The Lifecycle of a Small Successful Game Development Studio Mike Sellers Online Alchemy

2. TheLifecycleof a Small SuccessfulGame DevelopmentStudioMike SellersOnline Alchemy

3. Start with the End • What will you leave with today? • What do you want to have done? • What are you willing to sacrifice? • What comes next?

4. My Startup History • Cognitive Science • EPAD, Mentor Graphics – 1987-1990 • New World Designs – 1992-1994 • Archetype Interactive – 1994-1996 • The Big Network – 1997-1999 • Online Alchemy – 2002-present

5. Where Are You Going? • Understand going in what you want to get out of this. • What are your goals, really? • Wealth? • Fame? • Freedom? • Creativity?

6. Example Goals • “Work with great people on exciting problems… for at least a couple of years.” • “…look your family in their eyes and know that you did your best…” • “Learn to be a true leader” • “Prove the experts wrong” • “Never give up. Never surrender.” • “$10M would be nice to have.”

7. Example Goals • Mark Jacobs (Mythic): scale of 1-10: • Autonomy: 9 • Income: 6 • Longevity: 7 • Great team: 9 • Cashing out: 5 • (but: “If you are starting a studio with the hopes of cashing out big one day, good luck to you. Most startup developers eventually fail before a major liquidity event.”)

8. Where Are You Going? • What are you willing to give up? • Sleep • Salary • Benefits (vacation!?) • What are you not willing to give up? • Spouse • House • Health • Integrity • What about your “big idea?”

9. Start • You have an idea • You have questions • Team? Money? Publisher? • What’s next? • Where does it end?

10. What’s the Big Idea? • Original idea or licensed property? • What’s an idea worth? • Getting beyond “formless and void…” • Storyboards and mockups • Usage scenarios • Enough to attract others

11. Gather Your Team • The most important thing you will do • Find those not like you • Technical • Design • Art, Sound • Production • Management • Finance • “Hire who you need, not who you know”

12. Gather Your Team • Award equity – but not just equity • No formula – who brings what? • Equity is worthless… until it’s not • Manage expectations and information • Partners are gold • It’s not a democracy • Watch for the ‘freak out’ threshold

13. Gather Your Team • Build the vision, culture, and brand • What does your studio represent? • Clarity here keeps you on track • Be ready for change • Few initial teams stay intact • Few companies grow on a straight line • Find the right people, don’t fill positions

14. Find Your Funding • Assuming you can’t fund this yourself • Understand what you need • $50K-500K-5M+ • Casual vs. console vs. MMO • How thin is your shoestring? • Debt, contracting, equity, royalties

15. Find Your Funding: Debt • Most common: credit cards • No bank will touch you • SBA takes forever • Mortgages…?

16. Find Your Funding: Contracting • Find similar work • Pays the bills • Defocusing, demoralizing • Can work well with the right contracts

17. Find Your Funding: Equity • Take on other owners • Section 83b Election • Starts with “friends and family” • Angel investors • $50K-500K • Venture capital • $5M+ • Valuation, risk, and pie

18. Find Your Funding: Investors • “How will you use my money to make money?” • “How much do I get back and when?” • Risk/reward, ROI, IRR • Not interested in the next big hit • Funding shovels, not gold mines • Not interested in “lifestyle” businesses

19. Find Your Funding: Royalties • Traditional publisher method • You get an “advance”… • … And pay it back out of sales • What’s wrong with this? • Sometimes… nothing • Most likely, you’ll never see a dime

20. Find Your Funding: Royalties • Feast and famine kills studios. • Avoid this.

21. So What Can You Do? • Try different methods, see what works • Look to new models and niches • Casual games, online delivery • Don’t try to beat EA or Blizzard at their game • Your nimbleness is your advantage • Get to revenues as fast as you can

22. Funding and Cash Flow • No cash is fast • Money that’s “almost here” isn’t here • Fatman’s #1 Rule • If you don’t get cash flow, find a trusted partner who does

23. Growing Your Business • The other end of things… • Taxes, licenses, accounting, lawyers… • Marketing, PR, and ego • Revenue vs. Profits • Twilight Zone of “moderate success” • Opportunity for additional funding • Or a sign to reconsider goals

24. Build Your Game • The idea is the easy part • Turn your Vision into your Plan • Storyboard, wikis, Excel… • Mockups, prototypes • Keep moving forward

25. Build Your Game • Keep your vision, adapt to reality • Dynamic balance • Try your ideas as fast and often as possible • Keep what works, jettison what doesn’t

26. And then, a Miracle Occurs • Not covering game production in detail • Keep moving forward • Keep your team together • Move into and out of production • Adapt to reality • Soon you have a flourishing business

27. Step Back for a Moment • Things are going well… mostly • Why are you doing this again? • Have your vision, goals, or your role changed? • Starting a company isn’t the same as running a company

28. What Happens Next • Do you build the business slowly? • Expand to the next level? • Or find an exit? • Keep in mind: at some point every business exits • What if you have to exit?

29. Building Slowly • A common fuzzy goal • Keeps you employed • Potential for profit-sharing • Investor payback • Can you grow from small to large? • Beware the Twilight Zone • The real exit is still out there

30. Acquisition • Most common exit • Is it time? • Consider the value of your company • Market changes • Mutual strengths • Team issues • Cash crunch • Consider your goals • Is there a fit?

31. Acquisition • Negotiate the deal • Go back to your goals • Price only part of it • Stock transfer • Cash • New roles • Does everyone come along?

32. Acquisition: What Next? • It’s no longer your baby • Fit in with the new reality • Get (back) into BigCo mainstream • (Plan your escape)

33. The IPO – Going Public • Despite the 1990s, this is extremely unlikely • A different class of concern

34. Turning Off The Lights • The ABCDEFG problem • Prepare for this, and then avoid it • Review progress, set evaluation dates • Look for creative solutions • Remember where you drew your lines, and stick to them • Exit gracefully

35. Turning Off The Lights • Learn your lessons • Be honest with your team • Salvage what you can • Avoid burning bridges • Grieve – and then move on • You will grieve • But don’t wallow

36. Bouncing Back • Shutting down is a temporary setback • “What’s next?” • Growth occurs in the most amazing places.

37. Is This For You? • Lonely, risky, high stress • High (personal) reward • Filled with obstacles

38. Don’t be fooled Is This For You?

39. Is This For You? • This is not glamorous Don’t be fooled

40. Is This For You? • Autonomy! • Do it your way! • Make your own mistakes • No one is going to stop you • They’re probably wrong anyway

41. Is This For You? • Learn to live with uncertainty • Maintain your own parachutes (plural) • Remember to have agood time… and a life

42. Main Points • Get started, don’t wait or just dream • Consider your goals carefully • What’s success for you? • Keep moving forward • Roll with the punches • Know when to harvest • Know when to stop

43. End Notes • An idea is not a design • A design is not a demo • A demo is not a program • A program is not a product • A product Is not a business • A business is not profits • And profits are not happiness.

44. TheLifecycleof a Small SuccessfulGame DevelopmentStudioMike SellersOnline Alchemy