Making a game is hard enough - but financing it is certainly no walk in the park either.
As well as early stage funding, you need to think about development funding, and then growth capital. Spinning all these plates at once is tough, but if you’re strategic and well organised you can find the right solutions for your business.
There are several options available to you, but only a couple can really help you grow. There are government grants, or creative funds that can help, and many crowdfunding platforms you can raise investment through. But the real choice is between equity or debt funding. Both have their pros and cons, but what are they?
At different stages, you’ll need money for different reasons. You will need money to pay your staff, rent your office space and buy software, analytics tools etc. You’ll also reach a time when you just need a bit of money to get you to next month, so more of a cashflow bridge. Then there will be the time when (hopefully) your game is on its way to becoming a huge success, and you need to fund the marketing and user acquisition. There’s no right one size fits all to this but here are the things to think about.
FUNDING YOUR DAY TO DAY BUSINESS
You should have a strategy and a business plan, and a set of forecasts of what your costs and cash flow will look like for the next 12-24 months. This is based on what you’re trying to build, and what you need to do it. From people, to tech, to software, to external providers, to more. This is always absolutely key to financing your business. Your forecasts will almost always prove to be wrong, but it’s a good place to start!
This is often financed by angel money or venture capital money, though these require giving away equity. You will need to give a piece of your business away to fund it, but the upside is that you grow it to something potentially worth a lot lot more. Think carefully about the valuation, and what percentage you’re willing to give away. Having spent 17 years in finance, doing countless IPOs and capital raises, I have a good sense of how to value a business, but many don’t.
CASH FLOW
There will come a time when you need some money to bridge the gap until another investment round, until an invoice is paid, or until the app stores pay out. There are debt solutions available to you, but banks won’t be particularly helpful. They’re risk averse, slow to move and don’t understand the games space well enough.
You can however debt fund your receivables held at the digital Stores (PlayIgnite call this PlayCapital) - if they don’t pay out for 45-90 days. Some financial companies will pay you down instead - it’s a no brainer if you ask me.
Elsewhere, if you’re making a game in the UK, you may be eligible for VGTR, which is effectively a tax refund from the HMRC based on money you’re spending to build the game. In some cases, you can get hold of this refund earlier - again, PlayIgnite can do this for you with PlayCredits.
MARKETING
A big part of scaling your game is the marketing spend. Whether its Facebook, Google, Ad mediation networks, influencers etc, its all expensive, but very data driven - which is ultimately a very good thing. You need to decide on your targets; for example, are you prioritising revenues or users? Do you want to just be profitable and don’t care about how big, or small, your revenues are? Or do you want to rocket up the charts?
Most channels are very data driven, and, critically, you can track the efficiency of this spend. So you will know that if you spend $100 on UA, what will be the resulting revenues from it? Thats super important, and it means it can also be debt funded (at PlayIgnite, this is called Ignition Capital). Not many people do that - but it’s a great way to grow your business, and not give a piece of your studio away.
AND THEN……
Then there’s the actual UA or marketing, how you manage that and what systems you need to have in place - but that’s a topic for another time…
Finance may not be as exciting as designing, building, or playing games, but it’s critical. To plan your growth and fund your business, you have to get it right.
For more information please contact PlayIgnite or the author of this article, Matt Frenchman.