Ask HN: How does one company gets 30 M from investors to create a game? | Hacker News Reader

Ask HN: How does one company gets 30 M from investors to create a game?

5 pointsatum4711 comments

I just saw a post on the front page about a studio that got 30 M from investors to fund their growth.

How does such things happen? Who do you talk to to get that kind of money? What happens after you get the money? What are your liabilities?

They give you 30 M to grow, what if you don't grow? Do you have to pay the money back?

Sorry if there's many questions in one, but I figure someone with the experience could answer this with just one paragraph.

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I can tell you about a startup I worked in(EU)

So the CFO was the son of a guy that knew the guy that eventual became the angel investor.

So this angel investor invested 5 million, initially. Then he made us join his incubator with his other 6 startups. There he had other friends investing in these startups. So let's say 6 friends invest 30 million in 6 startups. And each startup gets 5x6 = 30 million.

Our total invst. capital reached 35 mill.

Here is my point: One the Christmas party we had, we were having the investors there and they got drunk.

So you would think that investing this kind of money is a risk? Not when they mentioned they they make over 100 million each year. That is every year.

So for them risking %5 of their annual income, is not really a risk. Actually make their money back already there and then, since less income taxes + more write off tax.

So instead of pay double tax because they have more money the actually pay 1/2 tax.

I see

Games are such a hit and miss market, that it will probably be difficult to find an investor willing to drop a full 30 million into your studio, unless you (or your employees) already have a track record in the industry making games close to that budget.

Hell, I worked as a producer for a small video game publisher, and we didn't spend more than $1 million on any given game, that included development, certification, ESRB rating, and marketing (was 11 years ago now), although granted they were smaller games for Wiiware and Xbox Live Arcade.

And we only hired established development teams to make those games.

We did evaluate pitches submitted to us by other development teams, and it was usually a Powerpoint presentation describing the game idea and the team that would be making it and what experience they had making other games. Sometimes it included a playable demo and we'd play that first.

I remember we ended up passing on a couple of pitches that ended up getting released through other publishers, including BloodBowl for Xbox and Desktop Tower Defense for the Nintendo DS.

We also at one point considered making a game based on the anime Tekkonkinkreet, but that didn't end up going anywhere. I didn't know about that awesome movie beforehand, though, and it was cool to find out that a band I already really liked, Plaid, did an amazing soundtrack for it too. We watched the Japanese version in the office, so my boss was roughly translating it to me as we watched it, since I only knew very basic conversational Japanese.

I'm developing a video game in my spare time right now, and I'm just keeping the scope small enough it won't need a big investment. It won't need any at all unless I want to make it pretty with a proper artist.

Also, could you link to that post you saw? I'm not finding it myself so I can check it out.

https://news.ycombinator.com/item?id=26901746

Yep, see, a proven prior track record: "The team behind the sensation Cat Game: The Cats Collector!" It has a 4.9/5.0 rating and 83,000+ reviews on the iOS store and 4.4/5.0 and 64,000+ reviews on the Android store. They made a super popular game, so raising money for their next game is much easier for them.

Edit: Just realized my wife used to play this game, even. She doesn't play that many mobile games, but she's played this one. She's not even a cat person, but a dog person.

the money is investment, so the idea is it would be soent on new developers, offices, hardware etc to create the game in question. The investors don't just send you $30m and come back in a 12/24 months, they are buying a bit of the company, so they will be there for meetings and updates and demand milestones and progress reports. So you could fail to achieve making a game, perhaps the money runs out and the investors dont want to put in any more. So the company fails/closes but you dont have to repay the investors. If the company is successful and the game launches and there are profuts then the investors get some of those profits but ultimately the investors will want to sell their stake in their now profitable company, ideally getting 50x or 100x their investment.

and how do you convince the investors that your idea is worth of the money? prepare a demo, a presentation, a prototype...

Depends.

If you have 0 network. Then you need to go to conventions and startup meetups and build a network

Some EU governments have startup grants that can help you on the way. But you can't apply as a one man show. Minimum 3

The presentation and demo is usually just an after formality.

People invest in people, and buy ideas

Somebody once told me that in order to get an investment term sheet had to be signed which in essence was a loan, like in the bank.. I wonder how often is this the case.

yes. in order to receive investment, you will have to sign a form that defines the terms of that investment.

All the knowledge I have of this type of things comes from Silicon Valley, the show

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