Is ToyBots Dreaming Big Enough?

One of my favorite startups at TechCrunch50 earlier this week was ToyBots, a spinoff of the popular Facebook/iPhone game developer Social Gaming Network. ToyBots has created technology that they’ll license to toy manufacturers that will make those toys Internet connected and controllable. Our launch post on them is here.

I think ToyBots is the future, where all toys (and just about everything else) is Internet-connected. But I don’t think the company is dreaming big enough.

There are obvious similarities between ToyBots and Teddy Ruxpin, an 80’s superhit toy that moved and lip synched stories via a cassette tape player hidden in the back. 1.4 million of the toys were sold in the first year it was on the market in 1986, and it was the number one selling toy in 1985 and 1986. Worlds of Wonder Inc., the company that launched the toy, had sales of $93 million in its first fiscal year.

Now imagine Teddy Ruxpin with an Internet connection. Upload stories (even ones that you read yourself) over Wifi. Then the toy talks them back to you. There’s a website that acts as a remote control and mirrors your movements, possibly even via a webcam that detects and understands your movements. Make and share a choreographed set of movements.

Add in the huge virtual and physical merchandising opportunities as the toy gets stuff in the real and virtual worlds.

ToyBots done right is a multi-billion dollar revenue opportunity. And CEO Shervin Pishevar knows it. But there’s just one problem. “We don’t want to build the toys ourselves. We want to be the gaming cloud,” he told the judges at TechCrunch50.

…And that’s not an unreasonable business plan. There’s real technology behind ToyBots, and some of the huge toy companies may license it instead of trying to just duplicate it in house. ToyBots can make some money off those fees and revenue sharing.

But what if those big toy companies don’t license ToyBots and instead go a parallel path to develop their own technology? Or another possibility – they do license the ToyBots platform, but the toys are a dud? And even if they do create a winner, they’ll keep the lion’s share of the revenue and profits.

In my humble opinion (which was shared by one of the TechCrunch50 judges I spoke with backstage), ToyBots shouldn’t be hitting for a single or a double, they should be swinging for the fences and launching their own superhit toy. If they fail they fail. Perhaps they could still pursue their technology licensing. But if they do it right, they’d win big. And I like companies that want to win it all. Even if they fail, they know they at least gave it a shot.

In addition to developing the platform, ToyBots should be hard at work on the first toy, for a release by the 2010 holiday season. Something significantly more cuddly and less please-don’t-kill-me-while-I-sleep than the functioning prototype they showed off at TechCrunch50. It talks. It walks. It has a virtual world and website remote-control. It’s always connected and downloading commands and content. It’s the must have toy of 2010. And it’s the first TechCrunch50 company to go public.

And once that hit is in place, everyone else will beg them to license the platform, too.

The next step is to hire the best toy designer in the world. Someone hungry, with a vision. Probably hard to work with. An artiste. Marry that person to this hard core tech platform and you’ve got something quite interesting. And if it fails, you don’t have to hang your head. At least you swung the bat, instead of watching others do it.