 Los Angeles, land of palm trees, silver screens, and broken dreams. At least, that's what we're supposed to think. But is it true? Yes. But we're not here to talk about Los Angeles, we're here to talk about Sandwich Video. Now, their company is pretty straightforward. They take an interesting product, make an amazing promotional video for it, and share it with the world. This is nothing new, though. Don Draper's been doing it since the 60s. What is new is that Sandwich Video is collaborating with the companies they work with in order to potentially scale what was once a totally unscalable business. Roll the tape. I'm Alexis Ohanian, startup founder and Y Combinator partner. Over the last year, I went on a 200-event book tour and met people building small empires all across North America. Now I'm back with a new season, revisiting some of my favorite stops from the tour. Video is increasingly becoming the way that we consume content online, and the power of a good launch video is massive. The highest-grossing Kickstarter of all time, the coolest cooler, failed its first shot. But 10 months later, they came back with a retooled video and raised more than $10 million. Sandwich Video in Los Angeles is the leader in the make-a-video-for-a-startup category, and they're experimenting with totally new ways of making deals with smaller companies so that they can make high-quality content without taking a huge amount of cash from the burgeoning startups who want to work with them. And that's pretty cool. My name is Adam Lusagor. Nice to meet you. Nice to meet you. I founded a company, a video production company called Sandwich Video here in Los Angeles. We're in downtown in the Arts District. We're a small company of nine people full-time, and we make videos for, mostly for tech companies, for startups and sometimes bigger tech companies, sometimes public companies, sometimes scrappy one-person, indie iPhone developer companies. The whole gamut of interesting tech stuff, we figure out how to condense what they're doing into a 90-second to two-minute piece of video that can be shared to tell the story. So how did I end up here? I booked it on Airbnb. Once I knew I was coming to this city, I took just a quick search on Airbnb to find what I was looking for. Sandwich Video is the de facto video. If you're going to make a sort of exciting promo, like shareable video about a thing, it's a Sandwich Video. How did you end up here? It was basically by accident, and the way it happened was I got really excited. I was working in post-production in the film and TV industry. I got really sort of bored with that side of things, and I got excited about the tech industry, and I started making connections with people who made things in the tech industry, made tools, made platforms, and working with the web. A friend and I decided to try and make an iPhone app. We made a small iPhone app for Twitter. It was called Birdhouse, and I made a video for that. So that's Birdhouse, a notepad for Twitter, available today on the iTunes App Store. Babe! The video got a lot of attention, and then unexpectedly bigger companies saw that, who had seen that video, and how it sort of drove a certain amount of attention to the software product that we made. It was a video where I came knocking on my door and asking for something similar. After I'd made a few of them, it became clear that this could be an enterprise in and of itself. Making a few successful videos helped Adam's clients build their businesses, but it didn't mean Adam had built a business yet. It wasn't until he had so much inbound that he realized he couldn't do everything himself. Writing, directing, producing. I mean, he was doing everything. So he realized he needed to find great people, and then still do all that stuff, but also be their boss. So for the first year and change that I was doing videos and working with freelancers, I was a one-man company working out of a second bedroom. And then my dad, of all people, suggested, you know, you seem pretty stressed out. Maybe you should bring somebody on to help you. And then I hired that guy sitting back there, JP. And you and Adam met on Twitter. Right. He posted a tweet, a really eloquent tweet, about needing this number two to help him take his business to the next level. And I was familiar with his work. I saw the square video, and I just loved the tone of it. I thought it was something new. I mean, it was something I had never seen before. I just liked how honest it was. I liked that he was dry, and he wasn't really selling anything. He was just talking about it in a really cool way, and I loved that. You sometimes get paid for this, but sometimes get equity from startups. Is that a normal thing in this world? Certainly not. It's not common at all in production or in advertising. We do things that cost real money. We're not doing things, work for free and asking our friends to work for free. We're paying people. A piece of work is going to have a cost, and it's a real cost. And a lot of times that cost is out of the reach of a smaller tech company. But as you know, what they do have to offer in their early stages can be even more lucrative than whatever the cash value of the work that you're producing is. And so that's a really interesting way for me to participate in clients that I work with. Is this a way to hedge for the long term in terms of building a business that has the potential of growing faster and bigger than its peers? I think the thing that offsets the long term effect of the equity is that we're also doing the rev share. And those happen, sometimes that's happening the day after we deliver. And the rev share is a much more immediate return, balancing that so that we're not just waiting on equity to pay off long term. Now that the business has evolved so much, you all have no shortage of deal flow. Plenty everyone wants you to make a video. How do you decide who to work with? And then, how do you decide the sort of equity trade-off for compensation? So we have two models. We do the traditional cash, bid out a job, this is how much it's going to cost, we make it. But for a lot of the more interesting jobs, and frankly the jobs that Sandwich has sort of made its reputation by creating content for, they're startups that don't have a lot of funding. And if someone comes to us with X amount of money, we don't necessarily want to make a video for that. Because, you know, we have a certain standard of the quality of the crew we work with and the expenses that go along with the shoot, the crew size and whatnot. So we want to make a video for three times what they have in cash. So at that point, it's just, the first thing is, you know, is this a company, is this a product that we're going to regret not launching? A lot of times these are companies for products that we would want to use ourselves. So we're just, we're able to tell a much bigger audience about these things that we love too. Something had to change. So yeah, we tried Slack. I mean there's some jobs that are just absolute no-brainers. We want to be the people to introduce this to them. What was one of those companies? You know, something like Square, we're very proud to be able to say, you know, we're the people who brought that to the, we launched that product. And then something like Navdy, we're hoping that, you know, in a year from now that will be the exact same thing. Hi mom. Hi Ed, just wanted to say I love you. Okay, I love you. I'm making a video right now. Oh, okay, I'll let you go. Just wanted to say I love you. Okay, I love you. My name is Max. I'm co-founder of Push for Pizza. And Push for Pizza is the easiest way to order pizza ever. You just push the button once and pizza comes after you give us your location and your credit card. And when you all first approached Sandwich, how much of a budget did you have? So our budget was super, super minimal. Fortunately Cyrus and I had a little bit of capital to be able to live really and put up a little bit for the video. But it was, you know, less than seven grand. So how did you approach the negotiation about actually getting the work done? So I made it fairly clear in the first email that we didn't have much money. And, you know, as we continued the conversation that became more and more apparent. But we could afford to get ourselves out there and put up what was considered the bare minimum to at least, you know, get kind of the basics down. Obviously the video would end up costing more than what we put down. However, it was enough to give Adam a reason to want to negotiate a deal with us. One of the really exciting things to me was that we were eliminating the agency. We were working directly with clients. And I saw it sort of as, oh, this isn't necessarily commercial. We're not making commercials. We're trying to tell companies stories in a way that we're interested in. Using my car for good, it's made me be a better person. It's definitely much more of a community feeling than service. So are you betting then, you know, there's the story of the graffiti artist who tagged up the walls of Facebook for some stock who I think is now a multimillionaire. Are you betting then that some of these companies are going to become that successful? And this is like how much of this I guess is financial and then how much of this is like, you know what, I really like what you're working on. You clearly don't have the money right now. So here's a way to compensate us. About 50-50. I talked to the company earlier today that was founded by an 18 and 19 year old. And they're doing something that I don't think many people are doing in the category that they're working in. And they already have a viable product and it's bringing a very, very small amount of revenue. And I know that if I were to step in and make a video and put my own money into it and make a video that would show their product to, you know, conceivably 100,000 people. That are their target customers, then it's going to have a profound impact on their revenue stream that they're bringing in. And when I can do that for the relatively small amount of money, I can go out of pocket and see a return on that investment. I'm talking like a VC now. But when I can do that, then of course it's really interesting. I'm willing to take that bet. It's in very rare circumstances. More often it's like these companies are just big enough that they can pay for a video. Just small enough that it hurts a little bit, you know, to write the check. And in that case, it makes a lot of business sense to do a little bit of deal making. And then, you know, with the risk of, you know, with the reward. The stock could be worthless. Oh yeah, absolutely. In fact, statistically, it's more than likely to be worth nothing. But you found that there is this balance. You can still pay the bills, still pay your people. But how do you evaluate the value of that when you don't have a ton of budget and equity is so important? Yeah, it's really hard, you know. It's one of those situations where, like you said, you want people to know about your product or not. And we were prepared to make the sacrifice to let people know in order to give up some equity and some cash. However, with that said, you know, Adam is a very fair guy. He's not someone who's looking to rip startups off of equity. He's looking to make a deal that's great for founders and great for him. And I see no reason why a deal cannot be organized regularly with someone like Adam for a small portion of equity for what you get in return. Because when you form a relationship with Adam, it's more than just the video. He acts as a mentor for us in many ways. He's someone I go to and we go to for advice and someone we hope to work with in the future on more projects within Push for Pizza or even beyond. You know, these guys reached out to us. It was sort of a plea for like, hey, we don't have money, but we really want one of your videos. And we just really like them. And that was a big part of it. They were just really we wanted to work with them. It was an equity arrangement where we, you know, they just really didn't have much capital at all. And yet what we created, I think, is, you know, they had a huge success on their launch. And I think the video was a huge part of that. And looking at that, you know, it's I don't think that given the market and what other people are willing to do, I don't think they would have been able to have any sort of commercial if sandwich hadn't done it. Nothing similar to what we delivered, both in the production value and the creative quality. It's like Uber for pizza. That's kind of stupid. We can't say Uber. Two choices for now to keep it simple. Plain and pepperoni. Just pick your preference. Then? Then push the button. Push the button. Push for pizza. How are you a good judge of a startup? I think that I'm just kind of like I'm just enough of an early adopter. You know, I have just enough of a vision on the tech landscape. I'm just progressive enough, but I'm not too progressive. I'm not too much of a futurist. So I still am grounded in what my parents are going to think about a thing. That's what I've always kind of felt about why I can sort of feel whether other people are going to enjoy, you know, enjoy the experience of a piece of technology. It's a little bit of empathy, and I feel like this might be a misstatement, but it feels like empathy is sort of what's missing from a lot of the tech world anyway. So that's why this city was built on empathy. Entertainment is built on empathy. So that's why we have something interesting to lend to the technology world. What I love about Slack is how it connects the team with direct lines of communication, business. She uses it to send funny pictures. I use it to send funny pictures. I know what a sandwich is. I don't know what sandwich video is. Is it a production company? Is it an investment company? They're doing something really different here. I've never seen anything quite like it before. They're making the same kind of evaluations of early-stage tech startups that an investor would, except instead of giving them money, they're helping them tell their story. The more you know about your body, the better you can be at taking care of it. So smile. This is Wello. I know there are entrepreneurs out there working on the next big thing who just don't know how to communicate it. That's the advantage to having an investor like Sandwich Video. They're not just writing a check. They've got a whole team of super talented people who are going to help you introduce yourself to the world on your terms. If they come to us and they want a sandwich video and then we tell them what our traditional price points are, it can be a letdown. But when we say the other option is, what cash do you have? We can take that equity, whatever proportions of that make sense in this specific arrangement. And we can deliver a video that's more in line with not the cash you're providing, but what we want to make for you. They get really excited. I think a lot of people aren't necessarily expecting that that's an option. But most of the time, I've gotten to the point where when a client isn't interested in equity in Reptura, when startups aren't interested in it, I'm surprised. Whereas before I was saying, this is a crazy idea. No one's going to go for it. Now I'm just like, why wouldn't you? And most of the times when we talk through it, they realize, oh, this is in everyone's best interest. In a number of your videos, you don't have to pay the lead actor because it's you. It's true. How did that come about? Because like I said when I came in here, I kind of felt like I already knew you from these different videos. Why? Did you always want to be on both sides of the camera? None at all. No, I put myself on camera for the video I made for that Twitter app I was mentioning, Birdhouse, because I didn't know any actors and I didn't have any crew. But you were in LA and you didn't know any actors. Yeah, and I work in the film industry. But I put myself on camera and I set up the camera in my backyard. And that just ended up being sort of the path of least resistance to putting a video up. And then my next client was Jack Dorsey, and he had seen that video. He thought I was decent on camera, and so rather than he being on camera to represent Square, he asked me to do it, and then that kind of just worked out for me. I think it's fun. I mean, I think it's cool that we're able to have a part of us in those videos, or like it's him as the founder having something that's intrinsically sandwiched in the videos is pretty cool. Surely most of your clients are in San Francisco. Yeah. Why does this have to be in LA? I'm an LA kid. I'm used to this climate. I love it here. My family's here. I love that everybody has an ambition, but it's not debilitating. I love that everybody considers themselves free to be anything, not just free to be one thing. It's an industry town, but I feel like it's becoming more and more diverse. More than any of that, in the context of working with the tech industry, I really love that I'm an outsider in the tech industry, and I get to just chill out over here and sort of let things happen in that cauldron. And it really does feel like a cauldron right now. I can't imagine being there. Even when I visit and do meetings and stuff, it just feels overwhelmingly tech-oriented. So I just kind of like separating myself from that a little bit. I think we've done 50 shoots this year, which is, for this size of companies, it's a week. And it doesn't seem like it's slowing down. What's happening is we're becoming more and more picky about who we work with. I mean, ultimately, Sandwich, what it's known for, as much as we're a team and we collaborate and everyone has their strengths, Adam's voice is inevitably the strongest. He creative directs everything, whether or not he's directing it himself. He approves every script. He approves every casting choice, every location photo. So there's always going to be a point at which that's the bottleneck. And I don't think that's necessarily a bad thing, because I think that is the quality control. I don't think we're ever looking to be just the ability to take on infinite amount of work, because ultimately, unless there's another Adam, there's going to be a chunk of work where he's not involved. And that makes you a much more generic company and loses what's unique about Sandwich, I think. How do you imagine scaling this thing down? Because again, Ray, you've got nine people. Shooting a video clearly takes a number of talented people. If you want to do more of these, you need more people. People are always going to be the limiting reagent, unless you can find great ways to scale up revenue, like taking on investments. Right. So that's one way. And then the other way is to just by brute force add more people and add more infrastructure. And we're sort of doing both in parallel. We're keeping up right now, but I can tell you it's very stressful to keep up. The one lesson that I've always kept very, very close to my heart, or the core tenet, is to do things very slowly and methodically and never grow faster than is comfortable. I feel like the smart way to not screw anything up, because there's a lot to lose at this point. I don't want to ruin my reputation. And the creative would suffer, and it's a domino effect. So yeah, how do we scale it? I feel like building reputation and strong relationships. We're at this really cool time where before broadcast videos were what everybody was seeking to make. Everybody wanted to make TV commercials. And I think even when I joined Sandwich Video, I was hoping, oh, I can't wait until we do TV commercials. Well, now I don't think we really care about that. I think we care about making cool videos that a lot of people are going to see. So I think it's going to be delivery method that changes. Broadcast budgets are coming down. Internet video budgets are going up. And who knows what the next content delivery method is, but I think Sandwich Video will be in a good position to tackle that when it comes about. Sandwich is doing something old. They're making advertisements for other companies. But they're doing it in a new way, online. And they're taking revenue share as well as an equity stake in a portion of their non-cash deals. All right, I know that's a mouthful. But what it proves is how important it is for a new startup to get their message out in a way that is elegant and effective. Great ideas don't always have great big budgets. That's the lesson from Sandwich. And it's applicable to founders, really anyone. Know what you're bringing to the table and how much it can help the other party. Next time you're going to negotiate with someone, keep that in mind. Maybe have a sandwich first. Running a successful business involves more than just selling products or keeping your inventory stocked. What makes small businesses stand out amongst their larger competition is the ability to offer impeccable customer service. So try focusing on your social media marketing. Post questions to customers online or offer tips and advice that pertain to your product. You can also create unique offers for customers, such as special discounts when signing up for your newsletter. And finally, make it easy for customers to find you. Think about what words or phrases they might use when looking for your service or products. Just because your business is small, it doesn't mean you can't make a big impact on your customers. For more business advice, visit the AT&T Business Circle. Wait, so you didn't have a beard when you started working together? No, I just had stubble sort of. This beard has become a recent development. It's grown on you? Oh, nice. Oh, come on. You're just always striving for that Easter egg. I just want it. You just want something at the end of the video. Someone, we can use that.