LESSON #29:
Starting Your Own Company

Originally written in July, 2003. Most recently updated in November, 2010.

NOTE: This lesson is subject to changes and improvements; reader comments are welcome.




This month's article is about "starting your own game company," from a nuts-and-bolts perspective.

I call these articles "Lessons" here on this site. When I refer to them on the newsgroup (news:comp.games.development.design, or access newsgroups from http://groups.google.com), I call these articles "FAQs" (Frequently Asked Questions). The reason I chose this topic this month is that I've seen an awful lot of questions about it of late, not only on my Game Biz Q&A bulletin board, but also on the aforementioned newsgroup and on the IGDA Student & Newbie Outreach forum.

The excellent Article #16 by Noah Decter-Jackson talks about how to bring together some friends and enthusiasts for a "volunteers" approach to making an indy (independent) game project, also known as a "garage game." His article is an excellent look at the management of a project, but the questions I've been seeing lately are about how to write business plans, how to get startup capital, how to get game contracts (publishing deals, development contracts)... stuff like that.

So that's what this article is all about.

It's possible for garage gamers to keep at it, game after game, learning as they go and eventually establishing themselves and becoming recognized as a development house in the industry.

And it certainly has happened that way. But that's the hard way.

Let's take a look at a path that is more likely, more reliable, and has probably resulted in the creation of more game development companies than the garage game route has.

But I'm going to take what might seem an unusual approach. I'm going to take it in reverse chronological order. To be honest, as I write this, I'm not even sure it's going to make sense. But bear with me. Even if you read something that seems to lock you out, stick with me. Okay? So...

Open your imagination. Imagine that one day in the future you're checking the latest game biz news reports on Gamasutra, and today's headline is about you! It reads...

UPSTART DEVELOPER GETS BIG PUBLISHING DEAL

Yes, you've made it - you are the CEO of your own game company, and you've just gotten a sweet deal with a game publisher. They're going to take your brainchild (a game your staff created from their own brilliant inspiration) and market it, advertise it, and get it into stores across the nation (and even across the world). Pretty impressive achievement. So...

HOW DID YOU GET HERE?

Well, most recently, you managed to actually make a game, of course, or at least an awesome demo ... or several (remember, we're working this backwards). It took a lot of management know-how to herd those cats (manage a team of programmers, designers, and artists). It cost you a lot of money and took you a long time (and as they say, "time is money," when you're paying salaries every week) to make that game or those demos.

Not to mention all the time it took you, making pitches at maybe as many as a dozen game companies, before this one actually didn't turn you down (see Article #11, Article #21, and Article #35).

Oh, by the way - if any of the terms in this article are new to you, you can look them up in the Game Biz Glossary (Article #28), here on this website. Just use your browser's Back button to return to this article after looking up a term.

And of course the game that you made (and which the publisher is willing to risk taking on) looks and sounds as good as any game on the market, and uses solid code. That's because the people who worked on it had an intimate understanding of how games are made. They're professionals, seasoned vets who've probably worked on other games before.

So, then, three different things got you to this point: Hmm. Not every Joe on a street corner has enough money to pay creative types for two years. And certainly, "Street Corner Joe" doesn't have the skills to manage a development team. And talented game creators probably wouldn't drop their previous jobs and accept job offers from some Joe who hangs around on a street corner.

So let's go back a little further, take a look at these three ingredients for success, and how they came together for you.

MANAGEMENT ABILITY

You aren't just some Joe off the street - Street Corner Joe doesn't have the ability to manage a game development team. How did you come by this ability?

You have to have had experience managing people before starting your company. Preferably, you had experience managing game developers. You were probably a manager at someone else's game company before you started your own company.

You probably had education which prepared you to become a manager at someone else's game company. You might have gotten a degree in management, a degree in business, for example.

Or you learned management on the job. Perhaps you were a game programmer, a game artist, a game designer, or a game producer, at someone else's game company, before starting your own company.

In order to become a professional game programmer, artist, designer, or producer, you probably got a degree in programming, or art, or management, or marketing, or writing... you get the idea.

Street Corner Joe has a high school degree. Street Corner Joe doesn't have what it takes to manage a team of developers. Therefore you couldn't be Street Corner Joe. You are a college/university graduate, and you have experience working in the game industry.

PEOPLE

It takes skilled talented individuals to comprise a game development team. If your company has to re-invent the wheel every step of the way, you're going to burn through a lot of time (a lot of wages), and the process will be frustrating for everyone involved. So not only aren't you Street Corner Joe, but... none of the guys and gals working at your game company is Street Corner Joe either.

You've heard the old saying about "the blind leading the blind..."? Well, that's what it would be like if Street Corner Joe hired a bunch of other Street Corner Joes to form a game company.

If an experienced game pro got a phone call from Street Corner Joe saying, "hey, I know you never heard of me, but, um, I'm starting my own game company, ya wanna come work for me?", the experienced game pro will just hang up the phone. So if you aren't a seasoned game industry pro, you won't be able to hire seasoned game industry pros.

But even if you are Mister Game Star, when you phone up the experienced pros to ask them to work for you, they're gonna wanna see the...

MONEY

I said above that you probably need about two years' worth of startup capital. One year to make two demos, or at least one demo, of concepts that'll knock their socks off. And another year to keep the team employed (perhaps working on another demo, or perhaps polishing one further) while you go around to the game publishers, pitching your concepts and your services (as described in Article #21)- and getting turned down by 90% of them (as described in Article #11).

So where'd you get that capital? Most likely, you didn't inherit it from your rich uncle. And you probably didn't win it in the Lotto. You might've saved up some cash from your time working in the game industry, but it isn't likely that you accumulated that much. You got it from either an "angel" (a venture capitalist who believed in your vision and in you, trusting that he'd get his investment back, and then some) or a bank (who was convinced by your well-written business plan, your solid credit rating, and your impressive resume, trusting that they'd get their investment back, plus interest).

Street Corner Joe doesn't have the money to start a game company. Street Corner Joe can't get the money to start a game company. Street Corner Joe, to save his life, could never write a proper...

BUSINESS PLAN

Before you could get the startup capital, you had to write a "business plan." The business plan described in lavish detail how you would spend money and earn money for at least a three-year period.

Your startup expenditures in the business plan included: And your ongoing expenses in the business plan included: And your business plan also discussed the market, how much you understand it and how you're going to make great successful games. Your business plan included the job descriptions of all the people you planned to hire, a hiring plan that discussed when you would hire them, and the resumes of the specific people who'd already expressed an interest in working for you.

So your business plan included all that stuff and much more. I just wrote all the above stuff off the top of my head - there's definitely a lot more that goes into a business plan than that. See the chapter I wrote in the book Secrets of the Game Business (listed in Article #8) for more about what ought to go into a business plan. And there are good books and websites out there about how to write a business plan. Just do a Google using keywords "business plan," to find websites -- and use the same keywords at Amazon and Barnes & Noble, to find books.

Once you had your business plan completed, you took your impeccable credit record, your awe-inspiring resume, and a fair wad of cash (since you had to inject at least 25% into the business yourself) and applied for the loan.

Street Corner Joe couldn't hope to get a business loan like the one you got to start your business. So therefore (ipso facto) you are not Street Corner Joe. So it follows, as the night the day. In order to get a business loan to start a game company, you first had to have...

GAME INDUSTRY EXPERIENCE

Looking back on things today, you see in hindsight that the key part of your getting the business loan was the excellence of your game industry experience.

All those years you spent in the industry netted you a lot of solid contacts. Knowing a lot of talented people, and more importantly, them knowing and trusting you and your experience, enabled you to build a top-notch staff that eventually impressed the game publishers so they'd give you and your company a green light.

And of course, what was it that got you your start in the industry? Two things: your demonstrable passion for games and your college or university degree. (Note: when I use the word "college," I don't use it in the way that many in the U.K. mean it. When I use the word "college," it means "that institution of higher learning that you attend after having graduated from high school, normally around age 18." I tend to use the word "college" to be synonymous with the word "university," so I'm just warning you now.

DEMONSTRABLE PASSION FOR GAMES

Game company employers don't just hire every college graduate that applies for a job. You have to have something else besides your degree to show them that you're the kind of guy or gal who lives, eats, and breathes games. Game companies don't want guys who just do the work that's expected of them - they want passionate, driven guys who'll go not just the extra inch, and not even the extra mile, but the extra astronomical unit.

Your resume just shows what you studied in college, what you did in your summer jobs, and maybe lists some of the software packages you're proficient in. But you can show your spirit, your passion for games, in your cover letter and in your portfolio, demo reel, or demo disc. I've written extensively about how you can demonstrate your passion for games (and show yourself to be not just a solid candidate but a must-have addition to their staff) in Article #12.

If you're a guy who's so obsessed with games that he can't stop himself from writing, drawing, programming, playing, and talking about games that his family worries about his sanity, and even his friends wonder about him, then you're the kind of guy that game companies want to hire. Especially if you have also demonstrated the forebearance, tenacity, and (should I say it?) stick-to-it-ive-ness to have gotten at least a four-year...

COLLEGE (UNIVERSITY) DEGREE

It is possible to get a job at a game company without a degree. But let's play a little "thought experiment" for a moment.

Imagine that you are a game producer. You're under a tight budget, you have to deliver your game on time, all the people reporting to you on your game development team are constantly knocking on your door bringing you more problems, and you're under a lot of pressure from the vice-president to deliver a triple-A game that will garner deliriously lavish reviews and breathtakingly huge amounts of sales.

Now you are looking to hire a new person for the team. You've narrowed the stack of resumes down to two. Both of them have equally impressive portfolios or demo discs. But one of them has a four-year degree and the other doesn't. No matter which one you hire, the pay will be the same. So which one do you offer the job to?

You want the guy to jump into the job running full speed with both feet. You sure don't want someone who looks like he might not have the ability to get in, learn the tools, get to work, and cooperate effectively with the other team members - and stick it out throughout the entire project. The college grad was probably exposed to a well-rounded program of education, involving numerous software tools that the college could afford but the non-grad couldn't. Yes, it's pretty impressive that the guy without the degree managed to make a portfolio as good as the college grad - but the college grad managed to make his spectacular portfolio and survive through a grueling four years (minimum) of higher learning.

To the producer, Joe College looks more likely to be able to fill the bill than Joe High School, all things being equal.

So what should you study in college? That depends. If your eventual goal is to become the president/CEO of your own game company, you ought to study Business or Management. An MBA would be a good thing to have if that's where you want to go eventually.

But before you got a Masters degree, you had to get a Bachelors degree first. Your particular skills, passions, and abilities helped you choose whether to major in programming, graphics, design, managing, marketing, or whatever. The college/university that you chose was a choice that you made yourself, based on your particular individual needs and goals. See Article #25 for more about this concept. Some wannabes think there's a "one size fits all" degree that they ought to get - can you believe it, some guys come to me and ask "what degree should I get to get into the game biz," without ever telling me what they're interested in or good at? Those guys are so clueless! But you aren't like those guys. Street Corner Joe you ain't. Check out Article #24 for more about the "stupid wannabe tricks" a lotta guys fall into (but you didn't, at least not for long).

BACK THROUGH THE LOOKING-GLASS TO NORMAL LAND AGAIN

Okay, I'm done with the "taking it backwards" approach. Taking it forwards, then, the best, most reliable approach to forming a game company, is as follows:

This diagram shows the recommended "straight path" from Point A (wherever you are now, presumably not yet a college grad and not yet in the game industry*) to Point B (you've done it, you've started your own game development company with real hopes of getting a sweet publishing deal).


* There isn't just this one path to get from Point A to Point B. The path I've outlined here is just one that's very focused and straightforward. You may well have to find your own route to get to the place you want to go. It might be harder than the one I've outlined, is all.

You might not even be anywhere near Point A. Maybe you're already a college grad, or maybe you've already been working at some kind of job (maybe a game-related one, maybe not). That just means that you'll have a different entry point into the path I've laid out above - or you'll create one that takes an entirely different angle. Up to a point. You might not enter the path at step 1, step 2, or step 3. But unless you are rich, you can't just jump in at step 10 from a perpendicular or tangential path. Be advised, though - the further from step 1 (the closer to step 10) you jump into this path, the more difficult the remainder of the path will be for you.

If you're already in your late twenties and never went to college/university, don't assume that I'm saying this goal is beyond your reach. You have something that the 17-year-olds this article is arguably targeted to don't have - life experience. You might have even worked as a mid-level manager already, or you might have worked in a parallel industry that taught you a lot of useful things that'll enable you to get into the game industry now (see Article #27 for info about breaking those barriers to entry).

And I'm not knocking the garage games approach. I have nothing but respect for the guys who manage to get there that way. All I'm saying is that that's an even harder path, a less sure way, than the one I've outlined here. (And of course that goes double for the "lone wolf" approach. By the way, if you're wondering if I am knocking the lone wolf, well, yeah. Loners are making it hard on themselves with their own "the hell with everybody else" attitude - and the rest of us in the industry are just as happy not to have to deal with them anyway.)

SO THERE IT IS

If you're thinking, "darn, that sounds too hard," then fine - you won't be running a game company. (Hey, it's no skin off my nose!) But if you're thinking, "yeah, I can do that," then I have no doubt that you will.


Also: Game Attorney Thomas H. Buscaglia has created http://gamedevkit.com/, chock full of Business and Legal Information and Forms for Start-Up Game Developers.

Read "Five Realistic Steps To Starting A Game Development Company" - http://makeitbigingames.com/blog/?p=29.

Entrepreneur.com has an article on How to Start Your Own Business (if the link doesn't work, just go to www.entrepreneur.com and explore).

The FAQs for the GameDev.net "Business of Game Development" forum, at http://www.gamedev.net/community/forums/showfaq.asp?forum_id=5, are an additional must-read.

Read The Finer Points of Starting Your Development Company [Part II]: Financing.

Need sales stats for your business plan? The Entertainment Software Association has industry facts and figures, sales and genre data, and economic data.
Also worth a look are EEDAR and VGChartz.
You can get some game sales data at http://www.game-sales-charts.com/cms/index.php
More game sales stats at http://www.gameproducer.net/category/sales-statistics/.
DFC Intelligence is a strategic market research and consulting firm focused on interactive entertainment and the emerging video game, online game, interactive entertainment and portable game markets. Lots of free articles on their website at http://www.dfcint.com.
I wrote more about gathering "Data from the Haystack" in my March 2007 column. The Games Game.
Dan Marchant has hosted a list of sites that offer game industry market research for big bucks (it takes big bucks to get really solid market figures - it costs money to get into the biz) -- http://www.obscure.co.uk/directory/directory-market-research/.
You'll find a lot more links about places to get game industry sales figures at http://www.igda.org/frequently-asked-questions.
Here are some more:
http://www.fastcompany.com/1684020/the-great-app-bubble
http://gigaom.com/2009/08/27/how-big-is-apple-iphone-app-economy-the-answer-might-surprise-you/
http://www.iphonestalk.com/app-store-may-not-be-as-profitable-as-many-think-according-to-report/
http://www.tuaw.com/2010/08/18/has-the-iphone-app-market-already-crashed/
NOTE: If any of these links don't work, just go to the mentioned website and explore. Companies are always redesigning their websites, and I can't always keep my links up to date.

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© 2003, 2010 Tom Sloper. All rights reserved. May not be re-published without written permission of the author.