A law firm, a marketing agency and a software development company have formed a joint venture based in Los Angeles to incubate startups building products and services in line with the needs of major businesses, including video game publishers and Hollywood studios.
O Labs plans to start building projects in-house that the large companies have already expressed interest in. It’ll then seek out executives to take the reins with the hope of successful launches leading to buy-outs or licensing deals. The venture includes Manatt, Phelps & Phillips, ICM Partners and Originate.
“The fact that this brings together so much operational expertise, not just strategists and people who can help you raise money, that’s something new,” said Matthew Pierce, the chief executive of O Labs and a former vice president at Orginate.
The twist on the typical startup accelerator or incubator program will “take the technical, legal and branding risk out of a company in a way that’s not possible with other models,” Pierce said.
The idea to combine the three companies’ global resources began with Pierce and colleagues at Originate, whose 120 developers predominantly do software work on contract with large companies.
Many startups provide tools that don’t fit a particular problem, but the ones that succeed have a clear picture of the problem and the resources for quick technical development, said Sarah Chambless, an associate at Manatt. O Labs seeks to originate three to five such startups a year, she said.
“We want to hold much larger stakes in these companies and de-risk them very quickly, so we have to raise less capital from outside and slide them into mergers and acquisitions without needing a lot in an exit to make a return,” Chambless said.
Keyvan Peymani, managing director of ICM’s digital strategy division, called the O Labs model “a step forward” for a media industry that is “facing fundamental changes from every conceivable angle.”
O Labs’ inaugural project is a platform called Versus that enables video game tournaments in which real money is legally at stake. Competing platforms were built without the complex legal issues in mind, Chambless said.
“We just look at them and say they are going to have a lot of problems when they launch,” she said. “We don’t have that issue. Our advice...is coded into the DNA.”
Discussions have just begun on how to launch Versus, but Pierce said he expects interest from companies that would benefit from a chance to see more engagement and profitability from video games.
Startups in the financial services, media and ad technology industries could be next in the portfolio for O Labs.
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