The last mile scenario

How do investors react to studios seeking funds to complete their game?

In our ongoing series of articles on how investors react to games company pitches, this scenario is one we see all the time – funding for that last mile to finish a game.

The last mile scenario

In this scenario, your studio has a new IP in development and you need extra financial resources to complete it.

Creative vs Commercial

We’ve advised a lot of games start-ups and we hear this one a lot from founders, especially those on the creative side of the business. The industry is chock full of teams wanting to make new games that are different from the rest, pouring their passion and creativity into their first title’s engaging gameplay, distinctive graphics and pristine code.

The creative side of your studio’s equation needs to be balanced by a very clear plan for how your studio will make money. ‘Build a brilliant game and they will come’ won’t cut it. Good reviews are not enough. Studios need to demonstrate a clear plan for taking the game to market, then converting, monetising and retaining players.

This balance between the creative with the commercial is an important characteristic of the most successful games studios. They don’t do this by accident. Their leadership teams have commercial people balancing out the creative people.

When you meet with an investor, especially in these tough times to raise money, they will usually focus on the commercial. Yes, they will want to see something fresh and new, be inspired by your creativity, but it’s essential they see how your studio will make money for them.

Unlike in the film industry, most early-stage games investors put money into companies, not individual titles. They invest in teams of talented people, systems to deliver and processes to optimise - as well as good games.

Companies with all these components are rare on the ground. Even in hard times, investors snap them up.

All your eggs in one basket

If all your eggs are in the one basket of a single title, we’re immediately wondering whether the company - not just the single game - has enough commercial potential for investors. European investors in particular tend to have a lower risk appetite and have been put off by pitches to back a single hit for decades.

Good and bad things can happen to that one cherished title. Yes, it could review well, chart nicely, find its audience quickly and monetise.

But what happens if the game doesn’t sell, or isn’t marketed well, or launches in a busy week, or is spotted in beta by another studio and ripped off weeks before your hard launch?

You can guess the stats on how many companies create a brand new hit IP with their first ever release.

The brutal truth is that most studios release their first game to muted commercial success at best. 

The studios that survive usually have to release several titles before achieving a real success. They learn their trade not just by creating fantastic games but also by learning from their mistakes and discovering how their studios can successfully make money. This process usually means some compromise with the creative side of the business.

What this pitch means to investors

Wanting to complete a game will elicit sympathy from any investor with an industry background but every investor wants to see how the company - not just one game - will thrive. 

Over-emphasising the creativity of your title and under-playing its commercial potential will reduce your chances of raising money. The quickest way to glaze the eyes of an investor is to make an unrealistic comparison between your game and a blockbuster title developed with budgets in the tens of millions.

Most investors don’t expect your first title or even your second title to be a material success. Instead they want to see a resilient and ideally experienced team that can learn how to succeed.

How studios can improve this pitch

If you’re adamant that your one title will take the world by storm, then equity investment will likely be very difficult to raise. The more viable investment proposition is one where completing your game is just the first in multiple steps towards developing your company. 

Edit out any assumptions of awesome success for title 1. Treat it as a learning curve. Prep a compelling strategy to learn success through multiple titles. 

Your first title is a stepping stone in your longer term strategy, which might include multiple games, more staff, different commercial, marketing or partnership models, learning how to execute on your chosen platforms, getting to know your players and demonstrating how your senior team develops a process of continuous improvement. Put realistic numbers against that longer term strategy and investors are much more likely to be convinced.

Even if the funds raised will largely be used to finish that first title, you need to show investors what the plan is after it’s shipped.

Key takeaway: Investors want to see a team with a long-term vision with multiple titles, not a single game.

Sound easy?

No?

It’s not easy but it’s doable with the right advice.

We’re here to help.

You can access some of our products like our Pre-investment checklist (10 reasons to raise money for the first time and when to act on them), 5 ways to plug skills gaps in your top team’s experience, our forthcoming Games Investor Profiles, our Games Investment Deck template (with explanations and advice for creating a strong pitch deck), the Art of the Pitch (10 pitch recommendations to read BEFORE you do your first investor pitch)

You can also book an Investment Deck Review, conduct a Practice Pitch Session with us before you face the investors as well as a range of one to one advice from a team that has reviewed hundreds of games investment pitches.