A Startup Canada Podcast Hosted by Dr. Sean Wise
As a thought leader, serial entrepreneur, and the Co-Founder & CEO of Vidyard, Michael Litt has scaled one of the most innovative video analytics technologies in Canada, confirming the idea that the most compelling call to action online, is indeed, the play button.
Solution obsessed, Michael has found the answers to many of the problems that arise when businesses choose to use video for their branding, marketing and way of communication. His platform allows its users to use personalized video for their business without compromising branding, engagement, data and of course conversions. Flourishing the both America’s and Canada’s tech world, Michael has successfully secured many rounds of funding and with each, continues to invest in Vidyard.
What do you think the role of financial knowledge has done for you and your business?
ML: If I rewind the clock back to when I started Vidyard, it actually began in the office of a professor of mine, who happened to teach introductory economics courses. Finance is not necessarily a key ingredient to being successful – but understanding it is. So, when we realized that we had a business that was going to be operating, and spending and making money, we took the time to build a spreadsheet that served as a dashboard for our finances. It became a guiding tool that we looked at on a weekly, monthly and quarterly basis that we could use to predict the direction of the business and to improve the business. And, though it has become more complex, I still use it today to make decisions for my business.
It is obvious when looking at your business, your leadership team, and your website, that you have scaled successfully. What metrics guide you when making decisions to scale and expand your business?
ML: I think that product market fit is a construct of the scientist, or the mathematician or the finance leader that is trying to build a business. When you look at businesses on a spreadsheet, it is very easy to make assumptions because high growth companies replicate certain metrics. But, until you have been on the streets, and have listened to your customers, you do not necessarily get that feeling. So, I really do think that building a business is very much an art, and a science, not just one or the other.
You have such a wealth of experience, you have multiple rounds of funding and as a result, your business has experienced great growth. Can you take us back and walk us through your seed round of financing with Vidyard?
ML: Fundraising is never going to be the same for everyone, but I do think there are certain rules that come into effect, based on the stage of your business. The seed round, the first round of investing in your company, is all about investing in your team and in their abilities to execute on your idea and make it successful. I believe that the first round of funding is 100 percent smoke and mirrors. No matter how good your metrics look, it is probably the hardest round of funding to raise.
What about the next rounds of funding? How do they compare to the very first round of funding?
ML: By contrast, series A, you have some traction, you have some numbers and there is going to be some diligence. Series A is 20 percent how your company is performing, and 80 percent smoke and mirrors. Many companies do not make it to Series A stage because they do not get the performance, they do not get to their customers. Each time you raise money, this component of smoke and mirrors is based on how you raise your valuation. By the time you get to the series B round of funding, it is 80 per cent how your company is performing, and 20 per cent smoke and mirrors. By the time you get to the final round, series C, it is based on 100 percent of your company’s performance.
This concept of smoke and mirrors, can you clarify what exactly it means? And, what it looked like for you while you funded your business?
ML: What I mean by smoke and mirrors is the magic of your business. It is the essence of what you are going to do with the money and how you are going to make the involved investors proud. It is the vision piece, and how you will make them successful by having them invest in your idea and in your business. In my experience, I even include the concept of smoke and mirrors at the Series C stage of fundraising for my business because when you make a round competitive and many investors can come into the round together, there is a fear of missing out. That competitiveness is really what drives those investors to be interested and stay interested in your company.