Moshi Monsters’ Michael Acton Smith on wasting $9m and pivoting to success
The Mind Candy and Firebox.com founder talks exclusively to Startups.co.uk and reveals how a last roll of the dice led to his $200m business
Every second of every day, a child signs up to Moshi Monsters. Inhabited by over 250 interactive, colourful characters, Moshi is an online world for children, designed by eccentric, fun loving entrepreneur Michael Acton Smith.
With 80 million users across more than 150 countries, children throughout the world are mesmerised by the fantastical creations sprung from Acton Smith’s wild imagination.
But it is not just children who are enthusiastic about the entrepreneur’s $200m virtual world. The company, which has evolved to include educational puzzles, magazines, pop-up shops, a social media element for children, and even has a Sony Music-backed music label Moshi Monsters Music, has been a darling of the media for a number of years now.
Acton Smith himself has been a prominent figure in the technology sector for well over a decade and a highly-sought sage when called to air frank recollections of business successes and failures.
The now trademark purple velvet jacket and snakeskin boots remain a feature of many an entrepreneurial conference and it was no different at the recent London Evening Standard Business Connections speaker series, where Startups caught up with him.
Michael Acton Smith’s entrepreneurial journey tracks the evolution of a mind determined to become a business sensation. Struck with the notion of becoming an entrepreneur before being hit by the big commercially-viable idea, Acton Smith has experimented with a series of often outrageous business adventures over the last 15 years.
For that reason, at least in part, the serial entrepreneur has been no stranger to the press. The boozy board game Shot Glass Chess he and co-founder of Firebox.com (then known as Hotbox.co.uk) Tom Boardman dreamt up in a Cardiff pub helped to save the business from oblivion.
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And in creating a real-life nationwide treasure hunt Perplex City seven years later, Acton Smith quickly learnt the value of a good story when it comes to business.
The fact it has not always been fun and games for the entrepreneur who recently placed a bright red slide in his Tech City office to fuel creative thinking, has made him worth listening to. Acton Smith has dusted himself off after major scrapes and a tremendous business downfall to get to where he is today.
Returning to the launch of ‘the thinking man’s drinking game’ he and Boardman only kept Firebox.com afloat after convincing a manufacturer to build 100 Shot Glass Chess sets on credit with the promise that press coverage in the run-up to Christmas would secure the necessary sales.
The company itself was an innovation as the world’s first online gadget retailer in 1998. And when Acton Smith created gaming business Mind Candy in 2005, the first monumental business idea came in the form of Perplex City. Based on children’s treasure hunt novel Masquerade, by Kit Williams, the business used real-life actors, planted secret clues and even hired a helicopter to build an extraordinary nationwide treasure hunt with a £100,000 cash prize.
But despite being hailed by the press as the future of gaming and even receiving a BAFTA nomination, the small take-up in treasure hunters failed to make up for the phenomenal cost of the extravagant $9m venture and after five years, Acton Smith was forced to admit to himself and his investors that his elaborate vision was a business disaster.
Speaking to Startups at the Business Connections event, Michael Acton Smith reveals how he picked himself up from the downfall and regained the courage and the support to build $200m business Moshi Monsters.
The ambition for Perplex City was huge, but ultimately didn’t work. How do you bounce back quickly from a business failure?
It’s tough. Perplex City was a really brutal time and I had months of sleepless nights. With entrepreneurs their whole personality and everything they have goes into their business so it is tough to pull the plug.
But you have to be strong and dust yourself off. I sat down to make a list of all the things I would do differently and all the mistakes I made, so I could try not to make them again in future.
What were the lessons that you took with you to build Moshi Monsters?
Perplex City was one of the most creative things I’ve ever done but also one of the most commercially disastrous. I learnt that there’s no shame in failing as long as you fail fast and we made the mistake of failing slowly, over seven years and very expensively.
I also learnt the value of simple ideas. Moshi Monsters was inspired by a toy I had as a child called Pet Rock. The founder became a multi-millionaire. He sold a rock.
If you hadn’t planned for a game targeted at children and therefore moved into that demographic mindset, what would have become of Mind Candy?
When we pivoted from Perplex City to Moshi Monsters, that really was the last roll of the dice and we didn’t have a lot of money left in the bank. It was last chance saloon so we had to make it work. If it hadn’t we would probably have had to close Mind Candy down and I don’t know what we would have done. I would probably have licked my wounds for a little while and then come back with another idea.
What’s it like when you’re trying to discover the solution to finding traction for your business? How do you go about it?
In the early stages of the business you’re trying to get product market fit. You’re moving as fast as you can, trying to make as many fast mistakes as you can to figure out what doesn’t work until you get the click.
Once it does work you have a whole new set of challenges. You have to try and scale it and figure out how you can do what you’re doing in bigger markets and hire a bigger team.
When you move onto scaling, how much is about strict planning and to what extent is it about reacting to trends and gut feel?
It’s important to have a rough idea of your plan for these things, but that only really acts as a guide. Once you’ve set up on your journey, you never quite know what’s going to happen.
One of the most successful American entrepreneurs Reid Hoffman describes entrepreneurship as jumping off a cliff and building an aeroplane on the way down and it’s true.
A mistake people make is having a very specific idea and then going down with that sinking ship, not believing anything else. What you should do is think about the area you want to have a splash around in – the area you want to crack and then launch something, while continuing to look at the data and being agile.
You created your very first online business back in 1998 when the internet was still in its infancy. How has the start-up scene changed since then?
We decided to set up on the internet because we didn’t really have enough money for a shop or a catalogue. The wonderful thing about the internet then was that there wasn’t much competition – the downside was that there were hardly any users. When we told people we had an internet business, their first question was, “What’s the internet?”
Obviously that’s changed very rapidly. I feel very lucky to be part of this internet revolution. Two billion people are online. Over the next few years internet use will double and smartphone uptake will increase further, creating new opportunities and incredible new markets.
Starting my business in the 1990s was so expensive, with hosting costs and things. Now you can try something out, see if it works if it doesn’t, try something new.
So is it easier to be a start-up today, or harder in this current economic climate?
This is the time to be a nimble start-up – a small team innovating and moving fast rather than a big, slow-moving corporation.
I don’t think there has ever been a better time to be an entrepreneur than this moment in history. It’s a wonderful environment to be experimenting, almost like a primordial soup bubbling away waiting for the real exciting stuff to come out.
What more could be done in the UK to encourage people to take advantage of this great opportunity?
I think it’s getting better in UK, but we need to not treat failure as such a bad thing. In the US failure is seen more as a kind of scar tissue and something investors overlook or almost expect to see. There’s a bit more of a stigma attached to it in the UK.
I think we also need to start at schools and encourage and inspire our children into thinking that entrepreneurship or going into freelance is possible, rather than encouraging them to go into a big traditional job.
The internet makes it so much easier – whatever your passion, however thinly sliced, there’s probably an audience for it online.