20VC How To Analyse Platform Shifts Effectively, The Effects Of Not Having Free and Open Distribution & The Right Way To Think About Board Composition with Neil Young, Founder & CEO @ N3twork

Summary Notes


In this episode of "20 minutes VC," host Harry Stebbings interviews Neil Young, founder and CEO of mobile game company Network and former founder of Ngmoco. Young shares his journey from a self-taught coder in the UK to a leading figure in the gaming industry, with stints at Virgin Games and Electronic Arts, where he produced major franchises. He emphasizes the importance of understanding big company agendas, the role of hardcore audiences in reaching the mass market, and the impact of platform shifts on business strategy. Young also discusses the significance of customer lifetime value (LTV) versus customer acquisition cost (CAC) in today's digital distribution landscape. Additionally, he offers insights on the acquisition process, board composition, and the future of Network, aiming to build a media company leveraging the gaming audience. Throughout, Stebbings also promotes partnerships with Naturebox and Lisa, emphasizing health and diet in the new year.

Summary Notes

Introduction to Neil Young and Network

  • Harry Stebbings introduces Neil Young, a British industry expert with decades of experience in the gaming industry.
  • Neil Young is the founder and CEO of Network, a next-generation mobile games maker and publisher.
  • Network has raised over $17 million in venture capital funding from notable investors.
  • Neil previously founded Ng Moco, which was acquired for up to $400 million.
  • He also worked at Electronic Arts, producing successful game franchises.

"Now Neil is the founder and CEO of Network, the next generation mobile games maker and publisher." This quote highlights Neil Young's current position and the nature of his company, Network, which is involved in creating and publishing mobile games.

"With their services already touching millions of customers, they've raised over $17 million in vc funding from some of the very best in the business." This quote emphasizes the impact of Network's services on a vast customer base and the significant venture capital funding it has received, indicating its success and potential in the industry.

Neil Young's Background and Career Path

  • Neil Young is originally from the UK and taught himself to code at an early age.
  • He chose to enter the video game industry instead of attending university.
  • Realizing his limitations as a programmer, he transitioned to a management role as a video game producer.
  • Neil worked at Virgin Games before joining Electronic Arts in 1997, where he spent 11 years.
  • He founded Ng Moco in 2008, which became one of the first mobile game companies and was later sold.
  • In 2013, Neil started Network, his second venture-backed company, with investment from Kleiner Perkins and others.

"So I'm from the UK, grew up in the UK and at a very early age taught myself to code, decided not to go to university and instead start in the wonderful world of video games." This quote provides background on Neil Young's origin and his self-taught entry into the video game industry, highlighting his non-traditional educational path.

"In 2008 I left EA and started one of the first mobile game companies, a company called Ng Moco that was backed by Kleiner Perkins ifund and we scaled that over the course of the following few years to one of the largest companies in the space." This quote details Neil Young's entrepreneurial journey, founding Ng Moco, and its growth to become a significant player in the mobile gaming industry.

Lessons from Electronic Arts (EA)

  • Working at a large company like EA requires understanding the company's agendas and aligning with them.
  • Times of misalignment with EA's goals led to less favorable outcomes.
  • Neil admits he could have communicated better when visions did not align.
  • He learned the importance of clear communication and leadership.
  • EA's focus on the mass market of gamers taught Neil to cater to the hardcore audience first as a foundation for broader appeal.
  • The success of a product is influenced by the natural audience size, with larger franchises like Star Wars inherently having more appeal than smaller ones like Babylon 5.

"The first is big companies tend to have particular agendas. And so when you work at a big company, it's important to really understand what those agendas are and make sure that you're building things that are consistent with them." This quote emphasizes the importance of aligning with a large company's goals and the impact of this alignment on project success.

"One of the lessons learned from Peter Jackson is that the path to the mass market goes through the hardcore." This quote conveys a key lesson from Neil's experience with Peter Jackson, suggesting that appealing to the hardcore fan base is essential for reaching a mass market.

"Everything ultimately has a natural audience. So if you had two teams or two game teams, one game team is working on a game based on Star wars and another is working on a game based on Babylon five... The game based on Star wars will just simply outperform the game based on Babylon five because the audience appeal of Star wars is that much greater." This quote illustrates the concept that the inherent size of a franchise's audience can determine the potential success of a product, using Star Wars as an example of a franchise with a large, natural audience.

Overestimation and Underestimation of Technology Shifts

  • The impact of technology shifts is often overestimated in the short term.
  • For successful technologies, their impact is underestimated in the long term.
  • Early adopters may face consequences from overcommitment to new platforms that don't meet expectations.
  • An example given is the early stage consumer VR which has been struggling.
  • Platform shifts should be seen as opportunities to be timed effectively.
  • Decision-making should involve assessing when the platform will be real and how user behavior has changed.

"The first is we tend to overestimate the impact of technology shifts in the short term, and then for the ones that succeed, we underestimate them in the long term."

This quote highlights the common pattern in the technology industry where initial excitement can lead to overestimation of a new technology's immediate impact, while the long-term effects of successful technologies are often not fully appreciated until later.

Timing and Leveraging Platform Shifts

  • It's critical to time platform shifts effectively to capitalize on them as opportunities.
  • Two key questions to consider: When will the platform be real? What user behavior has changed?
  • Understanding the timing and user behavior changes can position one better than jumping in without consideration.

"So that's sort of an example of one of those platform shifts that people get very excited about in the short term, over commit themselves, and then ends up not quite fulfilling the potential."

The quote exemplifies how people can get overly excited about new platforms, leading to overcommitment and potential disappointment when the platforms don't meet the early hype.

Starvation of Free and Open Distribution

  • Lack of free and open distribution can stifle the rate of change in technology.
  • Platform holders and consumers' interests may not always align, affecting the rate of change.
  • The example of Apple's initial stance on in-app purchases (IAP) illustrates the slow adaptation of platforms to new business models.
  • Lobbying and effort can be necessary to align platform holder policies with market opportunities and consumer interests.

"I think the fact that we don't have free and open distribution in the long term stifles the rate of change."

This quote emphasizes the idea that the absence of free and open distribution models can slow down innovation and the pace at which technology evolves.

  • Paid channels are essential for predictable business growth.
  • Relying solely on viral and popular content is not sustainable.
  • Businesses must understand the Lifetime Value (LTV) versus Customer Acquisition Cost (CAC).
  • Even in an open distribution system, it may still be challenging for consumers to find products without some form of editorialization or curation.
  • Paid channels are critical, especially in crowded marketplaces like App Stores.

"But you really do have to appreciate and respect paid channel as a method to find customers."

This quote stresses the importance of recognizing paid channels as a necessary and effective means of customer acquisition in the current market landscape.

Comparing Organizational Structures: Past vs. Present

  • The structure of organizations has evolved with changes in distribution channels.
  • Electronic Arts (EA) used to distribute games on DVDs sold in stores, requiring a direct salesforce.
  • EA's Salesforce and distribution were key assets, allowing for more shelf space in retail.
  • Today, organizations need to be adept at managing user acquisition through performance marketing channels.
  • The focus is on the cost of impressions, click-through rates, and conversion to installs in a digitally distributed world.

"And so the type of organization that you build today is an organization that is world class at managing user acquisition across every performance marketing channel."

This quote illustrates the shift in organizational focus towards expertise in performance marketing and user acquisition in a digital distribution environment, contrasting with past structures that relied on physical retail distribution.

Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC)

  • Importance of converting customers to paying customers and monetizing them effectively.
  • Necessity of CLV being higher than CAC within a reasonable time frame.
  • The concept should permeate all aspects of the organization, from user acquisition to customer service.
  • Success is dependent on the efficiency of acquiring paying customers and the derived lifetime value.

"It's how effectively do you convert that cohort of customers into a paying customer? And then how effectively do you continue to monetize that customer?" This quote emphasizes the significance of not just acquiring customers, but also successfully converting them into paying, long-term customers.

"Is my lifetime value of a customer higher than the cost of acquiring those customers in a time window?" The quote underlines the fundamental business question of whether the revenue generated from a customer exceeds the costs incurred to acquire them.

The Exit Process

  • The concept that companies are sold, not bought, suggesting active choice in the selling process.
  • Two outcomes of selling: a positive scenario with multiple suitors and a negative scenario requiring a soft landing.
  • The decision to sell is ultimately an active choice by the company's leadership.

"If you don't want to be sold, you can't be bought." This quote encapsulates the idea that a company's sale is contingent upon the willingness of its owners to sell.

Decision Making in Selling a Company

  • Assessing the peak valuation of a company and its defensibility in the market.
  • Evaluating potential acquirers for fit and the possibility of an enriching experience post-acquisition.
  • Decision to sell should be driven by valuation and the opportunity for growth or learning.

"Was the valuation right? And did we feel like it would be an enriching experience?" The quote summarizes the two critical considerations in the decision to sell Ngmoco: appropriate valuation and the potential for a beneficial experience with the acquirer.

"The first question that they need to ask is, ultimately, what are they trying to achieve and what are they trying to accomplish?" This quote suggests that founders should first understand their goals and objectives before deciding if selling their company aligns with those aims.

Board Composition and Dynamics

  • The importance of having a board with complementary skills and perspectives.
  • Avoiding overlap in guidance and assembling a team that promotes the best company outcome.
  • Different board members bring unique strengths to the table.

"What you want to try to avoid is too much overlap in terms of their ability to help guide you." This quote stresses the need for diversity in expertise among board members to provide a range of insights and advice.

"That group of people, I think, is a pretty world class team of individuals." The quote reflects the speaker's satisfaction with the current board composition, highlighting the value of having a strong, diverse team.

Board Intimacy and Transparency

  • The necessity for radical transparency between founders and board members.
  • Understanding the founder's role as CEO and the balance between taking advice and making decisions.

"You have to be radically transparent. There's no benefit to being anything other than radically transparent." This quote underscores the imperative of maintaining complete openness with the board to foster trust and effective guidance.

"You also have to understand that, and the board has to understand that at the end of the day, you're the CEO of the company." The quote highlights the importance of mutual understanding between the founder and the board regarding the decision-making authority of the CEO.

Board Management Methodology

  • Importance of selecting a great board.
  • The necessity of frequent and transparent communication with the board.
  • The value of listening to individual board members as well as the board as a collective entity.
  • Addressing divergent advice from the board early and openly.
  • Trusting the board's collective advice, especially when it differs from one's own direction.

"So for me, I guess my methodology for working with our board, it's one, pick a great board. It's two, communicate with them frequently and transparently. Three, it's listen to them individually and listen to them as a group."

This quote outlines Neil Young's approach to board management, emphasizing the importance of board selection, open communication, and attentive listening.

Book Recommendation

  • Neil Young's highest book recommendation is "World War II" by Winston Churchill.
  • The book provides deep insights into leadership decision-making during critical moments.

"World War II by Winston Churchill. Best book I've ever read. It gives you intimate insight into how leaders make decisions at points of great."

Neil Young recommends Churchill's book for its detailed exploration of leadership under pressure, which can offer valuable lessons.

Personal Inflection Point

  • Neil Young's decision to pursue video games instead of university education.
  • His determination to validate his choice to his mother.

"My mother crying when I told her I wasn't going to go to university, and instead I was going to make video games. Me being absolutely determined to prove to her that that was the right choice."

Neil Young shares a personal turning point that defined his career path and his resolve to succeed in the gaming industry.

Consumption of Content

  • Neil Young is not an avid consumer of newsletters or blogs.
  • He finds it challenging to concentrate on web content after a certain length.

"I have to tell you, I'm not a huge consumer of newsletters and I'm not really a huge consumer of reading blogs or reading websites. I know that sounds kind of crazy, but the idea for me, basically, after 200 words on a web page, I find it really, really difficult to focus."

This quote reveals Neil Young's personal content consumption habits, highlighting a preference for brevity in online reading.

Changes in Startups and VC

  • Neil Young desires more respect for entrepreneurs' time from venture capitalists (VCs).
  • He categorizes VC interactions with entrepreneurs into three types: exciting, disinterested, and non-committal.

"I would most like to see VCs respecting the time of entrepreneurs."

Neil Young advocates for a straightforward approach from VCs to save entrepreneurs' time, suggesting a clear yes or no is preferable to vague commitments.

Future of Gaming and Media Companies

  • Neil Young envisions building a new type of gaming and media company.
  • The goal is to create a company as enduring and impactful as major gaming companies in the West and East.
  • The company will focus on high LTV games, sophisticated user acquisition, and providing tools, technologies, and services to consumers and developers.

"Ultimately, I think that there is an opportunity to build an entirely new type of gaming company and then media company that's born from games..."

This quote summarizes Neil Young's ambition for the future, aiming to establish a significant presence in the gaming and media industry.

Acknowledgements and Partnerships

  • Harry Stebbings thanks Neil Young for participating in the podcast.
  • Acknowledgment of Bing Gordon for introducing Neil Young to the show.
  • Promotion of Naturebox and Lisa, highlighting their offerings and discounts.

"I do also want to say a big thank you to Bing Gordon at KP for the intro to Neil today, without which the episode wouldn't have been possible."

Harry Stebbings expresses gratitude to those who facilitated the interview and promotes sponsors who align with the podcast's themes of health and lifestyle.

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