From peer to peer research to an idea about online video streaming. A product launch and a short episode with Pirate Bay. Then through a complete overhaul of the technology and strategy, to a second product launch and recently being acquired. Building a startup often takes many turns. Now Peerialism has the GPS set for the Nordics and the American market.
But first, let us step back a few years.
In 2005, a professor at SICS and a researcher at KTH, Seif Haridi and Ali Ghodsi, were working on peer to peer research and a new file sharing technology that better utilized the users’ computers and internet connections to optimize traffic. At the time, Youtube had just launched and TV networks had started to offer online video-on-demand services. The content distribution market was growing fast, attracting venture capital and incumbent Telcos. Johan Ljungberg, an entrepreneur who at the time had exited a software startup and was looking for new business opportunities, received a call from SICS, which gave him the assignment to explore whether its research results could be commercialized.
”Work short cycles. Get in the face of the customer as soon as you can and launch early.”
Johan developed a business model and suggested that they go into online video streaming. A year later, Johan, together with three other co-founders, started Peerialism in 2006.
Recruiting all stars
Today, the team consists of 14 full-time staff with members from six different countries. Egypt, England, Greece, Italy, USA and Sweden. Johan appreciates the challenge startups often face when trying to put the right team together, but says they have been lucky.
– We have always stayed close to the academic world and therefore been able to recruit directly from Stockholm University, Royal Institute of Technology (KTH) and research institutes such as SICS . We have been fortunate to hire the right people. But now we are moving on to a more commercial phase and are competing for talent on the same terms as any other company, says Johan Ljungberg, CEO at Peerialism. To keep the diverse group a tight-knit team, the staff often plans activities things together, such as ski trips.
– One of our Egyptian colleagues is fearless and is learning how to ski now. Last year, another one came back on crutches. We voluntarily risk losing our limbs for the sake of the team, says Johan and laughs. Customer financing from day one Peerialism’s product for video distribution over the Internet – Peer2View – enables content owners to distribute better quality video at significantly lower cost to many more viewers. The cost savings are between 80 percent and 98 percent depending on network conditions, and the maximum number of simultaneous viewers is almost limitless, which has been an issue with existing solutions.
The technology is there and so far recruiting has not been a challenge. What about financing? Most startups struggle to secure external capital to finance their development into a self-sustainable company.stoc
– We have been customer financed from day one. Andreas Dahlström, CTO at Peerialism and one of the co-founders, had business contacts at MPS Broadband and we were a good fit for their existing business.
By developing our product in close collaboration with MPS Broadband, I’d say we were able to be 70 percent customer financed and 30 percent funded by grants from Vinnova and the EU, and through loans from Almi and Innovationsbron. In 2007, Johan contacted STING for help to further develop Peerialism. The company had been heavy in R&D and needed guidance in how to become a more sales-driven organization.
– It was especially the sales training that attracted us to STING. STING’s network of business and investor contacts has also been very valuable to us, which we now can see very clearly in hindsight, says Johan.
The Pirate Bay incident
Although Peerialism has done many things according to the book, the young company has of course had its share of bumps in the road.
One such event took place in 2009. Peerialism was approached by Global Gaming Factory X, a small IT-company that was planning to buy the Pirate Bay domain and also Peerialism. Peerialism’s advanced file sharing technology would turn Pirate Bay into a fast file sharing service and also give users a large free hard drive on the Internet. But GGF’s economic situation was unclear. The pending business deal created huge media coverage but ultimately, after months of postponed meetings and lacking information, the deal fell through.
– Regardless of how it turned out, the proposed deal put a market value on our business. And, in addition, it was a great and crazy experience. I’ll never forget talking to the international press while they were chasing down Pirate Bay executives hiding in the Burmese jungles, says Johan with a laugh.
The 180-degree pivot
The Pirate Bay opportunity turned out to be nothing, but no harm was done. However, a few months down the line, Peerialism would go through its most critical development stage yet. In 2010, the team realized that the company was going in the wrong direction. After years’ of hard work, they excitedly launched their product, but nothing happened.
It did not scale and it was much too complex to catch customer attention. The developers had the know-how but the solution was going nowhere and the energy within the team was fading fast.
According to Johan, it took the team three to four months to accept the fact that they were on the wrong path. Finally, they made the crucial decision to start over. – Our head developer said, ‘Screw this, I will try something different. Leave me alone, I’ll be back in two weeks.’ In one month he had turned it around. Then it took us another year, year and a half, to develop a new solution, says Riccardo Reale, software engineer at Peerialism.
– What we learned from this, and what I strongly would recommend to all entrepreneurs working in startups, is to work short cycles. How short depends on the business you’re in; for us it’s a year, for others it could be three months. Also, meet customers at an early stage; test, check and iterate. Get in the face of the customer as early as you can and launch early, says Johan.
In February 2013, the company saw proof that the 180-degree pivot they performed a couple years earlier had been the right move.
– We had our first real big commercial event at the beginning of this year. A real company, real users, real live video feed, and the customer was extremely happy, says Johan. We are just starting to commercialize the product now and have three major clients; Ericsson, Microsoft and Time Warner Cable. We also have a partnership with Live Arena, a service that lets you view live content.
”We survived on passion; we had the will and drive to prove our idea.”
The acquisition and looking ahead
Another important event in Peerialism’s history took place in the summer of 2011, when MPS Broadband acquired Peerialism.
– MPS were bugging us for two years to buy our technology. They wanted to integrate us with their company, but it was very important for us to remain independent. However, with the help of an inventive incentive scheme to motivate us, we finally caved in and managed to agree on the terms, says Johan.
Now Peerialism has the speed dial set for expansion in the Nordics and the US market. The challenges will be to build sales organizations, establish offices, recruit regional sales managers, and build the sales pipe. Five years from now, Johan predicts Peerialism will dominate the global live video streaming industry. The vision is to put headquarters in the US, keep R&D in Stockholm and have sales offices in the big European cities, then on to China and Japan. The demand for streaming videos is growing fast and the passion is evident.
– We survived on passion; we had the will and drive to prove our idea, say both Johan and Riccardo. You also have to be good at bootstrapping and live lean. And iterate, iterate, iterate.