Trends in mobile game funding

[Music] i actually thought about this this panel and i actually mentioned it to chris because i thought rather than have myself talk to you about numbers which can get pretty boring and stayed it's better to hear from guys like johan and stuart and michael who've been incredibly active in canada and have raised money have sold companies um and not just in in specific areas but but also the nice thing is johan's based in montreal so he can offer us some interesting views from a montreal perspective um stewart from from really well multiple places in canada and and also the experience of of selling a studio to the likes of electronic arts uh where michael was actually convinced a lot of people to do that deal so guys don't be depressed

here uh last year i gave three strangers in a powerpoint slideshow five million dollars so it can happen in in vancouver as well in vancouver yeah so so i'm going to take just a couple of minutes um i think a lot of you guys know these know these individuals uh probably on a personal level as well but but johan is uh is is one of the founders of uh cloud kate uh that that released a title called shop heroes which is performing quite well in the charts um and has a long history of being in in the industry from thq uh that he could also offer a little bit of uh background on um and well yeah let me know if i missed something there okay good um what i'm gonna do and then i'll probably make a little bit of an intro is can you offer i think i think would be great for um some of the audience members your experience of the transition from um being at a large you know kind of corporate

company such as thq and then having the opportunity to set up your own studio and then going through that fundraising process what were some of the what were some of the challenges of being a montreal-based studio and and raising money from a large asian player right so just very very quickly coming coming from uh a sort of environment where big studios rule which is which is a little bit of the the setup in montreal where you have players like ubisoft and about thirty thirty three hundred people uh in within within a block um warner is probably about five six hundred people um it's just big big studios all together but what's really cool about that is it's the pedigree that they've actually shaped and we saw it firsthand when we set up thq montreal we were able to recruit really really senior

top end um without a tremendous paycheck we don't pay a lot um how much but you got government so so uh in in pei they pay a lot uh so uh also the cool part about that is that you you can create a very compelling uh business proposal to uh to to the likes of uh and when we started thq for example we went through montreal was part of the entire restructuring of the company it was a little sad we went from 16 studios to eight studios and uh montreal just kept absorbing the work we hired in 18 months about 200 people it's very few places in the world we can do that and so coming into an environment like like ubisoft you have to ask yourself what you want to do and what you want to try to do and what the cool thing at ubisoft

that time was that they were trying to make indie games uh they have several initiatives inside of ubisoft and a lot of all of them are announced and really cool projects but how do you make an indie game inside a massive corporation like ubisoft and we actually tried to do the similar stuff at a thq we were working on a free-to-play game and i mean at conception we had 30 people i'm like it's not yeah it wasn't really matched up properly so uh so to go back to the opportunity of creating a small small studio in montreal you have all the talent you have the uh the capacity to you even at the very basis you're able to put together a team that can help you create the you know the first pitch that can help you create the vertical slice uh and help you create all the common little tools that you need uh to go and to go and fundraise and it's very easy because you can just show the previous games they worked on so with in the case of cloudcade uh the actual first round was

raised on the back of uh of my partner's previous games we literally showed the catalog and say this is what we did and in this particular games it's flash based games on congregate and that became the sort of stepping stone uh on showing what we could do so so so would you say it was your track record it was yourself absolutely it was it was it was obviously the other senior guys in your team and as you're tracking sure absolutely so so there's no you talked about risk in in in your in your previous slides and uh i think we checked off every single box there at the very least they would get a team that they could could be a knack or hire could be we could go and be pawned off anywhere if we failed now we kind of knew or had a recipe for for for this game and i'll credit uh credit my partner with that like he he is the creator of of shop heroes and just just seeing what we were able to do like we actually we spent five months just

making the game fun like no kpis no analytics nothing like we broke every rule in like how to design a free-to-play game but that's because we knew just based on that experience and i often say that shop heroes was was built up to up to launch in september 2015 on on experience and intuition and today we're refining it with metrics and kpis great stuart you have a couple of things that you can allude to so not only not only do you have did you have the privilege of selling bite to it wasn't trying to right yeah i think i think you're more excited about hanging out with michael yeah but um but also sure but but but actually but actually what i think would be really interesting is also talking about ice jam which is obviously your your your new studio um and and obviously raising that from vcs so so you know you have two things you

can allude to and maybe what might be really interesting for the audience is a a a pei based you know studio what were the challenges in selling that or what what was attractive enough for for ea to acquire you and then having having had that experience did that enable you because you have the track record to then uh go out and raise money from vcs okay sure in pei there's no option but to be a small studio so um per capita though i mean we're probably the we have the most game developers in the world probably but um we we developed a studio can i knock you on that yeah everything here is a fact i'm going to say so [Laughter] kind of like the leaf campaign for brexit yeah oh i had to put that in yeah that's right uh so

we founded the studio to do as much as we could make great entertainment and at the time like so i'm just gonna go back just a quick overview in 2004 um the video game business was really i was told everyone told me was impossible to get into except for maybe mobile because all those games are crap and we thought well you know if there's only crap that we we can't do too much worse than that and we started specializing in mobile making original games in 2004 we ended up doing a lot of uh work for hire and so how did you find people that actually knew anything about mobile we hired them from the uk so the the uk was going through a recession and losing their games funding that's right at the same time and we told them that they could live by the beach and buy a house for 70 000 pounds and they're like i'm in and have a lot of lobster have a lot of lobster and we got a 50 labor rebate on every one of those guys that's that's amazing 50 labor rebate right yeah and it was a straight rebate so i mean i'm not natively from pi i'm from just outside of toronto but i moved the business there to de-risk original ip we

wanted to make our own stuff and and the only way you could do that without without really any vc and mobile at that point at that stage yeah sure yeah was was because back then no canadian vcs were investing at all no that's right and there was no asian publisher financing no no there was no yeah there was it just didn't exist so um fast forward we did a um uh some products that you know were hits we did the simpsons tapped out and um i don't know how much money it's made now but a lot and yeah uh and so we we sold we might say about 300 million 300 million okay but that's not that is another fact right there then so so uh and we also prior to that though we did uh nba jam for ea and that was um roi point of view was a really great title for them as well so uh it was natural that um uh that that transaction happened but it

happened really on the back of our original game which was trade nations right right i remember yeah and trade nations uh was loved and adored by the the people who owned the by gracie films who owned the simpsons license uh and wanted to have a game made so it was really at the end of the day was an original game that motivated everything so after my um extensive non-compete i um started to compete and i um put the band back together long enough yeah that's right they stayed long enough everyone everyone was happy and so i pulled 22 guys back out of ea and uh we're 22. yeah okay they're they're mine first [Laughter] so so okay so you waited okay gotcha so i waited the appropriate amount of time and um uh legally and uh but we had we had this this vision to make great mobile

entertainment based on what we call the idea of connected reality so it's not just we want to make a game or we want to make clash of clans plus you know hamsters we want to make a whole new vertical in games which is games driven by uh what we call playable data so so i'm just i'm just a little conscious of the time and i do want to get a couple of people to answer questions out there so i'm just going to like fast forward to the race well yes yeah if you don't if you wouldn't mind please so we we raised money from a vc non-game specialist vc who had never made a games investment before um based on the track record of the team and on the fact that it's not just a game they're investing in but it's what you know uh but they see it as a has value beyond the gaming sector certainly in in a big data visualization and you know there's there's room for other kinds of exits so that's how we were able to do that right so it was really based upon team

track record um the fact that you'd already sold to ea so a lot of the points that yeah yeah you're right about all those points yeah um michael i think i think you can probably allude to a number of transactions you've been involved in actually if i could first thing by hands in the audience how many people here are in free to play mobile so keep your hands up for a sec if you are how many want to stay in free to play mobile okay so you like what you're doing you enjoy what you're doing and you want to keep doing it shum had a bit of a depressing start here a little earlier just want to let you know that really i want you to take money from ncsoft take as much as you can i want you to take that money and make life-changing wealth so you can go do what you want to do and and make creative and interesting games or other things and kind of change the world so have hope there are people who want to give you cash you just have to

come to us with the right goal story pitch everything else it is possible it's not it's not all hopeless but it is a bloody red ocean and free to play mobile right now and think about this a venture guy an institutional investor and i did 10 or 12 years of this before i wanted to do personal investing then i ended up the number two m a guy for electronic arts then on my own again with on my own and then with ncsoft look if you come to us and say i want to make the next clash royale with marvel or dc or something like that we're going to tune out right creative something new a venture guy is measured on his returns we have to compete institutional investors have to compete with and outperform the s p 500 the stock market do i give you a million dollars two million dollars five million dollars or do i stick it in apple or netflix or something else that's a little more liquid you have to have a pitch a story a rationale for us to give you that cash such that we're going to take the risk

on you lock our cash up for a number of years and hopefully get it back out that is a pretty high bar i'm gonna ask then in the presentation were there any of the criteria that i selected are there cert would you would you agree with with i mean because pretty much johan and stewart sort of agreed to largely to some extent would you would you sort of agree or disagree i agree with everything in your presentation and if i want you all to have money that may mean you have to adjust what you're doing if you want to stay in free to play mobile and you want to compete with the big boys if you want to target something that's top 25 top 50 top 100 you better be able to raise that much money required to do that when shum and i started doing this when i started interacting with stu 500 000 uh development deals million dollar deals were okay i don't see anything now without a two or three year development cycle five to seven million dollars of funding required just for the development some companies i know are saving 20 to

40 million dollars for the first year of marketing in ua to get a title up there if the numbers work they're just going to pour it all in and lock up their position on the charts it is a tough world to be in and if you're a smaller private company if you need to raise 20 or 30 or 40 million dollars based on what you have today we're basically going to own your company right so if you want to compete directly in this world you better be prepared to kind of pull out the big guns to your development cycle think about the live ops afterwards all the different complications around making a sustaining title that lasts four five six seven years if you don't want to do that or if you don't think you're you're able through the structure of your company to do that think about where else we're investing an early stage investor focuses on what they call like a holy trinity or at least a number of them do management market technology great management teams teams that can pivot on a dime teams that can adjust with the changing dynamics of a market market a leader in a small but rapidly growing market because when the market

is discovered to be a real market the big guys will come in and those small leaders who are able to kind of defend their position they will sustain when the large guys come in and that's a good position to be in and then lastly technology competition differentiation barriers to entry some unfair competitive advantage that you will have to block out everyone else from coming in this is what we're looking for from an early stage where we're investing you know five hundred thousand dollars a million dollars two million five million dollars a defensible position a blue ocean not a red ocean keep that in mind um you know out here today i still see a lot of free to play mobile kind of 20 30 man studios an idea that will take two three four million dollars it's really not that interesting i only saw a few people actually packing samsung gears around here and doing the tests which i thought was pretty interesting when i was at e3 a little back there were a whole lot more demos in that way more on the high and immersive vr side of things as well think about where the future is and it may or may not be vr many of us do not know whether vr

adoption will happen in any reasonable period of time or not but think about the world at large competitive dynamics and how and why we would give you cash no thanks for that i i i mean this is vancouver so i'm curious because you have invested in a studio in vancouver uh through nc soft what did you i mean you said you know basically uh uh um you know really three guys three dollars powerpoint slideshow but now but where are those three that's my point you you know who those guys were you know could you please maybe elaborate on how many of you are from vancouver so some of you may know these folks they came out of ea they went to form a studio called exploding barrel games kabam bought exploding barrel turned it into their vancouver mobile studio the teams behind fast and the furious 6 and marvel contests of champions we all know for kabam marvel contest champions has been their big success in recent times this team similar to stuart

did their job at some point in time they fulfilled their commitments they left they may have had a non-compete or not for some period of time time passes they fulfill their obligations and let's say they want to go back into the games business they went back in and we gave them 5 million dollars to reform a studio about 25 folks to go out there and do interesting things they had credibility they'd done it before in free to play mobile with licensed ip that was interesting and were able to do something with that and they had um good credentials good reputations and so we gave them the cash site on scene now a lesson learned from that that was literally a year and a couple of months ago we invested them on a self-publishing model 5 million bucks go make your game go launch it yourself what do we all know today not enough money not at all so they've partnered and they've partnered with one of our korean compatriots nexon to publish their first game because they need larger marketing

reserves to go out there and go launch the game and then spend money on you and other things again quality of team first and foremost the talent we're looking at the talent can you make something amazing creative different that will ultimately make us money no thanks i'm a little conscious of time so i'm gonna i'm gonna ask johan what are some things you would offer uh the audience uh other than obviously what we've discussed um in terms of how to impress upon uh whether it's vc or you know institutional investors and uh you know from your experience i i think uh one of the key a really big key thing is to be super humble and and very uh very clean in in what you do i i've seen a lot of pitches a lot of uh a lot of really i call it the extrapolations of extrapolations of of

numbers for example that once you start backing it out makes no sense and you end up losing credibility with stuff like that the other thing is is obviously there's a certain amount of salesmanship and showmanship when when you make when you make a pitch but at the end of the day these guys will do their due diligence they will dig in and they will find out what what's actually inside that box and at that point it and it comes back to all the same things that we talked about before like it's what you're able to do and what you're actually able to deliver so so one thing that i actually missed it was missing from your slides is execution that's really good you can have all those things but if you're not able to actually pull the trigger on other these things and at high speed because it moves really fast i i actually read about the exploding barrel deal i was extremely surprised that that ncsoft would let them do the next on the other

i thought that was really cool like literally like huh all right like that that's a you know a massive dynamic shift if i look at something like that it would have ever happened with somebody like ubisoft like where it's very closed and very uh um i guess in a way narrow-minded so uh i i think uh i think that that would be one of one of the really big things uh to to take away is i always have that humble uh humble view of things and when you're able to when you do get the opportunity to to really pitch something to have all those things all the ducks in a row be be really prepared for for all the tricky questions and that you'll get from uh from from guys like michael for example which is very appreciated when it's when it's spot on uh and i i think uh and you could probably agree like you guys can cut through the cut through the pretty quick that's uh that's my i've seen i've seen that side of the story as well so yeah just just be clean

thanks stuart some uh food for thought parting words um when you're when you're shopping an idea you need to listen i think or the game developers need to listen if your baby gets called ugly um you can learn from that michael again i'll just leave it with there is hope it's not it's not dark it's just it's not easy to raise money and it shouldn't be because if if you can do something interesting with it you will make life-changing wealth you will change the world and honestly we'd all be happy to let you do that if if you can so oh sorry johan no i actually one thing uh ties back into talking about about canada and vancouver and and montreal and pei one thing that is really cool is how the government's

supporting the development of what we do uh with tax credits in pei montreal vancouver it allows us to take a tremendous amount of risk and i think i mentioned this in the parking gamer article a while back i think it makes for a really interesting investing environment like you literally have the government coming in and taking on a huge chunk of risk when uh when you're creating stuff so we really have no excuse not to innovate and not create like we don't need to do another match three like like we can make the game we want to make and i think that's really cool you got canadian media fund as well all i mean these tools are are unreal and i've never seen it anywhere else not to that extent so so that's really if you've done your homework properly you shouldn't it shouldn't be any games out there that uh that are ugly in my opinion does that make sense so so just to summarize if you're humble if you're clean

if you sprinkle a little bit of showmanship and if you listen then there is hope to life-changing wealth but the ocean is red the free-to-play mobile ocean is red come on mobile vr immersive something else look we just actually invested in a mobile vr ad network why of all things would i invest in a mobile vr ad network so back in 2010 i was at ea and the lights on so hopefully i don't get sued for this um ea in june 2010 was all in on premium iphone games and ipad they believed this was the future you could charge 15 16 bucks per game we all know where the world went and went free to play mobile so in late 2010 ea was frankly out of position in terms of business strategy they did not have a lot of free to play mobile development design studios and they're like go out there and call them up and go find them go to

new toy go to backflip dragonvale go to supercell go to morels bring them in sure i brought them in i tried to you know what it was the infrastructure players it was the chat tap joys the chart boost and others who were able to show me who could change their mindset from a designer standpoint to adjust their minds for free to play mobile design who could adjust their mindset for free to play monetization the infrastructure players led me to who some of the good studios would be in fact it was tap joy one of the tap joy founders who said you know we've got this awesome new game coming out called trade nations that we're integrating into it's made by a company called z2 live i call it z2 live they answer some questions in a way i like some questions the way i don't understand which led to the fact that actually these guys did trade nations with z2 and so that's why things went this way with with simpsons tapped out but they showed me the path i don't know what's going to work in mobile vr content right now

but i know that this could be a large market and i'm going to have some people ideally myself and others track where this is going to go use kind of the the kind of the longer value chain the entire derivative to find out where interesting opportunities right may be you know back when free to play pc was really starting off in a bigger way with riot games league of legends and wargaming world of tanks i know the payment providers the prepaid card guys who's spending the most on the prepaid cards who's doing digital payments are there any other folks will that lead to high-res with smite moba or other things like that will that lead to the next you know leading league of legends or world of tanks type of company so that's why i invest in this company there is there are interesting new markets to go into you're not just constrained to free-to-play mobile you're not constrained to console or pc there's a whole wide world of opportunities available um i think we got time for actually a question so are there any questions from the audience

wow i think i think we did a good job guys great uh well if that's that then i think uh yeah thank you very much guys appreciate it [Music] you