How These Co-Founders Sold Their Startup for $30 Million in 4 Months

And they hadn’t even launched yet

Joshua VanDeBrake
Jun 20, 2020 · 7 min read
Image for post
Image for post
Photo by freestocks on Unsplash

Fate brought them together. Dom Hofmann, Rus Yusupov, and Colin Kroll met while working for the travel site, Jetsetter (which was later acquired by TripAdvisor). During their time at Jetsetter, the trio conceived of the idea for an app. They were sure it would go viral.

Their idea became Vine, which they founded in June of 2012. Fast-forward just four months to October and they accepted a $30 million acquisition offer from Twitter. They hadn’t even launched their app yet.

By the end of 2015, Vine had surpassed 200 million monthly active users. But despite its unprecedented growth and virality, the app was discontinued by parent company, Twitter, in October 2016.

What happened?

From The Beginning

Rus Yusupov, a designer-turned-founder, was born in the Soviet Union and moved with his family to New York after the Revolutions of 1989. His artistic abilities began blossoming early in life and his parents enrolled him in LaGuardia High School of Music and Art — a high school that specializes in teaching visual and performing arts.

He later graduated with a BFA from the School of Visual Arts and, in 2008, founded Big Human — his design and engineering studio — winning several design awards in the following years. Big Human’s client list included some notable names like, Urban Dictionary, Time Warner, Fortune, and a little travel site called Jetsetter.

It was while working with Jetsetter that he met Dom Hofmann, a 25-year-old programmer from New York with big dreams (and plans to back them up), and Colin Kroll, the company’s CTO. But the trio connected on a level deeper than just their work for Jetsetter.

They shared a sort of kinship — in the form of an entrepreneurial spirit — and it fueled their multimillion-dollar idea.

“We Should Build This Thing”

In their mid-twenties, filled with dreams, ambitions, and boundless excitement for what the future could hold, the three brainstormed together what they could do — or rather, what they could build — to “make it big.”

In May of 2012, Facebook became the first publicly-traded social media company. This was the rise of social media. And video was just beginning to blow up as a social phenomenon.

And that’s when they saw a gap in the market — there was no easy way to shoot, edit, and share videos. So they built one.

This is actually a huge lesson for entrepreneurs today. It’s really a blueprint for entrepreneurial success — analyze a hot new market, find a gap, and build something to fill it.

In a 2013 interview with Wired Magazine, Dom Hofmann recounts, “We wanted to build a tool to easily cut video shots together. It crashed a lot, but we gave it to friends and they liked it.”

They ran into a problem though: their friends were sharing the videos through text, and that was posing an issue because the very first version of their app didn’t have a time limit on the videos, so the files ended up being huge and bogged down phones’ bandwidth.

It took several iterations before they finally got it right, as Hofmann shared, “We tried five seconds, then ten, and some lengths in between.”

In the same interview, our friend Rus Yusupov shared the designer’s point-of-view. “We think that old things are beautiful, but Vine is a new thing, and we want it to look new. That’s why we don’t have play/pause buttons, or time lines, or blinking red lights, or anything else that imitates a dusty old video camera. We want the interface to essentially disappear so that you feel like you’re manipulating images and videos directly.”

This interface became a defining feature of the app. You press and hold the screen to record and let go to stop recording; you press again to continue recording. It was this novel user experience that made it so intuitive and exciting to use. You may even say it was “cool” to do so.

After founding the company in July, they’d begun building the app they believed would bring them fame and riches. By October, their app still wasn’t available in the app store yet, but word had spread. And Twitter, who had already acquired seven other companies that year, was interested.

“A Couple Mil Would Be Nice”

At this point, the three had still only developed a limited beta version of the app — mostly to friends — not quite suitable for the public.

Then they were approached by a man in a dark, expensive suit made from a material that shimmered like silk. He carried a briefcase full of cash. (Okay, that part may not have happened quite like that, but I like to imagine it did.)

Nonetheless, Twitter, seeing the potential of the app, offered the trio $30 million for it. They had a big decision to make.

Let’s try to see this from their perspective.

Imagine this: you’ve spent the past several years brainstorming, building MVPs, and trying to bring your “big ideas” to life. One idea finally pans out and you begin building it. You share it with your friends — they love it. You tweak it to make it better. You co-found a company with two of your friends who’ve been working alongside you to brainstorm, build, and execute each idea, with this one at the center. You’re excited. You know there’s so much potential. This could be your billion-dollar idea. Word gets out. And a man approaches you…

“We like what you’ve done,” he says. “And we want in on it. Actually, we want all of it.” He opens a briefcase and continues, “We are prepared to pay 30 million dollars in exchange for your company, which includes exclusive rights to the app you’re building, as well as your continued employment at Twitter, as you work on this business unit.”

You turn to your two buddies. None of you come from money. This is your chance. But… this could be your billion-dollar idea. Do you keep building it on your own and hope for a bigger break? Or do you take the early exit?

The same thoughts are running through your co-founders’ minds.

“A couple mil would be nice,” you think to yourself.

After deliberating amongst yourselves, you sign the papers — selling the exclusive rights to everything related to your work on the company. Your bank account is full and the four-month-old company is no longer yours.

Look, mom, I made it

The three of them became millionaires in October 2012, when the acquisition finalized. Three months later, in January 2013, Vine hit the app store and grew at an astonishing pace, almost beyond belief.

The app, at its height, grew to 200 million monthly active users (MAU), which is the metric most used to measure the traction and engagement of a social platform. And just a few years later, Twitter deprioritized Vine, allocating resources to repair the dam on their core business. Eventually, Twitter decided Vine just wasn’t worth it anymore, so they shut it down.

Did They Do The Right Thing?

Each with their own timing, the three co-founders left during the post-acquisition years, as Twitter struggled with its own identity as a company and eventually deprioritized and discontinued Vine.

Today we can see how everything played out. With that hindsight, it’s easy to look back and say they didn’t do the right thing — that they shouldn’t have sold the company, that they should have kept building it on their own, that they should have launched it and reaped the benefits of its viral success. But that’s today, with the benefit of hindsight. A benefit they didn’t have.

What they did have was an app that they hadn’t even officially launched yet. This wasn’t their third or fourth exit. They didn’t have millions of dollars sitting in a bank account, just in case this thing didn’t work out. Vine was all they had.

Yes, they may have later regretted their decision, but given what information they had at the time, I believe they made the most intelligent decision they could have — to sell the company for $30 million only four months after officially founding it. As intelligent investors and businesspeople, they eliminated their downside, while locking in enormous gains in a short period of time.

Sure, there could have been more upside had they held off on selling and continued bootstrapping. But there was no guarantee. It could have — just as easily — gone to zero, leaving them back at square one. Not selling would have been a huge risk. It would have been a big bet on an uncertain future.

Instead, they sold early. And by doing so, they guaranteed their multimillion-dollar payout — to the tune of $30 million.

Final Thoughts

And even though Vine has since been discontinued by Twitter, one of Vine’s co-creators, Dom Hofmann, recently launched a new app — officially dubbed “V2” — called Byte. Will it have the same success as Vine? That’s unlikely. It’s entering a competitive landscape that’s already dominated by others like TikTok, Snapchat, and Instagram.

The time for Vine may be over, but there’s certainly an opportunity in the marketplace for video-based social media, especially one whose ethos is centered around creativity, collaboration, and getting creators paid. And that’s exactly what Hofmann hopes to accomplish with Byte. Maybe it’s just what we need in a video-sharing app. Only time will tell.

Think he’ll settle for an early sale this time? I doubt it.

The Startup

Medium's largest active publication, followed by +754K people. Follow to join our community.

Thanks to Niklas Göke

Joshua VanDeBrake

Written by

Passionate about Marketing, Startups, & VC. Full-Stack Marketer. Ambivert. Millennial.

The Startup

Medium's largest active publication, followed by +754K people. Follow to join our community.

Joshua VanDeBrake

Written by

Passionate about Marketing, Startups, & VC. Full-Stack Marketer. Ambivert. Millennial.

The Startup

Medium's largest active publication, followed by +754K people. Follow to join our community.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store