(Photo by Flickr user Ryan Li, used under a Creative Commons license)
At one point in the very early stages of VideoBlocks, Joel Holland was shooting stock footage himself and selling it on eBay.
Today, his company has around 100,000 paying subscribers, and a marketplace of more than 800,000 clips that announced in 2015 a major partnership with Discovery Communications. He’s also got two spin-off sites — GraphicStock for photos and illustrations, and AudioBlocks for music and sound.
How VideoBlocks got from point A to point B is a story that provides lessons in growing a company from startup to scalable business.
Here’s step one (1⃣):
“The very beginning of a business is an idea, right — it’s a hypothesis,” Holland said. For Holland, as for many entrepreneurs, the hypothesis was a personal one. “I was like, you know what, I’m an independent video editor, I don’t have a lot of money, but I want to pretend like I’m a Hollywood producer. So how do I do that? When I started VideoBlocks, you couldn’t. So my hypothesis was — start a company that helps the little guy affordably create really big productions.”
Step two (2⃣), for Holland, was validation — and this is where eBay came in.
Once you’ve got a hypothesis, Holland said, you’ve got to make sure to test it. This means building a minimum viable product (MVP) and seeing if someone, anyone, will bite. Are there really little guys out there in need of budget-conscious video content?
Once Holland had determined that there were, he was on to step three (3⃣) — defining how big of a market his product could serve.
Holland says it’s important not to push this stage too quickly. Sure, you’re still in the early startup phase here, but solid research on a sizable market will be crucial down the road.
“If I’m making, you know, some crazy widget that there are only four potential buyers for, once I’ve sold all four of them the game’s over,” Holland said. “That’s not a business.”
Holland’s advice here is to take a look at your competitors. How are they doing? Do they have customers? It might seems strange, but competitors can be an excellent proof of market.
Jay Marwaha, president and CEO of Syntasa, also reiterates the importance of finding and understanding an addressable market space. A lot of startups, he said, go through this lengthy process of trying to figure out how to get customers to pay for their product — a process that often includes multiple pivots. Marwaha advises picking a few clients who are willing to take a risk with you, and working out the kinks in the product in partnership with them. This way your company doesn’t lose focus, and you minimize the need for major pivots.
Step four (4⃣), then, is figuring out how much a given customer is worth to your company versus how much capital you have to spend to acquire this customer. If, for the sake of argument, it costs $5 for you to acquire a customer worth $15, your returns are looking pretty good. That’s when you can, as Holland did, go raise some money.
Of course, there really is no set formula to starting a business, and there will undoubtedly be more steps along the way. But these four key (🔑) stages are good ones to keep in mind.
Once you’ve proven your product — that there’s a market for your product, that you have the ability to scale and have raised money in order to do so — you’ve made it to the business phase, or, as Holland puts it, “the growth startup phase.”