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Rossi458

Sell or development

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Hello folks smile.png

 

Got small indie team here smile.png Two founders, 4 co-founders and few freelancers, we established our company 1.5y ago in east EU, but we were researching from 2+. We also found private investor who invested  50,000$  and after 1.5y our first product is almost ready.

 

Our game is not innovative (besides killing flash completely and using JS for web) and is in the puzzle sector (farm heroes/candy crush), but in terms of design is completely different beast! We used some good hardware as Wacom 24hd touch and our main designer is third generation artist and has phenomenal skills... thus in terms of design the game looks more like Disney production with 2 main characters, 6 additional for the story-line, and much more art than our competitors. The whole atmosphere is very different  and magical with detail to every inch and different game-play, different goals and even different map (not scroll like).  The game can easy be turned to franchise  animation movies, toys, etc. I`m absolutely 100% sure that our game in terms of design is better than any currently available in match-3 sector, we made pools in school with kids, online, etc, very deep research and long preparation.

 

But one game to be good, making it just is not enough  smile.png The product needs a good marketing and advertising as its not vertical (first of its kind) and it has analogues. Thus we have a hard decision to make, try to find the big financing from VCs and develop the product and franchise by our self ?r sell it for smaller amount but way safer.  I`m sure if King (Blizzard now) or Disney have our product, with their marketing abilities will turn the product in the next big game. 

 

Would like to hear opinions from people with experience, what are your advice's and what would you do and why? What to avoid and  what to be prepared for? I`m guessing if we go to VCs we would have to sell at least 20% of the company for example.

 

Forgot to mention that we all have worked in marketing, digital art, small marketing games etc but on local level, not global, also working on side web  projects for financing the company. Also the product is finished for web only, mobile platforms are on hold for the moment, but we have the programmers and ux, etc to finish it very fast, wire-frame is ready. 

Unfortunately cannot show nothing from the game at the moment as we have just started procedures for copyright in eu, us and asia. I have to consult with our copyrights lawyer when its ok to "share", but the procedure started and it will be soon.

 

Thank you and sorry for the long post and grammar, my English is not native.

 

Regards!

 

 

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ok, you've got almost 2 years into the project which is not done yet, $50K in debt to an investor, at least 6 warm bodies to split the profits between after paying back the investor, the product is not innovative, and competes in a highly competitive / semi-saturated / saturated market.

 

and the question is whether you should go further into debt to complete the project and finance marketing, or whether you should sell out (assuming you can find a buyer)?

 

can you get adequate additional financing?

 

with adequate additional financing, is your team capable of completing the project, expanding the franchise with an entire suite of titles, and handling the marketing of same? do you want to do this for a living? it'll take a lot of your time....

 

can you find a buyer to sell out to?  at what price point? do you make a profit? do you even break even? can you even pay back your current investor?

 

answer these questions, and the proper course should be fairly clear.

 

from what you've said so far, i'm thinking you'll be lucky if you can even manage to just sell out and pay back you current investor. i hope they're not mafioso types! <g>

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In the professional corporate world, the cost of main development usually represents about 1/3 of the total costs.  

 

Marketing is usually as much money or more money than development costs.  So perhaps $50K or $75K in marketing, but an exact amount is a business decision.

 

You will also have support costs once the project launches.

 

Your existing business plan should account for all these costs. If it does not, you really need to revise your business plan.

 

 

How you get money to fund your project is a decision you will need to make.  If it requires getting a business loan or selling a part of your business or changing plans, that is all your decision.  Angel investors are best, but often businesses fall back to the three "F's:  Friends, Family, and Fools, where "fools" means "private investors willing to invest in your project". 

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TBH,

I'm going to cop out, and just say you shouldn't leave such an important decision to potential experienced strangers on the internet.  

 

If you act on any of our [perspectives, even if any of us are wildly famous and or successful, the decision is and should be with you and your team.

 

What you ultimately decide inpacts us in no way, but impacts you a whole lot.  Given such an imbalance, I'd take anything we say with a few grains of salt.

 

Or some how pay a professional of some kind, the help you lay out all the details, most likelly there will be things you haven't told us, because you didn't know we should know. 

 

It's like if you were at Vegas, and you asked random near by players what you should do with your hand in poker, and you show them your hand.

 

In the end,

Trust your gut, and trust the people who you have mutual respect for.

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In the professional corporate world, the cost of main development usually represents about 1/3 of the total costs.  

 

Marketing is usually as much money or more money than development costs.  So perhaps $50K or $75K in marketing, but an exact amount is a business decision.

 

You will also have support costs once the project launches.

 

How much is support costs (as fraction of budget during planning), in your experience? I knew marketing was equal to or greater than development, but I honestly haven't thought much about support in my own project beyond some cursory planning.

Edited by Servant of the Lord

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Hello thanks for the answers smile.png

 

Reading finance books,  articles,of course wont make decision based on internet answers rolleyes.gif  just gathering information so we can make  better decision. Lastly its not only up to me.

 

Our investors are not mafiozo biggrin.png In East EU deposit on banks are good as nothing, example if you put 25,000 eur in the bank you will receive 150-200 eur for the whole year. So for me finding private investors was more than effortless, we actually decline few and took only 2 (2x25k), who were the most cool and chill. We have clause in our contract that we don`t own them nothing if the product is not successful, only if we don`t complete the product.

 

About the timing, actually all quit their jobs January this year, before that all were working part-time on the project and no one received money except the designer. If our goal was to complete the product FOR the investors for exactly this date, deadline, we would be ready 6 months ago... but our goal was to create a much better product than the current leaders in this game genre and we quite did it smile.png  the investors are extremely satisfied even we are running late, the product can absolutely sit on the throne and everybody who saw it, told the same. I know it too, because we spend insane time in researching, prototyping, talking with artists and kids and so on. I`m pretty confident that selling it will be quite easy.

 

The hard way is to develop the product, not technically but to become "global".

Our analysis show that in EU 1 paid user acquisition cost is 1.40 EUR (optimistically) and that 1 user can bring 4-5 users viral.   

With advertisement campaign 75,000 EUR  for 3 months and if we REinvest  60% of the revenues every month in the advertisement... in the end of the year the product will have 900,000 mau.

Which is extremely low for product that can easily have 10-20 mill MAU, but it will be challenge to raise target valuation from 1% for 5K EUR to 30K or something. Actually i do know what exactly money we need to reach for 10 or 20 MAUs, but our assumption can be wrong and need more or less. We have talked with 1 venture capital fund and they are interested in our product, even they say that it looks very professional made smile.png but want it finished and tested. More meetings are needed, but i guess they will want at least 15-20% of the company and we can agree, depends on the target valuation.

 

edit: for support or burn rate, our team is hired from 1 accelerator for doing web sites and some applications, so we sustain the team and don’t relay on external financing.

Edited by Rossi458

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How much is support costs (as fraction of budget during planning), in your experience? I knew marketing was equal to or greater than development, but I honestly haven't thought much about support in my own project beyond some cursory planning.

Depends on the game and the studio.
 
If you've got a slow-but-steady flow of updates, you need resources for that.  That could be considered a support cost.
 
If you've got a big game with a big-budget mass distribution (think EA and Activision scale) then there needs to be a call center that handles support requests.
 
If you've got a small game you will need to establish your own support methods.  That may mean emails and a web forum or something else. How much time you devote to that will depend on the size and scale of your customer base.
 
Social networks and communications (SoCom) may require more or less time, and might be considered part of marketing. On some projects that was about 5 hours per week from one individual, basically an hour a day. On other projects it was 2-4 individuals each actively developing the business through growth plans in conjunction with marketing and production.
 
For the ratios, I've usually seen approximately 1/3 main development, 1/3 marketing, 1/6 pre-production and prototypes and market research, 1/6 post-production and support.  
 
 

Our analysis show that in EU 1 paid user acquisition cost is 1.40 EUR (optimistically) and that 1 user can bring 4-5 users viral.   
With advertisement campaign 75,000 EUR  for 3 months and if we REinvest  60% of the revenues every month in the advertisement... in the end of the year the product will have 900,000 mau.
Which is extremely low for product that can easily have 10-20 mill MAU, but it will be challenge to raise target valuation from 1% for 5K EUR to 30K or something. Actually i do know what exactly money we need to reach for 10 or 20 MAUs, but our assumption can be wrong and need more or less.

That is always a tricky thing.

Brand recognition and brand loyalty helps. Cross-marketing helps. A large existing customer base helps.

It can be difficult because there are many different factors and they all multiply. So your marketing may be 2% effective at getting them to your web site, your web site might be 8% effective at getting them interested in a purchase, when they go to make a purchase only 4% might be willing to buy and enter their financial information or pay the cost, etc. So you get 0.02 * 0.08 * 0.04 = 0.000064 effective marketing plan. You need to remove all the barriers and make it as easy as possible for people to give you their money, but also to return frequently and to tell their friends.

In many aspects of business, making a game is the easy part.

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