Business 2.0 on The New Startup.
I saw this article in Business 2.0 pass by the other day, but just noticed it again via Dave
and realized that as I'm actually a Business 2.0 subscriber I all I had
to do was type in my name and address to get the whole story. Nice!
Written by the ever-present Om Malik
(where were you today Om?!?!) the article talks about small companies
like OddPost and Lookout developing technologies that meet small
technical gaps in the market and then getting acquired by bigger
companies like Yahoo. Oddpost, for example, had 11 employees and were
purchased for $29 million. (Not bad for a couple years work.)
Here's another very relevant anecdote:
The acquisition frenzy isn't limited to the big
buying the small. Sometimes it's the small buying the smaller. Jimmy
Giliberti, a former IBM engineer, and two friends started FingerTwitch
in Giliberti's San Francisco basement with less than $100,000. Their
big idea was to create software that would make it easy to run a
videogame on many different types of cell phones. (Big handset makers
like Motorola, Nokia, and Samsung use proprietary operating systems, so
game developers have to create different versions for the various
phones.) Giliberti ran a lean operation — no office, a tiny group of
contract coders who worked from their apartments or from San Francisco
cafes, minimal salaries. About the only overhead was the phones
Giliberti bought to experiment with. He carried dozens of them in a
black duffel bag that he passed along to his coders. “It looked pretty
suspicious,” he says. “I was making phone drops and worrying about
getting busted.” Within 15 months, FingerTwitch had a growing roster of
customers. It also had a new owner: privately held MForma, a
fast-growing mobile games publisher in Bellevue, Wash., with deep
pockets; it has $63 million in venture funding. FingerTwitch had begun
to attract VC interest. But Giliberti says he preferred the more
certain payday from an established company and believes that the mobile
gaming business will ultimately be dominated by large publishers like
MForma. Besides, who needs VCs these days? “In this climate, you can
start a company with $50,000,” he says. “One or two people can create a
nice little business.” MForma won't say how much it paid for
FingerTwitch, but the figure is believed to be several million dollars.
This is a really great article – I think Om has the right idea and the right feeling for the market. A few thoughts though.
First, Om jokes about servers crashing. Actually, server hardware
and data access is so ridiculously cheap now you can rent tons of
decent hardware and bandwidth at companies like ServerMatrix (which I
use to host this site) for very little cash. That'll make growing to
meet traffic needs much easier. If, for example, I ever started hitting
the max processing or bandwidth on this box, I could rent another
similar server for just $100 a month, or move up to a more heavy-duty
box with a full 20megabit pipe for $299 a month. I remember researching
this stuff back in 1999 and this level of service would costs thousands
of dollars. It's really quite nice.
Secondly, not that anyone's ponied up the money for me yet, but
VCs are definitely sniffing around out there. Second rounds are way
over-subscribed, and just at today's BAMF there were at least three
different VC firms represented. When the cash starts flowing, then
we'll know, but there's definitely some money and interest out there.
Especially in the mobile market.
Finally, though I love the idea of having a successful company
being bought up quick and putting more than few million in the bank.
(Actually, I really love that idea.) There's something to be said as
well about creating the next Google. The next gee-whiz super company,
darling of Wall Street and Silicon Valley. No? That takes brains, luck
and tons of hard work, etc. But it's such a nice dream. Paraphrasing
Steve Jobs, “Do you want to spend the rest of your life selling J2ME
apps, or do you want to change the world?” I like that latter
thinking… that's where the buzz is.
Anyways, I think this is a very inspirational article. Great job Om! [Russell Beattie Notebook]