Finding Funding: Asking the right people at the right time

The Darwin Project by Scavengers Studios

That’s not to say that there aren’t exceptions to the rule, but a venture capitalist is not likely going to be interested in a short, narrative game with no opportunities for post-purchase monetization (microtransactions or long-term content strategies that can be used to incentivize additional spending).

He also urges developers to lead with empathy when seeking funding. It’s important to understand who potential investors are and where their interests lie. Once you’ve gone through that exercise, you can start to see if your studio or project is a good fit for a particular investor.

“A big part of the work that we often do with developers starts with asking them, ‘What are you doing, where is the opportunity, what kind of game or studio are you building?’”

The hard work of starting out 

There is an evolution to funding opportunities. At different stages of your company’s growth or project’s development life cycle, you’ll have your best chance of securing different kinds of funding. Early on, the going is likely to be tough. Unless you’re a high profile creative moving from AAA to an independent studio, it’s not likely you’ll find institutional or angel investors willing to take the plunge right at the outset.

Many new studios instead seek what Della Rocca calls “love money.” This is funding that comes from relatives and friends. That doesn’t mean it always comes without conditions. It’s not uncommon for those giving love money to request equity or revenue share.

Love money can be an important early boost, especially since it’s so hard to find prototype funding. The other options are to rely on savings or other sources of revenue. 

“You have to bootstrap or self-fund in order to get a prototype to the point where you can pitch a publisher or fund – and this can be really difficult,” said Robot Teddy co-founder and Kowloon Nights portfolio manager Callum Underwood. “Think about how limiting this is to people from underrepresented minorities or countries that don't have that amount of access. They don't have the finances or the connections. They may not have close connections to a wide variety of game developers, as those from say, LA do.”

Thankfully, there are things you can do early on to set yourself up for securing investment and project funding. Networking can be a valuable precursor to pitching.

“We knew we weren't going to raise money right away, but we had the idea that networking was going to be very important for the purposes of finding funding,” said Polyarc CEO and co-founder Tam Armstrong. “We started socializing, I guess I could say, with that intent in mind potentially immediately. Once we had the first prototype complete, which was for what eventually became Moss, we actually actively went around to some of the connections that we had been developing. Up to that time, we'd been talking with people about what we were doing and what we thought our process looked like.”

Godfall by Counterplay Games and Gearbox Publishing

Once you have a meeting set, there are a few things you’ll want to bring with you. You’ll want to have a pitch deck with information about your team, the game, and some assets; a one-sheet with basic information, and a top-level budget (you don’t need to get granular yet). You’ll also want to bring a playable build, if you have one, especially if it’s been updated. Don’t overthink your pitch deck. It should be clean and well organized, but it doesn’t need to win awards. The content, not the design, will make the difference.

Of course, it’s also important to properly identify the right funders to pitch. Once you’ve determined whether you're better off seeking project or equity funding, you’ll want to have a sense of what types of companies or games each potential partner is interested in.

“Genuinely understand what it is that you want from a partner and feel empowered to make that decision before you start approaching everybody,” Underwood urged. “I'm in a slightly unique position in that I work with Kowloon Nights on business and scouting. I work with Superhot at which I set up Superhot Presents, and I do consulting and scouting for Oculus.

“Now, it does not make sense for anybody to pitch all three at the same time. Understanding why that is true is core to the problem that a lot of developers have. If you look on the Kowloon Nights website, it says no VR or AR. Therefore, why would you pitch a VR game to Kowloon? We've said the same at Superhot—no VR or AR. If you take this specific example of the three companies, then you would go pitch your VR game to Oculus, not the other two. It’s surprising how often people make this mistake. It’s really important to spend 10 minutes learning about the partner, and not just throw stuff at the wall to see what sticks… that’s how you burn your chances.”

If you’re pitching a project to a publisher or a fund, it’s also important to know the budget ranges of each of your potential partners' targets. Coming to the table with a scope mis-match can end a conversation quickly.

“If you want $3 million for your non-VR game, it’s important to understand which publishers can even afford this amount, or find this an acceptable scale at which to fund. We get a surprising amount of pitches for this amount to Superhot Presents, which is sad because it just wastes the developers’ time.”

If you’re looking for equity funding, there is another aspect to consider. Project funding is relatively short term. Pitching your company to angels and VCs is a longer proposition, with relationships potentially lasting a decade or more. Polyarc explained how it focused its conversations for each type of funder.

In his talk, Della Rocca indicated that pre-revenue angel investment might begin as early as six months into a fully established company’s life cycle. That includes having key personnel in place and work beginning on a project. Once the company starts earning money and crawling back toward break-even, venture capitalists and equity funds may start to see long-term promise and provide seed funding.

After break-even, additional funding rounds can help spur growth by providing capital for staffing to support a thriving audience.

Della Rocca also provides a visual aid for those taking the project funding path. Publishers, which we’ll talk about in-depth in a future article, are best approached when there’s a team, prototype, and budget in place. Note that crowdfunding has shifted since 2012, when Double Fine kicked off the video game Kickstarter gold rush. Over the past eight years, crowdfunding has slowly shifted from the concept phase to much later in the production cycle. 

Disc Jam by High Horse Entertainment

You may also decide that you don’t want to move forward with investment at all. Independence is hard-won for many developers coming from AAA. High Horse Entertainment, a two-person studio that balances contract work and their own development, is in a unique position. The duo of Tim Rapp and Jay Mattis worked at Activision, and both have expertise in live services and networking. That was a contributing factor to the success of their first game, Disc Jam. 

High Horse has been staunchly independent despite entertaining acquisition and investment offers.

“When it comes to offers for acquisition, it usually stems from one or two places,” Mattis said. “It either stems from, ‘Hey, we're a company that doesn't really participate in the online space. Maybe we made an attempt or two, just enough to realize how hard it is and how complicated it is, and that we need people who get it right and to build technology for us.’ That's one avenue. Then there's another channel that's, ‘Hey, Disc Jam's really cool. You guys had a lot of users, and you did this as a cross-platform network title. We want to get in on that and whatever else you guys are doing. How about we acquire you and go forward there?’ Then there have been versions where it's, ‘We like what you guys have done. What if we just take you guys specifically and install you over at some other studio that we're either building or already exists.’ All three of them look a bit different, but actually our considerations all come down to the same thing. The reason that we left Activision in the first place was because we wanted to make our own stuff. That independent way, that has always been in each of our dreams.”

Leave time for fundraising

It’s easy to forget that fundraising is a process that happens outside of traditional physical events like GDC and other trade shows. It isn’t localized to one or two weeks each year. Rather, it needs to be part of your company’s operating profile.

Developing a pitch, creating a playable build, researching, making calls, and sending emails can eat up a large portion of your time. When your studio is small and bootstrapping, it’s likely to be a major focus.

“I can say that it's a significant amount of time,” Armstrong explained. “It is a job. I can say that the degree to which I was doing it was less than full-time only by virtue of the fact that I was also doing engineering and design work on the game. It was certainly more than an average of a day a week. I would say it was definitely north of one day, so it was definitely more than 20% of my time. It could have been 50% of my time. It was a fair amount.”

And even then, Armstrong wonders if Polyarc spent enough time securing fundraising. The studio didn’t have a dedicated business developer.

“Would that have made it go faster and more effectively? It's quite possible,” he said. “I definitely didn't see the upper limit. I've not yet seen someone put too much time into it.

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Mike Futter is a freelance journalist and gaming industry consultant. He is the author of the Gamedev Business Handbook and co-host of the Virtual Economy podcast. Find out more here.