It’s not easy to create a successful company in Silicon Valley; by popular estimates, only about 1 in 10 will survive, much less be successful. One of the ways entrepreneurs can try to hedge their bets is by joining an incubator, like YouWeb, a well-known venture started by former tech exec Peter Relan. In three years YouWeb hasn’t yet had an exit, but it has managed to produce three companies – CrowdStar, Aurora Feint and Sibblingz — that look like good bets, with more waiting in the wings.
YouWeb has definitely developed a specialty over its short lifespan. CrowdStar, the first YouWeb company to enjoy some large-scale success with its early Facebook games, is the content producer. OpenFeint, which initially tried to do mobile gaming, is creating iterating on a social platform with over 50 million users, which should allow companies like CrowdStar to succeed in mobile. Sibblingz, a less-known company, is working on ways to efficiently cross-publish web games to mobile. Another, iSwifter, is coming at the same web-to-mobile problem from a different angle, with a model that’s similar to the streaming game companies OnLive and Gaikai.
These companies are obviously related, but are they backed up by a grander plan? We recently got a chance to ask the entrepreneurs and YouWeb founder Peter Relan that question directly.
The structure and rules of YouWeb aren’t terribly unusual for an incubator. Relan invites in expert developers to spend a year working on their ideas. Each gets three tries to succeed, and if their ideas don’t pan out, they have to move on. The rules aren’t ironclad; Jason Citron founded Aurora Feint on his fourth try, according to Relan. Sibblingz founder Ben Savage started as an intern, not an entrepreneur.
Once a company gains some traction, it gets its own offices in the bank building that houses YouWeb in Burlingame. There’s also a YouWeb branch in New York City, started by an entrepreneur who decided he preferred Relan’s job, but it’s at an earlier stage than Burlingame.
As close as the companies are to each other, each told us that it’s focused on its own niche. One, Aurora Feint, may even be preparing to move on from YouWeb. “We’re kind of at the point now where we’re starting to really separate from them in a positive way,” says founder Jason Citron. “Peter’s whole thing is this incubation, they bring in entrepreneurs and teach business strategy until they grow up and exit the nest. We’re now getting to the part where we’re kind of starting to exit.”
Still, he says, that plan doesn’t prevent a constant interchange between YouWeb’s members. “We sometimes do pretty atypical but friendly collaborations that can be hard to do with a regular company,” Citron says.
For Suren Markosian, a co-founder of CrowdStar, the tie that binds is Peter Relan – doubly so, now that Relan has taken over as CEO of his company. “On a personal level all the managers are friends … we have a common friend, Peter, who’s very much like us but has a lot more experienced. He propagates our learnings throughout the company,” says Markosian.
Ben Savage, the Sibblingz founder, also has a personal take, having been mentored from his position as YouWeb intern to Sibblingz CEO by Relan. “He has a very good understanding of the whole space, but he can also see how each company’s strengths can complement the other. This is something that most companies don’t have the opportunity to do,” says Savage.
As much as each company agrees that YouWeb is useful for partnerships, though, they don’t express any enthusiasm for the idea of working toward a single objective. Relan, on the other hand, does find the idea attractive.
“The analogy I use is, each of you is in your forests, I’m like the helicopter overhead, and you’re carving a path. Anytime, they can radio me – am I headed into a pit? In the case of YouWeb, I say, do we have a big ecosystem that can make a play?” says Relan.
The answer seems to be yes. “It’s true that a company like Zynga will have the internal company engine to be cross-platform,” says Relan. “They’ll produce both Facebook and mobile, and there’s some talk of their zLive social gaming network. That sounds a bit like the YouWeb portfolio. The difference in approach is, Zynga believes all that value will be in one company, while I think if it’s true, all the companies will independently discover that for themselves.”
Asked whether he really sees YouWeb operating as a collective, though, Relan demurs. “I’m not going to force them to do it, because they’ll do better as CEOs than VPs of some giant company,” he says. “I believe, give all these people chances, and maybe someday they’ll buy each other. Many of the projects I can imagine being a giant collective, but for now I like that there are eight different companies.”
Whether a cross-platform ecosystem can develop at YouWeb depends, of course, not just on the entrepreneurs or Relan, but on the market itself. But here, also, each founder has his own thought process.
Markosian, at CrowdStar, thinks about the content. “I don’t personally believe in a one for all approach, where one product works on all the platforms,” he says. “I think each platform is its own userbase and users have their own behavior and expect different things from products. I believe in having enough understanding and expertise to deliver on each platform.”
CrowdStar hasn’t specialized in any one area yet, according to Markosian, so it can easily try out mobile gaming this year. “Mobile is the next obvious platform to go to. It’s not like a console, it’s much more mass-market,” he says.
Not all has gone smoothly at CrowdStar, of course. While competitors Playdom and Playfish sold to larger companies for massive sums, and Zynga has continued to hire and acquire its way past a thousand employees, CrowdStar recently laid off about two dozen of its hundred employees and replaced CEO Niren Hiro with Relan.
But Markosian isn’t worried by persistent rumors that his company can’t follow up its early strong performance on Facebook. “The last couple months has been an interesting experience for us. We’ve learned to optimize our teams around being more profitable. We have had restructuring, and some people left the company. It’s much more efficient now. We also shifted much more responsibility into game teams. So far, it’s our best quarter ever,” he says.
At Aurora Feint, Citron is already casting his eye beyond the biggest mobile platform, the iPhone. “I think 2011 will be the year of Android, and some developers will make a lot of money, kind of like the first year of the App Store,” he says.
“A big part of it is enlightening these guys on how to best use virtual goods. A lot of people on iPhone don’t have experience with that model, and we have people who do understand. So we want to elevate the tide for everyone,” Citron continues. “Our focus is on the developers. The fundamental thing about OpenFeint is that it’s a developer product first, a user product second, because the developers take it and make it part of the experience.”
At Sibblingz, Savage is focused on the technologies behind the content, whether it’s on the web or mobile devices. “We’ve taken a massive step back in technology in going to the browser, then again in going to mobile devices,” he says. “The reason we write for Flash is that 99 percent of people have it installed … I think gaming is on its way to being a very universal thing. From a tech standpoint that means, can we take gaming everywhere? Can we make it cross these artificial boundaries?”
Given the collection of expertise at YouWeb, the incubator should be one of the more interesting tech centers to watch over the coming year. Some of the smaller companies that may emerge include streamed games, a social television, next-generation social games, location-based games and even edutatinment, according to Relan.