Investing in game projects: why was it bad, but it became good?

In the last seven days alone, it became known about the opening of three venture funds aimed at supporting teams developing games. We asked Ilya Pshenichny, General producer of AminiLab, about why the market situation is changing.

On July 22, Tango announced the creation of a $25 million investment fund. The next day, the Indian advertising network InMobi announced that it was launching an investment campaign designed to support local game developers in the amount of the same $25 million. Yesterday, on July 28, Singapore's Inflexion Point Capital announced the opening of the "gaming" fund. She is ready to invest more than $15 million in games.

We asked Ilya Pshenichny to tell us why investors have become more active right now.

Ilya Pshenichny

Investing in gaming companies is quite an interesting topic. All “gaming” investors can be divided into 3 categories:

• Investors specific to our industry are game publishers;
• Professional investment funds/capitalists, with varying degrees of involvement in the digital industry;
• Non-core “wild” investors.

Crowdfunding financing has also recently appeared, but its volumes are relatively small. Plus, it is difficult to consider it as a financing tool. Rather, in a marketing capacity.

Going back to the basic categories.

Until recently, the volume of investments coming from the first and third groups (publishers and "wild"), according to my inner feelings, was much more than what was provided by "professional" investment funds.

The fact that some publisher invests and publishes someone is a private and frequent story. Probably everyone reading this article has a familiar “wild” non-core investor. But the stories when a "profile" one invested in a Russian game studio can be counted on one hand.

Why was it bad?

The first reason is the peculiarity of the funds themselves. The second is the peculiarities of “gaming” teams looking for investments.

Funds

From my experience, I can say that until recently, investment funds, oddly enough, perceived the gaming industry as something frivolous. All the same ordinary people work in these funds. And all those cliches that, frankly, are attributed to mobile/video/computer games, they are also reflected in the minds of experts in foundations.

Also, among many venture projects, games seem to be a “venture from venture”, because the success of the game is determined not only by a correct understanding of the user's needs, market volume and marketing strategy, but also by the difficult to formalize concept of “fun”. And although the industry has come a long way, it has developed both technological (a good layer of psychology and sociology under modern game design) and procedural (play tests, soft launchies, etc.) ways to minimize the fact that the game will turn out to be “not fun”, in fact, no one knows before the launch whether it will “shoot” The game is over or not.

Teams

In order to “raise” investments from a professional investment fund, it is necessary to have some level of managerial culture and meet a decent number of formal criteria. Starting with the availability of a business plan designed according to all the rules with a clear exit strategy for the investor, ending with the organizational and legal structure of the company, jurisdiction and the current state of affairs / product.

The exit strategy is mentioned here for a reason. The usual goal of the fund is not to make an operating profit, but to exit the company (resale or IPO) with a good multiplier. Therefore, by the way, you should not expect to receive investments if your plan is to make one superhit game that will break the market and earn 100,500 million.

And now think about how many young and hot game developers who dream of making “Fallout 3 MMORPG” (by the way, it's too late) meet these requirements.

Why did it feel good?

Due to the relatively large number of success stories (in a good crazy way, with an unprecedented ROI) and the fact that games are responsible for most of the revenue from the mobile market, the "psychological" block in the minds of profile investors turned out to be broken. Today they can't help but look in that direction.

And the requests from developers have changed, because the creation of “correct” mobile projects requires already very impressive budgets, estimated in hundreds of thousands of dollars. Thus, there is already a demand for capital that generates a counteroffer.

This movement is just beginning. I note that the investment funds mentioned in the article are still the flesh of the industry.

And all this, in the end, indicates that our native igroprom is finally becoming an “adult” industry not only in our own eyes, but also from the outside.