One of the primary goals of a tech company is industry leadership. Without taking massive amounts of funding, it can be hard to scale and outperform your competitors. Bootstrapping your way to market leadership with video creation is on a roll.
Recently, I was able to connect with the leadership at Powtoon.
Powtoon videos have been created for use in marketing, business presentations, product launches, digital and broadcast ads, and explainer and training videos. Powtoon is about to hit 70 million videos created on its platform. They have 26 million users, with 96 percent of Fortune 500 companies using their product and service.
Usually, companies with 20M+ users have raised significant capital from leading venture capital firms, and except for a small seed round of less than $750k, Powtoon has bootstrapped until now. The company decided to build a compelling product that people loved, and they built their business backed by its customers.
I had a chance to get some insight from the Powtoon CEO/Founder, Ilya Spitalnik.
I asked a few questions about how he built his business, his process of talking to customers while bootstrapping, what his thoughts are on many subjects — and where he sees all this is all going?
Question Brad Anderson:
We see companies bootstrap, raise a lot of venture money, and do something in between. What path did Powtoon take?
Response Ilya Spitalnik:
Powtoon followed a precise methodology I developed called “Rapid Validation.” We didn’t want to raise a ton of money before we could prove there was something real that people wanted. We began by making certain assumptions — and then, watching to see what happened.
For example: does anybody really want this product? We found that, yes, there’s a demand for our product. Then we needed to see if we could actually build a basic product, validate it, and test to see if people would pay for this solution. Each of these actions takes enormous amounts of time, cash, and teamwork.
Could we build a team that could execute for us? It was only after we began to earn real revenue that we started to think about ourselves as a bonafide startup. So, we took a little bit of seed money (mentioned above) to continue rapidly validating through the stages of becoming a real business.
After we launched and had our first big money day, we said, “Look, this could be a serious business, and we need to be sure we have oxygen in the tank, in case of an emergency.” Ever since that day, we’ve grown into a substantial business with over 25 million users and over 100 staff around the world.
We’re now at the stage where we have a solid product/market fit and deep penetration in the enterprise. Powtoon is becoming the go-to solution for any business communication — because in businesses today; you can’t afford to be ignored.
Millennials are now accounting for more than 35 percent of the U.S. labor force. They may be the driving force behind video becoming an essential business tool — maybe moreso than email. To cater to this expanding demand of easily create-able and consumable content — we’re ramping up our growth and scaling faster than ever.
Question Brad Anderson:
Rapid Validation sounds like the Lean Startup strategy. Is there a difference?
Response Ilya Spitalnik:
Rapid Validation predates the Lean Startup methodology by a few years and has a very different philosophy behind it. Allow me to elaborate. As an entrepreneur, you really only have one essential resource that trumps everything else at your disposal. That resource is your time. Time is finite — it’s precious — and time is irreplaceable.
Everything you do or invest in must be measured against this very precious commodity. The ever-looming pitfall of any entrepreneur is to go “all-in” too early. You have an idea, and then you ignore all rhyme and reason to pursue that idea. I’ve seen people chase castles in the sky for years when the idea should have been shelved after three months.
The Rapid Validation methodology gives you the steps of validating your efforts through various stages of your product or service. In a logical approach, this methodology addresses the psychological impact of the “all-in phenomena,” which can hold you captive for years. The Powtoon product and service is designed to eliminate the “false-hope” syndrome psychologically.
In Rapid Validation, you don’t even officially have a startup until around the fifth validation step. On this step, if you pass, you’ll get your “smart money,” as one of the validation points. Until that point, you’re merely testing whether there is actually an opportunity for your product and whether you are competent enough to bring it to fruition.
At the beginning of our business process — you are validating four things.
You’ll validate whether you venture can have legs. Can it grow?
You’re validating whether you, personally, have the skill to take your company to the next level of expertise and building.
Are you capable of assembling your team?
Can you grow a team in the direction it needs to go?
When we created Powtoon’s Enterprise platform and offering, we witnessed the adoption of our videos as a preferred communication tool for large organizations. We began to develop new offerings alongside key clients, who “sponsored” the alpha stage.
We hired one salesperson and signed up over 100 enterprises within six months. We were on a serious roll — and knew it was time to bring on a superstar to lead the sales effort. That’s Rapid Validation — small rapid steps.
Question Brad Anderson:
Network effects were a big part of Powtoon’s growth. Was it purely the freemium model with the logo, or was your trajectory also word-of-mouth? Talk more about that.
Powtoon’s virality can partially be attributed to adopting a freemium model that included our watermark on all free exported videos. But virality rarely stands on its own. Our community of users and their referral power has always been a significant part of our approach. We saw from user surveys that somewhere around 30-40 percent of users learned about our product directly via word-of-mouth. Even today, seven years later, our community and users remain our best advertising.
When we launched Powtoon, our product-market fit was focused around online marketers who needed to convey their ideas in short, sharp videos or presentations. As marketers and entrepreneurs spread their videos, and people began having a personal experience seeing a video or presentation performances — we saw more users working in large organizations on internal communications.
Capturing the attention of the Millennial and the soon to be Gen-Z workers will make all businesses debate easier ways to allow clients and customers to take a cue from friends and colleagues and how training will be done. Savvy video creation is the future of business — in any industry.
In the setting of a manager: the manager, or presentor would be giving a presentation with our free product. The users reported that people in the audience practically “bum-rushed” them at the podium to ask, “How did you make that video?” “What was that platform?” “How can I make one too?”
As another example: a corporate trainer who learned about Powtoon from a training session he attended in an outside training organization. The trainer brought Powtoon’s Enterprise platform to his team and was able to use our video platform to implement a video-based learning management system across his entire organization. From this experience, and others just like this, we have found that word-of-mouth and seeing Powtoon in actionable ways always contributes to our virality, significantly.
Question Brad Anderson: Powtoon raised a little money since its inception in 2012. How did this help your company while you were “bootstrapping?”
The small seed round we raised at the outset of our venture actually served two purposes: Any company needs a little oxygen in the tank, and after we validated our beta product and got paying customers — we felt we wanted a little safety net to act as a buffer in case of emergencies.
We wanted to validate that “smart money” would enter into this journey with us – it’s one of our validation points. We went to the funds that we respected, and who’s networks we wanted to plug into. We chose KIMA Ventures of Paris, France, and Curious Minds of Los Angeles as partners. We were able to plug-ourselves into a network spanning hundreds of startups — across all business lifecycle stages.
It turned out that Powtoon was profitable almost immediately, we didn’t need to rely on these funds, but the security of knowing they were there gave us the confidence to keep testing and growing in the early years.
Question Brad Anderson: Where does Powtoon go from here? What does the rest of the year look like?
The short answer is: Powtoon goes where our users need us to go — and where we bring the most value to people’s lives. Right now, that’s the business and corporate world.
We’ve stumbled upon a tremendous market-product fit in the enterprise. Trainers, HR professionals, IT staff, and internal communications teams need to stand out and make an impact too.
What was risky and cutting edge seven years ago (i.e., replacing traditional communications with explainer/training videos and animated presentations), has now made its way into more conservative organizations.
As a society, your consumption of media is 80 percent video in your personal life — why would it be different in the workplace? Seeing Powtoon’s growth with marketers and entrepreneurs and knowing we can facilitate this massive growth in video, we have prepared for internal corporate communications.
We hear from customers that they’re able to do things like transforming a dry, 22-page manual into a two-minute video. Their colleagues are now able to absorb the right information quickly, and they are seeing them put it into action. We’re implementing the features and compliance standards that enterprise organizations need, and seeing massive growth in that arena.
Question Brad Anderson: It’s clear Powtoon stays close to its customers. What has been the biggest surprise you’ve learned from them along the way?
Our team recently surveyed millions of users to find out what kinds of skills people have learned since signing up for our products and service. Of course, we saw things we expected, like skills directly related to video creation. But over 52 percent of respondents reported learning storytelling skills from using Powtoon. The list goes on, including 47 percent of those surveyed learned how to visualize abstract ideas, roughly a third of users learning digital marketing skills, training skills, public speaking skills, branding.
Recently held a day-long company deep dive we called the “Know Your Customer Olympics.”
We knew a lot about our customers, but this brought our team together in cross-departmental teams so that everyone could get a first-hand understanding of exactly what our customers’ pains-points were. Part of the process was to determine how to fix these pain points.
We had everyone from our customer support team to our developers, marketers, designers, and sales team. The teams were surprised how much more closely connected they felt to each other and our users, clients, and customers from this day-long adventure in learning.
Moving into the future, we will continue to develop products based on customer needs with a definite focus on the enterprise, where we have hit a nerve. We have been approached by several top-tier investors to join us on this ride. Though the suggestion is flattering and validating — we want to think very carefully who should be the right partner for us on this journey.
When we find that answer, the sky-is-the-limit for what Powtoon can accomplish. Exciting times ahead.