Find the Best Video Game Investors With These 5 Easy Steps
by Game Marketing Genie, on 27-Oct-2021 11:27:36
The video game industry has been growing steadily over the last few years. The latest global games market report by Newzoo indicates that the industry will grow with a decent CAGR (2018 – 2022) of 9.0 percent to reach $196.0 billion in 2022.
Figure 1: Global Games Report 2018 - 2022. Source: Newzoo
As a result, we now have more games and companies than before – and more money for those who do well, like the recent $1.25 billion investment into Epic Games. But how do you attract such investments for your game?
This article will guide you on how to look for game investors, where to find them, and how to convince them to invest in your game. Let’s get started!
Step 1: When to search for investors
It’s important to note that finding the right investors and negotiating an investment deal takes time. At the minimum, it takes two to three months to conclude a deal, but this is just for the small game funding investments. It can take a year or longer in some cases, especially if you are looking for more money. So, take this into account when searching for an investor. The sooner you start the process, the higher your chances of having a contract are by the time you run out of funds.
If you’re sure you will require external funding at some stage in the development process, start preparing for that early on. At the very least, assemble your investor materials and create a list of the potential investors you will approach for funding.
Step 2: Shortlisting investors
There are different types of investors you can reach out to for funding. It’s important to know how each investor operates to ensure you collaborate with the right partner who matches your needs.
Here are the different types of investors you can consider for your game.
Specialized investors will focus solely on the gaming industry. Such investors commit their funds to invest in video games, and they usually include successful developers or publishers involved with the gaming industry. Galaxy Interactive, Transcend Fund, and UK Games Fund are good examples of specialized gaming investors.
Before you work with a specialized investor, there are a few things you need to bear in mind. First, such investors have a deep understanding of the video game market and possess sufficient knowledge about games. As a result, you won't have to explain the basic things about games, and they can easily tell if a game is worth investing in.
They are also very good at pricing and can tell if your funding goals are justified. They will need to see your business metrics and have strict requirements for developers to meet to qualify for funding.
This type of investor focuses on a wide variety of industries, and video games are just one segment that offers a good return on their investment. They are not deep into the market and have lower participation in the business process.
Unlike specialized investors, these investors are more focused on the final result. They have very little expertise with game pricing and trust developers to set the right figures. All they are interested in is making a profit and trust the game devs to use the financial support to create a highly profitable game.
Publishers usually deal with the release and marketing of video games. But in some cases, they may support a project with an advanced payment that will be recovered from the profits. Unlike other investors, publishers don’t want a stake in the company or to become a founder. They just want their advance payment paid in full and a small percentage of the profit.
Before committing their funds to a project, publishers consider the following things:
- Whether the video game will be completed, and if the development team is reliable.
- The development stage – Projects that are closer to their release have a higher chance of getting funding.
- The track record and reputation of the developer
Step 3: Preparing your project pitch and documents
After shortlisting potential investors for your game, it's now time to prepare your pitch documents to convince them to back your project. First impressions matter, so you need to prepare a vivid pitch that paints your video game as a project worth investing in.
Here’s what you need to present to game investors for them to consider your game.
This is the first document game investors want to see to know more about your game. You need to pack as much useful information as possible in your presentation to get the investors to call you back.
Make the presentation visually appealing to encourage the assessors to view it to the end. Add a nice background and your brand marketing assets to make the presentation pop. Within the presentation, also include details such as genre, game type, setting, the target audience, and the supported platforms.
Team and company documentation
Investors for startups want to know the people behind the project before investing their funds. They want to know the track record of the founders and employees. You can present this information through a company portfolio document highlighting the team roles and the released projects.
This information will make investors respect you as the lead developer and the professionalism of your team. It will also help you convince them that you have a qualified team to develop the project at a high standard within the specified time.
Your financial model
What are your financial forecasts once the game is released? How have you spent the funds you have received so far? Investors are interested in this kind of information to justify the investment into your project.
Create a spreadsheet that highlights your expenditure in different project components. You should also give your financial projections once the game is released to help investors gauge the profitability of the whole project.
A roadmap including milestones
Your project pitch should also include your project roadmap and key milestones. This document will help you prove to investors that you can plan your time and allocate resources to achieve the desired results within a specific timeframe. You should report the milestones you have achieved so far to make your plan look realistic and attainable.
Step 4: Investor negotiations
When you are done with your project presentation, you will have to wait for your prospects to analyze what they have seen and give their responses. Don't be too disappointed when it takes too long to get a response. Sometimes, investors need to consult further to ensure they are making the right decision.
When an investor shows interest, start preparing for the next step – investor negotiations. Set an in-person or virtual meeting to discuss the game and how game startup funding from the investor will help take the game to the next level. The investor will ask you some questions to determine if your project is the right fit for them. Stay calm and answer their questions honestly to earn their trust.
Here are some of the questions an investor may have for you:
- How do you plan to use the funding?
- What type of game are you working on?
- Are you sure the game will be successful?
- Do you understand your market?
- Have you worked with other investors before?
- Will the project continue after spending the entire investment?
Since this could be your first official interaction with an investor, you want to maintain a friendly tone and attitude. Stay focused during the negotiations and don’t hide any facts that could be important to the investor.
Step 5: Negotiating and finalizing investment terms
When an investor commits to your project and states they would like to invest, you can negotiate the terms. You will need to agree on the project deliverables and the milestones you need to attain to receive additional funding. You should also specify the roles of everyone involved in the project and the circumstances that can result in the termination of the contract.
All these issues are very critical, hence why it's recommended to work with a lawyer when drafting the contract. The lawyer will help you interpret the terms forwarded by the investors and safeguard your interests in the whole arrangement.
Before you sign the contract, ask them how they plan to use their share in your company and if they are interested in earning a regular income or selling their stake at a higher price to other game investors. Don’t be in a rush to sign the contract – take as much time as you need to understand all the issues in the contract and the fine print.
The ultimate guide to game marketing
Hope you enjoyed this article! For more insider game marketing information, check out The Ultimate Guide to Game Marketing: Everything You Need to Know.
Game investors can provide you with the funding you need to bring your game to life. We have discussed how to identify the right investors for your game and negotiate for the best possible deal with the right partner.
When your game is ready for the market, get in touch for actionable tips on how to promote your game to the right audience.