Financing Indie Games: We Need More Game-Savvy Investors

On Friday, we've been at gameplaces international (GI). GI is a yearly one-day-conference with a focus on game financing that takes place in Frankfurt (Germany). There was a interesting session about the financing model of Entropia Universe (the developer just provides the platform and other companies create and run their own planets) and one about the future of stereoscopic 3D in games (may thrive on mobile but not in your living room for some time due to technical constraints).

What I enjoyed the most was a panel on the topic of how to finance game projects. It was held by Thomas Bidaux (ICO Partners), Marc Jackson (Seahorn Capital Group) and Jan Wagner (Cliffhanger Productions). At the beginning it centered around how you could securely finance your big AAA-project (hint: completion bonds seem to be the rage nowadays) and was not too relevant for small indies.

Things started to get interesting when the Q&A part started. I was able to ask some questions more targeted into the direction of financing smaller game projects (= indies). The outcome of this was that the panel agreed on the fact that Venture Capital  (VC) is not interesting for indie projects. This is mostly due to two reasons:

• VCs look for companies to invest into, not projects. They want to sell the company to the next round of investors, not share distribution revenues with you.
• Indie projects are too small for VCs. They have to invest 2MM+ or else their overhead (for consultants, due dilligence etc.) is getting larger than the sum they can invest.

This is not really big news but it made me ask them about how they thought of Business Angels (BA), Incubators/Accelerators (like YCombinator or HackFwd) and the Indie Fund. It was agreed upon that BAs (also called Angel Investors) and Accelerators are probably not the end-all-solution to your indie needs. They may be good for 10.000 to 50.000 EUR which sounds like a lot in the beginning. But even when you only plan with a small team of three guys and a short development time of one year this will not be near the money you need to develop your game comfortably. If you like having a day job and/or live in a very cheap place then go for it. But if not, you'll need to raise more money. That is if you're not able to run a pre-order model such as Markus Persson or the Wolfire guys.

Should your budget be more realistically between 100.000 and 300.000 EUR you need a bigger financier. There is only one that comes to my mind, the Indie Fund. They are a small group of pretty successful indie game developers who decided to spend some of their money and invest it into other indies. This is just what we need. They combine all that is good and honest:

• They can invest more money than your typical business angel.
• They look to finance projects, not whole companies.
• They have internal game dev knowledge enabling them to assess your proposal on their own (without hiring expensive consultants).

There's just one problem: There is only one indie fund. With limited funds. And limited time. And there's hundreds of promising game projects out there. A lot more than can be funded by just one entity. What we need is more of those game-savvy investors. Rumour has it that the guys behind Jagex (Runescape) and the ex-heads of some other AAA-Studio that was bought/closed (forgot the name, damn) are also looking for investment opportunities. Let's hope that they'll soon come out into the open. They are desperately needed.