Novel, Backed by Vancouver VCs, Uses Gaming Tech to Make Business Simulations for Companies

6/10/10Follow @gthuang

What would “The Matrix” look like for businesses? Imagine a virtual-reality system that a company could jack its employees into in order to train them, evaluate their decision-making skills, or test out different management strategies. The technology might not be as far off as you think, thanks to a Seattle-area startup.

This is the story of one of the most intriguing and entertaining companies I’ve heard about in the past couple of years. Please excuse my lack of objectivity here. I’m talking mostly about the company’s core idea, not so much its business prospects (more on that later).

First, the news peg: Novel Inc., a 20-person startup based in Redmond, WA, has raised an undisclosed amount of first-round financing from McLean Capital and Nairbo Investments, a couple of venture capital firms in Vancouver, BC. The big idea behind the company is to apply massively multiplayer online (MMO) video-game techniques to create new kinds of games and business simulations for companies.

“I look at Novel as being a leader in the future of virtual reality,” says Brayden Olson, the company’s co-founder and CEO. “If we can help businesses with simulations, it can put us in position to be at the cutting edge of R&D.”

Here’s what that might look like. A company might evaluate its prospective employees’ leadership and teamwork skills by having a group of job candidates enter a game-like computer simulation where each person controls a virtual character. The simulation would present the group with various management problems, or other business situations. By watching how each person performs and interacts with others, the company could potentially learn more about them than it would in a run-of-the-mill interview. And if done right, it could be more time-efficient as well.

Brayden Olson

OK, this system doesn’t quite exist yet. But what makes it viable is that the technology and user interface are grounded in Novel’s multiplayer online video game engine—it probably won’t require a quantum leap in tech development. And that seems to be one of the company’s key competitive advantages.

The idea of using virtual reality and gaming technologies to create training exercises and work-related simulations is not new, of course. Organizations ranging from the military to Microsoft Research have pursued such projects for more than a decade. And Second Life, an example of a 3-D virtual world, has become a sleeper hit inside some big companies as an efficient tool for collaborating and teleconferencing. In recent years, computer interfaces have gotten faster and easier to use, graphics have become more dazzling and realistic, and online multiplayer games have taken off. Those factors all seem to be in Novel’s favor.

The company, previously known as Novel Interactive, officially formed at the beginning of 2009. Olson, its 22-year-old chief executive (see photo, above), is a recent graduate of Seattle University, and has gotten national press in BusinessWeek and a New York Times blog for winning a regional entrepreneurship award, and for competing in a business plan competition. The buzz around him is that he might well be Seattle’s next Bill Gates or Howard Schultz (no pressure though).

Olson grew up in the late ‘90s being exposed to the first wave of commercial 3-D virtual worlds, in the form of MMO role-playing games like Asheron’s Call and EverQuest. He was hooked immediately. “I knew I wanted to do this and only this. It became an obsession to me,” Olson says.

Like most college students, though, he didn’t really understand what entrepreneurship was about at first. He was fortunate to connect with a very influential mentor—Bill George, the Harvard Business School professor, author, and former CEO of Medtronic, who is also a board member of ExxonMobil and Goldman Sachs. Last year, George worked with Olson to build an online leadership community, and helped him get seed funding for his startup.

Novel was incubated at Redmond-based Gas Powered Games, under the tutelage of video-game guru Chris Taylor, Gas Powered’s founder and CEO. (Gas Powered is known for its immersive action games like Dungeon Siege, Demigod, and Supreme Commander.) Olson and a small team of artists and engineers have spent more than a year working on their first MMO game, which will be a precursor to their business simulations.

The new game is called Empire & State, and it will be in alpha release by the fourth quarter of this year, Olson says. What makes it interesting is that its premise is business and politics-oriented, instead of action, shoot-em-up, or fantasy. It has some similarities to role-playing video games like Civilization or The Sims, except that those games are single-player only. Empire & State takes place in a fictional world where settlers are “planting the seeds of civilization,” says Mike Marr, Novel’s creative director. It conjures up the feeling of New York City when it was small, or the Wild West, or the California gold rush. As in The Sims, the graphics are rendered in an “isometric” view, meaning the world is stylized and “looks like it’s on a grid,” Marr says.

Players start out as citizens of an empire, and can collaborate and compete with other players to become leaders of young companies or presidents of countries. Depending on their interests, they can also become criminal overlords, military strategists, bounty hunters, or business tycoons. The game itself will be free, but Novel will charge money for transactions within the game, like when players want to purchase clothing, weapons, or housing. “Our innovation is that players have never been given the ability to explore real business practices and politics before,” Olson says. “We’ve never had the ability to do anything but kill stuff before [in MMOs].”

Where this all translates into the company’s future business simulations is the technology that lets players interact with each other through chatting in the game, negotiating trade deals for their virtual organizations, convincing other players to vote for them in political campaigns, and dividing up labor within virtual companies, for example.

Olson wouldn’t give any more specifics about the business simulations and virtual environments just yet. He did say, “Bringing simulations to the business world—that’s where our ‘change the world’ impact is going to come…It’s remarkably similar technology to the game technology.”

And although Novel’s main focus is on the game for now, it clearly has its eye on the larger business market—assuming it can make business processes more efficient through its simulations (which isn’t really clear yet). “Because of the money we can save customers, it’ll be a sizable amount of money compared to on the game side,” Olson says. “We’ll target Fortune 500 companies, and build our brand that way. We expect to help businesses save a lot of money because they can be much more efficient.”

As for the mechanics of raising venture capital in the current climate, Olson says he met with a Seattle investment group that seemed interested, but that deal stalled. “We went up to Vancouver, and it was shockingly fast,” Olson says. “We were looking for angel money, and got VC faster.” The deal took about four months to close.

Novel has doubled in size over the past year, and recently moved into a much larger office in Redmond (6,200 square feet instead of 700). Olson says he is still hiring for a couple of full-time engineering positions, and some part-time business positions.

The company will face some big hurdles with its business simulations, of course. One is branding, and getting companies to accept what is a “radical shift” in how they might use gaming technologies, Olson says. “We’ll have to prove the numbers and then get over some of the social expectations,” he says. Another hurdle will be getting the right distribution channels for its simulations, and adapting the products to what its corporate customers want. (It seems like no small feat to adapt MMO game mechanics to the world of business software.)

To that end, Novel is bringing on a few key strategic partners—big companies that are interested in using business simulations and virtual-reality technologies, and will help the startup test its products in return for a steep discount on using them. Olson declined to name any potential partners or customers yet, but he said large retail organizations are among them, because they spend a lot of time and money on human resources and recruiting. “We want to have businesses who see the potential of this, who want to get involved while we develop the product,” he says.

It might seem hard to believe, but if all goes well, your employer just might be using this kind of simulation technology in the coming years, either to help evaluate how well employees work together, or to hire new recruits—and there’s nothing virtual about that.

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 or call him at 617-252-7323. Follow @gthuang

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  • JBJ

    “We’ve never had the ability to do anything but kill stuff before [in MMOs].”

    Clearly somebody has never heard of Eve Online, which has enough going on that they hired an economist (back in 2007!)

    http://www.reuters.com/article/idUSN0925619220070816

  • http://www.justatish.com Jack

    There have been a couple of MMO based business communication companies. Its an amazing new avenue for communication and based on the amount of people sitting at home in their pajamas interacting socially for hours on end, seems like the logical next step for productivity in corporations. Novel’s templated scenario system makes alot of sense, I’ll be looking forward to seeing the finished product.

    On a side note, I’ve also evaluated proton media, second life enterprise etc… the most applicable to business I have seen so far is http://www.Venuegen.com . They have been around for over 2 years, and their product is ready for use right now as a plugin in the web browser. They also seem to have nailed the avatar emotion, user experience, and all the user tools for communicating.

    Good to see more companies in this space, with remote workers, distance learning, and groups of hobbyists all over the world bringing their ideas to market virtual business is clearly the not too distant future.

  • Eris

    I have to agree with JBJ…the author of this article seems to have not done his research. I don’t know about other virtual worlds, but Second Life not only has in-world businesses, but also its own economy with its own currency (Linden dollars). Residents (as players are called) can either purchase Lindens for real-world money or they can earn Lindens in-world.

    In fact, one woman became a millionaire (in real US$) just selling virtual real estate in SL! http://www.businessweek.com/the_thread/techbeat/archives/2006/11/second_lifes_first_millionaire.html

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  • Gregory D. MELLOTT

    ‘ERROR Analysis’ may be its practical value. Virtual playing is much too slow a way to test principles for the most part; if one is even doing that when one lets humans interact relatively randomly, likely triggered by the graphics effects as much as anything else.

    One might consider our trade balance problem. There is little, if any, coherent response to it. Japan’s primary way to deal with foreign trade is to keep it to a minimum by the individual’s behavior. Their economy has struggled for a long time. The only way I can see to deal with such a problem and not generate isolationist behaviors is to have a ‘charitable’ tariff on products made in substandard conditions compared to what our laws allow. Even returning the funds generated to the communities impacted in a way that is acceptable by all parties, and tries to deal with the low wages, pollution, etc, while avoids having it fall into corrupting influences, like drugs and its trafficking, can let us compete and thus even project our standards abroad. That’s something worth analyzing to me. How much virtual reality debugging might be needed? I don’t know.