🕹️ #0001 - Fundraising for... Video Game Developers

The new Fundraisedd series is out!

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Hello friends,

It’s been a while since the last issue of Fundraisedd went out. In the meantime, I’ve been thinking about taking this newsletter further and how to change its format so that it brings you the most value.

For the foreseeable future, each issue will talk about fundraising in a specific context. Finding investors for a social mobile app isn’t the same as finding some for a restaurant. You won’t face the same challenges raising debt to purchase machinery as you would raising equity in a tech Series-B.

All these business cases deserve a dedicated analysis, and that’s what I’ll be doing!

First up, it’s fundraising for… 🕹️ video game developers.

In this issue we’ll talk about:

  • 📋 Pitch Deck Specificities

  • 💵 Fundraising Process

  • 🚀 Success Stories

  • 🏛️ Public Companies

  • 🔮 Industry Trends

  • 🏗️ Incubators/Accelerators

  • 💵 VC Firms/Investors


📋 Pitch Deck Specificities

🖌️ Design

  • Your deck design should match the universe of your game (cel-shading, pixelated,…).

  • Use the in-world colours and fonts to provide investors with a feeling for your story.

  • Use a language in adequation with your universe, too.

  • Be serious, but don’t take yourself too seriously.

⚙️ Problem

Building a game addresses a need for entertainment. However, you must define this need more specifically1:

  • Sensation (game as sense-pleasure): Silent Hill, Monument Valley,…

  • Fantasy (game as make-believe): World of Warcraft, Civilization,…

  • Narrative (game as drama): GTA, The Last of Us,…

  • Challenge (game as obstacle course): Super Mario, Braid,…

  • Fellowship (game as a social framework): Among Us, Counter-Strike, Fortnite,…

  • Discovery (game as uncharted territory): Zelda, Geoguessr,…

  • Expression (game as self-discovery): The Sims, SimCity,…

  • Submission (game as a pastime): Sudoku, Candy Crush, Angry Birds,…

  • Education (game as a learning tool): The Oregon Trail, Wordscapes,…

💰 Opportunity / Market Size

You need to make clear who your target customer is:

  • If it’s a game for kids: your customer is actually a concerned parent. Your game must deliver educational value in a safe and comforting setting.

  • If it’s a game for teens/adults: make sure you know the preferred platform, play with trends.

As for any other venture, you need to demonstrate is that you’re targeting a valuable market that is both growing and dynamic and that you know who your customers are.

Use online resources like these to back your claims:

💸 Business Models2

How will you make money and distribute your game.

  • ❄️ Retail: Simplest model, you sell your game in a shop. Not so trendy at the moment, probably not a good bet for the future.

  • ❄️ Advertisement: Often feels spammy and low-quality. I wouldn’t go for it.

  • 🔥 Digital distribution: Steam, GamersGate, Desura, MacGameStore, Direct2Drive, there are many great online stores. It allows you to easily push updates, sell extensions, and let your community build mods.

  • 🔥 Subscription: If your game logic can be extended - new levels added, new characters to play, new quests to unlock - or if your game is a regular pastime (crosswords,…), consider a subscription model. Remember, you need regularly updated content to justify the price of a subscription!

  • 🔥 Microtransaction: Easy to “gamify” and integrate into the game logic/mechanics. Players can purchase new items, unlock levels, acquire in-game currency,…

  • 🔥🔥 Player-to-player trading: allow in-game exchange and trade and take a commission, much like a casino takes a rake at a poker table.

  • 🔥🔥🔥 NFTs: Just like The Sandbox, create a virtual world in which players can mint and sell NFTs. You can also create your own and sell them on a marketplace, collecting royalties on further secondary transactions.

💡💡💡 You can also combine multiple business models/revenue streams. As an example, think of FIFA. You purchase the game every year, and you have in-game microtransactions (not so micro!).


💵 Fundraising Process

Build a prototype!

Entertainment products spread through word-of-mouth of massive advertising campaigns. As a startup, you can’t rely on the latter and must focus on the former.

This means you need a playable version of your game as soon as possible. It seems reasonable to develop your game with love money first if you don’t have a successful track record in the industry.

One possible way

Raise money with FFFs (friends, family, and fools) to build a prototype: a single level of your game, a multiplayer demo. Anything that demonstrates the experience, the visual universe, the fun/sensations will do; investors need to play!

Consider crowd-funding: game crowdfunding campaigns perform decently on platforms like Kickstarter. Over the past years, an average of $15M per year has been on Kickstarter by video game campaigns. This allows you to take your game to a defined next step without giving away equity.

Join an incubator/accelerator programme. Video game development is often a long, capital-intensive process, and dedicated incubators/accelerators can help you tremendously along the way. A few are listed further down in this guide.

Go for VC funding when you have traction. Once again, you can find a list of VCs active in the gaming industry further down.


🚀 Success Stories

  • Among Us - From nothing in 2018 to 500M players in November 2020.

  • Flappy Bird - A amazing rise to fame, and $50,000 of ad revenue per day, and an abrupt end.

  • Fortnite - From $0 to $2M a day in 3 months.

  • Angry Birds - The 52nd game from a dying studio, Angry Birds propelled Rovio to the top: the company currently employs 900 for yearly revenues of ~$300M.

  • Pokemon Go - The game revived a cult franchise, grossing nearly $3B in 5 years.


🏛️ Public Companies

Activision Blizzard, Inc. (ATVI):
EV/Sales: 8.85
EV/EBITDA: 23.66

Electronic Arts Inc. (EA)
EV/Sales: 6.01
EV/EBITDA: 23.81

Glu Mobile Inc. (GLUU)
EV/Sales: 3.47
EV/EBITDA: 65.75

Rovio Entertainment Oyj (ROVIO.HE)
EV/Sales: 1.29
EV/EBITDA: 6.71

Take-Two Interactive Software, Inc. (TTWO)
EV/Sales: 5.56
EV/EBITDA: 30.38

Ubisoft Entertainment SA (UBI.PA)
EV/Sales: 5.34

Zynga Inc. (ZNGA)
EV/Sales: 6.27
EV/EBITDA: 89.49


🔮 Industry Trends

From Kevuru Games, Exploding Topics

🕹️ Major Upgrade in Game Consoles

Consoles are among the most popular devices for gaming as well as other activities, especially among players around the world between the ages of 25 and 34. In the current generation of consoles, Sony’s PlayStation 4 significantly outperforms the Xbox One in sales, with 113.16 million units sold by Sony worldwide.

👩🏻‍🦲 Re-release of old games / nostalgic gaming

Sony announced a remake of Demon’s Souls. […] Most likely, most gamedev companies will continue the nostalgic trend. What is also remarkable about these remakes of games is that nostalgia is one of the fundamental triggers for millennials to play games.

☁️ Cloud-based games

Every year, computer games are becoming more demanding: to play comfortably with the maximum graphics settings, you will have to pay a big sum for a computer or any other gaming platform. The global cloud gaming market is expected to grow from $0.16 billion in 2019 to $3.23 billion by 2023.

🔁 From one-time transaction to subscription

Today’s consumers are buying fewer games than they used to. What’s more, gamers who pay to subscribe spend about 45% more on games than non-subscribers.

📱 Mobile gaming boom in a new genre known as hybrid-casual games

Overall, mobile gaming revenue in 2020 will amount to $77.2 billion, up 13.3% from a year earlier. A fairly significant part of it comes from casual games. They combine elements of gameplay and monetization from both hyper-casual and mainstream genres such as action-based role-playing games (ARPGs) and deck builders.

📱 The arrival of big game titles in mobile gaming

As evidenced by the release of Call of Duty Mobile and Riot’s announcement that the mobile and console versions of League of Legends will appear on iOS and Android in 2020. These and many other AAA games have their own separate mobile versions that don’t have much in common with the PC and console versions of these games.

🏈 Esports is reaching a new level.

The Newzoo Global Esports Market Report 2020 shows significant revenues in this area – $1.1 billion, an increase of + 15.7% year on year. Globally, the total eSports audience will grow to 495.0 million people in 2020, up 11.7% over the same period last year.

🎥 Live game streaming catches on in a big way.

Today, the number of monthly Twitch streamers exceeds 7 million, this year users are watching over 803 billion minutes. And YouTube, not wanting to share fame with Twitсh, is actively promoting its service for game broadcasts YouTube Gaming.

🤖 The demand for VR/AR continues and will continue to grow in gaming

The global AR and VR gaming user base is expected to grow to 216 million users by 2025. Pokémon Go remains the AR industry’s biggest success story, earning more than $3 billion.

Early Access

According to research published in Empirical Software Engineering, approximately 15% of all games offered on Steam are “Early Access”. And as Early Access becomes the norm for many developers, this figure is set to grow significantly in 2021 and beyond.

More on the topic:


🏗️ Incubators/Accelerators

🌐 Global

Europe

More: Full list for the Baltic-Sea Region

North America


💵 VC Firms/Investors3

Asia / Middle East

Europe

North America


📚 Further reading


💬 Let’s talk

Please, let me know what you think of this new format!

Until next time, have a great week and see you in the comments! If you enjoyed this issue, share it with your network.

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