App games studio leverages its Canadian advantage

Bernard Simon

Financial Times

Published Friday, Nov. 25, 2011 3:22PM EST

Last updated Friday, Nov. 25, 2011 3:25PM EST

Even by the usual informal standards of the software industry, Ray Sharma and his businesses make a shambolic first impression.

Mr. Sharma, chief executive of Toronto-based XMG Studios, chairman of Xtreme Labs, and partner in several other affiliated mobile app and game businesses, is in baggy jeans, a Captain Morgan rum T-shirt and a woollen cap topped with sunglasses. He sips coffee from a polystyrene cup as he greets a visitor in XMG Studios? reception area, which doubles as the staff lounge and kitchen. A pile of pastries near the microwave attests to his practice of buying breakfast for the staff.

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The 190 or so employees - almost all young men, predominantly of Asian origin - are scattered across five floors in two adjacent buildings. Consolidating the sites, Mr. Sharma says, would strain the only men?s toilet on each floor (the women?s is in far less demand).

?If you?re going to have several hundred people between five floors, it?s going to get a little chaotic,? he says. ?Washrooms are the bottleneck to office design.?

Mr. Sharma is speaking just before flying to India to try to convince Bollywood producers that software developers in Toronto can produce games for Indian smartphone users. ?I?m thinking there is a huge opportunity to do games for Indians and the Indian market,? he says. ?The irony is that I?m pitching [to] Indian partners to outsource to us.?

As he sees it, Xtreme Labs and XMG have a big advantage: a culturally diverse workforce in one of the world?s most multicultural cities. He estimates that about half of their employees were born outside of Canada; others are the children of immigrants. ?For game development, multiculturalism allows for different perspectives,? he says. ?Why perspective is important is that it helps drive creativity, and creativity is the essence of innovation.?

Away from the reception area, a more conventional picture emerges in Mr. Sharma?s eyrie-like 16th-floor office. The handsome wooden desk once belonged to the CEO of BCE, Canada?s biggest telecoms company, from whom Mr. Sharma bought his home in Toronto?s fashionable northern suburbs.

Mr. Sharma uses an Apple laptop to project a slick presentation on the mobile app and video game markets on to a 46-inch wall-mounted TV screen. ?Games are the driving force of the app economy,? Mr. Sharma says, citing sources such as Nielsen, ABI Research and PwC. One chart shows that games make up 60 per cent of apps with the highest revenues. Another shows that playing a mobile app game costs 5 cents an hour, versus 18 cents to watch a film on TV or $6.25 for an hour at the cinema.

Mr. Sharma, who came to Canada from India as a child, worked as a technology analyst for Credit Suisse First Boston in San Francisco, before moving to BMO Capital and GMP Securities in Toronto.

Then, in 2008, he had an urge to set up his own business. ?Ten years in the investment banking industry was enough,? he says. ?I started getting a little fatigued, burnt out from that type of work and environment.? He adds: ?My roots were in every type of clich� entrepreneurial start-up that you have ever heard of - lemonade stand, paper boy, house painter at university.?

With some partners, he set up Extreme Venture Partners, a venture capital company that soon gave birth to Xtreme Labs. His role was to connect the dots and bring the initial investors, board and management together.�Xtreme Labs develops its own smartphone apps, but also nurtures promising start-ups in the hope of spinning them off.

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