Please note: This article is not intended to be formal legal advice. I am not a legal professional. You should always seek a qualified legal professional's advice about legal issues.
UPDATE: I'm flattered this post got so much traction. Please visit my personal website at www.nickhatter.com for more great posts like this!
Last December, Marmalade invited me to come and talk at their #include Developer Day, where I gave a talk on what I thought were the top 10 pitfalls indie developers needed to avoid. I never thought I would have the title of "CEO", because I have a confession to make: I used to be an indie developer.
Before I founded giftgaming, I was just like you; I loved games. I loved them so much I started developing them. First in DarkBASIC, at the age of 13 years old. By 18, I was building Tetris in Java. By 21, I was using Unity. And by 23, Marmalade. Somehow, my life kept going back to game development.
In the last 10 years I've developed a number of games, everything from Casual to FPS. After finishing my BSc in Computer Science, I started a big J-RPG project codenamed "Pilgrim", which took a lot of inspiration from Final Fantasy VIII (cliche inspiration; superb game). It was coming on great, with a fully fledged camera, battle, inventory and saving system.
There was just one big problem: I didn't have the funds to pay myself to do it full-time or to pay artists.
So I naively went to Cambridge Startup Weekend to "make investor contacts". But instead, I got much, much more than I bargained for. I gave birth to a startup: giftgaming. I became The Pilgrim.
After being accepted on to the Accelerate Cambridge programme at Cambridge Judge Business School, I was taught everything from how to raise funds, how to pitch, legal issues to watch out for, how to hire (and fire) -- all the staples needed for a new business.
The next thing I know, I'm getting press coverage from publications like TechCrunch and Management Today. Then I appear in WIRED Magazine. Everything moves so fast. It's crazy. Only last week my startup was named as one of 10 Companies From Cambridge To Watch In 2015. I'm also pitching for £300,000 in 2 weeks time. I forget I've only been doing this for just over a year...
(Image above of me from TechCrunch's Startup Battlefield)
It has been a "baptism of fire" as one of my mentors says. But in this one year, I have learnt a lot. About business. People. Myself. Life. Going from an indie developer to a CEO requires a "quantum leap".
Before embarking on the journey to becoming an indie game studio/company, take heed of the following...
Top 10 Pitfalls to Avoid (IMHO):
0. Thinking it has to be perfect
I've made over 7 complete games. How many did I actually publish though? Just one (Thundrclap). Because I was too afraid of making the others imperfect. Ship something. Anything. And ask yourself, is that feature really necessary? Will users actually notice? You'd be very surprised.
1. Evenly splitting equity in the founding team
No no no! We are not all equal. Unfortunately. What tends to happen is that people bring different value to team in experience, time commitment, skill and so forth. One good way to assign equity is to use "Distributive Justice", ie. to slice the pie is to take into account all of the aforementioned metrics, weight them, then have the team grade each other on points out of 10 on each area. Then divide each members points by the points of the entire group. This gives you the equity split for each team member.
2. Letting founders walk off with equity
It's a very good idea to have each founder sign a Shareholder Agreement with a "Vesting Schedule". The vesting schedule basically says "if you leave before x years, you only get to keep y% of your shares". Ideally, you would let founders "vest" (keep) around 25% of their shares for each complete year of service. So if a founder leaves before a year, then potentially they leave with nothing. Sound harsh? It's not. It's fair. I have seen other startups been screwed over by cofounders leaving with huge chunks of equity, forcing them to close down. Investors will not like founders leaving with big chunks either. You can get a tailored Shareholder Agreement for a very reasonable price from Lawbite who provide an online legal service for small to medium enterprises.
3. No formal Intellectual Property (IP) ownership
If anyone does any work for your game, you must make sure it's clear who actually owns what. Even if you pay them, they still own it. An IP Transfer Agreement allows you to formally assign "moral" (ownership) rights over. As always though, seek legal advice.
4. Too much time on competitions
Competitions can be great PR. But they can also take a lot of time, and also cause you to lose focus. I get confused whenever I see entrepreneurs who already have startups going to startup weekends to come up with another startup idea. Makes no sense to me. That's almost like being married and going to a speed dating event. The same can go for gamejams. Yes, they're fun. But you will get distracted. So, if you're working on a game, especially in a team, stick to that game. It's your significant other and you wouldn't want to cheat on it. If you don't keep focus, you may end up with a lot of unplayed and unpublished games like me.
5. Not sleeping or exercising enough
"Creative people suffer the worst" as one of my mentors tells me on the subject of sleep deprivation. You must get enough sleep and exercise. Both have been proven to improve well-being and thinking. When you're in the right psychological state of mind ie. relaxed, that's the prime time for creativity. It is very hard to be creative when you're a sleep-deprived zombie. Trust me. I have been there.
6. Not pursuing your passion
Sounds obvious, doesn't it? But I see it happen. Some people only care about the bottom financial line, rather than enjoying their job. Again, the same goes for your game development. Build games that you want to build, that are your true passion, even if they're not a money-making clone game. Statistically, the chance of your game being successful is low (as is any startup), so you might as well enjoy it at least. And if it is your passion, you're more likely to keep going even when times get tough, and you're more likely to work harder than ever before to make it succeed. Success doesn't have to be financial by the way -- it is how you define it, whether that is critical acclaim, having a niche fanbase, your own game brand and so forth.
7. Thinking you can do everything
As a CEO, I'm guilty of this one. But unfortunately, no matter how multi-talented you are, there will always be things that you're simply not an expert at. And you can't be an expert at everything. It actually makes more sense to find people who are experts, tell them what you need them to do, then step back so they can do their job. There are simply do not have enough hours in the day, especially if you're a part-time indie developer. Get a team. You need one. Yes, there are a few successful solos, but your odds of being successful as a team and not burning out is much higher. Plus a team is more fun. Do you want to be all alone every night behind a screen? Or would you rather be working on your awesome game with your friends and having a good time?
In addition, a team is absolutely essential for raising funds. Hardly any investors will invest in individuals (there are exceptions to every rule though...)
8. Thinking the live demo will work
I remember going to show my mentor an early prototype of giftgaming. In the 30 minute meeting I had with her, I spent all of the time trying to get it to work. What I should have done is recorded a video of gameplay, and taken some screenshots. "Huh, it was working last night" -- A phrase I've heard many times. Use screenshots or video in presentations. If you absoultely have to do a live demo, have screenshot backups ready. Technology and multimedia will usually fail you when you most need it.
9. Listening to naysayers
Someone said to me when I first started giftgaming that it would never work. In their words, "why the hell would a brand and a game publisher ever come to you when they can do a direct deal?" The answer is time. It takes a lot of time to close a big deal with a brand direct. Brands and game publishers (certainly smaller ones) do not have the time to manage all these relationships, not to mention finding the appropriate brands to put in their game. That's something giftgaming does. And don't underestimate how long it takes to build a robust ad platform.
We now have over 15 major brands onboard and we have started receiving self-service signups from game studios worldwide. What if I had listened to that guy? What if I hadn't done my research? My life may have stayed the same. Naysayers are dangerous, and are an enemy to innovation. Be careful listening to them if you have a new concept for your game. That one new concept could change everything.
10. Not taking constructive feedback onboard
Also known as "My baby is not ugly!" Contradicting my last point, it is also important to spot when someone is giving you helpful feedback. Listen to early feedback for your game. Perhaps the mechanic needs a bit of rethinking. Maybe the controls or gameplay aren't as intuitive as you thought. Good or bad, take all constructive feedback onboard. Learn from it. It is painful to have to listen to criticism sometimes, but it's more painful when your game or product is shunned because you didn't listen.
So, that's actually 11 pitfalls. And unfortunately, there are more. Many more. But if you can dodge these ones, I think you can be successful in any venture, not just indie games.
And maybe, just maybe, my baby might enable you to make enough money so you don't have to look for early-stage funding (without dirtying your game up with more intrusive ad solutions). It's best to get a team and prototype well-developed with some customers before you try to raise funds, or you end up giving too much of the business away.
RIP Pilgrim, My Pet Fluffy, FPS in the Park, A&E Hero...: These are my games that will never be played by anyone, because I was too worried about them being "perfect".