Lilipip, With Recent Focus on Animated Ads, Looks to Keep Growing Without Venture Capital
From architecture to kids’ videos to online animated ads, Ksenia Oustiougova’s path to founder of Seattle online ad company Lilipip has been unusual. To start, the company was funded not by investors, but on credit cards. The good news: after shutting down the kids’ video version of Lilipip and retooling to its current incarnation, Oustiougova is now paying down the debt.
Oustiougova said Lilipip’s change of focus in the summer of 2008—from children’s videos to online marketing ads—had a straightforward motivation. “We ran out of money. It was as simple as that,” she said. “Either reinvent or close down. And I’m not a quitter by nature.”
Now, together with more than 150 independent creative contractors around the world and a director of business development, Oustiougova makes one-minute animated videos for small businesses. Her team currently works on about four projects at once, she said, but they hope to get up to their capacity of 20 at a time eventually. Oustiougova and the director of business development are not yet salaried, taking a cut of the proceeds from each project, but Lilipip is bringing on four project managers as Lilipip’s first employees in the next six to 12 months. Now starting to pay off her credit card debt, Oustiougova has no plans to look for outside investment.
Asked why fundraising isn’t part of the plan, Oustiougova gave several reasons, among them: “The entire process takes months, and it takes away focus from sales; second, suddenly you have someone looking over your shoulder telling you what to do—we are breaking a lot of conventional rules, and I want to build a company where people don’t feel like they work, but feel like they play.” She added, “I am not interested in growing huge. I want to build an excellent business, and we won’t be necessarily big. But investors want a certain return at a certain time that might force us to do things faster…Some things just take time to get very good, like good wine—you can’t speed it up.”
Lilipip’s animations are mostly used online, Oustiougova said, on businesses’ websites, Facebook, YouTube, or other social marketing sites. She has also seen them played on TVs at trade shows, or used in presentations to clients or shareholders. Lilipip will encode the videos into any format its clients need for free. Many small businesses like having their ads available on their cell phones to share on the go, she said.
“This is really a tool to tell their story in a uniform way through all the new social media channels,” Oustiougova said.
Oustiougova’s first entrepreneurial steps came when, after leaving a career as an architect, she began making PowerPoint presentations for her son to teach him to read in English and Russian (her native language). Her friends soon started requesting custom videos for their kids, and another friend finally suggested that this could be her life’s work, Oustiougova said.
So four years ago, Lilipip (short for little people) was born. Oustiougova entered the University of Washington’s business plan competition, and won a prize for best consumer product. “After that I had no idea what I was doing,” she said. “People told me, ‘Now you have to incorporate and raise money.'” After trying to find investors, Oustiougova eventually just opened up a bunch of credit cards. “So basically the business is running on credit cards,” she said.
In Lilipip’s first incarnation, Oustiougova licensed content from YouTube and other sites, screening it for videos appropriate for kids and making them available to download for small fees. The problem, Oustiougova said, is that everyone loved the idea, but nobody wanted to pay for it. She’d already developed relationships with animators around the world through all the videos she’d licensed over the years, and in May 2008 she offered to make an advertising animation for a startup company to get some extra cash flow. “At first, I thought it would just let us live through the summer,” Oustiougova said. “Then I realized that was the business.”
The name Lilipip stayed—now “little people” refers to small businesses and startups, Oustiougova said, although one of her early (and favorite) projects was a video for Zappos, the online shoe store acquired by Amazon for shares and cash totaling approximately $847 million in July. She feels Lilipip is different from other ad companies out there because of its transparency in all aspects of the business. Oustiougova calls it “open source creative.” The company offers different pricing packages for the videos, ranging from $4,000 to $18,000, with different levels of involvement that the client is involved in. At the $4,000 end, Lilipip provides illustration, storyboards, animation, and stock music; at the highest end, it adds in such touches as script, photography, original music, voice-over, and sound effects.
Lilipip’s business is mainly drummed up through word of mouth, Oustiougova said, but she’s also very active on Twitter. That’s where she made the initial connection with the Zappos CEO, Tony Hsieh. Local clients include Kimberly Baker Jewelry, Intellectual Ventures, Seattle Web Group, MOD Systems, Waggener Edstrom, Perfect Pixels, LKK Partners, Shiftboard, and Cascadeo.
Openness about the price and the all-included nature of the pricing packages is important to Oustiougova. “There’s this mysterious black box whenever you’re hiring anyone creative. It’s always, ‘Let’s sit down and find the scope of the project and then figure out how much it costs,'” she said. “But that’s the first question of every business, how much does it cost? A small business can’t afford to lose that time.”
Unlike other agencies, Oustiougova says, Lilipip freely reveals information about its artists and creative contractors, even promoting them on its blog, so that if clients enjoy working with a certain contractor, they’re free to contact them independently in the future. Lilipip also gives all source files to the customer, which is unique as far as Oustiougova knows.
“It’s hard to know how to provide an environment to creative people where they love it,” Oustiougova said. “This is really exciting to me, thinking how to build a company that you love working at.”