It’s over.

After reaching out to the vast majority of the investors in Israel (and even some abroad), after 3 attempts to have an aqcui-hire deal (the last one almost came through), we are forced to shut down Stix.

It isn’t easy. We tried (and tried and tried), and yet – we failed.

Now we need to overcome the failure, take the lessons we’ve learnt, and continue each with his own adventure.

TL;DR

If you don’t have time to read, just go straight to the Summary section.

If you’d like to know more about the trenches – continue reading.

Introduction

I know that asking “what if” is usually unproductive, but I decided to run this theoretical experiment in a systematic way – not to blame myself (or worse blame my teammates), but try to derive crucial lessons for the next time I will be faced with this kind of situations. The main problem is that I will never know what could have been the consequences of the alternatives. But I do know that the path we chose was not successful. So the alternative – probably, though not definitely – had chances to succeed.

I decided to go back in time (starting June 2014, the launch date of Loonies) to critical decision points, which we encountered about every 3-6 months.

Before starting the journey, it should be mentioned that we achieved pretty good results with our game, Loonies, regarding retention: 45/15/5 (though not as high as we aimed for). Unfortunately, we didn’t have any time left to optimize its monetization model (as we spent almost all the time we had to enhance the retention). This resulted in a very low ROI, making any investment in user acquisition very problematic. So we were left with no time/money and a very underperforming game regarding monetization. It was a very hard situation to get an investment. Moreover, we had our share of problems working as a team, and were pretty exhausted when we finished our beta (with 2 months of money left in the bank). It was hard for us to even think of still working on Loonies in the same way we worked in the last few months, and we had to split the team into 2 sub teams. For the time left until we closed the company this work model created the best results, although it raised internal questions regarding the reasons of being a founding team of 4…

June 2014 – right before launch

We decided to raise funds that will enhance Stix’s valuation (and enable all of us decent salaries). To do that, we decided we should launch Loonies, tell its story in the most positive way, hope for some luck, and start working on new projects to show our creative and execution abilities.

We could have acted differently:

1. We could have tried raising smaller investment from private investors in the promise that we are close to making Loonies a financially successful game.
2. And, we could have started working on improving Loonies’ monetization model, and the ability to show progress in this domain.

In practice, we were exhausted from working together, and we started to believe Loonies cannot become a successful game because of internal design flaws (e.g. its turn-based nature).

March 2014 – 3 months before launch

The retention profile of Loonies we managed to achieve until March was 45/12/3. It almost hasn’t changed in the last 3-4 months, although we have added several retention-focused features.

We decided to continue working on Loonies. Moreover, we decided to take a risk and implement big changes in the game design (in an “all or nothing” strategy). Also we decided to add content exposure model that was always prioritized low (more content, more work, big risk). The end result? We did improve the retention a bit, but monetization got worse.

We could have acted differently:

1. We could have started looking early for a small investment ($100K-$200K) from private investors, mainly to prolong our runway and enable us to optimize both retention and monetization (and leave some money for marketing). Actually, we had exactly that opportunity with an investor,  but we passed. In practice, our investors (and part of the founders) didn’t want to take the new investment (as valuation wasn’t high enough) and we thought we might have better opportunities down the road.
2. Without any relation to the first option, we could have shifted our focus to monetization instead of retention. This would leave most of the time we had left to try different options with the monetization model. We might have succeeded in achieving (or at least nearing) positive ROI (per user).

December 2013 – 6 months before launch

We managed to overcome the activation hurdles and achieve pretty good retention results on iOS. We had much worse results on Android. We decided to focus on enhancing the Android version results and continue working on retention-focused features. Also, we got to a conclusion we won’t have enough money to invest in marketing, therefore we started working on a publishing deal.

We could have acted differently:

1. We could have shifted our focus on adding a single player mode for Loonies (or even focus only on SP), instead of working on enhancing the turn-based multiplayer game experience. Actually, this was exactly the feedback we got from several publishers (and later some game experts). This might have created new opportunities for Loonies to enhance both retention and monetization.
2. Alternatively, we could have decided that our retention is good enough as it is, and start focusing on optimizing the monetization. In practice, this was a very hard decision to make, as we got a lot of recommendation to achieve retention goals first, and only than move to monetization. Also, we didn’t have yet the information (revealed through a research we read) that most of the conversion to paying users, and the payments overall are made in the first few days of user activity.

September 2013 – 9 months before launch

We were very close to soft launching the game, but some of us became very concerned with the lack of diversity in the game (that would affect retention). We brainstormed for solutions and decided to deepen the power up model. This resulted in a month of delay.

We could have acted differently:

1. We could have just soft launch the game without delays. After all, our main lessons and meaningful iterations started after we had a big amount of users trying to play our game.
2. Assessing our situation early enough, we could have started approaching publishers even before the soft launch. If we got their feedback early enough, we might have acted differently, and maybe even had more chances to sign a deal.

June 2013 – 12 months before launch

In June we still didn’t have an asynchronous version of the game, it was still being built in Unity. During our user tests in June and July we got a lot of feedback, that indicated we didn’t achieve the “fun” yet (after 3-4 months of iterating the prototype!). Still, we decided that their feedback is not conclusive and we should continue to production phase. The time we have already invested and the theoretical launch date that looked so far away (missing the planned launch date by months), created the pressure to continue with the game as it is.

We could have acted differently:

1. We could have re-estimated the work-plan and understand we will not be able to run a good enough beta until the end of the year. It could have created more realistic expectations, and might have set different business goals for the next 9 months (for instance, get good beta results to be able to raise funds to bring the game to market).
2. We could have continued iterating the game features, and even adding fidelity as needed until we got excited feedback from players (and get more confidence in the project). If we didn’t get there, dump the game and start a different project (with a plan to achieve good initial results, not to launch successfully).

Of course, the problem was we “promised” to build and market at least 2 games with the funds we got, so it would have been really hard to pull these decisions back then. Continue iterating the game (after investing more than 3 months)might have sounded like a crazy things to do. Dumping the project – although sometimes is the best decision might have sounded even worse.

March 2013 – 15 months before launch

From mid January to mid March we have made the most critical decisions, that would affect the product we have worked on and the way we worked on it.

To enable us work better as a team (that had its internal struggles the passing 6 months) we tried to clearly divide the responsibilities between the team members, but we couldn’t agree on the most important parts, and so the product definition, the concept of the game, the features, the work plan and the priorities, was left to be a team effort. We paid a very high price for this decision, as we had hard time in agreeing on the audience, the concept of the game, and the priorities of the different features. We managed to decide what to do, but not always with coherence with previous decisions.

The other important decision was the game we would develop. We decided to continue working on the turn-based model (as our analysis suggested it can be a profitable genre, and it will be easier to create a bigger user base in the casual market), but instead of continuing our work on the President (or some derivative of it), as we originally planned (and shown investors), we decided to dump the concept of 2 layers and start a totally new project.

Moreover, based on our previous experience (in building the mobile game in HTML/JS), it was clear we had to change technology (later it was decided to be Unity).

We could have acted differently:

1. We could have insisted on diving the responsibilities. The truth is this could have created a clash, that might have broken the team apart.
2. We could have suggested 2 man work teams (like we actually did in the last few weeks of Stix).
3. We could have continued working the 2 layer game concept (as we knew what works and what improvements are needed). Making us much closer to soft launching and learning.
4. We could have chosen a different (either simpler or better monetizable) game model for our next game. Although we actually didn’t know how bad performing turn-based games were.
5. We could have simplified some of the requirements. For instance, develop a 2 player game instead of 4 player game (a decision we were forced to do several months later). This affected a lot of our original decisions, including the chosen game itself.

November 2012

By the end of October, we have launched our first game, The President. We decided to make it available in all App Stores, and we treated this (effort-wise and state-of-mind wise) as a real launch (although the product was far from being “well done”).

We could have acted differently:

1. We could have treated it as a soft launch, without trying to market it, and focus on learning and iterating. We originally wanted to use the 2012 US presidential elections as a boost, therefore we could release the game only in the US and learn from that.
2. We could use our next 3 months not only to get an investment but also show how we learn and improve our game metrics (by fixing the on-boarding experience, enriching the game diversity, etc.)

In reality it wasn’t easy to do. The product was still very far from being good enough (therefore, did not meet our own expectations – even though, originally, we planned to develop minimal viable game and iterate it). Also, the feedback we got after the pitch event in The Junction was pretty devastating for us. This resulted in one of our worse times as a team (getting the investment in January 2013, was actually a big surprise, as it was pretty much against all odds, in my opinion).

June 2012

June and July were very intense months, during which we have done some of the most critical decisions that defined Stix’s strategy, work plans, funds and projects.

1. We decided to follow our (and Guy Gamuz’s heart) and pivot into a game company (instead of a B2B service company).
2. We quit our jobs (as we were about to get funded by Guy Gamzu), moving us for the first time to be fully dedicated to Stix
3. We defined several game concepts (first game mechanics, and later creative concepts) – deciding to continue to work on a 2-layer game model that was derived from the B2B model
4. We decided to stay in the B2C game company model, although Guy Gamzu withdrew his proposal after few weeks
5. We joined The Junction, thus creating for us an adequate workplace (though not very relevant knowledge-wise)
6. We decided to develop a minimal viable game, that will help us learn and get funded (within 6 months)

Later, we struggled a lot with the creative concept of the game: we were “traumatized” by the original concept we had (Space Sheep) because of Guy Gamzu’s reaction, which led us to testing several new concepts, getting feedback (from Oren) that the concepts we created are not good enough, leading us to create another concept, that was found to be too complex to be implemented in the timeframe we had. We finally created a simple, yet problematic (Election theme) concept that was implemented to become our first game “The President”.

I still believe most of our decisions in this phase were good (quit our jobs, continue as a game company despite the changes, develop a minimum viable game). The problems were with executing the plan and managing our own expectations.

I believe we could be in a better situation:

1. We should have continued working on the Space Sheep creative concept. It was cute, funny, “timeless” and mainly very developed. We literally wasted months of creative work and weeks of development, in implementing, arguing and changing concepts. And all because of one person feedback. This would definitely help us achieve a more mature game at the (soft) launch date (and it would feel less time-specific as the feedback we got about The President), so we might not have dumped it later on.
2. We could have simplified the game complexity (making a 2 player game instead of 4 player). We were pretty sure this is part of our uniqueness, so I am not sure we could have decided this anyway.
3. Alternatively, we could have rolled back to being a platform company. We probably would have needed to find a unique model that would set us apart from the competitors (that were all ahead of us, and we got a lot of feedback that the market felt crowded). For instance, we might have developed a unique communication app, that would become a distribution platform (and maybe a bit more) for games. It should be mentioned that we had more experience in designing applications than games and the technology we used (HTML/JS) would fit an app much better than a game.

Earlier times

I could have gone even farther into the past, and ask myself if there was any logic in trying to build a desktop app (for almost a year, during 2011) in our spare time (it was hard and inefficient), or should we waste so much time on defining a product for desktop and for such a long time (during 2010), when the emerging trends were Facebook games and mobile games.

But all of that happened when we dedicated a fairly small portion of our time to the venture (and we had so little experience), therefore I see this whole model as problematic. We really started learning when we started getting feedback, which made us move (by the end of 2011) to a b2b service for mobile game developers.

Another interesting point in time is back in 2009, before Stix was conceived. We were 2.5 people working on a game toolbar project with 2 operating games, when we already had an early alpha version, several testers and some metrics.

Summary

So what were the main problems or the main causes to our failure?

1. We were – almost always – too optimistic about the time / effort needed to achieve our goals.
2. We threw away efforts (and achievement) in favor of starting something new, even though we didn’t have valid information to make these decisions.
3. We had a hard time making decisions, especially for Loonies, as each of us wanted it to be a different game, and we let it continue for a long time, without trying to drastically solve this way of work.
4. We fully launched products before they were “ready” for this stage, not meeting our expectations and making the case of a valuable investment very problematic.
5. We didn’t always get early enough and detailed enough feedback regarding the game (though we became better in this). Even when we got feedback we failed to use it to make the right decisions.

But when I look at these problems, I think there are actually only 2 root causes to our failure:

1. Bad team structure – I have already wrote a lot about the problems we had with our founding team in my previous post. I think this is all still very relevant.
2. Lack of experience – none of us worked in a game company before, nor did we have experience in building startups. It led us to take a lot of bad decisions (e.g. optimistic effort estimations, problems identifying the big challenges, selecting bad monetization models, plan the right time to raise funds, etc.)

Lessons learned

My conclusions:

1. Have a balanced and experienced team. Balanced team is much more critical, as experience can be gained by doing, or somehow hacked by getting an experienced mentor.
2. Have a clear vision for your game, that you believe in (don’t build something you don’t believe in), but have a solid business case for its financial success (if you are planning on doing business out of it).
3. Reduce complexity, not quality. Game are entertainment. More game features is not necessarily more fun, bad quality will backfire badly.
4. Test the game early, learn and iterate (from prototype to alpha to beta to launch). Have clear conditions to moving forward for each stage.
5. It is important to know when to quit, but it is not less important to know when to continue pushing. Throwing away hard earned efforts before exhausting the relevant options, might take you back months in the process.
6. Time fund raising efforts to the point when you are able show achievements, but before you have fully launched the game. This enables you to still sell a dream – and have more time to perfect the game.

Alternative paths

So was there a realistic path we could take that would eventually lead us to success?

I am not sure. Our team structure created a lot of problems and tension. That, combined with our lack of experience in game development and entrepreneurship, resulted in unrealistic expectations and bad decision making.

If somehow we could create the balance within the team (hard definitions) without breaking the team, or create a workable process (that manages to work around the lack of balance), and if we would have found an experienced mentor to help us make less mistakes, we might have executed this plan (starting June 2012):

1. Raise pre-seed ($50K-$100K) money for art / sound / small salary
2. Design (including monetization) and develop a game based on Spacesheep – iterate its prototype and alpha to achieve fun (3-4 months)
3. Soft launch the game and iterate to achieve good retention (deal with activation, add SP mode, deal with diversity) (3-4 months)
4. Raise seed money ($250K) to make the game ROI positive
5. Continue with the soft launch until good monetization (3-4 months)
6. Raise A round ($1M) to scale the game and create a lot of revenue
7. Market the game aggressively, generate revenue (6-12 months)
8. Raise B round ($5M+) to create a bigger company (with several teams)

There could be several sub options of course (for instance, create really small polished SP game that will show what can we do instead of developing a more complex game prototype), but this is the main structure.

This plan would not only mitigate risks for investors, it would also mitigate our own risks (for instance, create a good MP game or even good enough beta is almost impossible within 3 months, but creating a detailed prototype / alpha) within the same time frame is much more achievable). If we couldn’t create good results in each step in this plan, we would understand pretty early we are not up for the job.

Even if didn’t run this kind of plan from June 2012, we could come up with this kind of a plan when we started Loonies (after we got almost $300K) and focus on creating good retention in soft launch and raise additional money ($200K) to make the game profitable and launch it.

Another path might have been going back to the platform model. Still I don’t believe we would do better as a B2B company with so much competition. If we could find a different path to become a platform (like Tango), maybe we had an interesting chance.

A totally different path, would have been starting a partnership with the CTO by the end of 2009, without adding any founders. Back then, we had a basic (though not scalable) application, and one (and later) two games, and even alpha testers. We could have left our jobs (or at least work part time), pay for a designer (from our own pockets) to create a simple brand and enhance the user experience, to stabilize the app and run beta tests. By 2010 we could have enough information to take it further: talk about the achievements in beta and about the future (mobile app, which we designed already) and raise our first round. This path would create a founding team of 2 (instead of 4), and focus on what was already working, instead of generating detailed new concepts without any empiric information regarding the original idea. This is very theoretical option, as I was not yet ready to make the jump to full-time entrepreneurship in 2009, and we had even less experience…

Last words

Hoping your first startup / business will be a success is not very realistic. Most startups fail. I don’t think there was any different way I could learn all that I have learnt – first hand – beside being the CEO of Stix. It’s priceless.

So it is very unlikely our story would have ended in a different way.

But maybe

1. If I was more courageous in the early stages , or
2. If we found a way to work around our problems as a 4 member team, and
3. If we found a successful and experienced mentor 

This venture would have developed to a success.

So if you are a newbie and you are starting a new venture, make sure you have a well balanced team, and if you lack the experience, get someone on the board that has lots of it…