5 ms·

We Also Failed to Build a Billion Dollar Company

132 points by jim-greer 8y ago

coderintherye 8y ago
Very interesting. Your byline on Medium says "I have a games site called Kongregate". Are you still involved with the company? Is Emily still involved? If so what led you leave and her to stay? What got you to leave EA to start Kongregate?
- jim-greer 8y ago
  Whoops, I'm not there anymore. Emily is still CEO. The focus has shifted from being a web games platform to a mobile games publisher. I'm much more of a platform person so it made sense to transition it. She's doing a great job - they've published a lot of great games and are helping indies succeed in the age of of "games as a service." Before I was at EA, I started a game studio in the CD-ROM era. We published an RTS-puzzle hybrid game through Activision, which was a critical success but a commercial failure. Because of the distribution and funding model then, Activision owned the copyright. That meant that we couldn't make a sequel to correct the things we'd screwed up the first time around. When we started Kongregate in 2006, internet distribution was there, but it was very hard to make money. There were no smartphones and Steam only distributed Valve games. The goal of Kongregate was to fix that. We contributed to the change, though smartphones, Steam, and digital distribution on consoles were the big drivers of course.
  - forkLding 8y ago
    Is there a blog post on Kongregate's founding? Kongregate was my childhood and I've often wondered about the history. Much thanks for this post too.
    - jim-greer 8y ago
      Unfortunately no. Edit: Emily gave a talk on it at the IGDA Summit, but unfortunately it's only available to members.
  - ryandrake 8y ago
    NetStorm was awesome, and in many ways ahead of its time! You might know that there was actually a failed attempt by fans to pick up with the source and continue to improve/support it. Alas life happened and the effort petered out and was abandoned, but we briefly tried. Wish you guys could have been given the time and money to do a proper reboot! Edit: Doing a quick nostalgic search, it looks like there ended up being at least one other effort to reboot it that went somewhere. Nice!
pnathan 8y ago
These titles are interesting. I have, myself, like pretty much everyone on this planet, never built a billion dollar company. As much fun as it might be to be that rich, it's never seemed to be more realistic to think that than to think about being an astronaut. So the interest to me is the metanarrative that's formed that says, yes, this is something achievable.
- ProAm 8y ago
  I came here also hating the article title and thinking "most people or small businesses don't build a billion dollar company FWIW" but it's well written and worth a read.
  - jim-greer 8y ago
    The title is kind of meant to provoke that reaction (at least in my case, can't speak for the one I'm responding to.) The point is really that taking VC money requires you to try for a billion dollar company. Founders should think hard before they commit to that path.
- jim-greer 8y ago
  It’s more realistic than becoming an astronaut, but not by much. TechCrunch says there were 23 billion dollar exits in the first eight months of 2018. Call it 35 per year. That’s about as likely as being on a Superbowl-winning football team. Young people often neglect realistic opportunities for success to chase unrealistic dreams. As do entrepreneurs. https://techcrunch.com/2018/08/18/global-unicorn-exits-hit-multi-year-high-in-2018/ https://techcrunch.com/2018/08/18/global-unicorn-exits-hit-m...
  - titanomachy 8y ago
    "It's more realistic [to create a billion-dollar company] than to become an astronaut" You're missing half of the equation. There are a relatively tiny number of people (I assume mostly scientists and military pilots) who have set themselves the goal of becoming an astronaut and are working towards it in a concrete way. In contrast, virtually everyone is trying to make money, and a huge number of people create companies. Not everyone has "a billion dollars" as their specific goal, but the implicit goal of "as much money as possible" is not uncommon.
xiphias2 8y ago
I believe the solution is to be informed. Most of the problems I read about here in HN from founders come from information asymmetry: VCs have much more experience in negotiating. Still, I can't pity the founders, as it's always the employees in startups that get the worst deal. I was working only 1 year at a startup in my life as an employee, and I got burned out after 1 year. Working at a big company is so much easier, as it has the network effect already.
- Mitchhhs 8y ago
  Its not always being just informed. Its the difference between knowledge and wisdom. You may know all these things up front and make the same decision to take VC because of other factors, prestige, the easy money, thinking you will be the billion dollar company. Then things don't go as planned, the rubber meets the road, and the cool sound of telling people you raised VC wears off. Then you realize why all of these articles are written and write one yourself.
  - jim-greer 8y ago
    Well put.
  - xiphias2 8y ago
    I see. It's just so easy to get to a few million dollars of wealth over time if somebody's good enough to get to a big company and invest with a healthy diversification. I really don't understand why people are risking that to be a billionaire with a small probability, when the difference in the lifestyle that that money allows is probably not that big. I'm sure it's cool to be a billionaire for some time, but also it probably wears out quite fast when you get back to work.
caseyf7 8y ago
Fondly remembering the time “wasted” on Kongregate.....
- dwd 8y ago
  I remember they hosted Desktop Tower Defense - that was an addictive game.
mmmmmmmmm 8y ago
Author is an idiot. Random HN commenter: > Any guaranteed return above bank interest rate is appealing for investors. Guaranteed return of 50%/year is an amazing investment opportunity. Illiterate startup founder: > You would think so, but no. ... Knowing that many of those investments will be worthless, they want to maximize the number of shots they get towards a billion dollar company. If the 50%/year return is guaranteed as the commenter plainly states, then they know for a fact it won't be worthless. VCs would love a truly guaranteed 50% return. Anybody would. The problem is nothing is guaranteed.
goldcd 8y ago
Reading the story and the links, made me think. We have VC chucking in massive money and expecting billions in return and failing that dish out a swift euthanasia to the vast the majority within the cohort that didn't do well enough. Then Growth-stage funders, who seem to have more conservative investment/expected returns - but still "high expectations" compared to a regular old business or an interest rate. My personal knowledge comes from the other end, "guy with some cash started a company, knew some people with some spare cash, built it and sold it into an existing corporate and exited" He became guy with a bit of spare cash, who moved one up the totem pole with his next company. From both ends, it all seems a bit "jerky" and inefficient - potentially profitable companies fail as they either don't match the ridiculously high goals set for them - or don't have enough cash reserves to get them over a small blip in monthly revenue. Maybe more importantly, as a startup your employees care about this - as you've tied their income/job to the prospects of the company. Therefore that "next round of funding" determines whether anybody turns up on Monday. Now if your company IPOs this all becomes much simpler - keep the shareholders happy, grant employees options - the vast pool of money you're swimming in smooths out the bumps - or at least makes the rules clearer. There are rules, motivations and just generally "things" that happens "pre-IPO" and stuff that happens "post" - and they are very different. Different from a financial perspective - but from a company perspective it's just people going to work, making something interesting, and wanting money..
- goldcd 8y ago
  My point is that many companies are 'profitable' in a financial absolute sense - but not up to the expectation of the non-market owners. If we had a better system (similar to post-float IPO) before IPO to handle this and allow people outside of funding-rounds to invest/sell - I can't see how this wouldn't benefit us all.
azhenley 8y ago
These articles are making me want to try to fail at building a billion dollar company. P.S. Kongregate gave me one of my first tastes of passive income. Thank you!
- dmix 8y ago
  I'm guessing they have some sort of ad revenue sharing model? What type of income did you make?
  - azhenley 8y ago
    They do ad revenue sharing and microtransactions. I made 8 simple Flash games that generated a bit over 20k in ad revenue from 2009-2011 (very little came from Kong though). Anyone can download and host a Flash game on their own site, which meant my games would spread to hundreds of websites and I still get paid for the ads.
    - HNLurker2 8y ago
      Can you elaborate on the games and their processes (what was your magnus opus) -15 year old kid from Romania who's childhood was flash games.
jondubois 8y ago
The last article I read on HN abput this subject, the author was complaining about only achieving 20% growth per month and that it was a failure. This seems like an extremely unnatural growth rate. It cannot possibly be sustainable in the long run. I dont know what tricks they are expected to use to achieve the ROIs but definitely, it's some kind of magic trick because this is not natural. How can someone predictably and consistently grow by 20% per month. Not possible. Why is it that the growth rate is almost always correlated with the size of the investment. This is software, production cost approaches 0 at scale, it makes no sense.
- EpicEng 8y ago
  I saw the same and just assumed the author meant monthly growth targets to reach 20% growth per year. Did they really mean 20% month over month? That's insane.
  - wmf 8y ago
    Yes, the target growth rate taught by Y Combinator is 5-7% per week or 20-30% per month (at such high rates it's better to track weekly because otherwise you could fall too far behind before realizing it). http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
    - EpicEng 8y ago
      Wow, well... maybe it's just my ignorance, these people do this for a living. Just seems like a crazy number to me. I'm sure there's a lot of detail and reasoning behind that number.
      - wmf 8y ago
        Running a successful startup is crazy and unnatural; that's why it's so rare and that's also why there's backlash against that becoming the default mode of thinking. Based on a quick calculation, to get from zero to one (billion) users takes just under six years at 7%/week growth.
rwallace 8y ago
> The greater availability of capital has been good for founders, but as Tim points out, it’s been a mixed blessing for society. The only way to suggest that even for a moment is to compare it with a hypothetical state of affairs where capital is available from purely altruistic sources. Compared to the actual alternative state of affairs without the availability of capital - the lot of humanity for most of history and geography - blessings that exist in the real universe don't get any more unmixed.

132 points by jim-greer 8y ago

Very interesting. Your byline on Medium says "I have a games site called Kongregate". Are you still involved with the company? Is Emily still involved? If so what led you leave and her to stay? What got you to leave EA to start Kongregate?

jim-greer 8y ago
Whoops, I'm not there anymore. Emily is still CEO. The focus has shifted from being a web games platform to a mobile games publisher. I'm much more of a platform person so it made sense to transition it. She's doing a great job - they've published a lot of great games and are helping indies succeed in the age of of "games as a service." Before I was at EA, I started a game studio in the CD-ROM era. We published an RTS-puzzle hybrid game through Activision, which was a critical success but a commercial failure. Because of the distribution and funding model then, Activision owned the copyright. That meant that we couldn't make a sequel to correct the things we'd screwed up the first time around. When we started Kongregate in 2006, internet distribution was there, but it was very hard to make money. There were no smartphones and Steam only distributed Valve games. The goal of Kongregate was to fix that. We contributed to the change, though smartphones, Steam, and digital distribution on consoles were the big drivers of course.
- forkLding 8y ago
  Is there a blog post on Kongregate's founding? Kongregate was my childhood and I've often wondered about the history. Much thanks for this post too.
  - jim-greer 8y ago
    Unfortunately no. Edit: Emily gave a talk on it at the IGDA Summit, but unfortunately it's only available to members.
- ryandrake 8y ago
  NetStorm was awesome, and in many ways ahead of its time! You might know that there was actually a failed attempt by fans to pick up with the source and continue to improve/support it. Alas life happened and the effort petered out and was abandoned, but we briefly tried. Wish you guys could have been given the time and money to do a proper reboot! Edit: Doing a quick nostalgic search, it looks like there ended up being at least one other effort to reboot it that went somewhere. Nice!

pnathan 8y ago

These titles are interesting. I have, myself, like pretty much everyone on this planet, never built a billion dollar company. As much fun as it might be to be that rich, it's never seemed to be more realistic to think that than to think about being an astronaut. So the interest to me is the metanarrative that's formed that says, yes, this is something achievable.

ProAm 8y ago
I came here also hating the article title and thinking "most people or small businesses don't build a billion dollar company FWIW" but it's well written and worth a read.
- jim-greer 8y ago
  The title is kind of meant to provoke that reaction (at least in my case, can't speak for the one I'm responding to.) The point is really that taking VC money requires you to try for a billion dollar company. Founders should think hard before they commit to that path.
jim-greer 8y ago
It’s more realistic than becoming an astronaut, but not by much. TechCrunch says there were 23 billion dollar exits in the first eight months of 2018. Call it 35 per year. That’s about as likely as being on a Superbowl-winning football team. Young people often neglect realistic opportunities for success to chase unrealistic dreams. As do entrepreneurs. https://techcrunch.com/2018/08/18/global-unicorn-exits-hit-multi-year-high-in-2018/ https://techcrunch.com/2018/08/18/global-unicorn-exits-hit-m...
- titanomachy 8y ago
  "It's more realistic [to create a billion-dollar company] than to become an astronaut" You're missing half of the equation. There are a relatively tiny number of people (I assume mostly scientists and military pilots) who have set themselves the goal of becoming an astronaut and are working towards it in a concrete way. In contrast, virtually everyone is trying to make money, and a huge number of people create companies. Not everyone has "a billion dollars" as their specific goal, but the implicit goal of "as much money as possible" is not uncommon.

xiphias2 8y ago

I believe the solution is to be informed. Most of the problems I read about here in HN from founders come from information asymmetry: VCs have much more experience in negotiating. Still, I can't pity the founders, as it's always the employees in startups that get the worst deal. I was working only 1 year at a startup in my life as an employee, and I got burned out after 1 year. Working at a big company is so much easier, as it has the network effect already.

Mitchhhs 8y ago
Its not always being just informed. Its the difference between knowledge and wisdom. You may know all these things up front and make the same decision to take VC because of other factors, prestige, the easy money, thinking you will be the billion dollar company. Then things don't go as planned, the rubber meets the road, and the cool sound of telling people you raised VC wears off. Then you realize why all of these articles are written and write one yourself.
- jim-greer 8y ago
  Well put.
- xiphias2 8y ago
  I see. It's just so easy to get to a few million dollars of wealth over time if somebody's good enough to get to a big company and invest with a healthy diversification. I really don't understand why people are risking that to be a billionaire with a small probability, when the difference in the lifestyle that that money allows is probably not that big. I'm sure it's cool to be a billionaire for some time, but also it probably wears out quite fast when you get back to work.

caseyf7 8y ago

Fondly remembering the time “wasted” on Kongregate.....

dwd 8y ago
I remember they hosted Desktop Tower Defense - that was an addictive game.

mmmmmmmmm 8y ago

Author is an idiot. Random HN commenter: > Any guaranteed return above bank interest rate is appealing for investors. Guaranteed return of 50%/year is an amazing investment opportunity. Illiterate startup founder: > You would think so, but no. ... Knowing that many of those investments will be worthless, they want to maximize the number of shots they get towards a billion dollar company. If the 50%/year return is guaranteed as the commenter plainly states, then they know for a fact it won't be worthless. VCs would love a truly guaranteed 50% return. Anybody would. The problem is nothing is guaranteed.

goldcd 8y ago

Reading the story and the links, made me think. We have VC chucking in massive money and expecting billions in return and failing that dish out a swift euthanasia to the vast the majority within the cohort that didn't do well enough. Then Growth-stage funders, who seem to have more conservative investment/expected returns - but still "high expectations" compared to a regular old business or an interest rate. My personal knowledge comes from the other end, "guy with some cash started a company, knew some people with some spare cash, built it and sold it into an existing corporate and exited" He became guy with a bit of spare cash, who moved one up the totem pole with his next company. From both ends, it all seems a bit "jerky" and inefficient - potentially profitable companies fail as they either don't match the ridiculously high goals set for them - or don't have enough cash reserves to get them over a small blip in monthly revenue. Maybe more importantly, as a startup your employees care about this - as you've tied their income/job to the prospects of the company. Therefore that "next round of funding" determines whether anybody turns up on Monday. Now if your company IPOs this all becomes much simpler - keep the shareholders happy, grant employees options - the vast pool of money you're swimming in smooths out the bumps - or at least makes the rules clearer. There are rules, motivations and just generally "things" that happens "pre-IPO" and stuff that happens "post" - and they are very different. Different from a financial perspective - but from a company perspective it's just people going to work, making something interesting, and wanting money..

goldcd 8y ago
My point is that many companies are 'profitable' in a financial absolute sense - but not up to the expectation of the non-market owners. If we had a better system (similar to post-float IPO) before IPO to handle this and allow people outside of funding-rounds to invest/sell - I can't see how this wouldn't benefit us all.

azhenley 8y ago

These articles are making me want to try to fail at building a billion dollar company. P.S. Kongregate gave me one of my first tastes of passive income. Thank you!

dmix 8y ago
I'm guessing they have some sort of ad revenue sharing model? What type of income did you make?
- azhenley 8y ago
  They do ad revenue sharing and microtransactions. I made 8 simple Flash games that generated a bit over 20k in ad revenue from 2009-2011 (very little came from Kong though). Anyone can download and host a Flash game on their own site, which meant my games would spread to hundreds of websites and I still get paid for the ads.
  - HNLurker2 8y ago
    Can you elaborate on the games and their processes (what was your magnus opus) -15 year old kid from Romania who's childhood was flash games.

jondubois 8y ago

The last article I read on HN abput this subject, the author was complaining about only achieving 20% growth per month and that it was a failure. This seems like an extremely unnatural growth rate. It cannot possibly be sustainable in the long run. I dont know what tricks they are expected to use to achieve the ROIs but definitely, it's some kind of magic trick because this is not natural. How can someone predictably and consistently grow by 20% per month. Not possible. Why is it that the growth rate is almost always correlated with the size of the investment. This is software, production cost approaches 0 at scale, it makes no sense.

EpicEng 8y ago
I saw the same and just assumed the author meant monthly growth targets to reach 20% growth per year. Did they really mean 20% month over month? That's insane.
- wmf 8y ago
  Yes, the target growth rate taught by Y Combinator is 5-7% per week or 20-30% per month (at such high rates it's better to track weekly because otherwise you could fall too far behind before realizing it). http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
  - EpicEng 8y ago
    Wow, well... maybe it's just my ignorance, these people do this for a living. Just seems like a crazy number to me. I'm sure there's a lot of detail and reasoning behind that number.
    - wmf 8y ago
      Running a successful startup is crazy and unnatural; that's why it's so rare and that's also why there's backlash against that becoming the default mode of thinking. Based on a quick calculation, to get from zero to one (billion) users takes just under six years at 7%/week growth.

rwallace 8y ago

> The greater availability of capital has been good for founders, but as Tim points out, it’s been a mixed blessing for society. The only way to suggest that even for a moment is to compare it with a hypothetical state of affairs where capital is available from purely altruistic sources. Compared to the actual alternative state of affairs without the availability of capital - the lot of humanity for most of history and geography - blessings that exist in the real universe don't get any more unmixed.