Nexters on Boost Investment Program: "We want to grow independent development teams"

Yesterday on App2Top.ru There was a live broadcast with Nexters co-founder Boris Herzovsky and Nexters Boost executive producer Max Postnikov. We talked about their new investment program, what selection criteria it has and how much money developers can get. We also discussed the situation on the gaming market in Russia and the CIS. We share a recording of the broadcast and an excerpt from it.

Market situation

The stream began with a discussion of the post of Sergey Orlovsky, the founder of Nival and Helio Games Studio. He wrote the following on Facebook (perhaps just in connection with the Nexters investment program):

We asked you to comment on the post, and at the same time tell us what Nexters thinks about the investment climate in Russia and the CIS.

• According to Nexters, there have always been investments in games, but they have become so noticeable because of the lockdown. Lockdown showed that video games can grow even in difficult times, and a growing market always attracts a lot of investors. Does Nexters plan to make money on this? Yes.
• As for the CIS market, it is distinguished by a large number of talented developers. According to Max, our countries have historically had a very strong education: not only technical, but also humanitarian. Games just live at the junction of two paradigms. Therefore, investing in games in the CIS market is a logical way for an investor who wants to make money.
• Now, in fact, there is a risk of marginality reduction (the difference between the development costs with the marketing of the game and the revenue received). However, the company is confident that they will be able to cope with this:

“We will make better games, reduce the cost of installation. […] We have a very simple criterion. We are putting together a strong team, and we solve the issues as they come in,” Boris said.

The discussion of investments in games in Russia and the CIS was not limited to this. There was a conversation about deeper specifics.

• Unlike the West, the CIS investment market is not regulated in any way. As an example, Max cited Germany. There, to become a venture investor, you need to get a license. Otherwise, you can go to jail. We don’t have that, so there is a lot of money in our market. The consequence of this is that there is not only money from profile investors on the market, but also those who are just addicted to games. This is one of the features of the market of the entire post-Soviet space.
• The second feature of our market is that investors prefer to invest in games—services or mobile frituplay. The fact is that these are so-called “quick investments”. Having invested in such projects, you can start to recapture money in a few years. Whereas investments in AAA titles have a much longer return horizon.

As part of the investment topic, the discussion also touched on the competition for the best studios and projects.

• Although it may seem from the outside that half of the studios in Russia belong to MY.GAMES or Playrix, Nexters does not have the feeling that it will not have enough projects for investment. According to Max and Boris, there are a lot of studios in the country that no one sees. Nexters is more concerned about how to cope with the flow of developers who come to her.
• Nexters is also not afraid of a conflict of interest with Playrix if companies decide to invest in the same studio. As Boris noted, Nexters’ share does not belong directly to Playrix, but to its leaders, the Buchman brothers. The company cooperates with Playrix as an independent studio. In addition, Playrix buys teams internally, and Nexters wants to build “a galaxy of independent companies that can do the entire cycle of work with their product.”

And only after discussing the market, we started talking about the program that Nexters announced yesterday.

What is Nexters Boost

• Nexters Boost is a department within Nexters that is going to help developers with money and expertise. At the same time, the company will not arrange a competition between developers. She is ready to work with anyone who meets the selection criteria.
• The company can even start working with those who have not passed the selection, but only as an expert. So she hopes not only to help developers, but also to pump herself as a mentor.
• Nexters generally builds the concept of investing around its expertise. Now it is concentrated around freeplay, games, services, etc. The company considers it right to invest in what it understands and where it can be useful, as well as in where it can learn something useful itself. At the same time, Nexters does not deny that someday it may start investing in AAA titles, but this will not happen in the near future.
• According to Boris, Nexters is fully involved in every project it works with. Despite the fact that the company helps with both product and marketing issues, it does not intend to do everything for developers. Her goal is to teach the studio. The studio should have its own marketing department, creative department, etc. The only departments that Nexters is ready to partially provide are service teams like lawyers.
• As Max complements, Nexters is not like a classic accelerator. The company is not going to teach something for three months, then take a share in the studio and leave. Max compared the creation of games to the Valley of death:

“In gaming startups there is such a term “death valley”. This is when you have already done something, made some kind of prototype and something is being played, but there is no money. They are somewhere beyond the horizon, and you need to go beyond this horizon. You are walking through the valley of death, where your team is falling apart, marketing is not being built, processes are not being built and you do not know how to do analytics. If you just buy a book that says what is right to do, then you will get hooked on the survivor’s mistake. And we are not a book. We will tell not only what to do, but also what not to do. Nexters has spent a lot of time in Death Valley, and we have a map of it with all its oases and caves. And we don’t just give you a map, we go along with you as navigators.”

• Nexters Boost currently employs about 10 employees, but the division will expand. It is expected that by the end of the year there will be 15 people in it. But Nexters Boost is not limited to them alone. If necessary, employees from other departments are connected to it. Nexters itself employs over 600 people.

Selection criteria

• For Nexters, the key selection criterion is the developer’s competence. It is important for her to eventually create an independent business unit that can work with all aspects of games. Therefore, Nexters, most likely, will not cooperate with a studio that consists of only one person. Or in which a lot is outsourced.
• Nevertheless, Max noted that the structure of the studio is not too worried about Nexters (although they call it one of the main criteria). According to him, whatever the structure of the studio is, the main thing is that it works. If the team is able to create a product in such a configuration, then Nexters will be satisfied with it. It may be necessary to improve the structure of the studio later, but the company is ready to help with this.
• Another important criterion is the availability of the product. The company wants “something that can already be felt with your hands.” This can be, for example, an MVP or a softlonch game.
• But Nexters is unlikely to work with hyper-casual projects, because they have a very short lifecycle. In addition, Nexters does not have enough expertise with such games.
• As for metrics, developers often come to Nexters without them at all. To assess the potential of the game in the end is problematic. But according to Boris, “if the core is played recklessly and well, then the monetization system has something to rely on.” In addition to playability, Nexters bark looks at whether true socialization is suitable for the game — when gamers can build relationships inside the title. The company also assesses the depth of monetization of the game.
• Boris also hopes that over time, developers will become more and more involved in the narrative. Therefore, a good meta of the game may also be of interest to Nexters. As an example of a mobile game with an interesting narrative, Boris named Hero Wars, which Nexters made. And outside of mobile, he singled out strong plots from God of War (2018), Horizon Zero Dawn, Outriders, The Division and the “Hearts of Stone” additions to The Witcher 3.

Shares in studios and money

• Nexters is not going to resell studios. In other words, she will not buy a company cheaply, grow it, and then sell it. Instead, she intends to acquire a small stake in the studio, which will allow Nexters to become a full shareholder. Then the company will help to ensure that the studio’s game reaches certain indicators. If everything goes well, then Nexters can acquire a larger percentage of the developer’s shares.
• The size of the share that Nexters wants to buy at the entrance is “a few tens of percent, less than fifty.” If desired, developers will be able to withdraw from cooperation with Nexters.
• The amount that Nexters will invest in the studio depends on the developer’s content. From the stage at which the game is located, from the studio plans and other similar things. The minimum threshold of $500 thousand, which Nexters previously called, is in fact another selection criterion. This amount is usually claimed only by mature studios who already have an understanding of their project.
• The range from $500 thousand to $ 2.5 million is mostly money that will go to bring the game to release. Funds for marketing are laid, but not for the “combat”, but for the one that will allow you to see that the game is working. If Nexters sees the potential of the project and realizes that he needs more money, she can move on to the next phase of investment.

What’s next?

• After the contract with the studio is concluded, the actual work with the product begins. As Max emphasized, the work will be different in each case. But, in general, Nexters will start with the search for pain zones and growth points. Then it all depends on the situation. For example, if a team needs help with an art direction, art specialists will come to it.
• Separately, Max stressed that he would not be publishing Nexters games.
• Nexters is ready to conduct “several projects” at the same time, but she cannot name the exact figure yet.
• As a result, with the help of its program, Nexters wants to create a modern gaming analogue of the Knights of the round table, at which Nexters will sit together with other development studios.