The Foundry Announces Management Buyout

Since NAB, we’ve heard rumors from around the world that The Foundry was no longer going to exist as a company due to financial problems at Digital Domain. However, to steal a quote from Mark Twain, the reports of The Foundry’s death are greatly exaggerated. Thankfully for artists and those who wish for a diverse software market, The Foundry has announced that they are independent once again….

The Foundry today announced that a management buyout of the company has occurred for an undisclosed sum, led by Advent Venture Partners. Advent has backed The Foundry’s management team, including CEO Dr Bill Collis and the original founders, in a transaction that sees the sale of the shareholdings of previous investors, Wyndcrest Holdings. According to The Financial Times, the size of the buyout “is understood to be in the ‘double-digit millions of pounds'”.

The Foundry was started in 1996 by Bruno Nicoletti and Simon Robinson. Their first product was the Tinder plug-ins set for discreet flame — actually the first sparks available on the platform Over the years, their product lineup grew to include the Keylight keying tools as well as the outstanding Furnace image processing tools.

Bill Collis from an earlier fxguidetv interview

In 2007, The Foundry made a big move by adding Digital Domain’s in-house compositing software Nuke its offerings. Initially, the external appearance was that The Foundry purchased Nuke. However, once the dust settled, the reality was that The Foundry was actually acquired by Wyndcrest Holdings, which also owns Digital Domain, for about five million pounds (about $8 million).

Wyndcrest’s principals include Michael Bay and former Microsoft executive Carl Stork. Wyndcrest moved the development and marketing of Nuke to The Foundry over a year ago because software development was not and is not a focus of Digital Domain’s business strategy.

Wyndcrest announced an IPO for Digital Domain back in 2007, but the initial IPO wasn’t priced. There have been no filings regarding the IPO of Digital Domain for a year and with the current economic conditions it’s not fully surprising.

The good news for compositors is that Nuke is doing well and will continue to be aggressively developed under The “new” Foundry. Over the last 18 months, The Foundry has been highly profitable and doubled their revenue to $10 million (US). Once Nuke development moved to the UK, the company has increased staff from twenty to over fifty employees and more than doubled their office space.

The move by Collis and others effectively leaves four main competitors in the high end compositing space: The Foundry, Autodesk (Flame and Toxik), Eyeon (Fusion and Generation), and Apple (Shake). Having a slate of high end compositing software from which to choose from is good from a facility and artist perspective — healthy competition is good for the industry.

While Apple is no longer adding features or actively developing Shake apart from a few minor bug fixes, it is surprising to many artists that the software is still a leading package used in facilities around the world.

The Foundry booth at NAB 2009

Many large studios have developed extensive pipelines around Shake, so the cost of switching to a new software package is incredibly expensive. They have also developed extensive plugins and customizations which would need to be re-written for a new app. Also, several large facilities purchased the source code to Shake and some were able to extend its lifetime by moving the code base to 64bit. This allowed working with high resolution imagery and less render errors due to memory issues.

That being said, many companies are looking at transitioning their pipelines. “People are looking for more efficient solutions with good support and a clear route for continued development,” says Collis. “While Shake is still the dominant install-base, it’s now commonly accepted that it’s coming to the end of its useful life.”

The next 12 to 18 months should be critical as several major players will most likely replace their Shake pipelines or begin the transition to a new compositing software package. On the Toxik side, an OSX version was supposed to ship in March and is now about two months overdue. Layoffs at Autodesk towards the end of last year and recently have impacted all areas, including each of their products’ development staff. Eyeon has been improving their Generation app while development continues on Fusion 6, which was announced at SIGGRAPH 2008 but hasn’t shipped yet. These aren’t easy economic times for any company, as spending on upgrades and purchases has declined dramatically in the last 6 months.

We’ll continue to follow this story as it develops. In the meantime, we end with the official press release from The Foundry.

Press Release from The Foundry

Leading visual effects software developer, The Foundry, whose software products have been used to make many of the past year’s biggest motion pictures, today announced a management buyout for an undisclosed sum led by Advent Venture Partners.

Advent has backed The Foundry’s management team, led by CEO Dr Bill Collis and the original founders, in a transaction that sees the sale of the shareholdings of previous investors, Wyndcrest Holdings.

The Foundry is highly profitable and has more than doubled revenues in the last eighteen months to $10m. Advent’s support will permit the company to continue expansion plans that have seen staff numbers more than double from 20 to over 50 in the past two years, necessitating the company’s expansion into two additional floors of its Wardour Street headquarters.

Established in 1996, The Foundry is a world-leading innovator of visual effects and image-processing technologies that boost productivity in motion picture and video post production. The Foundry’s product portfolio includes two AMPAS (Academy of Motion Pictures Arts & Sciences) Sci-Tech Award® winners: Nuke, a high end compositing system, and Furnace, a collection of problem solving tools based on advanced motion estimation technology.

The Foundry has a well-established client base that includes leading visual effects facilities worldwide, such as Weta Digital in Wellington, New Zealand, Framestore in London, and Sony Imageworks and Digital Domain in Los Angeles. It is at the cutting edge of software development, marketing and sales for visual effects compositing. With Nuke, The Foundry has been taking significant share from the market leader, Apple’s Shake product, since 2007, and Advent believes it will become the industry standard over the next few years.

Nuke was originally developed by Los Angeles post-production house, Digital Domain, before becoming part of The Foundry’s offering in 2007. Since then, The Foundry has invested aggressively in the product’s development, culminating in 12 software releases. The Foundry’s products have facilitated ambitious effects sequences on numerous major Hollywood blockbusters including: The Dark Knight, the Harry Potter franchise, Sweeney Todd: The Demon Barber of Fleet Street; Speed Racer; Iron Man, The Curious Case of Benjamin Button*, Star Trek, Australia, Watchmen, X-Men Origins, Wolverine and many more.

Commenting on the completion of the transaction, Bill Collis, CEO of The Foundry said, “The Foundry is renowned for responding to user need and developing useful tools that boost productivity. With the backing of our previous investors, we enjoyed substantial growth and are now in a strong position to take the business forward with our new partners. We are ready to realise our further ambitions for Nuke and the rest of our product portfolio, ensuring the company goes from strength to strength whilst maintaining strong customer focus.”

Mike Chalfen, General Partner at Advent Venture Partners, remarked, “We are delighted be backing an innovative and entrepreneurial management team with such a strong reputation and enviable market leading track record that together will generate interesting opportunities for this business. The Foundry’s products are ubiquitous in its field, its Ocula 3D stereoscopic technology is poised to dominate its market, and the company is a true European digital technology success story. Furthermore, our investment fits with Advent’s strategic focus of backing capital efficient, defensible and differentiated businesses that have a number of levers to make money for shareholders. We look forward to working with the team to realise the company’s enormous potential.”

*The Curious Case of Benjamin button earned BAFTA and Oscar® Awards for Visual Effects as well as a plethora of VES (Visual Effects Society) awards including Achievement in Compositing.