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Did All These Fledgling Video Startups Not Get the Memo About the Crappy Economy?

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With the global economy in tatters, what are entrepreneurs to do? Stop believing in themselves? Never! Still, we at NewTeeVee are amazed by the unwavering flow of company launches that find their way into our inboxes. Especially in light of the utter instability of the media industry, why are so many people jumping into the online video biz now?

In recent days I’ve chatted with newly launched startups Clipgarden, a portal for paid training videos; Gawkk, a video feed reader; and Hitviews, a studio that matches brands and web stars. Meanwhile, this week my colleague Chris Albrecht profiled the launches of ZDONK, an online film financing community, and First on Mars, a premium video content aggregator.

So let’s look at those five companies that all happened to poke their heads up in the middle of this nuclear winter. Interestingly, all five are execution plays rather than original ideas or breakthrough technology.

  • Clipgarden: undisclosed angel funding, five employees, based in San Luis Obispo, Calif.
  • Gawkk: “six figures” of funding from another project of the founder, two employees, based in New York.
  • Hitviews: about $2 million in funding from private investors including Bob Weinstein, 10 employees, based in New York.
  • ZDONK: $1 million in funding from private investors, three employees, based in New York but moving to Los Angeles.
  • First on Mars: undisclosed private funding, 12 employees, based in San Francisco.

When I asked Hitviews CEO Walter Sabo what his funding situation was, the first words out of his mouth were, “Better than Lehman Brothers.” Maybe it’s a cheap shot, but it’s true. We’re not talking about huge companies or huge risks here; in fact, at this point it’s not even clear we’re talking about huge opportunities.

With the glut of recently launched how-to video sites weighing on my mind, I asked Clipgarden founder Chris Barbir if he and his co-conspirators thought of themselves as crazy. “We don’t,” he said. “We think if there is a solid enough value proposition it will work.” And everybody’s got a good reason (or perhaps just good spin) about how leaner times will actually help them. Barbir’s version was to contend that content creators will be attracted to his site to earn micropayments, while potential customers looking for training videos will be happier to pay 50 cents to $3 for a short clip rather than shelling out for a whole DVD or class.

And it’s true that even as market forecasts fall across the board, the only thing that’s getting cut with regards to online video is the growth rate, never the actual projected amount of revenue. eMarketer is forecasting that the U.S. online video ad spending growth rate will fall to 45 percent in 2009 from 81 percent in 2008. But in hard numbers, you’re still looking at revenue of $850 million in 2009, a nice jump from $587 million in 2008. Gawkk founder Gary Culliss’ take? “Internet usage continued to increase during the last downturn.”

But c’mon, it’s not like there are any healthy acquirers for these guys, given that nearly all the large companies in the space are busy laying off staff. The startups will have to endure for quite a while before anyone will help haul them up to the next level. So in truth, some of them would probably be better off pulling out of the game now before they lose anymore skin. But that wouldn’t be the entrepreneur’s way, now would it?

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7 Responses to “Did All These Fledgling Video Startups Not Get the Memo About the Crappy Economy?”

  1. I agree with Shawn and would even take it one step further…entrepreneurs by nature are less intimidated by risk and change than most (may be a generalization but, for the most part, I believe it is true).

    If someone founds a company and can interest an investor enough to raise capital during these times, they have as good a shot as anyone else in this landscape to weather the storm.

  2. Here’s a couple of good reasons to be starting a company now, assuming you can find the money to do it:
    1) With the tech sector shedding jobs, there are lots of very talented people looking for work. In good times, many of these would be snapped up by larger top-tier tech companies.

    2) Fewer emerging competitors means that start-ups can focus a little further out and build products and services that can really rock as the economy turns around. We’re a bit less fearful about being beaten to the punch as we would be if we things were really hot and competitors were everywhere.

    Is it risky? Of course. But entrepreneurs want to build things, and that isn’t going to change just because the economy is in the tank. It’s not like it’s the apocalypse. There is no basis for saying some of these guys should pull out of the game. We’ll only be able to judge that with hindsight (which is still pretty useless). Any one of the companies you mentioned here might evolve to be a huge player in future.


  3. Neno Brown

    You have to harness the power of fear, because ultimatly there is nothing to fear except fear itself.

    This financial enviroment; is where you unleash your not so tame inner Tiger, and let it scare everybody else.

    You have to be like a lonely wild Boar searching for truffles, if Dennis and Abigail have truffles, i’ll unleash the tiger and take their truffles.

    That’s the way it iz, in showBiz……….

  4. It’s good to leave the pity party for the big guys behind (for a moment!) and take a naked look at the tremendously challenging landscape facing entrepreneurs. One thing to note is that many of these startups first hatched their plans and models before the sudden collapse of everything. We were all ready for hard times, but no-one thought they could be so precipitous and so drastic. I have my fingers crossed for all the industries and players that can hold their own through creativity/innovation, chutzpah, and — yes — good luck.

  5. The economy maybe extremely bleak, but sometimes that’s the best time to start something new. That’s what I’m doing and hope other people in the online video industry are doing the same thing.

    Now please excuse me while I go back to writing, producing, shooting, editing, website designing, researching, emailing, phone calling, marketing, and eating spaghetti and instant noodles for breakfast, lunch, and dinner. :)