It was January 1997 — a typical carpool day for Marc Randolph and Reed Hastings, then colleagues at software development company Pure Atria.
Hastings ran Pure Atria and Randolph served as the vice president of corporate marketing since Hastings had acquired Randolph's company, Integrity QA, earlier that year. But Pure Atria was being acquired too, which meant that both Randolph and Hastings would soon be out of a job. Hastings, then 37, was planning to go back to school to study education, while Randolph, then 39, wanted to launch the next big idea.
That January day during their hour-and-a-half-long car ride from Santa Cruz, California to Silicon Valley, Hastings suggested they brainstorm.
"I said I was ready to launch my next company, and Reed being the entrepreneur that he is said, 'Let's come up with an idea and you can run it and I'll fund it' and away we went," Randolph, the co-founder and first CEO of Netflix, tells CNBC Make It.
For the next six months, as the pair commuted, Randolph pitched Hastings a slew of wacky ideas until something stuck.
"I remember getting into the car all excited and pitching Reed on the idea of doing personalized shampoo," Randolph says. Ideas for customized bats and dog food followed.
Then they hit on movie rentals by mail.
"We were sitting down having coffee one morning in Santa Cruz and we were talking about whether or not you could mail a DVD in a first-class envelope or not," Randolph remembers. So they walked down to a music store, bought a CD and mailed it to Hastings house using a first-class stamp.
When Hastings received the CD undamaged, the pair knew they were on to something.
In August of 1997, the pair launched Netflix — which today is the world's sixth largest internet company by revenue, which exceeded $15.7 billion in 2018 (a 35% increase from 2017). Netflix has now grown from a movie rental company into a streaming and production company producing award-winning original content, with more than 151 million subscribers worldwide.
When the company launched, Randolph was the Netflix's original CEO. He handed the reigns to Hastings in 1999. Then Randolph left the company in 2003, shortly after Netflix went public in 2002.
"Unlike me," Randolph writes in his new memoir, "That Will Never Work," "Reed is not only a phenomenal early-stage CEO — he's good (or better) as a late-stage CEO." Netflix now has a market cap of more than $130 billion.
Randolph says he decided to write about the early days of Netflix to inspire the next generation of entrepreneurs.
"I wanted people to know that I wasn't doing anything special, that anyone could have done something like this," Randolph tells CNBC Make It.
In fact, barely anyone thought Netflix was a good idea. Randolph says he and Hastings were rejected more than 1,000 times when they tried to pitch Netflix to various investors. He remembers Blockbuster CEO John Antioco trying to hold back laughter when the pair pitched him movie rentals by mail.
Still, the pair forged ahead and day by day, Netflix morphed into something bigger.
Randolph says "too many" entrepreneurs get stuck in their own heads by trying to puzzle everything together before launching a project or idea. But the only real way to find out if its going to work is to start.
"If you have an idea, it doesn't make a difference if it's a good idea or a bad idea — the whole point is starting. Once you start, that is when you begin to figure out if it's a good idea or a bad one. It informs you," Randolph says.
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