Letterboxd co-founders Matthew Buchanan and Karl von Randow, photographed in Auckland. The two designers built a wildly popular social network for movie buffs. Now, they’re cashing in - and sticking around for the sequel. Photo / The New York Times
Pandemic lockdowns turned into what you might call box-office gold for Letterboxd, the site co-founded by Aucklanders Matthew Buchanan and Karl von Randow.
The pair founded Letterboxd a decade ago as a vehicle for film nerds to log the movies they watch, share reviews and rankings and find out where to buy or watch a title (or, more recently, locate which streaming service it’s on).
Buchanan says he had been into movies since his days riding his BMX to rent VHS tapes. But when looking for recommendations, he found the database-like IMDB too dry. There was nothing with the community vibes of Last.fm for sharing music playlists or Good Reads for books.
Letterboxd, which spent two years as an invitation-only service before opening to the public in 2013, grew slowly but steadily over the rest of the decade. Then, suddenly, it became the hottest ticket. When enforced Covid hibernation arrived in March 2020, and people worldwide dug in for marathon Netflix binges, it exploded in popularity, with membership more than doubling to 1.8 million within months.
The site was splashed across the likes of the New York Times and the Wall Street Journal, which called it the go-to quarantine fix for people struggling to find something to stream. When Margot Robbie appeared to create an account, there was another barrage of publicity. (The account was under “Margot Ackerley” – the Aussie star is married to filmmaker Tom Ackerley.)
Buchanan told the Herald he could not confirm or deny the rumours, but he did note that Robbie’s Babylon press tour included a sitdown with Letterboxd. “Before the first question was asked, and unprompted by our interviewer, she very cogently explained exactly how the app worked and what it was for.”
Membership hit 4.1m by the end of 2021.
More recently, the site’s “Four Favourites” clips, featuring a parade of Hollywood A-listers, have become a TikTok staple.
@letterboxd Four Favorites with Maya and Ethan Hawke at @TIFF #filmtok #film #movietok #fyp #foryou #letterboxd #movies #ethanhawke #mayahawke
♬ original sound - Letterboxd
By May this year, Letterboxd had 16 full-time staff (under editor-in-chief Gemma Gracewood) and about 10m users in 200 countries across a free tier, plus subscriptions of $19 and $49 a year that unlock extra features.
That’s when Canadian entrepreneur Andrew Wilkinson came knocking. In the deal just finalised, Wilkinson’s investment vehicle, Tiny, took a 60 per cent stake in Letterboxd. Neither side has put a figure on the deal but the New York Times said it was sealed at a US$50 million ($83m) valuation, implying a US$15m payday each for Buchanan and von Randow. The pair each had a 50 per cent stake going into the transaction, which has now been diluted to 20 per cent each (worth US$10m each).
While many a Kiwi start-up has sold to a US tech firm, the Letterboxd deal has three notable features.
First, no venture capital firms have a bite of the action.
“There was no outside capital,” Buchanan told the Herald this week.
“We took the slow road, bootstrapping by using time from Cactuslab to build out the platform. And we only hired staff once we broke even. The first full-time person funded by revenue was in March 2020.”
The founders never had to trade a chunk of their start-up for VC money because Letterboxd was a sequel – or at least part of a trilogy of businesssuccess.
The aforementioned Cactuslab is the web design and development firm that Buchanan and von Randow started in 2001 as their first venture (both graduated from the University of Auckland in the mid-90s with computer science degrees; von Randow joined WebMedia while Buchanan became art director of NetGuide magazine).
Cactuslab was a pioneer in its field. It’s still 100 per cent owned by its founders, and numbers Barfoot & Thompson, Ockham Residential, Honda NZ, Jane Goodall Institute, the AA and Westpac among its clients.
“We didn’t realise at the time but, by starting and growing Cactuslab, we were building the engine that would eventually allow us to build Letterboxd,” Buchanan said.
“If you don’t take funding at the start of a big tech project, one of the few other viable options is to supplement it with other paid work. It’s a much slower path, but it allowed us to be much more deliberate in how we designed the features and grew a resilient community.”
Buchanan and von Randow founded their second start-up, Verifi Identity Services, in 2011 with fintech players Tyler McNamee and Vincent McCartney (each of the four had a 25 per cent share). They created Cloudcheck – an identity verification platform inspired by the user-hostile nature of the Crown-backed RealMe – and gained Sharesies, Milford Asset Management and other high-profile firms as early adopters.
In February last year, UK-listed GBG Group bought Verifi for $20m up front, plus $8m in earnouts (split between payments this year and next).
The firm was profitable at the time of its sale, according to a February 2022 GBC filing, which said Verifi was on track to generate around $2m in operating earnings on $5m revenue for that year. GBG chief executive Chris Clark said Verifi “has established a market leadership position in New Zealand”. His firm would take it global.
Letterboxd’s founders say they’re sticking around, billing the Tiny deal as a partnership.
Such commitments often ring hollow, with founders exiting stage-left as soon as an earnout period of bonded labour expires.
While Tiny’s offer to take a 60 per cent stake was unexpected (Letterboxd wasn’t looking to raise any money), Buchanan said he had been friends with Wilkinson and his younger brother Will for years after first encountering them on the once-trendy Tumblr (kids, ask your parents) in the early 2000s. They first met face-to-face at an industry event in Portland in 2011.
Wilkinson was a barista who decided to try his hand at building websites after some of his laptop-bearing customers told him they made US$500 per assignment. He went on to form his own web design firm MetaLab.
Then, frustrated by his experience when he tried to sell his web design firm, Wilkinson created Tiny in 2014 – a holding company he modelled on Warren Buffett’s Berkshire Hathaway.
“He had a really bad experience and that was the catalyst for him to say, ‘If I ever sell a business again, this is the team and the approach I’d want to take’,” Buchanan said. “He created the sort of company that he’d wished he’d been able to sell his business to. And that came through really loud and clear in the conversations we had earlier this year.”
A long-time friend providing a capital boost is a feel-good story (even if the finer points of the deal were driven not by Wilkinson but his Tiny colleague Austin Singhera). But at the end of the day it was about business. The Herald understands that Tiny was also interested in Verifi before Buchanan and co ultimately went with another buyer.
First on the agenda is expanding Letterboxd to cover TV series.
Buchanan said the site would take a softly-softly approach and not rush new features.
“There’s a lot of nuance to the way TV is structured. We want to do it in a way that won’t disrupt the people who are only there for the movies.
“We’ve done a really good job at giving the outward appearance of a larger organisation.
“I think we’re just looking for the next stage of support.”
Tiny certainly has the heft. The firm, which is listed on the Toronto Stock Exchange, with a C$597m ($738m) market cap, has invested in several creative and e-commerce companies recently including Clean Canvas, a maker of themes for online stores, that it picked up for US$13m.
And in May this year, it took over another Canadian investment firm, WeCommerce, whose backers included private equity veteran Howard Marks (the billionaire founder of Oaktree Capital, the distressed assets specialist best known here for its majority stake in MediaWorks).
Buchanan says that, while Tiny will provide Letterboxed with the wherewithal to accelerate its growth, “they leave founders to do what they do”.
There’s a new challenge for the bulked-up Letterboxd too, in the form of AI.
Buchanan was recently featured in a Wall Street Journal article titled “Can ChatGPT Recommend Movies?” (Spoiler: It couldn’t, at least beyond predictable recommendations presented in pedestrian fashion.)
He told the paper he was concerned by ChatGPT’s lack of transparency. To get the info it uses to make recommendations, it could be plagiarising the work of Letterboxd users without providing credit.
ChatGPT’s maker, the Microsoft-backed OpenAI, refused to comment.
Buchanan told the Herald: “We don’t really see it as a threat. It’s anodyne; it’s repeating and remixing opinions that have already been stated. There’s no spark.
“The joy and success of Letterboxd comes from grass-roots people writing reviews. Some of the funniest we’ve had are not even ‘reviews’. One of our authors wrote about a stand-up fight that people two rows behind him had about the movie and turned it into a brilliant review. An AI couldn’t do that. It’s about human connection.”
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
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