

AMA HN: I launched my profitable startup one year ago today. - podman

On August 1, 2010, my startup, http://SproutVideo.com, had it's first full day of public operations. I've learned a lot in the last year and would like to share my experience with you. Ask away!<p>p.s. I figured I'd give doing an AMA a shot on HN, but if it's the wrong place for it I'll move it to anyasq.com or somewhere else.
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djb_hackernews
What is your infrastructure like? AWS? shared hosting? self hosted?

Are you using any interesting solutions for storage of the video?

Are you using any interesting solutions for streaming the video?

~~~
podman
Just about everything is on AWS. I use EC2 for the servers, S3 for storage,
CloudFront for streaming, Route53 for DNS, SQS for messaging, and CloudWatch
for monitoring. So, there are no real interesting solutions for the storage or
streaming of video unless you consider S3 and CloudFront interesting.

~~~
fraXis
What is your estimated combined monthly bill for all those AWS services?

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Terry_B
Can you please talk about the economics of doing a video based small startup?

I have a couple of ideas that would involve users uploading large video files
and me having to store them at least temporarily.

I don't yet know if this is a show stopper for what would be a on the cheap
side project.

~~~
podman
There are pretty much three major costs to consider when it comes to video
online. They are storage, delivery and encoding.

Storage is pretty cheap. S3 starts at $0.14 per GB for the first TB and then
drops to $0.125 for the next 50TB and so on. There might be some cheaper cloud
storage options out there. If you don't need the durability that S3 provides,
you can use their reduced redundancy option which is like 40% cheaper. There
are other cloud storage provides out there worth considering like Rackspace's
Cloud Files, although I think S3 is the cheapest. CDNs also often include
their own storage so that might also be something to consider. You might be
able to get a good rate if you committed to a minimum storage and bandwidth
package. If you wanted, you could even go the route of building your own
storage units ([http://blog.backblaze.com/2011/07/20/petabytes-on-a-
budget-v...](http://blog.backblaze.com/2011/07/20/petabytes-on-a-
budget-v2-0revealing-more-secrets/)) which presents it's own pros and cons.

Delivery also isn't that expensive. CloudFront, for instance, charges $0.12/GB
for the first 10TB and $0.08/Gb for the next 40TB. If you're streaming over
10TB per month, you can start to get discounts by committing to monthly
minimums. Again, there are other providers out there, such as limelight and
akamai, but as far as I can tell, they don't publish their prices. That
usually means you probably need upfront commitments with them. Because of
that, there is probably a lot of room to negotiate the price of bandwidth.
Delivery will most likely be your highest cost just because of the volume
unless you don't plan to be streaming that much video.

Lastly there is encoding. Encoding can either be done by yourself on your own
serves or through one of the many providers online. Doing it yourself takes a
bunch of time to figure out all of the quirks of all of the different video
and audio codecs and containers. It's not a fun process, but ultimately, if
you can get it right, it might be cheaper. There are a bunch of transcoding
services out there. They have different pricing models so you'll want to make
sure that the model fits your use case. For instance, Zencoder charges for the
minutes of output video created but something like Encoding.com charge by GB
(Combined input and output file sizes). If you're dealing with a lot of short,
but really large, videos, the Zencoder model would fit better. If your files
are small, but really long, (like webinars) the Encoding.com model might work
better.

~~~
Terry_B
Thanks very much! So it sounds like from every aspect the cost scales fairly
smoothly from zero on up, is that right?

If that's the case then it makes life easy as from day 1 you can pass the
entire cost onto the customer in your pricing. Has that been your experience?

~~~
podman
As long as you pass on all of the costs onto the user, it works out pretty
well and you should never lose any money on a customer.

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iqster
NYC is different than the Bay area with respect to moonlighting/IP-ownership
issues when you have a full-time job and you do projects. Did you clear this
with your employer, were you in a contract that didn't have restrictions, did
you hope for the best, etc. ? Thanks for sharing!

~~~
podman
I had talked it over with both my manager and CEO. I just took a look at my
employment agreement and there was an attached Proprietary Information and
Inventions Agreement. In it, it states that the company shall own all right,
title and interest in and to all Inventions which arise out of research or
other activity conducted by, for or under the direction of the Company, or
which are useful with or relate directly or indirectly to any “Company
Interest”. While that is somewhat broad, the work I did was neither for nor
under the direction of my old company so I'm fairly certain it doesn't fall
under that agreement.

------
djb_hackernews
How did you determine this was a service businesses needed? It appears to me
they could do it all on any number of other well known video hosting services.

~~~
podman
Related to this: <http://news.ycombinator.com/item?id=2832961>

I used to work for a company that offered a very similar service which had
many paying customers who validated the idea. The company was acquired, but
not that particular business unit. We essentially stepped in and took over
that unit so the customers would not be left out in the cold.

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vorador
Do you have collaborators ? Did you take care of everything or did you
outsource some tasks to freelancers (for instance, design, etc.) ?

~~~
podman
I had (well still sort of do, but that's a whole other story) a co-founder for
the first couple of months. He's a non-technical person, so he didn't
contribute any code. He mostly contributed with product guidance and some
design / UX stuff.

Our site is based on a combination of two template we bought and we outsourced
our logo design to oDesk.

------
rosariom
How long did you wait until you quit your job? Where did the idea come from?
Did you outsource the web design?

~~~
podman
I wound up quitting my job about midway through October 2010 because customer
support was beginning to require too much of my time.

The idea was in no way original, but came out of an opportunity to both
prevent hundres of people from losing their videos when my old company was
sold to SnapFish and make a bit of money. See:
<http://news.ycombinator.com/item?id=2833008>

The web design came from a combination of two templates that we bought. I'm
currently talking to a designer about redesigning everything so it doesn't
feel so much like a template site and does a better job of showcasing the
product.

------
adyus
How long from first line of code to launch? And what were your expenses for
that time?

In other words, what was the bootstrap amount you needed?

~~~
podman
My first commit was on June 25, 2010. So, 37 from first line of code to
launch. I was still working a full time job at the same time, so it was coded
during nights and weekends only.

There were very few costs durting that period other than maybe a hundred
dollars in server costs for testing and food.

Edit: Now that I think about it there actually were a few other costs such as
incorporating the company, outsourcing the logo and business card design,
setting up the bank account, and so on. The total came to around $2k.

------
Swannie
How long before you were profitable? Have you managed to maintain growth since
then?

~~~
podman
The company was profitable pretty much from day one. We don't have a free
tier, so all of our customers are paying customers. We made sure that our
initial pricing structure ensured that, in almost all cases, the users at
least covered their own costs. We've added four pricing tiers since launching
and this still pretty much holds true (except for the lowest tier).

To maintain growth, we've mostly marketed our site using PPC though AdWords.
So far, even without much optimization, it seems to be working fairly well.
When I have more time to devote to it, I'll be able to spend more time
optimizing our ad campaign and explore other methods of marketing.

~~~
blakeperdue
Can you share some basic marketing numbers?

What price range is your PPC? What % of clicks convert? What is your
customer's total lifetime value?

Thanks!

~~~
podman
The average CPC for last month was around $4.21. The conversion rate was
around 4.86%. I don't feel comfortable giving away the CLV, but it's
considerably higher than the cost of acquisition.

~~~
kayhi
What is your daily or monthly budget for PPC? What beneficial adjustments have
you made since starting your campaign?

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cynusx
Are you funded? Where are you based? How many employees?

~~~
podman
The company is bootstrapped, based in New York City, NY and I'm currently the
only employee.

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clark-kent
What is your technology stack?

~~~
podman
Ruby on Rails, Node.js, MySQL and MongoDB

~~~
garethsprice
Do you think the business would have worked if Node.js and MongoDB were not
available, or are they absolutely essential to your core business?

~~~
podman
Node.js and MongoDB are not essential to the core business. I just chose to
use them because they made my life somewhat easier.

------
clark-kent
How long did it take you from idea to launch?

~~~
podman
Related to: <http://news.ycombinator.com/item?id=2832865>

It's hard to say when the initial idea came about, but it probably existed in
some form or another for 6-8 months before launching although no action was
taken until around a month or two before launch.

------
jakecarpenter
How did you get your first customer? How much of your time (%) is marketing
vs. sys admin vs. coding vs business?

~~~
podman
I used to work for another company called Motionbox which offered a similar
service in addition to a more youtube style type service. Motionbox was sold
to SnapFish/HP. SnapFish, for whatever reason, was only interested in
acquiring the youtube style customers. That left all of the commercial,
paying, customers available. We made a bid to buy them from Motionbox and the
bid was accepted. We then gave the customers the option to migrate all of
their videos to SproutVideo and become customers. Around 200 made the
transition.

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diminium
How did you get your first set of customers? After those were done, how did
you get your second set? What marketing, if any, did you do to get those
customers? How much time did it take to get them? Did the standard stuff work
"AdWords, etc" or did you need to do more innovative stuff to get them?

------
jenquiqui
How did you handle the terms and conditions? Did you have to go to a lawyer?
If it was just stander boiler plate, where did you get it?

