The

Lifecycleof a Small SuccessfulGame Development

Studio

Mike SellersOnline 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 ScienceEPAD, Mentor Graphics – 1987-

1990New World Designs – 1992-1994Archetype Interactive – 1994-1996The Big Network – 1997-1999Online 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 years.”

“…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?”

Start

You have an ideaYou have questionsTeam? Money?

Publisher?What’s next?Where does it end?

What’s the Big Idea?

Original idea or licensed property?

What’s an idea worth?Getting beyond

“formless and void…”• Storyboards and

mockups• Usage scenarios

Enough to attract others

Gather Your TeamThe most important thing you will

doFind those not like you

• Technical• Design• Art, Sound• Production• Management• Finance

“Hire who you need, not who you know”

Gather Your TeamAward 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

positions

Find Your Funding

Assuming you can’t fund this yourself

Understand what you need• $50K-500K-5M+• Casual vs. console vs. MMO

How thin is your shoestring?Debt, contracting, equity,

royalties

Find Your Funding: Debt

Most common: credit cardsNo bank will touch youSBA takes foreverMortgages…?

Find Your Funding: Contracting

Find similar work Pays the billsDefocusing,

demoralizingCan work well with the

right contracts

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 when?”• Risk/reward, ROI, IRR

Not interested in the next big hit• Funding shovels, not gold mines

Not interested in “lifestyle” businesses

Find Your Funding: Royalties

Traditional publisher methodYou get an “advance”…… And pay it back out of

salesWhat’s wrong with this?Sometimes… nothingMost likely, you’ll never see

a dime

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 game

Your nimbleness is your advantageGet to revenues as fast as you can

Funding and Cash Flow

No cash is fastMoney that’s “almost

here” isn’t hereFatman’s #1 RuleIf you don’t get cash

flow, find a trusted partner who does

Growing Your BusinessThe other end of things…Taxes, licenses,

accounting, lawyers…Marketing, PR, and egoRevenue vs. ProfitsTwilight Zone of

“moderate success”• Opportunity for additional

funding• Or a sign to reconsider

goals

Build Your Game

The idea is the easy partTurn your Vision into your Plan

• Storyboard, wikis, Excel…• Mockups, prototypes

Keep moving forward

Build Your Game

Keep your vision, adapt to realityDynamic balanceTry your ideas as fast and often as

possibleKeep what works, jettison what

doesn’t

And then, a Miracle Occurs

Not covering game production in detail

Keep moving forwardKeep your team togetherMove into and out of productionAdapt to realitySoon you have a flourishing business

Step Back for a Moment

Things are going well… mostlyWhy are you doing this again?Have your vision, goals, or your

role changed?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 goalKeeps you employed Potential for profit-sharing

• Investor payback

Can you grow from small to large?• Beware the Twilight Zone

The real exit is still out there

AcquisitionMost common exitIs it time?

• Consider the value of your company

• Market changes• Mutual strengths• Team issues• Cash crunch• Consider your goals

Is there a fit?

AcquisitionNegotiate 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

mainstream

(Plan your escape)

The IPO – Going Public

Despite the 1990s, this is extremely unlikely

A different class of concern

Turning Off The Lights

The ABCDEFG problemPrepare for this, and then

avoid itReview progress, set

evaluation datesLook for creative solutionsRemember where you drew

your lines, and stick to themExit gracefully

Turning Off The Lights

Learn your lessonsBe honest with your teamSalvage 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 setback

“What’s next?”Growth occurs in the most

amazing places.

Is This For You?

Lonely, risky, high stressHigh (personal) rewardFilled with obstacles

Is This For You?

Don’t be fooled

Is This For You?

This is not glamorous

Don’t be fooled

Is This For You?

Autonomy!Do it your way!

Make your own mistakes No one is going to stop

youThey’re probably wrong

anyway

Is This For You?

Learn to live with uncertainty

Maintain your own parachutes (plural)

Remember to have agood time… and a life

Main PointsGet started, don’t wait or just

dreamConsider your goals carefully

• What’s success for you?

Keep moving forwardRoll with the punchesKnow when to harvestKnow when to stop

End Notes

An idea is not a designA design is not a demoA demo is not a programA program is not a productA product Is not a businessA business is not profitsAnd profits are not

happiness.

The

Lifecycleof a Small SuccessfulGame Development

Studio

Mike SellersOnline Alchemy