Butterfield in no Hurry with Glitch

Stewart Butterfield has raised a lot of money for Tiny Speck, his 2-year-old gaming startup. He’s raised $17.2 million, to be exact, from Accel Partners and Andreessen Horowitz, among others.

There’s little doubt that investors are largely betting on Butterfield, who is best known for launching the popular photo-sharing service Flickr in 2004, then selling to Yahoo a year later for a reported $35 million. (Flickr, co-founded by Butterfield and his then-wife Caterina Fake, raised just $900,000 in funding.)

Surely, investors think Tiny Speck is also onto something with Glitch, the Flash-based multiplayer game that the company has developed since 2009, but hasn’t launched publicly yet.

It’s just as clear—to Tiny Speck’s investors and to Butterfield—that times have changed.

While Butterfield acknowledges bigger rounds and bigger valuations can “do things to the dynamic of a startup” and “drive salaries crazy high,” he also thinks the rounds being raised today means that a lot of companies, including Tiny Speck, can compete on the basis of stored cash.

“We raised $10.7 million earlier this year in our Series B without launching the game,” Butterfield says. “That means [we] can go a lot farther [without running out of cash]. And having the cash there now means opportunities when they arise, like attracting developers to build games on top of the Glitch platform.”

The reality today, adds Butterfield, is that “if your competitor has a lot more cash, they can do stupid things with it to put you out of business.”

It wasn’t always apparent that Butterfield would become a savvy Internet entrepreneur. He was raised in the tiny village of Lund in British Victoria, which, “by 1970, was full of American hippies like my dad, who moved to Canada to avoid Vietnam,” Butterfield says.

In fact, the self-described “hippy kid” spent his earliest years in a log cabin without running water or electricity.

But by the time the family moved to Victoria, where Butterfield began elementary school, giant Apple II computers had begun appearing in classrooms, and Butterfield fiddled with them whenever the opportunity arose.

By the time he reached high school, he’d grown “more and more” into Usenet, the early Internet discussion system. When he entered college, as a philosophy student at the University of Victoria, Butterfield was spending his summer developing websites.

Butterfield was planning to become an academic, but when friends at dot-coms began to earn real money in the late ‘90s, he dropped out of the Ph.D. program at the University of Cambridge and starting working on the Web.

As it happens, a game like Glitch is what Butterfield wanted to produce all along.

But he eventually realized that the idea that he and Fake were feeding was never going to be able to attract enough funding, prompting the couple to refocus on photo sharing. In fact, it’s largely because of Zynga Game Network—the profit-churning online social gaming company—that Glitch can exist today at all, Butterfield says.

“Now there is something like 150 million people who previously didn’t think they’d play a game online and now do,” he says.

Glitch is far from a sure bet. For starters, The game—which involves traveling billions of years back in time to re-create the future, by creating and collecting resources, gaining skills, and completing quests in increasingly challenging environments—aims to deliver a much higher level of engagement than Zynga’s Cityville or Farmville. Butterfield says that although the company aims to make Glitch satisfying to play for less than 15 minutes at a time, beta testers play for an hour per day, on average, with some playing for up to six hours at a stretch.

Unlike Zynga, Glitch won’t be available through Facebook’s huge distribution platform. Nor will there be an iPad version any time soon. Facebook is too cluttered with ads, Butterfield says.

Meanwhile, “in the MMO style of play, people spend a lot of time talking with each other through keyboards, and it doesn’t make a good experience when the [iPad’s] virtual keyboard takes up 60% of the screen.”

Butterfield thinks Glitch’s independence from Facebook will yield much higher revenue per user—between $30 and $40 per year—compared to the estimated 33 cents per user per month that Zynga reportedly earns, judging by Zynga’s S-1 filing.

Glitch’s revenue will come mostly from subscriptions, in-world advertising, and the sale of virtual items. For example, users will also be able to purchase “teleportation tokens” that enable them to get around faster. Over the long term, Butterfield hopes Glitch can snag users who want to play the game for months, if not years.

Whether Butterfield is right a second time in his career remains to be seen, but he has reason to feel optimistic.

“It’s hard to appreciate just how much has changed over the last five to 10 years,” he says. “You hear of advertisers backing out of soap operas to sponsor social games. Ten years ago, most people had access to the Internet through work alone. Now the Internet is in your pocket.”

All that funding to test the public’s appetite for Glitch should help, too.

“Hopefully, we’ll be profitable quickly, once the game launches,” Butterfield says. “But we have plenty of time.”

Stewart Butterfield at a Glance

Age:

38

Hometown: Lund, British Columbia

Degree: B.A., Philosophy, University of Victoria; M.A, Philosophy, University of Cambridge

Career: Design consultant; Co-founder and president of Ludicorp (parent company of Flickr); Co-founder and CEO of Tiny Speck

Did you know? With his “hippy” parents, Butterfield lived in a log cabin as a child, one that didn’t have electricity and running water until he was 4.

Sample Investments

Etsy

Mission:

Retail website that focuses on selling handmade items’

Located: Brooklyn

Funding: $51.6 million, including from Accel Partners, Union Square Ventures, and Index Partners

99Designs.com

Mission:

A marketplace where people and small businesses can post graphic work that they need done

Located: San Francisco

Funding: $35 million, including from Accel Partners and numerous angel investors

Bloom Studio

Mission:

Company is building a Web service that aims to combine the power of data visualization with the engagement of casual game play

Located: San Francisco

Funding: Not disclosed. Investors include O’Reilly AlphaTech Ventures and Betaworks