The Question of Being the First Mover

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A member of our group feedback to me about his thoughts on being the first mover in business. ” In businesses, first mover advantage often proves otherwise. The first one to do something usually fails. It’s more of a trap, really.

Usually, the followers observe and see what works and take out what doesn’t, then gain critical mass and soon people forget about the first mover while crowning the first one to gain critical mass. 2 cents.”

This is my answer below:
“You are right. I have another approach to this. I can only speak for my own experience.

When I said first mover, I don’t mean that you blindly go into it. One still need to evaluate the risk. My objective for being the first mover is for branding, publicity and awareness of our company. (Which is very important since we are a small company.) It is almost like jumping the queue. From no one knowing who you are to the global players pay attention to what you do.

A little case study of what we did. When I first discovered there is strong interest in stereoscopic 3D content, I start to evaluate if I should make our series into stereoscopic 3D format. There was some risk as the format at that time was not determined. Hence not many producers want to move into it.

I did some detail evaluation of the cost, the risk, the economical and technical viability before making the decision. I was weighting between money invested and potential returns.

With blessings, eventually it pays off.  With this decision, we manage to penetrate US by selling our Stereoscopic 3d series to the first 3d channel.  After we have sold our series to US, we started to create awareness. Today, Dream Defenders have sold to 5 platforms in the US in total. That deal also leads to another one with Cartoon Network where we get the chance to work on Award Winning Ben 10 Destroy All Aliens in normal format and Stereoscopic 3d format.

Now 3DTV is dead. So was it a wrong decision? Not exactly. We have achieved what we needed above which is creating awareness for the company and help us penetrate US. On top of that, it creates opportunities for some outsource projects for us.

After that we move on to work auto stereoscopic 3d content. (Stereoscopic 3d with no glasses) Then AR and now VR. Next will be MR. At every stage, the knowledge gained actually brought us forward to higher grounds.

Our current VR venture has given us an advantage. We are not just doing VR. Something more of a breakthrough that solves the current VR commercial viability issues. In the US, I have gotten many major players excited. So we will see where it lead us to next.

In conclusion, my main reason for being first mover is meant to create publicity, branding and awareness for our company.  I must emphasize that you need to evaluate the risk. In business, there is always risk.  With this move, Tiny Island has now known to be innovative and forefront; always ahead of the curve in the global market. This is useful for our future growth in consultation business.”

When you are small, how do you keep yourself alive.

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Met a friend in LA today. He used to be a senior management in a major studio. He asked me today. How did you manage to survive? The market situation back home is so bad. Regional countries provide cheaper services. You do not have huge investor’s money to back you up. Your company is so small. “

This is my answer.
” At times, I do ask myself whether this is my last month. ha ha.

I applied some of the principles of how our late Prime Minister build Singapore.

1) Build strong relations and connections with major players in North America and in Asia. Make yourself useful to others. As long as you are a useful chess piece to others. You will become important though you are small.

2) Identify new trends that can propagate. Move into new areas and take advantage of first mover. Provide unique services that others cannot provide.

3) Anticipate changes. Prepare new business model and adapt fast to the change.”

The challenges you should know in producing an animated series these days

(The following is written based on my own experience. It is meant to give independent producers a clear view of the current market situation. The following does not apply to big studios who has deep pockets or with strong commercial channels)

I have attended a Children TV Trade Show in the US recently. At the event, I have met a couple of independent producers. When they presented their IP to me, I am quite surprised that they are still trapped in the old system; expecting the TV licensing fee alone to cover the production cost. (Covering production cost is hard these days. Not to even mention profit. Even DVD market is dead.) One really need a licensing/merchandising strategy. It is no long an option. It is really hard to create an animated TV series or IP just to tell story without a commercial strategy in mind. I know it sounds horrible in a creative stand point. It is really not easy to raise funds these days.

I hope the numbers below will help you. When I first started, I was looking all over for such facts. Its not easy to locate them. This is first hand experience.

When I first step into the US, I heard that you can sell a half an hour episode at USD$50k. In 2007, (my personal experience) I sold at USD$25k per half hour  episode. In 2010, it drops to USD$15k per half hour episode. Now I have buyer in the US asking for free. I am not joking. The market kept changing for the past

Assuming your full production budget is about USD$5M (When I first got into the market, I was told that this budget should be able to recoup just by TV sales) and you are able to sell the TV series to 80 to 100 countries (which is not easy for indie producer) The TV licensing fees add up for these countries  can only cover between 1/4 to 1/5 of your production cost. I have seen independent producers still looking at producing it at USD$7M to USD$9M at the recent trade show. Its going to be very risky.

I am not saying there is no exceptional case. If you have a strong executive producer to back you up, hopefully it could be more. I am just being conservative. Last I heard is that some US OTT channel is looking for original content . They can finance up to 60% of the production cost. This does not include additional dubbing cost of 20 languages. Payment is made in every 3 months and can only come in after you have delivered the entire series. It takes up to 1 year to pay you back the 60%.

Typically, there are only about 6 countries who are able to pay between 4 to 5 digits per half hour episode. Or if you are lucky, you can get a couple of pan regional deals (e.g Pan Asia or Pan Europe Deal) which will also pay about 4 digits per half hour. The rest of the world is paying only 3 digits per half hour especially in Asia. If you add all these numbers up, you will know it is not easy to cover more than USD $4M of your production cost.

Currently, some of the countries that you might be able to get subsidy or investment to offset your cost is Canada, France, Ireland, Malaysia, Korea and China. The rest of the world is not that easy.

One need to have a strategy in place. Your IP needs to be able to engage the sophisticated audience not just on TV. But also on all new digital platforms. Your concept and designs probably needs to have Toys, Computer Games and Themeparks (China) in mind. (Now even Netflix has started to look at Toys now.) There are some  strategic investors looking for good IP to feed their business. These strategic investors will come in right from the beginning. No longer after the release of the series.

Korean producers are very savvy and focus. You will see many of them armed with concept based on the needs of strategic investors. The only challenge is you might end up having too many similar concepts. Hence to challenge your creativity, you need to find a way to create a concept that stands out from the rest.

Don’t get me wrong. I am not discouraging indie producers NOT to work on your own IP. In fact, if your primary survival is servicing (outsource work), you should work on your own IP as competing in prices in outsource work is not the way to go for long term survival. What I am trying to put across here is to change your strategy. Know the market. Build your connections. Get yourself updated with the latest trend. The world economy and technology is shifting its place. In business, there will always be a change. As long as you move with the change. You will survive.

Something I wrote previously. Hope you find it useful as well.
https://entrepreneurshipinanimation.wordpress.com/2016/05/14/various-potential-strategic-investors-for-animation/

 

Lessons learnt in Leadership

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One of my staff asked me the following question :
“Sometimes what is sad is after training someone to be a good leader, they will go away and move on. Isn’t it tiring to keep training new ones?”

Here are my answer.
“If you are a good leader. Your disciple will stay. If he choose to go, it could be because he does not fully understand the true meaning of the leader’s work. It’s a transition and growing up. Sometimes when he goes out there to see the world and experience himself, he might slowly appreciate what he has learnt from his previous leader. And maybe someday he will return.

If he does not return, then I can only say that I have to work harder as a leader to deserve him. That is how I consistently improve myself.”

Her Second Question:
“When you give a connection to people, do you feel afraid that they will take that potential job away from you?”

Here are my answer.
“In business and entrepreneurship, it’s all about relations and trust. If one is afraid of everything and do not trust anyone, one cannot get things done.

It’s all about integrity of your disciple and the client you choose. And most of all, the values you bring together in a company. I am selective over my long-term clients and most of them became my friends. That is how I run my business.

If your disciple can easily steal your client. Then you know that you are weak in your business relationship and you are weak in evaluating the right person to be chosen as a leader. So you have to pay for the price. The more mistakes you make. The sharper you will be.

Treat people with your heart and sincerity. You will attract the same kind of people to you. (Both client and employee) With this, no one can steal anything from you.”

Even if you are not a rich kid, you still can be successful.

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During the peak, we grew up to 120 artists with no external investment

Recently I have come across 2 articles. After reading them, I started reflecting my own journey.
“Entrepreneurs Aren’t A Special Breed – They’re Mostly Rich Kids”
“Entrepreneurs don’t have a special gene for risk—they come from families with money”

These are from my own experience. Hope it encourages you. Sometimes the more you have, the more you are afraid to lose. Its only when I lost almost everything. (My bank went zero a few times) Only then I have more courage to do what I am doing. When you are hungry, you will fight to survive. So not being rich is not a disadvantage. It helps you understand some valuable lessons in life.

I didn’t come from a well to do family. My dad was a taxi driver. I didn’t take a single cent from my parents or myself or investor to start my business.
“Reference: How did I first started the studio without external investment?”

Entrepreneurship has taught me some valuable lesson in life. It has taught me to stay clam during crisis. Stay focus, make fast decision and solve problems. Most importantly is the will to keep fighting until you reach your goal.
Reference: It’s the journey that matters. Not the destination.”

I am not saying all rich kids cannot make it. But I have witnessed quite a few in the following situation. When they do not understand the value of money, they tend to anyhow burn their resources. When they face crisis, they tend to give up and go back to their rich parents for more money easily. When they fail, they will just wait to inherit their family business. As they are not hungry enough to fight. When crisis come, their family business will go down with them. So not being rich might sometimes better prepare you for the journey.

In business, not everyday is Sunday. There is always a wind of change. It’s a cycle. One must remain clam. Focus. Hold on tight and fight on through this change. If not, they will be wiped out. Look at the situation now. The current Digital Disruption is changing how business has been running. Those who do not change their business model, will probably have to shut down eventually. (E.g e commerce killing shopping mall etc.)

When I first started, I only manage to borrow a room from my brother’s back office that fits 4 freelancers. In 2007, we eventually move to a 2000 square feet office. One year later, we were fortunate to be able to expand and move to a 10,000 square feet office. From 4 artists, we grew to 120 artists during the peak with no external investment. I am not saying it is easy. I am not saying we are successful. In business, we go up and down like a roller coaster. We have come a long way. But it is possible if you are persistent.

Next year will be our 10th year. The last 10 years, this is what I have learnt. Investment is not what matters most. It’s the strategy, the persistence to hold on and the core team who has the same values to fight side by side with you. (And not to forget a supportive family) Strategy is the key. This reminds me of a Chinese Chancellor (or prime minister) in the Romance of the 3 Kingdoms period known as Zhuge Liang (Kong Ming)  I have learnt a lot from his stories and applied in my business at times. His victory proves one point. Size does not matter. It’s all about strategy. This is how we have come this far.

Hope what I wrote encourages you. Even if you are not a rich kid, you still can be successful. Don’t give up your dreams.

(An abstract from the movie Red Cliff  and the part on Zhuge Liang using his intelligence to win the enemy of a much larger size)

How did I first started the studio without external investment?

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Many people asked me how I bootstrapped my company when I first started. In fact, for the past 10 years since I first started, I’ve been bootstrapping my business, till today. (Read past article with regards to getting the right investors)

(Reference: Bootstrapping in business means starting a business without external help or capital. Such startups fund the development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture, a small amount of money will be set aside for the bootstrap process.)

When you first get started, try to keep your overhead as small as possible. We have tried working from home and linking everyone up via FTP. DIY most things on our own. From assembling our own PC / network to basic decor of the office.

In 2007 – this was the first time – I setup my own permanent facility. I was first offered to produce 3 episodes for an animated series project. The project only lasted for 6 months. (Don’t do it like me. Ha ha. Try to ensure you have a project that can last you for at least 12 months. Else it’s too risky.) That is how I started.

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(Our first permanent office at Beach Road. We did all the decor and installation, ourselves)

1) FINANCES

When I first started, I had maxed out all my 4 credit cards to buy equipment and furniture. 2 of my cards and the 2 cards of my wife. You need to ensure the first 30% down payment can repay your credit card bills and at least last you for 3 months.

2 Important Things to cover: Labour and Rental. (Try to get an office with at least some basic renovation e.g air conditioning to save cost) If there is something simple you can do on your own to save cost, do it. (I have painted the office myself. This time, the network is more complex. Luckily my lead TD helped me to set it up as I have to doubled up on training and line producing.

For Hardware and Software, pay by installment: Else, it will wipe out your down payment. One of the sources I used was Hitachi Credits. This is known as hired purchase. There are also other sources of installment plans in the market. (Its fortunate that 3d software these days allow you to pay by usage per month) There are a lot more resources these days as compared to when I first started.

You need to ensure you control your cash flow well. Else, you will be in trouble later. If your down payment CANNOT cover your initial cost – (3 months rental, 3 months labour cost, 3 months installment for the Hardware / Software) then you know the project budget probably cannot sustain you and it’s too risky to go ahead.

You also need to make sure the second payment comes in at least one month before you use up the down payment. Therefore, make sure you deliver the milestone on time so that you can collect the second payment.

2) KNOWING THE WHOLE PIPELINE

Before you start working on a series, make sure you are familiar with the whole process and pipeline operations. If it is not you, someone senior in the team must have experience in this.

3) ASSEMBLE YOUR KEY PEOPLE

You need to ensure you have a few key people (or your close friends whom you can trust) who can fit into some of these key roles. (Modeling, Texturing, Rigging, Layout, Animation, Effects, Lighting, Compositing, Editing, IT support.)

Besides the above roles, we were also working on story development and pre production. Hence we also needed to ensure we had expertise in these areas.

4) HUMAN RESOURCE

You cannot suddenly assemble so many people at one go. You probably need to build your network and relations through time. (Read our past article on Maintaining Healthy Relationship with Potential Employees ) So that when the time is right, you know you are ready to assemble the people together. Based on my own experience, you need to have at least 50 artists (from start to finish) to produce 2 episodes a month.

It might sound very straight forward. But one really needs to plan carefully before execution. End of the day, you need to ensure you will not be in debt if the deal does not work out smoothly. Do the above only when you have secured a project.

Hope the above helps you.

 

Its the journey that matters. Not the destination.

Building this company has brought me to places I never dared to dream of. One thing that I have learnt is that you need to keep trying no matter how impossible it may seem. The dream keeps you alive and keeps you going. Someday you may get there. Even if you don’t, it’s the journey that matters. Not just the destination.DW02
Stepping into Dreamworks Animation was one of those “impossible” dreams of mine. This is probably not a big deal to those who works in the US industry, but for someone like me from this “tiny island”, it was something beyond my wildest imagination.

Many years ago, I had the honour of meeting an US executive who was running one of the largest US Animation Studio in Singapore. Years later, she became one of the key executive at Dreamworks. Having only met her just once, I thought that she would have probably forgotten about me. Still, I tried my luck at contacting her anyway. Unsurprisingly, I didn’t get a reply; which is very normal when you write to someone so high up there. I tried again after 6 months. And this time, astonishingly, I got a reply. She told me she had forwarded my mail to another important executive who was handling all of Dreamworks’ major overseas operations. This is a miracle and I am really thankful to every one who gave me such a rare opportunity.
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At that time, I was hungry to find opportunities for our crew. Without second thought, I immediately bought an air ticket and flew to Glendale. (Though I was left with only $67.50 in my personal bank and was surviving with just 2 credit cards at that time. This was during one of those struggling times when we first started.)
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I have to admit, I was nervous. This is a rare honour. I kept checking the time, waiting for every moment to go by. At last, I finally met the Dreamworks executive face to face. He was really nice to me, asking me about my humble beginnings, my passions, and what I did. It felt like I was meeting another artist rather than an unapproachable business executive. I felt very comfortable talking to him, as he made me feel confident about myself.

I am glad that he gave me his time. However it all had to come to an end eventually with “Thank you. Lets continue this conversation and see what happens.” At that point, I said to myself. “That is it. This is probably the furthest I will go. I am very happy. At least I got to meet the man and walk into this beautiful studio.”

A few months later, I was in Cannes MIPCOM for business when I received a message. It was from the Dreamworks executive: “I am coming to Singapore to see you if that is ok. I would like to visit your studio and get to know more about what you do.” I was stunned. It was a dream come true! Unfortunately I wasn’t in Singapore at that time, but my staff received him and showed him around. Though nothing really concrete came out of it at that time, it was definitely a memorable experience.
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However I didn’t let the chapter end here. Every year, I make it a point to visit Dreamworks to try my luck. I am still doing it to this day. And earlier this year, I have been blessed with securing a meeting with another top executive who gave me a chance to talk to him. And that is why I will continue to go back every year, to continue making contacts and to keep the conversation going.

Not just US, I am also heading to China for more opportunities.
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Dreamworks is distributing our IP Dream Defenders.
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Today,  Dream Defenders our IP is distributed by Dreamworks Classic. With blessing, it has reached out to 80 countries with Dreamworks’ help. It has been acquired by Dreamworks TV Asia the new channel. (http://www.dreamworks-asia.com/shows/dream-defenders) The series is now across 19 countries in Asia in additional to the existing 60 countries we have reached so far.

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I will keep trying, and hope that someday, I can finally get the chance to met the CEO and pitch Dream Defenders to him. I know its sounds like a long shot. I guess it’s the passion that keeps me going. Someday I may be there. Even if I don’t, it’s the journey that matters. Not just the destination.

Hope the story motivates and inspires you.

My Korean Journey

Cartoon Connection 2015

Cartoon Connection 2015

I was reflecting on my recent trip to Cartoon Connection in Korea.

2007 was the year I went to MIPCOM for the first time. A Japanese American Consultant was very kind to share his frank opinion about our work. He said “David, your work is good. But nothing extraordinary. Walk down to the KOCCA booth (Korean booth). See how fast they have progressed. It’s amazing. Every year, there is something different. Something new. So I went there to take a look. I was totally blown away. I really admire what they have done. I told myself that we must work very hard to improve ourselves.

KOCCA Booth

KOCCA Booth

Since then, I started going to their booth yearly to arrange meetings in hope to build a relation with them. And hopefully we can work together someday. Initially some of them were skeptical about me. Several executives were wondering who is this foreign guy who kept coming to our booth.

Invited as a Speaker at Cartoon Connection Busan in 2012

Invited as a Speaker at Cartoon Connection Busan in 2012

First Singapore Korea Co Production with Electric Circus on G Fighters.

First Singapore Korea Co Production with Electric Circus on G Fighters.

Over time, I have proven myself and has earned their trust. Today we have built such good relationship and friendship with some of their major players in their industry. Dream Defenders is what it is today was a motivation from the first time I went to the KOCCA booth. Working with them has been a valuable learning opportunity for me.

Dream Defenders on Dae Kyo TV Korea

Dream Defenders on Dae Kyo TV Korea

In business and work, friendship matters to me a lot. I believe in treating others with all your heart and sincerity. Though the focus of business is to make money. But integrity and relationships comes above money. Today, I have established such strong relations base on the above principles.

My best friend and like a brother to me. Ralph Son. Founder of Grimm Studios.

My best friend and like a brother to me. Ralph Son. Founder of Grimm Studio.

Over the years, I have learnt so much from them and I am forever grateful. Now I hope that I can give them back from what I have learnt from my own experience in Dream Defenders. By sharing with them what I have learnt in globalisation and my relationships in North America.

VP of SAMG. Harry Yoon. (My Mentor) The man who taught me "In Korea, we shoot then we aim"

VP of SAMG. Harry Yoon. (My Mentor) The man who taught me “In Korea, we shoot then we aim”

This is something I will never forget. “In Korea, we shoot then we aim” That is how fast they move. Thank you my friends in Korea. I will always value and treasure this friendship. 감사합니다

Think carefully before taking investors money

When I first pitched to an investor, I thought all my problems will be solved once I got the investment. I was very inexperienced and naive back then.

At the meeting, I managed to impress the investor. Since we were new and had hardly any track record, the investor squeezed our equity share in the company to rock bottom.

My business mentor said this to me: ” David. Don’t take the investor’s money. These guys know that you are good and have potential. Its business. At the negotiation table, they want to make you feel less worthy so that they can take control of the company. In Asia, investors have no patience. In 6 months, if they do not see any money coming in, they will shut you down. Singapore does not celebrate failure. It will be hard to get a second chance later. Why don’t you try to get business on your own without an investor first and start by building a track record before you approach them in the future.”

At that time, I asked myself if that was even possible. I had no workers, no office. How can I even be able to bring in any business? My business mentor continued: “How can you be so sure that if I give you workers and an office, you can bring in the business? Why don’t you just giving a try.”

That is what I did. I turned down the investor offer and gave it a try. It was hard at first. It really challenges your skills in sales, marketing, branding and packaging. I tried making many overseas cold calls. (Don’t forget, at that time, we have no LinkedIn, Facebook, Skype etc) In 6 months, I manage to bring in the first US contract. Though it was a small contract worth only about $10,000, but it was a start. A blessing. We worked from home via FTP. This was our beginning.

Looking back and seeing how others have failed not because they were not good enough, but their fate was ruined by the wrong investors, I am thankful to my business mentor who advise me back then. Finding the right investor is like finding the right life partner. It has to be someone who believes in your vision and is prepared to go through the challenges with you. In my humble opinion, Pixar turning point is Steve Jobs. Having the right investor can make that big difference.