VC investing and other types of corporate ownership are not a given in the creative industries – yet there are signs of change in the gaming industry. Maarten de Koning has over thirteen years of experience in executive, entrepreneurial and advisory positions in the industry, with a strong background in investment management. He is the Executive Vice President at DDM and oversees the agency’s new business development, expansion and servicing in the European and Asian markets. At our gamescapital.berlin Investment Masterclass during gamesweekberlin’s PRO X, de Koning was part of the panel of esteemed experts in the field. In conversation with Projekt Zukunft, he recounts the topic’s importance and offers insights and success stories in game funding.
Our masterclass at PROX generated a healthy discussion on the do’s and don’t’s in games funding. What’s your take on the event?
I think it’s a wonderful event, whereby both newcomers and more veteran developers can hear from experts what the lay of the land is for investment, and more importantly – what a company needs to have in place before looking for investment. I think this is a crucial part of starting this process and a lot of developers underestimate the amount of time, effort and money to start a fundraising process. So clearly, having an event like the Investment Masterclass is a great way to educate and inform developers in a very open and informal environment.
As someone with a background both in game development and investment management: What’s the perfect time for a studio to secure funding and what are investors looking for specifically?
The best time for a studio to start raising investment is when this company (ideally) has a few titles under their belt and has ownership of IP that has a certain value and is providing the company with a stable base busines. IP means value and when this is married with a solid pipeline of work, you have a very strong position to start raising investment.
I do however understand that this is likely not the case for everyone, but I would highly recommend making sure your company is in solid footing before approaching investors, as otherwise you are steering towards a ‘fire sale’ or ‘acquihire’, which won’t yield you long term results – both financially as well as from a motivational standpoint. No investor is interested in investing in a company that is structurally short on cash and/or doesn’t have a proper 3-5-year plan of where they want to be in that given time.
Any best cases you can share?
Without diving too much into details, I think that Focus Home Interactive acquiring Deck13 is a very good example of a developer that worked hard for many years on a broad catalogue of titles, which was effectively work made for hire, and then decided to double down on focusing on one core specialty which resulted in developing titles like Lords of The Fallen and the successful franchise The Surge. This brought them in a position that their longstanding partner Focus Home preferred to acquire them to not lose them to other publishers.
Another great example is of course YAGER, who received investment from Tencent last year as YAGER evolved the company from focusing mainly on work-for-hire to self-funding and developing their own IP, called The Cycle and is publishing the game fully internally.
VC investments and other types of corporate ownership are not necessarily widespread in the creative industries. What are the chances and risks for VC funding in the games industry?
I think VC funding in the games industry has mainly been focused on F2P mobile and game related technology, from esports to middleware or other technical solutions. So I think that is a strong focus for a traditional VC, whereas they are less focused on funding actual gaming content.
I would say the main risk with VC funding is that it is very ‘exit’-driven, meaning that VC’s want you to scale the company fast to be in a position to eventually sell. This might be a somewhat aggressive approach for certain creatives, so I see that as the biggest risk. But for other types of gaming companies that are more technology driven, I think a VC could be a terrific fit, given the expertise and know-how that VC’s can offer.
How do you see the German games ecosystem and Berlin in particular? What are its strengths and how does it standout from other international games hubs?
Germany, next to Scandinavia, has a great ecosystem and the German games industry is strong overall, hence I represent and work with quite a few well-known German developers! Joking aside – German has some of the world’s most successful game developers and is very strong in mobile, PC & console games, from casual to hardcore.
Zooming in on Berlin – Berlin on itself already has had a very vivid start-up scene for many years and I think that is reminiscent of some of the early gaming companies that started their business in Berlin, such as YAGER, who started their business in 1999 and for example Wooga, who started in 2009 and are now over 200 people.
And then you have the various international organizations that have set up their European offices in Berlin, like Tencent, Riot and so on.
In which area do you think the Berlin ecosystem has some room for improvement? What needs to change for it to become an even more important player in the international context?
I think some of the needed improvement (i.e. lack of funding) already has been addressed by the German government, by having a dedicated games fund, which I think can help various gaming companies both in Berlin as well as outside of Berlin. As of now, I think Berlin has a pretty good report as a city to recruit talent, hence various international companies have settled there.
Does Berlin need more exits or more VC investments also to attract even more companies to set up their businesses here?
I think every country, region or market needs a success story and I actually think Berlin already has a very good success story, if you look at the renowned companies in Berlin as well as the European offices of big, international companies. It is also known that overseas investors, both in the United States and Asia, are looking at Western Europe as their next focus, as Western developers have shown their level of creativity and innovation and Berlin proves to be a very central location for these investors.
Let’s have look into the future: What is the next big thing in gaming that’s going to attract not only players, but also investors?
5G and the removal of expensive, dedicated gaming hardware. There are of course a lot of hurdles in rolling out 5G and making it stable, let alone the work that is required to have a good gameplay experience regardless on which platform you play that specific game. But if all it does come together, the games industry will grow even more significantly once markets like India & Asia fully open up as they can play high fidelity content on their low-end phones and tablets, whenever and wherever they want. This makes the games industry so scalable and therefore more interesting for investors. And during COVID, the games industry has been getting notice and interest from non-gaming investors, so these new developers will only kickstart this more…
Thank you for your time.
The interview with André Bernhardt was first published on Projekt Zukunft and can be found here.