Stealthy No More, Skillz Brings Cash Tournaments to Mobile Games

4/30/13Follow @gthuang

Andrew Paradise is at it again. Scarcely a year after confirming he’d sold his last company, AisleBuyer, to Intuit, the Boston-area entrepreneur and angel investor is taking his latest company out of stealth mode.

Skillz (fka Lookout Gaming), which has offices in Boston and San Francisco, is trying to make a splash in the mobile gaming world by enabling game developers to host tournaments in which players compete for cash or virtual currency. The company’s software development kit, initially for Android apps, is aimed at skill-based games, as opposed to games of chance (aka gambling). As such, it enables cash competitions in mobile games in 36 U.S. states.

“We have bridged real-money gaming and the U.S. market on mobile,” Paradise says. Think of playing chess in Harvard Square for a dollar a game, he adds. “We’ve enabled the electronic counterpart.”

As part of today’s announcement, 10 game development studios have integrated Skillz into one Android title each, spanning the genres of sports, puzzles, and arcade games. The studios (and their games) include Gnarly Games (GnarBike Trials), Spooky House Studios (Bubble Explode), and Rocketmind (Big Sport Fishing 3D Lite).

The bigger picture here is the increasing opportunity to make money in mobile gaming. As Paradise and others have discussed recently, gaming is a big part of what people do on smartphones and other mobile devices. Yet “developers are having trouble turning a profit,” Paradise says.

He thinks that’s partly because current monetization strategies like in-app advertising and in-app purchases tend to drive users away and aren’t appropriate for certain types of games. For example, in-app purchasing may be fine for resource-gathering games, he says, but not for arcade-type games.

Here’s how the gaming tournaments will work, business-wise: If there’s an entry fee, roughly 10 percent of that will be split between Skillz and the game developer, with the rest going to prizes for winning players. For virtual currencies, the developer keeps all the proceeds.

And in general, the idea of enabling competitions and tournaments is that people will play games more often and invite more of their friends to participate. “If you start competing, you’ll play a lot more,” Paradise says. All of that could, in turn, drive more in-app ads and purchases as well. “Better monetization of mobile games means better games,” he says.

In case you couldn’t tell, Paradise (pictured) is a gamer at heart. He learned to program from video games as a kid; he says he wrote his first game in Pascal at age nine. “I play a ton of video games—it’s my No. 1 way to decompress,” he says. “At AisleBuyer, when I was stressed, I’d crank on Xbox or PC games.” (StarCraft II was a favorite, he says.) He adds: “After AisleBuyer, I wanted to focus on changing an industry that’s near and dear.”

His experience with AisleBuyer, a mobile commerce and payments firm, also taught him some valuable lessons he’s applying to Skillz. Namely, how to manage cash transactions for developers within games and across game networks. “There’s a huge amount of complexity,” he says, ranging from handling cash transactions legally and securely to “managing down fraud and cheating.”

Back in November, Skillz raised $1.3 million in seed money from Atlas Venture, NextView Ventures, and angel investors. Paradise says the 20-person startup will have “more funding to announce soon.”

His main challenge for now is hiring. “People build software, software doesn’t build itself,” he says. As a small company, Paradise adds, “we’re not set up to conquer the entire world of tournaments.”

But being in both Boston and San Francisco helps. While the game development scene is pretty well distributed around the country, Paradise says, the “Boston developer scene is fantastic.” And that’s where his product and engineering teams are. (They are in a Kenmore Square office, but preparing to move to a bigger space soon.)

Meanwhile, Skillz has its marketing and business development teams in San Francisco’s RocketSpace co-working space, for good reason. Paradise says their building alone houses more than 40 game studios. “We run into them in the coffee room,” he says. “We can 5x our customer base by just walking desk to desk.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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