In some instances, one must acknowledge that merely being “pretty good” doesn’t suffice. Just ask Spenser Skates and Curtis Liu. Today, these two MIT alumni are recognized as the co-founders of Amplitude, an analytics software company boasting a market capitalization of $1.35 billion and serving over 2,300 corporate clients. A decade ago, their pursuits were vastly different—managing a voice recognition startup named Sonalight.

As Skates, the 35-year-old CEO of Amplitude, describes it, Sonalight was akin to an early version of Apple’s Siri before Siri even existed. In 2011, they established Sonalight, secured a coveted position in Y Combinator’s startup accelerator program, and garnered 500,000 app downloads.

Then came a decision that might appear surprising: they chose to shutter it.

Internally, Skates and Liu recognized that while people initially used the app, they didn’t return to it regularly. “Sonalight was a top-tier idea,” says Skates. “Most ideas are subpar. It was decent, but not the absolute best. It led us to consider seeking a top-tier idea.”

They discovered this idea within their in-house analytics tools, which they’d developed to gain insights into user behavior. “We probably spent about half our time doing that—a somewhat arrogant mistake by engineers, trying to build it,” Skates explains.

However, at Y Combinator, their tools outperformed those used by their peers. Thus, in 2012, Skates and Liu commenced their work on Amplitude, officially launching the analytics platform in 2014 alongside co-founder Jeffrey Wang. By 2021, Amplitude had amassed $336 million in investments, and Skates made the decision to take the company public.

In the following interview, Skates delves into the risks associated with abandoning Sonalight, the process of cultivating exceptional ideas rather than settling for good ones, and why software engineers may not always be the ideal startup founders.

CNBC Make It: What prompted the decision to move on from Sonalight? Did you have concerns about exchanging a decent idea for one that might not work at all?

Skates: When embarking on something new, there is always an element of risk, but the decision wasn’t particularly challenging for us. The key question was: What was the potential success of Sonalight?

At Y Combinator, we had this remarkable, magical demonstration on stage where I placed my phone in my pocket, engaged in a conversation with it, and received responses. This garnered extensive press coverage, a modest amount of seed investment, and around 500,000 downloads. It validated that there was a genuine interest in the product.

However, after nearly a year of development, it became evident to us that the technology wasn’t advanced enough to deliver an outstanding user experience and encourage sustained engagement. It lacked the necessary utility to become a truly sticky product.

We could have persisted for four or five more years and achieved moderate success as a company, but it wouldn’t have been the breakout, massive success we aspired to. Sonalight was not the most promising endeavor for us; there were more impactful avenues to explore.

Once you resolved to change direction, how did you identify the “best” new idea to focus on?

We spent a month engaging in discussions and exploring various ideas. It’s crucial to locate a problem that aligns with your strengths, weaknesses, and interests. Technically, voice recognition was an incredibly challenging problem to solve. It was a probabilistic issue without a clearly defined correct answer.

Analytics, while considered a challenging problem by the average engineer, was relatively straightforward for us because we specialized in algorithms. Creating a distributed data store was well within our capabilities. It represented a solvable problem with a definitive solution. If we could address it, we knew people would want it. Consequently, we decided to embark on that journey, and it proved significantly easier.

We had developed our internal analytics, and what was intriguing was that many other companies were seeking the same insights we were gaining about the customer journey within Sonalight. That realization was a turning point. We spoke to 30 companies, identified a substantial need, and initiated the process of building Amplitude.

Why did you feel the need to pursue “breakout, massive” success? Was there something wrong with aiming for “good enough”?

[After college], I dedicated a substantial amount of time pondering how I could make a positive impact on the world. I reflected on my abilities and realized that I possessed expertise in software development. Consequently, I decided to determine the most significant way I could apply this expertise.

I spent a year working in finance and high-frequency trading while simultaneously attempting to recruit fellow MIT friends to embark on a startup journey. I reached out to classmates, peers, and other acquaintances. Surprisingly, nobody was eager to start a company.

Engineers, it seems, often express enthusiasm for the idea of founding a startup but rarely take the plunge. Many end up at companies like Google, becoming absorbed in their work and never returning to the entrepreneurial path.

Engineers tend to be risk-averse, pursuing a course only if it offers a clear route to success with interim validation. Conversely, startups and entrepreneurship entail embracing uncertainty and taking on personal risk. There are no supervisors or teachers providing reassurance. It’s either you have something people desire or you don’t. One must possess the determination to persist through the uncertainty and recognize the potential inherent in their pursuits.

According to a recent report from venture capital firm Konvoy, publicly traded gaming companies are holding a substantial $45 billion in cash and cash equivalents, potentially paving the way for further consolidation in the $188 billion video games market. Key players like Activision Blizzard, Electronic Arts, Singapore’s Sea, Japan’s Nintendo and Bandai Namco, South Korea’s Nexon, and China’s NetEase collectively possess $45.1 billion in liquid assets, as per Konvoy’s analysis of their latest public reports. This financial strength positions them to consider acquisitions aimed at expanding their intellectual property and product offerings.

In particular, these gaming companies are focusing on strategies to enhance gamer engagement, such as live-service games that provide ongoing content updates and paid subscription packages offering free games and access to cloud gaming. This approach allows players to enjoy games via the cloud, eliminating the need for traditional downloads.

Overall, publicly listed gaming companies experienced a successful year in 2023. Konvoy notes that the VanEck Video Gaming and eSports ETF, which tracks the MVIS Global Video Gaming & eSports Index, has risen by 20% year-to-date, surpassing the S&P 500 index’s 12% year-to-date growth.

Additionally, Big Tech giants like Amazon, Microsoft, Google, Apple, Meta, Netflix, Tencent, and Sony are well-positioned with a combined $229.4 billion in available cash for potential gaming-related deals.

Konvoy anticipates that the recent Microsoft-Activision deal, where Microsoft acquired Activision Blizzard for $69 billion, will stimulate further merger and acquisition activity in the gaming industry, potentially giving rise to a new generation of gaming companies. This move strengthens Microsoft’s presence in cloud gaming, which is set to open doors for emerging game developers, infrastructure companies, and gaming platforms.

Venture capital investment in the video game sector faced a 64% year-over-year decline in the third quarter of 2023, signaling a slowdown compared to the industry’s booming period in 2020 and 2021. Gaming startups raised $454 million globally during this period, down 9% quarter-over-quarter and more than 64% from the same period a year ago. Nevertheless, Konvoy expects a brighter outlook for gaming venture capital and startups in the coming year as investment conditions improve. Although funding for gaming companies is returning to a sustainable new normal, it is expected to continue at a similar pace for the next few years.

The gaming industry has faced challenges due to macroeconomic conditions, including high inflation and rising interest rates impacting consumer discretionary spending. While 2020 witnessed robust growth in the gaming sector, 2022 and 2023 have been more challenging as central banks raised interest rates. Despite these economic headwinds, the global player base continues to grow, reaching 3.381 million players worldwide, according to Konvoy.

The video game market remains substantial, with projected sales of $188 billion in 2023, a 3% increase from the previous year. Long-term growth prospects for the industry look promising, with Konvoy forecasting a compound annual growth rate of 9% over the next five years, leading to overall sales of $288 billion by 2028. This projection suggests that the gaming industry will continue to thrive in the years to come.

Vancouver-based startup Hiive has secured $4.2 million in fresh capital for its innovative marketplace, facilitating the trading of shares in privately held venture-backed firms on the secondary market. Established in 2021, Hiive’s mission is to “unleash the full potential of the private markets” by creating an automated platform for private share transactions. It utilizes bid, ask, and trade prices provided directly by verified buyers and sellers on its platform to deliver precise, real-time valuations for late-stage startups, mirroring the methodology employed in public market valuations.

This funding infusion coincides with a period when numerous late-stage technology companies are choosing to remain private for extended periods, due to a general slowdown in the tech market. This has led to an increased demand from investors and employees seeking to liquidate their shares.

Salil Deshpande, General Partner at Uncorrelated Ventures, remarked, “Many funds are active secondary buyers, and with IPO markets being choppy or companies just choosing to stay private longer, there are many more secondary sellers.”

Hiive’s platform allows users to monitor the fluctuation of a private company’s stock, similar to public stocks. As of the previous month, the platform hosted open offerings valued at approximately $1.9 billion, with over 570 companies actively listed, including Seattle-based startups Outreach, Icertis, and Convoy. Hiive boasts more than 12,000 users, including over 1,000 institutional members.

Over the past year, the startup has witnessed substantial growth, increasing its rate and volume of transaction completion by around six times. It competes with other private market share platforms like EquityZen and Birel.

Hiive generates revenue by imposing a minimum fixed dollar amount and a commission on transactions facilitated through its platform.

CEO Sim Desai, formerly a Managing Director at Toronto-based investment bank Setter Capital, leads Hiive. The company was co-founded by Prab Rattan, Stuart Eccles, and Sarah Huggins. In the course of its expansion, Hiive has expanded its workforce from six employees at the beginning of 2022 to a current count of 45.

Uncorrelated Ventures spearheaded the funding round, with contributions from Splash Capital, Harmony Venture Partners, Hack VC, Agmen Capital, and Renaud Laplanche, co-founder of Lending Club. Hiive has disclosed a post-money valuation of $77 million.