Thoughts on group ownership with unfunded startups

Good news! Steve and I finally released our website, VidSF.com, to the public.

More good news! We had a great initial meeting with content producers. We recruited them via craigslist and we made absolutely clear that a) we are unfunded and can’t pay, and b) we can’t provide equipment.

But, after this great meeting I am left with a tough puzzle. Given that we’re unfunded and can’t yet pay content producers a cut of ads that we don’t have, how can we treat them fairly? How can we encourage the vital sense of ownership that drives projects like these to succeed?

When I started a student TV station at Indiana University Bloomington, the idea of ownership was very, very different. The IUSTV entity was never intended to be for-profit. And, the IUSTV entity was a natural extension of the university system.

IUSTV’s non-profit and university affiliation gave each and every member a strong level of inherent ownership. An important fact to note, however, is that nobody, not even me — the founder, had any real ownership of IUSTV. Instead, this ownership was perceived given the organizational entity’s association with the University.

So, how can we achieve that degree of perceived or actual ownership with VidSF? Although VidSF isn’t an incorporated entity, Steve and I have personal intellectual property ownership of the platform code and design. The team members retain IP ownership of their video content.

But, how can we mix this together to achieve the nirvana of collective perceived entity ownership achieved with IUSTV? Could we offer partial ownership of a yet-to-be-formed for-profit incorporated VidSF entity? Perhaps, but it’s difficult to offer ownership when the yet-to-be-formed entity has no agreed upon valuation. Even if we know the value of a member’s hourly contribution, how can we convert that into a percent of a company with no real valuation?

What are other ways that real and perceived member ownership can be established in an organization?

  • Clear, honest and consistent communication from organization leaders. Check.
  • Shared community – physical or social. We’re working on this via frequent in-person meetings. Check.
  • Shared mission definition. Collaborative input on strategic direction. Check.
  • Honest and straightforward revenue share agreements. We’re working on this: We don’t have any revenue to share. We don’t yet know costs for increased traffic loads, which makes it difficult to peg an exact revenue share percentage. What if we have to go with a CDN and video delivery costs jump through the roof? This is scary.

Thoughts?

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6 Responses to Thoughts on group ownership with unfunded startups

  1. Jay says:

    “We don’t yet know costs for increased traffic loads, which makes it difficult to peg an exact revenue share percentage. What if we have to go with a CDN and video delivery costs jump through the roof? This is scary.”

    I can help you calculate this. You probably don’t want Akamai. I would suggest Amazon S3 with a local caching layer. i.e. you serve the most popular videos, but rely on S3 to serve ones in the long tail. This is surprisingly easy to do with Perlbal.

  2. Anthony says:

    First off, congrats to both of you for launching the site! I love the concept, and think it has the potential to be a big hit. I imagine you’ve considered expanding in a few years beyond only SF?

    With IUSTV, you had a bunch of reasons for people to work for free: recognition on campus, course credit, a creative outlet, a chance to get involved, etc. What ways can you motivate VidSF users to contribute? Until the ad dollars start rolling in (a motivator, but not the only one), I think pampering the content producers and creating other incentives is probably crucial. You need to make them feel special and involved. What extras can you give them without having to spend money?

    Once people start seeing their own content on a rapidly growing site, their motivation will grow along with it. (I say some because everyone’s motivated by different things.) And word of mouth is going to be key, in getting both content and viewers.

    Just random ideas. Here’s to your success!

  3. kfarr says:

    @Jay: Good idea to start calculating costs based on S3. Unfortunately Amazon is pricey compared to our current host:

    Current host: $10/month for 600GB of bandwidth = $0.0167 / GB
    Amazon S3: $.17/GB

    Since we’re working in terms of CPM (cost per thousand impressions) on the revenue side, I’ll calculate a serving cost per thousand impressions.

    So far, the videos are between 5 and 10 MB, but we’ll use 10 MB to be conservative. To serve 1,000 * 10 MB videos = 10 GB.

    Amazon S3 serving cost: $1.7 per 1,000 videos
    Current host serving cost: $0.16 per 1,000 videos

    Big difference.

    So then the issue is service availability — in theory Amazon’s increased cost helps pay for its advertised high level of availability at all levels of usage.

    Based on all of the above, your hybrid model makes a lot of sense. We should serve up as much as we can locally, and then syndicate with Amazon when we detect some sort of reduced quality of service from excessive demand.

  4. kfarr says:

    @Anthony: Thanks for the positive feedback. We have thought about expanding outside of SF, but right now that’s way outside our scope.

    I agree, we need to help the content producers as much as we can at this stage. Here are the general goals of the production team right now:
    – quick, easy projects
    – structure, external motivation
    – accountability
    – feedback/advice on videos
    – input on website development
    – experience / reel

    Unlike IUSTV where I was mostly a paper pusher and not a content producer, I’m a more active participant with the production team now. Even though we’ve only met once, I’ve really enjoyed the external motivation the team has provided — I finally got off my butt to do a quick video about the weird changes going on with the employment status of cab drivers in the City. (There’s a lot of disagreement as to whether they are employees or independent contractors, and this decision has a lot of ramifications on salaries, taxes, benefits, work environment, etc.)

    Anyway, this is a really fun project right now, despite (or perhaps because of) these challenges.

    Thanks for your thoughts.

  5. Bob says:

    Have you thought about a co-op style setup?

  6. Five whole years ago. Unbelievable.

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