The Netflix startup story (video)

Editor’s note: Foundation Capital produced the video with Reed Hastings below. We asked Foundation partner Paul Holland to provide some back story as an introduction.

In 1992, I had the pleasure of doing my very first startup, Pure Software, with Reed Hastings. Over that time, I witnessed Reed take the company through what we would call “Bet the Company” moments––these incredibly challenging, business-threatening, near-death experiences. We faced eight or nine of these “Bet the Company” moments at Pure, and in every single case, I watched as Reed persevered and rallied his team to come up with creative solutions to very complex problems.

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It’s this tenacity and bias toward action that has made Reed such a formidable force across today’s technology and media landscape. And he’s been able to take that spirit and management skill set and apply it to a much larger market today in the arena of digital content.

Fast-forward to 1998, when my partner here at Foundation Capital, Mike Schuh, decided that he wanted to fund a brand-new company called Netflix, which was run by Reed and whose service was pretty radical for the time. The idea was that you would take this new media format, the DVD, and ship it off via US Mail to customers, who would view it and mail back the disc.

The concept for Netflix arose during the very early days of DVDs. Only about 2% of US households had DVD players, but we saw that if the market grew to about 20% of households, we could have a really successful company. (Eventually more than 95% of households would come to own DVD players.) So we dove in with Reed to help the company take those first pivotal steps.

Now from the very beginning of Netflix––and the reason the company was named Netflix and not DVD by Mail––there was our belief that the marketplace for digital content would move to streaming. The idea that this content wouldn’t need to be couriered, but instead would travel over the air. And that’s just where media went. In our Startup Story featuring Reed, you’ll see it certainly wasn’t a cakewalk when it came time to battle the industry giant Blockbuster Video in the emerging battle for digital supremacy.

One of the key ingredients that makes Netflix so special is that it was started by one of the strongest software entrepreneurs on the planet. Reed is not only finely skilled in the software space but also incredibly talented at building teams and empowering his leadership. He had a phenomenal team he worked with during the rise of Netflix, including people like Neil Hunt, who is still the Chief Product Officer at the company and a tremendous software engineer.

Unlike most companies that go into the media space thinking about carving out a specific area of distribution differently, Reed and his team came at the challenge from a completely unique vantage point. And in doing so, they built a new idea around how content would be consumed and ultimately led an entire industry in the process. It was that forethought about how media would be consumed in the way it is today––on computers, mobile, and connected devices—that was Reed’s North Star. That said, no one involved could have dreamed just how large this concept would become and how successful Netflix would grow as a business. But it’s fun to look back on the journey through the lens of today.

What we do in the course of this Startup Story with Reed is take you back to the beginning, through some of the trials and tribulations that led to the creation of one of the best companies to ever come out of Silicon Valley––the cultural and industry cornerstone we know today as Netflix. And at its core, this story goes beyond Netflix. It’s about an exceptional entrepreneur who turned aspiration into actuality to build a great company.

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