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Startup Diary - Alan’s Story

Posted by Alan O'Dea | Sep 27, 2008 | Filed under News, Personal, Simple Lifeforms, Startup Diary

I found myself reading an article entitled Starting a Games Company in Recession by Brett Terrill. The article is personally relevant as I have recently left my role as Business Development Director at Online Game, Virtual World, and Technology developer Monumental Games to form a new start-up company Simple Lifeforms.

Some may question my sanity at leaving such a uniquely rewarding position, certainly when working at Monumental was a dream job where I got to work with an unbelievable team of people which I am glad to all call my friends. Ok you may all question my sanity but leave I did. A fundamental reason for my departure is my belief that social gaming, i.e. games that blend the best features of online games and social networks represent a massive step change and industry shift in the future development of online games.

At Monumental I worked on extremely well funded online game and virtual world projects using our globally commercialised online game development technology platform (Monumental Technology Suite). We really didn’t want for anything at Monumental. We were extremely well funded, we had an extremely talented pool of experienced game development professionals, we also had a complete MMO game development technology at hand to develop our games. On top of all that we had publishers and investors that supported us 110% in everything we did.

So I now find myself at the opposite end of the game development industry. Now this is not entirely unfamiliar territory, I have run a successful Internet advertising start-up in the 90’s, Steamdriven. Simple Lifeforms is not a well funding company; we are a small start-up working from our bedrooms and homes. We have just secured our first small investment round to cover the development of a small prototype, more about that in a later post. Sure we are all experts in our field but there are less than a handful of us, a few fingers at most. We do not have a market proven technology platform with licensees around the world and multiple online game development projects across many platforms.

Now I am sure we will get funding. We do not entirely come without contacts, partners, and allies. We are not as young as once we were and have, along with a few grey hairs picked up a few tricks so the fact we’re a start up doesn’t scare me. I think about why we’re here starting Simple Lifeforms and I believe more so than any other factor the drive to keep on working on something new, something that is at the cutting edge, and something that has the potential to either fail or succeed is why the other company founders and I are here. We belive social games has a significant future and it is always reassuring when you find others that also believe in that vision and passion, so hats off to Brett.

Alan O’Dea is CEO of Simple Lifeforms a UK based social games company. Alan can be contacted on twitter @alanodea.

The original article is reprinted from http://www.bretterrill.com/2008/09/starting-games-company-in-recession.html

Staring a Games Company in Recession

Warren Buffett says that the economy in a recession. When it comes to the economy, I believe Warren Buffet. Recession is a scary word. But if you’re a social games company (or thinking about starting one), a recession may actually be a good thing.

Obviously macroeconomic factors affect tech startups, and the big and the wise are raising enough money to weather a 2-3 year drought. Most small startups are not in the position to raise 2-3 years of runway money. Instead, we have to tighten our belts or become profitable. Startups in most fields have a very low likelihood of becoming profitable, check out Jeremy Liew’s fantastic analysis on profitability in the consumer interest space.

However, profitability is not a problem in social games. Most, if not all of the top social games companies are already profitable (or would be if not for their rapid expansion plans). Many smaller, quieter players are also seeing excellent revenues, but you’ll have to take my word for it, since no one seems eager to advertise their success.

When it comes to a recession, the common wisdom is that home entertainment surges, because people feeling the pinch opt for staying home rather then the more expensive option of going out. If that holds true during this recession, then online games are certain to benefit. After all, no one is giving up their Internet connection. And if you’re a free online game, then…well, I mean is there any better entertainment deal for a consumer then a free game?

Of course, the problem as always with free services on the internet, is that we rely on advertisers for our revenue stream. Fortunately, the digital goods model removes that dependency, making it even more attractive in the face of an advertising downturn. It’s still an open question whether people will buy virtual goods with a thinner wallet.

This is an aside, but I’d suggest that virtual goods can offer an excellent substitute for purchasing more expensive real goods. The desire to shop does not go away just because a consumer has less money. That desire to buy real items, such as clothes, shoes, and accessories is easily transferred to vanity virtual goods. Goods that come at a fraction of the cost of a real item, and therefore attractive even when you have a thinner wallet.

However, some people believe that that online advertising will actually increase during the downturn, as ad agencies turn their budgets toward the measurable world of online v.s that vast unmeasurable wasteland that is TV and print. If you look at data aggregated by Pubmatic, smaller publishers (around the scale of most social games companies) have seen rising ad rates, even as the rates of larger publishers have fallen.

So to summarize:

Free online games using a virtual goods model with an advertising kicker are one of the safest bets you can make in a recession. So come join the party.

And if you need further convincing, the biggest games company in the world, EA, started in a recession.

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