Lightspeed Venture Partners venture capitalist Jeremy Liew (@jeremysliew) explains exactly what he and other VCs look for in a game developer. Lightspeed has invested in Kixeye, Playdom, Serious Business, and Kongregate in the video game space.
In the past few years, the opportunities for game developers have exploded. With more places than ever to play -- from proliferating smartphones to Facebook -- games are the most popular category of applications. These platforms offer developers a huge number of potential players. As developers can now self-publish on these platforms, they are starting to look to venture capital instead of publishers to fund their development and growth.
Equally, venture capital interest in games is strong again -- especially for web, social, PC, phone, and tablet games.
Since I'm a venture capitalist, I'm often asked what I look for in a game company investment. I've had some good success in investing in this category, most notably Playdom and Kixeye, but this is still a difficult question to answer because investing isn't like giving a driving test. If a company checks all the boxes, it doesn't mean that I'll write a check. But there are a few things that I always do look for.
Everything starts with the team. When games first started to appear on Facebook and mobile, they were pretty lightweight affairs. Some were barely games at all, and others were straight ports of existing games, without consideration for what makes the new platforms different. But game quality has risen considerably and continues to do so.
To build a great game company today you need an experienced team of game designers, developers, and business people. You need a mix of experience that includes having shipped successful titles in the past, understanding how social and mobile differs from console, and understanding how free to play and games as a service differ from the packaged software model. You can't just wing it anymore.
I get excited when I see teams like Innovative Leisure, nWay, Hawken and U4ia who have assembled teams with the right experience to build great games.
U4ia's Offensive Combat
All games have title risk. I can't tell you that your game is going to be a hit before it is launched. Frankly, I don't think that you can either. I'm glad that you are excited about your game. You have to be, or you would not be an entrepreneur. But there are plenty of games that flop, and each of those flops was built by a developer who truly believed in that game. The only truth lies in what users think and do when they play a game.
As Unity, Adobe Flash, HTML5, and other tools increasingly get better, it is getting cheaper and easier to build a quality game and launch it in beta. I like to see real data from real users to see if people are playing a game, and returning. In the long term, aggregate time spent playing a game is the best predictor for monetization, so I like to see your early users getting addicted, and coming back again and again.
OMGPOP had many flops before finally hitting on Draw Something. In contrast, the first two games from Supercell, Clash of Clans and Hay Day, both look to be hits. But it is hard to predict in advance.