A Serial Entrepreneur’s Journey: Wowza CEO David Stubenvoll (Part 6)

Sramana Mitra: At this point, your main customer acquisition strategy was through this newsletter and the community that you had gotten yourself into, or was there any other kind of customer acquisition strategy in swing at this point?

David Stubenvoll: It was an email mailing list. It wasn’t a newsletter. We also attended trade shows. By late 2007, we started doing some keyword advertising. Even early on, we went to shows like IBC and NAB. We were completely inundated at those shows. In December of 2007, we went live on Amazon Web Services as well.

Sramana Mitra: How was the business tracking at this point? What were the revenue metrics that you were hitting? How were you growing and was there financing involved?

David Stubenvoll: We bootstrapped it. We were heavily profitable. We’re growing sub-100%. We grew pretty strongly. When we started the business, I was in San Jose, California. My partner has always been in Cincinnati. We were 100% virtual in 2008.

Sramana Mitra: How many people were there at that point?

David Stubenvoll: Five to six people. We were 100% virtual. I decided to move to Colorado. The company continued to grow. We were probably about a dozen people in 2011 and we opened our first office. Also, we were sued by Adobe.

Sramana Mitra: Why?

David Stubenvoll: Patent infringement with respect to patents around their Adobe Media Server, which was called Flash Media Server at that time. By this time, we were the number one media server in the market.

Sramana Mitra: How did you deal with that?

David Stubenvoll: I am a lawyer. My wife is a patent attorney. We looked at it. We were very careful about what we did. We took a really hard look at the lawsuit and knew that it was winnable. We also knew that patent lawsuits can be very expensive. We began dealing with it – mediation and all that sort of stuff. It was evident that they had no interest in settling.

I wanted to tell Adobe that we we’re not going anywhere. I wanted to tell customers and prospects that we’re not going anywhere. My lawyers are telling me that we have a great case, but I wanted to know how to do that. At that time, we decided to take on investment. I had been talking to Summit Partners for a number of years at that point. We went to Summit and they invested in us in 2012.

Sramana Mitra: The reason you went for that financing is to be able to finance the lawsuit?

David Stubenvoll: At that time, we didn’t think that we were going to need any of the capital for the lawsuit. I wanted a multi-billion fund behind me. I wanted a very conservative multi-billion dollar fund to do due diligence on us and come to the same conclusions that we came to regarding the lawsuit, which they did.

Sramana Mitra: That this case was winnable?

David Stubenvoll: Yes.

Sramana Mitra: Very good strategy. That’s excellent.

David Stubenvoll: I didn’t think it was just winnable. I thought that we had a really strong case. In the end, they just didn’t want to settle. We won a lot in summary judgements. I don’t know if you know how summary judgements work. I asked our lawyer, “We just had a great day. If you were them, what would you do?” He said, “I’d find another reason to see you.” They did.

We thought that the lawsuit really was without merit at this point. Our trial judge sent us to a Federal Magistrate to mediate and settle the case. We came to this Federal Magistrate judge. It took a while but we finally settled the case. The case was officially settled in December of 2014 in terms of reaching the agreement.

Sramana Mitra: During this period, how much did the company grow? How were you from a company performance point of view?

David Stubenvoll: The business kept tracking. Obviously, our growth slowed down quite a bit. Unless your’e Slack, you’re not going to grow 80% forever, but our business continued to grow. We grew the staff substantially. We’re 114 people now. Last year, we were probably 70 people. We grew substantially. We bought another company during the lawsuit. We bought a company in Germany. Were we negatively affected by the lawsuit? Absolutely. There’s no doubt in my mind.

Sramana Mitra: Where were you negatively affected? Was it the market that was reacting negatively, or were you just distracted? What was the source of the negative effect?

David Stubenvoll: I think it’s both. There is a chilling effect from a lawsuit. Also it is incredibly distracting. It takes an incredible amount of money. Those profits that we could’ve plowed back into the company were instead going into our lawyer’s hands.

Sramana Mitra: How did it end? In terms of the net settlement, what kind of deal did you get?

David Stubenvoll: I cannot disclose the terms of the settlement other than that everything that we did prior to the lawsuit, we continue to do today. This was a better outcome had we won in a litigation.

Sramana Mitra: Did you manage to negotiate a better settlement after this process than you were contemplating in the beginning?

David Stubenvoll: We ended up better by settling than if we had won the lawsuit.

This segment is part 6 in the series : A Serial Entrepreneur’s Journey: Wowza CEO David Stubenvoll
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