Stefan Lederer On Raising $68 Million To Power The Future Of Streaming Video

Stefan Lederer has built a tech startup that has been used to create the future of streaming online video by some pretty well respected international brands. His company Bitmovin has raised funding from top-tier investors like Swisscom Ventures, Atomico, Highland Europe, and Constantia New Business.

In this episode, you will learn:

• Capital raising
• International startups
• Picking your investors
• Stefan’s top advice for other entrepreneurs

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About Stefan Lederer:

Stefan Lederer is co-founder and Head of Business of Bitmovin in 2012, a company that focuses on products, cloud services, and consulting in the area of adaptive HTTP streaming.

He received his B.Sc. (Bakk.) in Information Management in Aug’10, his M.Sc. (Dipl.-Ing.) in Computer Science in Mar’12 and his M.Sc. (Mag.) in Marketing and InternationalManagement in Jun’13, all with distinction from the Alpen-Adria-Universität Klagenfurt. He gained practical and international expertise in various companies (IBM, McKinsey&Company, Dolby, Hillside, Ilogs, etc.) and has a strong business focus in marketing and international management. He founded his first company in 2008 and led several IT projects in central and eastern Europe.

In his position as an Assistant Professor at the Alpen-Adria Universität Klagenfurt, Institute of Information Technology (ITEC), Multimedia Communication Group he participated in several EC-funded projects (ALICANTE, SocialSensor). His research topics include transport of modern/rich media, multimedia adaptation, QoS/QoE as well as future internet architectures and he has published more than 20 papers in these areas. He participated in the MPEG-DASH standardization, contributed several open-source tools (DASHEncoder, DASHoverCCN VLC plugin) and datasets.

Connect with Stefan Lederer:

• Crunchbase
• LinkedIn
• Twitter

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting founder. We’re definitely going to be learning a lot about transitioning from Europe to the U.S. and being most successful first in the U.S. and then Europe coming after, which is something that actually happens. I think that you guys will find it inspiring. It’s all about building, scaling, financing, the acquisition interest, you name it. Without further ado, let’s welcome our guest today, and his name is Stefan, and let me see if I get it right: Lederer. Welcome to the show.

Stefan Lederer: Exactly. Thanks for having me.

Alejandro: Stefan, you were originally born and raised in the south of Austria. How was life growing up there? I’m sure there was a ton of skiing.

Stefan Lederer: Definitely. That’s basically one of my first memories. You spend your winters on the mountains and your summers as well, so it’s an amazing place to grow up. It’s as important to get out. The mountains are also limiting sometimes, so I really enjoyed exploring the world afterward.

Alejandro: How did you get this love for engineering? It seems that quite early on, you started to get into the problem-solving type of approach. So how did you get into this whole engineering aspect?

Stefan Lederer: I always love technology and engineering. I always played around with the stuff; dismantled all my toys just to figure out how they work. That ultimately led me to engineering school and the engineering university, pursuing computer science and computer and software engineering studies. I loved it. I also loved the intersection between technology and business. You can actually create value by technology. That was always a passion, like why the software, doing something with it, making money at the end of the day. It was always super inspiring for me, and seeing all of the technology companies in Silicon Valley was definitely a north star for me. It’s like, “Okay. All of that is possible.” That is one of the reasons why I went into engineering early on.

Alejandro: For you, the university was a big deal. You studied so many degrees—your first degree, then the Ph.D. I mean, you name it. Why did you study so much?

Stefan Lederer: I don’t know. Maybe I get easily bored. I studied computer science, and then I thought, “I love business, as well,” so I studied business and an additional degree. Then it became interesting. The more time I spend on topics, the more interested I get in them. I had my work experiences in-between, but I decided to go back to pursue my Ph.D. During the Ph.D., we did some interesting things. That led, finally, to start bitmovin. I guess I need things to keep me busy; otherwise, I get bored. It also led to quite a lot of activities around my university time.

Alejandro: Got it. In your case, after university, even in-between, you were doing your stents in the labor world in being an employee and figuring out how corporations really work. You did a bunch of consulting, as well, and I think that also polishes more how you’re thinking about problem-solving. That was a really nice segue for you, actually, to start bitmovin. Can you tell us about how you came up with the idea of bitmovin? What were the sequences of events that really needed to happen from idea to incubation to giving birth to it? What did that look like?

Stefan Lederer: We slipped into it a little bit out of Ph.D. research. We worked on streaming standards, in particular, and there was an upcoming streaming standard called MPEG-DASH. The purpose of if it was to enable open standards for all the streaming services out there. We benchmarked our implementations. We would load the first implementation. We showed the industry through our open-source examples and implementations how it could work. Then, based on that, we optimized things. “We can stream a higher quality. We can build a streaming system with better compression and things like that.” We benchmarked ourselves against existing solutions in the market primarily in the context of research. We also published all of that research because we said, “People need to reproduce what we are doing,” and we always wanted to spread the things that we were doing. This research, at the end of the day, created a lot of attention. We got thousands of downloads and hundreds of thousands of [6:56] an hour of website. The manufacturers contacted us to use our open-source code in their resets. Companies contacted us. We saw an opportunity, and we said, “Okay. This whole streaming thing is taking off. Even before the huge success of Netflix and all those other services, they were all still at the beginning. bitmovin was most already decent, but also at the beginning compared to where it is today. We thought, “There is something happening. There’s something really at the beginning of a bigger trend.” We started to spread out our wings and started to talk with companies, and started to try to build products. In the course of that, we suddenly ran into venture capital people. They’re like, “It sounds pretty cool what you guys are doing in your research, and improvements are meaningful. People would pay money for that, so would you like to take some venture capital money and build products and scale it further?” We went back and Googled what venture capital is. After we found that one out, we thought, “That’s cool. Let’s consider that deeper.” That was the beginning of bitmovin.

Alejandro: Especially for the people that are listening and watching, what ended up being the business model of bitmovin? How do you guys make money?

Stefan Lederer: We started to take all the technology improvements, the research improvements, and those are the patents that we created. Those things are a great basis. For a deep technology company, you need engineering and technology differentiation. Then, we took those things, and we brought the actual products that people can buy and how can they buy them?” We started different test balloons. We started a reader compression service, and we started a media player. We started them separate from each other. We put together a website where you can sign up and click on “Buy Here” for our media player. We started with the main model because others did similar at the time. We sold our first player licenses. The website and everything were put together in a few days; it was really basic, but we wanted to test it out. Would people pay for it? We did the same thing for reader compression software. Then we got our first learnings. We got our first customers. We finetuned a lot of the business model. We changed a pricing model, for example, and over two or three years, we found a good fit in terms of what’s the right product, what’s the right target audience, the right target market? There was a lot of preparation. It took us two to three years to find the right product and then scaled it from there.

Alejandro: For you guys, it seemed that the U.S. was always in mind. In fact, you went to Y Combinator, and I’m sure that was a remarkable experience, but why the U.S. before really establishing yourselves in Europe. What was in your head or your analysis or in that strategic roadmap that you had in mind? Why was the U.S. more important for you guys as a first stop before making it happen in Europe?

Stefan Lederer: When we put up those products on the internet, on the websites that we built, we saw a lot of interest in the U.S. I don’t know; maybe it’s just because there are more companies. Maybe people are more eager to try out new things. Maybe people are a little bit more open to newcomers to the market. Some of those factors contributed to some of our first customers came from the U.S. We also got customers in Europe, but we really got the bigger push in the U.S. early on. We had some really nice logos that are memorable. Those important logos, again, helped us in Europe and on a global basis to get traction. But it was easier for us with those U.S. clients at the beginning, and going to the U.S. and from the U.S. doing international again. So it was a great experience for us.

Alejandro: As a European founder, I’m sure that landing in Silicon Valley and being exposed to that environment was quite shocking for you. How was that for you?

Stefan Lederer: It was pretty crazy. We have so many great memories from Silicon Valley. We met our first investors that were European investors from Austria in the Bay Area, because we were on a business trip, and we tried to reach out to people and meet people, and we found awesome investors in the Bay Area. We found our first employee from Austria in the Bay Area. We interviewed them at Starbucks in San Jose. Also, pitching to investors in the Bay Area, we paid $20 to be at a small pitching event, and we saw how it works and how open people are in the U.S. I remember a guy in front of us was pitching in shorts and a Hawaii shirt. He did a great job. He got an investment right out of the gate. I was so impressed. People were really just looking at what you’re doing and things that you bring to the table and not how you look or where you come from. So it was really cool. You immediately get meetings with people. Everybody is open to talking to you. There’s a lot of movement. We talked to so many amazing people from amazing companies around our products. It’s like 10x or 100x faster than anything that we saw in Europe early on. It was a great experience and still is a great experience. Y Combinator was an amazing accelerator in the middle of this event. It’s a great place to scale a company and to get feedback and figure out what your product/market fit is.

Alejandro: How was that before and after on Y Combinator. I’m sure that experience for you guys was quite remarkable. What was the before and after?

Stefan Lederer: Before was okay. It was incredible. Let’s conquer the world. Everybody on the planet can be a customer. It was around the eighth day of looking at it. Then we went to Y Combinator, and they focused on us. “Okay. Not everybody in the world is your customer. You need to focus. What’s your beachhead? What does your customer look like? What’s your product? How do they engage with you? What’s the go-to-market model?” “Okay. Good questions. They really pushed us to go out and talk to customers. We got feedback from people by putting an ad in [15:05]. We asked people to take half an hour with us and walk through our website and our product and give us feedback. That was a great experience. They also pushed us to reach out to potential customers. “How many people did you contact this week?” “Ten.” “Can you make it 50 next week?” “Maybe.” The next week: “How many people did you contact?” “Fifty.” “Okay. Can you make it 500?” “If we stop sleeping, maybe.” They built things for scale, and we built machines and really good playbooks that they can put together for what fits your company the best. It was an extremely helpful school. They don’t help you to build the technology, but they help you to build the business model and the go-to-market model and scale it. We find the vision and give you focus. I think that was the big learning and eye-opening experience for us.

Alejandro: How would you say it also helped you from a network perspective? I think that from a network perspective, it also accelerates things, the ecosystem that they have and the access to other founders, the access to other investors. There are always a lot of people that think about accelerators and incubators, but there’s a lot of noise out there, and there are really only a few, Y Combinator being one of the top programs. People are thinking about going to these places for the network. It’s like universities. You have all the content online. Why do you go to a Harvard or a Stanford? It’s because of the network too. In Y Combinator, how would you say that you were also able to wrap up your network as well?

Stefan Lederer: Absolutely. It opens up for so many things. It gives you so much more attention on the market and acceleration. I think they’re doing it really well by basically building their foundation and setting you up with the right things. Then, putting you on the stage, on the market, and accelerating you with the publicity and the Y Combinator network that you’re getting access to all the former Y Combinator companies. That’s a tremendous initial boost. Then, with all the media work that they can do and the press that you can get from Y Combinator. And again, an additional accelerator. I’m still using so many of my contacts from Y Combinator to get feedback. So many founders that are at the same stage or maybe a little bit ahead of us, we ask them for advice on so many different things. We ask the Y Combinator partners for advice. It’s such a powerful network to have, just to ask continuously. It’s not like you do the program, and you’re done. You’re part of this community, and that’s extremely valuable. It’s a great thing.

Alejandro: In your case with bitmovin, what was that moment where you really knew that you had product/market fit? What did that look like?

Stefan Lederer: Once we saw customers coming to us and scaling up and having this repeated growth every quarter with something that goes up and to the right. We had that right out of Y Combinator. Then, consistently, I think we grew on a low basis, obviously. We did great like 7x in one year right out of Y Combinator. Then we surpassed our first million in revenue, and it’s like this sonic wall where you think, “It’s something that’s really here to stay. It’s not just seeing the customers think that we’re doing a good thing. It’s like a bunch of customers. We have a group of customers who think we do something well, and you can learn from every additional customer and build a better product. We were at the point where you realize you have product/market fit. Then to scale. It’s a very different challenge, but I think surpassing a million in revenue was a big step for us.

Alejandro: Of course. As you’re thinking about scaling and ramping up, capital raising comes to mind. How much capital have you guys raised to date for the company?

Stefan Lederer: After we hit our first million in revenue, we went into Series A with Atomico. It was $10 million. Our Series B was with Highland in Europe. It was another $30 million. Just recently, we did our Series C with Constantia, another $25 million. We have now surpassed the $60 million in venture capital. It’s amazing getting all those partners for the different stages. That’s a lot of responsibility with the money that you take to build a proper business. It’s a great experience, a lot of money, but also a lot of responsibility.

Read More: Chris Gladwin On Selling His Business To IBM For $1.3 Billion And Raising $65 Million To Analyze Data Sets

Alejandro: Of course. With money-in comes expectations for money-out eventually with returns. I can totally get that. As you’re thinking about your experience and dealing with investors in Europe and also investors in the U.S., what would you say has been the main differentiator from the investor mindset of someone that has the U.S. investor mentality versus someone that has the European mentality?

Stefan Lederer: It depends. You definitely see similar types of investors on both sides of the pond. Having that said, you have those really ambitious and successful investors a little bit more in the U.S. They have those billion-dollar and ten-billion-dollar exits that a lot of the Bay Area entrepreneurs have. Those guys and girls are very inspirational. It’s really interesting. If you meet somebody who is on the Leaders List in the top ten, it’s an amazing experience. Those folks really know the business. But it’s a different thing. You have to think, who is the right partner for your company and for your business? We talk to so many different investors, and not everybody is the right fit. When you take venture capital, and you get an additional board member, it’s a very tight relationship, and it’s a long relationship. That’s something that you have to be very sure about the fit, and also, the need that you have at this particular time. All of our investors have been tremendously helpful to us. I think we picked based on those criteria a lot, and we pick people from the U.S. We pick people from Europe, the UK, Austria, Switzerland. We picked U.S. entrepreneurs who switched to the venture capital side and are now in Europe. It’s also interesting to see this experience of bringing engineering from one side of the pond to the market on the other side of the pond. It was always important to us to have people who understand that. I think we made good choices with folks that we have onboard.

Alejandro: Going now to bitmovin, thinking about bitmovin, and more importantly, thinking about the vision. Imagine you go to sleep tonight and have a tremendous snooze, and you wake up in a world five years later where the vision of the company is fully realized. What does that world look like?

Stefan Lederer: It’s like when I go to any product manager or any intimate business and ask him or her, “You need to add media to your offering; shall it be your eCommerce, your app, your media company?” They’re like, “Yeah, bitmovin, it’s the API for media.” That’s my vision. We’re building this category leader. It’s the same way as if you ask somebody, “What are you using for your CRM system?” Ninety percent say Salesforce. “What are you using for communication APIs?” [24:38] “What are you using as a cloud provider?” “AWS” Like really being this category leader, a little bit of an iconic company in that particular space. We saw so many iconic companies doing it for customer support like SanDisk or Communication like Intercom, or Stripe, for example, for payments. That’s our vision and building a really great company. I hope to wake up five years from now and have that.

Alejandro: That’s amazing. I love it. Imagine, now, that I put you into a time machine, and I’m transporting you back in time, obviously with all the knowledge and everything that you’ve been able to gather since 2012. You’re able to have a conversation with your younger self, that younger Stefan that has been in school, did a little bit of consulting here and there, and is now thinking about launching a company, maybe launching bitmovin. If you were able to have a chat with your younger self and give that younger self one piece of advice before launching a company, what would that be and why given what you know now?

Stefan Lederer: I wish I would have spent more time in the workforce before starting the company, like working for a really amazing company and leaders, just to learn a lot of those things and what great organizations look like. That’s an experience that I missed. I would recommend that to my younger self. If I’m still too eager for that and still want to jump on it right out of the gate, then talking and learning as much as possible and figuring out how other companies are doing it, how other leaders are doing it. When you start your first company at such a young age, you lack a lot of experience. That’s something which is great to learn. That’s probably one of the most amazing reasons to do the chop, the learning aspect, but it’s also really, really good to not—you don’t need to make every single mistake for yourself. You can learn from others, as well, and that’s what happens when you talk to other people when you build a network of advisors, and coaches, and friends. Just be open with things. That was one thing I learned in the Bay area. It really helps you if you just say it straight out in the open. There’s no reason to sugarcoat anything or to not tell everything. I really enjoy this openness, and that gives me a lot of great feedback from people that made mistakes before and mistakes that I can learn from, that did great things before that I can learn from. I think that is what I would recommend to my younger self to be super open, search the network, go out and talk with people, and learn as much as possible.

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

Stefan Lederer: Just add me on LinkedIn or shoot me an email at st****@bi******.com. I’m always keen to meet people. I’m also keen to help people paying forward for the help that I got. It’s great.

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

Stefan Lederer: Thank you so much for having me.

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If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*******@pa**************.com.

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