Can you turn disappointing sales into cold hard cash?

The most popular talk I’ve ever given was called “5 mistakes and lessons from an indie developer”.

In it, I tore apart my own game – identifying the mistakes I’d made over the course of its development, which I believe were ultimately responsible for its failure to deliver financially.

The ironic thing is that giving this candid and self-deprecating talk was actually the first step in a long line of events that has resulted in me securing finance for my next title. So how did I do it?

Learn your lessons

My biggest piece of advice for someone seeking finance off the back of a not-so-smash hit is to learn from your mistakes.

The talk I mentioned earlier is a good example; I worked out what went wrong and what I would do differently next time.

It also had the fortuitous bi-product of putting me in front of 200 industry people, one of which was a potential investor.

Business time

If you want to secure an investment, you’ll probably need to write a business plan and a game design document to prove to potential investors that you’re a credible investment proposition.

The business plan should include a marketing plan, cost breakdown and sales estimates, all of which should be based on market research.

My market research consisted of things like sales figures from similar games, a breakdown of prices by genre and a general overview of the current state of the market I was aiming at, which was PC in my case.

In my experience, investors were more interested in the business plan than the design document, but writing one will help you nail down the scope of your game and make a prediction of what it will cost to make.

Show me the money!

At this point you’re ready to start talking to investors. In my personal experience, the most effective technique has been plain old face-to-face networking. This doesn’t mean you can’t use the wonders of technology to help though.

Before you go to an event, check the attendee list and look up the companies of those attending. I did this for an event earlier this year and struck gold as I saw that one publisher was currently looking for new projects to fund.

I dropped them a message, lined up a meeting and left the event with another potential investor.

The lineup

There are many types of investor and some may be more suitable for your business than others.

The Seed Enterprise Investment Scheme (SEIS) is a Government scheme in the UK whereby investors can claim investments of up to £150,000 in new companies as a personal expense.

Generally a new company is incorporated for the strict purpose of developing a single game. The equity in this company is then split between the investor and the developer.

Product finance is when a company gives you a loan to produce a game, secured against its future revenue. The loan is repaid via a royalty, often at a higher rate until the money has been recouped. After that, it reverts to a split that is agreed at the point of striking the deal.

Full production funding is available but the further along your project is when you start talking to product financiers, the better the royalty split you might be able to negotiate.

Publishers operate in a similar way to product financiers, in that they take their money out as a royalty on the game’s sales. They will generally help you market your game at release and, depending on the publisher, provide direct cash to help develop the game up to and including full production funding.

If your game is close to completion then it might be possible to negotiate an advance on the potential sales of the product.

This helps ensure the publisher is serious about pushing your product because if they don’t, they risk losing money.

Conclusions

Getting external finance is certainly not the only option available to developers, but I definitely think it’s one worth considering if you’re not in a position to fund your game’s development on your own.

There’s been so much focus on crowdfunding vehicles like Kickstarter over the last few years that it’s easy to forget some of the more traditional options. Every funding route has its own pros and cons; consider them all, and choose whichever is most appropriate for your product and business.

I think my biggest surprise from this experience has been discovering how many opportunities for investment are out there. I’ve been informed that some investors can’t actually find enough credible propositions to invest in. So do them a favour and allow them to invest in your next big hit!

This post was also posted on PocketGamer.biz: http://www.pocketgamer.biz/feature/58177/flop-to-finance-can-you-turn-disappointing-sales-into-cold-hard-cash/