How We Built a $150 Million Streaming Platform with $100,000 | Wendover Productions

0:00I remember exactly where I was. Sydney International Airport, wading to board at 10 R flight to Tokyo, followed by a 12 R flight to Boston, then a one hour one to DC to arrive home the day before Thanksgiving, 2018. My agent Dave said he had an idea he wanted to run past me, so we popped on a call. He just talked to Vimeo, the video streaming platform. They were trying to persuade him to persuade one of his other clients to build up paywall streaming site for their videos using their tech. This and infinite minor variations of this was something we'd get pitched constantly as creators, but everyone recognized that it couldn't really work. In fact, it had a long history of not working. Perhaps the most flashy failure was vessel. It launched in early 2015 with the big name creators of the time. Good Mythical Morning, Epic Meal Time, Shane Dawson, Linus Tech Tips. It was basically a YouTube replacement. Same content, same creators, same features with the addition that users could pay $2.99 a month to watch videos 72 hours early. Combine that with their supposedly unique advertising ecosystem and the pitch to creators was that they could earn dramatically more preview. This is always the core proposition

1:01with these alternate streaming services, more revenue preview, but they almost always have the same problem. The number of views is orders of magnitude lower. Platforms have to extract value from the audience somehow, whether through a paywall or through more intrusive advertising. So why would if you were watch on your platform when they could watch the exact same content on YouTube for free and with less intrusive advertising? So creator signed on the platforms like Vessel, the Minil Views compared to YouTube, and before these platforms can grow enough to get to a point where it's worth it for creators beyond an initial test group, they run out of money and shut down. But we had some ideas on how we could fix that. We thought there was a chance that we had identified a magic formula that we were in a uniquely good position to undertake that could make this simple concept work where all others had failed. Four years later, well, not to brag, but we were right. Nebula has grown massively. Over 650,000 paying users, 100 staff members, a conservative overall valuation of over 150 million dollars,

2:02and it did all of that with absolutely zero dollars of venture capital funding. So what did we do different? Why were we able to make this simple concept work when all others had failed? Clearly, this video is going to be different. I'm not gonna be talking about logistics, or geopolitics, or infrastructure, or another business. I'm talking about my business. So that's why, for the first time, I'm here. This was a tricky video to write. I'm trying to use my unique combination of positions as an owner of a now sizable business, and as a creator to tell an intimate inside story of how you can grow an idea into an enterprise. There are a lot of things that can't be said for legal or practical reasons, and there are countless different stakeholders involved. So what follows is what I believe is the fullest story anyone can tell about the inside operations of the business of this size and nature, but there are, unfortunately, some things I just can't talk about. It's a long story, but it begins in a very small way. On July 27th, 2016, I got this DM from Philip Deppmer of Crescus Act. Hey, man, let's get right to it.

3:02So being another big YouTuber might be starting something, but I can't really talk about it yet. We went back and forth for a month, trying to schedule a call, then finally we talked. Basically, Philip was going to introduce me to the freelance sponsorship agent he and CGP Gray had been working with for years, and later that might turn into something bigger. That freelance sponsorship agent was Dave Wiskes. That's a name you'll want to remember. It's pretty relevant throughout. We talked, he promised better rates to redate a driven approach with an upfront commission. I somehow believed him, but eventually it turned out he was actually right. Some important context. The industry that had arisen around YouTube creators in 2016 was chock full of liars, cheats, and thieves. It was only over the prior couple of years that people could start to make a living off of YouTube and seemingly the first people that thought to insert themselves as middlemen were all glorified cryptors. Getting sponsored is crucial to going full time on YouTube, AdSense alone rarely cuts it. But at the time, the only deals I could land for my fledgling channel were ones that automatically locked me into six months of exclusivity with the agency I booked through, without any guarantee they would actually fill video inventory and with undisclosed commissions.

4:05Undisclosed commissions in this context means they just told you exactly what you'd get paid, which sounds great in theory, but in practice what it means is that they're selling the slot to the sponsor for one price, then paying you a completely different lower price and never telling you what the difference was. You'll just decide what they think you'll accept, but you have little leverage to say no because once again, you're locked into exclusivity. You're only legally allowed to work with them. Oh, and also, contractually, they represented the sponsor, not the creator, so their incentives were to push the price as low as it could go. If you didn't like it and wanted to jump ship, you had to go without sponsorship for six months, which would kill your finances. I've seen hard evidence that this particular agency was taking a 50% undisclosed commission on certain creator sponsorships, so it's no wonder why Dave was able to immediately beat their rates and get sponsors to come back. They might have actually been paying less, but I, the creator, was getting more of it. By chance, Gray and Philip had also introduced Dave to Brian from Real Engineering. We had collaborated on a set of videos that turned out to be big viral hits that launched both of our channels into relevancy, so he was one of my first creator friends.

5:06The next one was Joseph from Real Life Lore. I had never met him in person, but we had talked plenty, so I convinced him to fly out to the inaugural VidCon year-up in Amsterdam in April 2017. Part of the reason was because I had been nagging Dave for months to work with Joseph, whose channel was exploding, and Dave would be there too. The perfect opportunity for them to meet. Joseph ended up having a nightmare weekend of travel delays, some snowstorm or something, so he didn't end up getting there until the afternoon of the last day, but I introduced everyone and we headed to a bar. We stayed there for hours. Everyone headed off, and it capped off an exhilarating weekend. The first time any of us had seen a physical manifestation of the industry we had inserted ourselves into. After working in isolation, it was eye-opening to see and talk to so many others doing the same thing as us. And according to Dave, in retrospect, this was the moment when he fully realized that this informal system of freelance sponsorship booking could grow into something. More. It'd be called standard. A purposely forgettable name for a company designed to exist in the background, making life easier for the creators on center stage. And it worked.

6:07Creators were simply just having a better experience working with standard. The rates were strong, the experience was personal, the ethos ethical, and a landscape filled with grifters and sheets. The concept of a sponsorship agency simply doing its job fairly was enough to drive natural word of mouth proof. We added dozens of creators to the roster and started to be viewed as the go-to agency for educational YouTube. We hired staff, got an office, started throwing VidCon parties. It was all happening. Unbelievably, this part, the part that at the time felt like hard, earned yet incredible success, needs to get glossed over to get to the good part. November 27th, 2018. After a couple of days of back and forth with myself and a few other creators, that's when Dave emailed his full roster of creators, the white paper, the initial concept, laying out our vision for Namula. This is that exact email. In some ways it was close. How would this work? Standard creators post ad and sponsor free versions of their videos and occasionally the service premieres exclusive content. Let's say we charge users $5 per month for their service. All of this is still true to this day, even the price.

7:08In other ways, we were way off. How do we track viewers? First, we can simply buy AdSense ads on standard channels. Sponsoring our own creators feels wrong, at least for now. We can revisit it later if we think we can do it without looking dumb. This is about as if wrong as it could be. We have never figured out how to make AdSense marketing for Namula profitable, while sponsoring YouTube creators has been the driving growth force. Well, get to how we made that work. But the real key that we understood from day one was that opportunity cost to standard, but especially to creators had to be as small as it could possibly be. Equivalents before us always raised a huge amount of venture capital funding, made a big splash at launch and ran out of money before profitability, leaving creators embarrassed when they fold it. We knew that creators were wary of aligning themselves to something so risky, so we needed to make a small splash. We needed to design Namula to fail gracefully. We needed to make it so that if it did fail, it would have the smallest possible impact on reputation and finances. Essentially, we followed the most dramatic form of the minimum viable product model of innovation.

8:10We needed to get a super scrappy version of the product out into the public so that rather than us having to guess, they, the customers, would tell us what they wanted through how they acted. You watch consumer behavior in order to fulfill their wants. Luckily, a lot of the bones were already in place. Dave's prior life was in the iOS app development world, so he had a lot of experience in software. We actually had a few engineers on staff to work on the back end tool we used for sponsor billing and inventory management. The trickiest bit would be the actual streaming. The big platforms like YouTube and Netflix make it look easy, but it's quite a technical challenge to distribute high quality video on low quality internet all across the globe. We didn't possibly have the money to build our own streaming tech. Of course, Vimeo originally approached us, but the problem with partnering with them was that they'd have owned the billing relationship. Basically, when someone signed up, Vimeo would keep their credit card details and info and while we'd get the money, if we ever decided to split with them, there was no guarantee we'd keep the subscribers. So we'd rather decided to partner with another streaming provider called Zeip. Therefore, all we had to build was a front end, a slick flashy user interface to make it all look professional

9:13and an iOS app. We barely even had a back end. We had Eric, who doubled as our podcast editor, who would take the videos, creators added to a share Dropbox folder, run them through the encoder and post them in the right spot with the right metadata. All in all, it cost around $100,000 to get nebulous ready for launch, an incredibly low sell for both the website and app, but there was still one key thing we were missing. You see, creators don't talk unless they're paid to. This is because creators are paid to talk. It's just pragmatic. You basically get one call to action per video. You're lucky to successfully get someone to listen to one call to action. So what the data shows is that if a creator, for example, runs a sponsor, then promotes their Patreon, what they'll see on average is that they'll earn less overall than if they had just promoted the sponsor as the Patreon push cuts into performance more than it drives additional revenue. It's not always intuitive, but it's a quirk of audience behavior that we'd understood for years running sponsorships and standards. Therefore, we knew we couldn't just simply ask creators to promote Nebula out of the goodness of their homes. Not only would this hurt their revenue, which would mean they would stop working

10:13with Nebula in the long run, this would hurt standards revenue too since it came from commission on sponsorships. At the time, standard and Nebula were literally the same company with zero legal separation. So weirdly, free promotion for Nebula would cut off the revenue source that we were using to build Nebula. We didn't immediately have a solution to this. And all honesty, this was the biggest flaw with the business model at launch. But again, the launch was designed to be an experiment, designed to be that minimum viable product. We didn't necessarily need a big marketing method at launch because the launch was designed to help us find that. So the last piece that we needed was for the creators to be emotionally invested. Everyone was excited by the concept, but to assure people would stay excited through the inevitably difficult early days, what we figured they might as well be financially invested. So through complex financial and legal wizardry, we developed a system where 50% of Nebula profits were distributed to creators, including crucially, if the platform were ever to be sold. It means if one day the platform were to sell for, let's say, a billion dollars,

11:13the creators would get half of that. We split that pool based on watch time, meaning the more creators bring in and engage an audience, the bigger share they're entitled to. And the short term, this would be a concept that would keep creators building for the future. In the medium term, this would allocate profit to creators based on how much they contributed to growing that profit. And in the long term, if Nebula were ever to sell, this would make that a scenario where everyone wins, rather than one where the platform wins off the hard work of creators. Not only would this directly tie platform success to creator success and vice versa, we'd also keep everyone in that collaborative mindset when where Nebula and its creators were business partners, rather than clients and servicers. We'd win together and we'd lose together. Next, launch. We didn't have some massive plan. The website had been up and running for a bit as we squash bugs, so what really marked the formal launch shift, anything did, was the first public promotion of the platform. That came from Isaac Arthur. On the morning of Thursday, May 23, 2019, he released a video called Colonizing Black Holes, which ended with a push to his Nebula original, one of the first three called the paper-clint maximizer. We also had originals that launched from real life lore,

12:14second thought, and polyphonic, so each release video is mentioning Nebula funded by a small and finite pool of money dedicated to launch promotion. This first week and went better than we possibly could hope for. By Monday, we had over 4,500 signups. They were trial signups, plenty would cancel, but that gave us plenty enough data to work with to figure out how to make this all work. Better yet, we were getting buzz. A lot of it was negative. Almost everyone thought we'd get added to the long list of failed alternate streaming sites, but at the least, this told us that the idea was exciting enough that people cared to care about us. Over the following weeks and months, we used some of our cash on hand to run some very small additional marketing tests. Basically, seeing if we could pay creators a similar rate to their other sponsors and bring in enough subscribers to justify paying that much. The answers we got were promising. On one test we did on my podcast, Extremities, Nebula paid us $800 and got 200 signups, each of whom would pay $5 a month. The only problem, we didn't have cash. Well, we'd eventually generate cash with the monthly revenue these subscribers brought in

13:15that'd be a very slow process, meaning it'd be quite a while until we could start sponsoring the larger YouTube channels and developing bigger Nebula originals. But we found a solution. Stadard had long run sponsorships for CuriosityStream. Another streaming service focused on documentary and nonfiction content founded by John Hendrix, of the Discovery Channel. To their credit, they didn't get scared thinking creators were trying to replace them, but rather understood that we were appealing to a different complimentary market. So Dave went down to the offices just outside of D.C. and came out the other end with a win, win, we'd bundle. While I can't discuss the exact behind the scenes mechanics, we found a way to make it worthwhile for both companies so that when customers sign up for CuriosityStream through age-cater sponsorship links, they'd get access to Nebula for free. Nobody could really see a downside. So we negotiated details, signed a term sheet, and as of September 2019, every Nebula creator just started promoting the bundle in their already booked CuriosityStream spots. In retrospect, it seems like a minor, ultimately easy change, but it yielded massive results. Personally, the bundle deals super charged

14:17by sponsorship performance. It was clear that the offering of CuriosityStream and Nebula together was a more convincing sell to our audiences than any other sponsor we ran on the channel. Even better, we started to understand the marketing message that worked. Pushing to behind the scenes videos or extended cuts didn't really work. Pushing the idea of no ads or sponsorship on Nebula works okay. But the thing that clearly created these performance multiples was a full length, high budget, exclusive originals. Seeing that, CuriosityStream started to co-produce Nebula originals with us. In October 2019, to film our highest budgets most ambitious one to date, I flew all the way to the remote Atlantic island of St. Helena to make the world's most useful airports. While I was there, we crossed 10,000 paying subscribers, and it took less than a month more to hit 20,000. By the end of the year, we had crossed 35,000, and in six short months, Nebula had transformed from an idea into a fast growth startup. Now, through all this history, I was not actually an owner of Standerk, just a highly involved long-term clients. But it was clearly something I was interested in.

15:18I was there from the start, I'd helped it grow, and I believed in it, and specifically Nebula's future. In 2020, an opportunity arose. Graham Philip were less keen on Nebula, and seemed to make less sense to them. While the rest of the crater roster was, so they were looking for a way to end their involvement with the company. Therefore, Brian Fruel engineering, Alex from LoSpectGamer, Devon from LegalEagle, Thomas Frank, and myself agreed to purchase their ownership stakes and divided up amongst ourselves, and we were all extremely bullish on Nebula. By chance, that sale occurred in March 2020, the same month as the world's descent into lockdown. With everyone stuck at home, the streaming industry exploded. It's awkward to talk about in the context of a tragedy. The honest truth is that our bundle promotion was selling faster than ever, and creators were earning a lot. Curiosity stream capitalized on industry momentum by listing a NASDAQ through a SPAC merger in October, which was initially a big success. Day one ended with an 11% gain, and they peaked in February 2021 and nearly double their first day price. To run through, the Nebula bundle was a win-win. It grew Nebula, it grew Curiosity stream,

16:20it grew creator sponsor payouts, and it was a worthwhile proposition for all. So we decided to double down on aligning the success of the two companies by the first time ever accepting investments. Now, investment had long been something we were wary of. In our view, a big reason why similar business models had failed in the past was because investors pressure the streaming platforms to squeeze more and more value out of creators. Basically, they did the thing that seemed right when you looked at it on a slide deck, take a bigger share of the revenue, make more money. But that fails to understand that the creators drive almost all of the value of a platform like Nebula. If they're making good money, they'll make more exclusive content for audiences, they'll bring their creator friends in, they'll keep promoting the platform. So it's really that if you take a smaller slice of the pie and give more to creators, the pie will grow so much in the long term that the platform will make more overall. Every dollar a streaming platform like Nebula makes is through the creators, so it's about creating that win-win scenario rather than trying to extract value from your business partners. We weren't confident that most investors,

17:21especially institutional investors, would understand that and the other nuanced dynamics of the creator industry in the long run with one exception, CuriosityStream. There are people seem to get it. They were also by far our biggest marketing partner, biggest production partner. We'd already aligned ourselves with them so deeply that investments seemed like a minor additional level that would yield a lot of cash to reinvest in growing Nebula. So after a unanimous vote by myself and the other owners, Nebula no longer was entirely ours. While the exact numbers are not public, what is is that they bought a significant minority stake that valued Nebula, the company that did not exist just three years prior at over $50 million in credible. Driven by this funding, 2022 is comprised of some of our fastest growth to dates, especially as shows like Real Life Lawers Modern Conflicts and our Jetlag the Game proved massively successful at driving huge numbers of subscriptions. Staff had count ballooned, especially in the engineering department, as they staffed up to build apps for new platforms

18:22like Roku and Samsung TV. We also finally had the money to build our own streaming tech, which freed us from some of the technical limitations of Zeips White Label offering. And we geared up to produce our most ambitious late originals to date with the co-production funding CuriosityStream would provide. But this is a good chance to acknowledge failure. Now, failure is inevitable in business. It's truly part of the process. You try new things carefully and success is defined by your batting average. If you win more than you lose, you're winning. Nebula classes, however, probably pulled down that batting average. It sounded like a great idea at the time. Through COVID, craters were earning massively by making online classes. We were constantly approached by various class platforms who wanted to sponsor our craters and so rather than promoting their services. We thought it better to build into Nebula so we could promote our own service and keep all the customer revenue in the ecosystem. In all honesty, we were trying to capitalize on a wave of popularity that was relatively aligned to what we were already doing. Unlike when we launched Nebula as a whole, we had a good amount of cash on hand to invest in this

19:23thanks to CuriosityStream's investment. So we wanted to launch strong. We built out a section of the website and apps for it. We built the backend tech to allow for multiple tiers of membership and we invested a lot in content. We launched with six classes and each was high quality. Shot in a studio in New York, well edited with motion graphics and everything. As to say, they weren't cheap. We then planned to release a new one each week which meant organizing a dense production schedule. It was a massively complex large scale undertaking but the engineering and production staff made it all happen without a hitch. The problem was that the concept just wasn't resonating with customers. We initially sold Nebula classes as an additional tier above normal Nebula. It was $100 a year by itself for a $5 a month upcharge for existing subscribers which might seem like a lot but was actually lower than competitors with similar production quality. We ran sponsorships on this and had some minor wins but on average, there was clearly audience confusion as we also ran bundle sponsorships on the same channels at different times. We couldn't promote classes in bundle sponsorships as classes weren't part of the bundle

20:24so in a way we were competing against ourselves and losing. Some people were upgrading. It wasn't some massive failure but hardly enough to justify our rate of production. Ultimately, creators could improve sponsorship performance more by making Nebula originals so that's what they would do. It was also clear that by the time we launched we were on the downslope of the online classes WAVE. We were far from the only class platform struggling to find product market fit. So ultimately we decided the best to just have one Nebula. No upcharge for classes, we make it available to all subscribers and simply slow down a production calendar. It was an important experiment and while not a direct overwhelming success, in a way the marketing test we did for it proved crucial for what was to come. Our biggest, most existential experiment to date. Come late 2022 as indicated in their quarterly reports, Curiosity Stream was looking to pull back their growth rate and orient more towards profitability. COVID was dying down, springtime was lowering, the streaming industry overall was weakening and so it made every sense in the world for them

21:25to switch from a growth orientation to a profit orientation as all growth oriented companies that survive eventually do. I assume for these reasons we got word that they wanted to significantly pull back on marketing spend through Nebula bundle sponsorships. Clearly this wasn't something we wanted. Not only would it slow Nebula's growth rates, but more crucially it would reduce how much we could pay creators to talk about Nebula on YouTube. This was still the primary way creators were earning through Nebula. While watch time payouts and originals were significant, payouts for YouTube sponsorships about Nebula were far more so. So the natural next question to ask was, could we just do sponsorships ourselves? You'll notice that nearly everything advertised in a sponsorship at the end of a YouTube video is an online subscription based service. For some reason or another, these are just what works best and here's how those advertising campaigns work in the background. Let's say a service costs $10 a month. Every service has data on how long the average subscriber sticks around, let's say it's 27 months. That means the average lifetime value

22:25of a sign up is $270. It might actually cost say $5 a month to run that service, meaning per month, there's $5 left. A good bit of that has to go to actually getting the customers in the first place to marketing. Knowing there's $135 left in the average lifetime value, the company will decide on a target average cost proposition. Let's say it's $75 leaving $60 in lifetime value for profit that can be reinvested in platform growth or just taken as profit. Now that $75 target cost proposition acts as the central success metric for marketing and when an agency designs a campaign with creators pushing the service, their payment will be designed in the background by this number. If on average they drive $100 sign ups per video, their pay will be roughly $7,500 per video and either the agency or the service itself will evaluate spots as they run to make sure the long-term average cost ends up at or below $75. This works quite well. The only issue is when that $75 needs to get paid. Here, right when the customer signs up,

23:26but on the company side, after the $5 monthly operating expenses, it's going to take 15 months for them to capture that $75 back in revenue. You essentially need to spend $75 to eventually earn that $60 in profits. Put another way, you need to invest it. This is the role of investors in these startups. Companies can have an entirely viable business model but just need more cash in the bank to pay for the marketing that leads to growth. But we didn't want to take more investments. We didn't want to give up more ownership of the company. So the question was, could we use the couple million we had in the bank to kickstart growth at a fast enough rate? We were sure we had a viable business model. We had years approved that we could get a customer through YouTube's sponsorship for less than their average lifetime value. The question was when that cost-pracquisition was recaptured. If it was quick in the first year or so, we were in business. The math worked out that we could maintain or even grow our monthly marketing spend if we would recapture revenue fast enough to reinvest it in new marketing. If it was slower, we didn't recapture target cost-pracquisition

24:26until far in the future. But the careful balance that had made Nebula work or so many close equivalents failed could all come crumbling. Damn. Today were five months on from the Switch to Direct Marketing ends. I won't bring the lead. It went off better than our wildest expectations. Crucially, over 80% of signups are opting to pay for the annual subscription rather than the monthly one. Considering we pay creators for Nebula sponsorships the day after they go out, that means we actually get a year's worth of revenue before we even pay for the promotion. In this case, that entirely eliminated the cashflow constraint because we make more day one on an average signup that our average cost will acquire a new customer. Of course, that doesn't mean we turn a day one profit. We have operating cost beyond marketing. But it means we have a marketing strategy that could theoretically expand basically infinitely. Zero cashflow limitations. In just a few short months, we went from spending zero dollars to more than half a million dollars on marketing per month. And we are earning back more than that in the same month.

25:30I can't stress enough how incredible this is. We, the creators, are now entirely in control of our own future. With this, we're charting our most ambitious slate of originals to date. We're bringing in new creators, we're investing in our tech. There is so, so much that this big risk has unlocked. Right now, it feels like the last couple of years have been an overwhelming success, but I truly believe that looking back, we'll consider 2023 much like we see 2019. The turning point that makes previous success, the backstory you just have to get through to get to the good part. We have learned so much. So now we understand what people want and we have a company configured to offer that. I truly cannot wait to show you what we can do. Now I need to do thank yous. When describing nebulous history like this, it feels like a success was defined by decisions and what partially true, those decisions could only lead to anything thanks to the sum of small collective actions made by dozens, hundreds, thousands of people. First and foremost, the staff of nebula and standards.

26:32Unlike us creators, they do not get the public recognition for what they do. They pour their passion into surfacing our passion, working day in and day out to build a system that allows us to do more of what we love to do. Nebula truly could not exist without them. Us creators could not exist without them. That's why I'm endlessly grateful for the work they do. Second, the creators. The community that has risen out of nebula and standard is just incredible. Every day we talk, celebrating our wins, commiserating our failures, searching for solutions to problems, we go to conferences together, we go on vacation together, we go to each other's weddings and we'll be at each other's funerals. I truly don't know if I could have navigated the stresses of life as a creator without them and I know nebula would have failed without our collective vision for a brighter future for the creator economy. Lastly, the subscribers. I could never have imagined that people would look at nebula as anything more than a company, something trying to separate them from their dollars. But I was wrong. There was an unbelievable community of people who not only use nebula,

27:32but have latched onto the same vision we have. They celebrate our wins and help show us where we can go stronger. I'm constantly in awe of how much forgiveness they gave us for scrappiness on our bootstrapped early days and we could not have come to today without that. Thank you for taking a risk on us. I hope we proved it worthwhile and I promise that we'll only work harder to make that even more so in the future. To close out, I had to pay for the production costs on this video somehow and it kind of felt weird to make it feel even more like a big long nebula ad by putting a nebula sponsorship at the end and it felt even more weird to put another sponsor at the end, so I'm gonna go with the less weird, weird option, but keep it simple. If you aren't subscribed to nebula, but wanna check it out, use our link. Nebula.tv slash windover, you'll get $20 off an annual subscription, bringing the cost down to just $2.50 a month. Thank you for caring enough to listen to this story. It's a wild one and I hope in a few years we have an even better one to tell you. Thanks to you.