
OnLive Sold To OnLive And Nothing Will Change - jamesjyu
http://techcrunch.com/2012/08/19/onlive-sold-to-onlive-and-nothing-will-change-heartbreaking-transition-notwithstanding/
======
casca
There's rightfully a fair amount of noise being made about this as many on HN
can imagine themselves in a similar situation. But there may be another lesson
to take here.

For me, the key phrase in this article is the first one: "Faced with a dire
financial situation...". The nature of working for a startup where you trade
current income for potentially huge future income implies a level of risk.
Looking at the breathless press coverage, it's easy to imagine that most
startups are a raging success. The truth is that most will be in a "dire
financial situation" and have no choice but to perform some juggling if
there's any chance that they'll stay in business.

It's quite possible that the owners were deliberately trying to screw the
employees, but more likely is that it's a desperate move by desperate
management who are trying to salvage their dream.

~~~
phillmv
Why was it in a dire financial situation if it had millions of subscribers?

I can't find any descriptions of the cause of the crap finances, especially
with millions of subscribers. A likely scenario seems possible: their
financiers/vcs decided they didn't like the direction the company was
taking/unhappy with growth and called in their loans and forced everyone out.

Everyone, except the vcs, takes a haircut.

(Was there a more straightforward reason?)

~~~
wmf
There was a rumor about 8,000 servers with only 1,600 simultaneous users; in
other words an out-of-control burn rate.

~~~
fjarlq
That rumor was reportedly a rhetorical question asked by Perlman during the
last company meeting. Anybody know why they didn't use a flexible virtual
server solution like Amazon EC2?

 _"There's no way to exactly estimate how many servers we'd need. So we
literally bought thousands of them, and all the equipment and networks to go
with it," Perlman told employees. Those servers, he said, came with lengthy
contracts -- contracts that tied OnLive's capital up in maintaining servers
that few (if any) users were actually using. "If you've got 8,000 servers and
1,600 users, how could we ever get to cash flow positive, right?"_

\-- [http://www.joystiq.com/2012/08/18/documenting-the-death-
of-o...](http://www.joystiq.com/2012/08/18/documenting-the-death-of-onlive-
notes-from-the-companys-final/)

~~~
newhouseb
As the other guys here have mentioned, they basically need CDN-level latency
virtually everywhere for OnLive to properly work and while Amazon does have a
CDN (Cloud Front), their normal datacenters only have a few regions within the
United States (which aren't close to any major metropolitan hubs (except maybe
DC)).

The other big thing is that GPUs have very limited scheduling (i.e. no pre-
emptive multitasking), so it's virtually impossible to virtualize into
multiple VMs efficiently. So when you get a GPU machine you end up with
isolated hardware which doesn't share the same economics as other Amazon
solutions. As GPGPU become more popular, this should, however, improve.

~~~
tmurray
You don't need preemptive multitasking for a known set of games, though;
context switching can occur at frame boundaries (or even finer-grained than
that, the GPU just has to go idle in some sense). It's necessary for GPGPU
because you may have one kernel that runs for 10 minutes, but that's not the
case with graphics apps (especially not a known set).

I also question the need for one VM per client. There's a very small set of
inputs (input devices from the client) and a lot of static output (rendered
frame). Why not share the same VM for a set of games that share the same GPU?

~~~
newhouseb
I have no inside knowledge into OnLive, but you're correct, you could
certainly context switch for games. I would assume that the limiting factor
would likely be texture bandwidth if you were switching between too many
different scenes (on the same or multiple VMs). It might be that some of
OnLive's IP is smartly managing resources in n->1 VM->GPU configurations (and
maybe why games IIRC require some adaptation).

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jstanderfer
HN is focusing far too much on the employee stock options. Once any company
gets into a "dire financial situation", the options are already completely
worthless.

The worse alternative would have been to not restructure and just shut down
the company leaving everyone without stock options, jobs and probably without
severance either.

~~~
balloot
How exactly does screwing the employees out of stock options help the company
not shut down? Outstanding stock options have zero effect on a company's
profitability/burn rate.

In any event, OnLive might as well just shut down anyway. It has completely
poisoned its name and nobody worth a damn would go work there after this
stunt. And it's far too ambitious a project to have any chance to thrive with
B-level engineering talent working on it.

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CaveTech
They're going to give stock options to former employees in exchange for
consulting work? Stock options similar to the ones the just forcefully
discarded from said employees?

I'd be camping out to take them up on that offer!

~~~
posabsolute
if that is true, that's just a mess. They would not have any product without
them.

I really wonder how you can face your fired employes and tell them that all
their stocks are gone but that they can do some consulting do get those back.

~~~
MediaSquirrel
Options in the old company would have been worth even less given the
preference overhang from existing investors! The new company is actually good
news for employees as a clean cap table and a reasonable (lower) valuation
gives employees a realistic chance that their options will ever be "in the
money."

The old OnLive was poison.

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dminor
> and that rumors of Steve Perlman cashing out of the old company were not
> true.

Gee techcrunch, I wonder who started those rumors?

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droithomme
> All of OnLive, Inc.’s assets (e.g. technology, patents, trademarks, etc.)
> were transferred to an assignee, which then sold the assets to the new
> company. There was no transfer to any other party.

What is the name of this assignee? They seem very motivated to not state that
piece of information, or how much he was paid by the OnLive Mk II company for
these assets.

~~~
Stratoscope
From the press release quoted in the article:

"An affiliate of Lauder Partners was the first investor in the newly-
structured company..."

<http://www.lauderpartners.com/>

Edit: Ah, I just realized that isn't exactly the answer to your question, but
may be relevant at least...

~~~
mikeryan
Actually it is Lauder Partners also invests in a Comapny called "Active Video
Networks."[1]

Active Video Networks has for years been trying to do the same thing on Cable
Set Top Boxes what Onlive has been doing with Games to PCs. Which is basically
move all the processing to the cloud with low end thin clients in the home. In
the TV Case they'd push interactive apps (via an MPEG frame over your cable
infrastructure) to your cable box and basically you could get a whole
interactive TV system on crappy old cable boxes.

Looks like Gary Lauder (who's the main guy at Lauder Partners) is doubling
down on this strategy.

[1] <http://www.activevideo.com/>

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AznHisoka
Sooner or later, you gotta make money. Hype doesn't pay the bills (and all I
heard about is hype about OnLive). There's no free lunch.

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batgaijin
Huh, I wonder how many startups are going to start pulling this to stay
'competitive'. Can't just let the plebes think they can get shares without
being a founder or investor.

~~~
pbiggar
It looks like both the founders and investors were wiped out.

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Mythbusters
A transaction like this is sure to raise the confidence of any enterprise
thinking of using the onlive desktop product. :)

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adrr
If it was a pure asset transfer and not ownership. Did the investors and other
share holders get burned?

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GlennS
If the company is effectively bankrupt, then your equity is worth nothing.
That's the risk you take when you accept shares in a company as payment.

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guscost
It's more of a restructuring?

