Club Penguin founder and Dragons’ Den star Lane Merrifield’s journey to the metaverse and back
Kelowna-based CEO-turned-investor has a knack for growing communities in both the real and virtual worlds.
By the time Lane Merrifield turned 28 years old, he and his two partners, Lance Priebe and Dave Krysko, had sold their Kelowna, BC-based company Club Penguin to Disney for USD $350 million.
Club Penguin was a subscription-based online world built for kids: a place where they came to create their own characters, meet and play games with other kids from around the world, earn coins, and put themselves in the centre of the ever-changing story. And more than 12 million pre-teens had signed up.
Merrifield, CEO at the time, may be better-known today as a three-season veteran of CBC’s long-running business pitch show, Dragons’ Den. But Merrifield’s story is much more than that.
Since the Club Penguin exit in 2007 he has remained in Kelowna, using his investment dollars, energy, and connections to help create a technology ecosystem in the Okanagan bubbling with Club Penguin alumni, innovation, and IP. In 2021 he had a second Kelowna-based exit with the sale of FreshGrade to California-based Higher Ground Education. At the time of the sale, 85,000 teachers and 1.8 million parents were actively using the FreshGrade platform: a digital portfolio and communication tool that allows parents and teachers to track student progress.
And thanks to Zuckerberg’s big bet, bored apes, and a virtual real estate rush, Merrifield is a man in demand. That’s because Club Penguin was like the Apollo moon landing in the metaverse—one of the first companies to successfully create a virtual world where users were free to create characters, experiences, and connections in real time, on their own terms.
Penguin blazed trails by running a subscription-based offering when the idea of monthly subscriptions was radical. Users didn’t simply play a game; they helped create a world at a time when the cloud was still a cloud, when mobile was not yet mobile, and when software was built from scratch as opposed to using plug-in APIs and tech stacks.
Today, Merrifield is currently fielding offers from companies big and small seeking to chart their own course through the metaverse, each trying to gain the experience of someone who has boldly gone where they hope to go, and who has a well-earned reputation as a genuine, creative, and cooperative leader.
Merrifield is the youngest of four children, born in Alberta to a pastor father and teacher mom. The family moved to Orange County California when he was four, where he grew up and became a citizen of both the U.S. and Canada. He describes his older siblings as overachievers and himself as the runt of the litter.
“I was a solid C-average student, and pretty much distracted and aloof most of the time,” he tells me with a laugh. “The joke growing up was that because of how well my sisters and brothers were doing, I would always have a nice couch to sleep on if I had to live with one of them.”
He played drums and took part in school musicals, and thinks he probably has some form of undiagnosed ADHD.
“I was constantly fidgeting in class and couldn’t sit still to write exams,” he says. “But if I was into the project, I would knock it out of the park. I remember making 3D animated movies instead of reports, because I would do anything not to have to sit down and write a 15-page report. But if I could do something creative, I was in my happy place.”
He graduated high school and went to university, trying to get his degree and escape school as quickly as possible. And while the classroom wasn’t for him, Merrifield was bit by the business bug early—something he says he learned from his father, watching him navigate the world as a pastor.
“Leading a church might not seem like the most obvious role model for an entrepreneur, but a lot of the skills relate,” he says. “Our move to California was my father helping a church that was struggling, so it was a bit of a turnaround. He was speaking in front of people every week, and modelling leadership, ethics, responsibility, hard work—things I really value now as a leader that I learned growing up in that household.”
He also says both his parents were genuinely optimistic at heart. In the Merrifield house, if one of the kids had an idea for something, the default position was: go get it.
“It was never five reasons why it wasn’t going to work,” he says. “It was always ‘go give it a shot and if it doesn’t work out, who cares? At least you learn something’. So we were all watching each other take different forms of risk, and our parents encouraged us to do that.”
Merrifield had several hustles as a kid—mowing lawns, and fixing computers and modems when the home-computer boom took hold. In the days before Geek Squad, he convinced his manager at Best Buy to allow him to set up a side business installing the computer systems for customers when they purchased at the store.
Eventually, he earned a degree from the University of Alberta and ended up working for a small creative production agency in Kelowna called New Horizon Productions, owned by Dave Krysko. Merrifield wore a lot of hats, supporting Krysko with marketing and business development as well as working on the creative side of the business. That’s where he met Lance Priebe, who in the early 2000s was spending his free time creating mini video games.
Priebe showed Merrifield some of what he was working on, and over a series of lunches shared his vision for rolling out what was then a real-time strategy game aimed at kids (both were new fathers with kids a few months apart). Priebe’s plan was to work on it slowly while still holding down his day job at New Horizon. Merrifield, excited by what he saw, thought there was an opportunity to broaden the vision and advance the timeline. After jamming on the concept for a few months, they took it to Krysko to get his reaction.
“Dave said ‘I don’t know what you guys are talking about . . . Penguins and islands . . . but I’ve never seen you two more excited before,” Merrifield says. Krysko gave them the green light to keep working on the game while still employed by the agency, as long as the client work got done.
It meant Merrifield and Priebe were effectively working two jobs for a year, with Krysko giving the pair what they needed (people, equipment) until Club Penguin officially launched in October 2005—at a time when online communities and the internet was still seen as the wild west; when people were still uncomfortable sharing credit card and banking information; and anything that looked like a chat room was not a place where you wanted your 10-year-old.
“It seemed like every week on Dateline there was a new episode about a predator on AOL chat rooms,” Merrifield says. “Parents were understandably terrified of it and as a result the entire industry was trying to avoid kids because of the fear and panic.”
But Club Penguin leaned into it.
“We had a hypothesis,” Merrifield says. “Kids aren’t streaming into the social web because they want to be in unsafe, grown-up environments. They are streaming in because they want to experience the social web and there’s nothing else for them out there, and nobody had built anything for them.”
Merrifield and Priebe believed that if they created a walled garden, a safe and secure place to log in free from advertising, kids would find it and have a positive experience. They also tested another theory: subscriptions. If they weren’t going to take advertising—something they didn’t want for their kids so wouldn’t allow for the kids on the platform—they had to make money somehow. And that led them to a monthly charge to unlock more features and aspects of the game.
“We were openly mocked by reporters for offering a subscription service,” Merrifield says. “We were one of the first on the internet . . . Netflix was just shipping DVDs at the time.”
Merrifield says they took their cue from Blockbuster Video. They thought that if a parent was willing to rent a video for five dollars for two hours of entertainment, they would be willing to pay the same five dollars for dozens of hours of online play.
They were right. While the company was private and didn’t disclose numbers, a Globe and Mail article reported 2007 revenues of $65 million and $35 million in profit coming from 700,000 subscribers and 12 million registered users (users could access some features of Club Penguin without paying the monthly fee). All in less than two years of operations.
But the pace of growth and the trajectory of the company came at a cost. Merrifield and Priebe had young families and the project they started as a safe place for their kids online was taking them away from their families more often, and for longer. Merrifield tells a story of travelling to Australia where he was on the ground for less than 12 hours so he could return home for a school concert. Pressure was growing to make the leap into toys and other content channels; things the founders didn’t know much about. It wasn’t feeling sustainable.
Still, in the heat of Club Penguin’s growth, Lance Priebe says they learned a lot about how a partnership can and should work, and he came to value what Merrifield brought to the table—skills Priebe says he just didn’t have.
“Each of us was looking at a different blind spot for the company,” Priebe says. “I remember walking down the hallway wondering what the heck Lane was doing. But I have learned that was my blind spot. The business stuff Lane did and the deals he negotiated is something I didn’t even see.”
Sony, Disney, Nickelodeon and other big names came calling. In the end, while other companies offered more money, the founders chose Disney because of their rich heritage and reputation as storytellers.
“We felt we were values-aligned and they had the infrastructure we needed. We needed to grow internationally, and we knew if we were going to take care of kids around the world like we were taking care of kids in North America, we needed somebody we could trust,” Merrifield says.
The Disney deal was valued at USD $700 million—$350 million up front and $350 million more if Club Penguin met certain profit targets. The earn-out never happened (Merrifield says they didn’t meet the profit thresholds for a variety of reasons). Still, with more than $100 million in his pocket, Merrifield found himself a wealthy man.
Merrifield faced the same questions many successful young founders face following a big exit: What now? There seems to be a playbook: start investing, give back, buy stuff. Deal with other people’s reaction to the news.
Merrifield was not yet 30 when he took his proceeds from the Disney-Club Penguin deal. He ran through each of the steps in the tech exit playbook and fielded calls from friends who needed time to process what it meant to now know “Lane the multi-millionaire Merrifield” as opposed to the hard-working entrepreneur formerly known as “Lane Merrifield.”
But he was dealing with something not always found in the playbook as well: guilt.
“I grew up in a middle-class family, working hard, the runt of the litter, a guy who didn’t have a lot of folks betting on me, and all of sudden this happens,” he says. “I wasn’t sure I deserved it. The way I dealt with the guilt was that I thought I would use the position I was in to take a risk on others, to help them do the same thing I did.”
Merrifield says he was over-generous early on with his investments, losing money on some and sharing that he was even ripped off by people he once viewed as friends and associates. With his success came a heightened profile and outside interest, including from the producers of CBC’s long-running show, Dragons’ Den. Molly Middleton is a senior producer with the show and worked to bring him on board.
“Lane was first on our radar in his heyday, when we saw that this 28-year-old was part of a group that sold for $350 million dollars,” she tells me. “He was too busy then but he stayed on our radar because he checked so many boxes: young, fun, from the West. We were super excited when things fell into place.”
Middleton says that what makes a great Dragon is a passion for entrepreneurship, a genuine curiosity, and the skills to ask the right questions to get to the crux of a business fast. Merrifield had all that, plus the ability to not take himself too seriously (she recalls one pitch where he got his leg waxed on national TV).
For his part, Merrifield remembers having to turn down the first request because of travel and changes on the home front but regretting the missed opportunity, having grown up watching the show. Then in 2018, producers called again.
“When they contacted me the second time, my assistant thought it was a prank call and wasn’t going to send it across my desk,” he says. “But someone overheard who had been there the first time around and said it might be legit. We followed up and it wasn’t long before I was in Vancouver doing a proper audition . . . and then spent three seasons doing the show.”
A Dragons’ Den shooting schedule is intense. During Merrifield’s run, each season was 20 episodes shot over about 20 days in Toronto, with 10 to 12 pitches per day. Each 45-to-60-minute pitch is condensed down to six or seven minutes of the best TV producers and editors can cobble together.
In keeping with the person I came to know through my conversations with him and others, Merrifield is introspective about his years in the Den. Yes, he had a great time and thinks the show does a great job of promoting innovation and launching businesses, but he saw how the format creates a hyper-concentrated narrative about what being an entrepreneur means, and that narrative doesn’t tell the whole story.
“We sometimes celebrate entrepreneurs like lottery winners and talk about the big successes that drive the machine,” he says. “But we neglect to talk about the personal impacts of putting everything on the line. Even in success there can be costs.”
He went on to describe how business books and schools do everything possible to prepare an entrepreneur to develop a head for business, but do nothing to help prepare their hearts.
“The heart stuff . . . feeling like you might be letting someone down every day. The stress of feeling like you are an absentee parent, the anxiety of risking your house or home or all your investments on an idea, the anxiety of risking investments from friends or family who you brought into the business. Nobody is talking about or teaching any of that.”
Erik Bywater of KNOSIS Nutrition is one of the lucky entrepreneurs able to access Merrifield’s hard-won perspective firsthand. His Nova Scotia-based company creates healthy energy supplements aimed at the booming esport and gaming communities.
Bywater secured a $25,000 investment from Merrifield in 2020 on Season 15 of Dragons’ Den. On the show, Arlene Dickenson was in for an additional $25,000 but Bywater and team declined the investment during due diligence. Bywater says he was targeting Merrifield before he went into the Den and has no regrets.
“He’s a real guy,” Bywater says. “He and his team are very personable, real-life people and not a bunch of suits and ties only trying to make money. They treat you like a real person, talk to you like a real person . . . that they really cared about us and our business and wanted us to succeed.”
KNOSIS has seen 100% year-over-year growth since Merrifield’s investment. Now, as the company seeks to raise additional capital, Bywater is leaning on Merrifield’s experience and connections to help. He’s also gained a mentor.
“Lane has been super supportive and super accessible,” Bywater says. “He’s taken the time to have hour-long phone conversations talking about business–not just operations and finance, but the personal side of business and what to protect against as well. He’s really taken a partnership approach.”
Raghwa Gopal has had a front-row seat watching Merrifield’s journey with Club Penguin and as a builder of the Okanagan technology ecosystem. Gopal, currently President and CEO of Innovate BC, is a bit of a pioneer himself.
He first moved to Kelowna in the late seventies where he co-founded Vadim Software, one of the first technology companies in the region when the Okanagan was known exclusively for tourism and fruit crops. Vadim built an integrated enterprise solution to support the operations of local governments and became one of the largest technology suppliers to municipalities in Canada.
“There was no technology sector in Kelowna in 1979 when we started,” Gopal says. “There was nobody local to hire and it was hugely expensive to try and bring people in from places like Vancouver and Toronto and Calgary. And when they looked around and saw there weren’t other companies in town—‘what happens if it doesn’t work out and I need to move’—it made it even harder. So I made it my mission to try and build an ecosystem in the area.”
Fast forward to 2000 when he and his partner took an exit that allowed Gopal to invest his time and money helping new companies grow in the region. In addition to making seed and angel investments over the next few years, he became involved with the Okanagan Science and Technology Council and the Okanagan Research and Innovation Centre, two organizations that merged to create what is now known as Accelerate Okanagan. It was there Gopal met Merrifield, who joined the board at Accelerate Okanagan following Club Penguin’s deal with Disney.
“All three of us [the Club Penguin founders] stayed in Kelowna, continued to invest in companies in Kelowna,” Merrifield says. “When I joined the board, we looked at places like Boulder and Waterloo and other places that were focused on building a regional technology sector, and we learned that they all seemed very intentional about it. It wasn’t happening by chance.”
In addition to the usual suspects—access to talent, post-secondary research, investment capital—Merrifield, Gopal, then Accelerate Okanagan CEO Jeff Keen and others determined a big driver of building the connective tissue needed to establish a tech ecosystem was having a physical space: a destination where like-minded people could come together to share ideas, experiences, and energy.
Merrifield was instrumental in encouraging all stakeholders to think big and creatively about what the space could be and how it needed to work for entrepreneurs, Okanagan College and UBC Okanagan, investors, and the community.
The group pulled together the funding—in addition to $6 million in provincial government money, Merrifield personally invested the bulk of the $35 million project—and the Kelowna Innovation Centre opened for business in the heart of downtown in 2017.
Gopal speaks to the role Merrifield played in the project’s success, and his value beyond the investment he made. The success of Club Penguin, his role and title with Disney, and the connections he was able to bring to the table created excitement and momentum. Gopal also said Merrifield brought a vision.
“Rather than focusing on the details of the building and the development, he was able to construct a story,” Gopal says. “Whenever we had a meeting or made a presentation, he wouldn’t talk about square feet or number of storeys. He would always start with ‘just imagine’.”
While both Gopal and Merrifield are quick to share the credit for the Innovation Centre’s success, Gopal is clear; without Merrifield’s leadership the project would not have happened.
“We would not have the building but, more importantly, we would have curtailed the growth in the region, and that would have been a big loss.”
Growth in the Okanagan’s technology sector, triggered by Club Penguin and the Innovation Centre, is remarkable. Remember that when Gopal and his partner started Vadim, they were the only show in town. Now, Accelerate Okanagan reports more than 690 companies in the region employing more than 12,500 people with an economic impact of $1.7 billion—more than agriculture and tourism combined. And those numbers are from 2017: the last time Accelerate Okanagan conducted an economic impact assessment.
Direct descendants of Club Penguin are embedded deep in those statistics—not only in Kelowna but around the world. Kelowna-based Two Hat, a content moderation and online security company founded by Chris Priebe (former Club Penguin security team member and brother of Lance Priebe), was purchased by Microsoft in October 2021 for an undisclosed amount. Merrifield says Club Penguin alumni are playing significant roles globally with the core Fortnite and Roblox teams. Yeti Farm Creative, a major animation studio, draws on former Club Penguin artists and animators. And Lance Priebe is still local and in the game, working as founder and Chief Innovation Officer at Hyper Hippo—a 130-plus-person game publisher headquartered in Kelowna.
If you value a technology sector based on the number of column inches, tweets, LinkedIn posts or podcasts it generates, the metaverse would sit shoulder-to-shoulder with cryptocurrency at the top of the tech-industry value pyramid. The term means a lot of things to a lot of people, but I was curious to get Merrifield’s take as someone who delivered a virtual world to millions of users long before a platform like Club Penguin could be packaged into a nice, tight, catch-all name.
“To me, what a metaverse is—because there is not ‘the’ metaverse or one metaverse—is a digital place or space that feels like a true place or space that has in it an inherent value in a non-linear narrative using non-linear methods,” he says. “It’s an alternate universe that grows and ebbs and thrives, and evolves based on the way its users want it to and influence it to.”
Merrifield shares a story about sending a note to retiring Walt Disney Company head of communications Zenia Mucha, his former colleague and the person the New York Times called “the power behind the power” at Disney in a story about her retirement last year.
“She wrote me back to say thanks and that she tells everyone: ‘Club Penguin was the first metaverse, so there’,” Merrifield laughs.
As he looks at today’s metaverse, he sees opportunities in the kids’ space as well as education. He’s also bullish on the future of VR—not the current version, where he still thinks the headsets are clunky and awkward. Once they become as light as ski goggles, he thinks there are big opportunities to see VR move from its current, rather isolating use, to more social and connected experiences for communities of users.
Merrifield is slowly wading back into the metaverse in a real-world way. He has been an advisor to a company called Dreamscape Learn—a way to deliver immersive learning experiences using VR that was developed in conjunction with Arizona State University.
And he’ll be working with a prominent San Francisco-based company that will take him back to his Club Penguin roots. The can’t-yet-be-named business (Merrifield says the project is still in stealth mode) is working to create a virtual world that’s education-based and aimed at kids, something Merrifield sees as a logical fit for where he’s been before.
Real world. Virtual world. It seems like Lane Merrifield will always find a place to call home.
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