Tuesday, May 30, 2017 11:51 AM / By Roger James Hamilton
Meet Rob Whitehead: A gamer from Liverpool who sold virtual weapons on second life to fund his Cambridge University degree. Rob met fellow student Herman Narula while working on his dissertation there in 2012, and they got talking about creating their own virtual games.
The next day, the two left Cambridge and camped out in Herman’s parents’ barn to launch their startup called “Improbable”. They maxed out three credit cards for equipment, held interviews in their shower room and filled the barn with a dozen staff who ate, slept and coded there.
Two years later, they were still struggling in creating their game, when they had a brainwave. As Rob remembers: “We realized the tech we were working on was bigger than the game.”
To create their game, they had worked out an operating system to build virtual worlds - the machine to build the machine. They realized that was where the real value of the business was.
So they switched to focus at that and created a brand new operating system for virtual reality called “SpatialOS”.
Within a year, they had attracted $20 million in investment at a $100 million valuation from VCs including famous Silicon Valley VC, Andreesson Horowitz.
Then, this week - just two years later - they have just raised $502 million from Masayoshi Son’s SoftBank, valuing the company at more that $1 billion.
What if your real product wasn’t the product you’re focused at, but the product behind the product?
Henry Ford said his real invention wasn’t the Model-T, but the production line that made the Model-T.
Elon Musk has predicted Tesla will be as valuable as Apple not because of his cars, but because of his robot factories that make the cars: “The machine that makes the machine.”
Billion dollar startup, Slack, became successful after founder Stewart Butterfield gave up on the online game he was making “Glitch”, and decided to focus instead at the system he had created for the team to communicate while making the game (Slack stands for "Searchable Log of All Conversation and Knowledge”).
The real innovation is often the innovation behind the innovation.
By turning Amazon’s servers into its own profit center, selling his back-end system as a service, Jeff Bezos has turned AWS (Amazon Web Services) into a $12 billion business - now more profitable than all of Amazon’s retail business.
And if you’re still not convinced of the hidden value that may be in your business, when Peter Thiel sold Paypal to eBay for $1.5 billion, he kept one part of Paypal for himself - the invisible system he had worked out to prevent payment fraud.
He took that system and turned it into a new company, Palantir, which used the same system to help other companies prevent fraud. Today that company is worth $20 billion and is the 3rd most valuable US startup behind Uber and AirBnB.
What if focusing on your current product means you miss the bigger opportunity? That you've got a system behind the system that's far more valuable?
There’s a world of opportunity out there.
And now, virtual worlds of opportunity too.
As for Rob and Herman, they have another $502 million to spend. Their most recent project with Bossa Studios launched this month: A massive multiplayer game called “World’s Adrift” with an area “the size of Wales.”
Now, with bigger funding will come bigger worlds.
As Herman explains, “Basically, we want to build the Matrix.”