I’ve been following the drama surrounding AviWorlds much, much closer than I would have liked — because I keep getting emails from the folks involved, and also because it’s my job.
And I can honestly say that I don’t know who owns AviWorlds anymore, who runs it, and why people keep coming back to the grid.
But it occurs to me that grid buyers might not know what exactly they’re getting into when they buy a grid, so here is my due diligence check list.
If I missed anything — please let me know!
Also, this is not legal advice, but general suggestions about some thing specifics to grids, that your contract lawyer might not be aware of.
Buying a grid isn’t just a matter of getting all the logins and passwords.
Is there a terms of service?
Don’t buy a grid if it doesn’t have a terms of service that specifies that the users give permission for the grid to use their content even after the grid is sold.
The way copyright law works, as a rule of thumb, if someone creates something and gives it to you, you’re only allowed to use it for the initial purpose for which it was given. So, for example, if a writer sells you an article, then, by default, you’re only getting first publication rights. You don’t get the rights to put the article in an online archive, to distribute it to sister publications, or to turn it into a movie — the author keeps all those rights. If you want those rights, you need a contract that lists those specific rights.
So check to see whether the terms of service allows the original grid owner to transfer the rights to use the user-created content to a new owner.
Also, check to see whether the grid has a record of every user agreeing to those terms of service. So, for example, if the grid adds that clause to their terms of service a week before selling the grid, did all the users have time to agree to the change? Probably not.
Ask to see the list of users who have agreed to the latest version.
Are there any outstanding debts?
Does the grid owe any money to developers, creators, or hosting companies? Even if the former owner agrees to cover any outstanding money owed, that’s not going to help you any if your hosting provider cuts you off, or your developer quits, or your creators raise a big stink about your grid ripping them off.
Don’t take the grid owner’s word for it.
Check with the hosting company and all the other service and content providers.
If the previous owners aren’t forthcoming with all the contact information, that’s a big red flag right then and there.
Look at the vendor agreements
And while you’re on the phone with all the vendors, this is a good opportunity for you to find out whether they’ll stick with the grid after a change of ownership.
And if there’s any content involved, check that the agreement allows the transfer of rights to a new owner. You’d hate to lose the rights to your custom-build welcome region or website. Even if you plan to replace them with your own, you need to have something in place until the new one is ready.
Non-compete clause
A virtual world, at its heart, is little more than a collection of relationships. The technology and the content is nice, but they’re not where the real value lies.
If the grid was small, or its founder particularly charismatic, then there’s a good chance that the previous owners are intrinsic to many of those relationships — and where they go, the relationships might follow.
What will you do if they go off and start another grid, and the developers, creators, and residents who know and trust them all jump ship?
This is where a non-compete clause comes in. Make sure you have one in place even if the former owner agrees to stay on with the grid in some capacity. Otherwise, they can easily decide that they prefer to be a boss instead of an underlying, quit, and go start over from scratch.
A non-compete period doesn’t have to be unreasonably long, but you do want at least a few months for your staff, vendors, and residents to get used to you.
Account access
When tallying up a grid’s assets, it can be easy to overlook social media accounts.
Or, when transferring bank accounts, to forget about accounts with PayPal, other payment services, or credit cards.
But all those accounts have value in and of themselves — plus, someone could do serious damage to your grid’s reputation, infrastructure, and even finances if they gain unauthorized access.
Track down all of the following:
- All email accounts connected to the grid, including customer service, billing, public relations, and any account used to log into other services, such as social media, PayPal or hosting. If any of these were personal emails, have the previous owners fix it right away.
- Infrastructure accounts. Grid hosting, Website hosting, and domain name registrations should all be company accounts, not personal accounts, and connected to company email addresses instead of personal ones.
- Financial accounts, including bank accounts, PayPal accounts, credit cards and loans all need to be identified and either transferred or replaced.
- Social media accounts. Twitter, Facebook, LinkedIn, Google Plus need to be checked first. If the grid was using personal accounts to communicate with customers, you’ll have to resolve that problem before moving ahead with the sale. And don’t forget to check for grid-related groups, pages, and communities, as well as Pinterest boards, Reddit subforums, and forums on other networking sites such as the Avatar Social Network.
- Any other accounts linked to any of the above. Is there an Elance account that’s directly linked to a company bank account, PayPal account or credit card? Amazon account? Kitely Market account? Ask to see transaction histories for all accounts and look for automatic or recurring payments.
Gut check
It’s easy to get caught up in the excitement of acquiring a new business.
And due diligence is a lot of hard work. You might be tempted to skip steps, or to take the seller’s word that everything is all set.
Don’t.
A five minute phone call could save you months of grief.
And don’t forget that it’s still early days in the development of the metaverse. There are still plenty of opportunities to start a grid fresh, and hosting providers who will set you up with everything you need at very little cost — and without any of the baggage of buying an existing grid.
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