Danielle Deibler, co-founder and CEO of Ignited Artists mobile game studio, shares six ways to find funding for his startup.
Deibler talks about his own experience. Ignited Artists was founded in 2014 and received, according to her, a “significant amount” of investment from SEGA Networks.
According to Deibler, there are six ways to finance a gaming startup:
- self-financing or “bootstrapping”;
- business angels’ money;
- seed investments;
- A-round investments;
- strategic investments;
- crowdfunding.
“Bootstrapping” means that you open a studio with your own money and go without a salary for a while.
The advantages of this method, Deibler believes, are that “your fate is in your own hands. And decisions have to be made quickly, because you don’t have much time.” The main plus is also the main minus. You don’t have much time: you are constantly driven by the fear that the money will run out. For this method to be successful, it is necessary to have a clearly defined goal. It is best to go into “free swimming”, already having a plan for the future project in hand.
Both family and wealthy friends, as well as experienced investors can act as business angels.
Investments from business angels can be obtained by having only a good idea or a minimal prototype of the project. However, this method often does not allow you to collect the necessary amount of funds. Another drawback, Deibler believes, is “a huge number of meetings.” We should add that in the conditions of the Russian gaming market, such a method of financing may mean that the project management will actually be in the hands of the investor.
Seed investments are “preliminary” investments. They are used to create a company “from scratch” – to conduct market research, write a business plan, hire employees. A developer can look for seed investments, having only a good game idea and a team in the asset. But it must be borne in mind that the funds issue seed investments very reluctantly. They prefer projects in which stable significant growth can be predicted in advance (and it is difficult to make such forecasts in the gaming industry).
A-round of investments goes immediately after the sowing round. At this stage, the company should have a prototype of the project and a team. Round A investments allow the company to start full-fledged development and direct launch of the game.
The advantages of these two methods are that it is possible to immediately get all the necessary funding for the launch. Minus funds want guarantees. Therefore, the investor company will either receive a part of the studio’s shares, or will want a representative of the fund to be present on the studio’s board of directors.
An unobvious bonus from venture financing – funds do not skimp on feedback. If they decide not to invest in your project, they will usually tell you why. And it’s very valuable, Deibler is sure.
She adds that venture funds like to work with specialists who have a portfolio. That is, to come “from the street” and immediately receive seed investments or Round A investments is hardly achievable.
Strategic investments are similar to the two previous methods. But in this case, the sponsor receives not a part of the shares, but a controlling stake, and will be much more actively involved in the management of the studio. Deibler notes that her own company, Ignited Artists, resorted to this method.
The pitfalls here are exactly the same as in the previous two methods: you need to have a ready-made demo version of the project and a team. Deibler emphasizes that since in this case the investor will be directly involved in the management of the studio, it is necessary to choose a company that already has experience working with projects such as yours. That is, it is certainly possible to come with a hardcore shooter to those who invest in cute casual games. But you won’t like the result.
And finally, crowdfunding.
Deibler says that he considers crowdfunding services to be more of a market assessment tool. They give an idea of how much the audience is interested in your project, data from such platforms can be used as an argument when meeting with an investor. But in general, Deibler is sure that crowdfunding is an additional financing tool.
Summing up, Deibler gives universal recommendations: before seeking funding, you need to allocate roles in the team. Solve all the problems “on the shore” before the studio gets the money. She also advises not to neglect the legal registration of the business and to accompany each step of financing with appropriate documents.
A source: http://www.pocketgamer.biz
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