Vidyard Co-Founder & CEO Michael Litt Interview Transcript
Clint Betts
Michael, thank you for joining us. You are the co-founder and CEO of Vidyard. You've been that since 2011, a rarity in tech, over a decade, which is incredible. Give us a sense of Vidyard, how you came to be the co-founder and CEO.
Michael Litt
Yeah, for sure. I'll try to give you the very brief version of the story because it can be pretty long. I'm a University of Waterloo grad from a program called Systems Design Engineering. And the cool thing about the University of Waterloo is that when you are in that program, anything you come up with in terms of an innovation, company, et cetera, the university does not take any IP in that business. And so it encourages ownership.
Clint Betts
Oh, wow.
Michael Litt
Yeah, because the way the co-op program works is you do four months of school, four months of work, all the way through your five-year undergrad. And so you get seven work terms. A lot of my peers and I work at companies in Silicon Valley. When I was an intern, Blackberry was a very desirable place to work. And when you're in these businesses, you see the inefficiencies of the way these companies work, and you realize that you have the skills or you're developing the skills to solve those problems.
And so it creates this wave of entrepreneurs and this kind of experience. And because you're going back to school, there's a finite end to each of your work terms. And then as soon as you get back in your school term, you start thinking about your next work term. And what that does is it drives a lot of us to start thinking about maybe starting our own company.
At the very end of that program, I was given an opportunity to do something called E Co-op, where I was essentially self-employed as an entrepreneur. The city I'm in, City of Kitchener, had a $500 Summer Company grant, and that's what I used to start the business. And we started with something really simple. It was this idea that all the companies we worked for during undergrad were trying to figure out how to explain the product, their service, etc., through video. And that was for the purposes of marketing their product for service, but also for helping existing customers understand how to use it better.
And my co-founder, Devon, and I were like, we're technical, we know how this stuff works, but we also know how to make video. Rewind the clock a little bit. I was the video kid. I always had a big camcorder on my shoulder. My uncle John gave me one. I'd go to all the family events. I got into freestyle skiing, and I wasn't the most talented, so I was always the kid behind the camera, editing videos. And then when I got into undergrad, I would create videos to explain our design projects, et cetera.
So, I had the skillset. Fast-forward to the end of school, end of undergrad, I basically went back to all of our employers and said, "Hey, I can do this work that you're trying to do, create these videos for you, at a fraction of the cost." And the idea that Devon and I had was that we could do four to five pretty big engagements per year, make $300K across the two of us, and live happily ever after. I mean, at this point in time, we're interns living on couches and stuff, pretty good at that level.
And so that's exactly what we did. We started making videos. Very quickly, all the companies that we deliver video for were like, "How do we put this thing on our website? How do we justify the spend with you guys, aka the ROI? So we started building that technology. We built an HTML5 video player that they could embed on their website that looked and felt like their brand. We started tracking who was watching and for how long.
And then a roommate of mine, a guy named Eric Migicovsky, he was the creator of the first smartwatch, the inPulse smartwatch, it was the highest grossing Kickstarter of all time, back in the day, he left Waterloo, went to this thing in Silicon Valley, called Y Combinator and said, Mike, "You got to apply. You've got to check it out. Paul Graham and these guys are really, really incredible, and Silicon Valley is the place to start a company.
So we applied, we got the interview, and we walked into the interview. It was Paul Graham, Sam Altman, and Gary Tan. Gary Tan is now the CEO of YC. Sam Altman, everybody knows who he is, OpenAI. This is when he was running a company called Loopt. This is a [inaudible 00:04:23] company. Basically, we told him we're building YouTube for business, we're helping companies put videos on their website, understand who's watching, and for how long. And I said, "But you guys knew that, you watched the video." And they're like, "Oh, yeah, yeah, yeah."
And then I turned my iPad around and I had their view sessions from our dashboard, and I was like, "No, you didn't." And they're like, "Okay, we get it. We understand the value." So YC funded us, and the first thing they said was, Stop producing video content. Start just building the technology. There are a lot of businesses that have this problem. There are a lot of video production agencies you can work with. So that was in 2011.
The reason I'm the CEO of Vidyard and not the CTO or any other role is that when Paul Graham asked his questions, I was the one who answered. And so when he asked, he said, "Which one of you is the CEO?" And Devon and I looked at each other, and we didn't know. And he said, "Mike, you're going to be the CEO because you're the one who asked the questions. You're going to be the sales guy. You're going to be the fundraiser. You're going to be all those things."
So I never desired to be a CEO. It wasn't something I wanted to do. It just happened by, I guess, chance and the personalities involved. And Devon and I have built a longstanding, really powerful working dynamic. We do lots of stuff together. He's one of my best friends in the world, and I feel very fortunate to be building this with him today.
Clint Betts
That's incredible, man. What did you learn at Y Combinator during those three months? For those who don't know, it's like a three-month boot camp for startups. They take a little equity, they give you a little bit of money, but really, the value seems to be the network that they've created. Paul has created it, when Sam ran it, and now it's interesting, you have the three people who've run it. I think those are the only three people who've run it, right?
Michael Litt
Yeah. Michael Seibel, I think, had a stint there.
Clint Betts
You're right, Seibel, I forgot about him. So you had these three kinds of like giants, and maybe they weren't necessarily giants at that time, right? What did you learn from them? What did you learn just from the overall experience and being there for three months?
Michael Litt
So I think there are two components of who I am. I'm a founder and I'm a CEO. And I don't really think I became a CEO until we had raised our Series B, Series C, and I'm sure we'll talk about that. Back then, I was just a co-founder. And the thing that YC does a really good job of is isolating the important work from the busy work. When you're starting a company, you get incorporated, you build your employment agreements, you get your business number, all that stuff takes a lot of time. And at the end of the day, you can reflect on your day and be like, "Yeah, I had a really productive day. I did all this important work," but it had nothing to do with building product or talking to customers. And that's really the only thing that matters.
And something that YC taught me that is core to how I operate today, the only two things that matter are, "Are you building great, powerful transformational products for users?"And when you join YC, they give you a great T-shirt that says, "Make something people want." And when you sell the company or IPO, they give you a black T-shirt that says, "I made something people want." And the transformational aspect of YC for me was going to Silicon Valley, being from Waterloo, and leaving my friends and family back in Waterloo, and having three months of just dedicated energy applied to building a product and talking to users.
And every time I'd get together with Paul Graham, he was like, "What's your most important metric?" We had a product in the market, so I'd say, "MRR." And he would say, "Your goal is to grow MRR by 10% per week. Figure out how to do that. Reverse engineer that process." And that is exactly the conversation we had every week for three months. And he held me accountable to that, and I held myself and my team accountable to that. So that totally defined the way we worked and the energy we applied to the business. So yeah, it was transformational for sure.
Clint Betts
Yeah, that's incredible. And so you come out of there, did you raise at Demo Day? Give us a sense of how you started raising after that?
Michael Litt
Yeah, so it's funny because now I invest through a fund called Garage Capital, but I also started with Devon and YC. The YC game has changed completely, but back then, it was very uncommon to raise money before Demo Day. Now, most YC companies have completed their fundraising by Demo Day. Everybody wants to get in, everybody just wants to build an index of YC companies.
But back then, we were building a product, talking to users, and Paul Graham liked to use us as an example of the company that was actively running a sales process. And so because of that, I got introduced to a number of potential funds and customers and the YC partners, liked what we were doing and the hustle, so to speak, because YC is very much a hacker-oriented mentality. And again, we're all engineers at Vidyard, like that's our background, but because we started a services business, we knew how to sell, and we were using the services business to fund the software development business.
So I had no problem putting myself out there and getting these deals done. That means I got to meet David Lee from SV Angel, Ron Conway, and Jawed Karim, one of the co-founders of YouTube. And so by the time we got to Demo Day, I wanted to raise $850,000 in our seed. We had more than that committed and signed up on our convertible note. So I got up at Demo Day and said, "Hey, we're raising $800 and we've already closed $850. And I didn't realize it, but what that meant was every investor in the room would want to talk to me because investors are like buffalo. They all stand at the edge of the cliff, and once one falls off to their death, they all follow suit. And if you raise more than 100% of what you've tried to raise, obviously, something's great about you. So everybody else follows suit.
So we ended up taking that raise to $1.65 million, and we just kind of escalated the cap to manage dilution as more investors came on. And I'm very grateful we did, because we raised our Series A when we had about $800K left in the bank, meaning if we had raised what we originally targeted to do, we would've run out of cash.
So there are all these inflection points that you reflect on. But yeah, the biggest investor in that round ended up being a gentleman named Jeff Clavier, who's been awesome. He was SoftTech VC, now branded Uncork Capital, and just a really great crew of investors that have been very supportive along the journey.
Clint Betts
How has the product evolved as video obviously has evolved insanely since 2011, right? Give us a sense of that.
Michael Litt
Yeah, I mean, it's funny, right? The big innovation that we initially came to market with was, back in the day, your listeners will probably remember this, the best way to deliver a video on the internet was Flash. That was what YouTube built, right? You could upload a video, and you needed the Flash content and solid machines that would function. And then Steve Jobs said, "Flash is garbage. Let's get rid of it, and let's migrate to the HTML5 standard. And so, one of our earliest innovations was that we had a free HTML5 player. So we could tell customers, this content's going to play on iPads and iPhones, and this is the future. It sounds ridiculous to say now, but all of the competition was charging extra for the HTML5 capabilities. And it was a few lines of code. But when we built that product, we were trying to figure out how to serve video via HTML5. The only companies that were doing it were streaming porn websites. And so you-
Clint Betts
They're always ahead of the game on innovation.
Michael Litt
Especially with respect to video, it seems to me it was. So that was the initial innovation. And then it was like, who's watching these videos, for how long? And then it was How do we integrate that data into these modern marketing automation systems like Marketo and Eloqua? And then HubSpot. Pardot came along, and then there was a consolidation there.
And then we got this idea of how to help the marketing teams we work with enrich the salespeople's experience? And marketing works for sales and vice versa, and they never get along. And a really awesome investor named Jill Rowley, she was the highest-grossing sales rep at Eloqua and loved what we were doing, she said, "If you can connect the dots between sales and marketing, you will never have churn." So we started experimenting with the product there, and the idea was, how do we give these videos that the marketers have uploaded to our system to salespeople so that they can easily send them to customers? And that's just another channel of delivery for these videos, who's watching it, for how long? But in their workflow, in their email, in CRM.
And then one day, a BDR in our business was playing around with this idea of just sending a webcam video to a customer, to a prospect, and say, "Hey, it's me, Mike, Clint. I'm really excited about what you're working on. I'd love to book some time to talk about XYZ." And what he was doing was he was opening QuickTime, recording with his built-in webcam, and then uploading that video to Vidyard and then taking an image from that video, embedding it in the email, then hyperlinking it to the video, and then sitting on the the analytics dashboard and waiting for the counter to go from zero to one. And then following up. We were like, "Wait a minute. We can build that entire workflow into a Chrome extension that allows a sales rep the ability of, click record, screen capture or webcam capture, with the backend infrastructure we've already built of who's watching my video for how long, the branded sharing page, the call to action capability, all that stuff. And that's when we entered into this realm of PLG and helping the sales rep.
And of course, that timing aligned really nicely with the pandemic. Everybody was starting to work from home. Video became the primary communication method. There was no more in-person. And so that was almost like the next chapter of our business. We'd been selling to marketers a very top-down, enterprise-focused process. Now, all of a sudden, we were selling to sales reps. They could buy it on their credit card, or we could sell it on an enterprise level, a bunch of licenses across a bunch of people. And that would just compound the size of our deals, really help with the NIR numbers, so on and so forth, which is, I think, the dream of every product company in every revenue-based business, so.
Clint Betts
As you've built this thing and scaled it, what's been the inflection point? What numbers should we think about, like the number of employees, revenue? At what point are you kind of reconstructing the company again?
Michael Litt
Yeah, I think of inflection points in terms of product-market fit more than I think about them in terms of number of employees and revenue. I think there's a massive shakeup happening right now because of AI, where employee count isn't really a metric. It always was a vanity metric, but it's not really the right metric. Productivity per employee matters a lot with all these agents running around, who are highly capable. And that's where our product has evolved to. We'll talk about that in a second.
And so, product-market fit is measured by your consistent growth of monthly active users. And something interesting has happened since the pandemic. There was this kind of oversaturation of SaaS in a lot of businesses. It overbought technology, chasing growth at all costs. The cost of capital increased, as rates increased, and then AI arrived. And now all of a sudden, businesses are like, "Okay, we have too much SaaS, and also there are too many people." And when you're selling seed-based SaaS, that might mean you're not necessarily losing logo, but you're churning seats. And you need to really think about the next horizon in terms of AI.
And if we step back and think about the evolution of history and specifically communication technologies, which is the world we exist in, back in the day, you wanted to sell something, you walked up to somebody's farm and opened your briefcase, and that's how you interacted with them. And then the phone was invented, and phone-based sales complemented the in-person interaction. And then email came along, and then email complemented the phone and the in-person interaction. And then mobile devices came along, and everybody was kind of always connected. And then automation got layered on top of email and these other communication mediums. And then video became a thing because all of a sudden we could stream it via HTML5 and all these other technologies. And basically, the infrastructure that was late in the 2000s supported the scale and the bandwidth required to do video really effectively. And now we're in this era of AI.
And so each of those inflection points really kind of changed the product landscape. And when we started Vidyard, we were moving from this world of on-premise, on-server software to SaaS. Mobile was becoming a thing. And so we needed to deliver mobile experiences for our customers' customers, and now we're in this role of AI.
And so we think about video embedding on the website, who's watching it for how long? That's the premium video hosting solution that we offer. Then we think about, okay, let sales reps create these amazing stories for customers, screen capture, webcam, etc. Now it's how we can use everything we've learned, the data around what makes a video successful, and the millions of videos that have been uploaded to our service to try to automate the creation of a video in the ways that matter most.
So the way that looks today is we've got this product called the Video Agent. When a customer comes to your website and raises their hand, that might be because they watched a video, they input their information, and we will automatically generate a video from the sales rep that will be assigned to them that says, "Hey, Clint, got your hand raised? I'm really excited that we got a meeting booked on the calendar because that's all automated now, too. On this call, we're going to talk about A, B, and C." And that drops no-show rates by 30% because you've seen someone on the other end, it's AI-generated. That doesn't necessarily matter.
I was just talking to a CEO of one of our customers whom I've never met before, but he's seen my avatar, and he's been like, "Oh my God, I feel like I know you." And so our relationship is now starting from a place that couldn't have started from before, which is text.
So I think about inflection points in terms of technologies and audiences and whether or not you have product-market fit. And that's again, back to what YC taught me. Are you building something people love? And you will know that in the metrics, revenue is the thing that matters most in a B2B business. It's the measuring stick it gets for all measured, but that is a byproduct of the value exchange and a high-value product that delivers upside for your customers. And that's what we have to be relentlessly obsessed about.
Clint Betts
Give me a sense of your overall thinking on AI and its future. Its future in video. I mean, obviously, everybody wants to know the answer to this question, even just about the future of humanity and where we're going with this thing. So obviously we don't know the answers to that, but give us your overall take on where AI is heading.
Michael Litt
Yeah, it's a great question. I think two things. One, that scenario I laid out where the Video Agent automatically reaches out to a new customer on your behalf and starts to build that relationship and fill that trust battery, that's not something that anybody had time to do before. If you're a business that gets 1000s of leads a week, there's no way that your team can do that. They're too busy doing other things, filling in CRM, and having actual conversations with customers. And so the way I think about AI in the context of how we deliver is it gives sales reps more time to do the things that matter, like meet their customers in person, meet them live, and it gives another touch point to help them build those relationships. So I see AI as augmenting humans.
And there's this funny meme right now, there are a lot of YC companies that are innovating in areas that are the things people actually want to do. And there's a bunch of stuff that people don't want to do that deserves automation, right? Like bookkeeping and expense management. No employee wants to do that stuff. Let's go automate that stuff so they can do the more creative work, potentially augmented by AI. So I see a future where AI and humans work really collaboratively together to do the things that matter most. And the things that matter most are the relationships that we can build, because when you take away the products and you take away the services, what's left in any type of business transaction is that human-to-human bond and that connection and the trust that gets created. And if you're spending 100s of 1000s of dollars on a technology, you want a human to be accountable for that outcome. You want [inaudible 00:21:31] good. We have this moral code, this obligation that's been trained into us. Guys don't necessarily have that, right? They don't have to have that. So that's how I have been thinking about it.
In terms of our product, what we've done is remove the friction and make it really easy for our sellers and our users to create video. I think the evolution now has to be making it really easy for viewers to consume that video, and that means chaptering, summarizations, things that can be viewed at a glance. You know a person was there, created that content, and said those things, but how do you digest them faster, because I think that's what we as humans are starting to do. So that's where we're starting to think about the future in terms of video-based interaction.
Clint Betts
So obviously you didn't stay in Silicon Valley, you went back to Canada. Give us a sense of what I love, and give us a sense of why you decided... You could have stayed in Silicon Valley, right? Give a sense of why you're building in Canada and the benefits and downsides to... I mean, obviously, we have this war with you guys now, right?
Michael Litt
Apparently.
Clint Betts
That none of us actually care about, but you know what I mean. But give us a sense for the upsides, downsides, and what it's been like building there.
Michael Litt
Yeah, for sure. I mean, I've always felt like the border is, it's a bit of an artificial line. Our cultures are not that different in some ways. The thing that... I mean, our currencies are very different, and we can talk about what that means in terms of arbitrage, but when we were finishing at YC, we took a look at every single ecosystem where there were startups that had been successful. Waterloo had RIM and BlackBerry, and this kind of longstanding history of big B2B multinational organizations meant there was existing talent. It also had the University of Waterloo, which we had all been to. It also had a big Google office that had a YouTube team that we knew we could recruit from. So it ticked a lot of boxes. And on Forex alone, if Canadian and U.S. salaries are roughly the same on an absolute basis, a Canadian salary is, over the years we've been operating, either at parity or up to 40% cheaper. And so that means every dollar you spend in USD can go a lot farther.
Now, when we decided to come home, right, the network, we were close to the Dean of Engineering, we knew these engineers at Google, and we could recruit. Paul Graham pulled me aside and said, "Going back to Canada is going to be like climbing Mount Everest with a 10-pound weight on your back." And I didn't really realize the extent of that metaphor. Of course, when you're at base camp, 10 pounds not that big of a deal, but when you're oxygen deprived near the summit, summit being IPO or exit, getting that black T-shirt, "I made something people want," all of a sudden that 10 pound bag or extra weight is a lot more. And I think what that meant is there just isn't the same volume of highly successful zero-to-a-billion companies in Canada as there is in the U.S. It's not even close.
What that means is there's less talent here that has taken something to $100 million of ARR. And we didn't really, I think, realize that until we were post Series B, post Series C. And the solution for us was to just hire more broadly. And so today, only about 50% to 55% of our team is in the Waterloo region. Otherwise, we're pretty highly distributed. I got a really good friend, Nick Marcello, who's one of the co-founders of a company called Fair, and all of their engineering is here in Waterloo, but their product, go-to-market, and business leadership is in Silicon Valley.
So yeah, we came back for the engineering talent. But what I would say is I didn't tell our investors I was coming back to Canada because for the first three years, I was two weeks in the Bay Area, two weeks in Waterloo. The way I saw it is I'd go to the Bay Area, I'd meet with investors, I'd meet with customers, I'd do some recruiting, and then I'd come back to Canada, go heads down, and we'd build, innovation, and then I'd go back to the Bay Area and get inspired again and think bigger, then come back to Canada. That's really served us well to be able to run a profitable business at our scale, and we're now innovating in this AI space. I think Canada has afforded us the ability to do that. The government subsidizes R&D, which is a blessing and a curse. It creates a lot of zombie companies, but if you're really ambitious, I think it helps fuel that level of ambition.
So yeah, I could talk about that a lot. There's a lot of political discourse right now, as you can imagine here. We've got new leadership in Mark Carney that seems really kind of aligned with the tech ecosystem, but we've seen this before. So yeah, talk to me in four years.
Clint Betts
Well, finally, because I want to be respectful of your time, we end every interview with the same question, and that is, at CEO.com, we believe the chances one gives are just as important as the chances one takes. When you hear that, who gave you a chance to get you to where you are today?
Michael Litt
It's funny, there are so many faces and names that I can think of at every single inflection point that gave us an amazing opportunity. But in the context of building something people want, I really have to think about our first customer. When we were at Y Combinator, there was a woman who worked at a company called Tribe HR, and she deeply cared about what we were building because she was trying to automate the onboarding of customers using video. And she assumed we were a much larger company than we were. And every time she had an issue with the product, she'd call a 1-800 number, and number 1 for sales went to my cell phone, number 2 for general inquiries and press went to my cell phone, and number 3 for support went to my cell phone.
So I would always talk to her. She'd call sometimes multiple times a day, and we basically wrote a list on the wall of everything that Donna wanted and needed the product to do, and we'd go deliver that, and then I'd call her and then eventually decided we'd go find more people like Donna, because she was our ICP.
Eventually, when I moved back to Waterloo, I went to this event and I met Donna in person, and I was like, wow, I'd really like to spend more time with her, and we will celebrate our 12th wedding anniversary on August 10th.
Clint Betts
That is incredible. Oh my gosh. That is so cool.
Michael Litt
And I always tell the team, this is what customer success really means, but it doesn't scale very well. So she did 1000s of customers, but without her, I don't think we would've built the way we did and what we did because she cared so deeply, and her job depended on our success. And that's exactly what you need when you're starting and founding a technology business.
Clint Betts
Well, that's amazing. And congratulations. Wow. Nothing better than that. That's incredible. Thanks Michael. Thanks so much for coming on. Congratulations on everything you've built. We should have you on again. We could talk about all sorts of different topics, but we really appreciate you coming on.
Michael Litt
Thank you, Clint. Really appreciate it. Cheers.
Clint Betts
Thanks, man.
Edited for readability.