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					Game Industry Start Up 101
 Financing Fundamentals


        Craig Sherman

        January 20, 2009


                           Wilson Sonsini Goodrich & Rosati
                                PROFESSIONAL CORPORATION
                              Summary


       •   What Kind of Financing Do You Need Now?
       •   Convertible Debt
       •   Common Stock
       •   Preferred Stock




                                              Wilson Sonsini Goodrich & Rosati
DOC#                                               PROFESSIONAL CORPORATION
           What Kind of Financing Do You Need Now?

       Seed Financing
          Size
                 Small Amount - $100,000 to $1 million
          Who
                 Friends and family; incubator; venture funds
          Why do it?
                 Opportunity to build the prototype, gain traction, achieve milestones necessary
                  for true Series A round
                 Result? Better valuation and visibility into business model
                 May be strategic or your only choice
          What form does it take?
                 Equity (Common vs. Preferred)
                 Convertible note



                                                                      Wilson Sonsini Goodrich & Rosati
DOC#                                                                       PROFESSIONAL CORPORATION
       What Kind of Financing Do You Need Now?
        Series A Financing
           Size
              •    Usually $2,500,000 to $10 million
           Who?
              •    Venture fund or other significant investor
           Why do it now?
              •    Well-developed business model with a clear market
              •    Need for capital (and the amount needed) is clear (not too little, not
                   too much)
              •    Category breaking business concept
              •    Value-add of the investors is compelling (experience, connections,
                   intelligence)
              •    Market opportunity window is now

                                                                 Wilson Sonsini Goodrich & Rosati
DOC#                                                                  PROFESSIONAL CORPORATION
                   The Term Sheet


        Money
        Control




                                    Wilson Sonsini Goodrich & Rosati
DOC#                                     PROFESSIONAL CORPORATION
                  Convertible Debt Term Sheet


        Debt convertible into next round equity
        Warrant coverage
        Discounted conversion price?




                                                   Wilson Sonsini Goodrich & Rosati
DOC#                                                    PROFESSIONAL CORPORATION
                      Common Stock Term Sheet

        Advantages
          • Simple documentation
          • Quick closing
          • Pricing resolved
        Disadvantages
          • Employee hiring -- option pricing
          • Investors not protected
          • Pricing resolved



                                                Wilson Sonsini Goodrich & Rosati
DOC#                                                 PROFESSIONAL CORPORATION
                      Preferred Stock Term Sheet

        Advantages
          • Employee hiring -- option pricing
          • Investors protected
          • Pricing resolved
        Disadvantages
          • Complex documentation
          • Longer closing
          • Pricing resolved



                                                Wilson Sonsini Goodrich & Rosati
DOC#                                                 PROFESSIONAL CORPORATION

				
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