No company, no product, no problem: Video platform raises $2.3M by leveraging earlier success
It’s not easy to raise more than $2 million in a pre-seed round without a minimally viable product, let alone when the team making the pitch is still in their 20s. And did we mention that they’re based in Bozeman, Mont.?
But the Special Project crew had solid experience they could leverage. Lucas and his co-founder, Chief Technology Officer Paul Burton, had been running their first startup, Triple Tree Software, for four years, specializing in building custom SaaS products for national clients. Some of those clients included companies backed by venture capitalists, who got to know Triple Tree.
Building on Triple Tree’s success, the founders had a new idea to pursue: a platform for sharing videos with subscribers. “Content is the new e-commerce,” Lucas said, and the team had a plan for a different way to deliver it and pay content creators and independent studios.
And the investors stepped up for a $2.26 million pre-seed round led by Bozeman’s Next Frontier Capital. Other firms and angel investors include: SpringTime Ventures, Next Coast Ventures, Service Provider Capital, 30West, Gary Rieschel of Qiming Venture Partners, documentary filmmaker and venture capitalist David Fialkow, and Stephen Burke of Comcast and NBCUniversal.
Special Project launched in February and by March had raised its starting capital. The founders wound down Triple Tree and all six of the employees shifted over to the new venture. The startup is working with roughly two-dozen video creators to get feedback on a beta version of the platform, which will officially launch in October, though still in a restricted form.
Their goal is to have 25 creators making $1,000 a month through subscriptions by the end of the year. The broader release will be in 2021.
While people can obviously create and share videos through YouTube and TikTok, Patreon is their top competitor, said Lucas, but their platform will differ in specific ways:
- Content creators on Patreon solicit donations and payments, while creators on Special have customers, or paying subscribers, with access to premium content.
- Patreon users are sent to videos posted on YouTube, which can in turn promote videos from everywhere that may not be of interest; Special hosts the videos itself and keeps viewers in a creator’s branded channel, or “project.”
- Patreon content is “unlisted” on YouTube and can’t be organically discovered; on Special, creator content can be discovered via search engines and shared virally to attract subscribers.
Subscription prices are set by content creators, and Special Project will take a 10% cut.
One of the big challenges for the startup is setting the platform’s terms of service and how they’re enforced. The site will rule out the obvious stuff — content that is illegal, hate speech, cyber bullying and pornography. Adult content will be allowed with restricted viewing.
But that ignores the fire hose of misinformation and disinformation that other social media platforms have struggled and often failed to manage, leading to the spread of falsehoods that have hampered COVID-19 response and misled voters. Lucas puts Special in a different category because people are paying for the content.
The company wants to support diverse content and ideas, with the objective of creating “a neutral platform,” Lucas said.
And what about a move from Big Sky Country— the founders met as undergraduates at Montana State University — to a city packed with content producers like LA or New York? It doesn’t appear to be imminent.
Their distance from trendy locales helps Special Project stay independent like the creators it hopes to attract, Lucas said. And lots of creative, innovative people are in their area and routinely passing through.
“We’re a landlocked state in a mountain town. We have a university that is booming,” Lucas said. “There are a lot of talented people and a lot of new faces coming from the coasts.”
We caught up with Lucas for this Startup Spotlight. Continue reading for his answers to our questionnaire.
What does your company do? Special is a platform for independent video creators, filmmakers and studios to launch their own direct-to-fan subscription streaming service.
Inspiration hit us when: We built subscription video platforms for our previous business’ clients and found success in doing so. Businesses in our network started asking for the same product, and that’s when we knew we were on to something. Building these platforms should not be custom one-offs and they shouldn’t cost so much. Our clients gave us the idea.
VC, Angel or Bootstrap: VC. Paul and I bootstrapped Triple Tree Software, starting from our college basements to hiring an incredible team and working with national clients over the last four years. So we’d already done it the bootstrapped way. This time we knew what needed to be done and how much it would cost, so we went the VC route. We also wanted the executive experience, mentorship and networks that come with VCs.
Our ‘secret sauce’ is: Our team. A few of us have been working together since junior year of college in 2015. We are so fortunate to have inspiring teammates that make our culture and company great. We’ve launched five products together and have learned a lot about launching companies and finding product-market fit.
The smartest move we’ve made so far: Hiring a director of customer acquisition who’s strong on data and targeting.
The biggest mistake we’ve made so far: We haven’t made a big mistake yet. The company is three months old. We made mistakes with Triple Tree. But I know we will have mistakes right around the corner.
Which leading entrepreneur or executive would you most want working in your corner? We have a few powerhouse media angel investors on our cap table and we admire their leadership and involvement. But if I could choose anyone, I’d pick Andrew Chen of a16z because he is so well versed in customer acquisition, lifetime-value (LTV), and viral engagement loops for subscription business models. I enjoy his blog. I’d also enjoy an a16z investment in our Series A.
Our favorite team-building activity is: We live in Bozeman, so our team building events change with the seasons. My favorite so far has been a powder day skiing at Bridger Bowl.
The biggest thing we look for when hiring is: Passion. Are you relentlessly passionate about being the best you can be and constantly improving and perfecting your craft? If you put a bunch of passionate, curious and hardworking individuals in a room, something great will develop.
What’s the one piece of advice you’d give to other entrepreneurs just starting out: If you want to be an entrepreneur, you have to start somewhere. I think the best place is working for an entrepreneur you admire in the industry you want to start a business. Learn their every move. Then start a service business and get paid to learn. Once you know how to grow revenue, manage profit and loss, hire a team, and build products, then go start a product business and raise money. You’ll build an incredible network of mentors and advisors every step of the way.