extremepreneur

How I Learned to Stop Worrying and Love the Crash

(With apologies to Dr. Strangelove)

They say every cloud has a silver lining, here's this one's.

For some businesses it MAY be very good. Here's why.

Let's take two iPhone game companies as an example, Company A and Company B.

Company A manages to get a few $million or so from a VC in the summer to build games for the iPhone market. They setup offices in Silicon Valley, driving distance from Sand Hill Road, and put one of the VC guys on the board. They hire people, start working on iPhone games. Last week they ship two very nice titles, one is free, one is around a buck. My guess is they will be lucky to see 10,000 unit sales, or gross receipts of $7000 on that paid title, and that is optimistic. Honestly, they will probabily make less (based on what I have heard from other developers). Knowing salaries, rents, overheads ... the paid title has a burdened cost of $50k to $100k. I'm sure the plan is to continue production but not be cash flow positive for a number of years. Spend the raise, put out titles, build I.P., get to a 'hit'. The typical B, C, round scenerio.

Company B doesn't raise $$$ from anyone. Instead it uses the profit from development projects to fund title development. They ship their first title when the iPhone app store opens, modest sales. The title acts as a showcase allowing them to secure more development deals. They don't move to Silicon Valley, they don't hire a bunch of people, they run off cash receipts. The development deals improve the skills of the team as well. Because of this they build an efficient system that produces quality titles at a fraction of the expense of Company A. They begin releasing a stream of quality titles for the iPhone that become profitable with even modest sales. As long as they maintain cost control they are profitable on every title and maybe even get a hit or two. Cash flow positive.

Fast forward several months.

Maybe Company A doesn't get round B (see Sequoia Presentation). They have to cut staff, expenses, try to make a profit on their highly burdened titles.

Meanwhile Company B just continues the flow of products, still brings in dev deals ... people get paid.

Who just benefitted from the Crash?

PlayScreen launches portal with 20 free games for the new T-Mobile G1 (Google Android) Phone.

G1 owners won’t have to wait for great mobile entertainment at PlayScreen.com

SAN DIEGO - Oct, 23rd, 2008.  The company that launched the first iPhone web-based games has announced the release of 20 web-based titles and its first downloadable game for the new T-Mobile G1™, Google Android™ Phone.   Titles include casual, action, puzzle and social games.

"These ad-supported titles take advantage of the advanced browser on the new G1 phone" said William Volk, president and CEO of PlayScreen. "Titles include solitaire, bowling, sudoku, solitaire, backgammon, darts, golf and other popular games."

“PlayScreen is applying its considerable experience in advanced mobile technology to bring these titles to consumers” commented PlayScreen President Sherri Cuono. “There are no installs required and these games are played instantly via the browser.  We're also going to make downloadable versions of these games available when Goggle’s App Market launches.”

“With all the excitement over this new phone and operating system we wanted to make sure consumers didn’t have to wait for their favorite games” added William Volk.

PlayScreen and the PlayScreen logo are trademarks of MyNuMo, LLC. All other trademarks are the property of their respective owners.

About PlayScreen: San Diego based PlayScreen is a social entertainment company delivering mobile social games, ringtones, wallpapers, videos, and text services on all major US Carriers.  More Details about PlayScreen at http://www.PlayScreen.com/g1/ .  (PlayScreen is a trademark of MyNuMo, LLC.)

Contact: [email protected] +1 858 692 1124

MyNuMo is now PlayScreen, the next generation social entertainment company.

PlayScreen to bring casual social games and entertainment to iPhone, Google Android, and other advanced mobile platforms.

SAN DIEGO, CA - Oct, 22nd, 2008.  The company that launched the first iPhone web-based games and the social network that enables independent artists to sell mobile content across all major carriers is now PlayScreen (www.PlayScreen.com), a new worldwide social entertainment brand.

"PlayScreen is the culmination of our acquisition of advanced social gaming technology and the successful launch of game titles for the iPhone" said William Volk, president and CEO of PlayScreen. "The mobile entertainment market has evolved tremendously during the last year, with the launch of the iPhone and Google Android, making the time right to launch a new brand. The imminent launch of our 2nd round of iPhone native games, titles for the new Google Android T-Mobile G1 phone and other new technology initiatives are well reflected in the PlayScreen name."

PlayScreen is creating high quality iPhone and other advanced social games” commented PlayScreen President Sherri Cuono.  “With over a year of experience in iPhone web and native apps as well as advanced social games, PlayScreen will be building the next generation of mobile entertainment applications.”

“You can expect major innovations on our independent artist social network as well” added William Volk, “We’re going beyond the current offering of ringtones, wallpapers, and videos to enable independent developers to market their mobile apps on a wide range of hardware platforms.”

PlayScreen and the PlayScreen logo are trademarks of MyNuMo, LLC. All other trademarks are the property of their respective owners.

About PlayScreen: San Diego based PlayScreen is a social entertainment company delivering mobile social games, ringtones, wallpapers, videos, and text services on all major US Carriers.  More Details about PlayScreen at www.PlayScreen.com.  (PlayScreen is a trademark of MyNuMo, LLC.)

Web 2.0 = Dead 2.0? The Financial Crises As An Extinction Event

Let's get this over with at the start.  I believe most Venture backed startups will not survive this crises.

First let's begin with some background.  A few days ago a presentation was 'leaked' from Sequoia Capital on the financial crises.  You can view that here (yes, this is the opening slide):

The summary?  This isn't like the dot-com crash or earlier slow downs.  This is systemic and it will last a long time.  

Here are some choice quotes from a recent Forbes Article:

Venture firms brace for cash crunch

"If you are not cash-flow positive you are in a tough spot right now"

"To the extent you haven't figured out your business model yet you are in trouble, because it's going to be hard to get another round," ... "You aren't going to get a second life this time."

So, why am I such an expert on this?

Well I saw this happen to a far smaller extent during the dot-com crash.  I've even heard the same sort of nonsense that I heard eight years ago.

"Web 2.0 and Silicon Valley is still in a bubble"

"Good ideas will still get funded"

"Mobile is growing, it won't slow down"

I'd advise EXTREME CAUTION here.  In hindsight the dot-com boom/bust looks almost insane but if you were in it, it seemed rational at the time.  The mind loves to rationalize events.  Come up with metrics that in hindsight look foolish.  Some choice ones:

"The valuation of a dot-com is the number of subscribers x $20" (this was for a free service)

"Forget revenue, the number of eyeballs is what matters"

So here's what will happen.

The "next round" ... maybe not.  Don't count on it.

The funding you are waiting on to get started?  Think of the wealth destroyed in the last few weeks.

I am so reminded of the summer of 2000.  People were still attending these events where you would network with potential investors.  I myself won a major venture event that summer, one that NPR covered.

The result was one investor who basically offered a small investment ($50k) backed by home equity.

THIS IS WORSE.

Now is the time to get cash flow positive.  Better to be one of the small mammals that survives than a large dinosaur who starves to death.

This isn't going away in a few months or a few years.

Another Day, Another App Store Clone.

In this case we have the BlackBerry Application Center, RIM’s answer to the iPhone App Store.

This will initially debut on the BlackBerry Storm software version 4.7.  It's on the handset, no separate web site.

Here's the rub ...

 

All application data will be stored at the carriers’ locale; RIM is totally out of the loop as far as that goes. Carriers put the applications they want on their own little store.

So it's just like the Apple App Store except for:

1. You have to deal with individual carriers.

2. The splits are probabily closer to 50/50.

3. Unlike Google or Apple, no word on Free Apps.

I can understand RIM's reasons, their existing relationship with Handango probabily precludes something as ambitious as Apple's storefront, but this really is much ado about not much here.

Nice handsets too.  Oh well.

News Flash! Flash on the iPhone, don't hold your breath.

PC World reported: iPhone Finally to Get Adobe Flash

Adobe confirmed yesterday at the Flash On The Beach (FOTB) conference in Brighton, UK that it is actually developing a Flash Player for the iPhone.
....
Whether Flash for iPhone will ever see the day of light is yet unknown. Adobe officials said that once their application will meet Steve Job's standards, it might just make an appearance in the next incarnation of the iPhone.

Well folks, this is unlikely and here's why:

1. Developer agreements don't allow it.  No programs that run programs are permitted, hence no Java, no SCUMM (adventure interpreter used by classic Lucas Arts games), and probably no Flash.

2. Steve Jobs has made a public statement that FLASH runs too slowly on the device to be useful.

3. The main reason?  This is a public stunt to embarrass Apple into approving Flash.  

As a business strategy, it's a non-starter.  Apple is now pushed into a situation where approving Flash would make them lose face.  Surely Shantanu Narayen (Adobe CEO) has done business in Asia and understands that this probabily won't work.  

If Adobe wanted Flash on the iPhone Shantanu would pick up the phone and work out a deal with Jobs. 

Look at it this way, a stand alone Flash-Player as a iPhone app doesn't even address the main use of Flash, as a plug-in in the web browser.  If Apple wanted Flash on the iPhone, that's how it would show up.

I personally like Flash (I have even coded  Flash Based Games  for fun and profit in my past) and clearly "Flash Lite", a reduced size version for mobile devices,would run pretty nicely on the iPhone. 

Flash Lite has been a big success in Japan, with one portal, Mobile Game Town, seeing over 1 million Flash Lite games played daily.

So why not Flash or even "Flash Lite?"

Well, here's one obvious reason:

Apple wants native iPhone apps.  Native apps take advantage of the iPhone's unique hardware and provide performance on a par with Sony PSP and Nintendo DS devices.  Apple shifted its focus from web apps to native apps for a similar reason.  Native apps also give the iPhone a performance edge over Java apps on the Google Android system.

Users now prefer iPhone native apps over iPhone web apps.  You now see Facebook, Linked-In, Twitter, and other web destinations offering native iPhone apps with a better user experience than the websites (even specially crafted for the iPhone) they replaced.

So maybe this is a 'stunt' by Adobe to make Apple look bad?

Well, if it's any comfort to Flash fans, I don't expect to Flash to show up on Android.  The Android development system is based on Java and I can't see Java running Flash in a acceptable manner.

Hey, I could be wrong about all of this.  It won't be the first time.