14 min read

EGD Special: Angel investors and founder/idea fit with Ethan Levy, Executive Producer at N3twork

EGD Special: Angel investors and founder/idea fit with Ethan Levy, Executive Producer at N3twork

In this special episode I’m joined by Ethan Levy, Executive Producer at N3twork, a San Francisco based games company, behind the hit game Legendary: Game of Heroes. We talk about the topic of Founder/Idea Fit and how founders should think about themselves being a good fit for the idea or concept that they are pursuing.


Joakim: Welcome to this special episode where I’m joined by Ethan Levy, Executive Producer at N3twork, a San Francisco based games company, behind the hit game Legendary: Game of Heroes. Welcome Ethan! 

Before we get started and I’ll let Ethan give more on his background, I wanted to introduce the topic of today. We are going to talk about game studio founders, pitching to angel investors. What can go wrong, what can go right. Ethan will play the role of curious and ambitious game studio founder and I’ll act as the angel investor.

Ethan, would you want to introduce yourself, talk about the idea for this episode and give some context on what we’d be talking about today? 

Ethan: Hi Joakim, thanks for having me. The quick intro on me is that I’ve been producing and designing games for 18 years. I currently do two things at N3TWORK: I’m the Executive Producer for Tetris and I also spend some time scouting for and evaluating games for our N3TWORK Scale Platform. That’s our publishing program with a $50 million dollar partner growth fund to help games scale with our user acquisition tech, marketing prowess and liveops expertise. So any listeners out there who have a game with winning metrics but need help achieving their next phase of growth might want to reach out to me about that. Before that, I was the lead designer on Legendary: Game of Heroes, and previous to N3TWORK I started two gaming businesses, a platform startup that failed and a monetization consulting business that was ultimately quite successful.

Anyways, we were talking the other day, getting to know each other and talking about what we’ve each been working on lately. You were telling me about some of the pitches you’ve heard recently, and remarking on how you see a lot of the same mistakes over and over again. And it made me think about my own failed startup attempt from almost a decade ago, and all the things I did wrong as a cofounder from even the moment the company was conceived. In the lead up to starting that company, I was listening to a lot of podcasts about entrepreneurship, just like this one. And most of those interviews and online Stanford lectures are really success resumes. You have an amazing guest like Kristian Segestrale and hear about all their accomplishments and even their mistakes sound kind of glamorous since they’re just a misstep on the way to incredible success.

And I wish there were more stories about failure. Whenever I have one of these “resume conversations” about myself, I might talk a lot about consulting, working on Call of Duty, NBA 2k, Family Guy: The Quest for Stuff and other hit games, just puffing myself up. Consulting is a highlight of my success resume. But I don’t talk about QuarterSpiral, the failed startup I cofounded in parallel, which is a highlight of my failure resume and where I ultimately learned a lot more.

So I thought it would be fun to get on the podcast and talk about being a huge failure 🙂

In all seriousness, I thought it would be a great area of overlap to talk about between us, and would be of great interest to your audience. What are some of the mistakes founders make at the early stages of setting out on their own, building their vision and product and looking for investment. Today I think we wanted to focus on the founder/idea fit, which was a huge failure point for me personally with QuarterSpiral. 

Joakim: Thanks for sharing those, Ethan. I think that you can make progress without placing bets in life, on risky things, and then learning from those. I’ve now interviewed a countless number of game studio founders and they all had lots of failures along the way. I would say that the only mistake you can make is not the failure itself, but not learning from the failure.

On Angel Investing

Ethan: One rookie mistake I made with the startup – not having or developing a network of potential early stage investors, and not really understanding what the world looks like on the angel investor side. Before we jump into my fake pitch & founder/idea fit, I’d love to ask you some questions about your angel investing if I could. 

Joakim: Sure, hit me with your first question.

Ethan: Why did you decide to get into angel investing?

Joakim: After building Next Games for six years and also before that, doing another startup for seven years, I was thinking what I would do next. First, I started Elite Game Developers, because I always loved blogging and sharing my thoughts online. I already had a blog back in 2012 which I stopped when I started NG. 

So, EGD was a product of wanting to share, and I had done lots of mentoring work before NG, I went to small gaming hubs and talked with entrepreneurs. It was a lot of fun. But I didn’t want to make consulting my next step in my career. And I was thinking what are the other ways to work with founders. And the most interesting and fascinating option was to become an investor. As an entrepreneur myself, I’ve always felt the interest towards the long-term. I’m happy to go lean now, and build something that in the long term reaps rewards. I think that entrepreneurship and investing have similar incentives. And finally, it’s awesome to see these founders build their companies, and be along with them on the journey.

Ethan: When did you start?

Joakim: I wrote my first check in October 2019. It was only 5,000 euros. It was a founder who I didn’t know personally but I knew their reputation and how good they are. Then, what they wanted to build was a great idea & founder fit.

Ethan: And how many investments have you made since then?

Joakim: Seven and I’m constantly looking at new deals. I will probably do six or seven investments during 2021.

Ethan: What is the range of size for an investment you make? Do you work with anyone else to syndicate deals?

Joakim: So I first started doing solo investments, which ranged from 5k to 10k. In November, I started an angel syndicate and invited some 50 people from the games industry to participate in deals. I basically work as a VC: I secure deals for the syndicate and get a portion of everybody’s profit for my work. We did Savage Game Studios in December and we are looking to do a few deals right now. The check size is from 100k to 200k. 

Ethan: What sort of return multiple are you hoping to achieve with a successful investment?

Joakim: As an angel investor, I’m happy with 5x, as I don’t need to return a fund or anything like that. But if I thought that a founder would be selling too early, I would try to push them to not sell to early, because a lucky break doesn’t happen that often.

If you’re asking from the standpoint on what kind pf business would I back? Then it goes more into where I have the most knowledge. I’ve built my career in f2p and know that in f2p, things exponential growth is possible more quicker and you get to scale companies quickly. And actually have an eventual return.

Ethan: Got it, so you’re looking not only at how big you think a business can ultimately be, but if it’s in your area of expertise and somewhere you add value. How many of these pitches do you get in a typical month?

Joakim: I’d say it’s 50 to a hundred new people reaching out to me every month. And the pitches do range from all sorts of games, all sorts of tech that is related to gaming, and a few that aren’t related to gaming. I would say that I always try to play their game, figure out what they are building and if it’s something for me. I’d say that I probably take calls with about 25% of the people who reach out to me.

Ethan: Wow, that is a lot of pitches. It sounds like a full time job to field all those pitches. Where do they come from?

Joakim: Predominantly LinkedIn, which is a great way to reach out. I then move the discussion to email from there.

Ethan: What do you look for in a good pitch? How does someone stand out against those 99 other inbounds you’ll field each month?

Joakim: First, I look at the founder’s commitment and ambition level. Are they at the level where I know they should be? Also, how strong is the team that they’ve put together, what’s their background. Finally, I look at the idea that they’re going after, is it something that I can understand. Meaning, do I know what it takes to win in that space, what are the risks in that space, and I’m I comfortable with the unknowns and the risks?

Ethan: How many conversations do you typically have with a team from first pitch to making the investment?

Joakim: Probably at least five. And I talk to people close to the founders, do reference checks, ask some people for thoughts on the space if it’s not entirely familiar to me. Then that usually leads to an investment decision, possible in a week of starting the work. I usually do mention in our first meeting if I’m starting to pursue an investment. I want to sort of give that signal to the founders that I’ll start spending time on this, which would possibly lead to an investment.

Ethan: Once you’ve made an angel investment, what does your involvement with the company look like?

Joakim: I love to be pulled in. So Whatsapp messages, biweekly check-in calls, are all good. But I don’t want to force myself on the company, I don’t want board seats. I’d rather be the helping hotline for the founders.

Ethan: So if you form a partnership with a founder or set of founders, it’s not only money but coaching to help them succeed. That sounds amazing. And with just a few questions, I’m 100 times more informed about this stage of investing then I was when I cofounded a startup. 

Founder/Idea Fit

Ethan (cont’d): You’ve said your first investment was a great founder/idea fit. Can you explain what you mean by that?

Joakim: I want to see that the founder is the right founder or co-founder team to build the particular startup. Like if you’re doing hybrid casual, you want to have founders who obsess about sec-to-sec game play, about a deep core gameplay. If you’re doing battle royale, can you explain why Zooba isn’t doing as well as Brawl Stars? If you can, you have founder/idea fit.

Why does it matter? I’ve seen teams rapidly develop a game, soft launch it and get day-1 numbers of 30% and they go like ”huh, ok, let’s move on to the next prototype.”

Founder/idea fit is about being a bit less wrong about what will work than the rest. That’s a competitive advantage that I want to back with an investment.

Ethan: So to tie it back to my failed startup founding experience, thinking about it through the lens of founder/idea fit really makes clear some of the obvious mistakes we made from the very inception of the company. So let’s go back in time to 2012 and without pulling out the keynote slides I’ll try and explain the team and company I would have pitched you at that time.

I think the important context is that at that time, Facebook gaming had been the hot new thing but was starting its descent and mobile was starting its ascent to F2P dominance, and Flash was still alive and kicking.

I’m at a mid-point in my career, having produced the Dragon Age: Legends free-to-play game for Facebook, but not having the success of Legendary to hang my hat on. I’ve left EA with the platform team producer I partnered with – he’s taking the role of CEO and I’m sort of product and evangelist – and we’re starting a company to build the back end platform to make it easy to run f2p games first on Facebook then for mobile. Friends lists, account management, guilds, tournaments, leaderboards, achievements, currencies, etc. Not that different from Playfab to be honest.

My cofounder ran the team that built this technology to run Dragon Age: Legends, and it was intended to power many games but didn’t. Our third co-founder was not involved in the platform at EA, but is instead a rails engineer that the CEO knew. Your book talks about the builder and the seller, this was sort of the CEO as architect, me as seller, and the engineer as builder.

It’s hard to think now with that 2012 mindset, but does this even make it past your LinkedIn inbox? Am I part of the the 75% that got rejected, or would I at least advance to a call? 

Joakim: Yeah I think I would be curious to hear more, since you’ve already done a lot in your career, you know how messy the games industry can be. A credible team always sparks my interest.

Ethan: Good to know I’m at least getting you on the phone. Let’s play this out a little bit, pretend I’ve just pitched QuarterSpiral to you. We can show your listeners what a trainwreck that pitch would have been from 2012 Ethan. And let’s just focus on the topic area: if I had just pitched this company to you on our initial call, can you ask some questions you would have asked to probe for founder/idea fit?

Joakim: So, one thing I’m curious on to start, you have a 10 year career as a game designer and producer, why are you making this platform play?

Ethan: Well, Alex and I worked together well at EA and want to continue working together. Alex’s team built this platform at EA with him at the helm, and I led the team that integrated it. It felt like a natural fit for me to partner up with Alex and be the one representing the developer’s voice, and then to be the one to go out and find those developers.

Joakim: And your technical cofounder, was he the key engineer at EA?

Ethan: No, he wasn’t part of our team. But a contact of Alex’s.

Joakim: How many engineers do you think it’ll take to bring a useful product to market?

Ethan: I think it will take a year from about 8 people for something that will bring obvious value to customers, that’s roughly the size team we had at EA.

Joakim: I’m curious why you’re starting with Facebook games? Do you think that’s where the big market opportunity is?

Ethan: Well, we think there will be a lot of customers in the Flash community, where there’s just thousands and thousands of games out there. Supporting Flash+Facebook is familiar ground for us, and once we’ve built the backend tech it won’t be hard to port to mobile. So in our mind, building for Facebook is the quick win, and then we add on mobile for our long term growth.

Joakim: Do you have a lot of Flash developers excited about the platform and ready to put their games on it?

Ethan: We have a few indie friends with Flash games who’ve agreed to integrate it and put their game on facebook once we reach milestone 2.

Joakim: And what about mobile?

Ethan: We don’t have any mobile integrations lined up.

Joakim: Do you understand the needs of the mobile game developer?

Ethan: Well, I’ve consulted for a few mobile, F2P games, and the needs are mostly the same across web and mobile in terms of backend tech. We haven’t built any mobile games as a team but I’m confident that supporting mobile will be a natural second step.

Joakim: Do you have a lot of proof out there game developers are excited for this platform? How are you going to get those developers onto QuarterSpiral?

Ethan: I’ve been doing a lot of pre-evangelizing. Writing frequent, featured blog posts on gamasutra. Giving talks at GDCs around the world and other conferences. Talking about free-to-play development and just sort of evangelizing free-to-play best practices.

Joakim: Has that turned into any QuarterSpiral customers?

Ethan: No, not yet. I’ve found a lot of consulting customers that way, but none for the startup.

Joakim: Look, I’ll be honest with you because I don’t like to give cofounders false hope. I don’t think this is the right idea for you. Maybe you should focus on your consulting and come back in the future when you have an idea that clearly uses your skillset.

Wrap Up

Ethan: That was brutal, right? Was it as excruciating for you to listen to as it was for me to re-live? There’s just no reason for me to be a part of that founding team.

Joakim: That was bad. Not the worst I’ve ever heard, but definitely a good example of NOT having founder/idea fit.

Ethan: It’s funny, in prepping for this podcast, I went and reread a post mortem the 3 cofounders did as a final part of winding down QuarterSpiral. Almost word for word I said “you should have started this company, but I shouldn’t have been part of the founding team. It should have been the two of you and three other engineers, and focused on mobile. I am not a service person, I’m a games person.” It took me 18 months to figure out I personally did not have founder/idea fit.

In retrospect, I wish I had done a lot more soul searching before agreeing to be a cofounder. I should have asked myself not only does this idea need to exist, but do I need to be part of bringing it to life? Instead I just thought “I like working with Alex, I need a break from EA, and if I want to try founding a startup I better do it before I have children.” If I had identified the lack of founder/idea fit, I would have either tried to pivot us to something else or not been a part of that startup.

Ok, so wrapping up, what are some of the questions you suggest a potential founder ask themselves to make sure they have founder/idea fit? 

Joakim: What is required to execute the idea? How to pivot to an adjacent idea if needed? How to get other people excited about the opportunity?

Ethan: Perfect. Very succinct. Those are the three questions I wish I’d asked myself. Thanks Joakim. This was a fun conversation and that’s some fantastic advice to close on. I only wonder how my stint as a startup founder would have gone differently if I had heard this back in 2012. Anyways, thanks for having me.

Joakim: Thanks Ethan! This was a lot of fun! I got my final questions for you:

What’s your favorite book and why?

Ethan: Steve Martin’s Born Standing Up. He’s one of my artistic heroes, and just getting to know him, learning about his challenges growing up, his struggles with his family, the years and years of hard work it took to become the top of his field, where his inspiration came from, and why he walked away from literally being the most popular stand up in the world. I just find it very real and very inspiring from a creator I look up to, even if its a completely different field.

Joakim: Do you have a story that has shaped how you approach your work today?

Ethan: Sure. My first job was an internship at Pandemic Studios, and I got it out of nepotism. My cousin knew Giz, the director of Star Wars: Battlefront, and I just pestered him until they let me in and I would do all sorts of gruntwork. Just anything they would let me do. Anyways, Giz would take me to lunch maybe once a month, talk to me, give me some mentoring. And whether you’re called the Executive Producer or Game Director or whatever, I now know just how taxing the role can be. And Giz’s team was probably twice the size of Tetris at it’s biggest. Anyways, we were driving to lunch one day and he was clearly having a rough day. As an offhanded remark he told me “When you get to Lead Designer, stay there. That’s the fun job.”

And it’s not that I took the advice literally. What I took away from that, and what affects my mentality at work to this day, is that it’s not about the power you have, but the joy you get out of the experience. So my career hasn’t just been a race to the top to get the most impressive sounding job title or to grab as much power and prestige as I can. I need to make sure I’m having fun in my work. That my tasks and my team are brining me joy. Because you spend a tremendous amount of your time on earth working, and time is that one resource that you can’t get back. So focus on the joy, not on the power.

Joakim: As the last question: How can people reach you?

Ethan: Just hit me up on LinkedIn or at FamousAspect on Twitter. I’m always happy to hear about free-to-play games & developers, especially if they think they’re a good match for our growth fund and are interestested in the N3TWORK Scale Platform. Or if someone just wants some quick, friendly advice about their F2P game, I’m happy to help. Sharing a little bit of time and expertise brings me joy. Joakim: Thanks Ethan! Take care man! Bye bye!