Going Through a Venture Capital Company


Foregoing publisher funding to sign with a venture capital company is a radically different experience, with higher risks for you—but also higher potential rewards.

While working with a publisher is pretty much like working for a publisher, dealing with a VC company is like having a partner—but one that doesn't share your priorities.

In addition to a good team and a good game idea, you need a solid business plan to obtain capital. Capital investors are buying a share in your company, not just in one project; they must be confident in your long-term plans before they open their checkbooks. Preparing a business plan requires significant work; hiring a professional to write yours might be money well spent. See [Laram e03] for details.

Selecting a VC Partner

Most VC companies are not interested in videogames. Unfortunately, game projects are too expensive for very small funds, and not large enough for most companies that deal in the stock market. Moreover, since a game might take two or three years to yield revenues, it is hard to reconcile investment in games with the typically very short-term horizon of venture capitalists.

If a VC company initiates a dialog with you, it will be extremely different from what you get with the publishers. Since you will be asking for "seed money" to create a demo, or maybe even for enough money to develop the entire product, they will question your ability to deliver the game, how you plan to sell, it and what they can get back if everything fails. Since they are not from the game industry, they might rely on publishers you choose with them to evaluate the product itself, and they might get involved in negotiating the publishing deal. For example, the VC might pay you to develop the game and receive the milestone payments from the publisher; this protects you from cash flow fluctuations, but at the cost of an extra middle man. They will also control expenses very closely, thus forcing you to stick to the plan instead of doing research—to a VC company, a decent title delivered on time is preferable to a better product that costs more than expected and therefore reduces the calculated return on investment.




Secrets of the Game Business
Secrets of the Game Business (Game Development Series)
ISBN: 1584502827
EAN: 2147483647
Year: 2005
Pages: 275

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