A Twitch in Time: A Wild Ride from Start to Finish

August 25, 2014
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Twitch

Twitch is the world’s leading social video platform and community for gamers.  In 2014, Twitch was sold to Amazon for ~$1 billion. (NASDAQ: AMZN)

Investment Date: 
2012
Exit Year: 
2014
Related Strategy: 
Geography: 
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Persistence pays. Emmett Shear and his team once again prove that to be true as they celebrate today’s announcement that Amazon has signed a definitive agreement to acquire Twitch. It’s the largest acquisition in Amazon history.

As an investor, I can’t think of anything more rewarding than helping entrepreneurs achieve their vision of building strong, enduring products and companies. Today, it might seem like a no brainer that Twitch would fall squarely into that category: after all, the company is the fourth largest producer of peak Internet traffic, outpacing even behemoths like Facebook and Hulu. Twitch streams more live video than ESPN, MLB and the WWE combined. And yet, the road to Twitch’s current success has been anything but straightforward. In fact, it’s been quite an amazing and unpredictable ride — and not an easy one.

Eight years ago, when Emmett Shear and his co-founders Justin, Michael and Kyle launched Justin.TV, online video was in its infancy. YouTube was barely a year old, and live streaming was a novelty at best. Emmett and his team raised a modest amount of money in 2007 in order to build a platform for sharing user-generated live streams, scaled the company to profitability, and slugged it out for four long years before realizing that JustinTV in its initial incarnation had its limits. Drawing on their deep expertise in video, they launched two skunk-works projects, and, incredibly, both worked. The first, Socialcam, was spun out as a separate company in early 2012, and the team that remained focused on the other project: Twitch.

A video platform that offered gamers the infrastructure for sharing live gaming — all while uniting players around an online community — Twitch caught on quickly. The Twitch team was killing it: the site was getting big fast, with SDKs and direct integrations that made sharing gaming experiences easier already in the works. And yet, the concept was met by profound skepticism — bordering on incredulity — by most who heard about it. I remember the blank stares I received when I first described the company’s vision to friends and so-called experts: “Who wants to watch other people play computer games?” was the common refrain. In spite of those early signs of traction, it was hard for people to understand how big Twitch could become, and as a result it was easy to dismiss the entire premise as niche.

Given Bessemer’s active roadmap on developer platforms and early investments in companies like Twilio, we fell in love with the team’s plan to build broadcasting and viewing SDKs directly into the games and consoles themselves. We jumped at the opportunity to invest, leading the first round of funding dedicated to Twitch. Through that investment, we had a front row seat as the Twitch team developed a highly engaging product, created infrastructure that could stream high-quality video at enormous scale, successfully executed their plan to embed SDKs in popular games and the new generation of consoles, and built a strong community of broadcasters and viewers in competition with the biggest Internet properties. At the same time, they built a successful advertising and subscription business that allowed them to operate on a relatively modest amount of capital. To call the Twitch team “scrappy” would be a massive understatement.

I’m a relatively new partner at Bessemer. And while I’ve learned a lot in my 6+ years investing, the most important lessons come from the portfolio companies that I’ve worked with. Perhaps none have been as instructive as the story of Twitch: strong founders don’t quit until they achieve their aspirations, and they don’t let momentary setbacks stand in their way. The JustinTV team could have declared the site a modest success and sat back on their laurels. Instead, they recognized the untapped potential they had created and didn’t rest until they’d made Internet history.

I know that I speak not only for myself, but also for my partner David Cowan and the rest of the BVP team, when I say that working with the Twitch team has been a wild and exciting ride – and a true pleasure. I’d put Emmett and the Twitch team up against any other on the Internet, and I expect equally wild and amazing things from them and Amazon in the years ahead.

Cheers, guys. Don’t rest.