Derek Andersen

In 2007 I spent two months working out of the Criterion Games studio in Guildford England (south of London). These are the rock stars behind Burnout, Black, and now Need For Speed franchises. I learned a tremendous amount about what it takes to build world class products and work really hard. The best part about the trip was Erica came along for a mini-vacation (thanks EA!).

I did however make some great friends. On one of my last days in the UK we recorded this video I found randomly this afternoon on my computer. I uploaded it to YouTube and voila.

It’s a little long, but there are some great moments. The British still got it.

 

When I left EA last year money played a huge role in each decision I made. Should I take the corporate money and save for another year? Should I keep the great insurance a few more months to make sure my new born is healthy? Should I get a part-time job? Should I just put it all on black? Should I rob a bank?

After getting through the first couple of panicy months I realized we weren’t going on welfare, and money didn’t consume my every thought. This was aided by not taking a single dollar out of the LLC for the first 9-months. Every deal, every consulting job fueled the business fire.

When we started building Steve Young Football we took a small injection of angel funding to hire our team and get the project completed. I’m proud of how we managed that money, and it allowed us to focus completely on the product.

With the game launch completed I’m back to bootstrapping Vaporware Labs. I’m working on a new project code named ‘CR’. There’s nothing to share right now except to say it’s ambitious.

Being overly aware and frugal about spending money has done two major things for our product: focus and simplicity. I’ve cut all non-critical functionality, simplified the MVP feature set, and zeroed in on the Day 1 value proposition.

At first this was disappointing but as time continued it’s become liberating. Fewer features keeps us focused on the core idea. My gut tells me if we can get that right, we will have success.

Not having a lot of money (read: security) in the bank to fund your idea is scary. Feeling like six angry guys with metal pipes are backing you into a corner is terrifying. But I’ve come to find out when your life is on the life you tend to throw your best punches. Hopefully that’s what we (Vaporware Labs) are doing.

I awoke yesterday morning and thumbed through my Twitter feed, stumbling on a tweet by Jeff Clavier confirming an investment in MovieClips.com. I know MovieClips well, and seeing their funding success and traction over the past 12 months has been remarkable.

In September of 2009 one of the founder Zach James flew to the Bay Area to show me their product in development. Zach and I knew each other in college and have lots of mutual friends. When I heard Zach was doing a startup I was immediately excited for him and offered to help if I could.

When we met last year I had briefly left digital media to pursue a crazy idea in a different industry (future blog post). He convinced me I was crazy, and allowed me to be a part of the team as they prepared for launch in December. For that I am forever grateful. I was privieged to be apart of the site launch, and helped create a YouTube channel with +2MM views, and a Facebook community with 35k fans. They’ve been on a roll ever since.

The other co-founder Rich Raddon is probably the most connected person in Hollywood you’ve never heard of. He knows EVERYONE. He’s also one of the genuinely nicest guys you’ll ever meet. If it were just these two guys starting a company I’d back them regardless of the idea…but wait; they also have a killer product!

MovieClips.com is one of the only places on the web to legally watch clips from your favorite movies. While other companies try to dance around the content owners, these guys did it right. They got every studio that matters on board and started making it happen. They’ve also built an amazing team led by wonderboy Philip Southam and others.

Did I get your attention yet? I hope so. They are one to watch. Besides, I just can’t help root for them.

Check it out. http://movieclips.com

The last 4-6 weeks have produced some seriously concerning/exciting/strange conversations with my friends across Silicon Valley. Maybe it’s just because I’ve had more time for coffee shop and lunch meetings since our game launched, or maybe it’s because something dramatic is happening. Either way I can say emphatically, something in Silicon Valley is changing. Whether boom or bubble I’ll let you decide. Here are the major indicators to watch:

1. Rising Valuations (unsustainable)

2. Talent Shortage (unsustainable)

3. Commercial Real Estate Boom (just starting)

Here are some of the external indicators:

Exhibit A) Rising Funding Rounds – Early stage companies getting HUGE angel rounds and valuations that ‘appear’ to go no where but up, even surprising guys like Paul Graham. At Startup School he said;

“One thing it means is that the high valuations startups are presently getting may not last forever. To the extent that valuations are being driven up by price-insensitive VCs, they’ll fall again if VCs become more like super-angels and start to become more miserly about valuations. Fortunately if this does happen it will take years.”

Exhibit B) Digg Firings – Digg recently fired its worst (generally you fire your worst employees*) 25 employees. But the sadness lasted about 2 seconds when job offers started pouring in from companies like AOL, IGN, GDGT, Groupon, and Twitter?!? The Google/Facebook talent battle is incredibly interesting to watch as well as two of the best fight for the best talent.

Exhibit C) Zynga Office – They may not be in Silicon Valley, but Zynga’s new office is SF is the biggest commercial real estate signing in five years. There are rumblings that Facebook has been looking at the old HP campus (500,000 SQ FT) in south Mountain View.

Here are some of my internal indicators:

Talent Shortage: I’ve talked to more than two dozen engineers looking for jobs in the past 8-weeks. I’ve seen some incredible things. One is that talented yet unproven college grads are getting offers from $120,000k to $180,000 (?!?). This has been inappropriately inflated due to competition in the Valley. Another friend literally went 4-days before getting a huge unsolicited offer. Smells fishy.

This was also confirmed by a Sand Hill friend who adds that Valley companies are looking outside the Valley to meet their needs saying ”If you’re not Facebook or Twitter right now good luck getting the top guys.” Some companies are looking to build offices in nearby locations like Portland and SLC where the opportunities are less competitive and talent comes cheaper.

Also look at the number of companies getting acquired for talent by Google, Facebook, and now LinkedIn. Seems like someone is getting bought for talent every other week. It hasn’t been that way for a couple of years. A top tier developer friend recently told me that he’s been encouraged by many to start a company and sell to Google/Yahoo in 6-months for a big check just to acquire the team. I believe it’s 100% realistic.

Another indicator is that many engineers are choosing to take money instead of money + options. I see a lot of developers just ‘working for the money’. Options currently seem to have fallen out of favor or seem less enticing in the current landscape (This excludes people headed to Facebook).

Real Estate: Talk to a real estate broker in the Valley and they’ll tell you things have really picked up in the past 2-months. Space in Palo Alto and Mountain View downtowns are starting to fill or get offers. Prices haven’t increased dramatically yet, but they will once people start to realize what’s happening. That is great for an industry that’s struggled the last two years, but it’s also an indicator that something bigger is happening.

Valuations: So much has already been made of this lately I don’t feel I need to back it up because it’s clearly on the rise. Dave McClure and Paul Graham have said some interesting things about it if you want something to read.

So what does it all mean? Draw your own conclusion, but something is definitely happening. I’m not bold enough to call it a boom or bubble yet – but something is changing.

*The only time the worst employees aren’t fired is if an entire division is dropped as part of layoffs. When this happens the good, the bad, and the ugly all get the same treatment. I’m not sure if that applies in Digg’s case, but it’s something to consider.