Profiles

There’s a good reason why investors keep knocking on Prezi’s door

- February 12, 2015 11 MIN READ

It’s easy to brush Prezi off as just a software product for creating and storing digital presentations. But the success of Prezi begs a deeper look into what it is about the company that gets investors knocking on the door and pitching what they would bring to the company aside from unneeded cheques.

For those who are unfamiliar with Prezi, what differentiates it from other software products in the presentation space is that it uses a single canvas instead of multiple slides as you’d see on Microsoft PowerPoint. Whether users are delivering a lecture to students, a sales pitch to a high-value client or a TED Talk to a crowd of progressive thinkers, Prezi’s zoomable canvas allows them to demonstrate relationships between the bigger picture and finer details, which means that ideas are placed within a broader context. This in turn aids in comprehension and retention of information.

Like traditional presentation software, Prezi allows users to integrate text, images, animation, audio, and video into a single presentation. However, whereas PowerPoint requires preparing a linear storyline using a storyboard approach, Prezi allows for a free-flowing presentation of a storyline. The user creates a presentation on a large blank workspace called the canvas, where all the elements of a presentation are visible. The storyline is created by arranging those elements on the canvas; and when delivering the presentation, the presenter can sequentially focus on different elements by using the zooming and panning features.

Typically, when using Microsoft PowerPoint, users are confined by space, having to limit the amount of information they can fit into the slides. Whereas with Prezi, there are no boundaries. And because software is cloud-based, it enables users to collaborate, edit and share presentations with friends and colleagues.

Drew Banks, a seasoned entrepreneur and Prezi’s Head of International, told Startup Daily that Prezi works in much the same way as the human mind. The only reason we’re comfortable with slides is because we’ve become accustomed to it. Banks said that the brain can remember and navigate spaces easily, but when it comes to remembering bullet points on slides, we’re far more forgetful. We remember exactly how to get to work every morning, but we’re unlikely to remember the specific details of a document or PowerPoint presentation. Our spatial memory is stronger than our semantic memory.

“The way people remember the speech is by remembering the image. Our brains are wired to remember spaces, but not bulleted lists,” said Banks.

“With slides, you have to read the text and then try to listen to the person. It divides your brain; and you can’t pay attention to the presenter when you’re reading the content in the slides. With Prezi, you have a visual backdrop, so you can completely pay attention to the presenter. Our brain knows how to navigate spatially and doesn’t force it to divide.”

He added that the slide-based and text-heavy approach is a good way to document information, not so much when you’re trying to transfer that information to an audience.

“You’re not going to be able to keep audience engaged with text-heavy slides for more than five minutes; and arguably if that audience is under 30, you’re not going to be able to keep them for more than one minute before they start looking at their phones,” said Banks.

He also pointed out that traditional presentations, which involves the repetition of rectangular slides, is very similar to the way films were made in the 1970s. In the 1980s, the film industry began focusing on immersive experiences. Computer graphics software were being used to make computer-generated imagery for films, and the evolution of computer-generated imagery then led to the emergence of virtual cinematography (e.g. The Matrix trilogy) in the 1990s. Prezi is very much following suit, but in the context of presentations.

The business story

Prezi was incorporated in 2009 at the TNW Conference in Amsterdam, Netherlands, by co-founders Peter Arvai (CEO), Péter Halácsy (CTO) and Adam Somlai-Fischer (Head of Design). But the first iteration of the product was designed by Hungarian engineer Somlai-Fischer, who only created the tool for personal use. After delivering presentations, audience members would approach him and inquire about what tool he used. Later, a friend suggested that he commercialise Prezi and Somlai-Fischer decided to pursue the opportunity.

Since its inception, Prezi has experienced tremendous growth, surpassing 50 million users at the end of last year with a growth rate of 1 million users per day, as well as  raising USD$71.3 million from a number of prominent investors including Spectrum Equity, Accel Partners, Sunstone Capital and TED. The company now has offices in San Francisco and Budapest, and has been adopted in more than 190 countries around the world.

In August this year, Prezi decided to turns its attention towards the ANZ market due to user acquisition and revenue growth in the region, and appointed two Prezi experts Kris Flegg and Emma Bannister as Australian ambassadors. Australia was found to be one of Prezi’s top 10 markets globally, with local corporate customers including Telstra, Zurich, MLC, and Rio Tinto among others.

Although Prezi is being used in over 190 countries around the world, the company has been very tactful in how it approaches international growth, according to Drew Banks, Prezi’s Head of International. Localisation may be a popular strategy employed by startups wanting to tap into new markets, but Banks stressed that aside from making the product available in multiple languages, Prezi deliberately avoids localising its software for a specific geography. This is to circumvent distraction.

For instance, if Prezi experiences a high rate of user acquisition in Japan, and the company then decides to localise the product for the Japanese market by introducing new, locally-relevant features, then the company would need to organise ongoing maintenance of those features. And if this strategy is implemented across 190 countries, then maintenance becomes ever-consuming and engineers are diverted away from technological innovation.

“We’re pretty clear about our core vision, which is to enable presenters to create more engaging presentations, and that’s irregardless of geography,” says Banks. “Then we look at where the growth is happening across the world and focus on how to expand in those geographies without changing the product apart from language. I’m very careful about adding anything that our engineers need to maintain. They need to stay really focused – focus is everything.”

Although the core product is remains consistent across countries, there are variations in the way Prezi is being adopted. Banks said that the differences aren’t in how different cultures create presentations, but the frequency with which they create presentations and the degree of interactivity incorporated in the presentations. Latin Americans, for example, are avid users of Prezi. One thing that Banks noticed is that Brazilian and Mexican schools use presentations more frequency than their US and Asian counterparts.

In countries like Japan, adoption of technology is very top-down, according to Banks, meaning that it’s the CEO of a company that adopts technology first, and it filters down to the rest of the organisation. Whereas in Latin America, adoption happens from the bottom-up. Young people bring products they used in school into the company, and the rest of the company follows.

Although the philosophy ‘never stop innovating’ is integral to the success of startups, many founders find continual innovation to be one of the most exhausting challenges. But for Prezi, innovating has been the least of its worries, according to Banks. It’s clear the company isn’t all that fazed about copycat entrepreneurs appropriating their ideas.

Banks says, “People may be able to copy us, but they won’t be able to innovative ahead of us.” The reason for this, Banks theorises, is because of the founders’ Hungarian background: “there is something unique about Hungarian culture – there’s an intersection of technology, mathematics and design that you do not find in other places in the world”.

“In the US, MIT is one of the few places where those elements come together – linguistics and design. I think the fact that it was founded in Hungary and will continue to be worked on by Hungarian engineers, means Prezi will be able to stay ahead.”

The bigger challenge for Prezi, according to Banks, is “getting people from that initial ‘wow’ to continual ‘wow’” or in other words, ensuring the novelty doesn’t wear off, especially for enterprise users.

“This is not an issue when it comes to students or teachers; students love it because they want something new and trendy; teachers love it because of the pedagogic nature of Prezi. But it’s challenging for people who are entrenched in businesses that have been using slides for a long time” says Banks.

But are Prezis really more impactful than PowerPoint presentations? Salesforce Robert Duffner, Director of Salesforce, said that customer satisfaction increased nearly 30 percent since switching to Prezi. In Canada, Parkland Fuel credits Prezi for increasing its share prices by over 50 percent due to the contracts they have secured since using Prezi.

The startup itself has used eye-tracking software to determine the efficacy of Prezis compared to its slide-based presentations, and found that when viewing a Prezi, the eye is focused on the core message, whereas with slide-based, text-heavy presentations, the eye is all over the map. Banks explained, as mentioned earlier, that this is because our brains can navigate spatially.

Startups are also using Prezi to pitch to investors. In fact, it’s these startup pitches that got investors interested in Prezi in the first place. After startups delivered their pitches, the investors would inquire about what tool they used, so in the process of selling their own startup, they sold Prezi.

For startup founders, particularly in Australia, the realisation that a good idea alone does not guarantee investment can be a bitter pill to swallow. Many complain of Australia’s ‘risk-averse’ investment culture, saying that local investors are biased towards bigger, more established businesses. Banks, however, offers a reality check, saying that the reason Prezi was so appealing to investors is because it didn’t need the funding.

He added that, in his own business, prior to joining the team at Prezi, he couldn’t even get a single VC to return his call for five years. Eventually, he was able to raise $20 million, but the process was all-consuming. He couldn’t focus on building company. All he was doing was raising money and managing the investors. This is one of the reasons why he left the company. Yet, in his first week at Prezi, a prestigious VC came knocking on the door delivering a gift. Banks laughed as he said, “I couldn’t even get my own VC to come to my office ever.” He realised that “if you can be in a position to not need money, everyone is going to want to give you money”. In many occasions, Prezi’s founders were simply rejecting investors when they called: “No thanks, we don’t need the money”.

Banks said that Prezi had a brilliant business model, allowing the company to generate revenue from day one. Whereas other freemium models were focused on frequency of use – that is, if you use a product more than X times per month, you will need to upgrade to a premium account – Prezi decided to charge for features. Initially, that feature was privacy.

“Pure freemium strategists will say that’s not going to do anything for you – but we based our pricing on a feature, which was privacy. Prezi was free for people who wanted to have public presentations – typically, they were students, NGOs, teachers, startup people, anyone who wants to spread their message,” said Banks.

“But businesses who can afford to pay need privacy. They don’t want their messages to be spread. Yet to try the product for free it had to be public, so we were cash flow positive in the very first year of operations … We didn’t need the [external funding].”

Startup lessons

If Prezi didn’t need any funding, why did it raise over US$70 million? Is it worth giving up equity for unneeded dollars? Banks explained that the money wasn’t what convinced the company; rather, it was the experience-based knowledge and expertise the investors would bring to the company, especially as it turned its attention towards global expansion. Banks acknowledged though that expansion is expensive, especially if you’re looking to grow fast in new markets.

“If you’re trying to achieve local dominance, you don’t need to raise money. But if you’re trying to grow globally, if you’re trying to beat out competitors fast, then yes, the money definitely helps,” he said. “Global expansion is expensive especially if you’re doing it fast. If you’ve never done it before, it’s nice to have investors who have been there and done that advising.”

Banks stresses the importance of actually asking investors for advice, something that entrepreneurs often forget or are reluctant to do in fear of exposing weakness.

“Call them, ask for advice, ask for introductions. Don’t treat them [investors] as just board member, treat them as a partners, get the value out of them. They have experience, use them. That’s what they’re selling you on. They say ‘you’re not just getting our money, you’re getting our network’. If you’re a serial entrepreneur you don’t need it as much. But if you’re a first time entrepreneur, you absolutely need introductions,” Banks explained.

“[After I raised $20 million for my previous company], I was just too intimidated to ask for advice. I’d been trying to get this money for so long that I was too intimidated to call them and expose that I didn’t know something. Entrepreneurs have egos, they don’t want to admit they don’t know something, especially to their investor. If I had to do it all over again, I would have asked everything. I would have been much more transparent in every conversation and get value out of it.”

Banks also pointed out how important it is for startups to choose their investors carefully. Unless founders and investors are on the same page about what they’re trying to achieve, the relationship will crumble – which is especially problematic when there’s money involved. For instance, if an investor wants the company to focus on revenue growth, whereas the founder is more interested in user growth, there will be tension when goals are believed to have not been met.

For the relationship to have longevity, Banks said that founders and investors have to genuinely like each other: “There are going to be some hard times and hard discussions. Same goes for your co-founder and executive team. You really need to know that you can argue with them, then come back the next day and be in a good place.”

When asked about how startups should control raised capital spend, Banks said that they have to be frivolous and always maintain an eye on the money. But more importantly, startups must keep an eye on the run rate – that is, the amount of money being spent on the business every month.

“You want to make sure you don’t spend yourself out of money before you start making money or before you can raise another round. A lot of startups do that; they raise a lot of money, then create an unsustainable run rate and they’re forced into raising that second round before they actually have a viable product,” said Banks.

“You need to focus on viability. I’m a strong believer in trying to get to the revenue. Growth is great in good times, but in more tight financial times, investors want answers.”

“Think big” may seem like a cliche in the startup space, but Banks presented an interesting example to support this philosophy. When Prezi’s CEO Arvai joined the company, before Prezi became a global success story, he put forth a gutsy idea – that is, to call Chris Anderson from TED and introduce him to Prezi. At first interested, Anderson asked Arvai to fly over to New York. But shortly after, he changed his mind. Arvai had already booked the flight so he decided not to take ‘no’ for an answer and told Anderson that he’s coming anyway. Fifteen minutes into the meeting, Anderson decided to invest in Prezi, even though this wasn’t Prezi’s intention.

“There was no intention to get TED to invest, but there was an intention to sell the vision of the company to someone very influential who would understand that vision. My advice is if you could get customers that are that influential that believes in you and your product, sell that to the investor in addition to your idea,” said Banks.

Nutshell

So what plans lie ahead for Prezi? Just yesterday, the company launched its second product: a visual storytelling mobile application called Nutshell. Photography, video and animation come together to produce short, shareable cinematic narratives.

The Prezi team noticed that people were using Prezi’s presentation canvas for sharing events like birthdays, road trips, and even marriage proposals, apparently due to the ease of integrating photos and videos, adding text and graphics, and using motion features like zooming and panning to connect the dots.

As such, Somlai-Fischer, who runs a small lab within Prezi and is always assessing the future of visual interfaces, created a new tool with the intention of it being video capturing system. But when he showed his friends, they said it was more than just a video capturing system, it was a way to capture the moment. This inspired him to release it as a separate product, Nutshell.

But how does Nutshell work exactly? Users snap three photos in succession and the app will animate them into a single movie sequence. Users can then add text and graphics to customise the cinematic vignette, and share the result via email, SMS and social media.

“Nutshell is exactly what its name implies: an epic story condensed into the space of a moment,” said Somlai-Fischer. “We incorporated some of the best features of Prezi – which helps people use spatial context to share ideas and visually communicate moments in their life in an equally impactful and memorable way.”

In regards to Prezi’s first product, Banks said that the company wants to conquer the experience of sitting down with a blank canvas to presenting on stage. The company will continue focusing on making spatial presentations easier so that more business adopt the product. Banks insisted that although the company wants to further simplify user experience, they don’t want to ‘dumb’ the product down.

“Infographics, for example, are really complex. We don’t want to create something that’s too simple. It’s about presenting information in a way that you can comprehend it immediately, and that’s what we want to change. That’s what will sustain Prezi in the unforeseeable future,” said Banks.

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