I''m in some new ground here, so I hope that someone can help me out by sharing their experiences with venture capital and game dev firms. I''m currently working out a deal with an industry professional who would like to start up a company and manage the business side. He is in the process of negotiating venture capital for this startup and we have discussed a partnership for the company where I would be in charge of managing development. I can''t disclose too many details, but please bear with me. We have a project in progress, and a solid business plan. However the investor''s major condition is that we focus on the MMORPG market. This isn''t a problem either as the team had planned to work on such a title in the future (when we had the resources), and much of the primary design for it is done. Now we have a grasp on the resources, and the drive to do it, but there are still several questions open that can pretty much only be answered by someone who''s shared the experience. 1) Does anyone know of a recent success story with a game company that has been started on pure VC (not publisher funding), that they''d like to share? 2) What should a dev team funded on pure VC look out for? I''d like to identify any known obstacles as soon as I can and work on contingency plans. 3) We will still be approaching publishers when it comes to distribution and advertising. Is pre-publisher advertising something to pursue..(ie. building up a player base and company reputation early on vs. the hassle and the risk of having an image that some publishers may not want to promote)? 4) Is a pitch broker still necessary at the point of approaching a publisher with a finished product for negotiation, or would it be a waste of resources? 5) Servers and tech support. We will need a LOT of both in the future. Which would be better for us in a 5 year run, outsourcing or managing this aspect in house? Thanks for your advice

I don''t know any success stories of game *studios* who got VC funding. But Intrinsic Graphics got $12.5 million from Venture group 3i (www.3i.com) to help them develop their multi-platform game engine Alchemy. Check 3i''s news page:

http://www.3i.com/us/news/index.htm

or Intrinsic''s site www.intrinsic.com for details.

LithTech has also received some money from various sources, including $5 million recently. See www.lithtech.com news pages for details.

Wish I could point to game studios specifically.

I''m no expert on VC funding...but from what I''ve heard you can expect *NOT* to get a big chunk of money all at the beginning. Its likely you''ll get a small chunk, perhaps $50K or $100K with another chunk held out like a carrot to be negotiated once you reach some required milestone. I gather that this carrot-chasing can go on for numerous milestones before they will trust you with bigger chunks of money.

I would also say that VC''s are probably a bit less anxious to take chances in 2000, given the current state of the US financial markets. (I cannot really comment on VC''s outside the US.)

I would advise you to approach other VC''s once you have initial funding. I don''t think you necessarily have to get funding from just one VC source.

I should hope that there will be more reliable server farms for hire in a few years, so that you don''t have to maintain your own servers.

Graham Rhodes
(normally replying as grhodes_at_work)

quote:
I don't know any success stories of game *studios* who got VC funding. But Intrinsic Graphics got $12.5 million from Venture group 3i (www.3i.com) to help them develop their multi-platform game engine Alchemy. Check 3i's news page:

http://www.3i.com/us/news/index.htm

or Intrinsic's site www.intrinsic.com for details.

LithTech has also received some money from various sources, including $5 million recently. See www.lithtech.com news pages for details.

Wish I could point to game studios specifically.

That's no problem, it's a great start, thanks for the links

quote:
I'm no expert on VC funding...but from what I've heard you can expect *NOT* to get a big chunk of money all at the beginning. Its likely you'll get a small chunk, perhaps $50K or $100K with another chunk held out like a carrot to be negotiated once you reach some required milestone. I gather that this carrot-chasing can go on for numerous milestones before they will trust you with bigger chunks of money.

Same deal with publishers usually. I don't mind per milestone payments, and beggers can't be choosers, eh?

quote:
I would also say that VC's are probably a bit less anxious to take chances in 2000, given the current state of the US financial markets. (I cannot really comment on VC's outside the US.)

Yes, very true. However it may also be a good sign for those willing to take chances in something with a lot of growth potential still, but more viability than a dotcom company.

quote:
I would advise you to approach other VC's once you have initial funding. I don't think you necessarily have to get funding from just one VC source.

It'll depend a lot on the agreement we reach with them.

quote:
I should hope that there will be more reliable server farms for hire in a few years, so that you don't have to maintain your own servers.

Tell me about it. However I'm hoping that with enough hype we can have HP or a similar company to donate a server farm in exchange for the advertising (I've seen them do crazier stuff). Maintaining it would still fall in our lap though.

Well thanks for your help

EDIT- Screwed up quote syntax

Edited by - m1dn1ght on November 26, 2000 5:54:45 AM

Ion Storm (makers of Daiktana and Deus Ex) were funded by venture capital. Gaming is growing bigger and becoming more mainstream. Some VC''s have understood this. If you have a good team you have a pretty fair chance of getting VC money.

True, it''s really just a matter of minimizing the risk for VC investors. A good project timeline, design proposal, and business plan will work.

Heh. If you want an example of a VC-funded game development company, Ion Storm is probably *not* the one to mention...

Ion Storm, in collaboration with a number of other game development companies of the late 90''s, have made it almost impossible for a game development company to get VC funding. Millions of VC dollars were burned up by such companies, and investors are rather gun-shy at the moment.

Good luck!


DavidRM
Samu Games