How to avoid risks in a gaming startup — Part 2
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.
In part one of on risks in gaming startups, we covered startups not having a mission, risks in hiring and fundraising. You can read part one by clicking here.
In part 2, we’ll cover three more risks that gaming startups can bump into, with devastating consequences.
Risk #4 The scale of the game
This goes back into discussing the big game. Early on, you don’t always know what it means to build a big game. If you look at the other games in the market, you’ll notice that the bigger games have a higher bar for quality and feature count.
If you’re building a big game into an existing genre, you’ll need to compete against everyone who’s already out in the market. Often times, the competition is made off of big companies with lots of money, who won’t suffer if their game fails.
To achieve the right understanding of the game, and how it performs, you’ll have to have a proper core and meta built out for a soft launch. An early soft launch will enable you to understand the appeal of the game. With this data, you can understand if you’ll get your marketing investment back from the players as they start spending. Often times, the player acquisition costs won’t come back in player spend, until you have content for day 30, day 60 and possibly day 90 of the player’s journey into the game.
For a hyper-casual game or any other smaller sized game, there will be less complexity and less moving parts. This enables you to build up the game quickly and test it within weeks of starting the development work.
If you look at the idle genre, it’s full of developers who know what they are doing with mitigating this risk. There’s Playgendary, Futureplay, East Side Games, Starberry Games, all focused on idle games. Why would they do this?
To mitigate the risk with the scale of the game, use the rule of 80/20. The rule means that you limit the amount of innovation that you put into the game, and use mostly proven solutions for creating games. Innovation is only 20%, and 80% is based on proven mechanics.
Kolibri Games used the 80/20 rule as well. They didn’t innovate in the user interface; they relied on a lot of conventions that worked, and then they added something new into the genre. It’s the same thing with East Side Games and their idle hit game Trailer Park Boys. They added a character collector mechanic into the game. This was s a novel feature that nobody had seen before in idle. And players loved it.
Back to Kolibri. For Idle Miner Tycoon, the Kolibri founders added lots of simulation gameplay, which was their 20, and the 80 was something that was already proven in other idle games. Adventure Capitalist is one of the earliest idle games that came out. The successful idle developers have been iterating on that, by adding their own small innovation.
I had Tim Reiter, one of the co-founders of Kolibri Games, on my podcast. He talks about the kind of development work they did for Idle Miner Tycoon. The founders of Kolibri were three guys from the university, and they wanted to start a games company. Their first game was a Boom Beach clone, which they worked on for a few months, but the game wasn’t working in playtesting, it just didn’t feel right.
They had started playing Adventure Capitalist, which had just come out. The Kolibri founders asked themselves: could we do something like this and one of the developers had an idea from the 80es from a miner game. They wanted to see if the miner mechanics would work in an idle game.
They started working and got the game ready in four months. Playtests showed that the game was working. They spent another two months to polish the game, and then launched it globally. The company started making a lot of money in eight months after starting the company.
To mitigate the risk associated with the scale of the game, the idle games and hyper-casual genre have been some of the best places to explore for new startups. After securing finances with smaller scale games, a company could go after a bigger game, with less financial risk. Without betting the entire company on a big idea.
Risk #5 Not being a learning machine
I think this is the biggest risk that newly founded games companies face.
You’ve just founded a games company and you have a clear understanding of what kind of a game you’re going to be making. You have a team of co-founders who are pumped by the idea and want to start building the game.
Six months later, the game starts shaping up, but it still doesn’t feel right. You feel that you still need to build more features to prove the game, so you stick to the plan and continue development work. After 12 months of work, the game is ready (enough) and it goes into soft launch. The metrics aren’t anywhere near what you were expecting. But no worries, we’ll need to tweak the tutorial and add another game mode. That will cheer up the players.
Three months later, you’ve done the changes. But the numbers aren’t improving. Your investors are wary and aren’t interested in putting any more money into your company. Three more months and the money runs out. The game didn’t make it. It wasn’t meant to be.
The failure could have been avoided if the founders would have been learning machines. Another name for this is the growth mindset. You want to learn. You want to understand why certain games are doing well. What are the underlying reasons? You know that you can do better if you know more. The growth mindset agrees with “Learning can significantly enhance my intelligence and I can achieve greater things.”
The opposite is a fixed mindset, which believes that “I have a fixed amount of intelligence”, and “I know everything I need to know about making games”. I’ve been in situations with game developers, where people talk about making games as a craft, but don’t get into applying learning, unlearning, and discovering new ways of uncover insights. How to get better at making games.
Seth Godin says that “The rationale for traditional education is that more learning gets you a better job, and a job gets you paid, which makes the learning a worthwhile investment. But what happens after you get that job? In some organizations, that’s the end of that. You might pick up experience and wisdom on the job, but the short-sighted organization may view ongoing learning as too expensive.”
Here are some obvious ways to build up your growth mindset. So that it becomes your superpower. And you leave behind your fixed mindset.
- Do market research.
- Play more games.
- Observe other people play the same games.
- Think and discuss why certain games work. Why are they doing so well and getting that amount of downloads? Do the same for all the games that don’t work.
This will mitigate the risks because you won’t be doing risky decisions because you will say that “I don’t know everything. I need to study and research the topic before I make the decision.”
Risk #6 Unrealistic expectations
You are hiring like crazy since you’ve gotten a lot of investor money. At the same time, you’ve received validation for your idea, through an investor saying “Yes”.
The technology needs to be built up, the market is not quite there yet, but the consensus is that the market will be there in a year. Is there a market risk associated? What is market risk? Is there a consumer need for your game? How do you figure that out?
Let’s talk about validation. When you have the money and the validation from influential people in the industry, you might not care enough about market risks.
In gaming, there are a few types of validation:
- Validation through metrics
- Validation through playtesting
- Validation through partnership
- Validation through investor money
- Validation through similar games (a gold rush happening)
To mitigate the risk of unrealistic expectations, the only validation to look at is based on the game’s playtesting and metrics. Sequels work as well when it’s proven that the target audience has a need for a sequel. The need has been identified with data, that backs the claim of the target audience being keen to play similar titles with a certain level of novelty. Decisions made on validation, which aren’t based on data, can cause severe consequences.
With my first startup in 2006, I was giving out press statements that “we are eleven (11) people now, and we’ll have tripled that by the end of next year.” What happened by early 2007 is that I had to lay off everyone and find new investors. I had the validation of having a yes from our initial investors. I thought that it was enough.When things get a bit out of hand, it can be hard to spot problems. How do you avoid these kinds of traps?
You should create a mechanism in the company to encourage uncomfortable information and “bad news” to be revealed. Ask your people constantly “What are the problems that we have?”. When you find a problem, figure out what caused it and how you can avoid the problem from causing issues, sometimes even catastrophic ones, for the company.
You can ask “What are the unaddressed problems that we are having with our game?” And when you find these problems, dig deep enough to understand what will happen if you don’t do anything about the problem. It needs to be genuine, showing curiosity to surface problems and deal with them effectively.
What’s next
That’s it for part 2. Stay tuned for parts 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.