$380 Million for Knowledge Curated at the School of Hard Knocks

Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

I think there’s a super power among entrepreneurs that is more important than where you went to school, who your parents are. It’s the willingness to be curious, to just be interested in virtually anybody or anything, because the best entrepreneurs are usually borrowing ideas that work in one industry and bring them to a new industry. And my next guest, David Perry is a perfect example of that. He grew up, got a high school education in Belfast and decided to leave for the United States. Ultimately built a company in the video game industry, which he sold to Sony for a cool $380 million.

Not an Ivy League graduate, not a fancy business school to his credit, only his curiosity and business savvy that brought him to that level of success. It’s an amazing story, and there are some specific things I want you to listen for, in particular, how he built his product without diluting his equity. He’ll describe that to you. He’ll talk about how naming your company and your product can create almost a tribal like degree of loyalty. And that’s important, obviously when you’ve got limited budgets to grow your company.

He’ll talk about how he pinpointed his natural acquirers, actually built a dart board and put the names of his natural acquirers early, which gave him a Northern stars. He built his business. He talked about how to protect your working relationship with your acquirer while also not undermining your negotiating leverage, a key strategy along that point. He talks about this concept of helping investors see a gold vein and how that can help you raise money for your idea.

I loved what David referred to as down the track thinking, and I think it can be a great way for you to contemplate your role as the founder and entrepreneur inside your company. Here to tell you the entire story is David Perry. David Perry, welcome to Built to Sell Radio.

David Perry:

Hey, thanks for introducing me. Thanks for inviting me.

John Warrillow:

I can’t wait to tell my kids I had this interview because both of them like video games, but I don’t know anything about video games. So, they’re going to be like, “You talked to who?” So tell me about Gaikai, because I think it’s a company I don’t know much about, but I know you will explain it to me and the listeners.

David Perry:

Well, I’m originally from the video game industry from when I was young, it was really the first thing I ever did. I didn’t realize you could be paid to make video games, and I started making them and I learned that if I made branded games that they would become hits. So the first one I did was the Teenage Mutant Ninja Turtles. That put me number one in the charts. In the video game industry, if you are number one on anything, just like the music industry, they want to work with you.

And so, I found myself in my career every time I tried to make something just for fun, no one would ever hear about it really. But when I made something branded, it would cause this huge spike in my career. So, I ended up moving to America to make a game for McDonald’s and that game ended up winning game of the year. So I stayed in America and we did one for 7 Up. Then we did Disney’s Aladdin, and Disney’s Aladdin ended up being a big hit. I’ve had lots of different games, but we ended up developing always licensing in. But then we realized what would happen if we licensed out, and we made a property called Earthworm Jim [crosstalk 00:05:09]

John Warrillow:

Say that again, Earthworm Jim.

David Perry:

Earthworm Jim, and Earthworm Jim, some of your users will, or some of your listeners will actually know that one because it’s a bit of a cult hit. So what happens is with Earthworm Jim, it became a TV show at toyline, lunch boxes, you name it. All the possible licensing categories, and so we learned about that as well. So, my career has always been making games. But then at one point I realized the future I think is going to be easier and easier and easier. It’s an entrepreneurial thing, how can you make things easier?

And so the question was, if everything is streaming, all the movies and music and even books now, wouldn’t you like to have every video game ever made everywhere you go instantly? Like, wouldn’t that be cool? And will that ever happen? So we thought, “Well, why don’t we start trying to make that happen?” And we started building the technology to do that. The concept was that that means that the video games would play from the cloud, because you don’t want to have a hard drive somewhere with every video game ever on it. How about we do it in the cloud and we can stream to any device?

And we built the technology and companies started really liking it. Samsung decided to build it into their televisions. Walmart built it into walmart.com. So you could actually play games on their website. Facebook allowed us to build it into Facebook. The net result was that we had this technology that you click a button and a game appears, and it turns out you could do it with any software. So we actually started doing demonstrations of Photoshop on adobe.com, for example, you could just click a button and you’re using the real Photoshop, but you didn’t have to download and install it.

And so, long story short, that became something that Sony was very interested in because the question is, will you always have to buy video game consoles? Someday in the future you won’t. I don’t believe you will.

John Warrillow:

You’ll be able to access them from any piece of glass that you can find.

David Perry:

Yeah, we find the same hardware was slightly improved year after … It’s not every year, but over time is not the most efficient way to distribute the games and get a lot of people playing them. This seemed like an interesting idea. Sony bought the company and then they’ve built it into the PlayStation. It’s called PlayStation now, and there’s millions of people paying every month to play and use that technology. It worked out [crosstalk 00:07:45]

John Warrillow:

I love it. So I want to go back. So you used to be like the creator of games, the publisher almost of the game. Even if we go back as far as Teenage Mutant Ninja Turtles, you created that from inspired by the movie, I’m assuming?

David Perry:

Yeah. So the property is, it was created by the original creators, but they end up licensing out the property through a licensing company, and basically I was working with a company in England that had managed to get control of those rights. And they said, “Would you be willing to make this game?”

John Warrillow:

And are you by training like an artist, like a freehand drawer or a programmer? Like what is your technical skillset?

David Perry:

It’s going to age me, but I started out as just a programmer when games were black and white and the sound were just beeps.

John Warrillow:

Like Tetris?

David Perry:

Well, even Tetris was color, even before that. But when it’s just beeps, you don’t need a musician, and when the graphics are really blocky, you don’t need an artist. So I was a one man team for a long time, but then when art started to become important and the game started to look good, I had to get an artist, and I had a friend of mine, his name’s Nick Brody, and Nick and I became a two man team, and together we had quite a few successes as we went along, including the Teenage Mutant Ninja Turtles.

Music wise, as the music got better, we didn’t actually ever have a third person for music, we always just outsourced that. So we would license that out and get some musician to do it. So our musician would change from game to game, but it was such a fun time, and the industry is so vast now.

John Warrillow:

Yeah, it’s incredible. So you grew up publishing games, licensing IP from others and making a game out of it, as well as working with brands like McDonald and 7 Up. What point did you start Gaikai? Was that the 2008 pivot to licensing this technology?

David Perry:

Well, there’s an interesting thing, which is, some entrepreneurs tend to think about their own country as being the center of the universe and it’s normal, it’s the absolute normal way to do it. I had a friend at the time who was looking at the Chinese in South Korean game industries, and it turns out that most Western companies weren’t paying any attention at all to how everything was exploding in China and South Korea, and the government agencies there were actually really interested in getting Western companies to come and visit.

And so, they would literally fly us out and set up all the meetings with all the CEOs of all the companies. How killer is that? Right? So you just literally walked into meetings with the CEO of each Chinese company. And the result of that is that they were like, “You’re the first Westerners to ever come and visit us. This is so amazing.” And our goal was to learn what on earth is going on down here. How are these games so successful? What are you doing differently than we are doing in the West?

And the thing that was really big at the time was free to play, this idea that you would play for free, but then you could pay to unlock features or add features to the game. And they would end up … They’d have a million concurrent users. So a million people playing simultaneously on some of these games, and it was just such an incredible thing. So, in my speeches in the US, I’d be saying, “I know you don’t feel there’s any threat from China at all, you’re just making your games and they’re doing whatever they’re doing, but if they ever get it right and make a game that hits the Western market, it’s going to be huge here. And so, you’ve got to watch out for that.”

And free to play has, of course, that has happened, the free to play business has come over and absolutely killed it in the West as well. There’s games like Clash Royale and things like that, that are just so successful. As a mobile game, they make billions of dollars from it. It sounds absurd to think that there’s people putting thousands of dollars into a single mobile game, but they do. And why does this work? Well, what they did, if you want to think about this from a business strategy, what the big difference was that, in the West we always thought that you would pay a certain amount of money for a video game. It’s going to be $39, and then it became $49, and then it became $59.

And what we’re actually doing is raising the money wall, and we were saying that you have to climb over this wall if you want to play our video game and the people who can’t afford to, well, you can’t play our game. And it’s a terrible idea. And so, the concept with free to play was, everybody can can play. In a way, the people that can’t afford to pay any money actually are there to play with the other people who can afford to pay the money. So everyone is able to play together, and it’s better to have more people, and the whole thing ecosystem becomes much more alive. The community’s much more vibrant.

John Warrillow:

There’s a network effect with video games as well, right, when more of your friends are playing the more you want to be [crosstalk 00:13:17]

David Perry:

Yeah. So the point is that, embrace what else is going on in the world. There’s other stuff that we are not aware of here. I’m sure you’ve maybe seen it when you’ve been traveling, you’ve tasted some food that’s amazing, and you’re thinking, “Why don’t they sell this in the US?”

John Warrillow:

Sure.

David Perry:

It’s like that in every dimension. There’s things that we just haven’t got here yet, that someone else has learned somewhere else, and you could be the one to bring that to the West.

John Warrillow:

Makes a ton of sense. I want to get tactical, because I still have a bit of confusion around your journey. So, I get the publishing of games, I get working with brands like McDonald’s and 7 Up and Disney to create games for them. Where I get a bit fuzzy is what happens next. So at some point you move from licensing other people’s IP to almost like a technology platform. I’m trying to get a sense in time, is that around 2008, when Gaikai starts as a separate company? Just give me [inaudible 00:14:21]

David Perry:

It was a little earlier than that, but in general, it was an interesting time because I was trying to learn as much as I could about, where’s the industry going? I have this company with a bunch of people, a payroll, I’m having to [crosstalk 00:14:40]

John Warrillow:

How many employees did you have at that time, ballpark?

David Perry:

Probably around 10 to 12 people, somewhere around there, and what-

John Warrillow:

And what’s the business model at that stage, 10 employees?

David Perry:

We were making the games, we’d publish them and we’d earn royalties on each game sold.

John Warrillow:

Got it.

David Perry:

And that was working well for us. But what happened was the industry, we were experts in two dimensional video games. Actually, when we made Aladdin, if you think about it, it’s all sell animation, the way Disney does their hand painted animation. So in the industry we were considered experts at hand drawing animation, and the whole industry was going three dimensional. And so I kind of went, “Oh, I don’t know if our team is going to want to make this transition.”

Talking to them about it, they were like, “We really don’t want to make this transition.” I was having to buy these computers. They were called Silicon Graphics computers, and they were $25,000 each, just as work stations for people to even experiment with 3D. It just didn’t feel good to me. So I ended up selling the company at that time for around 10 million. The idea was to just not take that risk of a company that’s not going to want to make the transition. But what happened was we ended up finding some talent that we already had internally, and we added a few more people and it turned out they were amazing at 3D.

And so much so that we made this game, which was quite interesting because it changed my whole perception on how you can sell video games. We made this 3D game called MDK, and it was just a very cool game. It was 3D and it was also quite funny. We sold it like we normally do. But what happened is we also realized that there’s an awful lot of people or companies that sell equipment that wants something else to go in the box. So, when Apple sold the very first iMac, they wanted to have some pre-installed software, and they actually licensed MDK from us to put it onto the iMac, every single, like all the video cards that were coming out, all had MDK.

The joysticks had MDK in the box, different hardware manufacturers that were making PCs at the time were licensing it and putting it on there. And so, what you realize is that, because each time we’re getting 75 cents for every single device or maybe a dollar for every single device that’s selling, so yes, we’re selling the game cheaper, it’s a simplified version of the game, but in reality, it’s just money from heaven. So, that was a kind of a fun experience with that particular game, but that was our introduction to this 3D space.

And so we ended up pushing our chips in and going hardcore on 3D, and so the company ended up growing and growing and growing. And just to give you a fun little end to that story is that, the directors of The Matrix reached out because they wanted to make a Matrix video game, and they liked what we had been building. They liked MDK. And so they ended up, long story short, I didn’t do the game at the same time as the first movie, but I did it for the second. And my team was just all in building this Matrix game, which was actually designed by the directors of the movie. And so it all tied together perfectly with their movie.

So we got acquired again. That was a strange situation to actually get acquired a second time. That was for almost $50 million because they wanted our team, Atari wanted our team because we had the rights to the Matrix, and so the game was finally published under the Matrix brand.

John Warrillow:

Got it. I have so many questions. Okay. Back to the first company that you sold for around 10 million, so Nick was a partner in that company, I’m assuming he was the artist?

David Perry:

Yes, he was one of the people. There was a whole collection of different people with different skills. So we had the whole gambit from designers to artists to … all of them. The only thing we didn’t have is music again. Funny enough. So, we still outsourced that.

John Warrillow:

I’m curious because Nick was the one who was the artist, obviously you were experts in animation, which feels like very art-driven. So did he come with you to the next company or did he stayed in the world of art in his?

David Perry:

No, no, he did. He came with me and that all worked out well. The problem was that, when I flew to America, because I’m from the United Kingdom, when I flew to America, I came alone. And so I had to leave him behind because I had had an offer just to do this one contract for McDonald’s. But as soon as I possibly could, I convinced them to hire him and bring him too. And so yes, he ended up getting on a plane and joining and became part of the team.

John Warrillow:

Okay. So the second company that you own the Matrix, the part two right to do that video, what was the name of that company?

David Perry:

It was called Shiny Entertainment.

John Warrillow:

Shiny Entertainment. Okay. Got it. Did you set that up? Was there an investment group that you guys … Did you just self-funded with the proceeds from the first company, or how did you financed that?

David Perry:

The Matrix? The Matrix-

John Warrillow:

No, Shiny Entertainment. The company behind that product?

David Perry:

What happened was, imagine we’re making … We did Aladdin and it was a huge hit and Jeffrey Katzenberg reached us out and says, “Would you like to do Lion King?” And Lion King was a really exciting property, but we had to make a decision. What are you going to do? Is this our future to just keep doing this repetitive thing or shall we try something new? And I was getting interesting offers. So I got an offer from Sega to join Sega, and I would’ve got to work with some of the best talented Sega, which was really interesting to me as an engineer.

But I also got an offer to join a company called Playmates Toys. It turns out Playmates Toys had the rights to the Teenage Mutant Ninja Turtles toys and they made over a billion dollars off those toys. You can see how that synergy of walking into the room, having a history with the Turtles, and then they were thinking of hiring me to help them build their video game strategy. I said to them, “I’m not really interested in that, but I am interested in starting my own studio, would you be willing to fund it?” They said, “Yes we would.” They signed a deal for the first three games that we make, they get to publish.

John Warrillow:

And this is the origin of Gaikai?

David Perry:

Yes. Oh no, sorry. This is the origin of Shiny Entertainment. The Gaikai situation, just to explain how that came about was once I’d gone through this Asian experience of learning about their industry, I realized that the problem that they were having was getting people into the games. So they couldn’t get people into the games easy enough. You had to go through this whole download, install, create accounts and all that. So is there some way we could make that easier? And at the time, I had joined a friend of mine from Activision who had bought the rights to a company called Acclaim.

He was the one that was really fascinated about the space. And so in working with him, we started to do the research on that. How could you do this? At the time they kind of chuckled, but there’s this game called FarmVille. It was a big hit.

John Warrillow:

Sure.

David Perry:

All investors were like, “The future is FarmVille.” So we were having to work out how could we get flash which was this technology that FarmVille used and those kind of games, how could we get flash to really do extraordinary things? And the answer was, from the cloud. So we started actually developing that software to make it so that flash could be terribly charged, and that’s when I realized … I actually gave a speech at a conference and it made me really think hard about, “I think the actual future is to run the whole game in the cloud and to hell with flash, like we got to get flash out of this and just run games from the cloud.” And I ended up …

What happened was I gave the speech, it was a keynote speech at a conference, a D.I.C.E. conference, and I got contacted by some engineers from the Netherlands who said to me, “We’ve been working on this technology, would you like to see where we’re at?” And I looked at where they’re at and I’m like, “I was talking about this as a theory. This is amazing that you’ve actually got this core stuff working. So let’s start a company.” And they became my co-founders of Gaikai. That’s how that got going.

John Warrillow:

Got it. Okay. So many questions. That’s super helpful. I want to go back to Shiny Entertainment for a second. So when you say, and again, this may be my ignorance about the video game industry, but when you say the investment group financed the first three games, what does that mean? They wrote you a check to go build the games in return for a percentage of the company, is that practically what happens in that case? Or how does that-

David Perry:

Well, this was a stranger deal in that they didn’t take any equity, they just wanted the output. So they wanted games to sell. So they were effectively prepaying for those games to be developed.

John Warrillow:

This is great.

David Perry:

It’s the best deal you’re ever going to get.

John Warrillow:

So they literally didn’t ask for equity, they said, “Here’s a check.” How much was the check for?

David Perry:

Well, they didn’t write as one check, we agreed how much it was going to cost for the games. And then they started to pay monthly to cover the cost of running the company.

John Warrillow:

Gosh, people are hearing this going, how do I get into the gaming industry? Like that sounds too good to be true. It’s incredible.

David Perry:

It’s absurd. I’ve had two of my friends come to me recently who just started new game companies, and straight out of the gate, they have a hundred million dollar investments.

John Warrillow:

Oh my gosh.

David Perry:

I mean, I thought it was easy back then, it is ridiculous now. The amount of money. If you have talented people, of course, you have to have people who’ve made professional games, but if you have talented people, there’s money out there.

John Warrillow:

I’m glad you brought that up because you’ve given the fact that these engineers and these programmers are so valuable and so hard to get, how did you structure it with Shiny Entertainment? Did you give the engineers a piece of the equity or how did you attracted them to come with you? Do you know what I’m getting at?

David Perry:

It’s a great question. At the time, I mean, I’ll be really honest. I was so naïve in business. I left high school to start the industry, so I never went to college, I never took any kind of business studies whatsoever. And so, everything I’ve learned, I’ve had to learn in the trenches as you go, and I never really …

Equity, I know it seems obvious that everyone wants equity, but what everyone wanted was royalties, they wanted royalties. That was how we thought. It’s a bit like a musician, you want royalties on the records that you make. You’re not necessarily trying to get a piece of Sony unless you’re Michael Jackson or something like that. But in general, you don’t, you just … And so everyone was very focused on earning royalties. And of course we did have a royalty system built into what we did for the whole team.

John Warrillow:

So the creators of the game, the engineers and the programmers, part of their compensation would be a royalty for its future.

David Perry:

Yeah. And I [crosstalk 00:27:05]

John Warrillow:

And would they get a base salary as well?

David Perry:

Oh yeah. They got a base salary too. Over my career, I’ve had so many times where I’ve employed somebody and all they can think about is their salary. Like, “I just want the salary and I want more salary.” And I’m like, “You really need to care about equity.” Because now I can explain to them that everyone that I’ve met that’s successful, didn’t make it from their salary. And like the ones that have boats or multiple homes, they did not do it just from their salary, they did it from equity in a company. Now I’m much more aggressive about explaining equity to people.

John Warrillow:

So this company, Shiny Entertainment, you got this financing from this company that paid you in advance for the three games. That gets you off. You’re paying the engineer’s salary plus a kicker on the royalties. You built that up. Did you raise capital for that business or did you keep a 100% of yourself?

David Perry:

No, it was a 100%.

John Warrillow:

And then you sold it for $50 million later?

David Perry:

No, I sold it for 10 million. That’s when the industry went three dimensional.

John Warrillow:

Okay.

David Perry:

It turns out that, long story short, I got half of it back.

John Warrillow:

Half of the company or half of the money?

David Perry:

Half the company. So I got half of the equity back and the company during that whole process. And that’s why I was able to sell a second time to Atari.

John Warrillow:

Got it. And that company, who owned the company that you sold to Atari?

David Perry:

It was a combination of myself and the company that had acquired us, which was called Interplay. And so Interplay had bought us initially, but we ended up both owning the company together, and so then we were able to sell it a second time.

John Warrillow:

So you’ve been through this a few times, this building to sell, so to speak, or building up and selling?

David Perry:

Oh yeah. I think it’s not a necessary thing, it’s just a fun piece of the way you can build companies. There’s lots of successful companies that never need to sell, they can run forever. But when you’re building technology, it’s quite common that there’s someone out there that wants it. I never got to a point of going public. I’m hoping to do that with my current company. I’m now an eCommerce, that’s a really bizarre thing to explain, but I figured I’d like to try to learn about another industry, and so my new company, PayPal just invested into it, and we’re literally trying to build something very big.

We have 30,000 brands using our technology. This, I think, is really, for me, the big swing, certainly the biggest swing I’ve made. I’m kind of excited to see where this journey goes. It’d be fun to have a chat with you in a couple of years to see what happened.

John Warrillow:

See if we can do it again. Well, I want to get to the new company, but before we do, let’s just dig into Gaikai for a second. I’m going to dumb it down for my own brain to consume, but effectively you saw that in order for some of these three dimensional games to perform, the flash needed to be … you needed to create some middleware so that flash could work in the cloud more effectively. You didn’t have to download the game to your device. You could literally stream it. Am I getting that roughly, correct?

David Perry:

Well, the thought was that a lot of the games are quite simple, is like you’re going through a dungeon killing things. And so can that be done in some new way that means that you can play it instantly on every device? So wherever you are, at any time, you can just hit a button and start and be in that dungeon and continue playing. I’d have lots of other people doing it too.

John Warrillow:

But you were selling the software that enabled that to be possible. You were agnostic of any game that was using [crosstalk 00:31:07]

David Perry:

No, no, actually we were building a game. We had to build a game to prove it worked-

John Warrillow:

Which game did you build?

David Perry:

It was a game called Kogama, which was just something that we were building as a set of a demonstration of the technology, and it was very, very simple because, of course, it’s flash, but it definitely worked. Is it possible to do that? Of course, it’s absolutely possible. But what it does is it means that the graphic fidelity is going to be limited by what flash can display. And so that’s why you can see those as constant inkling towards, “Well, but how can we get the full three-dimensional graphical experience to just appear on your computer?”

John Warrillow:

Okay. And that’s the software that Gaikai made?

David Perry:

Yes.

John Warrillow:

Got it. Obviously I’m a very slow learner, it’s taking like 40 minutes to figure that out.

David Perry:

No, it’s no problem at all.

John Warrillow:

Okay. That’s helpful. How did you finance the growth of Gaikai? Did you self-financed the entire thing? Did you raise money? What was your journey there?

David Perry:

I did self-finance at the start of the company and that was very basic, just paying for some servers et cetera, and just trying to get the company actually running. My co-founders were in Europe, so we needed to find a way to get them out into the US so we could actually get an office and start a company.

John Warrillow:

The co-founders being the guys in the Netherlands?

David Perry:

Yes.

John Warrillow:

How many of them were there?

David Perry:

There was just two.

John Warrillow:

Got it. Okay. And how did you guys decide to divvy up the equity? Because they put in a lot of work to begin with [crosstalk 00:32:46]

David Perry:

[crosstalk 00:32:46] No, you can get all crazy about that. We just said a third, a third, a third, and then there’s no discussion. That’s how you end up not having these stress.

John Warrillow:

Everybody is equal?

David Perry:

Everyone’s equal and we’ll all lean in and let’s get this thing done. That’s what we did.

John Warrillow:

Did you ever worry that you were going to get held hostage because the Dutch guys knew one another. They’d been working together for a while. They owned two-thirds of the company. Did you ever worry, maybe I don’t want to be held hostage by these guys that know each other really well, they have beers every night together [crosstalk 00:33:23]

David Perry:

Yes and no, because it’s not really the founders that run a company, it’s the board. So at the end of the day, the board makes the ultimate big decisions, including the [crosstalk 00:33:33]

John Warrillow:

[crosstalk 00:33:33] who was on the board then?

David Perry:

Well, they were on the board, but our first investor, which was quite early, was a guy called Mitch Lasky at Benchmark capital. He’s an investor at Benchmark that really understands the video game industry. He had built a company called JAMDAT that was bought for a lot of money by Electronic Arts. He knew the industry really well, and so when I came to him, we had a coffee once and I was explaining to him what this was and he’s like, “I totally agree with this. This is great. I’d like to invest.” I had other investors lined up at the time, but his offer had just trumped everybody else, and that [crosstalk 00:34:17]

John Warrillow:

And how does it work with a deal like that? So you guys you own a third, a third, a third, do you each have to agree to the dilution to bring Mitch in as an investor? Does everybody have to agree, “Yeah, this makes sense?”

David Perry:

Yeah. I mean, basically what you do is you’re valuing the company at some number that they’re going to invest at and then you’re agreeing how much they’re going to get for their money. So, if they’re going to give you $5 million, how much of the company are they going to get for that $5 million?

John Warrillow:

And do you have to agree in writing or is it just assumed that that $5 million investment from a guy like Mitch is going into the company, it’s not going into your pockets and that of the Dutch guys?

David Perry:

Oh, no, no. Yeah. So what they do is, the way it works is they give you a term sheet and the term sheet is, here’s what we’re willing to do, and here are the guidelines and the rules of how we’re going to go about this process. We call them exploding term sheet because usually there’s some kind of timeout, like you’ve got two days to sign this thing. And why is that? Well, they don’t want you to go out and shop it around 500 to other investors. They’re basically at major risk when that term sheet is issued. So they need to get it done as quickly as possible. That’s quite common, is there’s some kind of really, really fast time on it.

And ultimately then it’s up to you as a company to say, “We’re going to do this.” And you’re right, that does require all of the founders to say, “Let’s do this.” There was no question. Mitch is a rockstar, and so you get a rockstar investor from an amazing company. That’s a decision that takes about a second, and suddenly you’ll have proper funding and now you’re able to start recruitment and getting offices set up correctly and everything. That’s how you keep going.

John Warrillow:

Okay. You got this big injection of capital, then what was the next round of financing, and when did that happen?

David Perry:

It’s a great question. Now, it’s a little … I’m forgetting the timing of all of it, but it didn’t take that long before we started to talk to other investors, there were strategics that wanted to get involved like Intel Capital. That’s something that’s surprising, is a lot of these large companies have venture wings, that if you’re doing something that’s in their space, they will invest. And so, just a funny story on that. Imagine I’m pitching Intel Capital and the guy who was our … His name was Pat Walsh, he totally got what we were doing and thought it was awesome and wanted to invest.

But at the end of the day, the heads of Intel Capital have to see the final thing and give the final okay. And so I just thought it was funny because I pitched them and I showed them world of Warcraft and call of duty running from the cloud, and you can imagine there’s this executive at Intel Capital looking at it and just going, “I don’t.” He didn’t care about video games at all. And it just wasn’t interesting. And then I showed them PowerPoint streaming from the cloud, and at the time, Google had made Google Sheets and things like that, but there was nothing good. There was no way to get actual PowerPoint running in a browser anywhere you go. And it blew him out, it just blew his mind. He was like, “This is going to be huge.”

John Warrillow:

And like the relative complexity to those two softwares, would’ve been like a thousand to one. Right?

David Perry:

It was like night and day, it was night and day, getting call of duty to run and a browser is way harder than getting PowerPoint, but it made him just get, “Wow, this is incredible.” Because he was protecting, well, that means any software, this is going to happen. This is going to be available. That’s why he got very excited, but you can see those kind of investors, Qualcomm invested, and that was another interesting one. So we had high quality people coming in and joining.

Then for our third round we had NEA invested, and NEA is again a very highly respected VC firm. Probably the hardest problem I had in that entire process was actually, when I was pitching, I would explain that we’re going to need to buy thousands and thousands of servers because you have to be able to handle all these people playing games. This question would come up, “How are you going to pay for all those servers?” To be honest, that was a very challenging question because it could be a million servers. Right? It could be an enormous amount, and that is one of those situations where it was make or break for us. We had to answer that question.

And there was a company we came across called TriplePoint Capital, and TriplePoint I believe funded servers for like Netflix and Facebook. They’re the kind of company that will actually, based upon the success of your company, will give you as much money as you need to keep growing. Having TriplePoint behind us, just remove that question, we have this company that, as long as the metrics work out, they will keep giving you more and more money to scale. Sometimes it’s this unique structure that you have to build that helps people get over the preconditioned reasons they would say no, and then they relax and go, “Okay, I totally get it.”

Another example is when Samsung did their deal with us, they said they would pay for their own network. Suddenly you go, “Wait, well, why couldn’t we do that?” Obviously, if they’re willing to pay for the network, this can get as big as Samsung wants it to go.

John Warrillow:

Got it. What was the need for the additional rounds of financing? What was causing you to need to raise capital? I’m assuming at some point the business started to generate revenue from these licensing deals you were doing with the likes of Samsung, but I’m assuming the licensing revenue was not enough to cover the nut of all the engineers and stuff that you needed.

David Perry:

Yeah. I’m going to take a step back. This is an entrepreneur thing. Whenever I call it down the track thinking, which is, if you think of any, like a train on a track, the industry’s on the train, everyone’s sitting on that train is very happy, “I’m in the industry, I’m part of the industry. This is great.” There’s people who miss the train and are chasing after it, and they wish they were part of the industry and they’re doing everything to catch that damn train. And then there’s some people that are trying to predict what’s next, and they’re trying to think maybe a station ahead or two stations ahead, like what’s next.

The question really is to keep saying to yourself, “Well, if we get to station one, then what, then what, then what?” Until you just can’t project anymore. And so, the way we do that is we always think about what would make it better or easier. At some point you end up with every game everywhere instantly, and then you go, “How would I beat that?” And you kind of get stuck. You’re like, “I can’t quite beat that. That’s it.” Then you start building towards that. And if you build towards that future, you’ll be seen as if you’re at the tip of the spear for any given industry, and to some extent, our job was more to prove that we could do it more than to actually turn it into a commercial business.

And so, by making it so that the only way you could play a game was walmart.com, we weren’t charging Walmart for that. That was a strategic thing for us to achieve, because the minute we signed Walmart, Best Buy signed their deal. And then you go, “Well, now we’ve got Walmart and Best Buy, do you think we can get Target or anybody else?” And investors will say, “Yes, we believe you.” Then we had spent forever trying to get Google to change Chrome to support our technology. Can you imagine calling Google and saying, “Will you please change Chrome to support something we’re building?”

John Warrillow:

I can’t.

David Perry:

It was hell. I can’t tell you how many different engineering calls where the engineers were just not interested in changing it. And I was doing everything I could to try to get there. In the end, the CEO of Google at the time wanted to do a demonstration of streaming in the browser, and suddenly everything became possible. Like everyone was like, “Okay, what do we need to do to support you?” And we did a demonstration of how games can stream to Chrome with no delay whatsoever. It was the same experience as having a console in your house. That was exact same experience.

You can see how in every way, I just call it climbing through the barbed wire or it’s a culture I explain when I hire people in the company, including my new company. When we’re hiring somebody, we say to them, we’re allergic to hurdle pointers, we’re allergic to those people that tell you why you shouldn’t do something or how hard it’s going to be to achieve something. Oh, look at all those hurdles, and you’ve been in those meetings, I know you’ve been in those meetings. There’s someone in there that just can’t stop pointing at all the problems, and there’s other people who jump hurdles, but you never even heard about the hurdles. Right? You find out later that there was some things they had to deal with, but they just got through it. Those people are worth their weight and gold.

John Warrillow:

I bet. It just occurred to me, I go back to the boardroom meeting with the CEO of Google, and they’re looking at this saying, “Wow, these games are streaming without interruption through the cloud.” All of a sudden that’s a threat to the console makers.

David Perry:

Well, it is. You know the company Nvidia, have you come across Nvidia?

John Warrillow:

I heard the name, I have no idea what they do.

David Perry:

Nvidia is a company that makes the graphics cards that are in all of the consoles and all the gaming PCs.

John Warrillow:

Okay.

David Perry:

And AMD and video are the two key players. So they’re duking it out constantly. But I was invited to speak at a keynote that Jensen, the CEO of Nvidia was giving. So I went on stage with him and he wanted to show this cloud gaming idea, but he had such a cool idea, which was … Nvidia’s color is green, so you’ll see if you go to their website that green is their color. So he had this green ethernet cable to a screen and we demonstrated games playing. And he just said, “That cable is the console.” And that’s the future. The cable is the console. There’s no need for a console, it’s unnecessary.

John Warrillow:

But that’s a pretty big threat to the owners of PlayStation or Xbox or-

David Perry:

That’s why Sony acquired us because they wanted to learn and understand and be the leaders in the space, and that’s what they ended up becoming.

John Warrillow:

Yeah. So let’s get it. So you’re raising so you get Mitch on, you raised a couple of more rounds, institutional, the venture wings of Qualcomm and Intel. So you’re raising a ton of money. How much in the end did you ultimately raise through the three rounds?

David Perry:

I got about 50 million.

John Warrillow:

Wow. So you’ve got a big war chest?

David Perry:

Yeah.

John Warrillow:

Did you shop the company to Sony? Did they come to you? How did that all come about?

David Perry:

Well, actually, we realized something that was becoming a problem was, we realized that having all of these different games running, they were all built at different times by different people, and those teams don’t exist anymore. So, a team made a really great game, but then they disbanded and built their own companies or whatever. So we are going to have to run that game and make it work forever in the cloud. And some of the games have built in security systems and things like that. They were never intended to be run in the cloud.

John Warrillow:

Sure.

David Perry:

And so, we’re having to do all kinds of complex things just to make games work. We were dealing with all kinds of legacy issues. Sometimes we had to login or type in codes or choose options. And we were actually having virtual mice in the cloud, clicking things, trying to deal with some of the stupid things that these old games would do. And we realized, this is not fun. This is not fun. Who has a library of games where this isn’t like that? And the answer was Sony and Microsoft and Nintendo. Nintendo, God bless them, I love Nintendo, but they just weren’t interested. Cloud gaming to them was not interesting at all. They just didn’t care.

Microsoft was interested, but they were actually building their own technology. So they were trying to do it, and so Sony was by far the best choice for us. They were also trying to build this technology, but they really liked what we were doing. I thought it was funny because my co-founder, it was a guy called Rui and he loved Japanese culture. So he was the one that came up with this name Gaikai for the company. I had taken a marketing class. I was invited to this really weird offsite marketing thing in Texas, where companies pay like 10 grand just to sit at a table with glasses of wine and hear how to market.

I got invited for free. So I’m like, “Sure, I’m in. I want to hear this.” I sat there, and they explained something they called Mystique Marketing, which was the idea that certain people can pronounce things correctly and other people won’t pronounce it correctly. And it actually creates a culture of the people who know how to pronounce it correctly, feel closer to the brand. Every time someone says Versace instead of Ver-sace, they feel closer to Ver-sace because they’re somehow in the club, it’s the weirdest [crosstalk 00:48:37]

John Warrillow:

It’s tribal. Right? Tribal language.

David Perry:

It’s marketing psychology. So my co-founder says, let’s call the company Gaikai, that’s a terrible name. And then I’m like, “Maybe that’s not such a bad idea. Let’s try it. Right?” We did. But it turned out that every single thing that we did, all the servers and technology, we gave Japanese names too, so that … It was just a fun thing that so all of our different technologies that Japanese names, so how weird is it that then a Japanese company comes along and acquires you and can’t tell you how happy they were when we were explaining all of these things, and telling them the names and the names actually meant they had reasons to exist.

It made them so happy that part of our culture was being very respectful to their culture. And so it’s just interesting how that works out. So I enjoyed that whole process with Sony.

John Warrillow:

I love that. So Gaikai is Japanese for big ocean or wide ocean, or what is the actual [crosstalk 00:49:44]

David Perry:

Well, it was hard to even explain that, because if you ask different people, you’ll get different answers. The way we explained it is, imagine you’re out in the middle of the ocean and there’s a million different ways you could go, like you could go off at a million different angles. That’s basically what the technology was going to. It was going to fundamentally change so many different industries by the way it works. That was how we would explain it to people is that it was this open ocean strategy and that’s what the technology was going to solve for.

John Warrillow:

Got it. And the servers were named or inspired by Japanese names. At what point did you realize Sony would be the natural acquirer for your company? Was it years later or was this part of your thinking that naming it with a Japanese name would start to appeal to Sony as a potential acquirer?

David Perry:

Whenever I start a company, I tend to draw on a wall somewhere like the equivalent of a dart board or a target, and then I write the names of companies that I think would be interested in what we’re building. Mostly just to try to frame in my head, does anyone care? I have this other thing I do sometimes, I call it the restaurant test. If you have an idea, imagine you’re sitting in a restaurant full of people, how many of these people are going to do that thing today? So if I said VR how many of the people in this restaurant, let’s say there’s a 100 people here, are actually going to go home and put on their headsets tonight and play with VR.

And it helps you apply this at a very, very rapid filter to any idea like, how big is this idea? I mean, how many of those people are going to use Amazon or use Netflix?

John Warrillow:

Or Google Chrome or-

David Perry:

Or Google Chrome. Right? It’s a great question. And then you’re allowed to change the metrics from a restaurant of a 100 people to a 100,000 people. So, okay, let’s go for the 100,000, and you can see even at a 100,000, there’s a lot of ideas. We’ll have very, very limited amounts of people. And those are the ones you got to start to go, “Is this the best idea right now?” But it’s just an interesting little filter that you can use when you’re thinking of things.

John Warrillow:

So the dart board for Gaikai included Sony?

David Perry:

Oh yes. No doubt. Sony, Nintendo, Microsoft, Google, Facebook, Apple, all of them were on there. I mean, I was up at Apple. I spent so much time with Apple trying to get into there. I wanted them to unlock the hardware for us. And that turned out to be … I’ll tell you a funny story, somebody told me if you write an email to Steve Jobs he will reply to you. I’m like, “No, that’s just crazy.” I wrote an email to Steve Jobs and I said … I just very basically explained what we’re doing, and I got an email back the next morning. “What can we do to help you?”

And it said sent from my iPhone, which I thought was funny. I replied to him, “I’d really like to speak to whoever’s in charge of gaming at Apple.” That day I get a phone call from the head of gaming at Apple saying, “Steve just asked me to give you a call.” That was remarkable, that is not something that happened commonly, most CEOs don’t reply. They’re inaccessible, but Apple was very accessible. And so I did spend quite a bit of time trying to get into the actual hardware of the iPhone so that we could … Because if we could, the performance that we could deliver would be remarkable. People would’ve been like, “This is impossible. How are you doing this?” And that’s what I was trying to get to.

John Warrillow:

But I’m assuming you didn’t get there before Sony.

David Perry:

Well, it was meeting after a meeting after a meeting, after a meeting, and by that point, Sony had acquired us, but we were having those conversations.

John Warrillow:

So back to my question, did you shop the company to Sony and Microsoft and Nintendo in an auction style where M&A bankers took you around to these different companies and said, “Would you like to buy us?” Was that the process you went through to sell?

David Perry:

Yeah, there’s actually a company called Qatalyst, starting with a Q. Qatalyst, Benchmark brought them in and they were just remarkable. You see, this is what I’m talking about. This is all the learning, it’s learning by experience. How would I know that Qatalyst was the right company to call? You see, some people look at VCs and they’re like, “Oh, that’s such expensive money, blah, blah, blah.” They come up with some reason why you shouldn’t work with VCs. I’m the exact opposite. These people are awesome.

The connections they bring and the respect they bring, you’re obviously building something real when you have real investors behind you, that it’s incredibly valuable. And so Qatalyst would normally not do a deal as small as ours, they tend to do billion dollar deals plus. So, as a relationship thing, they jumped in which meant I got to witness how those people operate. They did increase the value of the deal, so they more than paid for themselves in the process.

John Warrillow:

So what did they do?

David Perry:

They come in and … They actually said something to me. I can say this now, because this is all history, but they said to me, “David, our job is to keep you out of all of this, you have one role, and that is to keep Sony happy. I want your relationship with Sony to be spectacular. It’s a love fest. They love what you’re doing, you love what they’re doing, you have a great relationship. We never want you to talk about terms or issues or problems or negotiating or any of that with Sony.” It was funny because that turned out to be incredible advice.

So, our relationship stayed fantastic the whole way through, we didn’t end up quibbling over things. And at the very end of the deal, Sony came back to me and said, “David there is one problem, is you have some patents that are … Personally, you have patents that may interfere with this company in the future. That’s got us a little spooked, like we’re going to buy your company and you have some patents, and we don’t know if this …” I said, “You can have the patents.” They’re like, “What? Wait, you’re just going to give us the patents?” Then I go, “Yeah, absolutely.” And they’re like, “Okay.” Because you can see that was something I learned from my attorney. My attorney said to me, “The job is to win the war, not to win every battle.” And that’s a perfect demonstration of that.

I could have fought and fought and fought over patents. Would’ve that made any sense at all? No, I’m here to win the war and get this deal done. There were plenty of other people out there. I had competitors that would’ve loved to have the deal that we got. It was about 30 competitors, and we were the only one acquired. And our biggest competitor ended up folding afterwards, like about a month later.

John Warrillow:

When you say competitor, are you able to share ballpark how much revenue you’re making as a company? I know it wasn’t valued on a multiple of revenue or EBITDA or anything like that.

David Perry:

No, no, not at all. So the revenue was actually almost insignificant at this point, because what we were doing was so bleeding edge. It’s an interesting question. This was advice given to me by Intel Capital. They said to me, “Don’t make any money. If you make money, we can judge your value. So the day you start trying to make money, we’re going to instantly know your value, but if you don’t make money, we don’t know your value, and we’re going to judge based upon interest in the market and what else is going on. So your job is to really show momentum, excitement, support, partners, growth.”

So we came up with an idea, which I think was part of what would’ve added a lot of value outside of Sony, was we added a little feature to anyone’s website relating to gaming. It could be a gaming website or a blog or anything. They could add one line of code and it would then … What we would do is, we’d say, “Look, we have a server free, would you like to play FIFA soccer and try it out for free right now?” It would actually pop up and give you a moment to click on it and you could say, “Sure, I’ll play it.” And then FIFA soccer would appear.

That seemed like a very simple idea, and then we said to the brands, “Look, here’s the deal. If we charge for this, for the brands, anything we make we’ll split 50/50.” They’re like, “Wait, what? That’s a great deal, we’re in.” We’re partners here, but what we actually were doing was, we’re starting to … Their traffic just became our traffic. Right? So how many eyeballs did we have? So every website we were adding was effectively letting us build this arsenal of how much reach that we had to gamers. I think we got to 50 million really quickly, and so, at that point, you could start to see there was a lot of value there too.

This is really my point, is you have this multiple strategy of how you’re going to … I was getting invited to do keynote speech after keynote speech at the time, because we were touching on so many interesting places. That’s why I think that the cloud gaming thing was starting to really cause some ripples in the game industry while we were doing this. And while other companies out there were starting to think, “Well, how could we use that technology?” So I had meetings with all the Comcast and everyone, they’re all thinking like, “What’s the future of our set-top boxes? Where do these things go in the future? How is this all going to work?”

And you can imagine when investors and your board are watching all this activity, they’re very, very supportive. So no one was saying to me, “You need to start charging 995 a month or something.” No one was saying that to me.

John Warrillow:

It all is possible by your savvy you raising money? So to your own point, you raised $50 million, which allowed you the luxury, frankly, of not making money in profits and stuff like that. You could continue to raise money because there was a huge story being strung together. You shared something before we hit record and I wanted to circle back to it. It was this notion of a gold seam. Can you describe what you mean by helping investors see the seam?

David Perry:

Yeah. One of the conferences I was on a panel with investors and I said to the audience, “I think I know what these investors want.” And the investors were all like looking at me going, “Okay, smarty pants, what is it that we want?” I said that it’s the entrepreneur’s job to go prospecting and find the gold seam in whatever industry you’re in. There’s some gold in there somewhere, and it’s your job to find it. It is not their job to find it. They have no interest in looking for it. It’s your job to find it. But once you find the gold seam, it’s their job to bring in the heavy machinery to get that gold out of the ground as fast as possible so that no one else even knew it happened. Right? They’re all too late.

Literally, all of the VCs were just nodding to me going, “That’s exactly what we do.” Their job isn’t really education. Their job is really about skilling you up and giving you the weapons and the armor and everything you need to execute and to do it efficiently and well. But you have to bring them something and you have to be able to clearly present to them what you’ve discovered or what you’ve found. There’s an awful lot of entrepreneurs who are like, “Well, I can’t do anything until someone gives me the money.” That’s not so great. You’ve created a much more difficult money raising situation.

Another thing is that people sometimes seem to think that VC’s job is to actually distribute money. Like they’ve got some bank accounts somewhere with a hundred million dollars or a billion dollars in it, and it’s their job just to hand out that money to random entrepreneurs and see what happens. It’s the exact opposite. Their job is to protect that money like it’s the most precious thing in their world because their career is over if they don’t. And so what they do is they have to do due diligence and they’ll check your backgrounds and everyone working with you and what’s going on, and with your customers and they’re doing all of that because they’re protecting the money.

And so, once you understand that’s really who they are, they’re people protecting money, then it changes your frame and how you should approach them and what you need to present to them to get them to be interested in whatever you’re doing.

John Warrillow:

David, it strikes me as you are an interesting cat. I mean, like you flippantly say, “Oh, I sold that one for 10 million and this one for 50 million, and this one was 380 million.” And I’m listening to you and you’re describing these incredible venture capitalists that you fly in these circles with and these investors and these huge companies, and yet here you are, somebody didn’t go to university.

David Perry:

I have a funny story there too.

John Warrillow:

Before we go to your story, help me square that, like how does somebody who is a computer guy, university drop out, or didn’t go to university, learn what you’ve learned about business? What’s your source of information? How have you become what you’ve become?

David Perry:

It’s a couple of things. One is that, I find myself sometimes doing things without thinking about it, meaning that you’re just doing it because it’s the next step and the next thing to do. And you’re in a way you’re climbing the mountain because you’re staring at the top of the mountain and you’re just climbing. What kills a lot of businesses when they get stuck in the fog and they don’t know where they’re going, they don’t know what the next step is. In this situation, I’m just trying to get to the top of this mountain, and what you’ll find is when people see that and they see momentum and they see …

I have a huge respect for talent. What’s made it possible for me throughout my career is finding great people. So that’s the answer to that question is whenever you are, there’s the people who you work with to help build companies, but there’s also the people who support you, your attorneys, your accountants, all these other people. Those people, you start to really trust and believe in, meaning that if I’m doing a deal and it’s going to be in China, it’s going to be complicated, I know that I have people to reach out to that will kill it. Right?

John Warrillow:

David. Okay. But let me push back, because I know a lot of people who do not have the self confidence to be vulnerable that way. Right? And put their lot in someone else’s hands. You had the humility to do that, but a lot of people are not confident, they’re self confident. Right? They feel like they need to know all the answers and they can’t give up that control. You got that from someone or something, where did you get that from?

David Perry:

It’s a great question. I’m not sure where that came from, but this idea that I believe I could start a business in just about any industry, meaning that I think you can learn and surround yourself with talent and take on just about anything. I’m proving that with my new company, and I’m literally trying to challenge myself just to touch on that really quick, this idea that I like to talk of about is the idea that you as a human being, it’s very easy to stuck in certain ruts. I do this, I’m an engineer, so therefore, I don’t do anything else. I’m an engineer, like artists, I don’t know what you do. You do art or something.

I’m the exact opposite. I want to know everything about how the artist or how graphic designers work, which software they’re using. Can I have a go with that software? I want to understand it completely. The love you get back from them when you actually start to talk their lingo, because you’re actually understand what they do is a game changer, and musicians, same thing, when you actually take the time to care about how their music sounds, they’re like, “Wait, you actually care what our music sounds like?” “Yeah, I really do.” “We’re going to try to make this sound awesome.” And then they want to work with you.

And so, it’s a case of trying to understand as much as you possibly can about as many different things. I’ve now taken that to the extreme. So what I do is, if there’s something, an opportunity to learn something, I go all in. I mean, I built my own makerspace and I have woodworking, the most advanced woodworking stuff, metalworking, welding. I set up a photo studio. I took classes with the best photographers that teach. If I have to fly somewhere, I will fly. I flew to, I think it was like Ohio. I flew out just to spend time with a master woodworker so he could teach me how to build rocking chairs. Why? Because that’s one of the hardest things to build, is this certain thing called the Maloof rocking chair. And he literally teaches you how to build it.

And you are there for just a few days, but the information that you receive and then you go back to your normal life is incredible, but it means that whenever you’re in business, you’re going to meet people. I was talking to you just before the call about like, for example, say this person’s in the water skiing. Do you have any stories? Can you talk about water skiing? I’ve done that. I’ve been in a flight with a guy reading his water skiing magazine, and I’m like … You start the conversation. You know he is in the water skiing, there’s instant rapport.

I think one of the funniest examples, I have water skied, I water skied and got a whole set of stories of things about water skiing. But one of the funniest ones, I was on a flight once. And this, by the way, is my challenge to everyone that’s listening, is when you’re anywhere where you’re sitting by a stranger, your job is to create rapport with that individual. That’s your practice. You should do that everywhere you go. So this individual, I have no idea who it is, so let’s just talk to him, turns out the guy was into iron ore. He ships massive amounts of iron ore, and he’s super wealthy.

And I was thinking to myself, “Well, this guy’s got me. I’ve got nothing on iron ore, I have no knowledge. I know nothing about his industry. I know nothing about this. I noticed he was playing this video game, which is a tennis game on a little handheld. And I said to him, “I know the people who made that tennis game.” And he goes, “Oh, I actually invested in this company.” Right? Suddenly we have a rapport, a common connection, and we can explore that, and we’re having the chat. He said to me, “Look, we’re flying into New York. I’m going to see you too tonight. I’ve bought a whole row of seats, would you like to come and see [inaudible 01:09:48] Madison Square Garden?”

And I’m sitting in Madison Square Garden listening [inaudible 01:09:52] really like with some guy, because I took the moment to just ask him about what is he does. That has been my entire life. I have a countless situations that have happened because of those interactions. Another one I like to give, and it’s not name dropping at all, it’s just part of being in the industry and being accessible, was when we did the Matrix game, I got a call from a friend of Michael Jackson saying, “Would you be willing to let Michael play the Matrix before it launches?”

And next minute, I’m at Neverland with Michael Jackson. He ended up saying, “Can we make a game together?” And of course we started working on that game. That’s the kind of stuff that … It’s having all the doors open and being willing to walk in through any of the opportunities as they surface in real time, but you have to make those connections. If you could just sit on your airplane and put your headphones in and just wait until the flight’s over, and the amount of people doing that’s remarkable, but those were all perfect training opportunities, I think, for entrepreneurs.

John Warrillow:

And where did you learn that? I want to know what David was like when you were 12. Tell me about your parents.

David Perry:

My parents, my mother worked for British Airways, which was wonderful, because we were in Northern Ireland where there was a lot of terrorism and British Airways was actually seen as a bad thing because the terrorists didn’t want Britain. So therefore, having a British Airline was the last thing they wanted. So they were given extra benefits, which included we can go anywhere in the world anytime we want for free. And that was marvelous. So as a kid, that’s what helped me understand there’s a bigger world out there when you start to travel.

I think my parents were very cool. They would hand me the tickets and say, you take us through the airport, you tell us what do we do next? And that was very, very helpful because it makes you start to become a little braver. You’re not just following behind whatever they say, that’s what’s the way it’s going to be. My parents were great. My father was a photographer. He finally passed away from cancer. But just before that, I said to him, “I’m going to buy a camera.” I was trying to tear him up. I was like, “I’m really interested in photography.” And I genuinely was, but I just didn’t have a camera.

So I said, “What should I buy? What’s the absolute best camera I could buy?” And he said, “When they went to the moon, they took a Hasselblad with them.” And so I went out and I bought a Hasselblad camera. And that changed my whole perspective of photography, and so I ended up getting into photography and I have my own studio. I took all these lessons, but then I realized that when I take pictures, nobody cares about them. So I found that if I take pictures of social media influencers, suddenly people care about them, you get all this action that happens, because everyone wants to meet this person. They want to marry this person.

And it changed my whole view of influencers because they would tend to gather in groups. So in my studio I would have 15 million followers worth of people waiting to get a picture taken. And I’m like 15 million people. How many people is that? I went to an insurance concert and there’s about 60,000 people there at the Rose Bowl. And you’re looking around the Rose Bowl going, “There’s so many people here.” And then you go, “That’s only 60,000. They have 15 million every day, multiple times a day.”

Suddenly I became very interested in learning. I have to learn more about this influencer thing. This is fascinating. The amount of power these people have is incredible. And so that’s where my brain is constantly going, is these interesting threads and how it all ties together. It’s not something that anyone told me to do, it’s not something my parents did, it’s something I’ve just evolved over time, but it’s a really fun journey when you do that. Like someone said to me, “Would you like to go skydiving?” And I was like, “Oh God, no, I do not want to do that.” But actually under this criteria, I have to do it. Right? I have to have a skydiving story, and boy, do I have a skydiving story? Right?

And that’s the thing. Now, do I have to do it again? Do I have to make skydiving like a piece of my life that [inaudible 01:14:28] Hell no. But at least understand it. There’s just so many fun things that you can experience that way when you start opening to it. But then when you see that later in life helping with rapport with investors or whoever, I’ve just been asked to speak at a conference next week, and I just found out that the guy that invited me is from Belfast. I mean, what? He’s lost his accent too, and instantly there’s the rapport again.

So, that’s the way life really is, and investors are just normal people with normal hobbies and they like to travel to certain places and you’ve probably been there or you could go there. Those are all interactions that you start to build over time.

John Warrillow:

Well, I love the idea of curiosity. I think I’m often talking to my kids about the entrepreneurial superpowers, I think curiosity as you’ve demonstrated, even as simple as finding out what the person next to you on an airplane does or is passionate about is an expression of curiosity, and I think it’s certainly has been your superpower or one of the many superpowers that you have. So I think you’re to be committed on that. It’s not always easy to be curious. Right? Sometimes it feels safer to stay in the zone in which you feel you have domain expertise. I know from me, personally, I have to push myself to try new things, but when I do, I’m generally always happy that I have. So, I appreciate you sharing that.

David Perry:

I’m super shy in general and you can’t tell it but I’m super shy.

John Warrillow:

You can never know.

David Perry:

Super, super shy. When I would give speeches, I’d be so stressed out about it, and that became to me a reason to give more speeches. I could feel the stress in my body when I’d step on a stage, and I would get invited to bigger and bigger things. And you end up in front of thousands of people. I once even got … It was a personal challenge, was I wanted to get invited to speak at the real TED Conference, not TEDx, but the real TED Conference. I went to TED and the guy who curates the whole thing was at the lunch line [inaudible 01:16:41] him at the lunch line.

And I said, “You know, TED means Technology, Entertainment, Design, and the one thing you don’t seem to cover is video games.” And he goes, “Oh, that’s a good point. We do need to a video game talk again. We have in the past, but we haven’t in a long time, would you like to give a talk on video games?” And so I did. The stress level, I was actually really sick when I gave my TED talk. I had the flu and I still did it. I was actually like physically sick right after my talk, because I was so ill on stage, but there was nothing on earth was going to make me say no to walking on that stage.

John Warrillow:

Now I want to go watch this TED talk.

David Perry:

When you watch that, I literally vomited after the thing, not from nervousness, I was so ill, but it was … This is what life is about. Right? Even though you’re stressed out, it means that every time you give a speech, you become less stressed about it. If you have kids, if you have young kids, I have to say that you must put them into theater because in a way it will give them that skill, whether they like it or not. They’re going to be unlocked. Put them into theater because they’re going to be made to go and stand on stage and deliver lines and stand up in front of other people.

It happened to my daughter. She went to theater when she was young, and she’s so, so ready for business as far as I’m concerned, because she’s got no fear at all of standing up in front of people.

John Warrillow:

That’s awesome. Good for her. Tell us quickly about the new company and where people can learn about more about that.

David Perry:

What we’re doing is, the concept was, is there a way we could get brands and influencers to work together in a new way? And what we actually do is we try to help brands work out, which influencers like their brand, and then we introduce the two, and that’s a shocking change, that was inspired by my photo sessions. Because I would ask the influencers, “How’s it going? What’s it like to be an influencer?” And they’d say. “It’s not so great, because we’re constantly getting asked by brands that we don’t use their products to promote their products. So tell everyone my candles are awesome.” “I don’t use candles, and so that’s not a great relationship. So, could we do it the other way, which is we’d work out …”

This influencer, which brands do they currently follow and post about and buy their products, and can we get those two to work together? The influencer’s response is, “Oh my God, I love this brand, I’ll be buying their products for years.” And so we’ve done that now 7 million times. And ultimately then we realized when COVID hit that this is great because we’re getting attention for brands, but what we really need is more sales. And so we came up with a technology that allows brands to collaborate and cross-sell each other’s products.

And what that means is [inaudible 01:19:43] for some crazy reason, you don’t sell helmets. So everyone that wants a helmet with their bike is going to end up going to another tab on their browser and going and buying the helmet somewhere else. Do you really not want to sell helmets? Because we have killer brands here in our network. Again, we have 30,000 brands. Why don’t you partner with one of those brands and we’ll take their helmets and put them right into your store? So now their inventory is your inventory. You don’t have to buy anything. It’s not going to cost you a dollar to transfer that over.

And then it’s up to you to sell those products. And whenever you sell, they will do the shipping, which improves the efficiency of online sales. Because today, if you’re moving products around from one warehouse to another, it’s losing margin, and they live and die by margin. Of course, if they sell a helmet and gloves and a lock, with each bike, they’re going to end up increasing their average order value-

John Warrillow:

Sure.

David Perry:

Which builds their business. So we built that technology and that’s live now, and brands are using that. But we have obviously more ideas. We’re trying to think of an organism of brands all helping each other, and how big could that become if all the brands collaborate with each other and cross-sell each other’s products and give each other advice on how to reduce shipping costs and all the rest. If we can create that ecosystem, I think it’s going to be incredibly valuable.

John Warrillow:

What’s the name of the company?

David Perry:

It’s called Carro, C-A-R-R-O. The website is getcarro.com. We’re currently on Shopify. And if anyone, just in case any of your entrepreneurs are on Shopify, if they would like to use this product, just go to … If they email hello@getcarro.com and mention this podcast, we will give them VIP support so they can come in and kick the tires and give it a try.

John Warrillow:

Hello@getcarro.com

David Perry:

.com. Yeah.

John Warrillow:

And Carro is C-A-R-R-O?

David Perry:

That’s right.

John Warrillow:

Okay. And we’ll put that-

David Perry:

It comes from the Latin word carrus, which means cart, and cart is the center of the online shopping universe. Like the cart is everything.

John Warrillow:

Yeah. I’m trying to think who’s in your bullseye for this one, I’m like Latin. I don’t know the [crosstalk 01:22:02]

David Perry:

No. We didn’t do that naming trick, the Mystique Marketing thing, but what we did do is … I think Shopify, Magento, Salesforce, Google, Facebook, all of these companies would find what we’re doing fascinating, Alibaba, all of them.

John Warrillow:

[crosstalk 01:22:23]

David Perry:

It’s a very, very large play because eCommerce is just so big. Yeah, again, PayPal has invested and we have other incredible people. We have brands investing, influencers investing. We’ve raised about 30 million so far for that company, and we’re taking a big swing. We’ll see what happens.

John Warrillow:

You’ve found another thread of gold and you’re backing up the big machinery?

David Perry:

Yeah. The investors coming in to help for sure.

John Warrillow:

That’s awesome. Hello@GetCarro.com. David, this was a real treat for me. Thank you for doing this.

David Perry:

No, thank you so much for inviting me. It’s fun. I always love talking about this stuff. Anytime in the future you want to do it again, just give me a call.

John Warrillow:

Hey, if you like today’s episode, you’re going to love my new book. The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years who have been able to negotiate an exit far better than the benchmark in their industry. Sometimes two or three times more than I would’ve expected. I was curious to understand the tactics and strategies of these entrepreneurs, and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to BuiltToSell.com/Selling, where we put together a collection of gifts for listeners who order the book. Just go to BuiltToSell.com/Selling.

Built To Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week. Just go to BuiltToSell.com.