This article tells my conclusion to the question “Should I deal with game projects as a startup?” or “Is my game studio a startup?”
When I decided to start a game studio, I knew it was going to be hard … I expected that it’s going to be the hardest thing I’ll attempt to pull off and spoiler alert, it is.
Now after two years of professional Game Hermits, and 6 years of managing game dev teams and projects, it never got easier. You’d think you’ll reach a point where you’ve got everything figured out, but that’s only if you stopped moving forward. We still have huge aspirations and thus, we face new challenges all the time. The newest challenge that has been eating me away is the main subject of this blog.
Now here’s the context, we’ve been steadily growing in Game Hermits for the past two years, but we are soon to hit a plateau where if we don’t prepare for exponential growth we will be effectively going down and slowly dying. This is not just me speculating, it’s what researchers have found that 85% of indie studios fail in the first 3 years.
And oh boy, I sure don’t want to be among that 85%. And so, to prepare for exponential growth, I had to first understand how startups achieve exponential growth.
I’ve taken many crash courses, read countless articles, attended lectures by business veterans, read a couple of books, and right now am undergoing a pre-accelerator program. You’d say I’d figure out what I’m supposed to do, but the truth is that I discovered the unexpected. Game studios are not startups, Game studios are in what is called a hit-based industry that has no strong foundation business-wise thanks to the nature of video games. Now I don’t know if I would have learned this much sooner if Egypt had a booming game industry or if I had spent 20 years or so working for the best studios in the world; But either way, I’m trying to catch up to the standard of the business in the game industry as fast as I can while sustaining the studio and it’s the only option to lead our team into the success they deserve … Hopefully without going completely hollow!
With that said, here’s what I found out in case you too are stuck in the same problem.
First, what are startups?
A Startup is not a company that just started, that’s a common mistake. A startup Is a type of company that is founded to develop a unique product that solves a problem and releases pain points for customers of that market. Startups are usually product-centered; That means they are focused on a single product and are usually looking for innovative solutions to existing problems.
The best examples for startups would be companies like Facebook, Amazon, Apple, Netflix, and Google. Yes, some of those companies have many products now, but that’s because they are now considered enterprises. In their early days, they were very focused on one product that solves a real problem.
With that said, startups are the ideal place for risky investors such as angel investors or Venture capitals who search for startups that provide meaningful products and solve problems, because that means a market is sure to be found and revenue can be forecasted.
Furthermore, risky investors are always looking for transformative business because those are the long-term winners.
Take Google, for example, Google started with a search engine that introduces an innovative solution to web browsing. Early investors didn’t only see google as a search engine but saw it as a potential disruptor for large industries like advertising newspapers and online shopping. This made investing in google worth it for investors.
A startup is always looking for rapid growth in a short period to dominate a specific market with its service/product. That means, startups usually start making profits at a later stage.
And to make things even clearer here is the general journey for startups
All of that makes investors able to pick which startup to invest in by taking a closer look at their clear vision, practical value proposition, focused target audience, MVP phase result, and AB testing.
Now here comes my problem. For Game Hermits to grow exponentially, our best action would be to secure an investment for our upcoming game and have it be a hit that translates into a huge profit. The best chance is for our next game to be non-indie. So far, we’ve been indie and we’ve been dreaming indie. But the transition from indie to non-indie is not an easy feat.
To produce a game outside the indie framework, we need to bring in investment that covers the entire production and marketing. And if we dealt with that as a startup, first we will have to acquire early adopters, study their “Problem” and make a game prototype that attempts to solve that problem. If that prototype gets positive feedback, we can then move onto the MVP stage where we work locally with partial monetization to test whether players are willing to spend in our game or not, then and only then can we look to raise investment for the game... Hold on a second, something feels off … oh yea …
GAME STUDIOS CAN’T DO THAT!
We don’t solve a problem, gamers don’t have problems with playing games, they have demands and these are so different. A problem is visible and known to users, but a demand might not be fully visible. A player might not know he/she demands a certain gameplay mechanic/style until they see a trailer for it.
Another thing is that we cannot forecast anything based on data. Successful games usually are product-fit, which means they reach a global audience of multiple regions that enjoy the same experience. For a startup, if the same problem exists, the same solution usually applies. But for games, you might do so well locally, but fail miserably globally.
You might do so well globally, but fail miserably in one or two markets that significantly reduces your potential revenue.
Another thing is repetitiveness. Amazon, for example, kickstarted the e-commerce industry and it’s still doing the same thing after all of those years. Of course, technologies got more advanced and the company’s services are much more refined now, but at its core, it’s still E-commerce.
The same logic cannot be applied for games, Angry birds was a super hit a couple of years ago, now players will probably not even consider downloading a game of similar nature and the developer needs to keep making new games to stay relevant.
The point is, the game business is shrouded in vagueness and uncertainty, it’s always changing and no one can predict the next trend which makes it a hit-based business… and that’s not what most investors are looking for … Even the risky ones.
Since I realized this fact, I’ve been struggling to understand what is the best way to pitch a game for an investor? How would an investor pick a winning game? If I was an investor from outside the game industry, I would like to see some sort of forecasting or at least data that shows a real possibility of revenue and a real possibility for growth and scalability, but games don’t promise that right off the bat.
But then it hit me as I was watching a movie, I stopped and asked myself this: how did the producer of this movie raise funds?
Wait a second! movies, music, and games are all very similar… You can always write a good screenplay, unique lyrics & toon, a polished prototype, but you can never guarantee the final version would become a hit. Yes … It’s all clear now, movies, music, and games are not traditional businesses, they are not startups, they are a mixture of business and art.
After this enlightening monologue, I started looking into the matter from a different perspective. First, I researched how movie producers acquire insane amounts of funds, then I studied how music producers secure a publishing deal, and lastly, I compared them against live examples in the game industry, and here’s what I realized: -
Since all those mediums are focused on becoming hits, investors who are interested in them usually are from within the medium itself whether they are gamers or game enthusiasts. Furthermore, they are not expecting every single project they invest in to make a profit. What they want to see is a new game idea, an expert team working on the project, a clear operational plan, a realistic budget, a detailed market research, and if possible, a track record of your work. I would like to connect with a game investor and see if my conclusion makes sense :D
Anyways, this builds the bridge I’ve been searching for, a bridge that allows me to search for those specific investors who are looking to fund exactly the type of game we’re making. It’s then our job to prove to them that we are the best team to execute this project and we would both do our best to make the game a hit by validating it along the way of development through beta releases, soft launches, local events, whatever the means.
Of course, getting everything right is very hard, and I’d say a part of the pitch would be for you to have already invested in your game and developing it. But at least now I have a clear goal to work for to developing a non-indie game and we start planning for that accordingly.
Step by step, slowly but surely, this has always been our model. No matter the final result, I’ll be here to tell you about it. And as always, our B2B services are always open 😉