DURING THE HEADY dot-com days of 1997 to 2001, I was a big fish in a small pond, being entirely focused on the local internet market as the head of Eircom’s internet content business, Rondomondo.
It was an initiative well ahead of its time, but it was commercially unsuccessful because there was simply no audience for what we were doing. We were making broadband content at a time when Ireland had less than 5% internet penetration and even that user base was largely on dial-up.
Sure, we were critically acclaimed, but ultimately that stood for nothing when the dot-com crash happened in 2001.
I remember seeing my picture on the front page of the Irish Independent around then, along with the headline ’300 jobs to go in Eircom’s multimedia business’. That was actually the first I had heard about it.
Since it was such a high-profile fall from grace, I became a pariah overnight. I was the poster boy for dot-com failure and found myself unemployed and unemployable.
That was a pretty tough experience and it forced me into a position where I really had to consider my options carefully. Finding employment in Ireland was not an option, and the local market would not sustain a consumer digital-content venture back then.
Flight to Japan
In 2001, I had been working on mobile content as well as broadband, but I also had a passion for video games. I’d heard that interesting things were happening in the Japanese market – DoCoMo’s i-mode, a precursor to the mobile internet, was rumored to have a games service. I decided it was an avenue worth investigating.
This was long before people were able to play games other than ‘snake’ on their phones and way before smartphones became the primary screen that they are today.
But I felt it was something worth exploring, and since Japan’s mobile networks were at that time fundamentally incompatible with international standards, the only way to do so was to go to Japan and immerse myself in the market.
By 2002 I was flat broke, so John Dennehy, who later became my co-founder, underwrote the ticket to Tokyo. As a direct result of that trip John, Hiroshi Okamoto and I created Upstart Games – a Japanese-Irish co-venture that I remained chief executive of until we sold it in 2006.
Getting out of Ireland was a game changer for me. I had no sense of the challenge or opportunity of international markets before then.
I quickly realised that much of what I’d learned in my Irish dot-com days was irrelevant internationally. I’d thought we might be able to acquire content in Japan and sell it in Ireland but soon realised the opportunity was much larger.
Specifically, the US mobile market presented a great opportunity because it was highly concentrated, with a large number of consumers across four mobile network operators.
So we managed, through a healthy amount of blagging (but never lying), to secure contracts with the operators for selling mobile games. We licensed in Japan, re-engineered in Ireland and sold them in the US and Europe. In time, we reversed the model and were selling international games in Japan.
That was a huge achievement because at the time we were the only non-US company that one of the US operators, Sprint, would license from and certainly the only western company selling games on each of Japan’s DoCoMo, Softbank and KDDI mobile networks.
The reason we were able to do that was because we were on the ground in our markets and not trying to steer the ship from Ireland.
In the thick of it
I look at the startup scene in Ireland sometimes and I see people who are supposedly developing products for global markets, but they haven’t really immersed in a market beyond Ireland. Sometimes they don’t even realise there are multiple companies in different territories trying to create something similar to what they’re building.
If they genuinely believe their target market is the US, UK or Azerbaijan or wherever, it doesn’t matter, they have to soak themselves in that market. It just doesn’t cut it to do the trip there every couple of months to meet potential customers or investors.
There is nothing wrong with keeping a headquarters and development centre in Ireland, but your commercial operations need to be in the market you are targeting.
That was one of the first things I had learned in Upstart. Another lesson, although somewhat painful, was that of having your own unique selling proposition.
We were actually a little late to the market – there were established US companies selling mobile games by the time we launched our first titles in 2003. Our differentiation was that we had great IP. The only problem was that it all belonged to others.
We had mobile rights for Konami, Capcom, Sony and many other high-profile game developers. The games were in high demand, but ultimately it wasn’t our IP. We were effectively repackaging their content.
This was a good way to establish a foothold in a market, but it also meant we were building somebody else’s business.
There comes a point when your success can lead to failure because once you hit a critical mass and prove demand, your partner may want to internalise the business – having taken little risk while you built it for them.
So if you’re working with licensed content it’s very important to protect what you’re doing and ensure that you have a balanced portfolio with risk spread across a broad range of products.
There is nothing wrong with working with other people’s IP, and at StoryToys we work with many licensing partners, including Sesame Workshop, DC Comics, and Eric Carle.
We try to run a balanced portfolio, including original content, and ensure that we are not dependent on any one licence to survive. For example, there’s not one product at StoryToys that would contribute more than about 8% to 9% of our revenues. It’s really important to keep that balance.
That lesson came straight out of my work at Upstart. We did so well running one particular partner’s international mobile operations they decided to take it all in-house. That nearly killed us because we had a strong six-figure revenue coming from their products and 80% of our revenues were derived from a single game.
Selling Upstart
Thankfully, we survived, and we managed to rebuild Upstart and sold the company in 2006. In fact, we’d had many opportunities to sell the business between 2003 and 2006.
At one point I think there were four potential acquisitions on the go. That was a mistake. Founders shouldn’t focus on building their startup with a view to cashing out at the first opportunity. They should be solely focused on building a sustainable company.
It can be very flattering to be courted by a number of potential buyers, but it can also be very distracting. You’re not thinking about the business, but only the deal. It takes a lot of work to sell a company, often at the expense of your focus on day-to-day management.
The best advice I have for anyone contemplating an offer is to make sure you don’t get yourself backed into a corner. You need to be in a position where you can walk away, even if a deal seems attractive and is a sure bet.
If you’re not in that position, you have a weakness that can be exploited. The best time to sell a company is when you don’t need to.
Barry O’Neill is the CEO of StoryToys. This article was written in conversation with Killian Woods as part of a series on business mistakes and what can be learned from them.
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Written by Barry O’Neill and posted on Fora.ie
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