10 Years Later: Backing YouTube’s media revolution

This month marks the ten year anniversary of our investment leading the Series B of YouTube. It’s a great time to look back to early 2006 when Chad Hurley and Steve Chen first shared their simple mission with us: to be the world’s easiest, fastest, and most entertaining video service.

In 2006, the online video space was crowded with dozens of competitors from new upstarts like iFilm, DailyMotion, and Vimeo to behemoths like Google and Yahoo.

Most video sites in 2006 prompted you to download Flash viewer tools or required videos to buffer for several minutes even with the fastest broadband network. The act of opening and playing a video was an exercise in frustration, and the content was almost never worth the hassle.

While the technology was clunky on all sides, Stuart and I had been investing for years in internet infrastructure companies. We saw first hand the improvements in speeds and feeds that were on the way. Our experience investing in PDAs and early smartphones also informed us that CMOS image sensors were getting better and better. We knew it wouldn’t be long before dominant players like Motorola and Nokia included cameras with video capability in all new phones. This knowledge gave us confidence that the production side of the equation was poised to grow dramatically ensuring that lots of video moments would soon be captured and shared. However, in 2006, before the iPhone, mobile video was almost non-existent. Desktop views and broadband subscribers represented the growth and opportunity.

In 2006, the concept of a viral video had not yet gone mainstream, and the iPhone was still in the lab. The hottest phone at the time was the Motorola RAZR with a 1.3megapixel camera, so home video cameras were still the best way to capture video content. VHS allowed people to spread videos through word-of-mouth. Before 2006 bootleg copies of Reefer Madness and the “Exploding Whale” were passed around like Grateful Dead recordings. Dial-up internet and GIFs allowed people to use the internet to spread clips, and I am personally still haunted by the creepy appeal of the “Dancing Baby.” If you wanted to see hilarious Fails and accidents, America’s Funniest Home Videos was your best bet. If you wanted to see clips of AFV’s inspiration, Fun TV with Kato-chan and Ken-chan from Japan, then you had to have a friend email you low-rez files.

Despite the challenging UX of video sharing by today’s standards, the drive to create and consume video content was a no-brainer. Email loaded with attachments clogged corporate email servers. Getting and sharing that hilarious or racy clip from a friend ensured a talking to by your IT department. At ARTIS, having invested in storage and server giants like EMC and Sun gave us confidence that like bandwidth, storage would be cheap and plentiful. While many of these insights were well accepted, it was our collective experience with Wall Street that encouraged us to step up on YouTube and lead the Series B when others worried the space was too crowded.

While conventional Wall Street and VC wisdom said that Google would crush YouTube, our experience with Wall Street culture put us in the epicenter of the birth of virality. Armed with huge broadband connections, real-time news feeds, massive email servers, AOL Instant Messenger, and an insatiable appetite for information (and bawdy humor) Wall Street traders were the first to find and spread breaking news, ideas or funny videos. Running a fund meant being bombarded with IM’s and emails from across the street. It is no surprise that Craig Newmark creator of Craigslist was working as a software engineer at WallStreet firm Charles Schwab when he decided to take his massive email list and put it online, saving email servers all over the street.

In these days before the growth of Facebook, Twitter, and Instagram, there was no way to measure someone’s social influence. Having a massive email list like Craig or more AIM connections than your peers was merely a bragging right. AIM Fight was the only Klout-type score and would confirm that almost every analyst, broker, or trader was in the top 5% of all connected users. Like having millions of Twitter followers, being able to communicate rapidly via IM with a large audience who could quickly re-share was as powerful as sites like Reddit are today for generating and sharing content.

It was this experience of being on the receiving end of dozens of videos a day that allowed us to take the leap of faith and lead the YouTube Series B. We lost some investors in the process who thought we were nuts investing in a small private competitor to online giants. But for the six months before our meeting Chen and Hurley, we had seen our network move rapidly to YouTube.

YouTube required no software download and videos loaded with minimal buffering. These small nuances meant the difference between hitting delete or clicking through and sharing on while working on fast paced trading floors.

Note: YouTube was founded in 2005, this chart is incorrectly labeled 01–02 instead of 05–06.

YouTube reduced the hassle and frustration of watching content and meant you would click more links. Downloading a flash player and tying up your processor while a video downloaded meant you were angry if the content didn’t meet expectations. YouTube’s easy playback lowered the bar for the content you were willing to consume. Watching a modestly amusing commercial at home on broadcast TV was annoying, and TIVO allowed us to fast-forward. Downloading it at work and freezing your screen was INCREDIBLY annoying. However, watching that same commercial at work was a small break in the day, provided it was hassle free. Content is King, but Context is God.

Most of all, we had fun doing it. Our experience, leadership and success funding YouTube led my partner Stu and me on a path to other high-impact investment opportunities and the formation of ARTIS Ventures. YouTube’s outsized success was an eye opener and proved to mark a pivotal moment in our own firm’s history that still guides us today.

Above all else, focus squarely on those unique ideas, products, and teams where you are deeply and personally passionate.

ARTIS Ventures

ARTIS has spent over a decade backing bold teams who take the hard path; building market-defining companies to re-shape, re-invent, and re-make industries.

Mike Harden

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Tech. Venture. Food. GP @ArtisVentures

ARTIS Ventures

ARTIS has spent over a decade backing bold teams who take the hard path; building market-defining companies to re-shape, re-invent, and re-make industries.