We talk to lots of mobile game developers who want to grow their games. More often that not, these developers need some combination of money and expertise to help take their game to the next level. But it’s not always clear what type of deals available and on what terms.
We also talk to lots of people that want to finance great games, so we get a good sense for what types of deals are common. In this post, we’ll lay out the types of deals that we see and the type of developer / game that’s a good fit. We’ll start with two posts: this post is for games that haven’t yet launched and need money to complete the game. A second post focuses on games that are largely complete and need money to help them grow.
There are generally two types of deals available for pre-launch games:
In the “traditional” definition of a publishing deal, the publisher provides funding that allows the developer to complete their game (“completion funding”) and the testing and tuning to ensure the the freemium strategy is successful. Payments are typically doled out after the completion of specific milestones, like the completion of a playable demo, soft-launch of the product for testing and tuning, or major market launches. The publisher will launch and market the game, often with a commitment on the marketing budget they will commit. Sometimes they will provide operational support for customer service and community, and other times they will help to localize the game for large international markets. The game developer will be paid a revenue share for additional receipts, after the completion funding and marketing spend have been recouped.
Equity financing involves selling a portion of the business (typically 15-35%) to venture capitalists or angel investors, in return for $300k – $2 million, though terms will vary wildly. Many VCs and investors shy away from games, due to a feeling that it’s a hits-driven business. So focus on investors that are known to invest in games or strategic investors.
Kristian Segerstrale from Initial Capital has a good summary of the funding options available to build games, focused on “standard” publishing deals versus equity financing. It’s worth noting that while this is a good summary of a standard publishing deal, there are lots of newer publishers in the ecosystem who aren’t requiring sequel rights, or forcing developers to give up IP. That said, if you can get a great equity investor to help you build your game, it may well be worth the dilution.
How much activity is there?
There isn’t a ton of money available pre-launch, for a few reasons:
- It costs a lot of money to bring out a new mobile game. Count on $500k before any marketing spend to develop a game that can challenge the top grossing charts. This raises the bar on success and makes it easier to say no.
- Many publishers prefer to wait for a finished product that has at least completed a playable demo, removing some of the risk that the finished product won’t match the pretty vision they were sold. They’ve also found that the freemium market is unpredictable, making games that look great in concept phase unprofitable in the market.
Increasing your chances of getting a deal
So how do you get either an equity or publishing deal? Build a great team.
Yes, you’ll need great art, distinctive game play, and a fun game. But the biggest success factor for either a publishing deal or equity financing is a great team that has built a freemium game in the past. This drastically increases the chances that the funder will get a finished product that is likely to succeed, and is generally required to get a deal done.
Want to connect with top tier publishers and investors? A great first step is to create a great-looking profile page at Think Gaming, outlining your team, concept, art style, and game play videos.