Original Author: Phil Shenk
The Responsibility of Middleware
Since this is my first post, please bear with me as I get familiar with the process and the kinds of stuff I’ll write about.. not to mention any pretty formatting to the post itself
This entry was prompted by Zynga acquired Dextrose AG, another company with a promising html5 engine. I’m sure most people have heard how aggressively that company has acquired studios and technologies. Many times these deals have seemingly been for talent or products, but often they also seem to be to take a potentially competitive company out of play, or away from it’s rivals.
I’m torn about both these deals. On one hand, I’m happy for the entrepreneurs who were able to reap some sizable rewards for their efforts. I know what it’s like to run a start-up, and a big exit is one of the things that we all hope for. But on the other hand, these were both companies that (as far as I can tell) set themselves up to be a solution for the broad market. They were intending to be middleware, and now, almost certainly, they are in-house technologies for companies that will never expose them to outside developers.
Just recently, I took a call from a VC who was doing due-diligence on a new middleware company they were considering for their portfolio. I’m a huge fan of this particular team, and I know they know what they’re doing. They’ve done middleware successfully several times in the past, and had good exits that kept their products open to their users. I mentioned to this VC that one concern I would have as a customer is that the product I rely on for a crucial part of my operations, could be snatched up by a competitor.
I guess this is a semi-unique symptom of the social gaming space. In traditional gaming space, more developers making more good games with more good tools is considered a good thing for the whole industry. It wouldn’t make sense for a large publisher to take innovative tools off the market, in order to deliberately hamper independent studios. They know that they need quality games from outside their organization, and the competition is over signing up talented teams.
I believe that eventually the social space will mature, and the true value will be in quality product with real entertainment value. But right now, unfortunately, the big players are afraid of that kind of innovation because it will mean a more level playing field, and therefore it makes sense for them to try to starve out new ideas and disruptive technologies.
I don’t have an easy answer. For html5 in particular, it would make sense for Google to invest in these kinds of companies, since from their perspective, they explicitly want innovation to occur, and for developers to start adopting the tech. It would also make sense for middleware startups to take VC investment, since those partners will be looking for large exits, which would help to prevent the “easy” $10-$20 million pickups.