While COVID-19 has disrupted our lives, the game industry has had an incredible year. 

There has never been a better time for entrepreneurs, and the quantity of capital available from specialists ConsolidationNow and non-specialized investors has increased.

At Makers Fund, we’ve been amazed by the great developers who are starting to build their studios, and we wanted to offer some advice to those considering approaching VCs for funding.

Figure out how to get on the radar of investors.

COVID-19 has unquestionably altered the way VCs do business. One thing that hasn’t changed is that warm introductions are still the greatest method to meet gaming venture capitalists. 

Look through your networks, such as LinkedIn, to locate avenues for these introductions.

We’ve also been astonished by how durable the video game industry conventions have been during the pandemic. These gatherings remain a terrific way to meet gaming venture capitalists, even in an online-only format. Because entrepreneurs and investors are strapped for time during these events, meeting requests are frequently prioritized. However, setting up pitch meetings can still be done by sending a cold pitch and deck via email or LinkedIn.

Look for “smart money” when looking for an investment.

Over the last few years, the number of investors interested in gaming has expanded dramatically, a positive development for the business. There are still only a few gaming-focused investors. So far, the tangible impact on their portfolio firms has pleased us.

Gaming venture capitalists specialize in offering industry-specific help by utilizing strong industry relationships and delivering greater product-level insights. They are more likely to be familiar with the industry’s peculiarities, such as the gaming life cycle, user base, etc. 

Many are previous entrepreneurs, either founders or executives.

When it comes to equity investments, finding the correct long-term partner is crucial. 

This includes the firm itself and the people you’ll be working with daily.

As an entrepreneur, the best thing you can do is to screen the investors yourself. Anyone interested in learning more about working with VC firms could contact their portfolio companies directly and ask them questions.

Be aware of how VCs assess a team.

The founders get a lot of attention. The leaders may be as few as two or three founders in the early phases, but a strong foundation is essential. We assess the founding team by asking people who have worked directly with or for the individuals for references. VCs search deep to understand that the leaders are proven in their domain.

Getting a feel of a leader’s fortitude and reliance are two significant signs we seek when evaluating them. We want to know how long the founding team has been working together. 

Did they start working together on the project they’re pitching today for the first time? 

We’re looking for indicators that leaders are both intellectually and emotionally mature.

Furthermore, competition for elite talent has intensified due to the influx of new studios. 

We seek founders with a track record of drawing people, since hiring has become increasingly critical.

Finally, we’re looking for founders who are close to their players, eager to learn, and open to change. Having tight and regular feedback loops has become critical to the development process in a business because gamers’ tastes are always changing and evolving.

Be aware of the distinctions between equity, project, and debt funding.

Equity, project, and debt financing are the three basic types of financing. There are various sources for each of them. VC firms or strategic investors like publishers or platforms can provide equity investment. Traditionally, project funding has come from publishers, but independent financial investors have emerged as a viable option. 

Debt financing is also available through various financial institutions, and gaming debt financing companies have started to arise in recent years. When you use equity financing, you give up some control of your business and dilute your ownership. You keep your intellectual property and creative control, nevertheless. This option hinges on how much creative agency you wish to retain. This is a long-term collaboration that could span numerous projects.

If a publisher finances a production, they get a cut of the profits and, in many situations, they’ll demand IP or sequel rights (sometimes both). Typically, the collaboration is limited to a single project.

One way to look at this is to figure out where you want greater independence and where you want more support. Publishers, for example, are excellent if you need assistance with marketing and platform business development. Other partners may be a better option if you believe you can self-publish, owing to your experience and contacts.