Raising Capital in 2023: State & Evolution of Sources of Sources of Financing for Developers.

foreign [Music] [Applause] let's get some things started so I want to bring up the first speaker first session is Raising capital in 2023 States and evolution of sources of financing for developers so Patty's going to lead our fireside chat Patsy Toledo from four players and then also I hope I'm not butchering this Naya and the CEO of sandlow as well as Christian segerstralis CEO of Super Evil megacorp you please turn on on stage

[Applause] um thank you very much for being here we're gonna start uh with a very simple please introduce yourself although we already know your companies but there is a lot of history behind it so if you could tell a little bit about you um can you guys hear me yeah all right um hi everyone uh pleasure to meet you all here uh we're sunlo the way we started the company both of us the founders worked in game development ourselves in product and Engineering so I have seen firsthand some of the challenges and opportunities of building games and then eventually moved out of all things into fintech and about two years ago we saw the opportunity we thought that there should be a company that builds Financial products and services specifically for game and app developers so we started Sandlot so excited to be

here my name is Christian segastronic I'm the CEO of super eagle Mega Corp I've been building computer games companies for 21 years now go way back here pretty much what Chris doing is uh text messages right now I'm sorry I'm sorry I didn't your height is your highness um so I'd be building computer companies for a long time Superman Corp the company I run today it's focused on AAA cross-platform games we came from mobile first AAA and we believe it is an opportunity to build incredible experiences for all players on all platforms as but I'm also relatively prolific I guess seed investor and a student more than anything else on the industry and where it's heading and this is a super interesting year for lots of different reasons and I really believe some amazing things will be built this year and I'm very excited to be studying the market together with you guys uh and nobody cares who I am but I'm a

little later I'm the marketing director for for players and the head of content from skilled media so if you saw any speaker and you didn't like you can complain to me later that's my fault and and um I am a big fan of of what San Luis is doing and when I was talking to Alia I convinced her that I know what I'm talking about so she allowed me to be the moderator here so big pleasure to be so I wanted to start with an overview a little bit of last year and how we're gonna do so last year we saw that there is a prediction that it's going to be a decline on on revenue for after the pandemic that games might be a little bit in trouble Chris talked about that in the intro as well um how do you see that happening on when it comes to work for investment and how the market would react

on that I can start um I think very simplistically I think people will always play games however you put it um there there has been growth in number of players that are playing there's been a number of companies that have been popping up the monetization has come down and that I think is obviously linked with the general economic environment and how much on average people spend um but I think it will bounce back but we are in a in a downturn for sure that being said again coming back to the basics people will play uh people will play people will keep building I think not to jump ahead but I think the way uh the way capital is being allocated is going to change from within the companies themselves and then from the investment perspective it will also change in terms of who invests and what kind of metrics teams are being looked at I'm not going to go further than that but again I think we've gone through

those Cycles multiple times already uh eventually it does come back so I think it's uh tough times ahead potentially but it's a it's a reset a little bit as well and I think it's potentially a higher pressure on the product and the quality of the product itself yeah I think he's well said I agree with that I think there's been a an unusually fast amount of growth in the industry over the last several years and as a result I think we've gotten used to as an industry this idea that we have to be growing by double digits every year and that just there's going to be a new platform and a new technology which will again power another very fast sort of growth cycle and I think right now I mean it's a it's a cliche but I mean investors at the end of the day and I sort of right at the end of the Whiplash effect in the industry and they have the uh behavioral patterns of lemmings or sheep depending on what you what you prefer I suppose where the meanwhile there is a clear narrative and a clear everybody thinks

that everybody thinks that this thing is going to be valuable so hence all the companies will be able to raise money so I better get in early these are really makes sense as a mindset if you know that you're in a flock of lemmings even if even if you happen to be a really really the dominant strategy still to follow the other language because you know that that's what everybody's going to be so hence this particular as an investor your number one goal is to make sure that company gets more accountable when it needs it so if you know that you're in a quote-unquote hot company or a hot sector yes they will be able to get more Capital when they need it even if they make a mistake down the line so as a result it makes sense to follow now that we're in a state where the narrative is much less clear in the industry I was at an event six months ago a uh sort of seed stage game VC event where they're prevailing conversation was like is gaming over like can you invest profitably at an early stage game company right now given how expensive it is to distribute given how Organics are down given how production costs are up all of these things that everybody in this room sort of knows to you know up

to here and the prevailing wisdom right now is you know what maybe not so as a result you have like an 80 decline in BC I mean early stage game BC investment which I think was published by what's the Convoy Ventures maybe a couple of days back put out that number I don't know if it's exactly right so don't quote by anybody but you do have this massive apprehension of hey can I invest at an early stage because the worry is one year from now and the company needs more money who will be there to invest in them because if nobody if everybody's important about this space that said as long as I always said that people will play games in fact in downturns one of the things I'm excited about is that there is a lot of talent available right now building some new stuff we haven't innovated as a game industry for another while was the last time you played a game that was truly different than some of the other games that you played for a long time and I think there's an opportunity to do that right now so capital is important I would just say that the what happens in these down Cycles in the industry I've been through a couple is that you just need to be more creative this is a sometimes hand-to-hand combat you think about are

there other sources maybe VCS aren't the natural funders of the a creative industry in every case always right maybe the right thing is to do to actually team up with folks that do have money to deploy whether they be Publishers for example other forms of strategic partners that also need access to players and want to deploy capital or even forms like more Innovative forms of debt funding like what satello is building for example it's a really interesting different form of funding for the market so it's in some ways when we are forced to rethink the market and rethink our situation there's a lot of opportunity for creativity on product and Company building and on how we finance things but I uh just to add to this I think General is an industry oftentimes we think about Venture Capital as a common source to put in perspective they're relatively few VC back companies in the world period um so thinking about the publishing I think obviously is one of the common um sources of financing for the gaming industry specifically I think we're a

little bit of self-promotion I suppose but where we're coming from and some other companies that are doing similar things is that there's enough data um on the from a from a third-party publishing as well as the market research as well as the proprietary company data where the decision making around financing becomes much easier and more much more objective and I think this is where the opportunities really are for the gaming companies themselves um why again from a PC perspective why dilute yourself from the publishing perspective why give up that Independence and ownership of the product um so I think that that's the exciting part and I think the in terms of to Christian point the amount of capital has not shrunk there's however cliche it may sound there's a lot of money in the world there has been a lot of capital has been accumulated now it's how that capital is going to be deployed and who it's going to go to and I think there's um companies that have the data that have not just not only the team and team

is obviously important but have the some level of traction and the the metrics going back to the product quality it's going to be I don't want to say easy but it's going to be easier to obtain capital and it does not necessarily have to come from the sources that we have known for for years as the industry what I love is that you already answered our second question which is great like that's what happens when you talk too much about something it goes the conversation goes directly so I wanted to jump to the third one which is a lot when we're talking about investment and the companies are applying for investment a lot of the discussion is always teams first the most important thing is what the team that you have the the back Trace that they have where they worked which company they were in and for a lot of companies that's not always the easiest thing to do because not all the time you had the the luck of working super sour Rovio or being part of these

big companies so what in your case what are the parameters and requirements that you look when you're seeing a company for investment what what does it make a company really attractive as an investment when you were talking in this situation yeah I think that's where a Christian and I can complement each other very well I think it depends on the stage and I would say so ourselves you know putting ourselves in the shoes of I think some of the folks here we we started a company two years ago we were a pre-seed Stage Company no traction just backgrounds and who who was being assessed it was the founders it was the two of us and it's our ability to execute and believe what our investors that we can do it um and I think it's the same thing with any industry whether you're fintech or a gaming company at the early stages it's the team and that's what matters um and I think it's more of a question maybe to to somebody or a Christian who's done investment as an

Institutional Investor as an agile investor I think when it comes to the point of uh again there's some some product in the gaming industry in particular there's a soft launch at the very least you already have the product you already have the traction so I think at this point it becomes the product speaks for itself and [Music] um you know in our experience as the company and my personal experience perhaps in companies that may have fantastic teams on paper but the execution is not exactly there and the metrics are not there so and then it doesn't just doesn't work so I think the more mature the product and the more demonstrable the the traction uh the last team become the lasting matters and when I say about the broad attraction you know we very much come from the free-to-play world a little bit of subscriptions um and uh you know in our case we're looking at the health of the economy of the game and you know is it and it's kind of across the the four buckets of uh metrics it's you know acquisition

retention engagement monetization and I think the the importance of each of those buckets varies depending on the stage of the company depending on the environment we're operating in But to answer your question I think the uh the more mature the product I I think the less uh the less important the team becomes it's still very important absolutely important but you as a as a capital provider you're not betting the future of your investment on the team as much as an early stages so actually interesting would you say that when you guys consider your finances do you actually look at the team at that point in time or is it like like what percentage of that decision does it make it's a small percentage it's a single single digit percentage in the in the total scoring sorry if we were to say 100 of scoring is allocated looking across different metrics of the company then the team is going to be in the single percentage and that's super interesting because most VCS that I have experienced talking throughout the year it's usually the other way around it's

all about the teams a lot of the companies are they are financed even before they have a product just by the team so the this aspect where the products talking and data is stalking gives a I think a fairer chance for companies to to get investment would you would you say so well I mean I certainly think that what someone is doing for sure is democratizing access to investment in that way because it is true that the venture capital is also quite an incredible relationship to the business I mean it's a it's a terrible example but it's true I mean audio used to work together I playfish a long time ago only it was absolutely amazing a total Superstar play for yourself when she comes back you know sometime later as they say I'm starting my company it's a really easy decision for me to say hey I wanted to back that company because I know just to share I'm smart and work ethic and everything else that goes into that and I I know that it's going to be a you know it's going to be at least a good shot but it's very very difficult truthfully as a venture capital I tried

to be a full-time investor 10 years ago and I I got really I got anxiety out of having to say no to too many people because it's just it's terrible I can try to assess in one hour somebody's pitching to you their live stream I want to build this thing and I really sympathize with people wanting to build things I want to be building things my whole life but it's exciting I don't want to be that person that shoots It Down based on really superficial arguments when really what you're trying to assess as an investor is is this group of people do they have the a the smarts and the talent to make the product but also do they have the resilience for when things go wrong can they back to that earlier point I made about raising more Capital can they go and convince someone else to give them 10 million or whatever it is two years down the line where they're going to need it and it's you sit there and you listen to like really passionate slides and things and it's really tricky if you haven't worked with a person before if you don't have a pre-existing relationship or you know somebody who knows somebody it's really difficult to assess and that's why like the Silicon Valley correctly I think accused of being incredibly like a relationship driven and to some degree

like discriminatory if you don't know somebody who knows somebody it's very very difficult to get into that world whereas on the other hand through providers like Samo I think there's a much more democratized much more open access to potential financing sources so from that point of view I think it's exactly right um I want to address a little bit the elephant in the room which is all those layoffs that is happening like I my question I put in 2022 but pretty much happened now like Google did and other companies dismissing a lot of people do you guys believe that it's gonna be like a happen with Nokia a few years ago where all these talents are gonna go out and build amazing companies doing great things or is it gonna influence the gaming Market in the investment Market at all I mean I guess I could I'm finished so I feel like The Narrative of Nokia collapsed and mobile gaming grew in Finland is probably not exactly right

most of the folks there's some people did get into Mobile gaming that way but it's not the predominant route most people who were building those Mobile gaming companies had already started building them before anyway another Handler there I do think that downturns like this are amazing opportunity to remix time and it is like and again I say with the greatest amount of humidity to obviously the people experiencing hardship and and and uh going through difficult times but the truth is that a lot of I think I was an industry arguably we've been stuck in a bit of a rut in that there's not a whole lot of innovation going on but has not been a whole lot of innovation going on people just looked at what's worked before let's make that and tweak it a little bit and when everything is going up and to the right the companies are growing and paying great salaries and just growing left right and center it's very difficult to argue against that narrative you'd be crazy not to take that high paying job offer at company X to go do more of the same thing whereas in this kind of situation where you know when your life gets turned upside down when you're no

longer you know you have a job you're forced to rethink what you're doing I think there's an incredible culture of innovation and opportunity there to go and make something new and different and frankly what players deserve to play as opposed to what the source current sources of big bosses are the big companies are wanting to make so I am hoping of course it's a wish for previous this will be done let's see how it turns out but I'm hoping that with a mix of interesting new sources of capital A it's a talent that are out there with this of course new sense of Technologies like AI perhaps even some of the Innovations brought To Us by three and other things perhaps they will be entirely new take some games if you take some communities and we take some ways to entertain ourselves and I think the industry needs that right now we need that far more than we need the next first person shooter in my opinion yeah I'll just quickly add to this I think to the point about the the tools um I you know personal opinion super excited about the the opportunities that generated AI for example presents right like I think the levels of productivity

just unprecedented and uh I think the the times of you know Freedom talents that's one but it it has the potential to be compounded by extra tools that did not exist before and and it's truly amazing to see how how much of immediate application that already has for you know asset creation of different types whether it's Sound audio or or graphics and like we've seen companies where it's it's changed the workflows significantly it changed the composition of the teams it changed their how people work and what kind of quality of work that they produce so I think in addition to having more Talent There's an opportunity to become more efficient but not just efficient but also being creative and I think that creativity creativity that's that's such an important aspect of the industry of the gaming industry like no other and that creativity can come in many different flavors so I'm personally excited about the you know every crisis I think has oftentimes presents the

opportunity and those that wanted to create the companies now is the time however hard it may seem but then in addition to that they're unprecedented set of solutions that did not exist before so I think it's a wonderful time to build and it's exciting I think we yeah I think we explored it on but I wanted to just to have one thing as we're starting the track what would be a message that you guys would like people to leave this Fireside shaft with hat all right well I was done firstly out of anybody who says Doom and Gloom about games don't know what they're talking about to be honest people play games more and more people play games but I would say this that as company Builders I think now is a really good time to really think how you're going to be different and also how you make it through the times that safe engine Capital investors are not out there because really Mystic sometimes that literally just comes down to if you have like 10 units of work or capital or

people or whatever it is I would invest nine and a half well nine out of those into purely making an incredible product and then the last one I would invest in finding Partners who also want to build that with you be the Strategic Partners or brand Partners or other folks who want to somehow collaborate with you that aren't necessarily Venture folks and then the 11th person because every game company does you know thin persons work with like you know rather 11 persons work with with uh with the 10 people whatever I would talk to Alia to see if you guys can collaborate somehow because that is Jesus providing a really interesting source um I think I think it's the product and it's the product for the right people um and it's starting it's it's nothing nothing new but it's focusing on who this is for and I think now in the times that uas would know it has changed it's it's not going back to what it was before I think it's even more important to understand who the who the game is going to be for and then why why they would even want to play it and I think from there the the pieces will come about more natural in terms of what's the genre what's the uh what's the

narrative where the distribution channel should be um so I think the user Focus becomes even more important because acquisition is is more difficult um and I think uh same so I would say product definitely is the focus and who this product is for and I think I just you know to to to build up on what Christians said I think it's um you know a founding journey is is it's a fun jury but it's not always easy so and it's tough times but it's a great time to do this so just never never giving up especially in those times and I think it's the time to it's time to build and it's there the strongest the most Innovative Will Survive thank you very much thank you guys [Applause]

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