How Studionow CEO David Mason grew to $6M revenue and 65 customers in 2024.

hello everyone my guest today is david mason he's a veteran technology entrepreneur and e-commerce pioneer starting one of the first internet bookstores in 1994. ultimately buy.com became and had a successful ipo with a market cap of 3 billion and raised more than 225 million in capital when it was listed on the nasdaq david worked as ceo of that company europe the europe version based in paris and munich he started a studio now in january 2007 since then it's gone through a bunch of different changes related to aol today though it's spun out we'll talk about it today david you ready to take us to the top yeah definitely thanks for having me on the show nate so like why aren't you you should have been jeff this you should have been the richest man on earth why aren't you yeah i should have a lot less hair on my head you know you should be seeing a shiny reflection right there no though in all seriousness i mean the concept behind buy.com was really an internet bookstore so why did jeff do what he did but you obviously didn't do what he did now it's a great question a question that you know obviously over over the years and based on the success that jeff and amazon has had i've asked myself over and over again um but you know it's very apparent you know now looking back so fortunately my brother and i michael mason we actually had a head start so we had a first mover advantage on amazon we started our internet books were really at the end of 1994. launched it early 95. opened it up it was a huge success on day one we had some partners in germany that had created their own internet bookstore about three or four years even prior to that so in 1991 time frame uh so we had the technology up and running exact same concept as of amazon just did it maybe six seven months before amazon uh there was two of us i i was technically still in college my brother is about two or three years ahead of me um our first business um something that we did not know anything about the book business the book industry technology um but david what did you guys what were you able to grow revenue do i assume you kind of went on you listed in 99 i imagine when you raise the capital you raised what were you guys doing in revenue at that point well in in in 99 we've gotten the company up to 100 million dollars in top on revenue okay when we eventually merged the company with buy comp to create buy.com we did about 115 million in total revenue and our first year of business is that combined entity and that broke compact computers previous first year in sales records so super successful company so i'm not jeff bezos and we're not amazon but we we got pretty close so david just to be just to be clear though on that so when you're saying a 100 million bucks top line revenue i i don't know if you're actually holding books in inventory that's not transaction volume through your platform correct that's actually what you're taking per sale well that's our gross revenue you know and then we're going to have cost of goods which is purchasing the books and then you're going oh okay so you're making much closer to a 10 or 20 margin on 100 million you're doing 10 20 million in net revenue exactly like amazon's financial model outside of aws yeah but for my audience who might understand that to be clear what you were doing in 99 when you listed is you're processing 100 120 million bucks in book volume you're going to buy the book right so your margin after that was maybe 10 20 percent in that range correct that's right typically in the book market and then discounting came to be much more aggressive with amazon barnes no typically in the book market the retailer keeps forty percent so if it's a ten dollar book your gross profit is going to be four dollars so what what did you optimize for back then you're taking 20 million to the bottom line or what uh no i mean what we were doing once we were part of buy.com we were being super aggressive i mean we're almost selling products that cost so if you know from a gross margin standpoint we were passing all of that to the consumer and that was our customer acquisition amazon has done that too i mean they're notorious for buying the market and not making any money until you know these these last five or ten years but in the early days amazon had you know heavy heavy losses um and that's because they're highly discounting the the product but kind of going going going back to the early days just your your first question i mean at the heart of it what it came down to we brought a knife to a gunfight so my brother and i super junior super young we started the business we're in a strip mall outside of ingram book company which was the main wholesaler that's where we bought our books from that's where amazon bought bought their books from they raised 10 million dollars from kleiner perkins the first day i think we scrapped together twenty thirty thousand dollars the first day so yeah we're we we were outmatched from day one we hung in the game i think we we did a fantastic job competing with amazon there was a new york times profile article that ordered books from us ordered from amazon we were the ones that shipped the books david i don't i don't mean to cut you off but we're very sure on time i don't want to spend too much time on this because i want to talk about studio now but the reason i'm asking these questions is because in the in the bio that your team gave me it said market cap of 3 billion and 225 million raised just to be clear there's a lot of money lost in 99 when this thing went down because you really only had 10 20 million bucks going to the bottom line on a three billion cap well i mean ultimately what happened is that we could not keep going back to the capital markets to raise more capital because it crashed the scale yeah so yeah amazon could and that's always been jeff bezos strength so they were able to sustain the market downturn but at that point they were they were far from profitable we were far from profitable so it was all about how much more capital could you put in correct yeah it's a story let's let's fast forward let's fast forward to today so studio now i want to start where you're at today and then we'll go backwards with the aol story so help us understand what the product does today and what your revenue model is is it pure place ass uh yes so so that's the focus of the company is pure place sas you have your advertising media industry which is about a trillion dollar global industry we're the other side of the coin so before you can even watch a tv super bowl commercial before you can watch an instagram video it has to be made first so what we focus on is the creative spend or the production spend and that runs about 15 to 20 percent of the media spend so we estimate it to be anywhere between a 100 billion and a 200 billion dollar market and that's what large brands spend every single year to create all that content so how do you price though yeah talk about your pricing model yeah sure so we have a sas platform that manages that spend so if someone like a procter and gamble will put 500 million dollars worth of spend on the studio now platform and that's for all their tv commercials all their digital spots so we charge them either a percentage of spend or a per user license and so we're making you know dollars on the amount of spend the amount of projects that go through our platform plus the number of users that are on that platform why why should so if i'm one of these guys buying this and by the way we had bill wise on media ocean and had this exact same conversation a couple weeks ago out of the coin they're but just just to be clear what you know this whole thing with the ad tax in the middle you're going to keep getting nailed by startups that are that are pissed off without ad tax and they want to get you out of the middle basically so why should someone pay you more money when the fixed cost to create the content is one time and let's say they put millions and millions and millions through that over the next decade why should they keep paying you a percentage of ad spend yeah because we deliver an unbelievable roi so we are saving them money in in two big buckets so right now there's no technology all right so so the way creative and production has been managed today is the same way it's been managed since the don draper days i mean it is old school it is telephone calls it is emails it is spreadsheets going back and forth it's incredibly inefficient however the big problem has been the exponential need to create more content so when you're dealing with you know very old school processes and kind of business rules and operations it can't keep up with the demand of all the content that needs to be created now so our technology is saving them time and it's saving them a ton of money then why don't you put your pricing axes around minutes produced versus dollars spent yeah so so it's very easy i mean we we charge a certain amount per seat and we can and we can show that we have about a 80 percent time savings in terms of sourcing vendors creating bids processing bids selecting a vendor managing a project and then finally deliverable a file we we save 80 from an agency standpoint and from a brand standpoint to go through that whole process the kind of a to z of production and then we allow the brand in the agency to bid out more projects because we're that much more efficient some of these smaller budget projects which agencies and brands just don't have time to bid those out we allow those to be bid out when you bid more projects you reduce the over there's you you introduce i get the price i get the product i get the time savings this is a massive market we've had a lot of people from this this kind of space on so i totally get the product you want to convince me on that what i'm trying to understand is the price amount so is there real software in this thing and are you tied to a sas fee or are you really like old media where it's a percentage of ad spend it it's both and so we're evolving we we have customers that pay us a percentage of the spend we have customers that that pay us a per license trailing 12 months revenue what percent was license fees sas versus percent of ad spend i i would say sas is the vast majority like 60 80 what i would say 90 oh wow okay so and okay so that is a per seat model that's why they're paying that's right okay let's just focus on that then moving forward so you've got these big logos this is clearly it looks like an enterprise play correct me if i'm wrong on average what are these enterprises putting you through per year i mean are you talking hundred thousand dollar acvs or what that's correct yeah that's kind of our average licensed revenue per client per year okay that's okay i nailed it first first guess it's 100 grand yeah yep and what is paint that picture of that kind of hypothetical company paying you 100 grand in a year one how many seats is that typically and how many minutes of content are they producing yeah i you know from the minutes of content that's that's kind of irrelevant but from a from a seat standpoint it's in that kind of i'd say 35 to 50 seats and it's going to cross the spectrum in terms of seats from the brand standpoint so you're going to have the marketers and the agency standpoint so you're going to have agency producers as well so it's a combination and a lot of these brands have multiple agencies so we might have you know individuals and production coordinators and agency producers from four or five different agencies plus all of the brand users capitalization wise and let's just focus post spin out for a second after you spend out of aol um how have you capitalized the business it bootstrapped or raised yeah all institutional vc backed so from from day one the same vc that uh backstudio now what we call 1.0 in 2007. they're the first ones that came in and led a series a that allowed us to spin the company out from aol okay so how much now today total raised post aol 20 million something like that i've raised about 20 million yep and how much of that went towards the actual spinout aol kept it versus operations on the spin actual spin out company the vast vast majority went to fund operations of the company not okay is aol still on the cap table of this new company or no they are they are yeah so when we spun the company out they maintained a minority position and a board seat and they still hold that position today yep interesting how at what point first off did you stay inside of aol after you sold to them managing an earn out or something or how did you know it was going to spin out i was highly involved at aol and kind of the larger strategic pitcher so after we are acquired i spent three years within the walls of aol which is actually longer than the earn out i kind of my role evolved i was more in charge of a more comprehensive content platform and content technology that aol was developing but but very focused in the video space helped lead three other acquisitions in the video space and just to be clear from my audience guys that that sale price david kept me if i'm wrong i was 2010 for about 36 million bucks to aol that that's right we're doing about a million in revenue at the time so good good and how much have you raised uh at that point we'd raise about four million dollars okay pretty pretty good situation how did you how did you get a 36 x on a million top line well convinced tim armstrong that the future of of digital media was video and aol did not have much video content or video technology or infrastructure at the time and that studio now had proven that we've created an unbelievable platform and technology and marketplace to create tons and tons of high quality low-cost video content let's go back to where the company is today so you funded essentially with 20 million bucks what's the team size today team sizes we're about 55 total and where's everyone based uh mostly in nashville we have some developers that are in san francisco and new york and then we do have on-site teams for some of our larger customers where we have full-time employees studio now employees show up to just help them strategically manage all the content that they need to create 2013 was the spin out what have you been able to scale to today in terms of total customers on the platform well i say we're probably up to about 65 70 customers i would say over the last two years we've been hyper focused on going after the fortune um so those are bigger customers and there's less of those but um you know moving forward that's that's our focus for fortune 500 a lot like you know the media oceans of the world that's who has about 80 of that 100 billion in spend moving through their pipes and so that that's our focus for sure this vista equity is a tough tough kind of group to go up against they're pretty efficient um talk to me here so 65 customers enterprise customers 100 000 acvs i mean that puts about 540 grand a month right now is that about accurate uh no we're we're higher than that okay so what which of those numbers did i miss your acv's higher or your customer accounts higher yeah um what you missed is our traditional part of the business which is the production marketplace so that's what we've had from the from the very beginning and so we have a vendor network of about 10 000 super high-end production companies that are really spread out all over the country all over the world and so when our customers need to source more production resources than they have in-house or that they have current relationships with they can contract out through us to access that network and when they do we we take a fee on that just because you said that was 10 that's essentially 10 percent you said sas was 90 right no no no so of our total revenue we're about 90 on the production transaction side 10 sas when i broke out sas of the sas it's about 90 that is sold on a per seat license um revenue model versus the percentage of spend okay the 65 logos paying 100 000 acvs that's your sas model correct that well those are we have customers that are both so those customers are paying sas and they are paying production transaction fees as well okay just because i thought you said what they're paying for is between 35 and 50 seats the combination of people at the brand plus at the agency that's pure sass yeah that that's the sas side okay if that's not a hundred thousand dollars on average per year what is it just the sas component no that that that is that's the sas component okay well if that's the case and and that's ten percent of your business that means you'd be doing 10x 540 grand a month yeah it's it's really the sas component of our business is a little over a million dollars and then the other component of our business is about 20 x that okay so sas is a has a million run rate today in terms of yearly run rate that's correct yeah got it okay and then our transactional business is you know in the 20 million dollar range got it got it got it okay that means by the way that is not volume to your platform that's the margin you take no that gross revenue that is gross volume coming through our platform not the margin that we did okay so if there's 20 million volume coming through your platform and you're taking dollars i mean ad taxes are typically go as low as five-ish maybe up to 25 that's right so i won't get in the details of those numbers but but we have a healthy margin it's a blend of transactions and different transaction fees based on the size of production uh we have a services component all that's baked into that 20 million yeah but i like the mix of professional service and sas a lot of people don't like it vcs ding you for it they say it's lower margin but it also makes the sas stuff more sticky so like i actually like it um just to go get some clarity here right so we don't go we won't go into your ad tags because i'm sure it's different based off negotiations but generally speaking on 20 million in volume if you're taking let's say 10 right that's 2 million there plus 1 million sas we can kind of back into the size of the company yeah yeah from a from a gross profit standpoint yes from a gross profit yes exactly yep now are you operating how aggressive are you being you had 20 million come in the company are you break even today are you still burning to drive growth no we're we're break even you are breaking okay so are you raising right now uh we're we're having some strategic conversations right now i mean we're always raising we we get a lot of inbound interest from private equity and growth equity and strategic as well so unity vista uh you know we we know the vista guys very well and and we don't compete with mediocre we're actually very complementary to mediocre that would mean that would mean yes that's even more likely than you're than you're talking well i we we know those guys very well yeah obviously that'd go in under bill not probably vista directly but but interesting space um last question here on economics churn is critical in this kind of space right so what does your churn look like and how do you manage it i'm just talking about the sas side of your business incredibly low turn incredibly return i i can't even think of a customer right now that has gone off of the technology what is net revenue retention annually obviously it's above 100 how far above um well that's that's one thing we're working i mean we're we're super early in the game so we're still collecting a lot of this data but i mean okay so too early acquiring new customers and growing within the walls of existing customers so what's it costing you right now to get a new customer if they're going to pay a hundred grand in year one uh i mean we're we're trying to get that roi you know in the kind of six to eight months okay so you're willing to spend up to 50 grand to get that that 100 grand customer yeah yeah okay and where would you spend that are you leveraging you mentioned your team earlier do you have an inside sales team that that's right and again we're super super early so we have a very small sales team just hired a marketing director so we're we're early early stage in our kind of whole sales and marketing and cac kind of fundamentals that's great and then um growth wise what are you growing at you're over here right now yeah on and again just on the south side uh we're up about 300 percent last year that means you've been doing about 30 grand a month a year ago now you're doing about 90 grand a month yes yeah yeah or the way or the million dollar run right yeah yeah a little bit higher than that but yeah very good david growing incredibly quickly that's great all right let's wrap up with the famous five number one what's your favorite business book my favorite business book i would have to say is uh the black swan number two is there a ceo you're following or studying i big admirer of jeff bezos still reach out to him every now and then number three what's your favorite online tool for building the company you know this is a oldie but goodie it's it's goodall excel number four how many hours i sleep to get every night uh i have six kids gotta kind of quit counting a long time ago all right okay good i mean but generally speak when you think six seven six six okay in situation married single uh married and how old are you uh 46 46. okay take us home here david last question what do you wish your 20 year old self knew uh how to knock on the doors of kleiner perkins and raise 10 million dollars raise money more effectively especially if you're back in 94 and it's a race with mr bezos himself guys there you have it from david now building studio now sold the company back in 2010 to aol for about 36 million bucks spun it out back in 2013 with the help of a 20 million dollar round of kind of funding from traditional investors today he's operating at the company had breakeven team of 55 helping enterprise folks manage content creation and ad spend around that their sas revenue stream is about a million bucks today in terms of ar that's a 3x year over year so nice growth there again willing to spend up to six or seven months of first year acb on acquisition uh that they're spinning that up and getting us up going today again all based in nashville david thanks for taking us to the top yeah appreciate it thanks a lot nate great to meet you