Wednesday, March 30, 2011

My Failed Startup (or How I Nearly Become a 3D Animator)

Building awesome software and having the right business contacts is not sufficient to convince the latter to hand over money for the former.
There was a time in 2004/05 when, for several minutes, I thought my future lay not in compilers and debuggers, but in modelers and animation. As you can see, it turns out I don't have the skill, patience, or eye for detail required to transition from "enthusiast" to "someone who gets paid".

The journey that led me to consider adding "animator" to my resume is more interesting than my non-existent animation career. After 6 years writing oil & gas inspection software, I teamed up with a good friend and very smart guy - Big Stu - in a quixotic attempt to extract some serious coin from the bottomless money-pit that is the Western Australian oil & gas industry.

Step 1: Combine his electrical / mechanical engineering knowledge and business contacts with my ninja coding and amateur 3D animation skills to forge a killer app.
Step 2: ???
Step 3: Profit!

Here's our Pièce de résistance:

Our output wasn't Avatar, but the cinematic eye-candy was a side-effect of the tools we used rather than the goal.

We built a system to visualize and simulate anything in a sub-sea installation. Each scene was fully interactive, and the models were based on engineering diagrams and were perfectly accurate. The field layouts were created from sub-sea survey data to perfectly depict every twist and turn of the flow-lines and anchor chains. I've still never heard of a system that provides that level of detail and accuracy for sub sea environments.

Despite the power of the tool and the shiny eye-candy it produced, our venture never gained critical mass and eventually fizzled as Stu and I went our separate ways - Stu as the admiral of a veritable navy of ROVs, and me to London.

What follows is a look back at why a great idea generated zero profit.

Some companies are born of technology, some achieve technological greatness and some have technology thrust upon them

Technology is at the very heart of Google. Any chance to advance the technology of which it was born is seized upon as an opportunity for greater success. It's the philosophy behind our endeavor to "drive the web forward".

Like Google, the oil & gas industry has an absolute dependence on technology. It simply could not exist without an army of technologists creating oil-field prediction engines and well flow models.

Like super-heroes, you can learn a lot about industries from their origin stories

The Social Network and There Will Be Blood both include generous helpings of greed and betrayal, but while getting gypped out of half a billion dollars is a pretty bad day, it's still a significantly better outcome than having your head caved in.

Don't get me wrong, in the 6 years I worked in oil & gas I never once saw anyone beaten to death, so things have progressed significantly in the past hundred years or so. But in it's soul oil & gas isn't about technology; it's a business of hard bastards drilling absurdly deep holes into the earth's crust, praying to f**k it doesn't explode, all in the hope of wringing a few more drops out of the bottom of a rapidly emptying cup.

I drink your milkshake. I drink it up.
(Value of a resource * quantity of resource extracted) - cost of extraction = profit
Finding more of a scarce resource makes it, by definition, less valuable. It's nearly impossible to increase the quality of a natural resource, so the best way to increase profits is to decrease the costs of pulling it out of the ground.

As resources become scarcer, the difficulty (and cost) of locating and extracting said resources increases. At this point your dependence on technology increases, and that technology costs money.

At Google, technology is the product. Our success has come from search and advertising, but technologies like Android, Chrome, and cloud computing offer an opportunity for more success.

In oil & gas, oil & gas is the product - and technology is simply a tool necessary to extract it. This is fundamental, and it affects the way technologists are regarded within each industry.

What they want is fancier tools - not a new cost center.

Stu and I quickly discovered that while there is a bottomless pit of cash, it is allocated almost exclusively to parts of the business that generate revenue.

They will happily pay stupid money for is a shiny box that helps you find oil reserves, or one that lets you extract said nectar from Mother Earth. What they do not want is to pay the salary of a dozen engineers (software or otherwise) that build shiny boxes.

The significant supporting industries - everything from field inspections and environmental surveys to intervention engineering and remedial work - is all just costs. Most have been outsourced and the associated budgets minimized, allocated, and fixed. Entire companies are created through such outsourcing and their goals are to lower costs as far below the allocated budget as possible.

Our technology was about lowering costs - so we should have been golden, right?

The best technology in the world isn't valuable without a customer to sell it to.

The oil companies loved our technology. The shiny graphics are like catnip to executives, and our pitch was compelling:
Using this software, we can increase efficiency by shortening each job by up to 20%. We only charge 5% for using the software, giving you a net saving of 15%.
Big smiles and firm handshakes all 'round.
You need to go speak to Our Contractor. They should definitely be using this!
Next week we bring our roadshow to the Contractor. These guys wear coveralls for a living and recognize the smell of bullshit as it pulls up in the parking lot. They know the animated movies for the smoke and mirrors they are, but they're also engineers - so we switch our focus to the accuracy of our models. So far so good, until we get to the pitch:
Using this software, we can increase efficiency by shortening each job by up to 20%. We only charge 5% for using the software, giving you a net saving of 15%."
The smiles are gone and people are starting to fidget.

Offshore jobs tend to operate on a "daily rate". So our pitch translated into something like this:
Using this software we can shorten your billable days by up to 20% and increase your operational costs by 5%, giving you a net profit reduction of 25%."
Oil Companies outsource technology for a reason, and they're not going to force their contractors to use one particular piece of new, untried technology. The aforementioned contractors have every incentive they need not to use it.

The week-to-week possibility of Croesus wealth punctuated by imminent doom were good practice for later years.

That said, it was a great idea that would likely have succeeded given more time and effort. If I hadn't been in such a hurry to move to London, we could have worked the right deals to get the Oil Companies to convince their contractors to use our tools. It would have continued to be challenging, but it had a good chance. I believe it's inevitable that others will succeed where Stu and I left-off, but in startups - like much in life - timing is everything.

The lessons I learned about business, entrepreneurship, and opportunity have proven invaluable. The pressure and excitement of seemingly imminent success parallel to equally imminent crushing failure was a brutal introduction into the Real World after years spent hiding in the dark corner of my own coding universe. It's strange, but seeing something you pour your heart and soul into fail, can be better incentive to strive than unmitigated success.

I never did persue a career in animation. After taking half a year off to travel Europe I settled in London with my passion for coding reignited. Some four years later, I found a job that offers the perfect mix of business development, technology evangelism, and hardcore coding that plays to my strengths. Oh, and did I mention we're hiring?


  1. Another couple of posts and we'll find out that you worked also as dwarf in a circus or that you tried to join the foreign legion :-)

  2. Ah the Legion. Now *there's* a story! ;)

  3. Anonymous12:46 am BST

    Great story, probably the best I've read in a long time. You very clearly illustrate that "benefits" can often run contrary to the business incentives.

    You very clearly illustrate the "daily rate trap" which is very common. I've found that it takes a lot of energy and clever positioning to transition clients to fixed cost contracts.

  4. Reto,
    I remember this time and your work in the area,
    I know you were loading yourself up with a fulltime job and this startup and your approach and attitude to both was top notch. It is clear that you have learnt well and I am sure that as a life and business experience it wasn’t wasted.
    Al the best
    Jack Andrys

  5. Reto,

    Great post, do remember you told me about this venture a few years ago!

    Keep blogging!

    Ben Jooste