Why We Invested In Vidku

We at Arthur Ventures are excited to have the opportunity to ‘lead’ Vidku’s $17M Series A round!

I’m using the word ‘lead’ a little loosely here. We set terms for the round and made a material investment, but there were dozens of other investors that made up the bulk of the financing.

Vidku’s product is Flipgrid, which at the highest level is video collaboration software primarily used by teachers and students to boost community and social presence in face-to-face, hybrid and online classrooms.

I say primarily used, because a big reason for our interest in Vidku was based on how Flipgrid has been being used in unintended ways outside of the EdTech market by Fortune 500 companies, global non-profits, NGOs and individuals in their personal life.

More on that later.

First, our first introduction to Flipgrid came when co-founder Charlie Miller presented at Minnedemo last fall. It was the only Minnedemo to-date where James, Andy and I were all there together. Right at the end of the presentation we all said to each other “what a cool product, too bad it isn’t for businesses” as b-2-b software is our focus, not EdTech. Not giving it much more thought, we left Minnedemo and Flipgrid left our minds.

Within about a week of Minnedemo a friend of AV, Greg Tehven, was in my ear about how his close friend Phil Soran was working on a new startup and that I should stop by a meeting that was coming up where Phil and another team member were going to be refining their pitch for investors. Not knowing much more than that, Greg described the business as some social video tool. I knew Phil a little bit and clearly knew of his track record, but social video is nowhere in our focus area at AV so while I put the meeting on my calendar, I was a bit skeptical that it made sense for me to attend. As the date arrived, still thinking the business wouldn’t be a fit for AV and that the meeting was probably some group session where nobody would notice if I was a no-show, I was about 5 minutes away from blowing it off.

Luckily I changed my mind.

I walked into the room to see Phil sitting next to Charlie and I just started laughing. The product I thought was great a couple weeks prior, but had dismissed since it was an EdTech product inside of the University of Minnesota, now had one of the most successful entrepreneurs in the state interested in it and I almost bailed on the meeting. After spending time with Phil and Charlie talking through the momentum of Flipgrid, the potential for Vidku and meeting their third co-founder (CEO Jim Leslie), I was hooked.

Practically everything about the business aligned with what we look for at AV:

  • An incredible amount of traction in a short amount of time with zero sales and marketing. In less than one year of operation, Flipgrid reached 1M users across six continents, uploading thousands of videos per day and was generating material revenue.
  • Users engaged as a true community. All you need to do is check out Flipgrid’s twitter handle to see the impact it the product has had so far. Student, teachers and others talk daily about the impact the product has had on their lives. Nothing prompted by Flipgrid, just genuine, authentic happiness and promotion from their users.
  • Roadmap driven by the product being used in unintended ways. There isn’t much better than when you find your users/customers using your product in ways you never imagined. This has happened rapidly with Flipgrid as 20% of their users are outside of EdTech. As mentioned earlier, they are Fortune 500 companies, global non-profits, NGOs, individuals, etc. We believe that this demonstrates the potential long-term impact Vidku can have in many business verticals and markets.
  • Strong, dynamic team. We would have funded the business had it been led by Charlie alone. He is that impressive. His blend of product, design, marketing and strategy is top-notch. Almost every business that we have funded has hired a C-level executive within the first year to compliment the founder’s skill set and searches for an impactful board member who has built hugely successful companies. In the case of Vidku, we get both individuals on day one. Their names are Jim Leslie as CEO and Phil Soran as Executive Chairman. In Jim, Vidku has a proven leader who has built successful teams and organizations from founding to exit. In Phil, Vidku gets one of Minnesota’s most successful repeat entrepreneurs who has gone the distance with companies multiple times in a big way. Even better, both are all-around great people. We couldn’t be more thrilled to have all three of these guys together from the start.

We made our interest in leading a round known to the team pretty quickly and the conversation turned to deal structure. We had some concerns about how complicated it would be to spin out the business from the U, could if we raise enough money since there was a cash component to the separation, etc.

Phil and team basically said not to worry, they were confident they could raise enough money in one chunk to pay out the U and have enough to fund multiple years of building a business and that the U was very supportive of the whole thing. By raising a total of $17M in a short amount of time and smoothly navigating the separation from the U, they did exactly what they said they were going to do.

We are really excited to see what the future holds for the business and its users. With an investment of this magnitude, the stakes are higher than what they normally are for most businesses at this stage, but we are confident that if anyone can pull it off, this is the team to do it.