Michael Acton-Smith To Step Aside As CEO Of Mind Candy As Moshi Monsters Struggles

Mind Candy, led by star gaming property Moshi Monsters and founder Michael Acton-Smith, has been seen as one of the breakout successes of the UK startup and gaming world. But as many others in the space know all too well, game fads come and go, and so things are changing.

Today Mind Candy is announcing that Acton-Smith is stepping down as the company’s CEO, while Divinia Knowles, current COO, will become president of the company and take a place on the board. The company is now looking for a new CEO. Acton-Smith will remain in the role until that person has been announced but will also be moving to a creative role in the company.

The changes come at an interesting time for Mind Candy. Moshi Monsters appears to be dropping fast in popularity, and Mind Candy is rolling the dice hard on a new, upcoming game called World of Warriors, while at the same time pushing hard on new mobile apps.

Mind Candy is firm on presenting this as a mutually-agreed decision.

“I love this company, I’m obsessed with it,” Acton-Smith tells us in an interview, “but Mind Candy is a different kind of company to when it was just Moshi Monsters. There is a lot of staff, operations globally, and challengers.

“I’ve moved away from the creative side, which is the part that I’m crazy about…. I’ve had discussions with the board and the most value I can add is on the creative side rather than operational side. I’ve decided to step aside into a creative leadership role.”

He’s also outlined some of these reasons and developments in a video that Mind Candy has posted on YouTube, embedded below, in lieu of a more formal, written press statement.

The move, the company says, is more in the vein of what many startups in the U.S. also do as they grow.

“We’ve spoken about the difference between UK and European startups, and I think what’s extraordinary about Mind Candy and Michael is that this is a Silicon Valley move,” adds Saul Klein, the Index Ventures partner who sits on Mind Candy’s board. “You don’t see this happening normally in the UK where founders and CEOs have such an extraordinary level of ambition of what this business could be.”

Much like Rovio with Angry Birds, Mind Candy has taken the Moshi brand and expanded it to many other places, from toys to TV shows (and don’t my kids know it). The last publicly-stated figures for its audience is at over 80 million registered users.

In Mind Candy’s yearly accounts at UK’s Companies House for 2012, the last published year (2013 are due to be published at the end of September this year), it reported total revenues of £46.9 million ($80.3 million), up over 60 percent on a year before, on pre-tax profit of £10 million (£17 million).

But there are indicators that in recent times Mind Candy’s star has fallen. Traffic to its flagship property, moshimonsters.com, has decreased by some 53 percent in the last year to June 2014, according to comScore. It’s not clear how much of an impact that would have on a business that claims to have pulled in some £100 million on licensing revenues, but what it does show is that the core brand experience is changing.

Acton-Smith is refreshingly honest about the challenges facing a (relatively speaking) legacy gaming company. “Our business has moved from web to mobile, and it’s a tough space for kids and entertainment companies,” he says. “We have great games and lots of downloads but it’s challenging out there.”

That’s echoed by Klein, but along with an ambition to think ahead.

“Moshi never quite cracked the U.S., but we think Warriors can,” says Klein, who describes Mind Candy in terms reminiscent of another gaming juggernaut that has seen some stumbles, Rovio.

“What’s exciting to me is that the original vision for Mind Candy was Disney 2.0,” he says of the company and its ambitions. He first became acquainted with it when Acton-Smith was just starting it out in his flat in Battersea in South London (before the heady days of the “Silicon Roundabout” in the East End of town).

“Even then, the company had a number of incredible brands and products,” he contines. “So now what we’re seeing is finally that transition from Mr Moshi to Mr Mind Candy. This is coming at a point when the business is mature enough and has a number of really exciting products.”

Mind Candy, which has been around since 2004 and built its business around desktop web use, has been trying to change with the times by turning its attention more aggressively to mobile. Last year, to coincide with Moshi Monsters’ fifth anniversary, it launched three new games.

And earlier this month, the company kicked off a new app and social media effort in the form of PopJam, a social network aimed at children that the Guardian described as “Instagram for kids”.

(Not this PopJam.)

The company, according to CrunchBase, has raised $21.5 million, from Index Ventures, Accel and Spark Ventures between 2006 and 2011. Earlier this year Index partner Saul Klein joined the board.

We had heard that the company has also recently had to raise a debt round, possibly to help it stay afloat, but Mind Candy would not confirm this directly, nor deny it.

“From time to time we always look at our capital, and over the last few months we decided that we needed to do a round to take an opportunity to go forward,” says Knowles. “There are lots of financing options and debt is one of them.”

Acton-Smith’s video below: