Sustaining Your Business COSC 405 Spring 2013 Bridget M. Blodgett

Marketing Yourself Although making games is what brings in money for your company, what sells those games in the long term is the name you make for yourself – Kurt Cobain is better known than Eddie Veder You will need to be able to reach out for people who may have ideas/work for you to do – If your company is known they may come to you!

Networking Have someone attend local, national, and international game development conferences officially as a rep of your company – Make sure they at least have business cards to begin putting your name out there Reach out to local organizations in the area to build connections to non-game businesses – The Art of Video Games at the Smithsonian

Staff Loss Your company will lose people – it’s just life – Sometimes this will be under normal circumstances sometimes you may be poached – Poaching isn’t all bad because it shows that other companies respect what you are doing to develop talent You want to try and keep that talent yourself though – If it is a significant loss see where your company staff policies could be better Keeping a strong network helps pull in new people to make up for losses

Exit Strategies Very important if you are pursuing outside funders – Both banks and investors want to make back what they put in and then some – Sometimes called a liquidity event – They will almost always push for the company to be sold rather than sitting and pulling in dividends Even in self-funded companies people will want something back for the work they did at startup

Why Exit? You are being pushed by investors You don’t have enough working capital – Games are expensive and if you don’t have a publisher backing that can add up Greed – You don’t work so hard on starting up just to be poor Upper management changes – If management has been in control for a long time and is looking at leaving this could be their nestegg

Initial Public Offering Usually only companies in the hundreds of millions in revenues can afford an IPO IPOs will only go well if investment firms think you have potential for growth (Google vs. Facebook) Management of the companies is strict and expensive – The money you make during the IPO is split with the underwriter You need to pay attention to the composition of your board of directors and control of “voting stock”

Sale of the Company Very typically you would sell to a publisher but there may be others Investors will want either cash or shares in a publically traded company equivalent – Management will often be incentivized to stay by being given only shares in the larger company Investors and Managers may be at odds over who to sell to – Investors want the most cash for them while managers may care more about ethics, quality, personal assets, etc.

Leveraged Buy-Out Managers of the company take on debt to buy out the existing investors – Rare in the games industry – Common when investors feel there is value in a company that current owners can’t unlock and management has faith in future growth May happen to buy out sole owner/investor in a company to make it independent from a founder who is retiring

Preparing for Purchase What do you have that is valuable? – Back catalog, IP, games in development, team, fixed (depreciating) assets Although revenue from older games is limited maybe platform expansions or updates of beloved titles can have value IP is very valuable as an asset – don’t assign it away frivolously but don’t be unwilling to part with it

Who Will Value You? Publishers Larger Developers Outside media companies Private equity investors Platform operators Others

Increasing Perceived Value Recapture lost IP (through outright purchase or contract negotiation) Purchase open IP from others Start high-profile projects before funding is available Hire a PR firm to increase company’s profile Reduce your problems and obligations Try to negotiate for money when you have some – You lose power in a negotiation if they know you’re broke

Downside Exits Most companies fail. This will happen to you too The important thing is to keep it together while you fail – Do your best to meet all obligations, treat staff well, keep your good name – Avoid criminal liability at all costs Keep an eye on your cash to help you decide what road for an exit you will go down

Orderly Close-Down If you have the cash on hand to close up shop this is the preferred option Pay out (in full or partially) to your investors, employees, the government, lawyers, etc. Acquire storage for your financial records – You must save these for a period to aid in any lawsuits that may arise You will need to pay for the legal advice on how to shutdown Be ready to sell everything you can to pay off debts – If you want to continue try to negotiate for IP

Bankruptcy There are many types of bankruptcy but for most game developers Chapter 7: Liquidation is the only viable option Often banks or a law firm will step in during this phase to sell off all your assets in order to pay debts – This means that negotiating deals for things like IP is much less likely – You won’t receive any money after this is complete

What to do after? Things to consider: – What are your personal obligations? – What do you hope to gain through the sale? – Do you want to continue with the company after? – Do you expect to expand operations after? – What is the corporate culture of the buyer like? How will you work with them? What do you think they are buying? – What guarantees can you negotiate? What restrictions are you under? How quickly can you liquidate any stocks you receive?

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