Victoria Belyaeva, who is responsible for business development and PR at AppQuantum, has prepared a guide on how to properly approach the issue of making an investment pitch.
The material was prepared on the basis of a lecture given by Victoria at WN Dev Day Canada 2022.
Financing issues concern every studio. It doesn’t matter if you just want to make a cool game, grow and develop as a studio, or turn your passion for a game rendezvous into a full—fledged business – all this is impossible without the availability of resources. But even a hit idea needs a good pitch, a presentation and a relevant offer.
In this guide, we will tell you in detail how to prepare a good investor pitch.
Decide on the format of the transaction
Before applying for financing, decide for what purposes you need funds, what you will spend them on. So you can immediately decide on the format of the transaction and, therefore, it will be easier for you to look for a partner.
To begin with, let’s look at what financing formats exist in general.
1. Financing a product without investing in the company itself
In this case, money is allocated for a specific project (most often — for hard KPIs and milestones, as well as with a refund of funds from the developer’s share of the project’s income).
Promising projects are rarely financed on the market without joining the company, but there are exceptions. For example, when you are interested in the subsequent publishing of the project.
If you want to get third-party financing of a product without any further obligations for publishing or selling shares, then your choice of partners narrows down to angel investors or rich friends/relatives.
Keep in mind that when the team’s burn rate is fully covered, the IP usually goes to the investor.
2. Development financing, convertible into a company share
Almost a complete analogue of the previous format with one key difference: the investor has the option to convert all or part of the funds spent on development into a share of the developer company. In this case, the obligation to pay all or part of the debt from the income of the project is removed.
This option is convenient when both parties are interested in the project and consider it promising, but are not sure enough that they are suitable for each other as business partners.
3. Development financing + investment in the company
The main difference from the previous format is that we are talking about two amounts at once.
This type of financing condemns you to a double portion of papers for signing.
The problem is that parts of the deal are often concluded at different speeds. For example, a publishing and financing contract is done faster than an investment contract.
Therefore, it is recommended to start development without waiting for the conclusion of the second one. We signed the first one and immediately got to work. This format allows you not to waste time.
4. Investments in the company
In fact, this is the purchase of a share of the developer’s company without an additional contract for development or publishing. This option is often interesting to those who have a product and have a team to develop it, but do not have enough funds, for example, to scale it. At the same time, along with investments, you can work in other formats: publishing, joint development, and so on.
Prepare the legal framework
Before you start looking for investments, make sure that everything is correctly designed from the point of view of accounting and law, and if there are any problems, then think about how you will solve them and how the investor can help here.
You may need to create a new legal entity. If your company has been around for a long time and you have a long history of income and expenses, then you will most likely need to go through the audit stage. Take care to create all the conditions for a quick and painless passage of it.
Formulate the goal that the company faces
We advise you to formulate your company’s goals before submitting an application. To do this, answer the following questions for yourself:
- do you want to do the full cycle (and develop and publish the project yourself)?
- what genres do you want to do in the future and what team will you need for this?
- what do you want from a partner (money, relevant expertise in your current genre or expertise in a genre that you want to do later)?
Honest answers will help you make not only a relevant shortlist of candidate investors, but also a good pitch. When you firmly and clearly tell what is important to you, it makes a good impression.
Draw a drawing
Conduct research and study which companies in the market are now offering investments and financing.
Have you already answered the questions above (about the company’s goals)?
Great, you’ll need them now. If you want your partner to have an experience relevant to your genre or for your partner to take on certain publishing/marketing obligations and the like, then look for companies that offer this.
Yes, on the one hand, this is an obvious point, but some developers forget that not all companies have the expertise they need or offer the necessary services.
Pay attention to who the companies you are interested in have invested in. Press releases about investments are easy to find by searching on the Internet.
Then take a look at the data from analytical systems (e.g. Sensor Tower, AppMagic, data.ai ): what happened to the developers in whom they invested, did their business go uphill?
If only six months or a year has passed since the announcement of the deal, it is not a fact that this will give you a correct idea of the situation. However, if two or three years have passed, or even more so, five years, then there should be enough information.
A tip for those who have a lot of free time: ask the studios about working with their investors, what they do and how they help, and what they don’t know how to do. This can be done, for example, at conferences. And, remember that good recommendations are not hidden behind an NDA.
Prepare presentations about the company and the project
Whichever financing option you choose, you will need to prepare in any case:
A) Information about the company in the presentation format
The presentation should contain only the most important things about the studio:
- date of foundation;
- in which country is registered;
- specialization (genre, niche, art style, target audience);
- technical stack (engine, gameplay character — single or not, etc.);
- list of released projects (if any);
- yes, you should not limit yourself to just a list, give links to those of them that you are proud of, that you want to highlight;
- in addition to the link, it also makes sense to give the following information:
- genre, art style, CA;
- year of release;
- the number of downloads (it will be great if you specify the ratio of organic installations and paid traffic);
- total revenue (since this is sent before the NDA, you can specify in the format > than (amount) or specify net before deducting marketing).
- a story about the team, in which it will be noted:
- number of people, availability of offices and their location;
- details about the team composition (number of game designers/artists/producers/programmers/UA managers, etc.);
- key employees are mentioned (those who occupy the main positions, for example, it is worth naming a leading artist, a leading programmer, a leading or senior game designer, producers responsible for products, directors, founders, and so on);
- a detailed story about each key employee (experience in game development, what projects he worked on, what exactly he does in the current team).
B) Information about the project
If you have a new project, please provide the following information:
- genre, art style, setting, USP, CA;
- the main references on gameplay / art;
- concept or design document;
- competitors and market analysis;
- roadmap and KPI target;
- ideally, a financial plan that will show at what point you plan to go into the plus;
- the required amount of funding (remember that if you are looking for partners who will not take on, for example, publishing, then you need to count on marketing funds).
If you don’t have a game, but, for example, a service project, then instead of genre and art style, you will need to specify its technical component.
Product and marketing metrics should be specified for the published project:
- retention 1/7/14/30/60+ days;
- ARPU, ARPPU and Ads ARPU;
- be sure to specify which GEO metrics were taken from and which analytics system they used (for example, USA, AppsFlyer, October 2022);
- in the presentation, it is also better to indicate the volume of traffic purchases (if it was conducted) and sources.
If you need money for scaling (for marketing, hiring, etc.), then you still need to write information about the main project (its KPIs, development plans and financial expectations). You will also need to give information about what exactly the investments will be used for (sources of purchases, who exactly you want to hire, etc.).
With these materials, you can send letters to investors with whom you want to communicate. Of course, each company can ask for additional data, but the above is quite enough for a universal “intro”.
Write a letter to the investor
It’s sad to say this, but we still often receive requests of this type: “Hello, we are team N and we would like to receive investments for the development of our game * link to store *“.
Of course, in any case, we will consider such an application, click on the link, go into the system’s spike, look at downloads and revenues, climb onto the company’s website and pull out some primary information.
But we are talking here about banal business ethics and professionalism.
Would you hand out business cards in the form of a piece of paper with numbers at the conference?
Most likely, you would try to make the business card neat, well-readable, would indicate your own name, contacts, company name on it.
So it is here.
Anyway, to make it easier for you, we have prepared a universal letter template:
- tell us briefly about yourself (who you are and what you do);
- write down what type of cooperation you are interested in;
- briefly note the main advantages of your team/project (highlight the metrics of new or old projects, tell us about the stellar composition of the team);
- let us know the meeting slots that are convenient for you;
- attach the presentations about the team and the project mentioned above.
We are “BlahblahGames”, we develop casual free to play games for women and mainly specialize on Time manager genre.
We are interested in finding a right partner for our next project, a time manager game in space setting.
We have already received some promising results by testing MVP of our project on US market: ret day 1 of 45% and ret day 7 of 20%.
Our studio has a 20 year experience in the niche and we are sure we have found a way to revolutionize the market.
We are located in Spain, so our time zone is UTC +1 and we will be glad to meet any week day after 11 am.
Please find more info about our company and project enclosed.
You can use our example, or you can ask ChatGPT to write an example for you.
It is important to formalize the letter correctly, because:
- investment companies receive a huge number of applications, and the easier it is to work with yours, the faster you will be contacted;
- a good first impression is extremely important, it can affect all further communication;
- the more detailed you describe the information about the chosen niche and the experience of the team, the easier it is to understand how to work with you further (for example, it is immediately clear from the application above that you need to give the presentation with the project into the hands of a producer who understands time managers);
- also, from the letter above, the company can immediately understand when it is possible to schedule a call with the team, who to invite from the investor’s side, and so on.
Prepare for a call with an investor
Unfortunately, at the stage of the call, developers often cannot explain what they want from a partner.
Funding? That’s clear.
And who will be responsible for LiveOps or game marketing?
Is the company considering investing only in the product or also in the team? If so, what numbers/shares are they interested in.
Very often, the team does not have an answer to these and many other questions.
The more clearly you formulate the request, the higher the chance of finding the right partner. If an investor has to literally pull information out of you, then you are clearly not ready for a meeting and for further productive work.
In addition, each investor has its own internal guidelines by which they assess the prospects of studios. And no, not only the desired profit is indicated there
For example, we always look at the founders: what kind of background they have, how much they are burning with their idea, how well (and whether well) they evaluated the market, prospects, risks.
We also look at the team: we evaluate the teamwork of the employees, whether they have already produced products with this composition, how experienced the employees are individually.
One of the key things that people also pay attention to is the vision of the team’s development: do you want to build a full—cycle company, develop a midcore or something else?
It is important to work out this vision, it is important to be ready to talk about the goals. This way both sides will better understand how they can help each other.
Remember that not all products that your studio creates may be suitable for an investor by profile.
For example, AppQuantum is less likely to invest in niches in which there is no expertise — this is contrary to the company’s policy. We want to share our knowledge as much as possible and fully help our development partners in those areas in which we can call ourselves experts.
Therefore, the more you tell about yourself and what you need and in what form, the faster it will be possible to understand whether you are suitable for each other. This will save a lot of time for both parties to the transaction.
Prepare additional financial documents in advance
No matter how the first meeting with a potential partner goes, most likely, the following additional materials will be requested from you:
- P&L of the company (conditionally, this is a more detailed version of the financial plan that you prepared earlier, in which you need to specify all expenses and income in detail, including employee salaries, office and software expenses, income from other projects, etc.);
- company documents (if we are talking about investments in a company or a convertible loan);
- certificate of registration;
- confirmation of the director’s authority;
- an up-to-date document confirming the ownership of the company/shares;
- detailed documentation (concept document and design document);
- also be ready to provide access to the cabinets or tracking system, with their help, the investor will be able to make:
- product financial plan;
- roadmap and KPI target;
- financial proposal (how much you need to invest and on what terms).
Of course, such materials are provided after signing the NDA. But before making an application, we recommend that you prepare all the documents in advance. This will save both sides a lot of time.
You can also request drafts of relevant contracts from the investor, for example:
- investment agreement;
- convertible loan agreement;
- joint development or publishing agreement;
- the so-called term sheet, if we are talking about options.
All these contracts the investor must immediately provide upon request.
It also makes sense to ask the investor to schedule a roadmap of work. For example, what tests are supposed to be, when exactly.
If the investor also plans to act as a publisher, then, of course, the roadmap should be more detailed (with a mention of when and how many producers are planned to be connected to the project, with a story about future marketing and analytics, and so on).
Further work will vary greatly depending on who you are communicating with and what kind of interactions we are talking about. You are definitely expected to have a series of calls with the teams, your future project partners, and with the managers who make the investment decision.
We have described the universal process for most transactions above. Be sure that by doing all of the above, you will greatly increase your chances of receiving funding. The right and comprehensive approach will show you as professionals who know what they want and with whom, and what result they expect.
Last tip: start looking for partners in advance. It will take you enough time for a good market sketch and communication, and getting to know companies can take several weeks. Contracts can also be prepared and discussed for months. Let the “fish” be on hand, but depending on the specifics of the company’s device or its country of registration, you will still have to change and add a lot.
Let’s briefly summarize all that has been said. Pre—production is a solid base and half of your success:
- the process of all negotiations and approvals can take several months, so start looking for financing in advance;
- choose the type of financing and suitable options for transactions;
- understand what kind of partner you want, what functions, in addition to financing, you need from him (for example, publishing);
- conduct a market survey, find out which companies provide financing and in which studios they have already invested, request feedback from developers and analyze the results of their activities;
- make a good presentation about yourself and your product, readable, with all the necessary information;
- write a good intro, try to disclose information about yourself and your product, let us know when it is convenient to contact you;
- during a personal meeting, be ready to answer questions about the team: what are you looking for, why are you developing this product and decided to look for investments;
- be ready to provide access to traffic trackers and share financial information about the company (of course, only after signing the NDA);
- do not choose the first offer made to you, talk to different potential partners and choose the best one for you and your company.
Now that you have read our guide and decided what type of financing you need, try submitting a correctly executed application. You can also write to us email@example.com.