Pivoting what you're known for with Arturo Perez

Lex:

Choosing your niche is a big pain point for creatives.

It can feel challenging to narrow yourself down to one space, one industry, one problem. How do you pick your lane? If you want your lane to be a lot of things. This episode is not about how to choose that niche, but rather how to pivot when you want your public persona to be known for something different and there's no one better to invite to speak on this topic than Arturo Perez.

Arturo is the CEO of Kluge Interactive, a VR and AR gaming studio, most popularly known for their game Synthriders. But over the last 16 years that I've known Arturo, I've watched him pivot his business three full times to now be running a successful gaming studio of over 70 staff and a major strategic relationship with Meta.

In this episode, Arturo and I talked through these company pivots, how he made them, and how the team adapted to new arenas and how they found their groove with gaming. We also talked about how following your passion doesn't always pay the bills and what to do if that feels like the case for you. It's a really fun episode because R2 and I are old friends. Let's get into it.

I'm Lex Roman. I help creatives make smarter marketing betts, and you're tuned in to the Low Energy Leads show.

Lex:

Arturo, welcome to Low Energy Leads.

Arturo:

Thank you. Glad to be here.

Lex:

I want to start, you are probably the most experienced business owner that we've had on this show because you've been a business for at least 16 years consecutively. And then before that even, you said you started your first business in the year 2000. Is that

Arturo:

Right? That's right, that's right. Yeah.

Lex:

So I want to start with a timeline of your businesses. I want to talk about the different pivots that you've made. So what was happening in the year 2000? What kind of business was that?

Arturo:

Well, I was in college and as college kids do, this is back when CDs were still at 17 bucks plus, and I actually was part of a music piracy group, and that music piracy group gave me the opportunity to build a magazine. So I started recruiting with people, online writers, photographers, globally actually. And we had 20 to 40 people all over the world going to concerts and whatnot. And it sort of legitimized something that started as this love of sharing music for free. And this is pre-Napster days to something like a legitimate editorial of new music. And we were sort of pitchfork at the same time as Pitchfork, and we didn't know them back then. But this idea that our slogan was Music Matters, and it was this idea of substance of music over whether it's mainstream or underground or what genre was we were thinking we were at the cusp or the cutting edge of where music, which is a little bit less segmented, less verticalized, and more of a hodgepodge of different genres coming together.

Lex:

And you've now made it first full circle and you're working in music or music adjacent again. So let's walk through the timeline. 2000. You're doing a music magazine. What was the next year of the next pivot?

Arturo:

Well, so 2005, I actually let go of the magazine. The magazine was actually doing really well. Now that I think about it in retrospect, we had people like Rolling Stone and Hard Rock Cafe coming to the table. We had relationships with the labels, but it felt like a really difficult thing to do on my own. And also, I didn't want to just think about music.

My passion is philosophy. And so music was a big part of by which I explore myself or my self-development, but there was a moment that I didn't, it felt limiting and then the business felt it was tough. And I was actually, funny enough, I was thinking of I had to evolve to print instead of embracing the online growth that was going on. And so I was still in school, I was in university, and I ended up, my last class actually, I won the entrepreneurship award at my school for the music magazine. And at receiving the award, I met a professor who became my strategy management professor. And when I graduated, I worked with him as a consultant and I learned about strategy consultancy and I ended up working at a consultancy boutique. And it was first the only legitimate job I've had outside of building businesses.

Lex:

And then coming out of that, so you worked at, what was it called? Grow Think.

Arturo:

Grow Think. Which worked there for a year. I liked the name, had a good name.

Lex:

How long was that job?

Arturo:

Yeah, two years.

Lex:

And coming out of that, you started a different business with the same name as the music magazine. What was that business?

Arturo:

So that was the digital agency. I mean, it took a while. We were a consultancy of sorts. Basically what happened is when I joined Grow Think, the web 2.0 movement had just started.

Tim O'Reilly had just talked about Web 2.0 right at that moment, and I was fascinated with it. And we were in LA and our business was a lot of entrepreneurs coming to us to write business plans or helping them raise money. And so we had a lot of MySpace.

MySpace was really big, so we had MySpace for dogs, MySpace for this space for that. And part of my consultancy was writing this business plan marketing strategy and et cetera. But inevitably there was a little bit of product development in that because it was a lot of online businesses that were being pitched. And so I got really into the product development piece of it and I was just like, this is cool, but I want to go make stuff.

And so I looked at the online space and I was looking at web development and where websites were at when creative digital development was at. And I wanted to sort of bring the business strategy that I've learned in this consultancy mixed together with the actual making of things. And that's where I run. I first learned about user experience design and started learning about that as a practitioner and learning about design. And so the business slowly but surely pivoted to a design agency.

Lex:

And that was like 2007, 2008?

Arturo:

That was the beginning

Lex:

Okay. And from then, can you fast forward to now because now you're doing something kind of different. What does Kluge do now?

Arturo:

Well, today we're a virtual reality game studio, which I think there's a creative technology overlap, I like to say. But yeah, it is different.

Lex:

How did your clients shift in that time? Because when I used to work for you in what, 2011? 2012? Yeah, that's right. The clients at that time were small business owners. We had startups and things like that. So what do your clients look like now?

Arturo:

Well, yeah, because we have a service side, or traditionally we've been an agency. When we moved to virtual reality, we also look for clients and we have a good relationship with Meta. And so we're working with them on Horizon World. So we have a good size team working exclusively making Horizon Worlds games. And then Meta has different media partners. So we've now working with a few different media partners as well.

Lex:

And I've been along for the ride since 2007 because that's when you and I met. And one of the things I think is so impressive about you and why I wanted you to come on the show is that you, you've reinvented yourself so many times in the last 15, 16 years that I've known you, and there's a lot of us that have known you in that time. How do you think about reintroducing yourself to people that you've known for years as you're making all these pivots, right? It's like, oh, the music magazine is dead. I'm now doing this. Oh, I'm not doing UX consulting anymore. I'm now doing VR.

How do you think about that reinvention? 

Arturo:
I think it's all entrepreneurship, and that's what's been consistent, who turns a piracy thing into a music thing, like a legitimate music entity. And then even in consultancy, I was consulting primarily for entrepreneurs. We did work with bigger companies, but my passion is always entrepreneurship.

And that's what I love about you as well. We both sold big tech, but you were like, I'm going to go help small businesses. So I love that. I love the idea or I love entrepreneurs at all sizes, but hearing from founders directly, whether it's a bakery or a big business, I think there's a similar mindset, and that's the through line for me.

Lex:

Your marketing looks quite different as well. When you were running the agency, you were doing a lot of relational stuff, you were doing a lot of events, a lot of blogging, a lot of talks and things like that. Now you guys are doing paid ads, you're doing commercials. Tell us a little bit about that shift in the marketing picture.

Arturo:

Well, yeah, and I mean, I think it's Kluge as a company still. Our website is literally the same website from the web design days with now the games sort of layer on top. So that transformation in one way hasn't been complete, but what we are doing is marketing or individual titles. And basically what happened is we had a prototype of a game that it became a hit game, and we did not ambition it that way, but we have this rhythm game called Synthriders.

And that once we realized this thing is its own entity, we started bringing in a team to help us market it. And it was basically a new team from the community of synth riders. We built a whole new team and we learned a whole new skillset.

Lex:

You hired out of the community, didn't you? Of people that were fans of the game, which is really cool.

Arturo:

Yeah, we didn't have the experience. I remember we would leverage our toolkit. We did design thinking workshops internally to understand our audience and understand what was going on, but in reality, we didn't know what was going on and else how much can you actually pull out of the workshop. But actually my business partner Abraham, whom I never thought as a BD sort of marketing dude, he went on Discord and just found all these great people and just brought them to us.

And one of them was this gentleman called Pavel from Poland, and he starts telling us how to market our game, and we're like, yeah, we're going to hire you right now. And he turned out great. And I think when he started with us, the game was selling five copies a day, and we've seen days of thousands a day, so he's really helped us out. It's

Lex:

Funny though, you guys were not a game studio at all. Can you tell us, we sort of glossed over this, how did you go from being designers to being game designers and to building that trust with Meta?

Arturo:

Well, so very single handedly, Abraham took us on this journey. I'm part of why I'm grateful because Abraham's somebody I've had a lot of conflict with, but it turns out same. Yeah, yeah, doggone, he did it.

Lex:

Shout out to Abraham though, if he's listening

Arturo:

That's right. That's right. Yeah, no, very. And the reason my relationship with Abraham started was because he's this visual guy and I got to hang out. I lived at his house, I know his parents, I know his siblings, and he's a very different mind. He thinks in visuals more than words, and I think in words more than visuals. And so I was this abstract strategist and he was the maker. And so we really pair up really nicely. I remember when we started working together, he's like, my gosh, goodness, you do all the things that I hate and you just make it easy on me. And then I was like, and everything, you sort of let me talk out loud and this beautiful stuff comes out. So actually a lot of our projects were done real time screen sharing, very much working together. I remember one of my employees said, you guys are one designer, but with two people, that's not efficient.

What are you? But all that was incredible. And so there was a time with the business where that wasn't so good where the business started making money from B2B and mid-market B2B creative services, and Abraham wanted to make video games and those things couldn't be further apart. And so the strategy is in me is like B2B is making money, games is uncertain. I don't mind, it's our experimentation because that could be sold to B2B, but why are we changing domains?

We'd have no expertise here. We don't know that audience. We don't know that market. That made no sense. Nonetheless, we let it happen. We let it all fall. Long story short, Abraham pulls through and the game starts getting traction and the community starts reacting and he keeps showing us the progress and everybody starts seeing the potential. He keeps bringing these funny gamers to our office, which were very different people than the B2B people.

And we started seeing like, okay, this is going somewhere. And then lo and behold, the VR market changes. And this is a little bit of luck, I think I'll say parenthetically, we were doing design thinking workshops back in this time right before the game starts going in the right direction. And I remember we had a group doing a workshop in our office, and one of the things they joked about was the stupidest things you could be doing. I think this was 2017, and they said, yeah, if you were trying to make a VR game happen, and they all laugh out loud, and I'm standing there as the facilitator going, that's exactly what's happening upstairs. Am I making the right choice?

So at the time, it didn't seem like a smart market decision. It wasn't aligned with our market. But nonetheless, what Abraham did well is that he persisted and he didn't listen to anyone, but he put 12 hours a day into this. And I think seeing that work, it's what it takes when you're coming from nothing. It's like nothing less than that was necessary to make this happen. And so I really admired him for, we all did, but we were still question mark because you're stepping into the unknown.

And what happened is the game comes in a time when meta releases the Oculus Quest, the first version, and that was a big inflection point for the industry. And we were a very early game there. We came in October 31st, 2019. I think they launched in June or July of that year. So we were very early and the very first day the sales were just, and we were number two in the store that week. And from there on out, we knew we had a business.

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Lex:

What was the timeline from game release to we know we have a business?

Arturo:

I think we started working on Synthriders in 2017, and that was October 31. I'll remember that day very well of 2019 when we knew we had a business.

Lex:

So two years, like a year to two years?

Arturo:

Yeah, and there was a lot of anxiety in those tweet. It's not so clear

Lex:

You've weathered waves of volatility for 23 years, essentially give or take a couple when you had a full-time job, you're in unique and having barely had a full-time job compared to the rest of us. But it is like your ability to know that you will find a way, right? Because in your mind, maybe you're going, maybe it's not this VR game, but you're not thinking the company's going to shut down. You're thinking what's the next move for the company, right?

Arturo:

That's right. That's right. I think that's why my main skillset is as an entrepreneur and I am embracing the unknown. I actually have the name Kluge is very dear to my heart because of it, because it's a funny name. I remember one of my first times I handed off Kluge business card, a guy from Yahoo said, he just looked at it and went like, ha, this is the worst company name I've ever heard.

I really embraced that story now because I think life is a Kluge and the web is a Kluge and things are not always so obvious and elegant and everybody tries to be very put together and tell their strategy. And everybody's very good at, or not everybody, but there are people that are very good at synthesizing information, having digested it and rehearsed it over time and saying something very astute. And it seems like very on point and thoughtfully put together. But the reality of life is more like we're learning on the go and we have to improvise. We have to think on our feet and things change and Kluge embraces that. And I have embraced that. And if we need to pivot again, I'll do it. No problem.

Lex:

This is, I think, one of your strengths in terms of riding the waves of seasonality. I mean you've ridden through Web 1.0 to 2.0 to 3.0 now riding all of those different changes is your ability to leverage expertise when you need it and know where those gaps are in your business, which I think is one of the things that differentiates you from someone who maybe gave up years ago. 

Arturo:

I think part of it is letting go of your own ego and realizing that you don't have to be the expert to lead a team into a new world.

Lex:

On that note, one of the ways that you've done this is through key relationships that you've developed. And so can you talk us through a couple of the key relationships? I'm thinking about Abraham and Pedro, especially Abraham since he's still with you. Tell us about how you find these people and how what those skills are that you need support with. Yeah,

Arturo:

I think it's an interesting combination of entrepreneurship, feels like there's a little bit of a personal journey and a lot about knowing thyself, and then there's a bit of a good instinct when you see something that is appropriate to where you're going. And so Abraham's a perfect example of that. What happened was at the time when our early days of the business and I had previous business partners, we were just the inception of Kluge was strategists talking about making things, but not necessarily having had that experience. I somewhat did because I built a music magazine online, but it wasn't in a professional way, let's say.

And so here I am selling this professional services. So the first thing we do is we hire vendors. We hired a vendor that we met at a UX design class in UCLA and through them they were a San Diego based company.

And through them we ended up talking to Argentinians. And I'm from Venezuela, and so I am like, what am I doing paying a San Diego company to talk to Argentinians?

But then there was also this thing of, I want to go back to Venezuela. So there was a little bit of a personal interest and a business instinct. And I remember asking my partners, do you think it's too crazy for me to go to Venezuela for a month and try to source some leads? And actually what happened is we ended up finding leads before that through my cousin in Venezuela. I ended up visiting once we had an assigned developer at this shop and this was Abraham's studio. And I ended up staying in that studio for eight months. It was totally impromptu. Everything was very organic. But by the middle of that journey we had, there was a moment where Kluge was Kluge Aberic, which was with Abraham's company. There was a bit of a merger, an informal merger of sorts. And long story short, at the end of that whole thing, and it was like a two year process, his partners went away. My partners went away, and him and I became partners, and Kluge stayed. And I came back to the States and it was a totally different company with the same name,

Lex:

Like a Phoenix rising from the Ashes. It's been amazing to watch. It's been amazing to watch because it's been like, I remember I met you before you went to Venezuela. I remember those former partners. I painted the office that you were in with them, right? And then I remember when you came back and you were like, here's what we're doing now. I love it. Right? So one of the reasons why I wanted to do this episode with you is that I think you really are able to separate who you are as a person from your company. And I think that's kind of unique as well. We were talking before we started recording about how the phrase be who you are. What did you say about this being who you are, what people say about that?

Arturo:

Yeah, I mean, I think there is an idea out there that just follow your passion and you're going to make money. And I don't think that's necessarily true. I don't think it's not true. It's true for some people, but know that it's not always true. So my passion is philosophy, and I like classical philosophy. I don't even trendy philosophy. I like people like Aristotle and Thomas Aquinas and Plato, and I can tell you pretty much that there's no market for that because I know that the top of the line in that world, and they're not making much money, let me tell you, they'd rather have a video game company. I can guarantee you that.

And I admire their brains and their intel way more than anything I've ever done. But they're struggling financially. And that's true for other fields as well. And some of it is an element of luck. So I think knowing that knowing who you are is important, but you got to balance it with are you trying to make money or are you trying to follow a hobby? And sometimes those merge, but not all the time.

Lex:

So can you talk about that, how you look at the company and its success and how you sort of find a mix of something that you're interested in enough, even though you may not identify this as your passion, it's like you have to be into it enough to spend every day on it and many years on it. How do you think about identifying that thing? You're passionate enough about where it intersects with profitability?

Arturo:

Yeah, yeah. Well, I had to deconstruct myself a little bit further than just like, I love philosophy, therefore I'm going to do a philosophy company. And by the way, there were many attempts. I did philosophy and design talks, I did philosophy. So longs. I talk about philosophy more than people care about. And all of that is true.

But I think part of my philosophical brain is also a good strategist because philosophy is meta concepts and I can think big picture, and I like connecting the dots at a high level. And that's something that served me well for the business. And that's been a lot of my role in the business. That's my style in product development. I'm a little abstract. I'm more abstract than a maker that can be very hands-on, but I pair up well with a maker that can be very hands-on. And so I have leveraged some of that passion.

And then the other places, as we've grown, I've been able to be more mindful and more thoughtful of moral, how morality comes into the company and how we treat our employees and what people first means for us, which I always think people first, that's something everybody says, but what is a person is a philosophical concept. So you really got to dig deep into those things. So I've found more the details of what I love and pair them together with the world of technology and try to do thoughtful, ethical, mindful technology development.

And I'm very excited. I'm very passionate about people. So I always tell my team, like Synthriders is amazing. It's making us lots of money. It's doing great. The game is great, but what I really care about is how we as a team made sense. Writers, we continue to make sense riders and how we as people have grown as a result of Synthriders. And that's more important than the thing in itself. And so that's how I get, you can see me spark up because I care about my people more than I care about the things. But they go together.

Lex:

They do. We did another episode of the show with Kristina Bartold-Sorgota, who talks about, she's an agency owner and she talks about how you have to be passionate about the team to want, it's a whole different skillset from making the product. It's about the people.

And it's interesting to hear you talk about this now, having known you as long as I do, because I feel like that's been a shift for you as well. There was a point in the company where you technically had full ownership and then at some point you brought in several partners, and now you have several partners in the business. It's not just Abraham. There's what, six of you:

Arturo:

No, four. Daniel and Cameron.

Lex:

Four. So tell us about that transition from, I'm running this to, I'm really bringing in, especially since you already had partners in the past and you were sort of burned by that a bit, but what was that like doing that again?

Arturo:

It took some time. I mean, I think Cameron is a good example. Cameron knew the business since the day. The story is I quit Grow Think. And I met him through a Grow Think relationship. So we go out and have sushi for lunch, and I tell him, I just quit today. And he is like, lunch on me, buddy. You're not going to see a paycheck anymore. And then over time, that was 2007, and by 2013, he was full-time with us. But it took a while. And even then he was a little hesitant, where's this going? All right, let's try to figure this out.

But even when he came in, he understood because he saw that journey by 20, 20 12, I think when my previous partners left. And he saw that journey. He saw how difficult it was. And so he was respectful of the fact that I didn't want to go into an equity deal right away. But with him, and Abraham and Daniel who at the time were in Venezuela, they were all wanting to be partners.

And there was a partner conversation, but everybody was mindful that it needed some development. And so they were willing to jump in to come in and show their value and sort of walk the walk before the equity deal. And it took a lot of trust coming in, hoping for something that I might not grant. And then for me, I'm saying yes to something I felt committed to, even if it wasn't on paper, I felt the commitment anyway. And I think it was three years later where we actually did it. It was like one night we finally did it. We call out the numbers, Cameron put it on a whiteboard, and there it was. And honestly, my first reaction was like, what have I done? I don't know if this was the right move.

And it wasn't immediately obvious, but about a year in we were like, oh yeah, that was the right move. But now I'm like, thank goodness I did that.

Lex:

Why do you say that? Thank goodness I did that. What changed when you made that official?

Arturo:

Oh, well, I think even though there was all this conversation, to have it on paper did change them. And it wasn't an immediate change because I used to call myself a benevolent dictator, and that was the way that the company was run. And there was a process of letting go of that. And even while I'm letting go of that, they're not necessarily sure of how to be different, how to act like partners. So even while there was a shift in the mind when the paper comes in, but it took some time for that to process into action.

And now it has. Now we're just in a great spot. We actually had a difficult year in 2018. We almost fell apart financially, and I'm really happy that that happened because when now that the times are really good and really there's a lot of growth for us, the fact that we went through all of that together, we're just so tight with each other and we're so good at making decisions together and we're so complimentary. I think what clashed was how different we were and now that's our strength.

Lex:

Yeah, I love it. I mean, it definitely been up and down. It wasn't always as easy as it's sounding now, but I think finding that equilibrium with other people, it's nice when you can do a lot of things yourself, but there's so much strength when you can find those beautiful partnerships with people that compliment you and where you can figure out the balance of personalities to really drive the business forward. And it does seem like it's really responsible for a lot of the impressive growth y'all have seen over the last few years.

Arturo:

And so now we're working with all the big, everybody in Big tech that's dealing with XR or the Metaverse has actually reached out to us and we're in deep conversations or we're working, collaborating or about to collaborate.

There's a lot of stuff going on, but honestly, it feels easier to manage this than the days of the restaurants and the print shops. And it was great to get all that experience, and it was great to see the wide range. We did a lot of mid-market tech companies in la. We work with companies like Deloitte, you were part of that. We work with the smaller businesses and the aggregate of that experience has made us really well suited to our current position where we're in a position of profitability and serious growth without outside investment and without anybody else telling us what to do. And I think if I had gotten that 10 years ago, I would be a lot more irresponsible than I'm being now.

Lex:

It's funny what you say about that because I think a lot of folks listening are trying to sell to small business owners as well. And it is really, I noticed this too when I shifted from selling to bigger tech companies to small business owners, it is a thousand times harder to sell a restaurant website than it is to sell Facebook on a web app project. It is so much harder. Can you talk a little bit about that and sort of what that ease looks like for you now that you've made that shift? Yeah.

Arturo:

I mean, the thing with small businesses that you have to educate them. They don't necessarily know anything about your field. So if they're doing web design, they might need it, but they don't even know why they need it. There's some resistance, there's some fighting. And then they're also, they're managing servers or account logins, and they don't know what is happening. There's a lot of blame and everything's always your fault. You have to do a lot of education and a lot of explanation, a lot of contextualization. And also, we didn't have sense writers. We didn't have the meta logo behind us. So then there was a sense of, I don't really believe you're the expert, even though I don't know what an expert looks like. And so it was really difficult. And now for example, with Meta and Horizon, their game experts, there's a lot of trust with us. We co-create. We're on the same page. We're both makers. They work in tech. It's just so much easier.

Lex:

Archer, if you could give one tip to our audience about how to connect with their best clients, what would it be?

Arturo:

I think sort of think about who you are. I'm paired up with what the market is, don't do either in isolation. It's both. It's not either and or it's both. Not either or, but either and.

Lex:

You want to share anything that you're doing. What's Kluge up to? Where can folks find y'all?

Arturo:

Yeah, we're building a follow-up to Synthriders. There's another thing if my strategist brain would've been like, we made one of the top rhythm games in vr. Let's own the music at XR space. But Abraham is more of an innovator and he was like, no, I want to make a fighting game that has nothing to do with what we've built for the last few years.

And so we have a fighting game. We have a street fighter for VR, that kind of technical fighting game, a classic arcade fighting game. It's enclosed beta now. It's going to launch next year. It'll be in open beta soon. And we're very excited. It actually looks great and it feels great, and we're working on other exciting things. I think we've learned to be a pretty dynamic game studio. We're bringing a lot of people from A+ game experience to the team, and we're growing in both the horizon side and in our own IP and expect more things to come out of us,

Lex:

More things to come. Many more years of success to you. Thank you for being on the show.

Arturo:

Thank you Lex

Lex:

One of the things that came up when we weren't recording was how while marketing the titles of the games is doing really well, marketing, the company has taken a back seat, and that creates a space where the games are more famous than the company behind them. It reminded me a bit of the creator model, where you end up with a series of projects or sub-brands, and there's not necessarily a company unifying everything together. It's sort of a modern switch on branding.

And what I think is really powerful about this for small business owners is it offers you some flexibility to try things out as a sub-brand, as a project, as a title, and not base your entire company persona around it. It offers us a little bit of an opportunity to test the waters and see how something goes, and then choose to bring it closer to the fold, amplify the company behind it, et cetera.

Check out what Arturo and Team Kluge are up to on LinkedIn and on their website, klugeinteractive.com, and let him know if you think they need their own podcast. If you're into VR, you should definitely check out Synthriders and their game Final Fury is now in beta.

If you like this episode, you'll probably also like the one I did with Dana Publicover where we talked about the pivots that she's made in her business and how she's found clients all along the way, even when those ideal clients have shifted.

Find it on the Low Energy Leads playlist wherever you're listening to this episode.

Until next time, keep your energy low until the value will be high.