Banking on an uncertain future: Tech startup counting on Apps to lure financing

Timing could be better for Chris Przybyszewski and Resolute Games and Apps.

Economic conditions are not particularly friendly to a tech start-up looking for financing, but Resolute’s 2009 revenues have been about $30,000 a quarter and it has grown to a 16-person part-time staff, thanks primarily to the company’s early success developing Apps for the one-year-old Apple iPhone.

Resolute was founded by Przybyszewski and James Ruffer last year as a gaming company to develop downloadable games for Microsoft’s X-Box 360 gaming system. When the iPhone was released, Resolute shifted its focus toward the then-brand new App market.

Resolute developed its first game, Thumstruck, a music-based iPhone game late last year. Thumstruck, which retails for $.99, was placed in the App store and has had more than 112,000 downloads since it was released.

Following that initial response, Resolute was contacted by Elvis Presley Enterprises about creating an Elvis App. Przybyszewski was apprehensive at first, fearing the company would be pigeonholed as being strictly an App developer.

“We said we didn’t do that,” he says. “But when they offered us money we said, ‘Yes, we do that.’ ”

Since the Elvis App’s release, Resolute has released six other products and has seven in production, including AppRoach, a game where players can smash roaches, and an events App for ArtsMemphis. Apple must approve downloadable Apps; the makers get royalties from sales. The company is working on a sequel to Thumstruck that should be out by the end of the year.

Przybyszewski, who still has a day job at InMotion Orthopaedic Research Center, says his employees are paid through royalties, contracts and “sweat equity.” Przybyszewski also invests close to $200 a week on pizza and soft drinks for his employees.

Ruffer and Przybyszewski are still trying to find investors so they can run the company full time. Przybyszewski estimates the company could survive for three years with a budget of $3.5 million, but says that level of funding isn’t available. An alternative would be $675,000 for the company to operate full time for one year with just Pryzbyszewski and Ruffer.

One of Resolute’s current investors, Jack Blair, formerly group president for North America at medical implant manufacturer Smith & Nephew, Inc., who has worked with Przybyszewski through InMotion, says he wasn’t even aware Przybyszewski was involved with Resolute until he read about Thumstruck.

“I’ve always been impressed with people that have a passion for what they do,” Blair says. “I put some money into the company and I’ve been introducing him to investors that believe in what they’re doing.”

Blair says his investments are typically with established businesses that are either in Memphis or close by. He says he’s been encouraged by Resolute’s early success.

“If you see a company growing despite the economy, you want to see what they can do when the economy turns around,” Blair says.

On the other end of the investment spectrum is Bob Compton, an entrepreneur and former COO of Medtronic, Inc. He says investing in gaming companies like Resolute is a risky deal because it’s an industry that is hit-driven like the music or Hollywood and Memphis isn’t known for software development.

“That’s like the trifecta of impossibility,” Compton says. “They’re a very creative team, but I told them they should be in New York, California or in China. The problem is it’s the type of investment that attracts investors that don’t live in Memphis, so they’re trying to do it in an economy where startups can’t get funded and in a city that isn’t a software city.”

Przybyszewski and Ruffer are well aware of the challenges the company faces. Ruffer says one of the biggest benefits of being in Memphis is the fact the company can hire designers for a fraction of what they would cost in Chicago, New York or San Francisco. Also, there are few local competitors to poach employees from Resolute, while in other cities, there are hundreds of software developers working for numerous companies.

“For us to get guys to come in from other cities, it would cost $50 to $120 an hour,” Ruffer says. “Chris has been able to do it for pizza, passion and a lot of caffeine.”

Resolute still faces plenty of challenges, but the potential for new applications for Web or smart phone platforms continues to grow, according to Sajeel Qureshi, vice president of operations for Ontario, Canada-based Computan, which provides Web applications and assistance for Web start-ups.

The number of iPhone applications has grown to about 70,000, but Qureshi says Resolute and other game developers should prepare for the next wave of application development.

“It’s a matter of time before more developers use iPhones and their capabilities for business,” he says.

With Web applications like Facebook, Twitter and YouTube gaining in popularity, Qureshi says, what began as a fun toy has become a viable business tool. He says the mobile app market, not limited to the iPhone, is moving along the same path.

“I don’t think it can happen this year or next year, but if you’ve got games or a client looking for a mobile application, it could work,” he says. “It’s very real for Web applications right now.”

Dan Young, principal of Cleveland, Ohio-based DXY Solutions LLC, a 3-year-old company that develops Apps for Blackberry, iPhone and other mobile devices, says domestic mobile technology is slowly catching up with Europe and Asia, where phones are used for everything from checking coupons to making major purchases. In parts of Asia, Young says, phones are the primary Web source for most users.

“In the U.S., there wasn’t a lot of room for small companies to get involved with Apps because of the carriers, even when the Blackberry and Palm (Treo) came out,” Young says. “That took hold with the iPhone and I think the sustainability over the long run is even better.”

Young believes companies like Resolute that have focused on games early will either be snatched up by bigger companies or evolve into developing applications for business clients.

“The way the App model is set up, if you can build a small App, you can build positive income and that can sustain development costs for bigger Apps,” Young says. “The App store is funneling consumers to a point and it creates a great marketplace for you to make a big splash without a huge marketing budget. Even if you don’t have financing, you still have a chance.”

Resolute Games and Apps CEO: Chris Przybyszewski
Address: 516 Tennessee
Phone: (901) 490-5897
Web site: www.resolutegames.com


msheffield@bizjournals.com | 259-1722