"Inflated market expectations are one of the most systemic problems," says Mikhail A. Petrov from New Edge about the challenges and mistakes of game development startups

The competition in the video game market continues to intensify, the cost of user acquisition remains high, and investors have become noticeably more cautious. We spoke with the founder and game designer of New Edge, Mikhail A. Petrov, about the mistakes that are currently costing gaming startups the most in this environment.

Mikhail A. Petrov

Alexander Semenov, App2Top: Let's start with the basics. How many new gaming startups are there in the industry today?

Mikhail A. Petrov, New Edge: Looking globally, market entry remains active, as evidenced by indirect indicators: more than 12,000 games are released annually on Steam, and tens of thousands of apps are published in mobile stores.

However, it's important to understand that the number of studio registrations and the number of sustainable businesses are different figures. The industry's perception is that fewer than 10% of new projects achieve commercial success, and a significant portion of teams close down within the first two to three years.

There are many startups. Successful ones, however, are few. And that's a normal, though tough, market reality.

Who typically launches these startups? And what is driving the current surge, considering the overall market situation is far from prosperous?

Mikhail: I would highlight three categories.

The first is former employees from major international studios like Playrix, Wargaming, Ubisoft, Electronic Arts. They have strong production backgrounds and an understanding of metrics, but they do not always have experience running an independent business.
The second is indie teams. These are small groups focused on the Steam or mobile market: they have high flexibility but limited resources.
The third is entrepreneurs from other IT segments. They see the market size and enter game development as a scalable industry, but here there is often an overestimation of the ease of entry.

The "surge" is largely related to market restructuring. After waves of layoffs, many specialists decided to start their own projects. Additionally, the technological barrier to entry has fallen: tools have become more accessible, and AI has accelerated content production.

But this isn't a growth in prosperity—it's a growth in the number of attempts.

Here we're talking about the most costly mistakes for game development startups. It's clear that the most obvious and initial mistake is to enter game development. Or do you disagree?

Mikhail: No, the industry itself is intriguing! Doing business in it is almost like playing the most fascinating game. But the mistake is entering it without understanding the economics.

Game development has a long production cycle, fierce competition for attention, expensive marketing, and a strong dependency on platforms. If a founder understands these parameters and accepts the risk, that's conscious entrepreneurship. But if the calculation is based on "we'll create a hit," then that's an illusion.

I've often heard from investors that a very common story is inflated expectations of the market and prospects. Is that true?

Mikhail: This is one of the most systemic problems! I thought the same way in the early stages! I still frequently hear things like: "The market is huge; it's enough to capture a fraction of a percent." This doesn't take into account that the market is already saturated and competition is not only with games but also with other forms of digital consumption.

There's also a regular overestimation of organic growth and underestimation of marketing. Without a budget for promotion and early hypothesis testing, a game simply doesn't exist for the audience.

Another mistake is building a financial model only on an optimistic scenario. It's necessary to consider every possible development outcome and then timely adjust the game's economics accordingly.

What are game development startups expecting from investors, funds, and publishers today? And should they be expecting anything at all?

Mikhail: They typically expect four things: money, marketing, expertise, and international connections.

However, in 2026, investors have become significantly more rational. They need a prototype, early metrics, and an understanding of unit economics.

An investor doesn't build the product for you. They scale what already works. If this isn't present, hoping for a miracle is futile.

In your opinion, how many people are willing to invest in development today?

Mikhail: There is capital in the market, but it has become more selective towards new projects.

After the investment peak in 2020–2021, valuations have dropped, and requirements have risen. Therefore, funds are more cautious about early stages, and the role of strategic investors has increased.

Money goes to teams with a track record, transparent structure, and confirmed hypotheses. The model of "idea + presentation" practically doesn't work. Thus, it's important to be careful about what you showcase and to whom.

There are investors on the market with non-transparent capital structures, sanction risks, or questionable business reputations. How should a startup evaluate such offers and minimize risks in cooperation?

Mikhail: This is an extremely sensitive issue. Any cooperation that could lead to account blocks, platform restrictions, or reputational losses is undoubtedly a strategic risk.

The minimal set of actions:

Conduct legal due diligence on the investor;
Check the jurisdiction and ownership structure;
Analyze the sources of capital;
Consult with international lawyers;
Develop a well-thought-out deal structure with an exit option.

And it's better to immediately realize a simple fact: sometimes refusing "easy" money is the only rational decision.

At what stage do game development startups make the most critical mistakes? And what are these mistakes?

Mikhail: The most critical mistakes occur even before the idea stage.

The first risk point comes even before checking the core hypothesis. When a team develops a product for 12–18 months without testing demand and basic retention metrics, that's already a critical mistake.

The second is at the scaling stage. Rapid staff increases, rising burn rate, aggressive marketing without a confirmed product-market fit—all these can lead to long-term negative consequences. It's often during the growth stage that startups lose control over the economy, followed by a project refinement stage where careful work with the target audience is necessary to prevent disappointment and to align with developers' logic.

Share a checklist that can reduce both the cost of mistakes and the risk of encountering them at all.

Mikhail: I would divide it into three blocks.

Before starting development:

Is there confirmed demand?
Is the monetization model clear?
Is the basic unit economy calculated?

At the prototype stage:

Is the core loop tested?
Are there early retention indicators?
Are the hypotheses tested on the audience?

Before scaling:

Is the product-market fit confirmed?
Is the runway sufficient?
Is the legal structure and investment structure transparent?

If the team goes through these stages diligently, the cost of mistakes is significantly reduced, and the product becomes clearer in terms of both the roadmap and audience positioning.

If we generalize the entire situation, the gaming market remains global and competitive. It's not closed to new projects but does not forgive self-deception.

Understood, thanks for the discussion.