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This whole time I’m doing this, I’m watching the gift industry takeoff, I’m working closely with tanner, got to know the guys at Giphy and I’m seeing how they run a business purely around gifts and they’re really good at it and it makes a ton of sense and they’re one of our best partners and I work with them daily and everything was coming from the brands they wanted to be involved with this and it was just this really quality business that I understood so well and here I am sitting here thinking like I still have this age old problem with my chrome bookmarks for and no one’s done it and I can remember asking tenor and asking Giphy like, what about video are we getting? If they had said, yeah, we’re doing it, Vlipsy never created
Jay Clouse: 00:00:42
The startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.
Eric Hornung: 00:01:09
Hello, Hello, Hello. Welcome to the upside podcast first podcast, finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my co-host, Mr. Guest Bedroom himself, Jay Clouse. Jay. How’s it going man?
Jay Clouse: 00:01:24
It’s good. You treated me well as a guest in your home. I had fresh bedding. I had towels. I had guessed candy left on the towels. Well yeah. How would a bit of better would have been a better touch on the pillow. The pillows are a little too vertical on the guest bed to be, you know, I think in hotels they’re a little more. Turned our, our, our pillows here, a little vertical. So they weren’t, they weren’t conducive to candy placement. So they went on the towels.
Eric Hornung: 00:01:49
They are vertical because you have like six of them. Yeah. Well Colleen has done an incredible job decorating our entire house and apparently girls love pillows. That’s something I learned. When you, when you live with girls, they love pillows out. Both of our beds have like, I think, I think it’s 200 pillows each
Jay Clouse: 00:02:04
Friend of the podcast, Colleen. Shout out to Eric’s wonderful girlfriend.
Eric Hornung: 00:02:10
Jay Clouse: 00:02:11
It’s fun. We haven’t spent a lot of time in the same city, let alone the same room and we got to do that for two days.
Eric Hornung: 00:02:19
Yeah, it was a ton of fun and it is funny. It is interesting because we were sitting across the table and I was like, hmm, this is like being on Skype, but I guess different
Jay Clouse: 00:02:30
For the listeners, a little bit of a spoiler. We have a show coming soon from the Cincinnati podcast festival and it’s interesting this live podcast format. I’m sure we’ll get into it more in the intro for that show. We’ve done two of these now and it’s an interesting medium. I like it as a trend. Eric, you tweeted about it. You seem to like it as a trend as well. There are still some things about it that seemed weird to me, but it seems like you like where things are going with the podcast festival trend.
Eric Hornung: 00:02:58
I think that there’s going to be a podcast festival scene, much like there’s a music festival scene, although music’s a little bit bigger in reach and comfort level for people for music, but I think that you’re going to see these podcast festivals emerge in each city, in each city is going to have one and you’re going to have this kind of ecosystem of live podcasting that develops over the next, call it three to five years and I really like that. Cincinnati has one. I think they did an incredible job. They brought the noise. They brought the love when we tried to do a dry run for a clap beforehand and we didn’t even need the dry run because they. They just brought it. It was awesome.
Jay Clouse: 00:03:34
Ready to go in year one. Do you think that the podcast festival scene is going to be like the musical festival scene in that the actual syndication of the podcast themselves will be free, but the money is made on the tours?
Eric Hornung: 00:03:46
That’s an interesting point. I haven’t thought about it, but sure. We’ll go with that for now. That’s my tentative. That’s my. That’s my strong opinion, very loosely held.
Jay Clouse: 00:03:53
I don’t know. There could be. There could be labels in the podcasting scene. We should do an episode sometime on the future of podcasting, but it could be label some day. In the podcasting scene. You have Spotify originals. I don’t know if apple podcasts or Google podcasts have none originals yet, but Spotify came in hot with dissect on that could be interesting.
Eric Hornung: 00:04:10
Yeah, absolutely. Well, we are not talking about podcasts today. We’re talking about something else in the digital realm. Jay, who are we talking with today?
Jay Clouse: 00:04:18
Today we are talking to Chris Nickless, the Co founder and CEO of Vlipsy. Vlipsy is a video clip search engine. You can use it defined and share classic quotes and scenes from your favorite internet videos. Think of it like Giphy with audio and previous to Lipsey, Chris was working in marketing and building social media campaigns for brands like the NBA, AMC, Fox, Ebay, and CNN flips as a company who’s going to run through some more stats here. Vlipsy as a company was founded in 2017 based in canton, Ohio. They’ve raised one point $1.3,000,000 at this point in funding from jumpstart, Techstars and some angel funds. They’re on ios and Android already.
Eric Hornung: 00:05:01
As we were getting ready to record this show, I sent you an you say Gif or Jif? I say Gif.
Jay Clouse: 00:05:07
Okay. I say gif too. I read in a reddit post once that it’s actually Jeff, the founder says Jeff, the founder says Jeff, but everyone else in the world says Gif. It’s got to be an interesting dynamic for him.
Eric Hornung: 00:05:19
Probably more like creator and inventor than founder, but that guy, whoever that guy is, says gif and I forget the reasoning why, and for a long time I was being. I was relishing in being the counterculture guy who told people no, it’s Jeff.
Jay Clouse: 00:05:36
Yeah, I think I did the same thing, which is in retrospect, I’m just gonna. Go with gifts. Anyway, I sent you a gift of coffee because I needed my coffee before we recorded and embedded within the skype chat function is an ability to send gifts and those gifts are powered by Giphy, so I think that there’s going to be a of parallels between Giphy as we talk today about Vlipsy and I’m. I want to put the framework in context for that.
Eric Hornung: 00:06:05
Cool. Yeah, I agree. A lot of the research that I did leading up to this call was on giphy and it’s interesting because giphy started in 2013. They were sort of the defacto place to go for a lot of these things. I find giphy hardy use a lot of times honestly for the way that I want to use it, but now in ims edge I find myself using the images app within ios more than trying to find or saved my own gifts like I used to because it’s good enough. I agree.
Jay Clouse: 00:06:34
So if giphy calls himself as a search engine, but they are in my opinion, really hard to use as a search engine. That being said, people see the upside in this search engine methodology and monetization strategy because I think they’ve raised like over $100,000,000 to date,
Eric Hornung: 00:06:50
Almost 151 through a series d that’s. Yeah. Only this year it seems. Did they start generating any revenue and how do they do that? Well, I’m glad you ask. They do what’s called paid alignment for brands creating gifts that they sponsor in popular search terms on the search engine, so if you search for tgif descend to to your girlfriend Colleen on a Friday, they may have custom made gifts for call it Pepsi. That shows a tgif gift that they promote as one of the top gifts. That seems to be the word they’re leaning apparently according to the founder that has led to some six and seven figure deals this year with Gatorade, Dunkin Donuts and Pepsi. I would say the media partnership angle is interesting and the advertising partnership is interesting. It seems to be what search engines do because they have an audience who is looking for a very specific thing. Be Interested to see as that approach matures. Does that play out as a good use of spend for Gatorade, Dunkin Donuts and Pepsi, or is this a novel thing they’re trying out in the beginning because that would be a hard thing to measure.
Jay Clouse: 00:08:00
Yeah, I agree. I think it’s. If you look at who did search best, Google, obviously their best feature was like their ability to be universal, so they were the search function on every website for awhile they were there. The place that you are, the first thing that you type in to an internet browser there. The first thing that you type into a mobile internet browser when you’re searching for something, so I think that these kinds of search engines have to be the same and I think that’s the route giphy’s going. You mentioned earlier you’re using that in ios. I mentioned it in skype. They are everywhere in terms of where you can embed gifts easily, so thinking about Vlipsy, is that a similar strategy? Are they. Do they have a different monetization strategy?
Eric Hornung: 00:08:43
I did see a quote from Chris and the cranes article that that announced their million dollar raise saying that they were going to be working with media partnerships and with his background in media. I’m sure he has some idea. I did a little bit of searching. I went down a rabbit hole this morning and looking into fair use copyright law because I wondered, I thought something about this came up with giphy in the past, but especially as you add audio components to this file, is there a copyright concerns?
Jay Clouse: 00:09:12
Yeah. I think if you go on, the first one that I looked at was like a step brothers video clip and that’s definitely subject to some sort of copyright law and maybe it’s a timeframe thing. Maybe there’s some sort of loophole in there where if you do something less than 10 seconds, you don’t have to credit it. I don’t know.
Eric Hornung: 00:09:29
Well, I’ve got some research for you and I don’t know. This is a little bit, you know, it’s a little bit broad so that if it did come down to a court decision, they could make a an interpretation, but there has been no legal standing decision that determines specifically whether gif’s made from copyrighted material are infringement. The four factors that are taken into account when determining fair use, the purpose and character of the use, including whether it is of a commercial nature or if it is for nonprofit or educational purposes, so arguably they use on something like Vlipsy would be commercial nature. The nature of the copyrighted work, which is very broad. I don’t quite understand how to define that. The mountain sustainability of the portion used in relation to the copyrighted work as a whole. That gets to your ten second sort of question here and the effect of the use upon their potential market for or value of the copyrighted work. And so I doubt someone is going to go on flip, see and watch a ten second clip as opposed to watching or buying the actual copyrighted material. So probably safe in that realm. But it does give me a little bit of pause to want to know, you know, what’s, what’s the lawyers take on this and I’m sure Chris has addressed that and just bring it up the interview.
Jay Clouse: 00:10:40
Awesome. Let’s do it. Are you ready to jump in?
Eric Hornung: 00:10:42
Let’s jump in. Chris, welcome to the show.
Chris Nickless: 00:10:49
Hey, thanks so much for having me. It’s great to be here.
Eric Hornung: 00:10:52
Great to have you. We like to start our show off by learning about the founders who take us all the way back to little Chris. Take us back and walk us through your history.
Chris Nickless: 00:11:02
Yeah. So I was a kid that loved video games. I start there because I think everything hinges off of that. You know, parents are always like, oh gosh, kids are gonna. They’re gonna write their brains. I have two kids now and my son right now, he’s upstairs playing Fortnite already this morning. So yeah, it’s a role reversal, but I think, I think what happened for me with video games was at some point in my teenage years I stopped caring about the video game itself and more about the puzzle of how it was put together, know there was things, whether it was the options menu to the artwork that went onto it. Everything was just so beautiful and so well produced and had to tie together so nicely that I started getting super curious. Almost like Legos of what? What is this master puzzle? How do you put it together? So I didn’t go into video games so much, but at that time, and you’re talking early two thousands, this idea that you could build websites and that not a lot of people could do. It was fascinating to me because I could fake it so well. Didn’t have to spend a ton of time learning how to do it. I could just, you know, basically piece together things, talk about minimum viable product. It was what do I need to research enough to make this look the part. So
Jay Clouse: 00:12:08
Was this like, was this like Geocities or were you doing some custom work?
Chris Nickless: 00:12:12
No, this was. Everything was always custom. I tried to make it as hard as possible on myself for some reason. But yeah, I remember the Geocities, Angel Fire, all of those things. But yeah, so I was doing html for, I think it was someone from my church who ironically today is my co founder. He also had an interest in this but you liked more of the data and the back end piece of it. The stuff that wasn’t interesting to me, I liked everything that looked the part and would give people, you know, on first glance to think it was better than it was and everything was just this like fancy facade. Right. So I was really big into an online gaming ps. Two game called so calm and I would play with a bunch of friends on an Internet connection and we had a clan and so it was like I needed to have a website for this claim. So we went out and I just figured out what I would need to do to build this together. We called ourselves the WWF clan, like the world wrestling federation. Everyone had a name after a classic wrestler. So I built these like intro videos. It was like the corniest thing, man. It was it was a flash intro that was like who the actual person was like real name location followed by like Hulk Hogan. It’s got the. I am a real American song in the background. There’s all this glitz and glamour, like his intro, like you’re going to come out of the metal. All that fun ended really quick because that site got ranked really high on, on search engines and then here came a cease and desist from the WWE. We had like hundreds of infringements. Every single infringement was like $75,000. Fine. Yeah. I’m scared to death. I still have the email that I printed out that was like I’m 15 years old. I don’t know any of this means I was just trying to have fun and they’re just like, just take it. That one. So progress forward a few years and I get to Ohio state where I went for college and my first year I roll enroll in computer science engineering. So the biggest thing for me was how am I going to balance all this new fun responsibility with like computer science engineering where you’ve got to go to class and then on top of that take these long labs and I didn’t have any computer science training in high school. I was amazed at some of the kids in my class, like they have been doing this for four years. So there’s all this formal ketchup, not this school of hard knocks from just teaching myself in my parent’s basement. So I decided at some point I was going to keep doing what I loved doing, which was making websites and I wanted to pair it with a passion. It’s no longer so much into video games, but now he’s more into. That was always a big sports fan. So I made a website for Cleveland Indian center fielder, Grady Sizemore, and at that time I was just a massive fan and I decided all right. Like there was no Twitter, Facebook was just taking off, but no, no one’s celebrity wise was on it yet. So it was like, how do I build something or other fans that are out there, how do we use this as kind of like my source material to learn. So I went to Barry Bonds website and I looked at it inside out, studied every single page, drew on paper, everything that was there and decided to like recreate it. Now again, I wouldn’t look at code because even if I looked at code, I didn’t know what it meant. So my goal is just a piece it back together in my own way of doing it handwriting if you will. And so I built the whole thing in photoshop, export it, it was slices, it was just the most Janky website. I remember I was updating his stats every night and rather than it being updated through like data, I would actually go into photoshop and update and update the batting average and like how many stolen bases all this.And then I’d like drop that onto the the hosting site. That basically would, would change the image for everyone, so I think this really proved to me at a young age that like so long as it looks great, that’s the thing that catches everyone’s attention. Can you look the part? Next thing I know, I was getting a call from the Seattle Times. Great. He grew up in the Washington state area and essentially they were doing a bio piece on Grady and they picked me. It’s like an export expert source because I made this website that then got my name out there to the marketing agency octagon in Washington dc that was representing Grady and we’re interested if I could do other work for other professional athletes and here I am with this Jakey website. I have no idea what I’m doing, but people seem to like it and I remember even Grady’s aunt wrote me an email and thought I was grading, which I thought was incredible. So
Eric Hornung: 00:16:35
Did you play the part,
Chris Nickless: 00:16:38
I don’t have that much swag like Brady.
Eric Hornung: 00:16:40
Eileen, it’s so great to hear from you.
Chris Nickless: 00:16:44
So I, I ended up going through and saying, of course I’ll do websites for you, but this meant I had to figure everything out quickly to be more and more professional, which is another great like entrepreneurship lesson. I feel like if you’re going to do the whole mom’s basement thing and try and figure it out yourself, you need real work to, to drive you. These kind of passion projects are fun, but there no timelines, there’s nothing as far as like, I have to make this work so I’m going to choose to not go to sleep and instead stay up and trying to figure this out. And there’s that whole like do or die methods. So you’ve got to ask questions now. There’s get hub and all these things. But you know, back then it was just forums that I’d have to ask questions on to try and get help. I basically at this point, just to wrap up this college story, I was starting to get leads. I was starting to teach myself, but class was becoming a hindrance and on top of that class was expensive. Books were expensive and and there were no, like YouTube was not there for me to learn, so the way that I flash websites where the thing that, and that was great for me because I loved all the Glitz and Glamor and athletes loved it too. They, yeah, you hear about these. So the first thing they do is they get their check and they buy a Rolls Royce and they make it custom and all this stuff. So having a custom website, that was everything about them in bright lights was, was everything thereafter. So here’s what I did. I went to my counselor, I said, are you guys gonna ever teach me? Because at this point we were learning c plus plus and things that I had no interest in. I wanted websites and they told me to go to the art school in Columbus if I wanted to do that. I’m like, I’m a Buckeye. I’m not gonna switch out of, out of this. I got to get my degree here. So they said, well, communications technology as some new program, it’s the first year of this. I’m not sure what they have. We can switch over there, so I switched there. The classes were so much easier. They gave it to. They were just figuring it out. There’s no lab.
Jay Clouse: 00:18:30
The major was Communications Technology?
Chris Nickless: 00:18:32
Yeah. Yeah. It was like, instead of the journalism part, it was like, we’re going to learn about technology stuff. I go into these classes and it’s teaching things like Dreamweaver and fireworks and not only that, they’re teaching at the wrong way and I had taught myself everything already, so needless to say, I could show up on syllabus day, look at what we had to do and just get it all done like in a week, and so I’m sitting there with all this extra free time. At that point I went to my counselor and the communications department and I said, all right, I’m full time word on the street as if I’m full time. Twelve credit hours. It was quarter credits at that time. So long as I’m full time, I pay the same price. Right. It doesn’t matter how many credits I take. She said, yeah, and I said, okay, how many can I take? She overrode the system instead of 12, she let me take 25 a quarter and I did that every single quarter, so I did 100 quarter credits in one year and just rent my way through it and a lot of it was I gained the system as much as I could figure out how it can be the worst college student to get the best grades.
Jay Clouse: 00:19:30
Were you trying to graduate early by taking that many credits or were you just trying to get as much bang for your buck as possible?
Chris Nickless: 00:19:38
I think a little of both, but mostly to get out of there quickly. For me, I kind of figured out what I was good at. I saw some doors opening up and I was ready to start life as an adult, so fast forward and I’m. I’m graduating after two and a half years and then if that wasn’t enough to put on my plate, the love of my life. I had met when I was delivering pizzas in high school and convinced her to transfer to Ohio state and we were engaged through college. We graduated on the same day. We decided at that point, my wife and I, we were gonna go for it while we were young and I think we went onto YouTube at that time and watch this video of Santa Monica Boulevard and it was beautiful in California, so we moved to Los Angeles and basically paid for myself to fly out to Los Angeles to take two interviews. One was with Sony pictures and the other was with essentially like a consultant shop that would work with all these very big names around la and their biggest lead at that time was MySpace and so I interviewed at my spaces headquarters in Beverly Hills and I was starstruck. It was amazing. It was really weird because I remember people are like skateboarding around outside of my space and at tattoos and just like cargo shorts and everything was like flip flops and I’m showing up in slacks and a button up and they won’t let me in the building unless I like untuck my shirt. Like under a couple of buttons, lose the tie, roll up my sleeves and I’m like, this is the place for me. Like this is awesome. So
Jay Clouse: 00:21:03
I also have this feeling of just feeling like MySpace, tom is like the first person to greet you in the building. Like hello, I’m Tom. Let me be your first round.
Chris Nickless: 00:21:11
Yeah, exactly. Now it would be some just like Ai Yvette, you walked by some screen and it says it. But yeah, it was. It was a really, really good vibe at the time. And for me, I got offers at both places. So I took the job with the consultant shop. It was one of the best jobs I’ve ever had because here I was through Ohio state taking as many different projects as I could and that’s what they allowed me to do out there. It was like I’d work two weeks at the comcast office where Hulu was eight people big at the time I was working with something called slingshot labs. It was an offshoot of my space to the founders went and created that, that I’d, you know, whether it was warner brothers, ABC, just all these studios at turn it Disney over at myspace to solve a problem there for a couple of weeks. Then bouncing out who is so cool to just be like, these are the most amazing projects. I’ve got a really talented team. I’m not going to get complacent anywhere, so it stretched me really, really quick. So that was only about nine months, but it was an awesome job. Then it landed in the startup world. Talk us through that day. You have this amazing job. It’s amazing. Everything’s great. Nine months. That’s what happened. Yeah, that’s a good catch there. So there’s a couple things, and this is again the, the irony of it all. I was so naive. Starting off, I had no idea what I was worth. So they made me a job offer. I just said, yeah, sure, whatever, whatever price tag I get out there and I realized that the cost of living, I mean literally like the apartment that I had gave me a special rate because I didn’t make enough money and I just didn’t realize that. Then the people I was more talented than on my team were also like making almost double what I was making and I was just like, holy cow, but they paid me a moving fee to move across country. It’s like 7,500 bucks and if I left within the first year I had to pay that back and so I was stuck there. I felt until I finished a year and ironically one of the best things that happened to me, certainly not for the company, but this was 2008, so here comes financial crisis and everyone wants to start cutting budget and as a consultant shop you start losing accounts of that. So when, when the company was losing, whether it was my space or wherever they lost, there was a reduction in force and so there was a, the whole round of layoffs. So this would have almost been a decade ago because it was around Thanksgiving of 2008. And I remember I was freaked out because I hadn’t saved any money. We were living paycheck to paycheck and I had no, I’ve never had to look for a job like this before and so I put it out there whether it was like monster career builder or something like that and all these recruiters call and it was my first go round with recruiters which now is very familiar with, but at that point like everyone wanted to call talk to me because I had this really good resume and before I knew it, within 24 hours I had multiple job offers and not only were they multiple job offers, they were also job offers that we’re going to pay me what I was worth. And so like you get laid off and immediately almost double your salary is crazy to me. So that was something where I had multiple offers and I go from Ohio state of being able to work on what I want in this job with the consultant shop. I get to work on like all these different projects to now I was going to go to one of these larger companies and basically sit in a cubicle, have one really small defined role. And like that’s it and I just did not appear appeal to me whatsoever. So essentially I took a job with a startup because when I had the interview it was at a coffee shop. It was all about like, we’ve got to go, we’ve got to hustle and we’ve got to do all this stuff. It was going over all my skills, the agony, photoshop, I can use flash, I can code, I can do some of the business stuff like in you got to wear all these multiple hats. I’m like, what is this magical land of startup culture? So that was again an amazing opportunity and ironically again, it nothing comes without its stresses. So I start that. And a month later on Christmas, the, the night of Christmas, I get a call from, from my boss that they were going to lay me off or they were gonna fire me. And it was had. Yeah, it had little to do with, with me. So I go in essentially just to tell you about the project. We were building an avatar engine and the avatar engine had probably four developers working on it. So you get a lot of mixed code and there’s just so many thousands of lines of code and you basically have to do this puzzle so that you can go back to seeing all the pieces laying out on the table. So I literally as as archaic as the sounds, I printed out every single page of code and do it a three hole punch, put it in a binder. And so when I was showing up to work, I was going through with a highlighter and making notes with a pen and stuff. And they’re like, why aren’t you typing on a keyboard? Why aren’t you like going through like where’s the new code that you’re writing all of this. But I was trying because it was only one person and I knew what they were against in terms of timeline. I was just trying to figure out how I could save us time by reusing what was already there. And so literally as I was highlighting this and making notes, I had to get my plan together so I can move faster. So it like go slow to run fast and they didn’t totally understand that. And clearly look, being a founder now, I get it from their perspective, there’s totally no blame at all. They just came off with paying for people to not ship a product and now you bring on this person and you’re not seeing any tangible progress. The first few weeks I’d be freaking out too, like sand is running out of the hourglass. You’re spending money here. At that point it would have been my first month there. So they just paid my first month’s salary on it and they’re like, what do we get for this? I guarantee I would have had the same reaction that they had. And so now you’re. I am on Christmas night and I’m just reeling from this because I love the opportunity. I’m so close to being able to start coding from everything I’ve laid out and I’m saying like, just give me a chance. Like, like what is, let’s set it together, like set the expectations. So we’re each on the same page. If I don’t have this shipped by what date, I will walk away all this. Like this way we know what the stakes are on the table and let’s go forward together and they said end of February, we need to ship this. So I think by January 14th I had to chip to now. I worked at that startup for a couple more years. I ended up moving up in the company beyond just a flash developer, so I started to run the team and the team of creatives. She got me the managerial experience and also build up something where here came the dawn of myself doing expression and I didn’t know what expression was or what I was going to do with it, but we had an avatar engine and now there was, I think we didn’t Avatar campaign for the walking dead. We did avatars for like Aeropostale as a clothing brand we did for timberland things like it was all these brands that you wouldn’t think of that one and an avatar engine because that was the hot thing at the time. You had all these social networks and everyone was looking for what their profile picture was going to be. So having something where you could do a custom branded avatar was in, and this was what got me into expression, which is what I’m still in today, what is expression? So expression, think about it like any way that you’re going to communicate when you’re not face to face. So that could be anything from personalization, which is you know, the Avatar that you’re going to make of yourself. It could be to the emojis that you use, the stickers, the means even the, I don’t even know how to pronounce it because it’s a acronym. The Osi characters or whatever they are back in the day where you’re putting a bunch of letters together to make faces. Anything that would bring out emotion or articulate something as a communicative language using media. That’s expression. And so I’ve gone through anything from avatars to Emojis, emoticons, stickers, gifs. Now I’m into videos, but
Jay Clouse: 00:29:03
I see on your linkedin something called Mimo, which has a very similar logo to something I remember as my Emoji keyboard. Are those things related?
Chris Nickless: 00:29:12
So that one was not ours, but it doesn’t surprise me because like I feel like everything had a name that number one had to have a strong and alliteration and then number two is like some sort of fun name and they were just popping up everywhere. So we started Mimo. Mimo is essentially a company that was formed around Ip licensing, so virtual goods now you see everything with fortnight where it’s like you’re going to buy these ad-ons costumes. All this. Like at that time it was done more in virtual virtual worlds, second life and we were one of the primary vendors for Xbox avatars. So if you were to go into XBOX and you’re going to turn your avatar that you got for XBOX live into something from whether it was the NFL or halo or Shrek, any of these things. We would take the IP from, let’s say Dreamworks, we would turn it into Emoji pack sticker packs, any type of thing that can be sold for a 1.99. And then we would go out and work with all those different tech companies to basically become a vendor. And sometimes that would mean they didn’t have a sticker shop, so matt and I would code them a sticker shop and build that in for them. So we would write policies for people in guidelines of if you wanted to get other third party people to submit stickers, these are the things that you should teach them how to do it the right way. We were doing everything for people early on in 2012 and that meant we were working for about 30 plus chat apps because there’s this big chat boom. And we began to build up a lot of trust in ourselves again that we knew what we were doing. We were the guys to go to for this stuff. And so whether the market has gone from, Hey, our users like to use emojis, are users like to use stickers? It’s gone from stage to stage of whatever the hot new trend of media is. But the principles are still the same. How to work with brands are still the same what thereafter? So it, it’s been nice that it’s not something that really goes away and every few years that reinvents itself.
Eric Hornung: 00:31:01
So at this point I think we’re at 2012, 2013. I’d like to kind of shift into the Vlipsy idea. You have a lot of life infrastructure in place. You have a portfolio, you have a life partner, you have a business partner, you have a mentor. How does this idea for Vlipsy get started?
Chris Nickless: 00:31:20
Alright. So the idea starts right around that time it was working remote for Mimo and on Skype we had a group chat with some friends. So everyone, my brother worked for a car dealership at the time he was on there. I had all these friends that were in a group chat, the name of the group chat was shooting, shooting the shit and essentially anyone can type whatever they want. And throughout the day it was all this random conversation with people. You know, today we have slack. So this is almost like the early iteration of how people use slack today. And one of the things we would love to do on skype was like drop references, the way we would hang out at a bar or something like someone’s gonna say something and it makes you think of a Ron Burgundy from anchorman and like just typing it out wasn’t enough. And here we are, we’re working in expression all day long. It’s like why isn’t this stuff exists? So we would go to YouTube and I would find the video and we knew with YouTube, if you looked at their url structure, you could put a timestamp on to the end of the url to where the video would start. You couldn’t put an end timestamp, you can just put the start one. So essentially we would figure out where it started. I would create a bookmarks folder now categorize these bookmarks folders into various different expressions. Hello, goodbye, funny, whatever our inside jokes were, et cetera. And all they would do would be links that would have the timestamp of where that quote would start. And I would pace them into skype. And the goal is to get it there as quick as possible. And now you have to hope someone clicks on the blue url to open up and watch the video to get the punchline of the joke problem was then it wouldn’t stop playing. So if like if it’s in the middle of a dialogue now it’s just going on so they may not know what you’re actually trying to articulate. And I mean how cumbersome to try and do all of this. So that was the first iteration of Vlipsy was this google chrome bookmarks folder separated by expressions with time stamped urls and. Yeah. And so we were always a fan of this even as we went through and I would say the best form of expression we ever got were gifts. We were obsessed with gifts. I’m so waiting for you guys to ask like the cliche question of gifts versus Jeff’s that like always comes up and I will tell you that like it’s both and I don’t think you’re ever right, but all the gift providers that I know well now, giphy and tenor, they, they always say give the a go. So yeah, we, we loved them. We use them like crazy and they almost got us there, but now you’d have this Ron Burgundy quote that had captions at the bottom of it and so I say this all the time, but it’s like, you know, you wouldn’t want to watch Anchorman on mute, you know, like you’re going to miss all the funny, like the livery of the lines and what makes Will Ferrell so great. So that was something that was out to try and fix if not for everyone else, at least for me and what we were doing in between the time 2013 to when we started the etsy in 2017 memo was we were acquired by kick, which is a large messenger app for us teens. So they brought us into basically run content and figure out the entire content strategy because everything inside of a messenger content drives engagement. You know what I mean? You’re a messenger is what it is. If you’re typing something, I type something and that’s not really gonna do it, but how do you get news? How do you get, whether it’s movies, pop culture, everything infused into that Combo to keep driving more and more messages being sent. And that was kind of my role, so content would call ourselves the content squad that we formed there. It was all about emoji stickers, gifs, videos, news, anything that could go in and we’ve got a mass audience of us teens so there’s a lot of brands that wanted to take part in this and it’s like how do they fit in, you know, whether it’s a Coca Cola or Nickelodeon or NTV, whatever, like where do we fit them into the picture and what our, what our users really want. So it’s as much about being a product lead as it was just the business partnership side. And this whole time I’m doing this, I’m watching the gift industry take off. I’m working closely with tenor, got to know the guys that giphy and I’m seeing how they run a business purely around gifts and they’re really good at it and it makes a ton of sense. And there are one of our best partners that I work with them daily and everything was coming from the brands they wanted to be involved with this and it was just this really quality business that I understood so well. And here I am sitting here thinking like I still have this age old problem with my chrome bookmarks for and no one’s done it. And I can remember asking tenor and asking giphy like, what about video? Like are we getting. If they had said, yeah, we’re doing it, Vlipsy’s ever created like literally I have no desire because all I wanted was, it felt so cool to build a product for myself. Like it was just something I was after for so long and I was finding that a lot of other people were too. So we started working on it nights and weekends. Vlipsy it was again cofounder Matt night. Now we just started doing the hustle thing, sacrificing sleep to be able to stretch more hours. We both have two kids, so it’s like living the dad life too and trying to fit it all in. Tenor say that they didn’t want to go the video route. Yeah, so you like, why does McDonald’s decide they don’t want to do everything on Taco Bell’s mania? It’s something like once you’ve got a business and you have a core menu that you know your customers want and you’re really good at that and you’re delivering product for people that they want and expect from you, let alone your name’s Giphy, which is matching your gift like it. Everything that they do is done so well. They’ve engineered systems and all this stuff is happening behind the scenes at a place like Vlipsy or Giphy. There’s so much that goes into how to prep media a certain way and you look at the way that give three of and found or even created everything off of a gift is what you see first are really just what you see. So I think of like a Jason Bourne or some action movie. It’s three second action clips from one camera angle before it switches to another and so really what makes it a good gift is not having that jittery like seen switch that happens in it. You want it to be very smooth and polished. Whenever you go into something like video clips you’re now talking about. Yeah, it’s got to be audio first and what you see second, I don’t mind as much about that jittery, seen switch so long as the quote is polished. I would much rather have, if you and I are talking and we’re going to split this audio up, the difference between so we’re not talking over each other and there can be like a fraction of one second that you have to like Polish that off on the audio side and you also have to know the context. Sometimes you have to. Same thing as a director with a movie. You’ve got to let a line breed so someone says something. It’s got to have that long pause and then maybe like a background noise that happens. So yeah, it wasn’t like if he intended could just snap their fingers and just boom right there. Now Walmart or Amazon or anyone at the top of the food chain on something has deep pockets and they can decide they want to do whatever, but ultimately it doesn’t make a lot of sense for their business. Could they be investing in something else with their time that is going to produce more
Eric Hornung: 00:38:17
So what is Vlipsy in your own words?
Chris Nickless: 00:38:21
Yeah, Vlipsy in my mind is the way that short form video is indexed. At the end of the day. We look at ourselves as another form of YouTube, but made for today’s consumer behavior everywhere that you go on. Social media, Instagram, Facebook, twitter. You scroll through and there’s short videos that play videos that are less than 30 seconds. Videos that are straight to the point, very articulate, but there’s no central repository, like there’s no search engine that you can just go to and find really quickly and if you look for them on YouTube, a lot of times they’re buried in a four minute video and you know everything. YouTube is serves to us as consumers. Again, I love YouTube. It’s, it’s about whether it’s YouTube, red originals and long form to creators and them doing 10 minute logs or instructional videos that are two minutes long or movie trailers that are two minutes and 30 seconds long. There’s not a ton for that, like vine type of content that’s really short. There’s not the 15 second videos that you see showing up on social media and so every time the Internet’s gone through something like this where there’s an abundance of content being created, but there’s no central place to search and find it. All of a sudden someone builds a platform for that and I wasn’t going to kick myself to let someone else build that because that’s what he did is the first gift engine ever seen him show up on tumblr and all these places and Alex Chung and our CEO is just like, I’m just going to build a scraper and put this all in one spot and I’m going to add some metadata around it and make it to where we all can find it. So Lipsey to me is how you extract the six second quote. Out of that four minute video.
Jay Clouse: 00:39:58
I got to take this short tangent. Sorry, Eric. I’m glad you gave me this door Chris. I want to hear your take on Vine.
Chris Nickless: 00:40:05
Oh, my take on vine. Boy, you can look at that glass half full or glass half empty. From a founder perspective, I think I heard once that vine was acquired when they had 65 users or $30,000,000. That is a founder’s dream.
Jay Clouse: 00:40:18
No Way. They required that early by twitter.
Chris Nickless: 00:40:20
Yeah, really, really early. That’s from the sources that I know who would know, but essentially Vine was fantastic. It was this. I don’t think we knew what we had with vine. It was started off as such a quirky thing and you didn’t know whether to take it serious or not, but I go as market research, I go into a bunch of local high schools. I always test everything out with a high school audience first and everything they say from all the focus groups in conversations I have is they miss the most. That’s the biggest hole in the market and that’s amazing to me. With something like I. I just went to high school two weeks ago and I said, well, what about musically now known as Tick Tock, like doesn’t that kind of replace it and somewhat abruptly blurts out if you’re eight years old, you know, because that’s how high. That’s what’s good about talking to high schoolers, right? They’re unfiltered, they have no problem telling you what they think. And so for us it was. I look at vine and I just say, you know, again, timing. Twitter gets it. Twitter really smart company that knows their core product really well. Everything kind of has to fit. When you get into these large companies, be it the mice, paste, the twitters, the Facebooks of the world. You have endless opportunities surrounding you. I mean you probably have things that are tabled here and there that are multi $100, million dollar business that you’re just not even touching. And it’s always there, but it’s about prioritization. That’s the hardest thing of working in a big company like that and everything kind of has to blend in, be cohesive together. And so when you acquire something that early, I just, I, I’m not saying this off of knowing anything, but I just tend to wonder as time evolves internally in a big company like that, do you really have the same intentions on a product side that you originally had? I don’t think it was anything filed with the product. Clearly consumers loved it. I just think things change in, in product initiative shift. That’s my take.
Jay Clouse: 00:42:13
Super interesting. I Miss Vine for culture in this idea of these big, these big platforms with so much opportunity around them. I think about that all the time too, with like Facebook’s dating opportunity and they keep saying that it’s coming. It’ll be coming in like nothing could be crazy anyway. Yeah, I’ll, I’ll get away from that. I just miss vine so much and it strikes me that what you’re doing now isn’t completely dissimilar from Vine and obviously very specific towards expression of things people will recognize already and less around original content. But maybe that’s something you guys have in the works too.
Chris Nickless: 00:42:46
Yeah, we’re, we look at original content all the time. I think there is from our side, look we’re, we’re a seed stage company right now. Do I want to do original content 100 percent like I think it would be awesome, but I think there’s a lot of responsibility from my seat to make that choice responsibility to the company to where we’re at, like to the user, to our investors. I think a lot of these things you just want to be really, really calculated how you do it and make sure you can. You can handle the follow through of it because one of the things as soon as you open up a camera very bluntly and you allow people to just upload what they want to avoid, you have a lot of checks and balances you have to go through and trust and safety. So it’s something that I want to be responsible about it and think through it the right way, but. But those, those thoughts are happening there. There are definitely a lot of internal discussion and places we’d love to take the product. But for now that we’ve got the best case scenario for us as a young stage company, like we’ve had a huge 2000, 18 like we took off this year, people love the product, the engagements there, all the things that we would need, that we laid out as a company, we would need to take the next step forward. Those things are happening. And so for us, stay the course and stay focused on what you’re doing is a seed stage company. You have to be narrowly focused.
Eric Hornung: 00:44:04
What’s the size of your team look like right now?
Chris Nickless: 00:44:06
So we have 11 team members, five of those are part timers and so just really talented people that I think one of the best things that we have in today’s world, uh, is a true understanding of current culture and the work climate. So we’re a remote company and on top of that, everyone has their own styles. Netflix is really popular for their relaxed culture, et cetera. I wouldn’t say relaxed is a word because I think that takes a negative connotation when you think of it in the workforce. What we are is like really understood and really, really connected as a whole group of what we’re after here so I can take someone who is at Georgia tech as a senior in engineering and going through machine learning and really bright and is looking to maybe take half the course credits and instead pay their way through college so they don’t end up with a student loan debt and arm them with all kinds of real work, get them fully trained and ready to go. It doesn’t cost us a ton at the seed stage and it builds up a great, you know, first hire that you’re going to have as soon as they come out of college. So we’ve had some success doing that. We also work with some professionals who have their own apps and are doing some things more as a part time basis now plus, but they’re really clued in and they work as any full time engineer on our team. So we’ve been very flexible.
Eric Hornung: 00:45:28
Is headcount your biggest cost right now?
Chris Nickless: 00:45:30
Uh, yes it is. Look, as as you get out to more millions and millions of users, you know, if all of a sudden we get turned on, whether it’s a google, Twitter, Facebook, tomorrow, a outset, everywhere you see a gift button, you’re going to have cost scale for server, infrastructure costs, but you know, those, those things are all planned. The biggest thing that we’re going to have right now is going to be our headcount.
Eric Hornung: 00:45:54
So when I look at your guys’ cost structure, it’s server infrastructure, headcount. Is there anything else?
Chris Nickless: 00:46:00
Uh, no, no, for the most part. I mean, we are scrappy. That’s one of the beauties about being remote is that you’re, you’re talking about, you know, there’s no real office costs or any of that. I mean, we have travel and other things that any business would have, but no, that’s, it’s mostly a engineering. And then we have a partnerships team as well because the biggest thing for us is to kind of carry over everything that I’ve talked about at the beginning of this, uh, working with brands and understanding what their needs are. That’s always been a really big part of the vision here. You know, you look at a new show that would launch on NBC and NBC essentially is putting out content on Twitter, Facebook, YouTube, you know, every single social platform and there maybe like a 62nd approved snapshot of the new episode, which when I say approved, it comes from the production company and they’re allowed to use it for marketing purposes, but it’s a 62nd video. So you’re still talking about the burden on the user that they have to sit there and watch the entire thing. That’s not, that’s not getting anyone hooked on a new show. You’re not. I don’t know anything about these characters. I don’t know what this dialogue is happening for a minute long. It’s not wrapped into terms I can understand. It’s kind of working against them. So our goal is to say to NBC, you want to get the most engagement for the show. You have hilarious characters baked inside of this 62nd video. Let’s split these out. Let’s make them four seconds long and let’s put them into a conversational context for expression. So if it’s, you know, you having an attitude towards someone you know, we’re going to tag it with whether it’s salty or whatever the current vernacular is of the Internet to make it bubble up. Now as I start to fall in love with those characters and I see a watermark that it’s this show and it’s the next show is at this time of the tune in message. That’s what marketing in this industry has always been about. So nothing’s changed. We’re just talking about moving with consumers and the consumer behavior today is we have zero attention spans. I mean it’s down to dust at this point and literally if you can get someone in whatever they were currently trying to do, like marketers have to stop expecting. People are going to come and find their video. You’ve got to take your video to the consumer and it’s got to be in something that they can consume really quickly and it’s got to be shareable. Like that’s. That’s really what Vlipsy is about.
Jay Clouse: 00:48:24
You said a minute ago that when you’re working with Mimo and you’re close to Giphy and tenor, you saw these companies as having a great business. It sounds like if I’m connecting dots here, their business model was related to some of this brand and media type partnerships that you’re alluding to. Can you spell that out a little bit more and under and help me understand what the business model is between them and even further on the Vlipsy side?
Chris Nickless: 00:48:50
Yeah. Perfect. So at kick we were working with Tenor. We’re, we’re doing various things with Giphy as well and essentially they were working with all the major studios, all the TV shows, et cetera. I was curious to know how that worked as well. I came from a licensing background just to my time at Mimo, so licensing the model there. We would go to, I think I said Dreamworks earlier, so go to Dreamworks and there’d be a minimum guarantee. Possibly like that’s the licensing world. If I’m going to put something in target as clothing, there’s going to be, I believe I can sell this much product, so I’m going to front you this much money to put my money where my mouth is. It’s 25k minimum guaranteed down for a year license of this and I get to keep the revenue on that first 25k that I sell and then once I get over that and then there’s a rev share agreement that was the traditional way that I came about.But that’s when you were selling products to a consumer for a dollar 99. So there was money to be had here and I think what’s interesting is that that failed miserably in our industry. What we saw early on was line, which was the biggest messenger APP in Japan. They were reporting these massive, you know, quarterly reports and earning statements about selling stickers for a dollar 99. And so everyone over here in the west, and this was really what we were, what Mimo is based on the sticker industry. We’re gonna set up a sneaker stores and help them to do the same thing is a huge revenue model. You’re missing out on. We’ve got all the content that stock the shelves. Just give us a percentage of it. We got this right. No one bought it over here because the culture and the West was so different. We’re going to go onto google image search. We’re going to like find a way to hack and get it for free. No one wants to pay for anything on that and they’re not going to. So whether you like it or not, these people are going to find a way to get your content and abuse it. You can either get out in front of that and handle it yourself and be the owner of an official verified account or you can let a bunch of people meme it and trash it and do whatever they want that steers away from the brand. So essentially when stickers weren’t working in this transactional model wasn’t working. The way that the industry started to look at this was less about the licensing department mean. What’s weird in my world is you can call up any one of these large companies, so you talked to the licensing team, they’re asking for money right away. You talked to the marketing team and they’re surprised they’re not having to give you money like it’s just two completely different cultures and objectives that thereafter, so you really. Now, when you look at tenor and Giphy or even ourselves, you’re working with the marketing teams are working with the social teams and their goal is purely to make sure their properties have the best chances of success. Are they in the conversation? Are they becoming topical or are you really getting engagement no matter what the new platform is, it could be another new app burst onto the scene tomorrow. How do you make sure that your brand is there and that you’re engaging with those people and yeah, there’s some of these products you snapchat used to and probably still charges an arm and a leg for those lenses that you can do that are branded. You know, that’s one way you could do it. The way that Tenor Giphy ourselves that we’re doing it is we’re saying there’s really no money exchange. We’re not going to charge you to do this and we’re not going to just take you to snapchat. We’re going to take you out there to every single platform that we work with as a distribution hub, and so there’s value on both sides. These things are mostly done on a master services agreement where money’s exchanging hands. I mean, look, if it gets to a point where money is filtering through and you know they’re trying to make money off of their content on, on one of our products or we’re making you no money like with them or something. Of course there will be rev share agreements at that point, but that’s not the focus right now. The focus for these types of businesses is that you’re based off of user engagement. I’m walking into any new big messenger that has the core audience that I’m after. The first question, they have to qualify me and it’s what I had to do at Kik when dealing with partners is what’s your engagement level like? How well do you retain users? How much are people sharing content? That’s the stuff they care about, and so if we’re doing our job as a search engine, surfacing the best content for you, the right time stuff that converts and leads to a share so that you’re tweeting more so that you’re sending a message more. That’s what we’re after. That’s what we’re graded on right now.
Eric Hornung: 00:53:12
So simplify this for me a bit. How does Vlipsy make money today?
Chris Nickless: 00:53:19
This, this can be really easy to simplify. We don’t. So yeah, like it and it’s not something like we’re allergic to revenue. We know what we’re doing here. Like we, Matt Nye at
Jay Clouse: 00:54:28
You have to take another look at you.
Chris Nickless: 00:54:31
And that came like a big meme. And so without really knowing it. So we were breaking down trailers. Essentially trailer hits. We’ve, we’ve got a catalog because I want to index really well on that with search engines. So if you were to search A Star is Born, want to take another look at you like and look at the video results were number one. And not only that, like we’re. I think our video is like five seconds salon because it’s just that quote, every other video underneath that is two minutes plus like it’s the trailers, etc. So now all of a sudden when vanity fair and refinery 29 and in these big publications like that are starting to review their film or review the film and they want to drop in references in the middle of their article. They’re using our in bed play. oh, reading audience that’s going down the page. The media should be used as a break in the action to give that media. It’s good that user that that take a breath before you let keep reading and you’re not going to toss a two minute video because you’re. You’ve distracted the user away from their core goal. so being able to just go from paragraph into, oh, there’s the five second reference. I mean we, we learned how to read this way, right? It was picture books when we were kids, so this is something that fits really well. We rank really well and so that’s why everything we’re about is become the best search engine. And then when you look at the monetization of it, if you can become a really good search engine, every single search engine out there monetizes the same way it’s about sponsored search. At some point people are gonna want to bubble up the top of results we think that can happen here too. And so then it becomes, you know, I’m interested in coffee and you have 3 million people every morning talking about coffee. what a great opportunity for my coffee shop to be able to target those people.
Eric Hornung: 00:56:11
So you’ve mentioned the idea of engagement a lot and I’m wondering if you can give us some of the specific metrics that you guys look at in terms of how well you’re doing with engagement.
Chris Nickless: 00:56:21
So the biggest thing, if you’re a search company and you claim to be a search company, people are searching for things and they’re not finding things to share. You suck at what you do. So the first thing that we look at each and every day is like, where do we suck? How. And that goes into a lot of things. It can be, do we have the right content? You know, we, we look at user behaviors, are they browsing content but not sharing it. That can be an indication that the content may be isn’t cut right. You know, it’s not what they expected. Like there’s a lot you can, you can decipher through looking at the numbers, but the biggest thing at the end of the day is what, what’s, what’s the search to share percentage on these top terms and are we growing on that? Everything in this industry is about shares, shares, lead to engagement. Wwe can drive views like crazy, but there’s so many things out. There are vanity metrics and you see this on. I think I was amazed at like subscriber account or YouTube because even though you have like a massive subscriber count, it’s still about like how many people actually viewed it. Not just because I’m going to put something out, it means I’m gonna get all these views and I think that’s the same thing for us. Like at the end of the day, there’s, there’s like a good metric and then there’s an awesome metric and the metric for us is shares and I don’t necessarily, I’m not partial to what those shares need to be. I just want a good healthy platform and shares to me mean we’ve got to help the platform. Now I will say this, there is a difference. I think the one caveat to what I just said about shares is that you’re. You’re really talking about the difference between a setback experience and a sit forward experience. So YouTube, you’re sitting back, you’re watching something. It’s probably not as shareable if you’re engaged in a conversation and the whole point of using see is as a quick keyboard to get to a quick expression. It’s got to be about shares. That’s what you’re after
Jay Clouse: 00:58:08
When you talk to people you guys just raised around, so when you talk to those investors and you were trying to quantify this opportunity for them, how do you quantify the opportunity ahead of Vlipsy in the future?
Chris Nickless: 00:58:20
Yeah, it’s a completely in. One of the things I was completely different about that seed round that we raised and like any financing will we’ll do in the future, is those seed round investors. They call them angels for a reason. I mean they. They were fantastic because they took a flyer on a company that was mean. I’m, I’m even sheepish to call it an mvp. We hadn’t launched yet. Like we had done some experiments. I had done my market research and everything, but they were really betting on founders and Matt Nye having been together for so long. You get the two of us together and we can finish each other’s sentences. Just see kind of the that how well were made to work together and then the confidence that we have of knowing the industry and had been doing this for so long. There was a lot about we’re going to be able to do this again. We’ve done it with emojis. We’ve done it with stickers, we’ve done it. We’ve seen him with gifts. Like this is something that is an industry that we don’t have to guess at. What we have to do is execute and so we need the to go execute and so the vision
Jay Clouse: 00:59:23
still in the Midwest saying, we’re we’re founders, we’ve done this before. We know the model isn’t monetization right away. That’s a hard pill for a lot of Midwest investors to swallow. It was it. Was it really that easy?
Eric Hornung: 00:59:33
It’s all competence, man. No, it’s not like. I wouldn’t say. I wouldn’t say to other people like, hey, I did it so you can go do it. I think there’s still that, that belief, and I do want to escape the stigma a little bit that it’s just made western investors that think that. I mean, yeah, the valley investors and coastal VC’s and whatnot, they’re more into understanding the social game and doing things that are consumer apps, et cetera, but everyone’s in it to just make money and I think at the end of the day, what you’re really after is where do you build the value of the company? I mean the Midwest investors at the end of the day or just the same freaking smart people that you’re going to have on the coastal side, so they’re going to do a deep dive of due diligence and their due diligence goes into, okay, is he throwing us a line of shit or as has been shown before, and the thing that was really proven there is that, yeah, if you can get. If you can get a big consumer base, if you can work with large platforms on one side, large brands on the other side, and you can start to build something that consumers love, that intertwines all of these key stakeholders, you’re building value for that company. If someone’s going to go try and raise money from any bc or anyone, whether it’s midwest coastal, you’re going to look at it and basically say, okay, is this. Is this at the end of the day, a company that makes sense? You know, you’re here today. You’re trying to go here tomorrow. How am I going to get a return on my investment?
Eric Hornung: 01:00:59
Is it fair to say that the strategy going forward is similar to the giphy model in that you’re looking to continually raise until you feel that you’re at a level where you can start implementing sustainable long term revenues?
Chris Nickless: 01:01:12
Oh, it’s really hard to say. Look, I think for the biggest part that I look at when it comes to revenue, revenue doesn’t exist in any company without consumers. So this is. I saw him going through that chat, boom. It was a really eye opening experience for me because there were a number of companies that died because they went for revenue too soon and it probably had people breathing down their necks that we’re saying, you’ve got to monetize now and we’ve got to do this. If you’re going To be sustainable, like traditional business, you’ve got to be able to having a revenue that you know, what’s your ARPU? Average revenue per user and all that. It’s like it’s all those classic things that everyone learns in business school, but at the end of the day, those guys died and the ones that stayed were the ones that kept the users. Because the biggest thing that you have here is the second you get egregious about the way that you’re. You’re putting ads in front of someone, you’re talking about social and in the social game you have communities. So if I brought a buddy list, it used the term buddy list from back. AOL messenger day is a showing my age and vernacular essentially if I were to leave and go adopt another app to communicate on, now I can take what, 15 friends with me and they’re leaving in droves. So there was always this even a kick. We were super careful to just be really smart about the way we treat our users. That’s the same game here and the only difference is is that I’m not doing it just with kicks consumers. Each platform has to do that. So it takes really good partnerships. Like if I’m to talk to a, a chat app and they say, look, this is something we’d like to experiment with, right? It’s the conversation kick had with Tenor, you know, can you help us do this? What’s our relationship here? We like what you guys are doing and we’d like to try and find a way to see if we can test some things just to see the palette with the users and at the end of the day the best advertisements are the ones that bring value to the user. You think about it like Superbowl ads and everyone tunes in to watch super bowl commercials. So I look at these short form videos and I basically say jack link’s beef jerky messing with sasquatch. Hilarious. Like that’s, that’s notable. Everyone knows it. He gets pissed off in a fit of rage and throw some on something like that. So if I’m pissed off and enrage and that’s kind of my, the whole touchpoint, that 32nd spot is that you think of jack links, you think of this edge, you think of, you know how badly you want that. Everything. So it still touches on their core messaging of that campaign, but you can say it in six seconds and you can tie it to an expression. So now If I’m a user and I go in and I search rage and that’s perfectly clip for me and maybe it has jack link’s beef jerky as a watermark in the bottom left hand corner, but like I don’t, I don’t care that that’s being sponsored and put in front of me. It’s not like it’s a pre roll video ad where I’m trying to get to somewhere and you’re shoving something in my face and preventing me from doing the action I actually want to do. They’re actually using the ads to help the core user behavior so it’s all about who’s ready to do it the right way, who’s really ready to do it, and then what are the opportunities if those all align, build a company that works for consumers first and the other stuff’s going to fall into place daily, daily. So what happened
Jay Clouse: 01:04:22
What has to go right for you guys, do you need to be in, in all these different chat apps as a button there to respond similar to images in imessage or giphy and all the other chat apps.
Chris Nickless: 01:04:35
It helps tremendously. I would say the biggest thing for us that we look at is like every single one of these apps are. I know it from being a product person, like you have your own initiatives. You set your product roadmaps, things shift. If I’m to build a company based on your product roadmap, I’m setting myself up for failure because you can tell me it’s going to happen in three months and it could happen in nine months and I can’t pay all our hopes on that. What we’re after is growing our own audience and growing our own brand, so it’s just as much about are we showing up on search engines the right way and it’s just as much. Are we making something fit? Whatever the new consumer behavior is. The goal obviously is to be anywhere a gift button would be because it’s just the easier you make it on the user, the better engagement you’re going to have, but we know that those product people that are making the decisions of what to put in their UI, you can’t just show up and be like, I have an idea because that’s what I would get served all the time at KYC and it’s like there’s no data to back this up.
Eric Hornung: 01:05:35
We asked the question about team earlier and we’ve talked a lot about your vision since. What kind of new hires, what kind of team members, what kind of leaders do you think you need to hire in the next few years to kind of get you in the direction or to take you to that next level?
Chris Nickless: 01:05:51
Engineer wise, search company, so rinse, repeat. What’s been done for us, it’s how well can you build a search? there’s so many variables. There’s so many complex things that go into that, but we care about making the experience right for each individual user. I always say this like the vision I have is I don’t want to market to consumers the way a grocery store markets to consumers. It’s not whatever is on the end cap or being featured, everyone sees I want it to be curated for you. I want you to have something that if you’re not into this show that is made for 12 year olds, you shouldn’t see content offer that show made for 12 year olds unless it all of a sudden is hitting with an audience about memes and you still happen to like means, right? So I know that the way, and everyone’s shown this before, whether it’s Pandora, Spotify, Netflix, you know, anyone like these recommendation engines work, they drive better engagement and there is a smarter platform out there to build for us. So I’m really excited about that. You know, we’re already really pushing that way and it’s exciting. So You had had their further so engineers in that category and then it’s really about, in my mind, partner success is something that’s super interesting to me. I look at what made tenor just so great for us at kik and you know, I compliment those guys like crazy because what they did was give first class service to us. We needed something done on the api level that was custom because they hadn’t had an opportunity that was coming along, you know, the cnn election. We wanted to do something around that and so we need these custom triggers to be turned on, which were things they had never built into the api before. And so they would just go do it for us and like 48 hours, turn it around.That is exceptional service. That’s what I expect us to be able to do. And then the same thing on the other side of it, you know, I talk about these studios and if nbc goes through, so typically let’s say they order a 26 episode season and 13 of those are gonna happen before Christmas. they’ll go on the holiday break and then they come back late January, early February. Like we need to have all those key dates in mind and we need to understand what content they’re looking to push and when we’re like, I would love to show up inside of snapchat or Instagram or any of these things around these four times and we can strategize with them to say like, okay, let’s let’s look at the content you have available. Let’s figure out what’s going to work for what’s trending. Again, I always say vernacular like try and match the consumer behavior and then let’s package these things in a way that our time correctly towards your core initiatives. That’s all what I consider to be partner success. I wouldn’t be the best in the industry of that because it’s all based on relationships. This, this entire company we’re doing relationships on the consumer side. It’s relationships on the partner side and platform side and also on the. On the brand studio side. So that to me is like core vision of where we’re headed and I think each of those three stakeholders has their own corresponding roadmap, but it’s very clear in our minds where we need to go.
Jay Clouse: 01:08:57
You’ve spent time in Los Angeles and New York. Why build Vlipsy in Canton, Ohio?
Chris Nickless: 01:09:04
so remote culture. First off, I saw this interview or not interview, but one of the polls that someone reputable and twitter put out asking engineers like in your next job what’s most important. There’s benefits, there’s like ping pong and arcade and all those things. That became big with google and then one of them was like remote work in remote work, far out shined everything else. I felt that because when I was in Los Angeles, what happened was some ego kind of going down, sadly was the thing that that gave us the opportunity to move. I would have stayed there as long as needed, but we had our first child in Los Angeles and both my wife and I grew up in northeast Ohio, so both sets of grandparents were here and essentially when we were living in Los Angeles, everything that we knew and loved as young 20 somethings we weren’t able to do. There was no like we used to be able to get like the seat fillers for like the movie premiers and stuff. We would go do that for free. it was amazing and it was all these like hiking. Everything was our own schedule and when you have a infant, everything was turned upside down and we had no help from any of the grandparents like they would come out to visit, but it was for the first 18 months we didn’t have a babysitter because there was just not that core community that we knew, so we moved back because we really wanted to raise our family in the culture that we knew growing up, which was this Midwest culture and I was scared to death. Man. I had so much anxiety around it. I knew just as I told you earlier, if I lost my job out in la, I could get another job in 24 hours and it might even be a better job. I was being recruited constantly out there. I never had to worry about job security. Coming back here. You’re taking out a mortgage, you now have a child, you’re the primary income. All of this, and I’m working for a startup which is extremely volatile and at that startup goes down where’s my next opportunity and my fear was midwest doesn’t pay what, what California pays and so now all of a sudden if I have to go get another job, I’m taking a huge pay cut and I’ve got a mortgage. It’s not like the mortgage is going to take a pay cut so I have to try and balance all these dominoes. what really all of that was remote work and I feel like it’s been good because it’s. It’s helped with the fair wages in the midwest as well. Like at the end of the day, talent is what it is and so instead of having to live in the valley, paying $4,000 for rent and doing all of that, like there are opportunities and everything is based off of what I noticed early in my career. It’s about what have you done? Like what’s your resume? What can you actually do? What I love most about the remote culture is everything is based on merit and not on water cooler talk. I feel like remote culture helps you understand who the key hires are from a very early point, like you start to see who cares and who does this the right way and you train that behavior, so in my mind you can do this from anywhere. Does that mean just because we’re remote culture that I don’t want to hire people in Ohio and build an office here eventually all that. Absolutely not like if the opportunity’s there and great, but let’s not lose sight of where I’m at. Like I’m a seed stage company. This is scrappiness, like one of the things that drives me the most nuts, like this is the thing that literally just eats at me is there’s been a culture a little bit around here, have the feeling that I’ve already done it all. Oh you raised this money. Oh you you convince people that you know you could do a consumer app that doesn’t make money and you’re like changing the way people are thinking here and you’re the success story out of the area and like meet Migo died Mimo. We basically sold off ourselves as an aqua hire to kick. It’s not like I’ve got fired or laid off from my first job, got threatened me, fired up my second like I’ve been through all these things where I’ve been where I’m at before. This is nothing to me. You know, you go out to the valley, there are thousands of people like me, like let’s change the way we think about this. It’s not I get it and I’m appreciative and I support all those people and I’m, I want to rally them and be like, yep, let’s go. But we’ve got to change our thinking. This has to be the norm. And so for me, this is just seed stage. We’re scrappy. I just want to move the company forward. I don’t care where people are located. I need talent. I need people who are in it to win it and all those other cliches.
Eric Hornung: 01:13:24
Love it, man. Well, Chris, thank you for taking the time. Now we went a little bit over here. We really appreciate you coming on and telling your story. Enlightening us to have Vlipsy and the opportunity. If people want to find out more about you or if Vlipsy, where do they go?
Chris Nickless: 01:13:41
Yep. Go to vlipsy.com, v l i p s y.com. If you have a slack team, we have a awesome slack bot. You can type in slash blip or slash blips as well as the expression that you’re looking for and drop it in line video. We also have apps built into skype, into Viber as well as an app that will share into just about any social site you could think of as well as Facebook messenger. We have an app there as well, so a lot of places that you can find us. Just search Vlipsy and uh, start upping your communication game.
Eric Hornung: 01:14:21
Jay we just talked with Chris and I think we forgot something.
Jay Clouse: 01:14:26
Yeah. Something we mentioned in the intro that we wanted to talk about specifically was copyright and we ran a little long on the interview and never got around to a question of copyright. So did the next best thing called on my friend Lee Thomason to come and give us some insight into copyright. Lee Thomason is an associate clinical professor of law, formerly of the Ohio state moritz college of law. He’s a registered patent attorney and litigator. He’s also a former fulbright scholar, a native Kentuckyian which he says he was raised by wolves and then adopted by buckeyes and a former us marine sergeant, least set up the Ohio state entrepreneurial business law clinic and I figured he’d be a great voice to come in and talk about copyright, so please enjoy this very quick interview with Lee Thomason.
Jay Clouse: 01:15:20
Lee, welcome to the show. Thanks for joining us here and given us some insight
Lee Thomason: 01:15:24
Happy to be here.
Jay Clouse: 01:15:25
Can you help me think through in a case like our guests, what type of copyright concerns would you have? Well, as an attorney or as someone who is looking at a company who operates using media that may be generated by other users?
Lee Thomason: 01:15:43
Well, I sort of go with, um, who’s content or we’re using whose platform or were you using? And that’s kind of my first point of analysis. And if we’re using someone else’s content, meaning if the company is using someone else’s content and relies upon that for their business model, then I take a little deeper look at where the content comes from and what is the likelihood they could lose the right to republish or use that content. So in the example We’re talking about it is more than likely they would receive copyright infringement notices, which are often now automatically issued by the owners without really much thought given they just see their information there and they just send the letter and go from there. So I usually start off, as I said with, is this like a square peg in a round hole? Is this a disruptive model? It’s just not really gonna fit the current law or is there some way that we can kind of reframe the business model, reframe the website offering so that it is more useful, possibly less risky to do in the copyright issue? Yeah, and I can work through it, but it is really definitely someone else’s content and it is a derivative work of their copyrighted content. So we can use that as a starting point.
Jay Clouse: 01:16:58
Yeah. I’d love to dive down a little bit deeper into that. Obviously in the case with Vlipsy or in the case with Giphy, most of the content comes from copyrighted materials like movies or tv shows. I would guess, and I’d love to hear your input. There haven’t been a ton of cases in recent years where this type of platform raises this type of concern, so I’d love to hear your input of anything you’ve heard in the realm of copyright for this type of materials for sort of modern tech companies, whether it is a Giphy or have Vlipsy or Vine. Anything that has precedent.
Lee Thomason: 01:17:35
Jay Clouse: 01:19:55
The DMCA compliancy, the digital millennium copyright act. That was something that Chris actually mentioned to us off air. Is that something that you have to be completely user generated content to fall into? Does that apply only to content that is supplied by users to the platform?
Lee Thomason: 01:20:13
I believe that’s true. I mean certainly you can have your own other content on there which would naturally be responsible for regardless, but it’s really to limit your liability for third party actions.
Jay Clouse: 01:20:23
So if if a platform was curating and sort of seating their own content onto the platform, that would be a problem spot.
Lee Thomason: 01:20:31
That is still an unclear area. There are cases where they promote certain videos because there’s some level of popularity or currency to them and that’s considered more pushing infringing content for rather than just lead to being passively produced. So if you have a homepage that just puts new stuff up automatically, things that are not clicked on tend to drop to the bottom automatically. There shouldn’t be any liability, but if you promote things, if you reformat things, if you clipped thing, you know, edit it in some fashion. If you involve yourself with someone’s else content, then you run the risk of saying that your content now,
Jay Clouse: 01:21:10
And this goes to something related to commercial use, right, for for Vlipsy or Giphy or these platforms who don’t start with a clear business model where they aren’t even where they’re pre-revenue, does that change the considerations in any way?
Lee Thomason: 01:21:26
Well, I think there should be a consideration. This relevant consideration would be does the model look tore a revenue stream based upon the content? So if you’re just going to have passive content but you’re going to relapse on ads or some other things around it, or in the Cafe press example, you’re gonna reprint it, sell in some fashion, enable people to download and put it on their own site. Then the closer that revenue model has a commercial basis in the content, then they’re going to fail that aspect of the use. So everything has some commercial use or arguably does to the extent that it’s overusing the content or profiting from it. When someone else could take that profit for themselves because of the rightful owner. That’s where you’re gonna run into the problem. So the political commentary example is fine, there’s plenty of ways to make that political commentary without using a celebrity or a well known movie that you can use other available stuff. So that again would be a risk you would take and say, well, you didn’t need to use that copyrighted material to make your point. It was other ways to do it, so maybe that answers your questions, but the more involvement, more revealing, the more potential for liability, the more you’re reacting and being passive, the less,
Jay Clouse: 01:22:42
And this may be a leading question, but I’m assuming if you use copyrighted content solely for the purpose of driving traffic to one location, which is your website or your application, that could lead towards a commercialize aspect that infringes on fair use.
Lee Thomason: 01:22:58
That’s true. But if you think of like the YouTube example, they make their money other ways. They don’t really necessarily make officer cat video that as someone else’s voice overlay. There’s really no bright line rules here. It’s an analysis of what they do and what the content consists of and if you follow kind of a business model that tends to steer away from the problems, then you don’t have to make these hard choices about is this copper and infringement or not, so I always tell them that, can you. Is there something about your business model or the clickthrough path that a consumer or user follows that we can change a little bit so it doesn’t like we’re promoting that we’re involving and things that I’ve said pretend to create gullibility.
Jay Clouse: 01:23:41
So before this interview I looked at what Vlipsy has been doing lately and it seems that they’re piloting a model where they work with brands to create brand specific gifts on their website and so they’re not monetizing the videos that are curated there. The gifts that are curated there, they’re monetizing new original content that they’re creating in conjunction with brands. What’s your take on that? Does that. That just kind of feels like a great spot to me given what you’ve said so far and I’d be interested to hear your thoughts there.
Lee Thomason: 01:24:13
Well, I think it’s less gray in respect to that is their own content they’ve created and therefore there is no right to push that liability to somebody else, but the specific content and whether or not a person needs to see cooperated information to make a purchasing decision that they, uh, that they affect some other way. So the example I’m thinking of is people take like a well known video and they put a can or container of a well known product in the hand of one of the people in the movie and if you click that can then it takes you to a site where you can buy that product so you don’t necessarily have to use that cooperated content. But it’s assumed that the user understands they’re not buying it from the actor in the movie. They’re buying it clicking through to another site. So again, there’s a lot of different ways you can sort of present that to the user without making him as a work consume the copper edited content.
Jay Clouse: 01:25:08
I think the assumption with Giphys model is they’ve created such an expectation of their users that they can come to Giphy. And find the gift that they want to use, which is usually copyrighted material, which they can usually use for free. But the idea with this branded content is they place it alongside this copyrighted material that people may have come there to see and use, but there’s not what they’re monetizing.
Lee Thomason: 01:25:33
Well, I think you, you pointed out that there is a risk. they’re no different than if I just did tv advertising that relied upon you wanting to see a particular celebrity’s face who does not endorse your product or does not have any connection with it. And you say, well that’s separate product is my, is my content. It’s not a, there’s not a relationship that confusion that would result from that or the extent to which you would reduce the profitability. The celebrity may have to monetize their own image. That’s commercial problem. You’re gonna run into. People are going to say you’re infringing.
Jay Clouse: 01:26:06
Last question I had, is this the same sort of argument that’s playing out in music right now with the sampling in rap music or hip hop music?
Lee Thomason: 01:26:14
I think it is. I guess that, um, when you talk about fair use and you talk about that being a test of whether certain factors are substantially favoring one side versus the other, what is substantially really need. So if I have the 10 bar sample of something, many people may not even really realize what that is in a given context. If I take those same 10 bars and I make a ringtone out of them, then clearly people buy that because they like it and recognize it perhaps. So Again, the context of it is if you just are creating a way to attract business to your site by a bit of sampling music or otherwise, you’re probably clear then you would be. if you had. Obviously we had the old song, but if you’re just selling those 10 bars, then you’re probably going to be an infringer who’s not entitled to fair use.
Jay Clouse: 01:27:05
Is there anything I’m not asking that I should be asking?
Lee Thomason: 01:27:08
Well, I think my comment really to the startup community is just don’t go off thinking that no one will ever find out what you’re doing that it doesn’t matter that there’s not a simple, cheap way to sort of at least mitigate the problem. You may never resolve it, and too often I hear people say, oh, don’t worry about it. Just go forward. So take some minimal steps and think about your business model, thinking about your revenue model and how that’s connected to content and if you can change a few things you’d probably be okay. And the bottom line is no one’s going to invest a lot of money and a site unless you have the ability to limit your liability.
Jay Clouse: 01:27:48
Alright, so that was super helpful to hear from lee there on copyright. Before we get into the weeds on that, we normally start the deal memo section here talking about the founder. As a quick reminder in this section of the podcast, we’re trying to answer four questions here. How committed is this founder? What are the founders chances of success in this business and in life? What does winning look like? In terms of revenue in my return and why has this founder chosen this business? We’re trying to answer all of those here in this deal memo section. So before we get into copyright, probably want to talk about Chris as a founder. So Eric, what stood out to you?
Eric Hornung: 01:28:28
Talking to Chris. I get why he chose this business, right? He loves this idea of expression and that he spent his whole career pretty much in it and he saw a need in the market and there’s obviously a demand in the market since every single app you see has a gif on it or a Jeff, what did we decide to call those gifs?
Jay Clouse: 01:28:49
We’re going to call it gifs for this episode. Okay. Drawn the line
Eric Hornung: 01:28:53
For this episode we’re gifs , we’re team gif, but I, I just see like the founder product fit is so strong and he loves the space and I think he knows a lot of the people in the space as well.
Jay Clouse: 01:29:04
Yeah, I think you’re right. I think his background is very clear and like he said, when he spoke to investors around this raise, he’s been in this space. He’s done it before. He said at one point that he and matt were the first people to monetize gif’s which you kind of said offhand, but as a pretty big statement to make. I loved hearing about his background. we spent a lot of time getting up to where he is now and I think it was really good context, a lot of similarities frankly to my life to be honest. Growing up and really being into video games and then getting into early website building. I think he was doing it earlier than I was, but it was clear from his whole path and getting to the point where he was with kick working with Tenor and Giphy. He is one of few people on the planet I would imagine that are qualified to start and run this business in. What you mentioned there with expression was something he talked about a lot and I love that term and I think it’s a unique term that comes from his unique insight into user behavior. He says we want to be another form of YouTube made for today’s user behavior, which I thought was a very deep insight. This idea that people want the four second clip, the six second clip instead of a four minute video and they can’t get that out right now. So long winded response. I really like Chris’s background for this opportunity.
Eric Hornung: 01:30:29
I agree and just thinking about that clip, I mean you and I have started using Vlipsy a lot since this interview. Would you agree with that?
Jay Clouse: 01:30:37
Yeah. Full disclosure of Vlipsy has completely replaced my gift usage outside of instagram direct where I don’t have a flip side button and I have a gift button is the friction is just a little bit too high, which I think is something we should talk about here, but outside of that, not only do I use Vlipsy to send gifts a lot, I have made a lot of flips. Sorry, I shouldn’t say use the Vlipsy of gifs. I send Vlip with Vlipsy and I’ve made a lot of lips in the past year, effectively full time employee number 11 in there, making department.
Eric Hornung: 01:31:14
What’s your favorite? What’s your favorite Vlipsy you’ve made?
Jay Clouse: 01:31:16
I used a local legal ad with Kevin Curtis where he had this. He had this saying at the end of all of commercials, they says, remember, I don’t get paid unless you get paid. I made one of that recently when I was at LinkedIn in recording, after I got out of hair and makeup, I made of lip from both Burnham song. Art is dead Where he says it’s all an illusion. I’m wearing makeup, I’m wearing makeup, I’m wearing makeup. that was probably the best one I’ve done, but yeah, doing a lot and it’s because to Chris’s insight, and I, I told you going into this and I think I told Chris to give you a lot. When I first heard about Vlipsy , I didn’t know what type of pain I was feeling for, not the audio with the gif. My assumption was it wasn’t much, but now having the option of completely replaced it and I’m so on like Chris that had not literal folders of YouTube videos, but I lived for very quickly finding the right clip that I could send in a text message thread that gave the right context for the conversation.
Eric Hornung: 01:32:20
You are like a power user of Vlipsy. I use it a good amount, but not to the extent you do. That was, that was intense. Jay. That was an intense response.
Jay Clouse: 01:32:30
It intense. Uh, I’m, I’m enthusiastic and I’m trying to not be biased about the opportunity here because I love the product, but you know, we’re using on twitter now. I just, yeah, I enjoy. I enjoy the product itself and it’s clear that they’ve taken such a bent on user experience. Even things down to the slack app that he mentioned at the end of the interview. We’ve checked that out and the experience feels like a native giphy experience, but there’s a lot of technical work around they’ve done to make it feel that way because it’s not as native as a player. I’m not sure how the best way to say that, but to just to say they’ve put so much focus on the customer experience that they’ve made, things that are workarounds not look like work arounds.
Eric Hornung: 01:33:17
Yeah, absolutely, and I think that might come from one of the points about Chris as a founder that I really liked, which is in his backstory that we went through. There were a lot of points of call it failure and I think that when you have those, that more tumultuous path, you get a lot more insights into certain things. Whether that’s managing the company which is doing all remote now, which is really cool. Or it’s seeing different types of consumer behavior or thinking about things a little differently. I really liked that he has gone down a road where he has had some stumbles and this isn’t his first attempt at something like this
Jay Clouse: 01:33:58
And he acknowledged that himself and spoke to his frustration of people in the midwest. Kind of speaking to him as if he’s already gotten over a hump because of the fundraised and specifically because it’s a b to c company in the midwest. With the fundraise and he’s saying, I wish people would change the way they think about this because this is just the beginning of this journey and he’s been there. He’s seen it. You’ve seen how for his own companies and for other companies that didn’t always end the way they expected or wanted and now he’s. He’s doing it with his own neck on the line and really trying to push forward
Eric Hornung: 01:34:29
Which gets to I think the revenue model because to me, and I think he alluded to this, he said that they could turn on revenue at any time. It wouldn’t be maybe as much as it could be in the future and there’s this balance of turning it onto early versus waiting too long. When’s the right time to start optimizing this for monetization and if we look at giphy as an example they took for ever and they’re just starting to monetize. So they built their base and built everything on the vc dollar and that model is different than all right, we’re going to start monetizing right now with partnerships for movies and all this other kind of stuff. So I think when you think about that in the midwest context and people are like, oh, you got funding, great, like you made that hurdle. They’re not thinking about this. Looking at giphy, who’s raised, what was it, $151,000,000 through today to get to where they’re at. That path might not even be on the radar of some midwest vc type companies.
Jay Clouse: 01:35:35
The one thing I will say, one, I liked his honesty about this. I don’t think people are going to invest purely on honesty, but he came right out of the gate and you said this is very simple. There is no revenue model right now. The model he’s planning is around a search engine revenue model which brings sponsored search is the model as opposed to just some other form of ads. When we talked to Seth at rap chat, one of our first episodes, he mentioned in the b to c space, there are a lot of companies where the model is just engagement sell to someone who understands the model you use their model was what he alluded to Chris’s speaking to a different known tried and true model, which is the search engine model where you bring forward sponsored ads. I see how that makes sense. The cynic in me wonders how effective that type of thing as his example was. We have a bunch of people in the morning sending Vlips, talking about coffee. What a great place to put an ad for coffee. That makes sense for that model to stick and continue working. Those advertisers will want to see some sort of metric or return on that ad spend, so the question is would that really convert in a way that can be measured or believed that the sponsored ad, bringing a vlip of coffee is valuable enough to an advertiser that that model works out
Eric Hornung: 01:36:58
And this gets into the snapchat question, which was, and I think still is. I’ve kind of stopped following snapchat as closely, but how do we guarantee that our advertisement dollars spent to this hyper targeted audience are converting into in store sales and I think that’s the question you’re getting at there. I think that the whole of Vlipsy model is predicated on growth of some of those KPI’s he mentioned, which are mostly shares and Chris told us offline that in the last 12 months they have gone over 300 x on their shares. If they can keep up rate like that, I think this model becomes a lot more interesting.
Jay Clouse: 01:37:46
Maybe. I dunno, it’s hard. It’s hard for me to say for sure. Like I am confident that this product will pick up a lot of users and a lot of shares. I don’t know if the advertising model buffs out or not because you know, in a google world people are searching for something that they’re trying to usually a problem they’re trying to solve. And I think in a animated video world that you’re searching for, you’re searching for something that’s gonna. Make people laugh, something that’s going to move a conversation forward. I don’t think the consumer is in the mindset to buy something, but it may not be direct marketing where you’re expecting to be able to measure the exact ROI of the ad based on purchases directly and maybe going more towards people’s brand marketing budgets, which is the same budget that goes out to billboards or tv, things that are harder to measure, but you’re saying I’m Coca-Cola I know that I need to be in in people’s line of sight all the time and think by chip away at that budget and that can be effective. I don’t know how big that iS, but that’s my guess of where they’d probably go. The model is the hardest part for me about this opportunity is can and will this make money because as we’ve already covered, I absolutely love the product.
Eric Hornung: 01:39:02
I think it’s different than Google. I mean it is a search engine. that’s the model I got that it’s different than google in that the dynamics of the industry are different. So if we think like porter’s five forces type stuff, so Google is aggregating information from a lot of small sources. I mean, there were some newspapers, but every city had a newspaper, there’s internet blogs, but those are small, like there’s no concentration of power that was fighting Google when they created their search engine. When I think about Vlipsy, a lot of what they are putting together in flips are shows that are held in under the portfolios of one of like eight companies. There’s also the YouTube smaller stuff, but when I’m thinking about like quoting Happy Gilmore, that is owned by a company which is owned by a company which is owned by a company that has some really powerful lawyers, so I think that gives you a pro and a con. The pro being that you can accelerate your growth through partnerships, which is unique to the Google model is they didn’t have and they did have partnerships, but they weren’t gonna move the dial as much as say partnering with a Fox or a Disney. It also gives you a con because if you go and you piss them off by monetizing too much compared to what they’re expecting, then you could get into some potential legal issues.
Jay Clouse: 01:40:25
Eric Hornung: 01:42:06
Well there’s also all the Vlips that you make on those kinds of user generated content.
Jay Clouse: 01:42:11
Yes, but you know, my assumption is Vlipsy is curating a lot of those themselves. I do think they all, or a lot of them come from YouTube, so I’m wondering if making content based on other user generated content is still considered user generated content. It’s, it’s tricky and you know, it’s something else I asked Lisa, I said I broke it down very specifically. I Said let’s use giphy as an exact example. The idea is they are not monetizing the copyrighted materials. The copyrighted materials is simply what is drawing people in to the product and driving traffic where they are using sponsored agreed upon materials that is monetized and least seemed to think that was safe. So yeah, it’s uh, it’s something that, there’s not a lot of precedent. It’s, you see it in the music industry too with the size of samples that people can put into songs. I think Kanye was actually part of a lawsuit for that. As an investor, would I be a little concerned about that? Probably. I don’t know if I’m more concerned about that risk than just the risk of being able to make money. Yeah. I don’t know. Do you have any thoughts?
Eric Hornung: 01:43:17
I think it depends on which path they go down. If they monetize too early and one of these big players gets upset about that, then it’s going to shut it down, so I think if you come into this opportunity, you have to come in with the idea that it’s going to follow more of a giphy model where it probably won’t make money for a while because if you’re not doing something for commercial use, I he making money, it’s going to be very hard for anyone to come at you with any type of legal rationale. If you’re not making money, no one’s going to sue you. They might send you a cease and desist or something. But to be honest, they probably won’t.
Jay Clouse: 01:43:54
Yeah. Or if it was putting the content in a negative light in some way, which I don’t see how that could be.
Eric Hornung: 01:43:59
Right, and I think the content is being put in the best light because it’s just free publicity for these content producers. That being said, I can see why some investors would be a little skittish about this opportunity. I think that the risk attributed to potential regulation or lawsuits in this case and in this example is offset by how confident I am in the founder and the team.
Jay Clouse: 01:44:32
Eric Hornung: 01:46:24
Closer to the six month timeframe? I’d be looking at the same things you just mentioned. Closer to the 18 month time frame. I’d be looking at how their next fundraise is going because I fully expect that if things are going well, there’s going to be another fundraising. It’s going to be soon and it’s going to be big.
Jay Clouse: 01:46:39
Yeah. Yeah. A company that doesn’t plan to have immediate revenue 18 months from now. You’re looking at are they still kicking?
Eric Hornung: 01:46:46
Right. They can’t have too much of a runway with their recent raise, so is it. How is the next raise going is the most interesting thing to me.
Jay Clouse: 01:46:58
Alright guys would love to hear your take on this. This is a very unique and interesting company out of Canton, Ohio. If you have any thoughts, please tweet at us @upsidefm comment on this episode on breaker. If you listen to breaker and if you or somebody you know, it could be a good guest for our show, please email us firstname.lastname@example.org and we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email@example.com, or find us on twitter @upsidefm will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guest to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast, and so here we go. Eric Hornung and jay clowns are the founding parties of the episode podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of Duff and Phelps LLC and its affiliates Unreal Collective LLC and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.
Chris has introduced brands to the concept of emojis and stickers, and worked with 30+ messaging companies to launch expressive new products during the chat boom. He invented an Ad:Tech patent for sponsored expression within chat interfaces in 2015. Chris was the CEO of Meemo which was acquired by Kik and served as the Director of Media Solutions at Kik where he drove content for any products related to platform engagement through media (emojis, stickers, GIFs and video).
Vlipsy is the video clip search engine. Use it to find and share clips from your fave internet videos in Twitter, Slack, Messenger, Viber, Skype, Kik and more.
Vlipsy is a Techstars alum founded in 2017 and based in Canton, Ohio.