$0 to $1 Million: The Raw Numbers Behind Indie Success

Um so you're here to see zero to 1 million, uh two different sta- studios with different success and different strategies. I'm Tanya Short. And I'm Richard Atlas. And we're going to do our best to take turns talking about our studios in a totally natural way. Uh we definitely practiced a lot. We did actually, but More than once. Well, we'll see how it goes. Um so you probably know me as the captain of Kit Fox Games primarily. We are studio that started a little while ago. We've We're primarily known for Moon Hunters which came out a couple of years ago. We also released Shrouded Isle last year, Shattered Planet some time ago, and we've announced Boyfriend Dungeon. Woohoo! Yeah. Um so we have officially been working together for about five years now. And in USD, I think we're up to about 2 million total in revenue. Um and we have five-ish full-time staff.

Everything's a little bit-ish in the indie world, but that's kind of where we are. And on our end um Oh yeah. Uh so I'm Richard. I'm CEO and general business person. Um take care of some marketing and PR, a little bit of design, a bunch of other stuff at Clever Endeavour. We have a game called Ultimate Chicken Horse which launched a couple years ago on Steam and launched on PS4 and Xbox in December. We uh started working about 2015 and on our side US dollars around 2.5 million in revenue. Uh we also had a cool cake that was made in Ultimate Chicken Horse style. Uh and we're also five full-time staff members. So pretty similar uh looking studios on the onset. So I proposed this talk partially because I think survivorship bias is rampant in the business development community. Um it often makes us act like our our methods are the one true way to do business. And if we succeed, that is the correct way to do things. Um some of you

are probably here hoping to hear some steps to follow um in order to make your first million dollars. And unfortunately, that's not going to happen. Um this is not a talk about what to do um or a formula to apply. There are lots of different successful strategies and although our studios have a lot in common, we're both commercial indies, we're both based in Montreal, we're both around the same size, started around the same time, even so, we have very fundamentally different ways of running our studios successfully. So the point is not to follow either of us at all. Um we're going to walk you through our thought processes so that you can inspect your strategies and make your own decisions that are best for you. Okay? So we're going to go through what goals our studios have, um how that impacted how we diversified our development or not, our burn rates, our revenue, and our projections. We're going to get very deep into the numbers of things as much as our uh business partners will allow.

And uh we'll see what differences and similarities we can find. So why do our studios exist? I mean okay, we want to make games apparently. Um and what what are we trying to achieve? Um as we put together this talk, we did realize that our goals are very much the same. Uh we wrote them out separately, but then they actually were kind of the actually the same goals. So when we started looking at these at these studio overall goals, we noticed that they're very similar. So we're going to break them down a little bit and sort of run through these. So at Clever Endeavour, we want to make sure that um our employees are always developing in terms of their skill and that we feel that they're growing in their uh as as individuals in their skills and in their work uh throughout the work that they're doing with us. Yeah, I would actually say that improved skills or craftsmanship as we call it and personal growth uh are really important to Kit Fox, maybe the most important at this point. Um we really do want to make some of the best games that

exist and and that ambition means that with each game we have to keep raising the bar a little bit. Um we actually didn't discover this goal at first. We didn't think of it on day one. Uh we kind of realized after we finished Moon Hunters um that we had this ambition and we felt we could realize it together. So now part of what we're going to be talking about are plans to enable this self-improvement and this this team growth together. And And now one of our first goals from the very beginning um was to treat ourselves like professionals, but also to take care of ourselves. So we do occasional overtime, but in the past years we've never worked on the weekends. Um and we've never had sustained overtime. Um I personally as the captain of the ship say you're not allowed to work on Kit Fox stuff after a certain hour. Feel free to work on your own stuff. Um and we work smart. Uh pictured here are the original four co-founders of Kit Fox. Um although Mike is no longer at Kit Fox, we still miss him. And uh on our end we're in the same boat. We look a little bit different

than them, but uh we also try to avoid overtime and crunch pretty uh vehemently. And we want to be able to work on the things that we want to work on uh obviously. But that leads to a better quality of life and we want to take careful attention to make sure that uh our employees and the partners themselves uh our lives come first before our work. So if there are issues, if there's whatever things come up uh we know that the priority is on our lives and our stress and our situation before our work directly. The next thing is sustainability. Of course, we want to survive. Um so our goal as a company is to become a long-term sustainable company that can survive for many years, pay competitive salaries uh like we talked about skill development, have our employees develop their skills. Uh we never really had the goal of, you know, growing a company to become huge and like flipping it, selling it, and then starting something new. That's not really the way we see it. Uh it's more of a long-term slow steady rise. Yeah, it's the same for us. We put survival as the number one priority. I I

wanted Kit Fox to exist in five or 10 years. Now it's been five years, so goal one achieved. Um and so in many ways this did translate into safer, less risky, more conservative business development practices. Uh the primary of which um is actually that we felt uh diversifying our studio into developing multiple different kinds of products was what was best for us and our goals. Um so this decision of whether or not to diversify into multiple products um or to develop just one game at a time um does impact everything else. Um it determines what your studio is good at, um how it grows over time. It It's a cyclical thing where as soon as you start either diversifying or focusing on one game, um your personnel changes, your your strategy for dealing with crises changes. Um and of course you can change your goals midway. Um you can you can start to diversify after developing only one game. You can start to focus after deciding that diversifying was bad for you. Um but the way that you develop

even your first project um could change develop depending on how you want to orient your studio and its strengths. Um so the short answer is that Kit Fox is very diversified oriented. Um some successful studios diversify such as Klei. Um Klei is one of my favorite game studios and honestly a lot of the advice I'm going to give you today um is actually advice that Jamie Cheng of Klei gave me back in 2013 and I immediately started trying to act on. Um lots of game studios are happy to bet it all on one big release um especially, you know, they have nothing to lose. Um you're making your first game, why not make it your big only thing? Um but I preferred again to bet on survival and uh calculate our risks and take the safer bet. So when we were in the middle of developing Shattered Planet um I saw an announcement online that the Square Enix Collective was going to exist. Um and there was no call for pitches or

anything like that. I just cold emailed Square Enix saying, "Can I please pitch something to your weird new thing?" And they said, "I I guess. I don't know who you are, but okay. Uh you have to get it in by Friday though." Um so like we hadn't even soft launched our first game yet, Shattered Planet. We had four people um and I when I told the team, I was like, "No, no, no. Let's stop for two days, make a pitch document, and send it to these randos." They were like, "What are you doing? Like we're behind schedule. We have assets to make." Um and and our our business partners also, our investors, um said, "Maybe you should be focusing a little bit more, Tanya." This is this is a recurring theme with me, but um it it worked out. We actually pitched them Moon Hunters which was our next game, and it was actually a really great opportunity for us. And we had no way of knowing that at the time, but we decided it was worth risking two days to explore this new opportunity for diversification because I had already known that I wanted to be developing multiple projects in parallel as much as possible. Um so over time Kit Fox has

become maximally diversified, like maybe way too diversified actually. Um in five years we've released three major projects and we spent a year on work for hire. Um and 2018 marks our very first time uh with two games solidly in production together. Even though I was just here on Monday um talking about how Moon Hunters had initially disappointing sales. So there's good and bad sides of diversifying and developing multiple uh games at at once. Um I mean sure, yeah, it's it's lower risk obviously. Um if one project does well, we can split it up into multiple other things. And if it if no single failure can close the studio. And because we're having multiple little revenue streams, um things are generally more stable. Uh we don't need to rely on one individual sale. Um of course it's still a little spiky because Steam, but um more games equals a stronger back catalog and steadier flow. Um and I sleep better at night.

And our team members are are quite flexible now because they worked on lots of different projects together in lots of different configurations. Um hybrid team members stay more excited and refreshed because they're not working on the same thing for years and years and years. Um and so people are less likely, I think, to feel uh cynical or bitter on a project because they know they have other options. And if there isn't one right now, there probably will be soon. Um so we can adjust to change according to team members' interests pretty quickly. And with a large number of projects, we can experience a very junior team member can join in straight from school and experience from pre-production all the way to shipping um very quickly because they can see the whole life cycle of a project happening right next to them. Um so there's a lot of different opportunities from start to finish. Unfortunately, hybrid team members are also not particularly specialists. I mean, this is no new problem in indie. We're all kind of wearing a lot of hats. Um but this is this is another thing altogether when you are doing something

completely different on a different kind of project every year or so. Um I mean, that's at this point we have specialized a little bit into system-driven RPGs, I guess. Um but the art styles are all over the place, the technology is all over the place, so you can't say like we have the world's best person at anything. They're the best at making that one game that one time. And we also start projects constantly. Um thankfully, I like coming up with new ideas. I I don't really mind having blank pages all the time. Um but it is a little bit stressful to say, "Oh, we got to start again" uh every every year and a half or so. But at least it's better than finishing projects. Finishing projects is the worst. Um I mean, I don't know how many of you have survived a game. Games are are terrible to finish. Um and diversification makes that worse because every time you shut down one crisis, there's another one coming in the door. Um so we do have regular upending of priorities and tasks. Um the

good news being that we definitely have to prioritize um uh well. And but as the director, I mean, I still do end up with more difficult decisions per week. Um last fall, we were actually shipping The Shrouded Isle while also hiring up for Boyfriend Dungeon and shipping Moon Hunters on Switch. And also our tech lead was doing R&D on his own uh personal project. So we had like four projects for six people. Uh not not ideal. Um this is what diversification tends to look for like for us. So on the left, um you have the spend per game, and then on the right you have the income per game. Um so or maybe see it the other way around. Which way we forgot to label that one. Um Yeah, no, it's it's income on the left and and revenue on the right. Yes, because on the left, you see there's a canceled project that we spent on, which oddly enough did not make us any money. Um but yes, so uh Shrouded Isle is a

special case, by the way. Um I keep referring to it as if we developed it, but in actuality, we published it. So we spent almost nothing on development. Um it was a side project of one of our members, but then we also don't get to keep most of the revenue, unfortunately. So the other end the other side of this uh are the companies like Supergiant Games who focus on one game at a time. So Supergiant you might know from Bastion and Transistor and Pyre. Uh they managed to make amazing games every time all the time somehow. Um and they're only focusing on one at a time. Uh in our case, Ultimate Chicken Horse was a game that uh came out of a game jam originally. So we kind of fell into this one game that we were starting. Uh and throughout the process, we'd have to make the decision, "Okay, we're working on this. Do we want to start another project or do we do we just full steam ahead?" Um and we've still been working on on Ultimate Chicken Horse. Like I said, it came out March 2016 on Steam. Uh we're still on it and we're still adding stuff to it. And while we're going to start prototyping new stuff hopefully soon, um

it's still been the main the well, the only money maker uh and it's been worth our time to continue it. So with these goals in mind or the idea of focusing on one project at a time, there again some pros and cons. So one of the positive things that we think that we can try to achieve high quality by focusing on one thing. We don't have to split our mind between many different things. Uh we know we can focus our design efforts and our feedback uh on this one game. And hopefully, the same way Supergiant do it, uh we're going to try and achieve really high quality in each of the games that we're working on. Um the next thing is that there's a simplified cash flow, pretty straightforward, uh less projects to spend money on. But not only simplified in terms of the sales uh and the terms of the budgets, but also in terms of if you're going to pitch to people, uh choosing which events you're going to, what kind of business development you're doing, that is very much more simplified. Uh so the decision is process is simplified as well as the actual spending. Project management is a similar thing.

Um as someone who's helping manage the project, it's a lot easier to know that all of our employees and our partners know what everyone is working on at all times because there's only one thing. It's it simplifies the process quite a lot. So we're all on the same page. We know what other people on the team need. Uh we're not going to bug someone to pull them off a project for a second because we need some help last second on this thing. Uh that simplifies it a lot. Zing. Another uh sort of interesting point, which might be debatable, but I was thinking of this one uh when we were writing this, was that I feel like we can meet the expectations better by focusing on one project. What I mean by that is uh if we were a 30-person team making three projects and spent putting 10 people on each of those teams, the expectation is that we are a 30-person double-A or triple-I or whatever you want to call it, those kind of teams, and that we're going to produce something that has that kind of quality, that kind of polish. Well, if it's actually three games made by teams of 10 people, we're probably not going to hit that bar. So I think the expectation can be kept consistent with the size if you um well, if we're

focusing on this one game. On the other hand, uh as Tony was saying, the opposite of the the many eggs in many baskets is that we only have one revenue source, right? So there's no other additional revenue streams. Everything is coming well, almost everything, as we'll see in a minute, is coming from this one game. If it fails, it fails. Uh you don't have the any additional um additional resources to to well, you're not getting any additional revenue sources. So uh we think this can be balanced up by the high quality argument, but I guess that's to be seen in the future. Um the next thing is that after a game launches, there's a lot of pressure to produce, right? So uh right when the game launches, you say, "Okay, we're on to the next thing." Well, all of a sudden you've got X amount of money and X amount of time to survive, and you have to be creative right away. Uh having projects that are dispersed more like Kitfox is doing uh gives a little bit less pressure to produce. So we that's something that can be tough for uh for the people running the company. It can be tough for the people who are forced to be creative. Like, "Hey, we need an art style right now. You have a week. Go." Uh that's not

ideal either. So uh these are our charts. They're they're a little less complicated. Um so most of our money went into, you know, Ultimate Chicken Horse, and uh most of it came in from Ultimate Chicken Horse. But just cuz it's it's a simplified thing doesn't mean we shouldn't be careful about how we spend our money. So with that, I'd like to talk about burn rates. Burn rate is how much money you spend. Uh so it's going to be how much money you spend within a given certain given amount of time, and that can be a weekly burn, a monthly burn, yearly, however you want to call it. Either way, you have to make sure that you're aware of how much money you're burning and hopefully not actually burning, but spending on useful things for game development. So there's some obvious things that your burn is going to go towards, things like um salaries, rent, uh software if you're using game engines, et cetera. There's the next level that we call um there are things that are a little bit more under the hood. So they could be uh contractors or outsourced work. That can be things like employee training, things

you probably consider, but aren't necessarily at the at the forefront of your of your mind when you're thinking of these things. Beyond that, there's the things that you really don't want to think about. Uh and often we we fail to realize how uh how important they are. Things like taxes, loan repayment, uh and royalties, and things like that. We'll see a little bit later, it's it's not ideal when at the end of your uh of your quarter or your year, you find out that you're losing 40% of your money to taxes. So uh you got to be aware when the money's coming in, of course, what you're spending it on, and what you're going to be spending it on later. So our theme of Kitfox is scrappy survival. And so we do what we can to save up enough money during release years to make up for our lean years. Um and part of this means that we pay ourselves much less than we could probably get at a bigger studio. Uh we all decided that together that we were more interested in stability than in uh cash out right now, so that we can invest in projects for longer years to

come. Um and we try to minimize the numbers of recurring payments that we're spending on as well because that also helps increase the longevity of the studio. Um so cut out all those extra subscriptions if possible. I'd rather take the team out to lunch than have a I don't know, recurring thing. But um I mean, unlike a lot of indie studios, maybe probably most, Kitfox exists because we did find an investor on day one. Um none of us had significant savings, none of us could bootstrap. Um not nobody had much leeway. Um one team member, uh me, I am supported somewhat uh by my spouse. Um but that was it. Every all all of us had rent to pay, all of us had had to find income from somewhere. So that stability of revenue that I mentioned um from diversification was very important to us, and we continue to to do that. So, the diversification approach does bite us here a little bit because burn rates are very complicated for us to to

calculate which makes some business partners nervous. So, I I I act very confident. Haha. I hope no publishers are watching this. Um but no, we we can't quite to the dollar say exactly how much we're spending on any one thing because someone's spending 40% of their time sort of on this project, I'm sort of 5% on this project, um etc. And we also try to avoid loans where possible um because the more we lean on them now, the more we'll pay later. But we obviously didn't have a choice early on. Um so, because stability is more important to us and continues to be, some loans are worth the peace of mind even if it means in the long run we're going to lose money. So, early on um like this is like a couple years ago now, payroll was so dominant uh a cost that nothing nothing really came close at all. Um but then I mean a side effect of shipping things um that when they sell okay, you start having to pay those loans back.

And pay royalties that you promised. So, the the last year hurt a little bit more um but that was because we were more successful. And remember that cost chart that I showed you per game? This is how much we spent per game, right? Totally totally sensible. Except that I have no idea how to turn that into actual spend because a lot of those costs are across multiple projects. Um like I uh there's often some back of the napkin things I can do about rent was sort of 60% on this project and sort of not. Um but at the end of the day, I kind of know what we spend per the year, but it's very hard for me to calculate specific burn rates per project. So, the Clever Endeavour story is a little bit different at least in the way that it started. So, uh the first thing was that we did start pretty much completely unpaid for a year. Uh there was a Kickstarter in there, but the Kickstarter raised about as much as much enough money to pay us um

I don't know. Let's say well below minimum wage for about a month um out of the year. So, not huge in terms of in terms of salaries. But uh but at that point actually I sort of counter to what Tony was saying was two of the three of the partners who started the company were living at home. Uh we didn't have any expenses. We don't have any kids didn't have any kids. No cars, etc. So, uh it was a lot cheaper and we were able to do that for for about a year. Um after that there was investment and so on and we'll talk more about that in a little bit. But uh on our side we have a slightly higher burn rate. Um we're around 30 to 35 USD. Sorry, it's really tiny here. Um per month. And uh so, this has been partially due to the game's success. We've been able to um to increase salaries. Um and so, salaries have been have been good. We're trying to increase employee salaries and keep them competitive, of course. Um but one of the interesting things that we have have admitted to or are going to be uh accepting doing is uh

partner salaries that are variable. So, we understand that if game's doing well, then the salaries can go up. Uh of course, the employees you're not going to tell them, "Hey, you're earning less this year than you did last year." That doesn't work. But the partners are very aware of the fact that if the next thing doesn't take off, that is we're accepting the fact that we might be taking significantly lower salaries from, you know, one year to the next. Um so, most of the burn comes from salary and that's the same thing as we've seen across many studios uh including the two of ours. Um And lastly, uh this is just a a point that I figured I'd fit into the slide cuz it it just seems to make sense. Um I really want to say not to ignore your own pay. It sounds almost like the opposite of us not paying ourselves for the first year. Um but what I mean by that is that I've seen a lot of people in the indie dev world, especially in the startup world in general, who will spend two years of their lives working 60 hours a week not paying themselves uh and and they don't realize that that's not sustainable, but you really need to

pay yourself a certain amount or or be able to sustain a kind of lifestyle uh where you're going to be earning enough money to survive and not working 60 hours a week every week. So, um I just wanted to make sure to say that we should pay ourselves. I mean, I think even if you if you can afford, let's say you do go two years without paying yourself, um you should be mentally tracking what would that burn rate have been because if you go around I've seen this happen. If you go around saying, "Oh, you know, I'm a 1,000% ROI or whatever." Because you didn't pay your salary, like that's not actually something usable going forward, right? Yeah, the break-even point when you spend no money is not very high, right? But Um so, this is a breakdown of our um 2016-17 fiscal year in terms of what we spent. Uh and so, you see that giant big green beast at the bottom uh which is taxes. So, I'm putting that in the spend. This is I guess just money out in general. Uh that was somewhat of a surprise, but of course, it's a mixed sort of blessing

and a curse because if the taxes are high, it probably means the revenue's high. So, that year we had done well and we're paying more taxes, but again, have to keep in mind that that's a number that you have to pay. Uh the next thing was there was some royalty uh repayment. That's loans and royalties that you see in blue. That was paid back to investors. And then the rest of it is payroll. So, if we ignore the big taxes part, you can see a big chunk of of that majority that uh the the remaining chunk is payroll. So, we also looked at some other studios in Montreal and we asked them what percent of their what percent of their monthly burn was payroll. Now, there is a caveat here. We're not entirely sure if they were including things like loan repayments in their burn. So, these numbers might be a little skewed. even. Not sure. Um but across the board you can see that we're, you know, the minimum's around 55-ish percent up to 90% payroll. So, obviously that is a big chunk of everyone's spending.

So, there are different companies that have different ways of of spending money and in this case we want to talk about how companies reinvest in their employees. So, um one of the things that some companies do, like Kitfox, is slow and steady raises and they want to try to basically slowly keep that up and and keep their employees happy by keeping those those raises coming. Um there's another company in Montreal called Spearhead Games which we got permission to talk about here. They do a sort of profit sharing. So, once the game has made its money back uh and that means the let's say the game cost however much money, once it makes that back, anything beyond that uh profit sort of net profit is split uh 10% of that is split among employees. It doesn't matter uh seniority doesn't matter salary doesn't matter any of that. If you worked on the game, you get a cut of that. Um there are some other ideas that we've thrown out here. So, one of the things is game performance leading to bonuses. The game's doing well, you can give it

out in bonuses without necessarily increasing salaries because like we said before, those are hard to bring back down. So, you just give bonuses instead if the game is doing well. you're considering something like that. Yeah, and this is something we've considered um as well. Another idea is um to designate some sort of source of revenue as bonus money. So, uh one idea for that was let's say you're going on sale for you know, Steam had recently the lunar lunar what was it called? Lunar New Year sale. Um and so, you could say, "Okay, anything above our baseline that we make during that sale, that will go as bonus money to employees and partners." Um also, if you're living in a region that happens to have tax credits. Like Montreal. You could then designate that money as employee reinvestment money. Whatever it is that helps you kind of separate it emotionally from the rest of your income will probably help you see it as employee money. Yeah. So, uh we're all decently good at spending money. Um that's that's not the hard part. But uh how do we make money? Our money comes from lots of different places, right? Um so, yeah, we're we're

maximally diversified, but again, most of our money doesn't actually come from sales or it didn't for the first million. Um because we can't handle bootstrapping, we had to go out hunting for other sources of cash. Our first game, a Shattered Planet there, um did did not make back its initial investment for like a year, right? So, how did we survive? Um well, there's lots of different places you can get money from. Um I don't think I've technically done every single one of those, but almost all of them. Um and it's not really much of our of an exaggeration. So, here are the major ones in chronological order. I can I can leave that up. I see a few phones are taking pictures. Um but yeah, you should definitely investigate each and every one of those um if you're looking for another few thousand to put in your pocket there. Um so, first we had Execution Labs. Um they were our very first believers. They invested about 85K USD um and about 9 months later we started running out of money.

Um and so, we panicked a little bit and we applied to lots of different places actually and uh a lot of them paid out. So, we had technically we have venture capital. Um in in reality, it was actually kind of through a government weird program, but there are startup programs in lots of different places like places you wouldn't expect. So, you might actually want to ask your your local uh officials about any kind of entrepreneurial thing cuz everyone wants to be the next San Francisco or whatever. Um but we also ran a Kickstarter. Sorry. Sorry, San Francisco. Um So, Kickstarter also gave us a little bit which was great. Uh we also did a very small contract with Cartoon Network during this time. Um but around that time we oops, nope. We also started doing some work for hire. Um something I I mentioned on Monday was that Moon Hunters initial sales were not great and I I was worried that they would be zero. So, in preparation for that, I actually set up a contract for work for hire. Um, and although that didn't end up really going

anywhere, it was still helpful for us to keep going and surviving um through to help Moon Hunters get uh nourished. And I'm calling it loans here on the Canada Media Fund. Although it sounds like a grant organization, it's actually a loan organization. So, it is a very favorable loan. Um, but theoretically we could have also gotten that kind of loan from a bank or something like that um at much worse terms. Um, but that is also a source that we could have could have looked at. Um, so our sales are mostly from Steam. Our our sales are are very Steam focused, but consoles aren't doing bad either. Um, we got almost nothing from mobile. Um, and that was even back in 2014. So, I imagine it would be worse now. We are focused on premium games and I do think that in an ideal world we would do more direct sales uh by kitfoxgames.com. There's a really great uh blog article recently from Jason Rohrer about um how he's doing really well selling his games on his website in 2018. So, that's definitely worth checking out because Steam does add value, I think, and they

earn their 30% but um being able to get my own 30% would also be nice. So, here we go again. Remember this simple clean chart? Well, those sales are only half the equation. Um, so in reality, although everyone only asks about sales, everyone only talks about sales, um in reality the survival of a studio like Kit Fox is only possible through having lots of different sources of revenue and being able to put aside my pride for a little bit and be willing to pay some interest in a few years. We still have years without as much income as other years. We're still a little bit spiky because that's how premium game launches work. Um, but unless we're willing to transition into games as a service, which I mean I don't know, it could happen. Um, but this seems kind of unavoidable for now, but we're we're making the best of it that we can. So, from Clever Endeavour Side, um Ultimate Chicken Horse, like we said, has been the only real revenue source um

except for a small investment which we got before the game launched. Um, so we're going to talk about that in a second. Um, the first million dollars and uh and overall uh game sales, of course, have been the major source of revenue for us. So, uh if we look at overall, this is going to be the all-time revenue sources and then I'll show you one with the just the first um million. So, we see PC sales PC sales is really high. Um, console sales are there, but we've only been out on console for about 2 3 months. So, that hopefully that red piece will start getting bigger. Um, and there was a small investment that you see there as well as uh along with the Kickstarter. So, on the PC sales side, uh most of our income comes from Steam. About 91% of our uh around 91% of it is from Steam. Uh the next highest contributor is going to be Humble Bundle, which included two Humble Bundles as well as just being on the Humble Store itself, which I believe is on this part. Um, so our PC console focused so far, uh

that's what Ultimate Chicken Horse has been launched on and we sort of plan to stay that way, but uh we're not really sure. Right now, we haven't had any interest in mobile because none of the people on the team are really mobile gamers. Um, but obviously we're not going to close any doors. So, we'll see what happens. Um, we're not Yeah, actually let's let's not get into that. I had a note about mobile, but yeah. Um, so the other thing I wanted to note is uh we're not on a lot of the small stores. So, we have the Humble Store because they helped us set up a cool four-pack deal uh and we're on Steam, but we're not on a bunch of little stores because we take the contracts that we sign very um we we're we scrutinize them quite closely and we've seen a lot of really really really really awful contracts and I think the amount of money and time we would spend just sorting that out is probably more than the sum of all that we would make on all of the small stores. So, we're going to leave that out for now. Um, if we look at the first uh million this is again a little bit simpler than

uh than what Kit Fox Games has, but you can see the investment is a small chunk and the rest of it is simply game sales. So, again, like with the uh burn rates, we talked to some different Montreal studios about how much money or where their first million came from. And we had a pretty wide variety of of revenue sources in this first million. So, uh the first three that you see on the top are just sales. Um, the next one, the purple and the blue, uh is 75% Kickstarter and 25% sales. And then there's one on the bottom that's a mix of uh work for hire, government funding, um and I think there's something else in there. Um, and then the last one, interestingly, was all from a publisher. So, this was an advance on sales uh that they made a first million on that and I don't know how much they might have made after that, but point is the revenue sources obviously can be quite different in the first million dollars that you're making or in the first hundred thousand dollars that you're making. So, I mean obviously this this probably isn't a

representative sample of the entire indie community, but I think it's interesting that in a city as indie healthy as Montreal, you still see that only about half of the companies um who are still around it it looks like who answered my email. We're we're initially uh bootstrapped apparently because they didn't get any money from anywhere but sales. Yeah. So, the next thing I want to talk about is projections. I think you should do projections. Um So, we we talk a lot about the cash flow, the money that's coming in and the yeah, cash flow in terms of revenue sources also in terms of burn rate, so how much is going out. So, we try to look at the runway that we have, which is basically how much time we have to survive based on the money that we make. It's fairly simple. It's the revenue minus the burn. And this way you'll be able to see how many years or months you can survive uh with your current in your current situation. There's a few things we want to point out about this before we get too deep

into it. So, the first one is to know your limit. Obviously, you can't project accurately 5 years down the line. So, if you're spending hours calculating pennies 5 years down the line, that's probably silly because we can't do that. Um The next thing is to always add contingency and to estimate high. So, every time I make budgets for anything, I always make them quite a bit higher than uh than I expect. And I can tell you from experience, you'll be happier when you're a thousand dollars under budget as opposed to a hundred dollars over budget. So, the accuracy might be less, but you'll be happier if you didn't go over the budget even by a bit. Uh also it's nice to find you have extra money based on the budget that you've made. Um, the next point is somewhat obvious. Um, every situation must be considered, but I want to point out the way in which we look at at every single situation or try to think of every situation is uh to look at it from So, my perspective is the business marketing PR perspective, but also try to think of it as okay, well, if I'm the lead artist, maybe there's going to be

software I need, maybe there's going to be uh things that are going to come up, maybe we're going to want to hire people. What does this company do? They must have had to consider what was happening when they did this promotion or this or this or this. So, really trying to think of everything from your perspective, but also from the perspective of other people in your milieu uh will help you to to get a good a good handle on how much money you're going to be spending and how much money you're going to be earning. Yeah, so I find money really scary. Um I come from humble origins and the idea of the number of dollars that we spend per month is literally terrifying. Um, and it can be really emotional at first. Um, but I also very much believe in projections and we do a very basic calculation every 6 months or so. Um, it is it is definitely completely worth it. So, here's some example numbers. They're they're a little bit fudged, but um it gives an idea of how we calculate. So, as a small team, um our variance from month to month can

be very high because although salary is the the majority of our spend, um we still, you know, when PAX comes in and blows our budget by an extra ten thousand dollars, that's a lot. That's like, you know, half of our usual burn. So, um between travel costs like in 2016, our month-to-month costs varied by up to 50%. So, we couldn't just take a random month and then multiply it by 12. That absolutely wouldn't work. We have to actually see what the average is and what the variance is, both. Um, so 15% is what I've heard tossed around as like an average contingency plan or in the budget for projects. Um, but even last year, like in our fourth year of existing, Kit Fox still had a variance from month to month of 34%, um which is still high, but maybe it'll slow down a little bit over time. Um, so if we hire two more people this year, which is the plan, um that does increase the monthly burn by a certain amount uh per month, right? And then you multiply that by 12 and you have an idea of what you might be spending um in 2018. And then if I

see how much money we have left in the bank and pessimistically add how much we'll get this year, um again, very very rounded numbers, um but you get the idea, um and divide how much we spend per month, um it looks kind of like this. So, it's like um we kind of have enough for about a year and in 6 months I can calculate that again and see if that's actually true. Um, and I all I know this is a little bit crazy. Uh actual business people are probably like, what are you doing, Tanya? But I I do actually put in our burn as if it was at its highest, like continuously, and also what if suddenly Steam crashed tomorrow and didn't give us any money or there was a legal problem. I don't know, but I still am seeing in the very worst case, can we survive 6 months? Yes or no? Because I feel like we absolutely have to. And if if that ever becomes a no, we're not really sure if we're going to survive for 6 months, then I'm suddenly no longer a game designer. I am now business developer full-time. And I don't like that, so I try to avoid it. And this is how, yeah.

Um so, yeah, we check in on that that's that every 6 months. And because we're spending conservatively, we can also have a moment where the whole team takes the Intimacy Day and they they guess how much will we sell before we launch. Now, of course, nobody has an idea. Nobody knows how much their game is going to sell before they launch. And anyone who tells you otherwise is lying. But um having your employees actually go through the mental exercise of how many would I think it would it sell is interesting because it is kind of like a cross-disciplinary learning moment because people don't even realize what assumptions they're making, what expectations they have until they put them on paper and look at what other people's expectations are. It can be really wild. Um so, this is the kind of thing that I do with the team. I tell them, "These are some example sales. These are not actual sales. These are my guestimates based on by the way, Steam reviews like times 12 at a certain point in time. I don't have any secret source for sales numbers. I'm sorry. I actually think that multiplying Steam reviews is a better source for this kind of thing

than Steam Spy. Steam Spy is wonderful and amazing, but I don't use them for sales estimates at all because of bundles and stuff. So, anyway, I give the team this kind of thing, like here's some comparable games and their sales over time. So, what do you think it'll sell in a month compared to these things? Of course, the scary thing is that employees stop here. They don't really need to know the rest of it. They don't need to know the the financials. I mean, if they want to, I don't mind. I'm a transparent kind of business owner, but most people are stressed out like I am when they see lots of zeros and and things everywhere going out of their bank account. Um so, for them, all they need to do is say, "Oh, I think it'll be about 5,000 in 3 months." That sounds reasonable. Of course, in real life, sales are very rarely in the middle. And that's a whole other lecture for a whole other time. But I generally I like to sense are my employees feeling very pessimistic about the sales coming up? Are they feeling optimistic? What do they think it will perform like and why? And that is an interesting

thing. You'll get a different conversation based on whether you're talking to an artist or a programmer or what games they play or if they're in the genre, that kind of thing. Or just a pessimistic person. Yes. Yes. I have those, too. So, yeah, we do lots of pessimistic things. And we're very conservative. So, I go back to this kind of projection or this sales idea and actually calculate how much I need to make before I spend on a game. So, I know burn I I made a lot a big fuss about how my burn is very hard to calculate, but I still want to know a general like idea. In a in a general way, am I going to spend 100,000 on this game? Am I spending 400,000 on this game? Am I spending a million on this game? And I actually calculate all of that and I see how much I feel like I would need to sell at a minimum. These are basically all of my numbers that I use. This is as deep as I go. I'm sorry. Um but it generally works for me that I can see whether I'm I have a realistic expectation. Is it is it realistically

possible for this game to sell the number of copies that I need? Um usually the answer is maybe. Um but that is still a better answer than literally no, I cannot find a game on Steam that is like this at all that has sold anything like this. That is a scary reality that was actually true for Boyfriend Dungeon until Dream Daddy came out. Oh my god, that was the best day. Um and projections are really hard without historical data. Unfortunately, in the first couple of years of Kitfox, it was much much harder than it is now. The more data you get from your own games, the better you'll get at your own projections, obviously. But it's like I mentioned before, it is dangerous to assume your game will perform in the middle cuz almost no games do. We've been really lucky that way. We've been very middle-classy release-y developer. But usually you'll sell either very poorly or very well, unfortunately. But yeah, good luck with that. I'm I'm very uplifting.

I'm I am an optimist. This is probably why I hate money. Anyway, so, assuming that we've met our long-term goal of survival, now we reach this existential moment in Kitfox's history. I think we're actually going to look back at 2018 in the future because we have money projected to be coming in. How can we best meet these other goals? Do we have other goals? We need to think as a company now that we are surviving. What is our third goal? Should we give ourselves better raises? Should we hire more people? We've actually talked about maybe moving to Japan would be a fine trade-off. Like we don't really know. I mostly just want to keep designing cool games. So, I guess wish us luck, but in the meantime, Clever Endeavor does a little bit more than we do on the projection side. Also, we're going to try and make sure that she stays in Montreal. Yeah, so we have a little bit more of a complicated system that we use at Clever Endeavor. I should mention I didn't put this in the slides, but you're talking about make the employees making projections and we actually did that three Well, we were just three partners at the time. We made projections before

our game launched and we got very wide range like I I think it was like 10,000 units to like 400,000 units was the range Yeah, that was the most pessimistic and the least pessim- or the most optimistic and only three people. So, you can imagine. Anywho, so yeah, so we're a little bit more in-depth. Part of that is because a couple of us kind of like playing with Google Sheets and and formulas and things. And part of it is cuz well, we think there are some upsides and we'll discuss the upsides and the downsides after I go through this. So, we have this big complicated document that we update monthly or whenever we need to make an adjustment. It's not that complicated, but it'll look complicated, but I'll try to explain. Um so, this is the the main tab of the the projections document. And you can download this. I actually made a template that people can download and I'll show you the the link to download that throughout the the slides and at the end. Um so, this this thing is going to help

us consider many different scenarios and play out different scenarios in our minds and see how long we have to survive. So, just breaking this down a little bit. Um so, we see there's one section with cash on hand. That's whatever money you have, bank accounts, if you have investments or anything like that. Um the next section is going to be receivables. So, that's going to be money that you're expecting to that's coming in from Steam, let's say that you haven't received yet or whatever money that's coming from a deal in the future. And then you've got all the stuff that you have to spend in general. And sorry, when I say projections document, it's not just projections, it's all the cash in and all the cash out and then this sort of runway calculation. So, this this other part is expenses which are broken down based on monthly or annual expenses or per project expenses or simply one-time expenses. So, something like audio you'll have to pay per project, whereas something like accounting fees, let's say maybe that's monthly or yearly. So, I allow for breaking that those down into the different categories. And and then when you're doing your

your actual projections, you can see the highlighted part here is how many months ahead do you want to calculate and how many projects you think you're going to make. So, you say, "Okay, 36 months, we're going to make two new projects." So, that'll pull the per project costs and that'll that'll put that in well, that'll put that in the calculations and it'll include the monthly costs based on how many months. But look at all those tabs. There's a lot of tabs. So, each tab is a separate chunk and I try to make it simpler by having these tabs. The idea being that each tab can be it can be one one chunk. So, salaries for example is one tab. But the the power of this was that we have a list of employees and how much were being paid. These aren't actual numbers, these are just made-up numbers. But there's also there's So, you can see the employee and how much they're getting paid. There's also government contributions. So, in in Canada and Quebec, there's a certain amount that you remit to the government for taxes. I presume that in the US it's there are similar things. So, it allows you to calculate by whatever government contributions, so you can find out how

much your company's actually paying as opposed to just the gross salary. Um the other thing is you can put potential raises. So, you're saying, "Okay, well, what if we gave everybody a raise of this much? What would that do to our bottom line?" Um the other thing is you can put potential employees. So, you're thinking, "Okay, well, what if we hire two employees and we give a raise to one employee? How is that going to affect it?" And all that gets fed back into the main sheet which gives us our our final output which is, "Okay, you have 14 months to survive." or whatever. Um so, the game projections are done in interesting way that was done by by one of my colleagues, Alex. And we've sort of argued about it and fixed it throughout throughout the process. The page looks a little like this. So, the way it works is we say if the game is already out, we know how much we've earned 1 month. Most games do this sort of, you know, curve down. And so, we assume that our game's going to do the same. And what we do there is that we can

choose if we want a fast decay rate, so it means it's going to go down very quickly or a slower decay rate if we think the game's doing well. The nice thing with this is that we can actually check back after each month and say, "Okay, how are we doing compared to what we're calling the medium estimate or the slow estimate?" You can also flip this and just make it immediate. So, it decays immediately, you stop making money forever. That's the super pessimistic thing you were talking about. Except that except that it's interesting to me that we both had a better year two in our major game than we had a year one, right? Yes. And that's why So, actually, there's a couple things in the slide that I'm I guess I have a couple minutes. We'll go into a bit of detail. Uh so there are also percent bumps that you can do. So you can say, "Okay, well we know summer sale is happening at this point. We expect we're going to make 200% what we usually make." So then you put that in and that will just bump bump it and bring it back down to the same decay that it was using before. Um but I believe this is Okay, yeah. So it is somewhat complicated looking, but it does allow us to think of actual scenarios. So we

will think of a scenario that's like I said before, hiring two people or giving one person a raise, or starting a new project, we're going to Gamescom and GDC and PAX. How does that affect us? And another thing which I didn't mention here is that there's also for future game projection, so future game sales, we don't do this decay thing because it's about as useful to pick a random number and decay from there as it is to just have an overall But there is a sheet on that spreadsheet that gives you a breakdown of you set how much money is going to a publisher, how much money is going to an investor, how much money is going to the platforms that are taking their cut. And then you can see how many copies of games you'd have to sell at what price to be able to make a certain amount of money. So there's just this big table and you can kind of find out like, "Oh, if we're selling our game at $40, then we only have to sell half as many." And things like that. Um you can grab this cash flow document thing at cleverendeavorgames.com/cashflow or I wrote a Gamasutra article about

this that was just sort of a really short blurb and it links to this website as well. It'll also be on the last slide. Yeah, it'll be on the question slide as well. And as Tanya was saying, it's kind of hard to know how how your sales are going to be in the future, which makes which makes this an interesting endeavor, which is you can see our launch was the first little tiny blip, which is somewhat rare. When you look at most games, the launch is obviously higher and they scale down. Ours launched really tiny, then our first summer sale was big and then our next winter sale was even bigger. And somehow our winter sale after the game was almost two years old was better than our winter sale after the game was one year old with the same discount. So there's a lot of things I mean at that point the game was probably more popular, more people had wish listed it and so on. But the point is that it's not always it's not standard across the board for sure. And it's always good to be pessimistic because you never know if your second year winter sale for some reason is going to do better than the first one or

significantly worse. So there are some pros and cons to this. So one of the pros is that you can see where you can save money. When I say pros and cons to this, I mean going in-depth about this. And that is like I said, you flip one employee on or off and you can see how much how much money extra money you're going to spend or save. The other thing is you can understand your sort of short-term decisions. So if we go to PAX this year, how much is that actually going to cost us in terms of months of survival? You can also think about longer-term strategy. So that was again with employees or starting several projects at once or going into a new office space. On the other hand, it takes time and there is certainly a strong argument to be made for maybe you should spend your time making better games and they're going to sell however they sell. So that's definitely an argument that is that can be valid. The other thing is that we're never actually sure. Right, this isn't a super reliable thing. Like we said before, you can't predict five years into the future. Um

but we like doing it at Clever Endeavor. Tanya doesn't like doing it quite as much, but they still do some amount. And I think that across the board regardless you should be thinking about this and you should be doing these projections. The level of detail is of course up to you. So how do we wrap this all up? So oh, that's incorrect. So regardless of how you feel, I do think that it is important as a business owner to think about what strategies you're going to have. And even beyond strategy, I actually think that it's it's maybe most important to keep your eyes open and stay reactive to what opportunities come available because that is definitely the most common thing across both of our strategies is that we were opportunistic in some way. We we had an amazing opportunity and we had to keep we had to do that, whether it was me jumping on Moon Hunters or it was doubling down on the success of Ultimate Chicken Horse, you you really have to respond when you get new information. So I mean different

studios obviously have different methods, different goals, different constraints. There's no one right way to run your company. Um and I I think anyone who claims otherwise is trying to sell you something, but as a business owner to other potential business owners, treat your employees well, maybe allow them to unionize and think carefully about why you're doing what you're doing. Calculate your costs, your risks, your consequences and you'll have a strategy that works for you and for your team to achieve your goals. Thank you. So five minutes? Perfect. All right, so we have time for one or two questions. There are microphones there and there, but if you leave I'm not hurt at all. So please, any questions? Yeah? Um this is mostly for Tanya. Do you find it hard to resist kind of or do you feel pressure to keep investing in your

existing games and like do the games as a service thing and how do you sort of resist that and make sure you're putting resources into your new game? Um for Moon Hunters, we did end up reinvesting quite a bit. We were porting it to multiple platforms and even when it wasn't selling very well, we had decided to make a free DLC for six months after that. And part of that was that we didn't want to leave it in a state that we weren't proud of it. Um so that was kind of an emotional like, "Can we survive making this thing? Yes, then we probably should because otherwise we'll just have this project that we're always kind of embarrassed by, whereas now I don't I don't feel that way. I mean and I'm not going to go around saying it's the perfect game, but I'm not embarrassed by it. And and that was more important to me. I think it is a question of personality whether you enjoy live ops or hate it. Um I personally enjoy live ops. My my first few jobs were on live MMOs actually. I was hired onto Age of Conan right as it launched and it was the best job ever.

Um so there I don't have a good answer for you except that some reinvestment is probably wise and obviously for us porting to different platforms has definitely been helpful for us and making those business relationships. Every time we've released on a new console, our Steam sales have boosted. So like for us, we've decided that simultaneous launch although it's common wisdom is not best for us because our community is fractured and it's all over the place and by having it have new new cycles and and press cycles and influencer cycles, we can actually make our primary platform Steam sell better. Yeah, sure. I'll also add that it is an opportunity thing, right? Like we are continuing this because the game's doing well. If it wasn't if it tanked, then we would say, "Well, forget it. We're on to the next thing." Not to say a game that is doing badly can't be sort of revived, but it is like we talked about really an opportunity thing. Let's go on this side this time. Uh well, first of all, thank you for your talk. My name is Nacho like the Mexican food. Anyhow, I have a quick question regarding ecosystems. For instance,

I I am from Mendoza, Argentina, right? And one of the issues we have over there is that our ecosystem doesn't provide any sort of help. So the only solution that we have is bootstrapping. Uh how would you say I mean it's bootstrapping for real the only option we got down there for instance? I mean there's Kickstarter. There's I mean every country has the idea of loans, but it depends how favorable they will be and who they will lend to obviously. Yeah, there's also the idea of you know, starting working part-time or working full-time while working on your project part-time a lot of people do to get started. And then sometimes that again, it's a different ecosystem, but in our ecosystem that if you have something that you can show, that's a lot more likely to get some publisher attention or someone who can put some money into it. So maybe the project starts part-time or you know, remote or something and then you're at a point where you might be able to more favorably get a loan or Like one of the

most common ways to survive for a studio that we almost never talk about is work for hire, which is taking some or all of your employees and working on someone else's game and they pay you to do it. Um and that gives you experience, it gives you contacts and it can level your team up a bit. The problem is getting those contracts when you haven't made a single game together before is very difficult because like me, I wouldn't contract you out I wouldn't give you money to do work for hire until you've made a game. So before making your first game, one thing that we didn't mention on any of our slides is the fact that we can't account for the number of studios that have closed. Um like that Montreal studios thing, like those are six studios who still exist. Um Yes. as opposed to all the studios that probably almost existed and then didn't. So short answer is that yes, it is absolutely much harder in some studios some cities and some locations and Montreal is maybe an ideal place in a lot of ways. Um but if you can't bootstrap, definitely find money wherever you can and think about what services you can provide to

other people and businesses. Well, thank you very much. Thank you. Welcome. The short Thanks for the talk, guys. It was really cool. I was I had some questions about early investment and the projection stuff was really neat, but when you were meeting early on with investors, what kind of breakdown were they looking for? How much of that was on the creative side? How much of that was, "Hey, can we see your projections? Do they feel accurate to us?" Um so for us, it was really it was a standard program actually for both the VC-ish thing and the Execution Labs incubator thing. They were both a situation where they had a certain amount of money um, set aside for these kinds of profiles and then I just had to convince them I was that profile. Um, so like the more information I could get about what they wanted to hear like the best. So it's kind of random a little bit. And in lot in those cases, I mean they assumed that it's all going to be payroll. Like they know that you're not going to spend all this money on a Lamborghini or whatever. Um, so it really wasn't about like tell me exactly where this dollar is going. It was more like how much are you paying yourself? How many people do

you have or how long? And they can do it in their own head to figure out like, oh if you pay yourself minimum wage this will last you this long. If you pay yourself normal salary it will last you this long. Um, and that's kind of been fine. I mean even for fairly late stage um, like publisher money, it was still kind of what is your burn rate was the number one question um, rather than how much are you spending on audio or whatever. Yeah, and I should say like so we when we're pitching investors so we ended up actually having a a fortunate situation where I had a family friend investor and then a bunch of family sort of jumped on. Um, and so we got favorable terms but still we still did the full pitch thing and for us the big thing was uh, comparing other games that are in that are out already and comparing their sales and saying okay if we do badly uh, then sorry there are some that did really really badly and we think this is why. There are some that did fairly badly and you'll make your money back and this is what will happen if we do fairly badly. And this is the upshot. So it's kind of like show the probable situation

uh, and then sell the dream and they understand that that's the dream but that's what they're investing in, right? Uh, so there's the burn rate and then there's what you think you're going to make and if you have comparisons, I mean Boyfriend Dungeon will be harder because it's you know, there's not as much comparison but in our case it was a lot easier to find games that were like, well here's seven games that are similar that have all done this well. Oh, I absolutely told a venture capitalist at some point that we were intending to grow to 100 people and like that was a total lie but thank you. It was put to good use. Um, yeah so we are past time so thank you very much. We will take more questions over here. Thank you. Yep.