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.