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GDC 2005


of a Small Successful
Game Development

    Mike Sellers
   Online Alchemy
        Start with the End

What will you leave with today?
What do you want to have done?
What are you willing to sacrifice?
What comes next?
      My Startup History

Cognitive Science
EPAD, Mentor Graphics – 1987-1990
New World Designs – 1992-1994
Archetype Interactive – 1994-1996
The Big Network – 1997-1999
Online Alchemy – 2002-present
      Where Are You Going?

Understand going in what you
  want to get out of this.
What are your goals, really?
  •   Wealth?
  •   Fame?
  •   Freedom?
  •   Creativity?
        Example Goals
“Work with great people on exciting
  problems… for at least a couple of
“…look your family in their eyes and
  know that you did your best…”
“Learn to be a true leader”
“Prove the experts wrong”
“Never give up. Never surrender.”
“$10M would be nice to have.”
              Example Goals
Mark Jacobs (Mythic): scale of 1-10:
  •    Autonomy: 9
  •       Income: 6
  •     Longevity: 7
  •   Great team: 9
  •   Cashing out: 5
       •   (but: “If you are starting a studio with the
           hopes of cashing out big one day, good luck
           to you. Most startup developers eventually fail
           before a major liquidity event.”)
       Where Are You Going?
What are you willing to give up?
   •   Sleep
   •   Salary
   •   Benefits (vacation!?)
What are you not willing to give up?
   •   Spouse
   •   House
   •   Health
   •   Integrity
What about your “big idea?”

You have an idea
You have questions
Team? Money? Publisher?
What‟s next?
Where does it end?
What‟s the Big Idea?
    Original idea or licensed
    What‟s an idea worth?
    Getting beyond “formless
     and void…”
      •   Storyboards and mockups
      •   Usage scenarios
    Enough to attract others
        Gather Your Team
The most important thing you will do
Find those not like you
  •   Technical
  •   Design
  •   Art, Sound
  •   Production
  •   Management
  •   Finance
“Hire who you need,
  not who you know”
         Gather Your Team
Award equity – but not just equity
  •   No formula – who brings what?
  •   Equity is worthless… until it‟s not
Manage expectations and information
  •   Partners are gold
  •   It‟s not a democracy
  •   Watch for the „freak out‟ threshold
           Gather Your Team
Build the vision, culture, and brand
   •   What does your studio represent?
   •   Clarity here keeps you on track
Be ready for change
   •   Few initial teams stay intact
   •   Few companies grow on a straight line
   •   Find the right people, don‟t fill
         Find Your Funding

Assuming you can‟t fund this
Understand what you need
  •   $50K-500K-5M+
  •   Casual vs. console vs. MMO
How thin is your shoestring?
Debt, contracting, equity,
  Find Your Funding: Debt

Most common: credit cards
No bank will touch you
SBA takes forever
Find Your Funding: Contracting

Find similar work
Pays the bills
Defocusing, demoralizing
Can work well with the right
   Find Your Funding: Equity
Take on other owners
  •   Section 83b Election
Starts with “friends and family”
Angel investors
  •   $50K-500K
Venture capital
  •   $5M+
Valuation, risk, and pie
 Find Your Funding: Investors
“How will you use my money to
  make money?”
“How much do I get back and
  •   Risk/reward, ROI, IRR
Not interested in the next big hit
  •   Funding shovels, not gold mines
Not interested in “lifestyle”
Find Your Funding: Royalties

Traditional publisher method
You get an “advance”…
… And pay it back out of sales
What‟s wrong with this?
Sometimes… nothing
Most likely, you‟ll never see a
Find Your Funding: Royalties

   Feast and famine kills studios.

             Avoid this.
      So What Can You Do?

Try different methods, see what works
Look to new models and niches
  •   Casual games, online delivery
  •   Don‟t try to beat EA or Blizzard at their
Your nimbleness is your advantage
Get to revenues as fast as you can
    Funding and Cash Flow

No cash is fast
Money that‟s “almost here”
isn’t here
Fatman‟s #1 Rule
If you don‟t get cash flow,
find a trusted partner who
       Growing Your Business
The other end of things…
Taxes, licenses, accounting,
Marketing, PR, and ego
Revenue vs. Profits
Twilight Zone of “moderate
   •   Opportunity for additional
   •   Or a sign to reconsider goals
          Build Your Game
The idea is the easy part
Turn your Vision into your Plan
  •   Storyboard, wikis, Excel…
  •   Mockups, prototypes
Keep moving forward
       Build Your Game

Keep your vision, adapt to reality
Dynamic balance
Try your ideas as fast and often as
Keep what works, jettison what doesn‟t
And then, a Miracle Occurs

Not covering game production in detail
Keep moving forward
Keep your team together
Move into and out of production
Adapt to reality
Soon you have a flourishing business
 Step Back for a Moment

Things are going well… mostly
Why are you doing this again?
Have your vision, goals, or your role
Starting a company isn‟t the same as
  running a company
       What Happens Next

Do you build the business slowly?
Expand to the next level?
Or find an exit?
  •   Keep in mind: at some point every
      business exits
What if you have to exit?
Building Slowly

A common fuzzy goal
Keeps you employed
Potential for profit-sharing
   •   Investor payback
Can you grow from small to
   •   Beware the Twilight Zone
The real exit is still out there
Most common exit
Is it time?
   •   Consider the value of your company
   •   Market changes
   •   Mutual strengths
   •   Team issues
   •   Cash crunch
   •   Consider your goals
Is there a fit?
Negotiate the deal
   •   Go back to your goals
Price only part of it
   •   Stock transfer
   •   Cash
   •   New roles
Does everyone come along?
Acquisition: What Next?

       It‟s no longer your baby
       Fit in with the new reality
         •   Get (back) into BigCo
       (Plan your escape)
    The IPO – Going Public

Despite the 1990s, this is extremely
A different class of
      Turning Off The Lights

The ABCDEFG problem
Prepare for this, and then avoid it
Review progress, set evaluation
Look for creative solutions
Remember where you drew your
lines, and stick to them
Exit gracefully
       Turning Off The Lights

Learn your lessons
Be honest with your team
Salvage what you can
  •   Avoid burning bridges
Grieve – and then move on
  •   You will grieve
  •   But don‟t wallow
          Bouncing Back

Shutting down is a temporary
“What‟s next?”
Growth occurs in the most
amazing places.
             Is This For You?

Lonely, risky, high stress
High (personal) reward
Filled with obstacles
Is This For You?

Don‟t be fooled
  Is This For You?

  Don‟t be fooled

This is not glamorous
         Is This For You?

            Do it your way!
  Make your own mistakes
No one is going to stop you
   They‟re probably wrong
         Is This For You?
Learn to live with uncertainty
Maintain your own
  parachutes (plural)
Remember to have a
  good time… and a life
              Main Points
Get started, don‟t wait or just dream
Consider your goals carefully
  •   What‟s success for you?
Keep moving forward
Roll with the punches
Know when to harvest
Know when to stop
             End Notes

An idea is not a design
A design is not a demo
A demo is not a program
A program is not a product
A product Is not a business
A business is not profits
And profits are not happiness.
of a Small Successful
Game Development

    Mike Sellers
   Online Alchemy

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