Tadhg Kelly writes: “Games Are A Difficult Investment Proposition, But Crowdfunding Could Change That”
Typically this is because of the conservatism of European investors. A speaker at an event like Games Invest might sound a high note of ambition (such as following blue-ocean strategies or lean-startup thinking), but in practise they tend to be terrified of risk.
They’ve overcome this problem in the film industry using mezzanine and convertible-debt rather than venture financing. This involves essentially loaning money to the producer in exchange for the intellectual property rights, which are then bought back through earn-out clauses. Some people have thought to apply the same model to games, but it rarely works well.
Tadhg outlines what he thinks is a better model (looking at games IP in terms of the scope of a franchise) and the possibilities of crowdfunding but he falls short in actually delivering the answer.
My hope is that game investors everywhere realise that, through crowdfunding, their fears of risk can be mitigated.
Then, finally, we might see a funding structure for games that actually makes sense.
With crowd-funding, the risk is greatly reduced. What is the point of an investor if not to take a risk?