Week 9
Abstract Our learning objectives for the week were:
Post 1: The GameDev Business Handbook
Key insights from the GameDev Business Handbook were to keep costs down while developing our vertical slice and that founders rarely took salaries while developing their first game.
However, as founders, we wanted to do this full-time, so we need to source some investment to get by.
Therefore I thought it wise to have all founders on UK living wage at £8.91 per hour. Using that figure, I used the following UK Salary calculator to work out the Employers taxes and true costs.
This equates to £18,532 per year and around £1,608.91 in Employers NI and Pension contributions.
The means our monthly burn rate would be £8,392.05.
To bring the game to market we will need to scale up in other skills such as, sound engineering, QA testing and accounting, requiring the following roles.
This would mean an monthly burn rate to £17,142.05 (£8,392.05 + 8,750.00). If we estimate we require 6 months to develop a full vertical slice, 3 months of Play testing, 2 months of early access. We'd need in the region of £188,562.55. We'd also need to make sure we have enough cash flow to keep on building if we have any unexpected expenses. However, all this planning means nothing without funding.
References
Business, As. | A.S. for (2021). True Cost of an Employee Calculator. [online] www.accountingservicesforbusiness.co.uk. Available at: https://www.accountingservicesforbusiness.co.uk/calculators1/true-cost-of-an-employee [Accessed 22 Jul. 2021].
Post 2: Funding - Presentation Target
There are different funding possibilities available now for game studios like ours can take advantage of. All of them have both advantages and disadvantages.
Savings This isn't technically a salary for a group of founders; it is just about us individually having enough money to get by. This is where things tend to get complicated when we start to consider the need to contract other services that are out of our skill-set and founders not having equal amounts of savings to all continue at the same time. This approach will not be ideal.
Family investment and crowdfunding Taking money from friends and family is always difficult. Most of the time, people we already know would be willing to investing in us as they know us, like us, like our idea, and think we could make a go of it.
However, the downside is the relationships could go sour if the business goes bust. In most cases, it's not worth losing friends over.
Venture Capitalist (VC) Investment VCs invest in high-risk companies like ours, which means they potentially seek substantial equity in the company. Because of this high risk and the skin-in-the-game they have, they usually insist on significant control too.
The other thing to worry about is that they can lose interest and may seek to end the investment early. At which point, the investor will expect a return on their money and look to either sell the company or float the company. Which can be alright, so it may be worth considering.
Angel Investor The final option for us is Angel Investment. This is typically a 'high net worth' (rich) individual who invests in businesses for fun and profit.
Similar to VCs, they'll seek equity in the company, but less than a VC and again, they can lose interest and may seek to end the investment early too, which can be alright, so it may be worth considering too.
Publishers The game publisher role has changed vastly due to platforms like Steam and console self-publishing. These two channels alone have given independent development teams like ours a direct path to consumers that simply wasn't around before.
The main reason we might want to seek a publisher is to secure the financing necessary to realise our vision. They can also provide the external resources we need to our gaps in expertise. They also have a wider reach and existing relationships with some console makers.
However, to stand a chance of attracting a publisher to fund our game will require a AAA standard game and or an amazingly strong and original concept.
Our Approach The way the module had been designed, I think the most appropriate funding options for us to create a pitch that would appeal to publishers, VCs and Angel Investors. Additionally, we'll seek Early Access/Alpha Funding to provide extra cash that can be used to fund any unplanned changes or problems we encounter.
I think I'll start off by opening the pitch with something like:
"We're Simulacrum games, and we're here to ask for £250,000 funding, in return for 15% equity in the company"
I worked out that each founder would need 17% equity each to have a controlling stake over the 3rd part investor.
This £250,000 figure will give us 3 months buffer if we have any unexpected expenses. The table I used to work this out is displayed below. Calculation sheet can be found here
I'll also mention the Early Access/Alpha Funding during my investment slides.
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