Written by Richard San Juan for Gaebler Ventures
YouTube is a video-sharing website where online users can share video clips by uploading and viewing various video clips. It was founded by Chad Hurley, Steve Chen, and Jawed Karim.
YouTube was launched in 2005 and has played a big role in the revolution in Internet culture.
The beginnings were similar to scenarios in which most great computer technology related companies started...in a garage and without much initial capital.
The three founders knew each other from their previous work at PayPal. Therefore, they were very familiar with each person's capabilities.
How YouTube started is supposedly one night they were trying to send an e-mail with an attached video clip. However, the video file was either too big or they decided there must be an easier way to share videos with your friends and co-workers.
The three decided that it would be great if they can develop a site to have that function. Thus, Chad Hurley, Steve Chen, and Jawed Karim created the preliminary infrastructure for the video sharing platform in a short time. This was a classic situation in which they were able to view a problem from a perspective of a customer and come up with a solution to address it.
After tweaking and updating the infrastructure, the YouTube site, in its beta state, was fully operational and open to public use by May 2005.
This innovative website became an instant hit. As it increased in popularity, word of mouth began to spread the positives and endless possibilities of YouTube. This, in turn, fueled the expansive growth in the online community and immediately attracted the attention of venture capitalists and other investors.
After its initial launch, YouTube secured needed funding from Sequoia Capital (about $3.5 million) and this assisted in "officially" launching the website to support the growing interest. Sequoia Capital invested another $8 million later to ensure that YouTube's growth was not flash-in-the-pan.
The thought of having outside investors being involved might have been scary to the YouTube entrepreneurs, but they know that growing too fast can be equally as damaging as growing too slow. By pursuing the essential financial capital from big investors, the three founders of YouTube ensured that they will have the necessary funding to beef up on the infrastructure and respond to user requests/upgrades during the beta test.
Additionally, if they didn't go after the cash from Sequoia Capital and other investors, their servers would have slowed down from the heavy traffic, innovative features could not have been added, and users would have quickly gravitated to some of the similar services that were rapidly following YouTube's model.
The one remarkable aspect of YouTube's story is that despite the significant amount of investment cash, very little was used to promote or develop a marketing campaign for YouTube.
The founders had the creativity and foresight that the online users would do the promotion for them by just sharing the videos with other people. That in itself was marketing YouTube.
Some aspects of viral marketing included simple ideas such as having short links to the YouTube videos that would make it very easy to e-mail. Moreover, with the creation of MySpace and Facebook, the founders made sure that YouTube videos were able to be embedded in profiles of these popular social networking websites.
The innovative ideas and good strategic business decisions paid off for the YouTube founders when Google bought them out for $1.65 billion.
From $0 to $1.65 billion in such a short-time period is an impressive feat and is a testament to YouTube's ability to recognize an opportunity in the computer technology industry and take advantage of it.
Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.
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