EGD 096: Ask Me Anything #3
This week I published my third Ask Me Anything podcast episode, where I answer people’s questions related to game studios, fundraising, and all other entrepreneurship-related stuff. I will be recording another episode quite soon, so please submit your questions by filling out this form.
Here is the transcript for the episode.
Let’s take our first question of this episode. Steve says:
We are planning a D1 test and I have a quick question. We are launching with 3 levels of content and because these are early levels, we allow players to work their way through them relatively quickly, gradually extending the length of time it takes to complete each level. In general, players will be able to complete all 3 levels in approximately 90 mins to 2 hours of continuous play. The question is: In our retention metrics, how do we account for players who like the experience enough to play through all 3 levels on their first day? Can we include them in our D1 count or not? I appreciate your insights on this one. Thanks.
Well, Steve, this dilemma of people consuming all the content on the first day comes up quite often. It’s good that you asked the question so that we can tackle this one right now.
First, I want to cover the “what is enough content for Day-1 retention testing?” which I believe should be in the realm of 60 minutes minimum. How did I come up with this? Through spending years on game development, looking at data, and seeing what happens. Half of your players won’t play your game for more than half an hour on Day-0. Google Play has a report on playtimes. Also, Game Analytics has a report on this.
Let’s focus on what happens on Day-0. Many analytics tools like Dive.games will give you this automatically, but I’m going to walk you through the process of crunching the numbers so that you’ll have a practical understanding of why this matters.
So, Day-0. When you start looking at the players on a cohort level, where you group players based on common characteristics in these groups, aka. Cohorts, things get interesting. You have two lenses, session count on day-0 and playtime on day-0.
When viewing the players through these lenses, you want to chop them down into ten different cohorts of players. Then you put these in a bar chart graph, where the bar height represents the number of players in this cohort. Now, you want to group your players to these ten bars based on their characteristics. One session count as one bar, then another one with all the players who had two sessions, then another bar with three sessions, etc. The tenth one could be ten or more sessions to group all the passionate players into that one. Then you order the bars from the lowest bar on the left to the tallest bar on the right.
As you are looking at the session count chart, you’ll most likely see that the people with one session are more represented with a lot more players. The bar is much higher because most players will give your game a try, but they’ll never return. That’s OK, but you want to move players from that bar to the other ones as soon as possible.
The same goes for playtime. You’d have the first bar at 0 to 1 minute, then onward to 1 min to 2 min, etc. Here you want to start moving players into the realm of playing more than ten minutes, but not over an hour.
I’m referring to playtime on Day-0 specifically, as you want to get a read on how much time they are spending on that particular day before we look at them coming back on Day-1 or not.
Too little playtime means that the players are bored, confused, getting stuck, closing the game but not finding their way back. It would be best if you improve that area.
Too much playtime means that you, the players, will burn out a lot of the content too early in the game. Your game seems to have pull, and people like it. So that is a good thing. But what you want is several sessions, where players come back for ten minutes and then leave to come back later. Better sessioning mechanics will do wonders, like an energy gating, difficulty barrier, which makes the player notice that OK, I need a few things, but I won’t get them before this timer runs out, so I guess I’ll come back in two hours to play again. Push notifications work well in these situations.
So Steve, to answer your question, I would include all players in the Day-1 retention measurement. Still, I would want to understand where my players are after Day-0 regarding session count and playtime to focus on improving things in an update and continue testing in soft launch after some changes have been made.
And with including all players, I would include them all, the ones who have no content left and the ones who have content left.
A question from Paulo, who asks:
In your opinion and experience, Is there any difference in securing funding for a studio based in a Country that is not among the leaders in game development (example: any country in Latin America)? And do you believe being a remote-first studio can be a problem or a virtue – or neither – in securing funding? Has that changed with the pandemic and the whole home-office surge?
Thank you, Paulo, for submitting this set of questions. First, let me tackle the first question. I believe that startup funding is becoming more and more possible wherever you and your cofounders are residing. Some fifteen years ago, there was a saying that Finland is too far away and that investors treat startups in Finland as a second-grade country. Things started changing a lot after the success of Rovio with Angry Birds and Supercell with Clash of Clans.
But the change that has been taking place recently is not related to having a successful startup in your country. That is still happening, like with Turkey having the success of Peak Games and Rollic, but the changes I’m talking about is that if the team is excellent and what they are doing is impressive, you will get funded ever you are located. Investors are comfortable with Zoom meetings and writing cheques without seeing the founders physically. That was still unheard of two years ago, but the pandemic made things a lot easier to get funding.
So, if you have an attractive team and company, but you are operating in a country where the banking system isn’t stable, or the government isn’t stable, then what? I’ve seen several companies in Turkey set up the company in the UK, although they continue to work in Turkey. The legal stuff just stays in the UK, and it’s stable for investors. Similar things could be done with Latin America like you could set up the company in the US or the UK.
But what if you are still pre-revenue and pre-funding, and you are barely surviving with the cash you have? Then you can always pitch the investors that we will incorporate the company in the US or the UK when the investment happens. This is totally OK, and investors have agreed to these kinds of setups. Estonia is also a good option that has been getting more popular recently with startups.
For your second question, how can remote-first studios get funding? Again, it all depends on the team and what they are doing. It’s up to the studio to manage to be remote-first, and they seem like people who can make it work or are making it work. I’d say that no investor will be opposing this, especially after what we’ve gone through during the pandemic.
Question from Dani, who asks:
What happens if your startup manages to make, say 1-2M in revenue, enough to be profitable for a small team, but doesn’t manage to burst out to become a 100M revenue company like VCs want? How can this be resolved with the VCs and the founders?
That’s an excellent question, Dani! Thank you for sending it over.
As we are talking about investor expectations here, I’m going to lay out a few scenarios to help out in answering this question.
In fundraising, you have pre-seed, Seed, and Series A. These are the most common stages for game studios to raise funding. At Pre, you’d raise from 100k to 1m, depending on the team’s strength and attractiveness. Have they worked in gaming, how much experience they have, etc. In Seed, you’d raise from 1m to 4m, again depending on the team and the progress they’ve made. Sometimes you don’t need much progress here if the team is world-class and the investors know they can execute their plan.
Then you’ve got Series A, where investors invest from 5m to 20m, or even higher. Here, the team already has data from the game, some revenue flowing in, and an understanding of how this company will become a 100M revenue company.
So to answer your question, at pre-seed, there is less need to map out how you’ll get to 100M from where you are, but rather how you’ll find a game that will start working, that you can vision that game making 1-2M in revenue. The investors are OK with this planning, as they know that most of the time, it’s hard to sell a story of 100M.
I’ll give you two examples. You’ve got a mobile game studio that is building a merge game, and they only have a team, which is experienced, maybe they’ve been working at mobile game studios for several years, and now they have started their first games company. They are raising 500k as a pre-seed. Here, the investor isn’t pushing them to talk about their 100M revenue plan; it’s more about exploring their idea and seeing if it works. If it doesn’t, then what will the team try out. So those kinds of discussions will be happening, not so much focusing on the “big dream.” Of course, the pre-seed investor would also like each of the companies they invest in to become 100M revenue companies, but they are trying to focus on what can realistically be achieved in the next 12 to 24 months.
Then the second example, which is Dream Games in Istanbul, Turkey. Dream founders had previously worked at Peak Games on their top-grossing games, Toy Blast and Toon Blast. And they set up to start a company that would take over the match3 category. They raised a seed round of $7 in 2019 and then $50m a year later in Series A. This is a different case: these people were pitching the 100M revenue company immediately. They had the most solid and credible plan ever presented to investors in mobile game VC funding history.
So, focus on the stage that you are in build your story appropriately.
Question from Hans
What would be your advice to find potential co-founders to create a game company, without infringing non-solicitation clauses from employment contracts? I have tried several times to create a game company but so far I didn’t find the right partners. Over the years I have met amazingly talented people in various companies but they’re not all willing to make the leap to entrepreneurship, and the ones that could I can’t really partner with them because of contracts. I understand it is normal to protect companies interest, that’s why I wanted to ask if you have good tips to find talented people to create a game startup. It’s tough because I can’t really talk openly about it on social media like linkedin for now since I’m still working for a company at the moment, gotta pay the bills
Answer from Joakim
Thank you Hans for asking this question. First off, lets tackle your non-solicitation clauses. This means that if you terminate your work relationship with your employer, you will not be allowed to solicit or poach your ex-employer’s people to leave and join you at your new employer. Be it a startup or an established company, no matter if you’d be a founder or not.
The legitimacy of having such clauses in work contracts varies by country. A few years ago, there was an interesting legal battle between two game studios, where the ex-employee had solicited people to leave their ex-employer to join the new studio. First, the courts ruled in the favor of the ex-employer, but then the Swedish Labor Courts decided to overrule the local court’s decision.
According to the Swedish Labor Court, a non-solicitation clause should be assessed based on the same statutory provisions as non-compete clauses. An overall assessment as to the reasonableness of a non-solicitation clause must be made, taking into consideration e.g. to what extent the employer has a legitimate interest in the restriction being in place, to what extent the clause restricts the employee from carrying out professional activities, and whether the employee is compensated for the restriction.
So this varies by country. You better check with local authorities if such clauses on non-solicitation are allowed or not.
In the case that they are, you have less options when it comes to soliciting your colleagues to join a new venture. Maybe you’d want to explore the possibility of having a permission to work on side projects with colleagues. I’m of the camp of allowing people to move freely, and restrict anything in gaming, especially if people aren’t happy in your studio and they want to leave. Maybe they want to leave together. It’s up to the management to create an environment where people want to stay, and not create artificial barriers for creativity.
If you still want to leave to build a studio, and you are looking for co-founders, I do talk a lot about this in my book The Long Term Game. Being active in the local game development community is a way to get to know people. Find like-minded people at meet-ups, game jams. Also, reach out to people in the industry and ask them if they know of anybody who’d be interested in doing a startup.
You can also do a lot of stuff online. Start podcasting, or writing a newsletter about things that you are excited. Eventually, you will start gaining an audience and you can find likeminded people from there.
Let’s take one final question. This one comes from Tsur who asks:
What steps, if any, should a game company take to protect a novel game idea from being exposed and duplicated by others (at soft launching or at any other stage)? and if this should not be a concern, why?
Thanks for sending this question, Tsur! Early in my career, I would always ask everyone to sign Non-disclosure agreements before I was willing to show my idea, prototype, or game in development to anybody. I know that a lot of folks still do this, but often it’s not worth it. You want people’s opinions and feedback on your game as soon as possible, and making it frictionless for them is your top priority.
When my first startup transitioned to Facebook canvas games in 2009, I would start having lots of people come to the office and play the game. Then I’d look at them playing, hear what they were saying and then incorporate the feedback and learnings into the game’s development. This playtesting was immensely valuable for the success of our games. Without the openness of letting people try the game, we would have launched a product where nothing would have worked.
So that’s one thing, keeping your game secret and protected with NDA agreements will get you somewhere. Of course, you can ask if people will test your prototype once they’ve signed an NDA. It’s not pleasant, but if they are your friends, they will most likely do it. You can get an NDA template from EGD’s template section.
So other things to protect your novel game ideas. You can patent game mechanics, but that is arduous and will cost you a lot of fees. And you’ll need to do a lot of paperwork. There have been few startups in gaming who’ve recently gone through this process. Still, the problem is that you need to be sure that you have a novel discovery in your hands that others haven’t patented or have attempted to patent yet.
Protecting game mechanics with patents is not for everyone. If you have the capital and person-hours for that, by all means, patent your mechanics.
But things are moving so fast in gaming. As we see in hyper-casual, people develop a game in a week or two and then soft-launch it. Often, there are novel mechanics incorporated, but when you’d start a patenting process, some quick competitor would have already cloned your novel idea into their game, and the patenting process would most likely fail.
As an investor, I don’t want any entrepreneur spending time on patenting their game. Of course, they should be cautious about existing patents and watch out for possible lawsuits down the line once they become successful and have mechanics in their games patented by some big gaming corporations.
So to summarize, I’m not too worried about not protecting your game ideas. You want to launch your game soft as soon as possible and get it out there. If it’s a success, there will always be clones of some sort, and they will know how to circumnavigate your patents.