My First Million: The techie who turned £4 into £4 million
An ingenuous technology led Stephen Streater to ditch his PhD and found software company Eidos. But the serious money came with the advent of the Playstation.
As a 24-year-old PhD student in the physics department of King's College London in 1990, Stephen Streater had developed a novel way of dealing with the problem of image recognition' the means by which a computer turns information into an image. "All standard applications didn't work, so I said: I know, I'll invent a new way'," he says. His new way involved an entirely different approach to the problem. He began applying the new approach to editing video on computers. Then, fortuitously, his brother met a video editor at an entrepreneurs' conference in Brighton.
The editor was impressed with the ingenuity of Streater's application, because, at the time, a computer was doing "all the tasks of traditional video-editing equipment, which cost up to £30,000 a unit". He convinced Streater to start a business and enlisted the help of a neighbour a venture capitalist to get him to do so. The venture capitalist offered to put up £1m to found the company that would become Eidos.
"At the time, PhD students could only work six hours a week, but the venture capitalist was only prepared to invest £1m if I worked full time." For a student on an annual Government grant of £2,000, it was too good an offer to turn down. So, with an initial share capital of his own of £4, he founded Eidos. "The corporate finance lawyer told me to put in £40 of initial share capital, but that was a month's food for a student, and I couldn't afford it. So I put in £4."
It didn't seem to matter, as growing the customer base slowly between 1991 and 1993 brought in big-name clients, such as ITV and the BBC. But it was a pioneering video games console that would bring in the serious money. The release of the Sony Playstation was delayed by a year in the mid-1990s, suddenly pushing companies developing games for Sony close to bankruptcy. Eidos bought up these firms, including (very cheaply) the company behind Tomb Raider which has become one of the best-selling video games of all time. Streater was convinced, rightly, that the Playstation would be an immediate bestseller. "The Playstation's games were made on CDs, which could be made for 30p each overnight. Cartridges (which preceded CDs) cost £10 each to manufacture, and could take up to six months to be delivered."
The Playstation has since been the first console to sell more than one hundred million copies and at the time made Eidos £100m. Streater himself pocketed a million times his original investment and has no regrets about giving up his PhD. Had he continued as an academic, he says, he wold simply have been "pigeon-holed as a techie".
Now the head of Forbidden Technologies, Streater is still developing video-editing technologies, but this time equipping computers with the capability of editing videos over internet connections. "We're seven years ahead of the competition, which is good, but you have to be careful not to get too far ahead." If you do, he says, "you'll run out of money".