Ask Mary-Margaret:
Proposing Your Game Idea

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The Ins and Outs of NDAs Proposing to the Publisher Proposing to the Investor

Now, about talking to investors… this is a whole different area, and you're going to have to educate yourself far beyond anything I can write in this column to deal successfully with the business and legal issues of having a formal investment in your project or company by anyone other than a game publisher or developer.

You should give your investor the same game proposal, but also add a section in which you explain how the investor is going to make a profit. Keep in mind that investors aren't doing this for fun, they're doing it for a return on investment. With the stock market going gangbusters these days, you're going to have to make a very convincing argument why the investor should risk his money on you and your idea rather than just invest it in a mutual fund.

An investor is going to need a lot more business information than just the game proposal. What I'm attaching here is a short version of the table of contents of my former company's corporate "bible," which was a document that had all of our current pertinent business information in it. While this isn't information that necessarily needs to be in your prospectus, I would strongly suggest knowing the answers to these questions before talking to investors! It's pretty intense business data, but if you're going to talk someone into giving you money to build a project, you need to be a pretty intense and savvy business person! Even if you're only going to pursue deals with game studios or publishers, you probably should compile this information and keep it handy to answer questions from your prospective publisher.

I should mention that good accounting software like Quickbooks will allow you to easily build financial statements like a balance sheet, without the help of an accountant.

Here's the list of info for a good "company bible":

1. Overview of the company, including a company organizational chart;
   
   
2. A list of all employees, including function and salary;
   
   
3. Professional references;
   
   
4. Income statements and balance sheets, quarterly;
   
   
5. Projected income statements and balance sheets for the next three years;
   
   
6. Information about stockholders, how many shares are authorized, issued, and reserved, plus any contracts for issuing of stock;
   
   
7. A list of all loans, equity, and leases, including unrecorded liabilities;
   
   
8. A list of all existing and pending contracts, both clients and vendors;
   
   
9. Insurance policies;
   
   
10. Employee benefit plans and costs;
    
    
11. Any legal claims or actions by or against the company, either past or present;
    
    
12. A list of company assets, both equipment and intellectual properties (copyrights, patents, and trademarks);
    
    
13. Company budgets and reports used for financial planning;
    
    
14. Bank statements;
    
    
15. A list of accounts and the banks that the company does business with, and who is authorized to access those accounts;
    
    
16. Federal and state corporate tax returns;
    
    
17. Federal tax withholding records;
    
    
18. The Articles of Incorporation, Minutes of the Board of Directors, and bylaws (if incorporated).

Just to give you some perspective on this, the bible for my company filled two large notebooks, and weighed over thirty pounds! I would suggest having a short version of these questions and answers (a few pages long) and a long, extremely detailed version that you keep current with your company's info.

Yes, if you're just getting started, a lot of the answers to these questions is going to be "Not Applicable." But I think it's worthwhile to at least think about the answers before talking to a publisher or investor. Keep in mind that your business structure is going to be just as important to them as your great game idea!

Also, I should clarify that there is a major legal difference between someone investing in a project and investing in a company. Investments in a project are purely contractual between individuals and companies, investments in a company may require the company to have a specific legal status such as incorporation, and the sales of shares of stock is very closely regulated in the United States. The fact that you're Canadian may mean that there are specific local laws that will affect how companies and individuals can invest in your company. Learn your local laws before you make any deals!

In either of these situations, I strongly, strongly recommend getting a lawyer or business agent who is specifically experienced in game deals to help you in your negotiations.

As for how much you'll need to show to get a deal, I believe in a sliding scale of experience versus proposal. A highly experienced, well-known developer may be able to sell a game based on a one page proposal. At the far end of the scale, if you have no track record, you'd better be able to at least show a playable prototype of your game, plus a lot of design and production planning to convince a publisher or investor that you'll actually complete the project. You should start with just your one page proposal to see whether the company is interested, but have these other materials ready to show on request.

And keep in mind that until the contract is signed, the deal isn't real. I don't know how many projects I've seen where a publisher has expressed interest, negotiations have begun, and the project never gets started. Delays and project cancellations are a reality of our fast-moving industry.

The main thing to keep in mind in this is that ideas are cheap, production is hard. Most game companies have more ideas than they have time and people to develop. So what you need to emphasize is not just the salability of your idea, but how you and your team will carry through and develop it into a completed game that will be profitable in the market. You will need to have substantial industry experience, not just yourself but in your entire team, to get a publisher or investor interested in doing business with you. But even though it may be a long shot, if you have the passion to build your game, and the experience to do it right, it's worth pursuing that dream.

Mary Margaret Ipser is one of the leading recruiters in the game business, with successful placements ranging from entry level to Vice Presidents, and is the founder of Mary-Margaret.Com.

Ellen Guon Beeman designed and/or produced over thirty titles for top game companies including Microsoft and Electronic Arts, prior to joining Mary-Margaret.Com as a recruiter.

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