium that combines them best; it communicates the way real life communicates, and our brains instinctively respond to this.
And then there are the emotional reasons why video has such deep impact. For example: the use of animation or animated characters can trigger childhood conditioning that transports us right back onto the carpet in front of the TV on Saturday mornings as a child.
No matter the explanation, with video we can become immersed, and suspend disbelief long enough to absorb a message, and to be moved to take action. That's powerful. That's why video.
Koetsier: So what's next?
Spitalnik: Even 2-3 years ago, when I told people that they can and should make videos by themselves, because of the surefire nature of getting and holding attention, I was generally greeted with friendly, but firm skepticism. But that's changing. Video is in everyone's life today, and the tools are getting easier to use.
Our mission at Powtoon is to democratize video, and to empower anyone to create their own. And just like we saw growth beyond startups and SMBs to education and enterprises, we're seeing tremendous growth in video for social media, ecommerce, municipal and government offices, and many additional areas.
And we're developing for the future. Today, you give Siri tasks, or talk to your phone while it takes down notes. Soon, video creation will be as easy as dictating your ideas into your phone. In fact, our voice-to-video prototype, Powtoon Storyteller, was a recent finalist in IBM's Watson Build Challenge - Artificial Intelligence contest. So that future could be closer than we think.
But beyond AI and future tech, we are working on projects that have very practical business benefits. We're currently releasing a pilot with Salesforce which will enable companies to use data from their CRM to create individually personalized videos to send to thousands of their customers with just a few clicks.
We will continue the hyper-growth partnering strategy that's worked for us until now. This year alone we've partnered with AWS, YouTube, Microsoft, IBM, Salesforce, HubSpot, Adobe, Kaltura, Getty, and others to develop integrations and solutions at our technological intersections. Developing solutions for partners makes video a natural part of their users' daily lives, and allows them to bring their users the ability to easily create videos when and where they need it.
John Koetsier: Thank you for your time!