Tuesday, November 15, 2011

The monsters of Silicon Roundabout

The economy as a whole can go from bad to worse, but online businesses seem to be immune from it all – or is it that people don’t have money to do things in the real world any more?

Mind Candy is a social gaming company, whose star creation is Moshi Monsters (below), an online game for children, which makes its income from subscriptions. There are 50 million members already and it’s growing at one a second, apparently.

That makes it a hot property. Its last investment round valued it at $200m, but its founder Michael Acton Smith reckons it’s worth more – although he admitted that all entrepreneurs say that about their creations.

What makes Mind Candy unusual is that it’s based in London – in the Silicon Roundabout area, to the East of the City – and that Smith has all the hallmarks that big-time investors look for in someone they’re backing.

He’s already had a success, with his first online business, Firebox. And he’s scraped through some bad times too – both with Firebox, which he turned round from a loss-making period by firing most of his staff and working from a single room until the company was back in the black; and with his current business, where Perplex City, a massive online and real world game, didn’t take off as hoped.

Now he's reaping the rewards from all the hard graft, and has big plans – already coming to fruition it seems – to be a kind of backwards Walt Disney company: one which creates its characters (intellectual property, or IP) online, where they can be refined by constant iteration to see what works, and then spinning them off into magazines, cards to collect, products to buy, TV, movies, anything really.

Speaking at a Glasshouse event in London last night, Smith waxed lyrical about the unsung wonders of the product licencing business. Someone just writes you a cheque for your IP, then they do all the work of commissioning factories in China, arranging shipment of products or whatever, and they take all the risk. And then they pay you a fee for every item they sell.

Last night, Smith remembered how he first got into business with Firebox, when he and his university friend and business partner Tom Boardman raised £400 each by taking part in medical experiments in Wales.

It was worth selling his body. Today, he has the ambition and experience to make the most of the popularity of Moshi Monsters and is talking about expanding into ‘family entertainment’. Mind Candy is already something big; in a few years time, we’ll know whether it's the start of something really big.  

Thursday, November 3, 2011

Is the Big Short a bit short?

The Big Short: Inside the Doomsday MachineThe Big Short: Inside the Doomsday Machine by Michael Lewis

Michael Lewis goes in search of the winners in the 2008 financial crisis, the traders who had bet on the market collapsing, and had done well from it. He finds a handful of oddballs, outside the big Wall Street businesses, and tells the story of their sometimes shaky confidence in the common sense view that property prices couldn't keep rising and that people with no money couldn't make large mortgage payments.

In explaining how his heroes made their bets - with Credit Default Swaps - Lewis takes on the challenge of educating the general reader in the complexities of a system which, as he explains, only worked because it was complicated and wasn't an open and elastic market like the now well-regulated and transparent equities market.

Although he is reporting on what caused the global financial crisis, he is shining a light in an area which hasn't received much attention. Indeed, he explains in his Epilogue that since first publication he had to fob off various official commissions of enquiry looking into the crisis which wanted him to appear as an expert witness. He didn't see himself as that, but the fact that they couldn't come up with other candidates for the role confirmed his thesis that this was unexplored territory.

Lewis paints a rounded picture of his subjects, telling us about their families, their childhood and their anxieties. That makes the book genuinely original: there were real people behind the bank failures, people with ordinary domestic worries, whose work lives were just part of their lives.

The range of the book, from personal details to the big economic picture, is ambitious and on the whole successful. It is less than 300 pages long in paperback. Perhaps at double the length, not War and Peace, but a little more fleshed out, it could have been a classic, a defining picture of some key players who personified an era, and an explanation of the strange work they did - a kind of factual Bonfire of the Vanities for the Noughties. As it is, I found I was patchily gripped, sometimes lost by the concision of the financial explanations, sometimes muddled - my fault probably - between the various characters. Taken slower, and written longer, I think it might have worked better, but perhaps Penguin wanted it short, or Lewis needed to get on with his next project.

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