Louis Rosenberg, founder of Immersion Corp., turned down an offer of millions from Microsoft for his startup (it makes joysticks with "force-feedback" technology for video games and other applications). He appeared online to explain why he said "no" in this Business Week Enterprise chat, presented as part of America Online's Your Business Dinner series. Enterprise is a special edition of BW published seven times annually for small business and entrepreneurs. Online with Lou Rosenberg was Fred Strasser, editor of Enterprise.
Copyright 1997 by America Online, Inc.
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JackBW: Good evening and welcome to Business Week Online for another in our series of Enterprise chats, presented as part of AOL's Your Business Dinner series. Tonight's guest is Louis Rosenberg, founder of joystick maker Immersion Corp., to tell us why he turned down an offer of millions from Microsoft for his business. Welcome, Louis Rosenberg (LouRosenb). I'm Jack Dierdorff of BW Online, your host tonight.
LouRosenb: Thanks for having me, Jack. Glad to be here.
JackBW: Jophz signaled that he wanted to ask a question. Go ahead, Jophz. Meantime, welcome SmallbizBW, who is Fred Strasser, editor of BW Enterprise.
Jophz: Why did you turn down Microsoft?
JackBW: That's the basic question, Louis Rosenberg. Why did you?
LouRosenb: We sort of unveiled our technology a few years ago once we had the ability to do low-cost force-feedback. Microsoft was one of the first companies interested in our technology. In one sense, we have to give them credit for seeing the potential of this technology a few years before it was ready to be launched as a consumer product.
We, as a small company, were not ready to give away our technology before the technology was realized. We knew we had to wait a few years, so people could understand how important it was to computing. Rather than selling our technology before it was ready to a single exclusive party, we decided to do nonexclusive deals with many parties -- basically keeping our options open as the technology becomes important.
JackBW: Tell us a little for background about your technology and why Microsoft wanted it.
LouRosenb: Force-feedback adds the sense of "feel" to computer peripherals. So a force-feedback joystick is like a regular joystick, but it has the ability to give physical sensations. Imagine you're using a force-feedback joystick to fly a spaceship. When the ship crashes, you don't just see it on screen, you actually feel it. This has a huge impact on the realism of video games -- from driving simulations to first-person action games. Being able to feel interactions makes a really big difference to gaming. Microsoft's interest has been to make Windows a gaming platform. They thought force-feedback was important to doing that. They had a great interest in doing that.
BobABW: What's your opinion of the technical savvy of the people you dealt with from Microsoft?
LouRosenb: Force-feedback is a very new field where there are very few experts in the world, so we could not expect really any company to really be up to speed on what we're trying to do. Also, it's a little different from most peripherals. Traditional joysticks are plastic with a few simple sensors, so people who make joysticks -- all of them -- have a very certain skill set. Force-feedback turns the joystick into a robot on your desk. For a lot of peripheral makers, making this kind of leap -- from plastic mass to robot -- is very overwhelming. You have to give a lot of credit to the companies who got in early. The first company, CH, took that leap. Microsoft understood it, too, and recognized the importance of the technology early on.
SmallbizBW: There has been a lot of talk that patents aren't worth the trouble for tech companies becuase the product cycle moves too fast. Yet you guys spent a lot of your initial capital on them. How come? Do you agree or disagree with the notion that patents are passe?
LouRosenb: For a small company like Immersion that's developing innovative technologies, we're forced somewhat to rely on the patent process to protect our technology from larger companies that can commercialize the technology faster than we can. Our fundamental protection for licensing technology is patent technology. We have a lot of expertise that helps protect us. What it comes down to is: Do we have strong enough protection to stop others from copying what we've invented?
The first part of your question refers to how long it takes to issue patents in respect to the product cycle. For companies in a slightly more mature stage, I'm sure that's a problem. But for Immersion, we've been developing technologies and filing patents for many years. The real consumer versions of those technologies haven't even been produced yet.
Jophz: Basically, the joystick will shake if you were flying a plane and crash on a video game? The joystick will simulate real crashes -- great movement?
LouRosenb: Jophz, the technology does more than shake and vibrate. We consider force-feedback to be an information technology that opens up an important channel of communication between humans and computers. And it's a channel that's very easy to take for granted. But imagine interacting with a video game where you could pick up and bounce a ball and you could feel the weight of a ball, feel the springiness of a paddle hitting the ball, you could feel the pull of gravity, you could feel all the things you would feel in the physical world. As soon as you play that game, it becomes very clear that force-feedback adds a lot. Your understanding of that paddle and that ball is much greater than that of any traditional video game. In fact, we have a demo where you can bounce the ball with your eyes closed.
Jophz: Will this be at any computer shows near Columbus, Ohio, soon?
LouRosenb: We've been showing the technology pretty aggressively at all the entertainment-related computer shows. The next big show will be the E-3 show, and our technology will not only be shown in our booth, but also in the booths of our licensees. Right now Immersion's strategic partners developing force-feedback include CH Products, Logitech, Interactive I/O, and SC&T International.
JackBW: That leads to my next question. What strategy did you embrace for the future of Immersion after you said "no" to Microsoft?
LouRosenb: Our plan from the start was to develop nonexclusive strategic partnerships with mainstream peripheral makers. And we stuck to that plan. The fundamental reason we didn't come to terms with Microsoft is that we didn't want to stray from that plan.
SmallbizBW: Given your rejection of the Microsoft offer, what is the worst thing that you can imagine happening to your company now?
LouRosenb: The absolute worst thing that could happen is that force-feedback as a whole does not take off. We feel confident that if force-feedback does take off, we should be in very strong shape. We do think that it will take off. We think that by Christmas of 1997, force-feedback will have proven itself to be an important part of computing.
BobABW: Strategic plan or not, what kind of analysis did you go through before rejecting a buyout? Any sweaty palms?
LouRosenb: When we assess the offers from any company, we weigh the potential upside and downside, and we try to convince ourselves that we are getting the most out of our technology that we can. Sometimes it's pretty clear when there's a lot of risk and the potential upside does not seem the best to take advantage of our innovations. Meaning: Sometimes it seems like a difficult thing not to come to terms with a strong potential partner, but usually the answer is pretty obvious.
SmallbizBW: Lou, I think you dodged my question, so I will press ahead. I assume force-feedback will take off -- it sounds too great. But still, what's the WORST that could happen to Immersion? In other words, is there a scenario that might leave you with regrets with respect to Microsoft?
LouRosenb: Probably not. Right now we have strategic partnerships in place with a number of very strong companies. We're forming more with other strong companies. Already the potential upside from our technology seems to be better than any relationships that we've turned down.
BobABW: To mirror Fred's question, what's the worst that could have happened had you sold to Microsoft?
LouRosenb: The worst that could have happened is that we would have given exclusive rights to any single company, the technology would have really taken off, and we would have sold our technology too early for too little.
JackBW: Lou, what's the present size of your business, and how fast has it been growing? Or is too soon to ask?
LouRosenb: A good way to look at our growth is in terms of the size of our staff. Right now we have around 25 people. A year ago we had about half of that. And a year before that we had about half of that. So we've been about doubling every year.
BobABW: Did you seek advice from anyone before making your decision?
LouRosenb: When we're structuring any potential licensing relationship, we rely heavily on the advice of our lawyers. And we also get advice from some of the investors who've supported our company.
JackBW: I assume you're still private.
LouRosenb: Yes.
JackBW: Any thoughts about going public?
LouRosenb: It's certainly something that we think about. The first step for us is to make sure our technology really takes off, and we assume the next steps like going public would naturally follow.
SmallbizBW: Our article on the company [Enterprise edition, Oct. 21, 1996] discussed the fact that you "gave away I-Force." Could you amplify on that? What exactly did you give, and was this a leaf out of Microsoft's book?
LouRosenb: Could you clarify, Fred?
SmallbizBW: What is I-Force, precisely?
LouRosenb: Immersion's technology is called I-Force, and I-Force has two parts. I-Force is a hardware technology that we license to peripheral makers -- people who make joysticks, steering wheels, flight yokes. They can license I-Force and add force-feedback to their peripherals. The other side of I-Force is software. I-Force is a software API (application programming interface) that game developers use to add force-feedback sensations to their games. For example, the people at Electronic Arts used I-Force to add force-feedback to their Need 4 Speed game. Once they did that, that software will now work with any piece of hardware that uses licensed I-Force technology.
So a force-feedback steering wheel from CH Products, or a force-feedback joystick from Logitech, or any other hardware product from one of our partners, will work with any game that supports the I-Force software. So Immersion's business strategy is to license I-Force to many hardware makers and distribute the software for free to game developers.
JackBW: Looking back over your progress, what advice would you have for someone else starting up with a hot new idea? Any mistakes to avoid?
LouRosenb: Tough question. Things to avoid: The biggest problem that we always face is having too many opportunities and not enough people on our staff to take advantage. I think our biggest weakness has been growing our staff too slowly. But that's a problem we're trying to remedy.
BobABW: If you didn't want to sell the company at an early stage, what about a few years from now? Or do you want to milk those 21 patents forever? And how did you come up with so many patents so fast?
LouRosenb: It's not clear to us right now where the company will go in terms of staying private, becoming a public company, or becoming part of a bigger company. Our expectation is that that decision will become more obvious as we progress. As for the many patents that we've been filing for, they're just a result of our very aggressive development efforts. We're very lucky to have a staff of very strong engineers who are very creative and solve problems in very unique ways.
SmallbizBW: I understand now about the software. Now, does that differ from your competitors, or the typical developer?
LouRosenb: The answer is that it's pretty common for unique peripheral devices to have a set of software that enable the unique features. It's usually up to the peripheral maker to evangelize that software. Every peripheral maker that has a unique device has a different set of software drivers. What we did that was unique was that we had a set of standard software drivers endorsed and developed by a number of peripheral makers. The drivers that let the joystick work are exactly the same as that for another steering wheel.
This is a great bonus for the game developers. By supporting I-force once within their software, they're compatible with a number of different hardware devices from a number of different manufacturers. So game developers really like that because it reduces their effort. Hardware makers also like that because it amplifies the software support for their particular devices.
BobABW: How does your innovation process work? What are your criteria for filing for a patent?
LouRosenb: Well, there's no simple answer that describes the innovation process. Usually we confront a difficult problem and the more difficult it is, the more interesting the solution. Whenever we fall upon what we feel is a unique solution to a difficult problem, it's usually something we should file a patent for.
JackBW: Lou, what's the next big breakthrough for Immersion?
LouRosenb: Right now we're all real excited about our announced partnership with Logitech. That happened about a week ago. Logitech has a reputation for making very high-quality joysticks, and we feel that the combination of our innovative technologies and Logitech's manufacturing and marketing expertise will result in a very exciting product.
SmallbizBW: I was just wondering, given that you came out of an academic background, what the greatest influence on you was business-wise?
LouRosenb: I did all my academic work at Stanford University. I was there for a long time -- from undergrad to PhD. Although Stanford is very much an academic institution, there is a very unique atmosphere that promotes entrepreneurialism. It might be because Stanford is located in the heart of Silicon Valley, or it might be because so many important companies have come out of Stanford. But the Stanford engineering department definitely produces a lot of small companies. For me, it was just being at Stanford that pushes you in a direction of taking technology and turning it into a company.
YBizExp: Lou, as far as marketing and advertising, which ways have you tried, and which was most successful?
LouRosenb: For force-feedback technology, the best way to advertise is at trade shows. You really need to get your hands on the technology to understand what it's all about. Our marketing has not been to consumers but to game developers and to hardware makers. We can go to trade shows and target those people. Now that we've licensed that technology to strategic partners, they have a unique challenge -- they need to promote the technology of feel through media that are mainly visual. It will be interesting to see how the industry of force-feedback evolves and how the companies we work with learn to market "feel."
YBizExp: Thank you very much.
JackBW: That's about it for tonight, unless someone else has a quick final question. If not, many thanks to Louis Rosenberg of Immersion Corp. for sharing his thoughts with us and answering our questions. Be sure to visit BW Online's Small Business Center, full of useful information -- including all the BW Enterprise editions.
Transcripts of this and all BW Online conferences and chats are available soon after the event -- look under Talk & Conferences on our opening screen. And remember to tune in every Monday!
LouRosenb: Goodnight -- had a good time. Thanks!
JackBW: Thanks again, and goodnight to all!
Copyright 1997 by The McGraw-Hill Companies, Inc. All rights reserved.
