The founder of a Solana Beach startup that provides film editing software to Hollywood has come up with a template for surviving hard times. Streamline costs while generating revenue with licensing deals, partnerships and retail sales.
David Taylor launched CineForm with a modest investment. He’s been keeping the business afloat through initiative and sweat.
“Whenever anyone wants to know how to bootstrap, I say, ‘talk to Dave Taylor.’ He’s kept it going for seven years now, not only with little cash, but promises of cash,” said Jeremy Glaser, an attorney with Mintz Levin Cohn Ferris Glovsky and Popeo, who has represented CineForm since 2000. “To me, he’s the master of keeping a company alive on a shoestring.”
There have been times when he couldn’t pay employees. Taylor even had to sell his home in Rancho Santa Fe to keep the doors open. And all the profits have been spent prudently, mostly plowed back into the business, says Taylor.
“It means we have to be extra cautious and make sure everything we’re spending money on we can justify,” he said.
That’s evident down to the furniture, says Glaser.
“Their desks are two filing cabinets from Home Depot with a wood door on top. Their offices were very, very basic, plain,” Glaser said. “I remember having a sense of ‘Wow, this is what a startup is supposed to look like.’ ”
Taylor started the business with two partners in 2000 and $1 million in funding from 2M Invest, a German venture capital fund that later failed.
Since that early investment, he has steadily grown the business. In 2008, the startup generated $5 million in revenues and now employs eight, Taylor says.
CineForm sells its software to independent filmmakers who like to shoot to digital files (because it’s cheaper and easier to edit), and it’s working with Hollywood studios that are moving from videotape and film to digital formats, he says.
A recent independent hit film, “Slumdog Millionaire,” for example, was shot straight to CineForm files.
CineForm uses a type of formatting called “wavelets.” Instead of defining images by tiny pixels , such as JPEG and MPEG formats that allow byte-by-byte transfers of images over the Internet , wavelets compress an entire image.
“We don’t break the image into little blocks,” he said. “In postproduction, when you’re doing editing work, you don’t care about lowest bit rate. You care about quality.”
CineForm’s closest competitors for the independent filmmaker market are Apple, which makes compression software for the Mac called ProRes, and Avid, which makes software for Windows and Mac called DNX-HD.
The business is also working with postproduction companies such as Technicolor and Deluxe to convert their vast archives from digital tape to CineForm, he says.
“When you finish editing a feature film, you need to store a version somewhere. In the past, it was on tape,” he said.
When a studio wants to release the film in a new format, the tape has to be converted , to one of a myriad of formats: high definition, standard definition, interlaced, progressive, French, Italian, German, and even airlines.
“It takes a massive amount of work to repurpose the tape,” he said.
CineForm is vying against another wavelet compression format, JPG-2000, to become the preferred digital archive format in Hollywood, he says.
Progress has been bumpy. After the German investor went bankrupt in 2002, ending any potential for follow-up investment, CineForm signed with a partner. The partnership collapsed.
Taylor says he survived by trimming costs and earning revenue through licensing fees and customizing his software for larger companies.
“A lot of us went without salaries for a long period of time,” he said.
The startup licenses its software to six major businesses, including Adobe and Sony.
But its biggest break came in 2004 with Microsoft, which was building the infrastructure behind Xbox Live, which streams video to Xbox 360 consoles.
In 2006, Microsoft invested $1 million, which included a $100,000 equity stake in the business, but only after Apple offered to acquire the business for $1 million.
Microsoft now archives video content in CineForm’s format, which opened the door to Hollywood as Microsoft began requesting movies in that format, Taylor says.
He says the business is a few weeks away from closing a $500,000 investment with a Burbank postproduction studio.
Glaser says other companies should take survival notes from Taylor.
“We’re entering into a time where the ability to squeeze the most out of your cash is going to be highly valued,” Glaser said. “I think Dave is a really good example of an entrepreneur who found a way to make his cash last as long as possible.”