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OnLive CEO Explains What Went Wrong, Talks About Buyer

August 19, 2012 Written by Sebastian Moss

This past Friday, OnLive held its final meeting, with CEO Steve Perlman telling staff they were bankrupt and that the company as they knew it was coming to an end. Here’s what was said.

I’ve been a non-stop fundraising machine. And I finally got to the point where I just could not bring in enough funding to carry this thing forward.

Another administrator added:

All of us, technically, as of today, our jobs have ended – our current jobs with this company.

OnLive is entering “Assignment for the Benefit of Creditors,” where an “assignee” (a person, persons, or entity) takes over the assets of the current company in a buyout to help alleviate the original company’s debt. The assets for OnLive are “the software, hardware, network architecture, our logo, all that stuff,” according to Perlman. He didn’t specify who the assignee was, just saying that he is “an extraordinary guy” and a “very accomplished and well known venture capitalist” who is “very wealthy” and believes that OnLive “is the entire future of everything”. Considering the criteria, that rules out Microsoft, Sony or any other major company, and makes you wonder what he plans to do with the patents that could potentially be used to “sue the shit” out of Gaikai.

Sadly, whoever this venture capitalist is, he wasn’t wealthy enough to employee most of OnLive’s staff:

Here’s the tough part, and this is the thing I’m very sorry to say: it’s just not possible for one individual in a startup – whether it’s that old startup or this new startup – to bring in this many people into a company.

Continuing:

The people that are gonna be coming on board here, that will come out of the group … I’m gonna tell you, most of the people will not be coming on board… The people that come on board are the essential people, as needed, to go and accomplish that goal of getting this thing to cash-flow positive.

But why did OnLive, a company that Microsoft was rumored to be looking to buy, and had several offers from companies such as HP, crash?

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.

The servers came with lengthy contracts, but were only used by a few users at any time:

If you’ve got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?

OnLive also”dramatically expanded the number of employees” during the past few years, despite the poor user figures.

We made it through the whole recession without any disconnects, any layoffs, or any down rounds.

Perlman repeatedly expressed his regret during the speech, saying:

I’m the one that brought you here. I’m the one that ultimately made decisions. And I’m the one that ultimately takes responsibility. So I am sorry, and it didn’t end up exactly as we’d hoped.

The OnLive service will remain online during the transition to the new company.

[Source]