Start-ups and indie developers in search of funding should be calling for support long before they need it.
That’s the message of nDreams CEO Patrick O’Luanaigh during his talk ‘The Many Paths of Games Finance’ at today’s TIGA Games Summit in London.
O’Luanaigh split the potential sources of finance available to developers into four categories: profits, loans, project investments and equity investments.
When it comes to profits, the CEO recommends employing a work-for-hire model while starting up your studio, since contractors will pay you a definite amount for the work you do rather than risking making a loss on any game you lose.
“Work-for-hire is also great for teaching you about your team and what they can do,” O’Luanaigh told attendees. “However, the challenge is letting go of this model and transitioning into games development and self-publishing later on.”
He then ran through the various sources of loans available, ranging from personal loans from friends and family to bank loans and grants – “Talk to your local business area to find out what is available,” he urged – and crowd-sourced loan sites.
“A lot of these need guarantees, but they’re still worth looking into,” he said.
Project investments are available from SEIS and EIS project investment schemes – something O’Luanaigh stressed that smaller studios should look into – as well as publishing and co-publishing deals. In the case of the latter, the CEO said such deals have benefitted nDreams greatly over the year, with the company sharing development costs with partners and splitting revenues evenly on completion of the project.
The most obvious source of project investment are crowd-funding sites such as Kickstarter and IndieGoGo, but O’Luanaigh warned that these must be approached carefully.
“It’s a real challenge for small studios: you either need a low target or an incredibly unique idea. There’s a lot of failures on Kickstarter and a real knack to getting a lot of interest in your appeals.”
The exec finished with a round-up of equity investments, with sources ranging from supportive friends, families and colleague to investment angels.
“Networking is the best way to find angels,” O’Luanaigh advised. “Be honest about what you’re looking for. Some studios are a little sheepish about the money they’re looking for, but you need to go out there and explain why you have a brilliant idea and what you would do with the money.”
Networking also helps identify venture capital firms that will be interested and are relevant to your project or market but these, more than anyone else, must be approached early.
“You need need to be talking to these guys before you need the money,” O’Luanaigh said. “Tell them who you are and what you plan to do, because then they can see how you are progressing as the discussions continue.
“Not all VCs want the same level of risk. Some are really risk-averse and won’t invest in you unless you’re a really sure bet.”