Startups are risky enough, you don’t have to invest both your time and money. The CD was dutifully delivered unharmed a day later, which was validation the idea could work. To test whether a DVD would get damaged in the mail, Marc Randolph purchased a music CD from a store and mailed it to Reed Hastings’ house in Santa Cruz, California. Test the idea and take a calculated risk. You build a prototype, you create a product, you measure traffic or early sales, all so that when you go to potential investors palm out stretched you have numbers to prove that what you’re trying to do isn’t just an idea, but exists and already works…. You do that by validating your product ahead of time.
You have to convince your future employees, investors and business partners that your idea is worth spending money, reputation and time on. When you’re starting a company, you’re getting other people to latch onto your ideas.
On the bright side, movies by mail could work if and that’s a big if, DVD become a popular format. Worst, they’re still competing with the industry Goliath, Blockbuster. What’s more, they couldn’t rent a title for more than 4 times a month, and chances are the title wouldn’t be a new release anymore by the time they could make some money. Plus, it’s easy to forget how much VHS tapes used to cost.Īfter crunching the numbers, the team realized it will take 80 rents for them to even break-even. Plus when people want the movie, they want it now. But it did.Įventually, the idea of selling VHS online was born. It seems absurd that one of the largest media companies in the world could come from those two desires. In 1997, all I knew was that I wanted to start my own company, and that I wanted it to involve selling things on the internet. I had no idea what would work and what wouldn’t. They wanted something that already exist and take it to sell online because Amazon has proven the potential of e-commerce. They want something that can scale, and something that people use over and over again. Reed, a friend and former investor of Marc who he’s carpooling together, got in the way however, warning him customizing a unique product for every customer is too difficult. Before the idea of Netflix took hold, Marc had a thousand ideas from personalized shampoo and surfboard to dog food.
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