Kun Gao did not intend to build a billion-dollar company.

It just kinda happened.

Kun co-founded Crunchyroll, an anime streaming service that was acquired twice: first by WarnerMedia in 2018, and then by Sony in 2020 for $1.2b.

The story behind those acquisitions are juicy as heck, but that’s not what I’m gonna talk about today.

Today I wanna talk about how Kun and his team:

1. stumbled into the idea for Crunchyroll
2. built something basically illegal with millions of users, then lost 50% of those users when they went legit, then got those users back.

Oh, and in case you haven’t guessed… Kun is gonna be speaking at Camp Hustle in May.

So, yeah. Get your ticket. Like right now.

Ok, on to the story.

Kun The Tinkerer

Back in 2004, Kun was on a path. This path was not leading him to entrepreneurship, but rather deep into the world of academia.

He had just graduated from UC Berkeley and had a few months before kicking off his PhD project.

So he decided to take an internship at HOTorNOT (please tell me you remember this website). For 12 weeks, Kun built features for Yafro (basically instagram before instagram) at the HOTorNOT company while learning about PMF, product engineering, growth hacking, and virality.

By the end of the 12 weeks, he was infected… with the startup bug. He worked on his PhD during the day, but his nights were spent tinkering.

Together with a fellow UCB alum, Kun built a community map tool — built on top of recently-released Google Maps — that users could collaborate on to share their locations with a select group of friends.

The product exploded.

Millions of users got onboard, and Kun and his co-founder started staying up nights and weekends building the product and responding to users. It wasn’t long before the map app was acquired. Kun and his buddy left grad school and found themselves back in the bay… this time in Silicon Valley.

Kun worked for the acquiring company during the day, but he knew he wasn’t destined for corporate life.

So Kun kept tinkering.

Then they built something sort of illegal

Kun and his buddies loved watching anime. But despite the huge anime fanbase in the US, it was shockingly hard to find a comprehensive library of anime content. So they built it themselves.

Yep, this is the beginning of Crunchyroll.

In the beginning, the team allowed any user to upload anime content to the platform. This resulted in Crunchyroll quickly having the largest library of anime content on the web. We’re talking 1000s of videos, almost all uploaded by Crunchyroll users.

There was just one problem. This content wasn’t licensed.

Kun and his team knew that eventually that content would have to come down. Hosting unlicensed content is illegal.

But the Crunchyroll team was smart. They knew a change was coming, so they built features into the platform to make it “sticky” — elements that they hoped would result in users feeling like they were part of a community, not just a passive audience.

While his team was building the platform and growing the user base to millions of people, Kun was in Japan. His mission: to figure out the world of licensed anime content and try to get his hands on some.

He nailed it. After a year of working on this problem, Kun secured the rights to one of the biggest anime shows in anime history: Naruto.

Then they lost millions of users

Acquiring licensed content – especially a series as famous and beloved as Naruto – meant that the era of user-uploaded, unlicensed content was over.

On New Years Eve 2008, the Crunchyroll team removed thousands of videos from their site. Literally overnight they went from thousands of pieces of content to about 20. And that move drove away millions of their users.

However – because the team had put so much effort into building an engaged, connected community rather than just a passive audience, about 1 million users opted to stick around. And over time, Kun and the Crunchyroll team climbed their way back up the mountain.

A Happy Ending

By 2017, Crunchyroll had over 20 million registered users and over 1 million paying subscribers. They had a vast library of content, merchandise… they even launched Crunchyroll Expo, which brought in around 16,000 attendees in the first year, and 45,000 attendees in the second.

WarnerMedia acquired the biz in 2018, and sold it to Sony in 2020 for $1.2 billion.

Phew.

Y’all. This story is crazy. And there’s so much I haven’t shared, like…

• how Kun led the company to a massive exit as a first-time founder
• how Kun navigated fundraising as a first time founder
• why so many early investors said no (and why Venrock eventually said yes)
• how the team increased user engagement
• the insane world of content licensing and what investors should know
• the learnings Kun is applying to his new startup, GGWP

We’re gonna dig into this stuff at Camp Hustle.

Come meet Kun and hear the insane story on May 17.

‍