STARTING AN INDEPENDENT DEVELOPER

MAX HOBERMAN, PRESIDENT/FOUNDERCERTAIN AFFINITY, INC.

From Bungie to Bootstrapping

March 25 , 2009

Bootstrapping

bootstrapping [ büt stràpping ] Building a business out of very little or virtually nothing.

My Background

Mid-90’s – tried to start a game company in college

Goblin Games (R.I.P.)

Summer between college semestersMe and one of my roommatesInvested $3,000 of my own savingsPaid ourselves hourly minimum wageArcade-style space combat game for the MacLasted just a couple monthsCreated the shell interface, one 3D model,

and a broken audio systemDecided I had to get a real job

My Background

Mid-90’s – tried to start a game company in collegeHelped Aspyr get startedGot hired by Bungie

Hired as Webmaster and Graphic Designer Experienced all aspects of marketing and publishing Started designing interface for Myth games Managed Bungie.net online community Acquired by Microsoft Founded Bungie’s Community team Multiplayer and online lead for Halo 2 and Halo 3

Founded Certain Affinity

Mission Statement

“Create a hybrid Halo/WoW killer, sell it to the mafia, retire to a villa in the Swiss Alps.”

Mission Statement

“Become an independent developer with a reputation for creating high quality games and original IP.”

Certain Affinity

2.5 years old Founded in October, 2006 Austin, Texas

Independently owned S Corporation $80,000 initial investment

29 full time employees Started with 9 developers

4 credited releases 1 multiplayer map pack 1 downloadable title for XBLA, PSN, and Windows Contributed to 2 full retail titles

Certain Affinity’s Game Credits

Accomplished Work in Progress

Independent developer

Strong business relationships

Reputation for quality work and delivery

Intellectual property ownership

Financial independence

Success Metrics

Lessons Learned and Unexpected Challenges

We’ve done a lot of things right, but…We have not yet achieved financial

independence!Work for hire business model makes this

difficultWe’ve learned the most lessons about team

building and business relationshipsEconomy also poses challenges

Business Sense

Profit Potential Profit Consumption

Publishers are generally happy if you’re making 20% profit

Not all staff engagedDowntime between

projectsSick leave, vacation

and comp timeDevelopment of own

IP and pitch materials

Work for Hire Business Model

Not Enough Margin

Breaking even with “20% profit” is doing well!

Bootstrappers need a lucky break in order to have financial reserves Long term steady work Bonus or royalties Outside investment Lottery proceeds

Cost control is absolutely essential Keep your overhead low Focus on doing what you do best

Certain Affinity 2008 Expense Breakdown

Overhead Expenses10%

ContractorExpenses

9%

Employee Expenses81%

Cost control. Just 10% of our total expenses are for operating costs.

Development & Support Staff Over Time

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 300

5

10

15

20

25

30

35

Keeping it lean. Majority of our employees are development staff.

Development

Operations

Internal Functions External Functions

Software developmentDev support and ITOutsourcing

managementRecruitingSelf promotionCommunity

managementVendor management

PublishingBusiness developmentBenefits and HR

consultingAccounting and payrollRetirement planningInsurance agentAttorneyReal estate agent

Business Support Relationships

Finding Good Support

Learn what to do in-house vs. external Unless you’re an expert in employment law, income

tax, etc., get help from someone who isAsk other developers for referencesBusiness people know business people

Team Building

Lessons learned What we’ve done well

Not everyone is fit for a startup

Don’t take shortcuts in hiring

Watch group dynamics

Know when to let go

Maintain high quality standards

Hire experienced developers

No communication barriers

Team Building

Team Building: Lesson #1

Not everyone is fit for a startup Talent doesn’t equal business maturity Previous startup experience is a definite plus People willing to take personal risk can help you get

off to a good start Look for people that always give 100%

Team Building: Lesson #2

Don’t take shortcuts in hiring Establish a strong process for screening candidates Don’t bypass process due to existing relationships Don’t lower quality standards due to pressing needs

Team Building: Lesson #3

Watch group dynamics Smaller the team more critical the dynamics Leadership team dynamics are especially important Get leads on the same page before communicating

with team Trusted advisors can convey the feelings of the team

Team Building: Lesson #4

Know when to let go Recognize when the risks of retaining a problem

employee outweigh the benefits Act quickly and decisively to remedy this situation Make sure the company is protected Communicate with the team so the lessons aren’t lost

and you’re not sowing fear

Team Building: What We’ve Done Well

Maintain high quality standards Set a high bar for candidates from day one Communicate quality bar to everyone involved Expect high standards regardless of role Personally meet and approve all hires Trust your gut

Team Building: What We’ve Done Well

Hire experienced developers Need a good mix of experience and fresh perspective Lean towards experience early on Fill leadership positions with experienced people Experience with failure and success are both valuable

CA Developer Experience

Less than 5 years 5-9 years 10-14 years 15+ years0

1

2

3

4

5

6

7

8

9

All Staff Leads

Development Experience

Empl

oyee

s

Team Building: What We’ve Done Well

No communication barriers Everyone’s voice matters Pay careful attention to who’s sitting where and next

to whom Open office layout solves problems for you Don’t separate yourself from the team

Open Office Layout

Business Relationships

Lessons learned What we’ve done well

Myth of long term relationships

The speed of business

Your own best representative

Follow through on commitments

Don’t waste other people’s money

Don’t put all your eggs in one basket

Business Relationships

Business Relationships: Lesson #1

Myth of long term relationships Hard to get steady work from even the best partners Publisher interest waxes and wanes based on their

own circumstances and priorities Factors external to your relationship can stall decision

making (budget cuts, reorganization, mergers, etc.)

Business Relationships: Lesson #2

The speed of business Contracts and negotiations take a very long time to

complete Likely you’ll start working without a full contract in

place Don’t rely on getting paid on time; have a backup plan

Business Relationships: Lesson #3

Your own best representative Early on expect to spend half your time running the

company Expect to spend the other half generating new

business Avoid being critical path on development Know when it’s time to get help Hire people that you can delegate to with confidence

Business Relationships: What We’ve Done Well

Follow through on commitments Don’t commit without consent from your leads Diligently work towards meeting deadlines Always meet or exceed the expected quality bar Communicate frequently and proactively with

partners Admit when you make mistakes and remedy them,

even if it’s on your own dime

Business Relationships: What We’ve Done Well

Don’t waste other people’s money Publishers want to work with stable developers Even the most well-off partners respect tight cost

control Everything makes an impression, from office space to

your personal automobile

First Office, Exterior

First Office, Server Room/Kitchen

First Office, Security Guard

Whew, security is sure hard

work!

Business Relationships: What We’ve Done Well

Don’t put all your eggs in one basket Even the best partners can disappear at crucial times Multiple projects can be a lifeline, but are difficult to

manage Multiple projects require stellar production

management and enough leads to go around

CHALLENGES AND OPPORTUNITIES

The New Economy

Challenges in The New Economy

Increased competition More developers willing to do work for hire Developers willing to work for less Startups forming from layed-off employees Publishers offloading games and even entire teams

Challenges in The New Economy

Everyone is trying to reduce risk Budgets are tight Most publishers are cutting back external spending Publishers more likely to cut losses, cancel projects Fewer publishers taking chances on new IP

Benefits of the New Economy

Best time to be hiring Lots of great talent looking for a home Fewer illusions about stability of large corporations

Benefits of the New Economy

Natural selection Those that survive will be stronger for it Better business practices will make the industry

stronger

Benefits of the New Economy

New IP for the win Entertainment can’t be solely sequel-driven Strong new IP will be valuable in the future

PLEASE INTRODUCE YOURSELF

Q&A