The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:07:19 · Harry Stebbings, Alex Mashrabov
[00:07:19] S1: Okay. And so that was the company that we built before that you sold to Snap? [00:07:23] S0: So, yeah. So the company was called AI Factory. Was fortunate to meet Mahi twenty eighteen. He's co founder of Hicksfield. And he's a veteran of Silicon Valley, went through ups and downs, and sold it to Snap for 166,000,000. Then I was leading GenAI there. Pause. No offense, dude. You come from a family of incredibly ambitious parents who push you to do well, and you [00:07:48] S1: just skipped the moment where you sell for 166,000,000. It's a lot of money. How did that feel when
00:07:48 · Harry Stebbings, Alex Mashrabov
[00:07:48] S1: just skipped the moment where you sell for 166,000,000. It's a lot of money. How did that feel when [00:07:54] S0: you did it? We both remember these times where the capital for AI companies was not really that much available, and AI multiples were not like 2 hundreds to revenue as they are today, but closer to zero because AI was not a topic. So there was like severe dilution, which we experienced. So just to calibrate. But what was the round? No. Look, I mean, back then, of one, two million dollars... Having $12,000,000 in investments was considered to be really good. But it was still an opportunity for me to finally go to The United States. So after the acquisition, I permanently moved to First two LA and then to Silicon Valley, and my dream simply came true. Was it what you thought it would be? That's a good question. So San Francisco is definitely a place where no one judges by race, nationality, and so on. That's truly phenomenal. There is definitely a meritocracy in a sense that it's possible to meet anyone. But in the same time, what I see across Silicon Valley investors, it's extremely consensus driven. I think that last part, expected to be different. But then I read the book about the law of capital, and I realized this is just how the world works. [00:09:03] S1: So then we have sold to Snap. We're now in The US. This is the moment you wanted. How does Higgs field come to be?
00:09:03 · Harry Stebbings, Alex Mashrabov
[00:09:03] S1: So then we have sold to Snap. We're now in The US. This is the moment you wanted. How does Higgs field come to be? [00:09:11] S0: Back then, like Snapchat 2020 was really growing so quickly. And the face filters which my team has built was driving most of daily new users. What's important is that these face filters, we were able to manage to run on mobile devices, so it was virtually for free for Snapchat. It's not like current LLM tokens costs. And it scaled to hundreds of millions of people throughout the world. It was truly phenomenal to me to build a product which is still probably the most used consumer media AI product. But then what I realized is that there are a lot of unmet needs on advertising sites. Average company cannot figure out how to be relevant on social media. And this is a major gap. Social media is the main media in the world. A lot of companies are actually able to build direct response advertising so that they can actually sell more. But in the same time, most of the companies in the world cannot simply do that. And basically, no... Because no one simply can keep up with the pace of production for social media as trends change pretty much every day. [00:10:15] S1: And so you were like, hang on a minute. These big brands aren't able to have media houses, and so we need to create
00:10:15 · Harry Stebbings, Alex Mashrabov
[00:10:15] S1: And so you were like, hang on a minute. These big brands aren't able to have media houses, and so we need to create [00:10:21] S0: a tool that lets them? That was to sell? Yeah. Absolutely. So where it all really started is that there was a tool to upload set of images and transform them into a slideshow with music. It's kind of better than nothing, but still pretty bad. Right? Another solution was to take long form video and cut them to short vertically oriented videos. This was better, but still really not perfect. And it felt to me that, especially 2023, it was absolutely clear that scaling loss finally work. It's not just a concept from science that scaling loss work. Video just takes maybe two, three years longer than LLMs encoding, but it was clear that finally scaling loss should work in video as well. And I decided just to take a bet. [00:11:05] S1: But I just want to go back. I get that in terms of what we see, which is, hey, we want to empower these brands and companies to create amazing media for social media, but it wasn't a hit from day one. And I spoke to Amy at Menlo who mentioned a couple of pivots before and the meandering that we had. So what happened when we launched? Did we have immediate product market fit?
00:11:27 · Alex Mashrabov
[00:11:27] S0: No. Actually, we spent more than a year in a search of products which could work. We burned more than 10,000,000 out of 16,000,000 raised in seed fundraising. So we felt we have just one attempt left. And frankly, I feel I am responsible because I was focusing on the wrong things. I think I just lost the touch with reality back then. I was so much optimizing for what's hype today, what's the right narrative, how we can hijack their attention, all these things, really, everything, of building a good product. So when we had less than 6,000,000 left, I guess it was slightly less than five actually, I realized that the only thing which we can be focused on is to lean into the product PLG and just finally set belief that the best product is gonna win. And then we just started to talk to customers. We spoke to eight creative directors about their experience with AI and what's simply missing. Everyone told us that camera control does not exist in AI, and camera control is so important to tell a story. So this is a very important bottleneck to solve. So we released our products March thirty first last year. And since then, we are really riding this crazy wave. Was it immediate product market fit then? Yeah, it was immediate. Is product market fit like love? When you know, you know. Yes, it's definitely when you know, you know. Like, for example, we don't do any paids. And we have on the team people who scaled businesses to over billion and 2,000,000,000 in revenue, like other businesses, with paid advertising. At Hixfield, we decided to really make a bet
00:13:12 · Harry Stebbings, Alex Mashrabov
[00:13:12] S1: that You don't do paid. [00:13:13] S0: You don't do paid. Is influencers not paid? That's a good point. So with influencers, there is typically... There are different types of influencers, but typically, there is some fee for just video production and then some cost per click attribution, which works really well on YouTube. You guys [00:13:34] S1: got into some controversy for... I can't remember what it was. You were paying people to promote for you or doing something rogue with influencers. Was that completely unfair? Was it kind of my bad we did do that? How do you respond to that? [00:13:52] S0: Look, I think the main takeaway from our experience is that it's very very important to own distribution. Distribution now more important than ever. And we basically did outsource. We had just a team of two people on creator and customer success sides, And we just did outsource to the agency, and that was not a good experience. I do just wanna go back to part of the story. Where are you at revenue wise today? So today is actually exciting day. When we record, just Bloomberg article went out so that we cross 1,000,000,000 in annualized revenue. If I had a gong here, I'd [00:14:29] S1: be like hitting the gong. A billion in revenue? [00:14:32] S0: Yes. Actually, it took us eighteen months from 1,000,000 to 1,000,000,000. For Corsair, it took twenty four months. So we are probably probably, like, the thirds after OpenAI and Anthropic. Eighteen months from a million to a billion?