Successful startup: Is there life after death? (part one)

The word “startup” began to appear more and more often in our everyday vocabulary.

Many young developers have the impression that participating in their own gaming startup is a very promising activity that is guaranteed to predict a bright future.

This myth, fueled by isolated examples, is flying through young minds at the speed of light. In news portals, stories confirming this thesis appear with enviable regularity about how someone somewhere hit a big jackpot.

So gradually the idea creeps into the head of many developers that it would be nice to gather a team of friends and do something of their own.

Inexperienced developers formulate their desires abstractly and simply do “something for the fan”, without having a plan for the future, without having specific goals. They want to “just try”, “do something for themselves”, “realize their idea”, “make a dream come true”.

More experienced developers want to get a project that will make a profit. Moreover, everyone has different ambitions: someone has enough profit “for bread and butter”, and someone sincerely dreams of repeating the path of the creators of Angry Birds.

Well, the most ambitious think about their own company, which will join the ranks of the game dev and occupy its niche.

And so, date X comes, a person decides to burn bridges, get away from routine daily work, gathers a team and launches the gaming startup of his dreams. And then with 99% probability it fails and remains at the broken trough.

Why is this happening?

Yes, because launching a gaming startup is just the first and easiest step on the path to success. Developers are starting something of their own, but they have no idea what they are getting into.

In reality, each team expects such a thorny and difficult path that most do not come to the expected finish.

Plus, the huge problem is that after that people often console themselves with the thought that it was a negative, but necessary experience. But this is self-deception. Deep down, we understand who learns from other people’s mistakes, and who learns from their own, right?

Since not everyone knows about the difficulties that will come across on the way to success, and even more so not everyone knows that there are many ways, I decided to write a series of materials about the key points in creating a successful gaming startup, as well as an assessment of their advantages and disadvantages. You will read about what awaits you from the moment of start to the moment of the first productive finish in the form of any success. About what forks there may be, where this or that road will lead, what this or that decision will lead to.

But we will start from afar. My first article is devoted to comparing the difficulties that faced game developers ten years ago and those that exist now.

In the early 2000s, everything was much simpler and more complicated at the same time. At that time, the gaming industry itself was something unknown, unfamiliar. In the CIS, she was just developing and resembled a teenager who has not yet got stronger, who does not know the rules and does not follow the laws. And the people who worked in this industry (and not only in game development, but also in the IT industry as a whole) grew up with the industry itself. Because of this, it was much more difficult to learn anything, since the amount of information available was less. But it was easier to build something, because the number of ways to do it was not so limited. And it was easier to succeed, too. Although, of course, it was not without pitfalls.

Factors that suggest that it was much easier to implement a successful gaming startup in the early 2000s:

1. Financing

Finance is the foundation of success, and money and profit are the main goals of any business. To put it briefly, all the differences concerning finance can fit into several theses:

a. Cheaper development

Today, salaries in the IT industry are greatly overstated, and you can write a separate article on this topic. Despite the fact that there were many times fewer specialists then, globally they were cheaper. And today there are hundreds of times more specialists, but they cost more.

b. More combined sources for income

It used to be easier to make money in the entire IT industry. In those days, the simplest business on the Internet could bring sufficient amounts. At one time, even several Internet portals in total brought quite a solid income due to elementary advertising and downloads.

B. There were no financial falls and crises

At that time, no one knew what a financial crisis was, and the dollar exchange rate remained stable for a long time (and if it rose, then not as much as today).

G. Investors actively invested money, as this direction was considered promising

Of course, not as active as during the boom of game development. However, firstly, they did it quite actively. Secondly, the invested amounts turned out to be quite enough for business development. And thirdly, at that time, medium and even small businesses could well act as an investor. Today, even representatives of large businesses are not always ready for this, because large sums are required. And small and medium-sized businesses simply do not have them.

2. Lower competition

In those years, the gaming industry was not so competitive. Despite the fact that the browser games and PC games markets remained the main ones (no one except God and Steve Jobs knew that in 10 years we would have a mobile device market), it was not so difficult to enter them. Moreover, with a variety of products (from a simple flash drive to a browser) and in a variety of ways (from creating your own projects to collaborating with partners from abroad).

He knew

3. There is a high probability of making a profitable project even with its low quality

A derivative of the second point. If the competition is low, it is quite possible to make an elementary product and make money on it.

People made money on everything, even on small flash games, which were made by the hundreds.

Who remembers the toy developed by the legendary CS player 400kg for Counter-Strike shooting training? And who remembers a 2D shooter with a view from above, in which you find yourself on a desert island and shoot back from a crowd of brutalized aborigines with indeterminate inclinations? We do not even consider the earnings of such legendary and high-quality browser games for their time as “Fight Club” and “Ganjavars”.

4. Work for the idea

In part, it is a derivative of the first point.

In those days, the teams were much friendlier than they are now. Often people worked either for a minimum wage, or just for an idea, for a fan. There was no such pampering as today. Money was not the No. 1 motivator. Young teams gathered quickly and broke up just as quickly, but if they managed to make a cohesive team, it achieved amazing results. Back then, for young guys, game dev was more of a fan and hobby, and only then – a business.

More than 10 years have passed, and today all the dreams of beginners about a successful startup are just dreams that are not connected with harsh reality. Time has changed, and the industry itself has changed. It has become a sea in which sharks swim, but even they are threatened by whales. She’s grown up. Today, game dev is primarily a business, and only then a fan or hobby.

Factors that allow us to say that a modern gaming startup is an incredible risky occupation:

1. Financing

Time has passed, but nothing has changed in this regard. Money still plays a primary role. Finances are still needed for success. That’s just the required amount of money has changed at times, and there are more factors “against” investing.

a. Higher salaries

Salaries of specialists have increased.

This is a private and not the most recent example (source: http://spb.hh.ru/article/14828 )

It has become difficult to do projects if there are third-party developers who need to be paid. Even if you have gathered a group of friends and think that development is free for you, you are mistaken. And this is really a very big mistake.

Having spent the same amount of time developing someone else’s game, and not your own, you could earn N money, and not lose it. That is, even our own development is not free.

Also, be sure to take into account such a resource as health, which is also very expensive nowadays.

And, most importantly, consider the time resource. Lifetime is a limited resource. Youth passes quickly (and according to research, the same programmers have a flourishing career before the age of 30). If a person is ambitious, he has no right to waste time. He should get the maximum profit from every minute of his work and use the chances that are given.

b. Development has become more expensive

Besides the fact that salaries have increased, the quality threshold for projects has also increased. A project that should allow you to get a normal profit, by definition, cannot be of poor quality, because in this case it will not be competitive. And if the project requires quality, it requires money. And the higher the quality, the more money you need to spend on it.

Many may immediately object that there are such unique independent projects as Minecraft, Flappy Bird or Proto Raider (to take fresh examples), etc., which receive features and earn. But keep in mind that in reality, such projects on the market are 0.001% (and maybe less), and monthly earnings from any project of average success (not a hit) will not allow not only to maintain a large studio, but even to feel financially confident for a long period.

Flappy Bird

b. There are practically no sources for combined income

Now it is no longer possible to earn easy money on the Internet. And it is unlikely that anyone will go to work at the plant in order to live on something and simultaneously develop their own project. And even if it does, then you can afford a minimum for this salary with current prices.

When a person is young and responsible for himself, it is permissible. But when he has grown up and has a family, then first of all he thinks about it. He prefers not a crane in the sky, but a tit in his hands.

In general, age is a pitfall: if a person is young, then he can afford a lot, but he has no experience. And experience comes with time and age. A vicious circle.

The modern way out is to go as an autosourcer. But a high-quality and well-paid order still needs to be found. And this is very difficult, believe me.

There are not one or two good specialists on the market today, there are hundreds of them. And everyone has their own pricing policy, which may be more profitable than yours. And there are many people who are above the level, well, or at least at one level.

Resumes from people who are willing to work on an outsourced basis constantly come to our company, and there is a huge selection of specialists. And you, being autosourcers, will have to compete with them.

G. Financial crises

With the current conditions in the foreign exchange market, any financial investment becomes risky. These risks hit the project budget very hard, calling it into question already at the development stage.

D. Investors are investing money less actively

The peak of unjustified investments in the CIS IT industry has already passed (in the USA it is much better with this). No one will give money to newcomers or teams in which there is at least a fraction of doubt.

It is profitable for any investor to invest money in a potentially profitable company (which is on the border of self-sufficiency), an already profitable company (one that already earns and can earn even more), or in a team of experienced developers who have already proved their worth as part of other teams. However, the latter option is extremely rare.

There are other factors reducing the activity of investors:

– Only big business can afford to invest in a gaming company;
– A large number of negative experience of investing in game dev;
– Financial and political crises in the CIS;
– Poor investment climate in the CIS countries.

e. Huge marketing budgets

A derivative of point D. Besides the fact that you need to invest money in the development of the game, you also need a marketing budget. Huge marketing budget. And marketing specialists, who, by the way, are also not cheap. Or a good publisher. But you need to share the profit with the publisher (often no less than 50-50). Also, all expenses related to the support of the game and a percentage of the income that markets or social networks take for themselves are deducted from this profit.

That is, in any case, the project must earn very well in order for it to reach payback or profit.

2. Huge competition

Today, hundreds of projects appear every day, it is almost impossible to stand out among them. If earlier it was possible, for example, to make a bright attractive icon of the game, and only due to this change significantly increase their performance, today it is just a small factor. Yes, you also need to pay attention to it, and to some extent it affects the number of downloads from the conditional app store, but the profit is no longer the same.

The markets are no longer interested in figuring out the 1583rd match-3 project or the 146th hog. They feature only really original projects or well-known titles.

A sea of specialists appeared. And this means that if, for example, one artist expects to attract an audience with a visual component, then he must be prepared for the fact that hundreds of artists draw better and they also want to attract an audience with this. That is, he initially loses the competition, so there must be some kind of “chip” in his art.

There are hundreds of competitors in each genre. You need to be ready to make games not only qualitatively, but also quickly, because new competitors appear on every lost day.

Match-3 is on the market today, well, a lot

3. It’s hard for beginners to gain experience in game development

Beginners need a starting experience, and it is very difficult to get it, because it has become more difficult to find a job in game development. It’s not enough to be just a talented guy – you need to stand out among the same guys.

Not every company is ready to hire juniors, because the culture of young developers has begun to decline. Previously, they were more responsible about their work, and there was loyalty to the company that trained and gave a ticket to game dev.

Today, many are not ready to grow inside their first company. As soon as they get the knowledge, they try to sell themselves more expensively to another company. So now companies are very careful about the practice of educating their own personnel. This has led to inflated prices for IT specialists.

Although, of course, the world is not without decent people who are pleasant to work with, and who become part of the team.

4. Misunderstanding of the specifics of the modern gaming industry

Game Dev is developing and it has its own specifics, its own rules and laws. But for success, you need to know and understand them, it’s not enough to be just a good specialist. It is not enough to assemble a company of good and specialized specialists. There must be a clear strategy, without which you are doomed to failure.

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In the next article of the series, we will look at the difficulties (and their possible solutions) when creating a gaming indie startup.