How to avoid risks in a gaming startup — Part 1

Joakim Achrén is the Founder and CEO of Elite Game Developers, a Helsinki-based company that helps gaming entrepreneurs in starting their first games company.

This article is the first part on the topic of How to avoid risks in a gaming startup. It’s not easy out there for any games entrepreneur, even for the seasoned ones. First off, the biggest challenge that I see is that people are expecting to get revenues early on, but usually, it takes longer to see money flowing in.

When you want to have a profitable game, how do you minimize the risks involved? Game development has so many dead-end roads, and going from point A to point B isn’t just going to happen by itself. I’ve often reflected on projects in a way that “It looked like a path that we should go down”. But there are always risks involved. So what are those risks?

I’ve identified ten clear risks for gaming startup founders, and in this first article, I will share three of them. Part 2 and 3 will be released in the following weeks.

Risk #1 Not having a mission

The mission of the company states clearly what is the purpose of the company. Often times in gaming, people start companies because they have an excellent idea for a game, something that they are dreaming about. They’ve assembled a team of skillful co-founders and they start to work on the game.

Later, down the line, the game gets canceled with poor metrics. Now, what is the purpose of the company?

Purpose creates full alignment

I recently wrote an article about Simon Sinek’s book, “Start with Why?”. In that article, I pointed out how important it is to find a real purpose for your games company so that you can align everyone around a common purpose. You want to have the founders, the company staff, and the players of the games, understanding the purpose, that it is meaningful in similar ways to everyone.

Questions that reveal the alignment between founders, staff, and players will be: “Why am I showing up to work?”, “Why am I playing these games?”

Risk #2 Hiring

You are either hiring too early or too late. I’ve often been given the advice that if you raise venture capital, you want to start hiring early so that you’re ready to grow your business quickly when the product is launched. I’ll make the distinction here for a games company, that hiring early means that you don’t yet have a game ready, and proven with good metrics. Hiring too late would be that you have already launched the game, with some solid metrics, but you don’t have all the people in place to run a live game.

Hire too early

Hiring early can cause lots of issues. Each new team member is a new node in a network of people. You bring in more people to a team, and you need to start communicating more, have more one-on-ones, spending time with people.

Do you need two game artists for the game, or would one be enough? Or what if you hired that Performance Marketing or player support specialist, but your game is still several months from soft launch? Can they wear other hats, meaning if they are capable of doing other jobs in your startup while you are still working on finding the first game that has solid metrics?

Hiring managers early is an interesting endeavor. If you hire someone from an existing industry job, who is used to being a lead or a manager in their previous job, what will do in your startup of five people? Will the be ready to wear several hats? Will they be able to take on different kinds of leadership challenges when the company starts to grow?

Hire too late

The best part about hiring too late is that you can build an expectation in the team that people are expected to do several jobs, wear several hats. The CEO needs to understand game design, and needs to ask the right questions about what should be done about the product, about marketing.

Here are a few observations on how you can achieve Hiring Late & Wearing Several Hats mode:

• Minimize business development This should be a given. When you don’t yet have a game that has proper metrics if doesn’t make sense to run around at gaming conferences. You can reach all the game publishers over intros and video calls. All the effort you can put into the company at the early stage is with your team working together, either at an office or if you work remotely, at your place of choice.
• Hire people who thrive when working independently Make sure you hire people who have the right attitude to get things done and figure things out on their own. Programmers who are waiting for game design, or specs on what metrics should be measured, will slow you down. Prepare things before you start the work so that these people can fly.
• Have stretch goals You should ask of your team to push for stretch goals. These are things that won’t be easy to achieve, but they break down the problems that you can face when reaching for the skies. You might not make it to Mars, but you can reach the Moon.
• Don’t wait for things to be perfect When you have a prototype with core gameplay in place, just launch it to get some metrics from player engagement. Then you’ll see the lay of the land, and you can ship the next build to try to improve the numbers from the previous release.

Hiring the wrong people

The one thing that I’ve noticed in running startups is that you won’t be able to change the people you hire. At least to the extent that they have certain traits that will stick with them and since you have a limited runway, you might not be able to change them in time before the money runs out.

The main observation is that they will change you, so keep this in mind. If you keep Brilliant Jerks, or ”Prophets of rage”, on your team, even when they weren’t the right fit, your lack of action will start to change the culture. Meaning that the company culture reflects the fact that it’s fine for toxic people to be on your team.

Risk #3 Fundraising

When I discuss with gaming founders on fundraising, they usually say that the biggest problem there is that investors just aren’t willing to believe in them and place a bet into the company. Most often, it’s the investors not believing in the game project that they have. I would always ask if they are already in the position to raise? Investors are happy to see the founders working on their company first without funding, and see that they are making progress on their own.

When thinking about the risks involved with fundraising, is the fact that you can’t raise the real problem? Actually, the more money you raise, the more problems you will have. First of all, do you already understand what the money is meant to be used for? Investor money is used to fuel the company, not a game project.

Some investors are considering gaming investments as lottery tickets, especially when they don’t have gaming experience. In these situations, gaming founders might be raising money from people who don’t have the experience but want to have control. The requirement of control will start to happen eventually, once you raise enough money, so be prepared to give some of the control to the investors. Or would you rather bootstrap the company for as long as possible?

One of the biggest risks comes from treating fundraising as a lifestyle upgrade for the founders. Suddenly you can pay salaries and take an expensive vacation again. An anonymous founder, recalling their experiences from their gaming startup “When we were more on the funding path, we were much less disciplined with our finances and a lot of the other details of the business. You just aren’t comparing yourself to profitable companies who aren’t raising.” The point is that if you raise money, it can be hard to focus on saving money and building the business with money coming from the paying players.

Before raising money, you should ask these questions:

1. Can we still go for three months without raising money?
2. Does it make sense to lose a stake in the company to investors?
3. Can we do some projects on the side which pay our salaries, while we build our own on thing on the side?

What’s next

That’s it for part 1. Stay tuned for parts 2 and 3, coming out soon. To get notified about this, I suggest you subscribe to my newsletter where I’m sharing more on building successful gaming startups. Visit https://elitegamedevelopers.com/ to sign up.