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Comment by melling | Hacker News Reader

Isn't it a very competitive market with low margins? Lots of companies already make games. It's well established. Maybe you have better insight on the market? Where are the $100 million to $1 billion dollar companies? What can be done differently? I know we had one big ipo last year. Don't most end up like Zynga?

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I don't think investing in gaming startups is about getting a return from a 100m or 1b company.

It's about investing in games. I think an individual game is analogous to the typical startup. Minecraft is a $2.5b one[1].

Here's a list of 11 games grossing $3b or more: http://www.businessinsider.com.au/the-11-top-grossing-video-....

Riot Games had $1.3b revenue in 2015, and has had VC funding. I think that's what you're asking for.

[1] http://recode.net/2014/09/09/game-on-why-microsofts-2-5-bill...

[2] https://en.wikipedia.org/wiki/Riot_Games

You put it in a much better way :) As you said it's about investing in games, but expecting to create a financially successful game on the first try is kinda unrealistic. So I think the better plan is to invest in a team that has a methodolgy to build games that have chance to be financially successfull, and let them build and test at least 5-6 games. This is like a startup pivoting and trying to find the product market fit. In gaming business this confirmation is quite straightforward, you do limited play testing for a prototype, and decide if you'll continue develop the game according to test results. If you do continue to develop, you release the game for soft launch with limited features and limited marketing budget. If the game has enough retention, you have a game that can become financially successfull. The studio follows this procedure and iterare till finds a game market fit :)

I think Zynga might not be a good example, in my opinion it's a company that doesn't care about their customers enough. Any company takes that road will face the similar results. I'm not exactly sure if it's a market with low margins also, with mobile phones, cheaper PCs and more accessable consoles the gaming business is getting bigger. In every business there're big players, but look at SuperCell, in 3 years they were valued more than 4 Billion, actually SoftBank bouth 51% of Supercell for 2.1B. Wargaming, Riot Games are the other examples. I think we still couldn't figure out how to iterate quickly and find winning games, like we did in lean startup model. As an example you can manage to develop a game and do a soft launch to see the retention values for under 50K USD, talking about mobile games. So with a very basic calculation a small studio can iterate through 8-9 games with 500K USD investment, and I think optimizing these iterations are also possible.

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