Greg Banas - How investors make their decisions: a tale of Bullshit Artists and Serious Devs

foreign [Music] thanks for coming and slice him to be working so I believe I can start so shortly about myself I've been Venture Capital Investments for the last 13 years and my first job in adventure Capital was a fund called satus that was the first investor in the blueberry team but that was way different Bluebird team much less organized and doing polish version of Guitar Hero music Master shop and rather than Horrors that we know them of today and that's my cat he's called tamilan so starting from the basics are

investment decisions always start no because they are made by humans and humans make errors so if you're sometimes wondering why some investment has been done maybe it wasn't just not this much investment and you need to always remember there's not a single group of investors it's not like a club you can have different people uh with different approach different knowledge and different expectations so you cannot judge investor based on one particle uh example you need to actually think that everyone is probably different in a way so as I mentioned people different different uh with their knowledge their expectation and the time they can spend on analyzing your project so just to give you like a basic idea not everyone is a investor in all their

time some people just invest the Surplus that they have been doing from their daily jobs uh those people who I call occasional investors so they can be for example your friends your uncle someone wealthy that you met or for example owner of the commercial center as it happened to be investors in Game Dev Studios later on if the company goes public you can have individuals investing in uh on the stock exchange but you have also different group the group I myself belong to so people who actually do it as their daily job so from them you can have different expectations you can expect them to understand a little bit more of your business but they also have more time to analyze whatever you're showing to them and very important thing uh If someone becomes the shareholder of

the company they can be called investors by many people but you need to actually understand that there are two ways of joining the company either is a capital increase when you the company Issues new shares and that cash goes towards the budget of the company so for example if you're actually planning to fundraise for the game that's the way to go but there's also possibility of someone purchasing their stocks that already exist and that money goes to the seller of the stocks not to the company itself and I would like to also mention a couple of popular misconceptions nfts web 3-0 crypto all the blockchain stuff I've heard numbers of times about investor wanting that about Candice you know trying to implement that because investors want it I can only tell you shortly no we don't

and that's not the typical day of investor either sometimes it's just the people you know who have their own companies that want to invest that Surplus for the kids to have better life and not work that much so if you're actually thinking that's how it looks like no it's a hard work and also if you see people from venture capital or people investing we're not Bankers we don't wear suits we actually look weird you know when we sometimes meet the bankers or later stage funds that's how it looks more and if you're presenting your project it doesn't need to be perfect actually if you're showing that okay I'm missing this and these things you sound much more believable I've seen a lot of projects which trying to be perfect but if you scratch a little bit then you see that it's not as great

and this thing some of you may heard about it and some people may really think that there are some investors who are writing on this kind of portals no no one seriously is considering that but sometimes you can read it for fun and see funny names or funny stories most of them made up completely so and another misconception is when I'm being approached by companies and they're saying Okay so we want to do this game but we have an option for this and this and this budget but what does it say to me for me what I can see it's uh you don't know what you're doing because why should I decide if the budget should be X or Y if you're saying for example that 250k is enough for the game why do you want 1 million

and you don't have to push for the biggest budget there is so you can actually actually just focus on the size that makes sense your perspective the bigger is not always better and how to separate facts from fiction so one thing Investments are interconnected with the risk if there is no risk there is no reward but what you want to achieve and what you actually need to give to the uh the other side the investors is that the reward from investing into your company is the reward is bigger than the risk itself and what is a success in case of Game Dev it's selling the game in the great numbers if you make money on the game that's the success but what is not a success

that's not a success if you get investment and suddenly your start spending the money in huge numbers you know like moving from a tiny office then to the biggest and um the most expensive office there is or spending a lot of cash on events or cars in the car park and so on so that's not the way to go if you get investment that's just the beginning of the way it's not the goal and taking advantage of fools that happens and that happened a lot in uh in the last few years well that's not something you should be proud of so yes you can get money from different kind of people you can push your way into it but should you do it not necessarily so one thing that's important to remember following is failing is not wrong you can fail that's as I said

investing is connected with risk but fraud is not the same so if you may be attempted to [ __ ] your way into getting an investment there's a couple of things that you need to consider so there's probably there can be a moment in time when people realize that you well you were not honest and maybe the things that you promised are not to be delivered maybe the prospect you show them had little to do with the reality or you didn't have the team that was able to deliver the quality of the game or scope of the game so when the people will realize they will not be happy and you risk also running out of fuel because usually the projects very rarely complete in the first initial budget so

you're gonna see probably like a couple of next financing rounds that you need to raise to complete your project or get your company working as it should be but if you like in the beginning or you are not honest you can route out of the fuel and not be able to fundraise and the thing in the last case if you actually committed a crime or bullshitting your way into investment it may be considered a crime so basically better not to do it and last but not least well if you [ __ ] it cheated how can you wake up on the day after day and look yourself in the mirror so being honest and fundraising in an honest way is also a good thing so how decision making process works

well it's a little bit different on different stages so if you're fundraising for a new studio then the team is the most important factor because there's not necessarily a lot more to show there's not a prototype yet there are no wish lists no communities no uh discussions on your Discord so the team and what they have done in the past is the most analyzed element second thing is the reasonability of what you're showing so what's the scope of the project how big it is is it doable if you're pitching to me that you're doing a Diablo 3 in a team of 20 people and that's not really gonna happen another things to consider is the stage potential if you're doing a very Niche kind of game and the numbers the statistical numbers of them uh are

particular then you're telling me that you're gonna sell a million copies where the other games were selling in tens of thousands that's not necessarily a way how I'm gonna understand it what I'm gonna see is probably you have no idea uh what you're planning to do very important thing if the team has a leader because you need to consider that that in the beginning everything may be going smoothly but there will be a crisis there will be a problem so you need to actually see if it's you or someone in your team that's a leader other things like budget cap table or who are your current uh investors or shareholders in the later stage of the investment there are more things to show there's prototype or the vertical slice that you can demonstrate and show that you're able to deliver

there's a sales potential that can be better verified if you for example start gaining followers or people who want to actually play the game so the later stage the more you can show the more you can show in a way that your game is being recognized that the game is gaining traction the better for you and it's also Worth to remember that there are some people who if there are your investors shareholders that they may bring and other people on board because of their reputations but there are also some people who can make it more difficult and couple of things that for example me myself as an investor see on a daily basis and far too often so in the beginning if you're living your previous employer as a group everyone is in love and it's

like we're gonna make the games together till we grow old but usually it's not gonna last forever so you have to actually put mechanism in the company itself what happens if at some point you'll have different Visions who's gonna make decisions who's going to take responsibility decisions were made good or bad and what happens if someone decides that they don't want to work with you on the same project anymore very often I see a studio speeching about their grand vision for the next four or five games when I and I know that they're almost out of money so basically we're doing a very good face to a situation that is not necessarily that great be honest about it if you're fundraising

and you need to fundraise quickly because you have cash flow problems don't pretend that everything is fine just be honest and say okay that's the situation myself I've been talking to one of the studios that was telling me that everything is great we have so many customers we're doing projects in game after game it will be released soon and after like one month I get an information that they went bankrupt because they didn't get paid and far too often blaming other people for the misfortunes of the company I hear very often than it was someone else fault the game didn't sell it was Publishers fault okay you spend too much money oh that's investors fault because they gave us too little or someone else's fault failing as I said it's not a wrong thing but at the end of the day just remember who signed that publisher who got this

investor on board who made the decisions about all the things and very often in the last years we get the creators of a Witcher symbol it almost never is being shown I've been working as a lead artist or a programmer on the game now I've been co-creator of Witcher so be honest be honest about your role if it was also a minor role it's not nothing to be ashamed of but be honest and not necessarily call yourself a creator of The Witcher because well that's just not serious and very often uh I see the studios trying to make kind of a push for the decision push for the decision very fast because they're trying to prove that they have other options so we need to do it now tomorrow without checking all the things that we

need to do so no it doesn't work it doesn't work only people who are doing the investment as their daily jobs and very often it's also shown like the grass is greener on the other side so there's the foreign publisher investor or whoever wants to give you money it's just waiting so we need a little bit for now when you need to be quick because they're already waiting so if they're waiting and they're so eager why don't you sign with them do it and showing or trying to prove that the studio has many of us well the office are gonna be different they're not all the same so if you have different offers just choose the best one it's uh if you're telling me that someone else

made an offer and I don't like the project just the same fact of you telling me that it's not gonna force me to sign faster or area or at all and on numerous times I see that it was not the Studio's fault that there was a problem with the game with the budget it was the investor who made me do it unless even some podcasts I've been listening to other people saying okay so that's investor false they were so sneaky they were so tricky they were so uh cunning that they were able to trick us but you didn't have to sign with them at the end of the day unless they're keeping you in a basement with the gun to your head you don't have to sign the deal if you don't like people don't sign the deal if you feel there's something fishy maybe it's better to wait and look

longer for a better occasion and something that's becoming quite a recent Trend that people announcing that they're doing The Witcher killer I mean which is obviously one of the most famous games from Poland that has been recognized all over the world but you don't have to compete with them just do the game that you will be the best at and you don't have to prove anyone that you're making a better game than which just make the best game that you can and how to identify an approach the right type of the investor for your project so basically if you get multiple offers just look on the people and what have then they have done in the past what kind of the companies they invested in how they've been helping them to grow how they

behave in the times when the situation was maybe not so great because that the investors and people who you get on board are gonna be with you for a long time it's not something like with a publisher they only sign for a single deal the game is published it's sold that's it it's done with the publisher but in with investor you're gonna stay there for a couple of years so choose your champion wisely and as I said look how people get involved in the lives of companies because some people will just be able to provide you with cash if that's enough for you or not it's up to you to decide but you have to be realistic about it if someone is has no track record not net no network in the game that is not able to uh connect you with the proper Publishers or help you to analyze the

publishing agreement then you have to be aware that they're not gonna suddenly become aware of it if they don't have the experience they're not gonna get that experience suddenly and couple of tips and tricks so if you are going to an event but or any occasion be prepared to pitch have a peach deck ready something that you can send immediately something that shows your game how it is supposed to be done put as many reference reference titles show your sales potential uh show your team and be ready to send it immediately not like okay you've met someone you want to discuss your company and then there's

nothing that you can send just have a PDF ready at your email all the time and as I said especially at the earlier stages but that's equally important the later one is the team so show the team and preferably what they have done together in the past if the people work on the same projects if they were able to deliver some things that or if they were able to actually live with each other and not to go crazy because people have different ways of working they're always humans so some people work in a particular way some procrastinate some early Rises so the more you can show that the team has a potential to be stable to deliver things and not just go into human nightmare in a few months into the project the better

and be reasonable in the with the ndas the pitch deck I mentioned just send it without any ndis because it just doesn't look serious uh have a deck that you can send and the NDA may happen later if there are some things that are more fragile okay that can be protected additionally but don't start with it uh and don't be an [ __ ] it may seem trivial but that was an actual reason I have ceased some negotiations if you're behaving in a way that people don't want to talk to you or spend the time with you the investors are not gonna invest if you're passive aggressive in your way of communication that can be uh the deal

breaker as well that was an actual founder who I stopped replying to emails because when I was reading them my pulse was Rising above the level I considered good so I said to myself do I want to work with this guy for another five six years the answer was simple no and don't lie lies have usually very short life be honest if you're missing someone in the team if then something is not perfect or you need some contest if you need some help improving your projects that's okay but don't lie if you have problems with something don't hide it I've seen number of times the founders trying to hide some problems but the problems will

arise and even on the process of signing the deal you can uh have this skeletons in the closet unveiled and then you wasted not only your time but the other sides too so be honest about what's the condition of your project and have a Clear Vision about what kind of games you're doing because with every game you gain some experience your team starts to get particular skills a lot of people are speaking about Hades and how successful it was and that's the the second one coming but not a lot of people realize that the previous games were just very similar and if you even look at the screenshots of Bastion the first famous game it looks very similar to Hades so be clear if you want to do particular

types of games because that's helpful You're Gonna Learn improve and iterate so every game will be better and even if your first game is not a great hit maybe the second the second or third one will be an important thing I understand that you might be tempted after leaving your current employer to make the game the best game that is in the world that you want to prove the whole world that you're the best game maker in the world but start reasonably start with the game that you can deliver the game is always better than unfinished great hit so make the game that you can make it that you can make it with a budget with the people that you have with the time that is reasonable so the scope

needs to be not the biggest not the smallest but just the way that you can deliver and then we will be the time for the game in the future and if you have hated some things at your previous place of work just don't repeat them if you sing for example talks about bonuses from the revenue from the game uh that were never actually uh mentioned again other they were never paid well don't repeat that be able to share if you're making a new studio be prepared to share with your crew The Spoils of War because for me I'm looking at the new studio it's like equipping a pirate ship if you succeed in getting that that

wealthy merchant ship and you get a lot of gold share it with your team because they risk a lot they risk the same things as you did and don't be too fast with creating an entity I guess well some people just start with the company and it's very easy to open one nowadays you open it with a couple of clicks on the internet but usually if you don't have like proper experience about it uh you're gonna make some simple errors and it was only at some extra work it doesn't speed things up it actually makes a lot of issues and as I said investment is not a success it's the beginning of the road it's like gaining fuel for the company to get to some somewhere so if you don't

treasure the fuel if you spend it in a careless way you might not get to the place you intended to and you need to realize that if you open your own company you're responsible not only of yourself but other people who trusted you trusted you you're responsible for your employees responsible for the trust that your investors put into you so you need to be aware that this is something much more than a daily job and making your own company regardless of Industry it is in it's a big responsibility it's not something that it's five o'clock and you can just shut it down and go it's gonna be with you all the time and that's something that I see very often probably like 30 percent of the project

I'm getting preached about they fail the simple math uh do the calculation of the sales potential the fees of steam of the Publishers share taxes and fees these are the things that you can actually uh Google you can actually check and do the basic math so what's the sales potential of the game you're planning to make in this particular genre compare it to other games that the released in the past and look what's reasonable sales volume that you can achieve do then the calculation with the price with this steam publisher taxes and fees and see if that is bigger than your budget because very often I see projects that pitch to me and they fail because their budget is actually bigger than the money they can make from the game and that's a thing that appeared or

appears from time to time when the market gets better so all different sorts of inter mediaries of people who are gonna tell you well I know your project is not perfect but you need to boost it up you need to tell investors some things and he may think like hmm should I do it uh and these peoples usually uh work on the basis they take a share or a percentage of the money they fundraise for you but the thing is you need to be careful if you're not get involved into bullshitting people into giving you money be honest because at the end of the day it's you that people will blame now those people who just acted as intermediaries so if you're wondering

what to answer to them if someone asks you okay you need to paint the the grass greener the answer should be simple you say well maybe not not today let's say then no I'm not gonna do it and I think I've reached all the slides that I wanted to to mention and I wanted to leave sometimes for questions so if anything gets you interested or you have any questions feel free to ask hi Greg i'm Pierre from something random and it was a very nice presentation and I have one question and one thing that I disagree with you so I'll maybe start with uh the thing that I disagree you've said that you should not settle the entity uh very soon and I have the

opposite opinion because if you already finished this process you want to go into the discussion arguments with your partners and also you will probably cover up the situation with the IP ownership which might be crucial and difficult to sort it out on later and the question the question is what's your typical pitch like is it a pitch prepared for the VC or it's the same page that is sent to the publisher and as you're if your potential Industries are aware that if they are coming to the investor not to the publisher so about entity FairPoint about the IP usually just the simplest way how to hold it is either each of the team members remains as a owner of the IP or for example uh one of

the persons or or the leader of the group actually signs the agreements and holds that IP so that's very good point to keep in mind that you need to uh remember about who produced what and who's the owner so I don't know at some point if your game is being released it will not be blocked by someone but you can do it for example on your self-employment entity for the time being and then create the entity the proper one with the proper mechanism when you're ready and all the pictures they come in loads of different ways sometimes we get the same page as the Publishers we get uh 60 slides that is far too often because we don't need for the first Glimpse to look at every character you're gonna have in the game it's not that important so well the better prepared speech for

investors is always welcome but we work with what we get hi I'm Mike I'm working with the Japanese gaming industry and I was wondering if you could tell a few words about the best ever picture you came across like what was it and why you thought that it was the best ah very good question huh I might be still waiting for that but uh best so far best so far but uh maybe what is for me from my perspective what makes the the pitch the best especially for the early stage team if the team experience is shown in a very clear way if you had people working together it would be great to for

example show it in a form of even like a simple table you know like okay who work with whom you know on which projects when they were delivered what was their experience uh onto what was were the roles in a particular project and the more I see uh people work together on same projects the happier I am so that would be for sure like a description of the best pitch that you can have uh hi thank you so much for a great presentation my name is mache and I've got two questions to you um how do you how does it work I mean investing in your case I mean uh does your Capital obtain the um shares of the company let's say limited liability company or does it work like differently that's the first question yeah so we

acquire shares or stocks depending on the type the company usually we go for stocks and uh the type company which have stocks because that makes other things easier like for example employee stock option plan which is a must have in our investments so all the team members who are in the college team should be [Music] rewarded with the thing that is most valuable in this case so the the stocks of the company so yes we obtain new shares that are created for us in the company and that is the capital increase so there's a new emission new stocks and that's how our money go into the company to produce the game are we going like for uh 51 percent of the shares like like in the beginning or it depends on like investment and like how does it look like so we always gonna be minority

shareholder but uh there's a couple of companies that become you know successful and they have been creating their cup table or the companion structure in a way so if you look at the companies that are succeeded for example creepy jar and that's probably like the way how to structure your fundraising well how you want to get your cup table looking at the particular point in time how much it needs to stay for the team to be motivated so the team shouldn't have uh too little shares because then you know you become like a employee with a couple of uh extra stocks so look at the companies you know which were successful what was their structure and you don't have to reinvent the wheel you know just look at the best cases you

can also look at the bad ones and see what not to do but learn from the ones that made it well okay and the last question from my side um at the early stage um of the investment let's say uh you are just um looking on the page deck and do you need to have like vertical Slice on the LA stage or is it just like some Cup tables um some graphs some like ideas maybe graphic like some assets and that's it or maybe like gameplay so we we don't require the Prototype or vertical slice so that because we are early stage investors so we understand that uh the work needs to start but the more you can do on your own it doesn't have to be like uh real life working uh prototype but if you were able to make even like a fake demo to show how your game is going to look like you know it's not that it's not just the concept but

you can get the feeling even if it's not playable uh that would be welcome as well because that's something that you can do even if you're having a daily job somewhere and do it after hours so it doesn't need to be uh perfect prototype but the more you can do the more you can show uh the better of course hello my question would be what is the best way to approach investors should we just send an email or is it better to book a meeting at some conference what from your perspective you know is the most successful way of approaching so for example in my case I try to be on every event that is important in the

industry so just simply coming and discussing what you're doing is uh very welcome because we're here to talk to you guys so just feel free to approach us uh if you know people who work with us and they do an intro that's also very nice but even a simple email you know that's enough too but from my perspective if I met someone in the conference and they show what they're working on but that's the most effective way because I'm here at the moment and I'm speaking to you so I have time if I just get an email and I get a lot of emails it may be less effective you know to communicate that one so feel free to just talk to us okay thanks hello uh thank you for a talk uh I have

a question uh do you make an investment like in full project or you make some like Milestones that you have like first like investment in some prototyping and then maybe you will invest more or only full project like from start to finish so in our case uh we do sometimes a number of financial rounds for the company we're happy to be the first investor on board but will help you to participate in a further financing rounds one thing that's important it's better not to fundraise the whole project at one point because if you have very little to show how it's going to look like and if you're able to deliver you don't have too many hands or too many cars on your hand in negotiations so you know fundraising for the whole project if you don't have a prototype or vertical slice or whatever

is wealth it's harder it's less effective and you get worse deals done if you divide it into parts for example that are connected with your Project's development so okay you get the first investment then you get the Prototype vertical slice and so on and you fundraise at different valuations so the money when your project you know starts to look better and better and you're able to prove that for example team is able to work together effectively and people are not spending their time uh fighting all the time but they're able to deliver Milestone after milestone in your in your production then the money becomes cheaper so it's better not to fundraise for the whole project but adjust it to the stages or the important stages of the product development and second question

do you give something more than money for the project you support them with something else some marketing or some like knowledge based or connections yeah so in our case we're industry focused investors so we all do only game that and because of that we see a lot of cases so starting from we become I believe some sort of a database of good things that work and bad things that didn't work so we're able to share from other experience what are the typical problems with your creation of your studio or uh going forward with the production maybe how to reward the team how to construct the employee stock option plan uh that's what we're able to provide but we're also talking to Publishers and

Publishers I believe maybe a little bit more open to us than to Studios because for them we're kind of like a natural partner because if you have Publishers from different country they control over if you're delivering stuff is less strict than for someone for example who is invested in your company and tries to help or tries to ensure that you're delivering what you promised uh and also from our perspective if we're speaking to Publishers uh we have a little bit different uh position because for us we gonna invest into multiple uh Game Dev Studios and if particular Publishers doesn't do his job very well on our portfolio project or the game from one of our companies I will make sure that they will never sign a deal with another company I ever

invest so for them it becomes a little less of a single time deal but more relation based so for us if someone works very well with our companies or the companies that we invested in they're gonna see The Games first because we know that they will deliver but if the publisher screws our company will make sure that will never sign with any of them again I think we are running all the time so thank you for use for your speech thank you for your attention for your time