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EGD News #190 — If I Would Start a Games Company - 2023 Edition

EGD News #190 — If I Would Start a Games Company - 2023 Edition

This is where I would spend the most time on. I would not hesitate to take twelve to 24 months to find just the right people to join my co-founding team.

How would I define “the right people?”

This famous quote from Steve Jobs: “It doesn’t make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.”

That is precisely the right way to approach hiring talent, but it also applies to getting the right co-founders.

Besides getting people who are smart and know what they are doing, there are a few other aspects that I would focus on.

Figure out what the company is going to do.

After two decades of startup work, I’ve concluded that it makes sense to bring in the people first and then figure out what you will do. I would still want the company to be a games company. A game studio that creates games.

But what kind of games? What kind of platforms? What is the opportunity?

The best business theory for “people first, idea second” is Jim Collins’ Right People on the Bus from his book “Good to Great.” The concept centers around the idea that achieving organizational greatness primarily depends on having the right individuals in critical positions within the company before determining the company’s direction. This analogy of a bus represents a company, and the people on the bus represent the employees.

In other words, instead of formulating a detailed plan, you’d want to focus on assembling a team of talented and motivated individuals. Once the right people are in place, they can collectively decide the company’s direction.

The most significant risk for a founder: How big should the company be?

I’ve realized that any successful pre-seed, pre-product-market fit company should exceed ten people in its headcount. When you pass ten people, keeping everyone in the loop and giving everyone a chance to contribute towards the common goals becomes harder. With ten people, the burn rate will also stay manageable.

The nuance of the actual size depends on what you are building. Perhaps you don’t need more than four people if you are making a certain kind of game studio. In many cases, you will need more.

Why not fifteen or twenty? This is based on my experience, but I’ve seen that the games don’t get made faster in startups by adding headcount past the core team. When you increase headcount, the core team needs to be onboarding new members and managing existing team members: your core contributors don’t have the impact they would have as a small team.

Venture-backed path

I would game the venture-backed path with detail.

The goal for the first round would be to raise enough venture capital cash to operate the company with a team of eight people for no less than 18 months. Depending on where people are located and how much their salary expectation is when joining a startup, the raise would be somewhere between 2 to 3 million.

What is the most essential thing that needs to happen to raise this round?

The team needs to develop an idea representing a blue ocean opportunity. The idea needs to be interesting, it needs to have a business model, and it needs to excite people. But it needs to be a blue ocean opportunity. Almost no competition, small user acquisition costs, that’s a blue ocean.

In a recent talk, Zynga co-founder Mark Pincus talks about waves.

These waves are the places where blue oceans are created. The launch of in-app purchases for the iOS App Store at the end of 2009 marked the start of the blue ocean for mobile free-to-play, which eventually turned into the red ocean.

Inside a single blue ocean, like mobile free-to-play, there were countless smaller blue oceans, each with the possibility of generating a venture-backed outcome. They are also called game genres and subgenres.

The Match3 genre first had Candy Crush from King, and then Playrix created a subgenre of decorative match3 games with Gardenscapes. There are countless other subgenres.

The same goes for more core titles. Clash of Clans has ruled the RTS subgenre, Empires & Puzzles, the puzzle RPG genre, etc.

Incumbents can rule as they can price their users substantially when doing UA since they have years of content to sell to their players. In contrast, a red ocean genre entrant must have immense capital and skills to build a competing product.

As an entrepreneur and curious and analytical one, why wouldn’t I spend time discovering a blue ocean and then capitalize on that opportunity? Why would I ever choose to enter a red ocean? I have the choice, and I’d go for Blue Ocean any day of the week. Would I even do mobile? I’m not sure I would since there are so many opportunities out there in gaming for the curious entrepreneur.

Final words

I’ve written extensively on the topic of starting up a new company. Here are my favorite pieces from over the years, since 2019, when I started writing EGD News.

(Photo by Jessica Lewis Creative)