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The Investor Game: The Good, The Bad and The Ugly

We have been struggling with one not-so-simple-dilemma for the past year: funding.

Timo Naskali, Blogger

January 5, 2015

12 Min Read

[NOTE: This article was written by Jukka Laakso, a co-worker of mine, and originally posted on http://blog.rival-games.com/]

Year 2014 just came to an end. It is time to lay the cards on the table.

First of all, everything I discuss here is based on my personal experiences from the past year. I’d like to point out that there are some excellent investors in Finland, who are quite different than those discussed here. Likewise, everything you’ve read/heard about the Finnish game industry as a community is true: industry veterans offer their help and guidance to new entrepreneurs to an astonishing level of detail and involvement. Without them, we wouldn’t be here. I’m trying to continue that same tradition.

I have been struggling with one not-so-simple-dilemma for the past year: funding. You’ve probably read from the papers how yet another million or so was raised by a Finnish gaming startup. Yes, there has been plenty of those around, which is great for the industry itself here in Finland. However, for all the dreamers over there who are planning on launching their own game startup in the future, here is the harsh behind-the-scenes reality we’ve been bashing our head into. And sadly this reality is the truth on most of the cases currently in the Finnish game industry.

As most of us already know, you need a few things to get the investors even remotely interested:

• A team with a competitive edge (usually experience)
• A product
• A market
• A scalable business plan

Looking at us, we definitely have them. The first version of our product has been launched, and as you can see from the launch trailer below, the reviews have been excellent. The product sells on a daily basis still, two months after launch, starting to trend upward thanks to our hard work in solving the discoverability issue. There is still a lot to improve upon, but for a debut title it is decent enough.

We have a market. A huge market. Telltale Games has sold over 28 million episodes (by July 2014, the current figure is probably closer to 40 million) of their The Waking Dead. That is well over 100 Million in revenue with a single franchise, probably with a return rate of 10+ times the initial development costs. They have created a market demand for deep emotional dramas, where the core gameplay is branching narrative. However, currently they are the only one answering that demand. Especially on mobile, where the few-second-core-loop is the only “right” way to go according to most.

We have a scalable business plan, one that focuses on creating value through our own IPs as well as well-known international franchises being development into interactive dramas. Our first episode of The Detail was made for a mere fraction of the budget of The Walking Dead, yet is capable of standing on its own in comparison. Here is a quote from the most recent user reviewfrom Steam (reviews are just reviews, user are the ones who buy the games):

“With all the games made in the graphic novel vein (walking dead, wolf among us, etc.) one wonders if the next one will be just a bandwagon jumper or something truely inspired.
Well, ‘The Detail’ is a true CLASSIC in the making if the next parts are up to the level that this one has.
Beautiful drawings, inspired storytelling, great conversations, music fits like a glove, what more is there to say???
For the price it is now this is not a recommendation…. it is a MUST buy!”

Neither of these would have been possible without the magnificent team that we have: they share the passion that the founders have for storytelling, and bring more than enough talent to make that passion into reality. Sadly, the issue we have faced yet again, is the constant questioning of our competitive edge.

The experience issue: are we inexperienced?

The trend in the industry seems to be summing up the years each founder has in the industry. Well, we have been working on Rival Games for the past 33 months and there is four of us. So the total would be around 11 years of combined experience from the industry. During that time, we have:

• gone through a startup accelerator
• an internationally awarded startup incubator
• raised angel funding
• raised a variety of government funding
• been chosen as the finalist for Game Connection America from 350+ applicants
• negotiated with multiple international partners for mutual interests
• built an extremely experienced Board of Directors
• built a vast network of international advisors
• clarified the vision of what Rival Games will become, and how

We aren’t “young, non-educated dreamers” anymore: turning thirty next year with different M.Sc. level degrees from Universities on business, productization and entrepreneurship. Additionally, if we add our current multitalented team members into the experience pool, another 20+ years can easily be added from the games industry. Together, we have:

• launched the first episode of The Detail with a review average over 80
• achieved 97% positive user feedback on Steam (exceptionally high)
• built tools and pipelines to allow fast scale up
• a team capable of creating everything we need in-house

Still, in the eyes of the investors, we are inexperienced. For them, a few years of drawing birds as a graphic artist means more than building a product from scratch to finish and commercially launching it, while developing the company from an idea to a reality people enjoy working in. Thankfully, this is not the case between developers: we are receiving tons of applications from the major game studios in Finland and neighboring countries, because they see something they like and want to be a part of.

Personally, I still see us as inexperienced. Hell, the whole industry is rapidly changing so basically everyone is inexperienced for the things to come. There are always new things to learn, old things to improve on, forgotten things to innovate on. But compared to hundreds of other gaming startups, we’ve already learned most of the lessons that are needed for the next steps.

The funny thing is that I’m not sure if we are going to have the chance to take those steps. The game industry in Finland is constantly growing, tens of millions in funding is being raised by various experienced founders, and the media is addressing the gaming industry as the savior of the Finnish economy. I truly hope it is, but at the same time I’m scared: when the next radical innovation hits the mobile industry, can these companies adapt? The ones who have all the funding and pretty much compete in all the same markets?

If they can’t, we are up the creek without a paddle.

So the lesson here today is quite simple. If you’re dreaming of founding your own game studio, make sure to match your dreams with reality: Tekes (the Finnish government) and a few industry angels might fund you, but the larger venture capitalist seen in media won’t. Your only option is to go work for another company for at least a few years (10+ recommended) and then perhaps one day dream again about founding your own company. Additionally, you are not allowed to explore new opportunities as an entrepreneur in the current Finnish gaming industry: the safe bet is to copy the Top 100 Grossing list on AppStore, pick the one with the least copycats available, introduce a “new innovation” for it and start developing.

Don’t take me wrong, there are companies which I respect a great deal, thinking outside of this box, some of them even doing pretty well. I have faith in them being the future. The industry has and will keep changing rapidly, and these companies have the guts to try and hit the next big wave before it even begins. That is what I call an innovative company, and will do everything I can to make sure Rival Games is one of them.

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