OnLive is shutting down - Company's final meeting

Documenting the death of OnLive: notes from the company's final meeting

"I've been a non-stop fundraising machine," OnLive CEO Steve Perlman told his entire staff yesterday morning. "And I finally got to the point where I just could not bring in enough funding to carry this thing forward." The hundreds of employees that make up OnLive were – en masse – relieved of their positions in yesterday's meeting, including Perlman himself. "All of us, technically, as of today, our jobs have ended – our current jobs with this company," another administrator informed the crowd after Perlman finished speaking.

OnLive is entering what is known in California as an "Assignment for the Benefit of Creditors," or an "ABC," (a form of bankruptcy) wherein an "assignee" (a person, persons, or entity) takes over the assets of the current company – in OnLive's case, this means "the software, hardware, network architecture, our logo, all that stuff," according to Perlman – in an effort to lighten the previous company's debts and get its creditors paid off. Thus the "Benefit of Creditors" part of that acronym.

Perlman didn't say who that assignee was during the company's meeting, only referring to him as "an extraordinary guy" (not an entity), and a "very accomplished and well known venture capitalist" who is "very wealthy." The unknown assignee apparently believes that OnLive "is the entire future of everything," Perlman told employees. Unfortunately, he isn't wealthy enough to bring on the 150-200 people that OnLive employed.

"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," Perlman said. Without giving numbers, Perlman said that, in the new company, "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."

He prefaced that news with a stinging reality: "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." 

So, what caused the sudden implosion of the gaming industry's most successful consumer-facing Cloud Streaming service? In so many words: scale. "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?" Perlman rhetorically asked employees during the meeting.

Beyond the servers, Perlman said the company "dramatically expanded the number of employees" during its past few years. And during those years, it never downscaled to account for its lacking user base. "We made it through the whole recession without any disconnects, any layoffs, or any down rounds," Perlman boasted toward the end of the meeting.

Going forward, the employees who won't be joining the new venture are being offered "a very simple consulting arrangement." Former employees who help smooth the transition to the new startup will be offered stock options in the new venture. If at some point that new venture becomes profitable (read: gets sold or goes public), those options gain value. If not, the stock remains worthless. Additionally, any stock that former employees own in the original company ("OnLive, Inc.") are now valueless. This includes the preferred stock options offered to executives.

Perlman expressed regret several times during the speech. He even directly accepted blame for the whole mess. "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," he said.

OnLive reps are adamant that the service will continue, uninterrupted, during the transition process, and "future products and services" are also unaffected.

Originally found on: http://www.joystiq.com/2012/08/18/documenting-the-death-of-onlive-notes-from-the-companys-final/