IMVU

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IMVU

• Customer development process lessons learned

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A Long Story - Will Harvey

• Electronic Arts
• Music Construction Set (age 15), Marble Madness
• Rocket Science
• Sandcastle
• There.com
• Stanford PhD Computer Science

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A Short Story Eric Ries

• CatalystRecruiting.com
• There.com
• Yale Computer Science

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Lessons Learned - Sandcastle

• Sandcastle
• Solve a big enough problem
• Dont confuse technology with a business

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Lessons Learned There.com

• There.com
• Dont scale without customers
• Dont build without customers
• Dont bring in the suits before execution phase
• Keep it real small until the hockey-stick
• Dont assume customers will get it later
• Focus on core values, test your hypotheses

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Lessons Learned IMVU

• IMVU
• Small lt7 team
• Great Business Advisory Board
• Pass the Hat funding model. Viewed early
  financing as a bridge to profitability
• Go for World Class VCs at the Hockey-Stick
• Take a small amount of funding
• Sell some of your stock in Series A, right to
  sell more at Series B
• Pursue the big vision in small, focused steps
  (1-2yr)
• Ship a product early get real reactions from
  real customers
• Expect to iterate

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Lessons Learned IMVU

• Customer Discovery and Validation
• Founded company in April 2004
• Sat in this class Fall of 2004
• Started with the founders vision
• Online socializing with avatars
• Shipped in 6 months
• Charged from Day 1, despite barely-functional
  beta

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Landscape before IMVU
Social networks and Communities (Myspace)
2D paperdoll avatars
Social games and virtual worlds

• Sticky, but...
• No realtime interaction
• Low barrier to entry
• Hard to monetize

• Interactive, but...
• Subset of games market, not superset

• Expressive, but...
• No person-to-person interaction
• Hard to monetize in US

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IMVU model

• Online socializing with avatars
• Viral and sticky
• Combines person-to-person interaction and social
  networking
• High barrier to entry
• High switching costs once you invest in your
  avatar
• Easy to monetize
• Mass market appeal

3D IM and casual games
Interaction and animation
Customizable 3D avatars
2D snapshots
Avatar home pages with messages, blogs, photos
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3D IM with avatars
Customizable avatars and thousands of virtual
clothes for sale
IM Buddy list
Interactive 3D IM windows showing your text in
bubbles
Fun scenes and animations
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Social networking with avatars
Customizable home pages with avatar pictures
Messages, gifts, blogs, picture galleries,
rankings, stickers, wish lists, etc.
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Customer Discovery ValidationQ4 2004

• Product
• 3D IM add-on for hanging out online with friends
• Piggy back on existing buddy lists and IM
  programs
• Our customers told us
• Avatar customization is the key appeal.
• Add-on concept is confusing. They actually
  want a separate buddy list.
• So we
• Ditched the IM add-on idea

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Customer Discovery Validation Q1 and Q2 2005

• Product
• 3D IM service for hanging out with friends and
  meeting people
• Introduced Chat Now feature (instant matching)
• Our customers told us
• Meeting new friends is as important as talking
  with existing friends (50/50)
• Not enough people on IMVU
• Retention is a problem
• So we
• Scaled up our advertising budget (to 40/day)
• Learned about retention from market leaders
  (Cyworld, Myspace)

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Customer Discovery Validation Q3 2005

• Product
• 3D IM service plus avatar home pages
• Introduced avatar home pages, plus messages,
  gifts, picture galleries blogs
• Our customers are telling us
• Avatar home pages are highly addictive
• 2D and 3D complement each other
• Messages in home pages and realtime interaction
  complement each other
• Revenues continue to grow
• June 1,661
• July 3,721
• August 9,267
• September 15,700 (approx.)
• October 25,000 (est.)

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Todays Dilemma

• VC Funding
• Sell 33 of the company
• 14MM pre-money valuation
• Raise 8MM
• Realize the vision on our own

• Buyout offer
• Sell 100 of the company to A Big Company
• 16MM valuation earnouts
• Build the vision inside A Big Company