These guys have balls of steel to be doing this (or other people's money...). I started writing a long reply, but realised it was turning out almost exactly the same as an earlier post I made so with appologies for the copy/paste:
I'm a game developer, have built a profitable but small studio and I wouldn't invest a cent of my money into a game company I didn't have control over. The risks of developing a game are:
* Technical. Modern games of the retail console variety are incredibly complex pieces of technology. I would not be surprised if building an MMO was comparable to designing a car in terms of engineering effort expended. If your schedule slips, you need to rework major pieces of code just so your engine is no longer dated.
* Artistic/Creative. The game world needs to be interesting, believable and engaging. Asset production is very expensive. Let your schedule slip, and it will all feel dated.
* Gameplay. The game needs to be fun! This is much, much harder than it looks.
* Market. Distribution is incredibly hard, and even very good games often fly under the radar. Is your game the genre of the month? Is it fun enough that everyone talks about it? etc
Very rarely is someone great at all 4. I'm reasonably good at #1 & #3 and hopeless at #2, and average at #4.If you manage to somehow succeed at all four points, then you have a game that makes essentially a one time income of $x (it's spread out over a few years, but it spikes high and rapidly diminishes). Hopefully you made a profit!
And that's per game. All you need to do is mess up your next game (for instance by being too ambitious and letting your success get to your head), and you're bankrupt. The trouble is that you're essentially engineering new products each year or two. There's none of that nice, slow maturation of product and increased customer base you may get if you make, eg, bug tracking or database software, operating systems etc. Each release is potentially a very big, maybe-the-company-won't-survive flop.
There are a lot of companies that are established enough that they can survive on their fan base and income, but they're the exception, not the rule. I admire every one of them.
In a nutshell, you're right. This looks like, on paper, a bad investment market, and it might be.
Indie Fund doesn't have to turn a profit and they'll be successful: they're fundamentally about funding the games that they want to see developed that otherwise can't for financial reasons.
Look at their submission setup. You won't find the word "market" there in any form. Not once do they ask about the potential upside. This is not an angel fund in any traditional sense.
I think it makes more sense to think of the "IndieFund" as funding Art and not businesses. They care about how the product will change them and the people around them.
I agree. From the looks of it, they're akin to a rich benefactor commissioning a work by a promising young artist that will ultimately end up hanging in a museum, just to say in their social circles, "I funded a promising young artist that is showing at blahblah..."
I mean, they're basically giving the prospective developer all of the profits and guaranteeing them 100% of the IP. They just want to expand the culture of Indie games.
Your points are all valid, but many of these apply to other industries too, and other industries also have their own subset of problems.
You could basically sum it up by saying 'Startups are risky. Angel Investors are brave'.
All the risks are why Angels/VCs (including PG in his essays) are always saying they look for promising founders rather than good ideas. There are so many risks that can derail a great idea, what's important is that you can trust the people at the wheel to make the right moves.
There are a lot of technical problems in making a game, but if John Carmack is doing the coding, I'd trust him to solve them.
There are a lot of gameplay problems in making a game, but if Soren Johnson is doing the design, I'd trust him to solve them.
"they look for promising founders rather than good ideas."
This is even more true in the gaming world. Everyone that's played a game has an idea for a game, a small number of them are actually very good ideas, a tiny fraction have been written into well thought-out designs, and a miniscule sliver of those ideas come from minds that can actually manage to create those games.
Stop right there. You haven't added anything substantive to support your "but". And saying that you'd trust John Carmack to solve technical problems is pointless. If John Carmack was on your team, you'd get funding even if your startup was about making cupcakes. The probability that you have someone at the very top of their field is extremely low.
Finding someone who can solve the technical programs of your game may not be a huge deal, but gameplay and creative both give you massive amounts of rope to hang yourself with. Moreover, they can completely upend all the work you've done if things don't pan out. This isn't quite like the web startup world, where if you've got a decent amount of sense, you can predict what will be useful, release a minimal version and iterate post-launch.
They don't seem to be aiming at console gaming in particular, and much of what you wrote does not apply to non-console games. In casual and social gaming, for instance, there is no schedule. Technology isn't always easy (you'd be amazed what it took to scale our game to 100k daily users) but it's doable on a budget and you don't worry about being outdated.
Gameplay's always tough. Distribution varies. Social game distribution was easy for a long time, though it's now gotten harder. I don't know enough about casual to say.
Are you talking about complex desktop/platform games or the whole social gaming phenomenon ?
Here's an interesting article by Tobolds (http://tobolds.blogspot.com/2010/07/another-theory-of-fun.ht...) where he describes how the Metaplace virtual environment founder - Ralph Koster - turned around, created Facebook games and sold them for a pile of money to Playdom.
The question is, if indeed you are going the low-tech-but-flavor-of-the-month social games route, would you consider things like outsourcing your tech ?
If yes, then becoming a small but successful game studio means that you can drop #1 off the list.
disclaimer: I run a outsourcing gig, that works on social games amongst other things
So you're saying it's like investing in a band instead of a company. I'm working my way out of being only #2 and bit of #4 to #1 and #3. Hopefully I'll start on it sometime soon.
"It is one of the main reasons we are able to offer funding terms that are better than anything else out there. Well, except maybe Canadian government funding, but we’re not all fortunate enough to be Canadian."
> It's founded by a bunch of people who have done pretty well with their indie games.
Reminds me of the fund that one of the creators of Teenage Mutant Ninja Turtles setup to help independent comic book artists publish their own comic books.
"The Xeric Foundation has awarded in excess of $2,000,000 to comic book creators
and non-profit organizations since its first grant cycle in September 1992."
(note: The post above seems to have been deleted. For context, it was asking whether this fund was only for games.)
It is. From the website:
"Indie Fund aims to support the growth of games as a
medium by helping indie developers get financially
independent and stay financially independent."
It's founded by a bunch of people who have done pretty well with their indie games. People like Jonathan Blow (Braid), Ron Carmel and Kyle Gabler (World of Goo), and a few others. They're trying to help others do something similar.
What are the terms of the funding? If an indie game has low cost development already, why need the extra fund to dilute the profit? It would be great if it's a grant.
Because the kind of people that tend to make indie games don't have the money to keep themselves under a roof and fed without taking gainful full-time employment, which gets in the way of getting a game out in a timely manner since it's done purely in free time. The investors don't want to make it into a grant a) out of respect for the developer and transaction and b) because they don't have oodles of money themselves, at least compared to more traditional investors.
Think of it less as a business venture to jumpstart a company and sell it for millions later and more as a way to allow people to have a job doing what they really want to do full-time... so long as the game is successful enough. :)
Understood. Then it's more important to spell out the terms of the funding ahead of time. Are they paying you money to develop the game then take over the end result completely? That would be 100% equity funding and it sounds like a "job" to the dev. 6%, 10%, 20%, 50%?
Vague outlines to the funding terms are at http://indie-fund.com/about/ . Basically you pay back a proportion of revenue til you pay then back plus a bit. Or, if you make no money in the first 3 years, you don't owe them anything.
Cool, my game almost qualified except for the last bit of making money.
I'm developing an android market distributed game (which doesn't make that much money, from what I've heard) and a free add supported version. So the income possibility isn't that high. Though it is a social mobile game it might have an edge.
I'm a game developer, have built a profitable but small studio and I wouldn't invest a cent of my money into a game company I didn't have control over. The risks of developing a game are:
* Technical. Modern games of the retail console variety are incredibly complex pieces of technology. I would not be surprised if building an MMO was comparable to designing a car in terms of engineering effort expended. If your schedule slips, you need to rework major pieces of code just so your engine is no longer dated.
* Artistic/Creative. The game world needs to be interesting, believable and engaging. Asset production is very expensive. Let your schedule slip, and it will all feel dated.
* Gameplay. The game needs to be fun! This is much, much harder than it looks.
* Market. Distribution is incredibly hard, and even very good games often fly under the radar. Is your game the genre of the month? Is it fun enough that everyone talks about it? etc
Very rarely is someone great at all 4. I'm reasonably good at #1 & #3 and hopeless at #2, and average at #4.If you manage to somehow succeed at all four points, then you have a game that makes essentially a one time income of $x (it's spread out over a few years, but it spikes high and rapidly diminishes). Hopefully you made a profit!
And that's per game. All you need to do is mess up your next game (for instance by being too ambitious and letting your success get to your head), and you're bankrupt. The trouble is that you're essentially engineering new products each year or two. There's none of that nice, slow maturation of product and increased customer base you may get if you make, eg, bug tracking or database software, operating systems etc. Each release is potentially a very big, maybe-the-company-won't-survive flop.
There are a lot of companies that are established enough that they can survive on their fan base and income, but they're the exception, not the rule. I admire every one of them.