Thoughts on the power of founders

In response to the Google decision on China, Fred Wilson writes about the Founder Factor and how that leads to bolder decisions.  While certainly not on the same scale as Google's decision to potentially pull out of China, I thought I'd relate that to a few of the experiences I had at Mochi Media.

On Monday of this week, Mochi announced that it was being acquired by Shanda for 80MM.  This is a fantastic outcome for the company, and I'm super excited for the team there.  I wanted to review two critical decisions that were made in the past year that led Mochi to this acquisition as opposed to alternative paths that they could have taken.  For the record, I was on the wrong side of both of these decisions but fortunately for the company the founders pushed for and got the right decisions made.

A little background, Mochi Media is a company that provides tools for flash game developers, and in particular, tools to embed ads directly into the flash game.  A game developer would write a game in flash, and then come to Mochi for a couple lines of code to insert into the game to add advertising to it.  Publishers would come to Mochi, where they were able to get tens of thousands of games for free to use as fantastic content on their game portal or other site.   There are many examples of Mochi powered games, and the format of pre-loading video ads works particularly well for advertisers.  I joined in April of 2008 to head up the engineering team there.

1. Picking the right new market
Around December '08/January '09 Mochi was thinking through how it wanted to expand its business and was considering a couple of new areas to enter into.  One possibility would be to create a new virtual currency and make it easy for our game developers to integrate with it.  Virtual currencies were quickly becoming all the rage, and companies like Zynga and Playfish were making tens or even hundreds of millions of dollars from them.  This model would be very aligned with Mochi's traditional flash tools model where we are an infrastructure provider and the developers would still be responsible for creating the content that would be critical to our success.

Several other alternatives were discussed in detail, and a few prototypes were built as well.  I won't go into too much detail on what they were, but one of the key differences was that it didn't play to our strengths as an infrastructure provider nearly as well as Coins did.  But we had started moving down that path, and were preparing to jump in with both feet when Jamseon, one of our founders, started pushing hard for us to drop the alternatives and move into Coins.  There was a lot of internal discussion, and I personally wanted to continue down some of the other options we were exploring since we hadn't seen them to their conclusion and would be making a big bet the company decision and throwing that other work away.  The key questions up for debate were:
  • How much should we focus on playing to strengths we already had (building infrastructure) vs getting into areas that we'd probably need to hire new people for.  Anything from SEO to customer service that we simply didn't have expertise in.
  • How could we protect the ecosystem of developers and publishers and advertisers we'd worked so hard to cultivate..
  • Finally, there was a fundamental debate about the potential upside of coins vs our other options.
We discussed extensively internally with the entire company, and certainly over my objections, we made the choice to pull the plug on our other project and deploy all of our resources into building out Coins.

In hindsight, it was absolutely the right choice.  As soon as we started down that path, interest from potential acquirers heated up because Coins added so much more strategic value, whereas other options added none.   And our developers made many fantastic Coins enabled games.  As for the financial value, all I'll say is that I've heard it's doing quite well.

2. Picking the right acquirer
As I mentioned, after we released Coins, we had interest from a number of strategic acquirers.  We got pretty far down the road with one of them, and some of the outcome of that was covered on Techcrunch.  While the battle that Techcrunch portrays is way overblown, there was a legitimate difference of opinion, and Jameson and Bob under pressure from me to do otherwise made the courageous decision to stay independent.

That's the point where I left Mochi.  I left on good terms and keep in touch with the people there, but having been on the wrong side of two decisions that were very strategic for the company, it became clear to me that I didn't have the same vision for the company that the founders did.  And now several months later, I'm happy to see that Jameson and Bob got to a fantastic outcome, much better than the one discussed earlier.

Without the Founders there to make courageous and bold decisions, bucking the convential "wisdom," Mochi would have wound up in a much different, and in my opinion, much worse position.  So I heartily congratulate Jameson and Bob.  They stuck to their guns and made tough bold decisions as only Founders can, and Mochi is better for it.

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