Hi, I'm putting a business plan together for a startup, and I'm wondering about the monetery value of our code, artwork, and toolchain for listing current assets. What I'm looking for maybe an article where someone covers this, or maybe some sort of record of sales (since it's better to have real data than educated guesses), or some other pointer. I presume it's not completely unheard of for someone to sell an incomplete game, but it's not like I can go see what the going rate is on eBay. In case anyone wonders: what we have now is 3D action-adventure style game, quite playable, and I'd say about 50% feature complete (the main todos are combat, vehicles, and character AIs). Probably only 10% of the storyline is complete, though (scenery, characters, cut scenes, etc.). However, the tool chains to create and integrate artwork is nearly complete: we can create a scene or character and plop it into the game with very little additional effort. And, just for the sake of argument, the game is written in Python. Thanks in advance for any info.

aerily wrote:
>I'm putting a business plan together for a startup, and I'm wondering about the monetery value of our code, artwork, and toolchain for listing current assets. What I'm looking for maybe an article where someone covers this

http://www.sloperama.com/advice/lesson29.htm


http://www.gamasutra.com/features/20040211/olsen_01.shtml

Hope those help.

> I'm putting a business plan together for a startup, and
> I'm wondering about the monetery value of our code, artwork,
> and toolchain for listing current assets.

From an accounting perspective, you cannot get accrued development as an asset. Salaries are expensed against revenues in the Income Statement. The effect is immediate at the statement's date, not accumulative. You may be able to talk an accountant into turning some part of it into Goodwill because you can claim it's R&D that can't be duplicated easily, but this is a VERY BIG assumption and the average Goodwill amortization rate is insanely high; software tech Goodwill of this nature is fully amortized in 3 - 5 years in general depending on many legal and accounting factors. Patented tech can claim better value and amortization rates. Accounting rules were designed with manufacturing in mind, unfortunately. Software companies are largely undervaluated in this scheme.

A rough evaluation would be via what we call "comparables". You can talk to contract developers in your area to find out what is the going rate for a project. It's usually quoted in man-months; some will say it's a bad metric but that's the industry yardstick. You could determine how many man-months you have invested into your game tech so far and multiply this by your average monthly salaries.

> I'd say about 50% feature complete

How much any software product is truly complete is a very subjective matter that you cannot reliably measure. I can have a software product that is "100% code complete", but still require 6 - 9 months of optimizations and debugging. Reminds me of "Duke Nukem: Forever"...

Hope this helps.

-cb

[Edited by - cbenoi1 on September 25, 2006 9:11:28 AM]

Quote: Original post by cbenoi1

From an accounting perspective, you cannot get accrued development as an asset.

...

A rough evaluation would be via what we call "comparables". You can talk to contract developers in your area to find out what is the going rate for a project. It's usually quoted in man-months; some will say it's a bad metric but that's the industry yardstick. You could determine how many man-months you have invested into your game tech so far and multiply this by your average monthly salaries.

Arcane accounting rules aside, I'd like to get some idea of how much we could salvage if we had to liquidate. I was hoping there'd be something better than sum of total work.

Thanks.

Quote: Original post by aerojockey

Quote: Original post by cbenoi1

From an accounting perspective, you cannot get accrued development as an asset.

...

A rough evaluation would be via what we call "comparables". You can talk to contract developers in your area to find out what is the going rate for a project. It's usually quoted in man-months; some will say it's a bad metric but that's the industry yardstick. You could determine how many man-months you have invested into your game tech so far and multiply this by your average monthly salaries.

Arcane accounting rules aside, I'd like to get some idea of how much we could salvage if we had to liquidate. I was hoping there'd be something better than sum of total work.

Thanks.

Unfortunately, he's absolutely 100% right. Having taken a fraction of the accounting classes the above poster has (I'm guessing), when you liquidate or shut down shop you'll probably get more for your office furniture than your source code, unless your source code can be independently apraised or go through some such process that gives a 'difficult to value' item a quantifiable value. (anybody know of such a profession - a source appraiser?)

You may pour your judgement upon those arcane rules, but those are the rules you've got to understand and follow when doing business. Those accounting rules are there to protect businesses and investors alike.

> Arcane accounting rules aside, I'd like to get some idea
> of how much we could salvage if we had to liquidate.

The braintrust is more valuable than the source code. When gone are the people that have the know-how to build and maintain the tech, so is the company value. That's just how things work in a knowledge-based economy. Sorry.


> I was hoping there'd be something better than
> sum of total work.

That value can change upward if you have developped a highly-prized IP. Then someone else could build other games based on this license; but that someone is likely to use very different tech than yours. Based on what you have written, I don't think this case applies to yours here.


-cb

Quote: > I was hoping there'd be something better than
> sum of total work.

That value can change upward if you have developped a highly-prized IP. Then someone else could build other games based on this license; but that someone is likely to use very different tech than yours. Based on what you have written, I don't think this case applies to yours here.

When I said "better", I meant I was looking for a better estimate.... Geez, I didn't expect to get the sum of total work for an incomplete game.

Consensus here seems to be very little if any, but I'd still rather know where I could find some real information about or examples of these kinds transactions. It's not big deal, really. I'm just looking for something that could go towards placating a lender.

Thanks again.

Quote: aerily written:
I'm just looking for something that could go towards placating a lender.

Ah. How reusable is your engine code? How well-documented and reusable are your tools?
The game code itself - well, you already got the picture.

[Edited by - tsloper on September 25, 2006 11:09:03 AM]

Quote: Original post by aerojockey
...I presume it's not completely unheard of for someone to sell an incomplete game, but it's not like I can go see what the going rate is on eBay.

Actually it is very uncommon for part completed titles to be sold. Generally if a game isn't finished its viewed as a failure and as such not something someone wants to buy. When games do get bought it is usually as a result of a fire sale. If a publisher is funding a game project and the developer goes into liquidation the publisher may step in and buy the rights to the code for a nominal sum or may often just get them as part of the publishing deal - they then move quickly to secure the services of the key staff in order to get the game finished.

The problem with work in progress code is that it often isn't that well documented and there is a high time cost in picking up the title because new developers will have to spend time going through the code. As for tools, they may have some value, but only if they work with the new owners existing code base/systems. Otherwise there isn't much point in them adopting them. In addition the primary value of most middleware is actually in the support. I recently did a deal for a Renderware license code only (no support) for peanuts. This was just after the EA deal and this was a completed, proven middleware product - just without any support.

If I were valuing an incomplete game I would be looking at {your cost of dev} - {the cost of getting to know your code} - {a big chunk because you have gone bust} = two bob and a couple of buttons.

If you are looking to make a development studio that is an attractive investment then you need to be looking at funding sufficient to get multiple games done, because even if you get one game finished there is no guarantee it will actually make money. Alternatively build a model with multiple revenue streams - an original game in dev and a team doing outsourcing, so that if the original title fails you have a going concern with the outsource work.

[Edited by - Obscure on September 26, 2006 2:24:33 AM]