Emery Wells On Selling For $1.2 Billion His Collaboration Startup To Adobe

Emery Wells is the co-founder and CEO of Frame.io, a video review and collaboration platform used by over 1M media professionals and companies like VICE, BuzzFeed, and Facebook. After raising close to $100 million from top-tier investors, Frame.io was acquired for $1.2 billion by Adobe.

In this episode you will learn:

• How to take risks in making your project successful and gain great outcomes
• How to set up lightweight diligence to build trust and share information with the investor or company on engineering, product, legal HR, finance, and product
• What initial thing you should focus on before starting a small business venture
• How to keep your agenda, values, and philosophies straight to get the company culturally and philosophically aligned in the marketplace
• How to think about the ideology of big risk, big reward in the business sector
• Gaining the confidence to execute and build something really good

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About Emery Wells:

Emery Wells is a tech entrepreneur involved in filmmaking, post-production, and computer graphics for over 17 years.

Emery Wells is the co-founder and CEO of Frame.io, a video review and collaboration platform used by over 1M media professionals and companies like VICE, BuzzFeed, and Facebook. Emery Wells is the recipient of an Apple Design Award at Apple’s 2016 World Wide Developer Conference.

In 2007 Emery Wells founded Katabatic Digital, a boutique post-production facility in NYC that pioneered 4K digital cinema services for the post-production market. Katabatic grew to offer a wide range of digital services to television and advertising clients and participated in the creation of over 100 Digital Shorts for Saturday Night Live.

Prior to launching Katabatic, Emery Wells was an award-winning producer and self-taught visual effects supervisor. In 2004 Emery Wells was awarded a ProMax Gold award for his work on the Nickelodeons holiday interstitial package with credits including visual effects supervisor and lead compositor.

In 2005 Emery Wells co-produced and co-hosted “MacBreak,” the first high definition podcast on iTunes which held the #1 spot for several weeks.

Emery Wells later went on to co-create “The Circuit,” a technology news program and first scripted series for the MOJO HD network.

Connect with Emery Wells:

• Crunchbase
• LinkedIn
• Instagram
• Twitter

Read the Full Transcription of the Interview:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m super excited today with the guest that we have—incredible story, incredible journey, and an incredible outcome, too, and we’ll talk about that as well. So without further ado, let’s welcome our guest today. Emery Wells, welcome to the show.

Emery Wells: Thank you. It’s good to be here.

Alejandro: Let’s talk about your journey a little bit. You were born and raised in Miami, Florida. How as life growing up there.

Emery Wells: Miami, Florida—you know, I’m not a huge fan of Miami, so that’s probably why I don’t live there today. I think it was a fine place to grow up. Miami has changed so much, by the way. Miami is, obviously, having a second, third, or fourth coming since I left 20 years ago. Miami is having a renaissance. I can’t speak to the Miami today, but the Miami that I left almost 20 years ago, I was yearning to be around people that were out to accomplish bigger things. At the time, Miami was a much more laid-back kind of city, and I wanted to be in the action.

Alejandro: Let’s talk about you moving to New York City. How did that happen?

Emery Wells: Yeah, I moved to New York City shortly after graduating from high school. I was all set to go to college, as most people are when they graduate from high school. I was going to go to college in New York City, but about a month before I was supposed to move, I decided I didn’t want to go to college, and I was hanging out in Miami for another year or so after that doing random things. I ultimately decided to move to New York City anyway to pursue a dream of becoming a filmmaker. I had a very classic New York City story. I had $500. I didn’t know where I was going to stay. I didn’t know how I was going to survive, and I made it work. I started working as a bartender in the restaurant industry, and that was my film school. I didn’t go to film school either, but a lot of people in New York City in the restaurant industry tend to be involved in media, filmmaking; there are actors, there are filmmakers. I happened to work at a place that was full of other people that were pursuing their dreams just like me. That was my network or film school, if you will, where I was working with those people to make music videos, short films, and things like that. Ultimately, over the course of many years, I was able to get myself into the media industry, and ultimately, I was able to start my own post-production company, which went on to do a lot of fun stuff. I used to do all the digital shorts for Saturday Night Live, and everything was pre-recorded for them. I did a lot of broadcast advertising and things like that.

Alejandro: In this case, before we even continue further, how did you develop this love for filmmaking, to begin with?

Emery Wells: The real story: I think heartbreak tends to play a big role in our lives. I was dating somebody when I was a teenager at age 18. We broke up, and I was very heartbroken about it. I thought my big idea was, I’ll make a video about how great our relationship was, and I’m going to win her back with this video. This was 20+ years ago, so the ability to make a video back then was not at all like it is today. It was a science experiment, having a video camera, adjusting digital footage into a computer, editing it, all of that was expensive, complicated, and a science experiment. I fell in love with the process of making video during that time of trying to make this—I don’t know what I would even call it. This was a win-her-back video. It was through that process that I realized, “I absolutely want to be a filmmaker. This is amazing. I love this expressive medium. All the ideas that I have in my head, I feel like I can share them through this process of filming stuff, editing it, and choosing the music that has the feeling that I’m feeling inside. That was the start of it.

Alejandro: When you were in New York City, bartender, as well, to be able to make a living and make ends meet, I’m sure that was very uncertain for you—a new city, no money. I’m sure that has also developed your character and your personality quite a bit, and also how you’ve been dealing with uncertainty, too, as an entrepreneur.

Emery Wells: Yeah, I’m sure it has. You’re absolutely right. I had very little certainty or stability, and I’ve always been comfortable in that environment. I’ve never been averse to taking risks, which, obviously, you have to do over and over again as an entrepreneur. So, yeah, I think that did make me comfortable with a lot of the unknowns and instability.

Alejandro: In your case, also, there was one pivotal moment or one interesting moment of you becoming the owner of one of the first red cameras. What was that about?

Emery Wells: I’ve always tried to be at the forefront. I think throughout my career, I’ve always been at the forefront of the technology changes that were happening in the video industry. I’ve done this a few times. I was the owner of one of the very first red cameras. For people that are listening that might be unfamiliar, this camera called a red camera, which is made by a company called Red Digital Cinema, was a really transformational piece of technology in the camera industry. This company was founded by Jim Jannard. He’s the founder of Oakley, and he sold Oakley. He decided, “I want to build a camera.” People said, “You make sunglasses. You’re not going to build the world’s most advanced digital cinema camera.” But at this time, this was the mid-to-early 2000s, something in that timeframe. The digital cameras that we know today didn’t exist—feature films and episodic television, and everything that was high-end was still shot on film. The digital cameras just weren’t good enough. He built this camera called the red camera. It was at 4K resolution, which, at the time, was absolutely absurd. People, at that time, were still arguing whether or not we needed HD, and this camera was a 4K camera. It was file-based. It shot to digital media cards. Everything about it was different. There were 100 of them that were produced in the first year that the camera existed, and I owned one of them. I found myself owning this piece of technology that was super transformative, and everyone in the industry was trying to get their hands on it, wanted to shoot with it. Immediately, there were all these other things that had to be figured out. All the professional video workflow basically broke when this camera was released because it was file-based. It had this different way of handling color information. Literally, everything changed, and I started figuring out how to support the workflows that these professional post-production companies needed to use this footage. I was able to use that, owning this camera as a catalyst to start my own post-production company, which I eventually did. As I mentioned, I went on to use some really fun stuff like all the Saturday Night Live digital shorts.

Alejandro: Nice. Obviously, you had your projects here and there, but definitely starting your own post-production company was a really big one, Katabatic. So tell us about this company.

Emery Wells: It was a very typical kind of boutique post-production company. It’s a lifestyle business. As I said, I found myself at the intersection of a lot of interesting changes that were happening in the industry, so I was able to figure out what people needed, solve problems, and offer services. It’s a service-based industry. You’re trading time for money. We did all kinds of post-production services: editing, visual effects, motion graphics, color grading, dailies, full-service post-production. I grew a great lifestyle business. I was making north of a million bucks a year. I had a couple of employees, and I could have stuck with that for many years or for my whole life and retire. I built it from the ground up from nothing over almost a decade. By the time I eventually shut it down to focus on Frame.io, it was throwing off a lot of cash, but I knew I wanted to aim for something bigger, and I knew if I were to achieve that, I had to put my full focus into it, which ultimately led me to shut down that company to focus on Frame.io.

Alejandro: You are already making north of a million bucks. That would be anyone’s dream, especially keeping in mind that you came to New York City with just 500 bucks in your pocket, and you needed to be a bartender to be able to make ends meet. So walk us, all the listeners, through that moment where you realize, “I think Frame is the way to go. It’s time, right now, to shut this down, and I need to go full-focus on Frame.”?

Emery Wells: I think that we’ve all heard the saying: big risk, big reward. The people who have been the most successful in their lives just continuously take on risks. I think about some of the risks that Elon Musk has taken on throughout his career. I just went through this acquisition to Adobe, and obviously, it was a really incredible outcome.” While I’ve taken risks, like shutting down my post-production company, it was making a million dollars a year, to focus on Frame.io, that was a big risk. But I think about someone like Elon, who maybe when he had sold PayPal and had a similar outcome to what I’m experiencing now, and he took what is pretty substantial, and he risked it all and put all of that money into SpaceX and Tesla, which were enormously risky. That blows my mind. So as you asked me this question about how I was comfortable taking on that risk of shutting down this lifestyle business to focus on Frame.io, I think of someone like Elon, who risked decades of work and net worth into Tesla and SpaceX. You’ve just got to keep doing that. If you want to go bigger and if you want to achieve more, it’s not even about the money. It’s about outcomes, outcomes in achievement. I love creating stuff; I love having big outcomes, and the bigger the outcome, the higher the risk.

Alejandro: How did Frame.io come knocking with the idea, and what was that process from incubation to bringing it to life?

Emery Wells: My cofounder was an employee of mine in my post-production company, and we started building Frame.io, an internal tool for ourselves in that company. We were very deeply into it. Frame.io is a video review and collaboration product. It helps teams collaborate while they’re working on video, and it was a problem space that we knew intimately. We weren’t building something that we thought should exist. We knew it needed to exist, and we knew the problems very intimately, so we started building it. For John and me, this was our first big software project. We had done smaller-scale software projects prior to this. We had built an iPhone app together. But starting Frame.io was both our investment and wanting to do some larger-scale software and learn, and also solve this problem that we knew really well. But I can’t say that I had the grand vision for Frame.io then that exists now. I think it would have been difficult for me, at that point, almost ten years ago to say confidently that we were going to sell to Adobe for north of a billion dollars. That’s certainly not how the project started. But as we were building it, we continued to gain confidence in our ability to execute. We thought we were building something really good. We were really good at building software and really good at designing software. That just built our confidence. After a couple of years of building it internally, we realized 1) everyone that has the problems that we had at my post-production company has these same problems. Everybody that makes videos shares this same set of challenges. We had built something really good, so we said, “You know what? We should try to do this. We should take this out to market.” So we launched it and announced it publicly, and we had this viral launch campaign, which there’s probably not time to give the details about that. You know, a lot of launches can be viral. They have the mechanics of sharing on social; we sold gamified point systems to get early access and everything. So we did this viral announcement that got the attention of Silicon Valley. I didn’t know anybody in Silicon Valley. I was in the media entertainment industry. I didn’t know anyone in tech; I didn’t know anyone that worked in tech. I certainly didn’t know any investors, but this viral launch got the attention of investors. The viral launch wound up getting us on the front page of Hacker News. We were the #1 story on Hacker News, and that used to be, and probably still is, prime ground where investors would be looking for interesting products, interesting startups, entrepreneurs. So we were on the front page of Hacker News, and I got a lot of the inbound from investors. But I’ll tell you here, one little growth hack that actually worked really well is when people signed up—I think a lot of companies do this now—but when people signed up for Frame.io, this initial announcement, when they dropped their email in, we did a timed automatic response from me. So 15 minutes after you signed up, you got an automatic response from me that was one sentence. It looked like super plain language. It didn’t have any unsubscribe or anything like that, which was not compliant with how you’re supposed to do email, but it looked very organic. It was like, “I noticed you just signed up. Why did you sign up?” I got, from that, literally thousands and thousands of personal responses, and it was because of that little email engagement that I was able to start conversations with some of these investors. Some of these investors might have been like, “Ah, I’m going to keep my eye on this. I’ll drop my email here.” They got that auto message from me, so 15 minutes later, they responded back like, “I’m so-and-so from Andreessen Horowitz. This looks really interesting.” I wouldn’t have even been able to scan all the emails. I tried scanning all of the emails of people that signed up, but we had 15,000. That is what started conversations with investors. Actually, my very first pitch was at Andreessen Horowitz. We tried to raise money before we launched the product. This announcement that I’m talking about was just simply that. It was an announcement. It wasn’t an actual working product. We tried to raise money from the momentum that we built off of this announcement, and it didn’t work. We pitched, and people said, “Wow.” We had a working product that we could demo. We weren’t live in the market yet. We pitched, and people said, “Wow! Incredible product—super exciting. Come back to us when people are paying. So I did a big round of pitching, 10-15 pitches that went nowhere. But then we actually launched, and when we launched, it was a very different conversation because we had very early traction. The first 90 days of launch, we were doing $30,000 a month recurring revenue, or something, in the first 90 days of launch, so there was really strong early traction. Then when we came back to investors and pitched, that story was very different. We wound up having a very over-subscribed and competitive deal that was led by Accel. That anointed us. That put us into Silicon Valley. Now, we were anointed by Silicon Valley; it put us on the track, and we continued to see really phenomenal growth in those first couple of years. Our last round of fundraising prior to being acquired was a Series C in November of 2019.

Alejandro: How much capital did you guys raise up until the acquisition?

Emery Wells: We raised a little over $100 million, all in.

Alejandro: In those investors that you were attracting, what were you essentially looking for in them?

Emery Wells: I’ll tell you this about investors. I wasn’t looking for anything. I was looking for money, which I think was what a lot of people are looking for when they’re trying to get funded. I feel really fortunate that I wound up getting incredible people and partners, and not just money. There are so many challenges that people have in building companies. It’s just like a constant string of fires and issues and everything. I never had board member problems. Our investors were so supportive and such great partners. I’m super thankful that I wound up getting money from really good people because, as I think back to all the pitches I did, I’m like, “Wow. I think I really dodged that bullet not taking money from that person. I don’t think it would have been a good fit on the board. When you’re early, you will take money from anyone. It’s so hard; you’ve got that initial seed round. You’re willing to take money from anybody. I think that’s kind of right, in a way. If you’re not taking a board seat in those early rounds, I don’t think it really matters. They’re signaling from who the investor is. If you get money from a seed-level investor, that signals to A-level investors that you couldn’t get the attention of A-level investors. So there are other dynamics there, but assuming that you don’t give up a board seat, getting money to get the business going is the most important thing.

Alejandro: Yeah.

Emery Wells: But the moment you have somebody on the board, you really do need to consider who these people are and choose them very carefully. But I wound up having a great board.

Alejandro: Let’s talk about the acquisition by Adobe because, obviously, it was an incredible outcome. You definitely gave those investors a 10x return that they typically look for. Let’s talk about that. How did the acquisition come about?

Emery Wells: It initially came about with Scott Belsky, the Chief Product Officer of Adobe Creative Cloud. He reached out to me on Twitter, actually, and said, “It would be great to connect. We should chat.” Of course, I’m always willing to have those conversations. We connected over Zoom. This was in March of this year, so peak pandemic. So I connected with him. He was forthright. He shared that he would be interested in having a potential acquisition conversation. He didn’t quite say it that way, but it was forthright, and we started a series of conversations of just getting to know each other. We spent three to five meetings. We took long walks in the park. He lives in New York City, and I’m in New York City, so we took a long walk in Central Park. We walked along the West Side Highway. We walked through many parks during the pandemic, so no offices. We had a lot of outdoor park-walking meetings, and we got to know each other. We talked about the future of video. We talked about some of the things that he’s working on and had been working on at Adobe, and just the world of SaaS, in general, and product philosophy. Through those conversations, I came to one perspective as a product leader. I think he’s a fantastic product leader, and we had a shared vision for the future. So that opened the door to the next part of the conversation, which started to get into some of the financials and things like that. That’s when it kicks off with negotiations, bankers, the board, the M&A team, and all of that. I can’t quite get into the dynamics of that, but it suffices to say it was a fascinating experience. As hard as it was, which it was, it was an incredibly stressful process to go through, but it was super fascinating to see how that all works up close. 

Alejandro: No kidding.

Emery Wells: Certainly, I had never done that before.

Alejandro: What was the price of the transaction? 1.28. Is that it?

Emery Wells: $1.275 billion.

Alejandro: Wow! You were mentioning that the first contact happened in March, and the closing happened in August. Was it fast from that first conversation to then all of a sudden you find yourself in the middle of an acquisition process?

Emery Wells: There are a series of steps. The general steps, which I think are true for most acquisitions, are you have whatever initial conversations you have. In this case, you’re getting to know each other; you’re building trust and things like that. Then there was some lightweight diligence where they said, “We would love to engage in a real conversation and see if there’s something here.” But to do that, you have to provide some information about the business, so it’s like lightweight diligence. That lightweight diligence leads to an LOI, which is very similar to a term sheet. It’s a high-level document, material terms of the deal. At that point, we negotiated the material terms of the deal and put in the purchase price. One of the things I learned is that there are a lot of really important terms of these deals. That’s one of the reasons they take so long. The purchase price is one thing, but there are so many things to understand and negotiate. But that LOI, Letter of Intent, is that high-level term sheet. You sign that, and that’s what begins the diligence period. Then, in diligence, you’re fully opening up, sharing every bit of information about the company on product, engineering, finance, legal HR. There’s a lot to do. And the diligence, I only have experience of this one time, but the diligence for an acquisition is 100x the diligence for a fundraising round. Fundraising diligence is fairly lightweight, I would say, for an acquisition. At least, for this one, it was very intense. Through that, while that diligence is happening, you are negotiating a merger agreement, which is the definitive agreement that has every single detail figured out. Legal teams are spending lots of time together and certainly creating some big bills for both sides. At the end of the diligence period, you sign the merger agreement, and the merger agreement is, as I said, the definitive agreement. But at that point, the deal is essentially done pending closing conditions and regulatory approval, which is for this deal, and for many deals, it has to be approved. It has to go through anti-trust approval, and that process can take anywhere from 30 days to many months, depending on what level of scrutiny is applied to the deal. In our case, we wound up completing that in about 45 days. So, the key milestones are the letter of intent, then you go through diligence, then you sign the merger agreement, and then you get anti-trust approval and officially close.

Alejandro: I’m sure that the people listening really appreciated that, Emery. In this case, obviously, it’s super stressful doing a transaction. There are so many moving pieces, so many people involved, even the lawyers can blow it up with getting into a pitching match and seeing who is right and who is wrong on the language of the agreement. For you, I’m sure there were ups and downs in the process of getting this deal done, and I’m sure it was very stressful for you. How do you deal with stress, Emery?

Emery Wells: I would say it’s certainly one of the highest times of stress over the course of these years because while you’re in diligence, you have to start operating the business differently. If you have a pending acquisition, there are all kinds of things you put on hold, on pause, and things that you’re not attending to that you need to be attending to because 90% of your time is going to the acquisition; it’s tons of very stressful ups and downs. I don’t have any secrets. I don’t have any good ways of handling it—having some good friends that you vent to, I think, is important. I wish I could tell you I meditate or do something. I don’t. I just deal with the stress. 

Alejandro: I hear you. Obviously, you came to New York City with just $500 in your pocket. Now, there’s certainly more than that. What was the first thing that you did when that deal was closed to splurge a little bit?

Emery Wells: I haven’t. I haven’t splurged. There really isn’t time, number one. I mean, after you close a deal, there is so much to do. We’re in the midst of integrating the companies, and I need to be a shepherd for the team and ensure that this is happening in a way that is ultimately going to lead to our long-term success at Adobe. There’s so much to do that to give an honest answer, I haven’t had the opportunity to splurge, so maybe that’s still coming.

Alejandro: Emery, imagine I put you into a time machine, and I bring you back in time to that point where you were shutting down Katabatic, and you were thinking about the idea of going full force with Frame.io. If you had the opportunity of sitting down with your younger self and giving that younger self one piece of advice before going full force with Frame.io, what would you say to that younger self, and why, given what you know now?

Emery Wells: I think the key learning that I would have is to be intentional about the culture that you are trying to build and the values and philosophies that are most important to you. Be very intentional about building a company around those values. I didn’t understand; I did not have an appreciation for the fact that there are people out there that just think fundamentally different than me. When you’re building a company, and especially when you’re small, you think, “I’m the boss, and I’m going to hire people, and they’re going to do what I say, and this is my company. First of all, that’s not the right way to think about it, and I learned that the hard way. What you really need to do is, you need to attract people who are already as aligned as possible to your values and philosophies. When you look at companies out there, companies are so different from one another. Their products are different. The things that they value are different. What makes them successful? What do they choose to be excellent at? Are they excellent at sales? Are they excellent about design? Are they excellent at whatever? Every company is different. In the early days of Frame.io, I learned the hard way of hiring good people who aren’t aligned. It took some painful events to get the company philosophically and culturally aligned. I would have given myself guidance on that. So specifically, the things I would have said are: write down your values—the real ones. Not the ones that you’re going to—for better or worse, a lot of company values are not so great. I tried to be intentional about our current actual official company values, but even those aside, the things that are most important to you about the way you work, the way you make decisions, the things that you care most deeply about, the things that are nonnegotiable in the way that you show up in market, etc. Try to figure those out. I didn’t even know what mine was until somebody was battling me and trying to do it a different way. That’s what I would have given as advice. I’d say, “Just wrap it up.” It’s not only that you have to know what’s important to you; you then have to systematically make them visible and engrained in the culture of your company so that they continue to thrive, grow, and be understood by every new person that comes in the door.

Alejandro: I love it. Very profound, Emery. So for the people that are listening, what is the best way for them to reach out and say hi?

Emery Wells: Emery Wells on Twitter.

Alejandro: Amazing. Emery, thank you so much for being on the DealMakers show today.

Emery Wells: All right. Thank you so much.

 

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