It’s not unusual for entrepreneurs to meet naysayers when they’re seeking seed capital to start a business. However, persistence can pay off for visionaries who are thinking about starting a business.
Farhad Massoudi went through various stages of growth as the founder and chief executive of Tubi, the ad-supported video on demand platform that Fox last year acquired for $440 million. He came up with the idea as advertisers shifted their media spending to digital platforms including social media.
“I thought that TV channels ultimately were going to be replaced with TV apps, and in that process, TV advertising will be completely disrupted,” he said in this interview with Beet.TV. He started a company called AdRise, which evolved into Tubi.
“I have to say, it was really hard to raise money for it,” he said. “In the early days, people didn’t believe TV would be disrupted. The power of the bundle was very strong, and I was told it would never change.”
As Netflix branched out from mail-order DVD rentals and into streaming video, it showed that many consumers were willing to pay for an alternative to cable and satellite TV by offering a quality viewing experience.
“When Netflix proved them wrong, I was told that subscription video on demand was the way to go – so, a lot of naysayers both in Silicon Valley and in Hollywood about ad-supported video on demand,” Massoudi said.
Advice to Entrepreneurs
He initially raised about $400,000 from friends and family to get his company off the ground, and later found a venture capital fund that led a financing round of $2 million-$2.5 million. Massoudi recommends that entrepreneurs dream big when they’re pitching their business to investors.
“It has to be a big idea, a multibillion-dollar idea, because otherwise, you’re not going to attract the right VCs,” Massoudi said. “Even if you do, you’re going to disappoint them. Financial models are such that they need huge exits.”
He said Tubi was working on a plan to go public, but the growth in AVOD services started drawing interest from major media companies like Fox. Before the deal with Fox, Viacom had acquired Pluto TV for $340 million in 2019, while Comcast acquired Xumo for more than $100 million.
Massoudi said Fox’s purchase of Tubi has given the platform access to more resources for growth.
“It made sense to use the muscle and the power of a larger media company that’s very sophisticated in this space to help better our products, our offering and our business,” he said.
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