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June, 2010

Back in the Game

By Ruth Bradley
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After founding and selling one of Latin America’s first videogame developers, two Argentine entrepreneurs are back in the game with Atakama Labs, their second Chile-based company.

Atakama Labs logo

An unassuming house in Santiago’s Vitacura district is hardly most people’s image of a place where sophisticated videogames are produced. It is, however, where Freaking Inkies, one of the latest games to hit the iPhone market, was developed.

An arcade shooter that uses paint rather than fiercer weapons - the trick is in mixing the colors - Freaking Inkies is the first launch from Atakama Labs, a company formed last August by Argentine entrepreneurs, Esteban Sosnik and Tiburcio de la Cárcova, with the backing of two Chilean venture capital funds.

The iPhone game is a small taste of what the company can produce, ahead of its June launch of a larger game for social networks, says de la Cárcova. Over the next two years, it expects to develop another four or five large games, he adds.
Atakama Labs is the two entrepreneurs’ second venture into videogame development. They first joined forces in 2002, after being introduced by mutual acquaintances, to found Wanako Games, the company they sold in 2006 for US$10 million to industry giant Vivendi Games.

But, in Atakama Games, they are not just repeating a tried formula. It is a far more ambitious project, says de la Cárcova.

Whereas Wanako developed videogames for traditional consoles, Atakama Labs will produce games for social networks like Facebook. And, by selling directly to the consumer, rather than through distributors, it aims to capture all the value chain, not just the development end of revenues.  

“It’s a much bigger challenge,” says de la Cárcova, “but there’s also much more upside.” And, with the gaming industry estimated to be worth US$50 billion globally and growing fast, that is an enticing prospect.

For its start-up, Atakama Labs raised US$ 2 million, plus the promise of a further US$ 2 million, from Austral Capital and Copec-UC, the two Chilean venture capital funds that hold just under a 50% stake in the company. “That was a real achievement because we did it in mid-2009 in the midst of all the financial uncertainty,” recalls de la Cárcova.

The confidence of the company’s backers was inspired partly by his and Sosnik’s success in Wanako Games where they were backed by Wenceslao Casares, the Argentine entrepreneur who is a role model for aspiring entrepreneurs around Latin America. “Our track record gave them the confidence that, if we had a good idea - and that’s always an ‘if’ - we would have the capacity to develop it,” explains de la Cárcova.

But that was not the only reason for deciding to base the development arm of the company in Chile. In 2002, when the two partners formed Wanako Games, Chile’s attractions in terms of stability and predictability were obvious compared with the meltdown in Argentina. “But a lot of the premises on which we based that decision proved right,” notes co-founder Esteban Sosnik.

Contrary to frequent criticism of bureaucratic red tape as a disincentive for starting a company in Chile, he says that Wanako Games and Atakama Labs had a positive experience. “We found few of the disturbances that can distract so much time and money from the key tasks involved in launching a company.”

And, according to de la Cárcova, they also found an interesting pool of talent - “more virgin than we could have found in the United States”. Out of the 14-strong workforce at Atakama Labs, ten are Chileans, he points out, and Wanako, which employs around 60 people, has remained in Chile, despite its sale.

But Sosnik and de la Cárcova, who were recently selected for support from Endeavor, a U.S.-based organization that promotes entrepreneurship, are themselves an interesting mix of talent. Although both born in Argentina and in their mid-30s, they approached their joint ventures from a very different angle.

De la Cárcova, who studied law in Argentina and Spain, started at the hands-on end of the business. In the mid-1990s, he founded one of Argentina’s first Internet service providers, a success that was sold - prematurely on the insistence of its misguided backers, he says - to a telecommunications company, before going on to found Collective Mind, an Internet services company that, like so many of its contemporaries, fell foul of over-ambitious growth and regional expansion plans. 

Sosnik, by comparison, came from the money end of the business. After studying international relations and economics in the United States - where he is currently based as the head of Atakama Labs’ marketing arm - he joined JP Morgan.

Then, in the late 1990s, he returned to Argentina to work in its incipient venture capital industry, but soon realized he wanted to be closer to the action. “My dream from my teenage years was to have an impact on the world around me and there’s no faster, more transparent way of doing that than to start a company,” he says.

The partners are reticent about sales - “our focus at this stage is on research and team building, rather than revenues,” says de la Cárcova. The figure the partners appear to have in mind, however, is around US$30 million in sales within five years, mostly in the United States and Europe.

But they also see themselves as part of a broader picture of the development of the videogames industry in Chile and, indeed, Latin America. Wanako Games was a pioneer that has served as a role model for other companies, in some cases created by former employees, points out Sosnik.

In that sense, according to Sosnik, Wanako Games and Atakama Labs have a unifying aim. “What I see them as doing is serving as a bridge for taking Latin American talent to the U.S. market,” he concludes.

Ruth Bradley is the Santiago correspondent of The Economist.