A Serial Entrepreneur’s Journey: Wowza CEO David Stubenvoll (Part 5)

David Stubenvoll: What we found out was that a lot of people felt the same way about that media server product. People started to beg to buy our server. In August of 2006, we decided to turn this into a media server software company. That resulted in, what is today, Wowza Media Systems.

Sramana Mitra: That’s a significant pivot.

David Stubenvoll: It was a big pivot for sure.

Sramana Mitra: When you were getting these pings from people who wanted to buy your media server product, were they outlining what they were willing to pay to buy that product? Did you have a sense of what the business model and the pricing model would look like?

David Stubenvoll: There was a very strong incumbent product in the market. We were able to look at their product. My theory has always been if you want to take on a strong incumbent, you need a factor of three. The product you bring in either needs to be three times as better or one-third the price.

Given that we were starting up and our core ways of competing from a products standpoint were reliability and extensibility, it’s really hard to prove that you’re more reliable than the incumbent. We said, “Let’s just assume that we’re at feature parity. We’re going to go for one-third the price.” Benchmarking their price, which was $4,500 for a server with a certain number of connections, we came out at $1,500.

Sramana Mitra: Who were the first clients who adopted your solution?

David Stubenvoll: The very first client was a church.

Sramana Mitra: Why was the church asking for that product?

David Stubenvoll: The key thing here is we found what we call the herd. The herd was where all the geeks that cared about media servers hung out. We were able to get into that list. Believe it or not, in the winter of 2006 to 2007, we had 700 beta participants.

Sramana Mitra: You advertised in that newsletter to tell that niche world that you existed and invited them to come and try out your beta?

David Stubenvoll: Correct. We didn’t advertise per se. We were members of the list and started saying, “Hey, we have something. Do you want to give it a try?”

Sramana Mitra: This church was part of that group?

David Stubenvoll: Yes. Specifically, the technical admin was part of it. Churches are a significant part of our business today.

Sramana Mitra: Interesting. I’d like to understand what is the use case. What do they do with it?

David Stubenvoll: They were streaming their sermons.

Sramana Mitra: It was live streaming or streaming offline?

David Stubenvoll: At that time, it was video-on-demand. They would record the sermon and go from there. Today, we include the Pope as one of our customers. The Vatican actually uses Wowza to stream sermons as well.

Sramana Mitra: When you got this church as your first client, did you actually proactively go after other churches with that value proposition?

David Stubenvoll: No, because we quickly found out that we had an extraordinarily diverse customer base. We have service providers, content delivery networks, enterprises, churches, public safety, military, and media and entertainment. We have a ridiculously diverse customer base and that was apparent from day one. It’s diverse in terms of industry and also in terms of geography. For many years now, we’ve been sitting at about 35% of our customers coming from North America, 30% coming from Europe, and 30% from Asia.

Sramana Mitra: Of the 700 that were part of your beta, how much of that converted into paying customers?

David Stubenvoll: That was always hard to tell because a lot of those beta customers were actually consultants who would end up recommending or buying directly. We’ve always had trouble with those conversion numbers as we deal with so many consultants. We did become profitable on our very first month of operations.

Sramana Mitra: At what level were you profitable – MRR or ARR? What kind of metrics were you tracking at that time?

David Stubenvoll: Monthly cash flow. The proper way to say it is we were cash flow positive both on true accounting basis and cash accounting basis.

Sramana Mitra: This is now 2005?

David Stubenvoll: This is now 2007.

Sramana Mitra: At what revenue number did you end 2007?

David Stubenvoll: It wasn’t very high.

Sramana Mitra: Let me put it this way, when did you hit the $1 million mark?

David Stubenvoll: It probably took us two years.

This segment is part 5 in the series : A Serial Entrepreneur’s Journey: Wowza CEO David Stubenvoll
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