Reality Panic

Since posting my original outline for setting up an indie game incubator, I’ve gotten a deluge of feedback (over 50 comments on the post and FB thread, along with 100+ emails, etc). It has all been a bit overwhelming to parse, but definitely encouraging! The original model I outlined had a few unique twists, but was largely inspired by existing incubation/acceleration programs out there in the tech world.

Then I met Ben.

Ben is a co-founder of Year One Labs, an early stage accelerator in Montreal, which actually had a game project within their first cohort. He’s written extensively about the meta aspects of running an accelerator, along with thoughts on how to revamp the traditional model. Going back and forth extensively with Ben has allowed me to refine some of the ideas and challenges that came out of the flood of feedback.

My thinking is now evolving beyond just the incubating aspects and really thinking bigger picture about how to unlock talent and put them in the driver’s seat with the goal to generate original/owned IP and successful new studios to grow around that talent’s new IP. It would still involve incubation and acceleration, but there wouldn’t be a cliff after a developer completes the program.

So, there are three main parts this: The Incubator, The Studio and The Commons. This super awesome diagram roughly blocks out what’s described below (click on image to see larger version):

Much like with the original proposal, things would start with the incubation side. Talent would come into the incubator and would sign a standard deal for the 6-month program: $2k/month of seed funding, basic resources (office space, wifi, computer gear, tools/licenses, etc), weekly demo nights, mentoring from industry experts and business coaching, access to business contacts, follow on deals and funding, etc.

During the incubation phase the goal (in addition to important stuff like gelling as a team, learning via the mentors, etc) really is to build and validate your project. That can mean different things for different types of games or platforms. For example, in the social space, that could mean releasing a minimum viable playable and starting to collect basic user metrics.

Based on some objective metrics/filters, after the incubation program, there are several possible outcomes:

1. Complete failure: team doesn’t gel, game sucks, no validation, etc… you pack up and go home
2. Promising but needs more baking: now you move to the Studio side…
3. Massive success!: Your stars align and your game is a success right out the gates so you spin out into your own company

(I suppose there’s a fourth scenario where you are not a complete failure, but not quite promising enough to be invited into the Studio to continue baking. But, the team wants to stick at it anyway. Hmm, I guess in such a case, you could spin off as well and give it a go.)

In the case of complete failure, there would still be options for the individuals, like choosing to join a team that is ramping up, re-entering the next incubation phase to start something new, getting a job at one of the other studios in town, etc.

In those cases where a team completes the incubation program, but are not quite ready to spin out (either because the game is simply not ready yet, or the team don’t quite have a grip (yet) on being business owners and entrepreneurs) – and the game is showing promise (in some yet to be determined objective manner), they can opt to jump to the Studio side.

Being on the Studio side would entail a modified deal that would look like:

• Same $2k/month seed funding per team member
• 70% share of revenue in your project (Studio keeps 30%)
• .5% equity share of Incubator/Studio itself (earned after recouping seed funds)
• Same resources as before (wifi, gear, space, etc)
• Ownership of IP (see below)

Aside from gaining a bit of extra time to complete a promising project, teams will still be pretty motivated to hit revenue generation quickly since seed funding of $2k/month for more than half a year is likely going to start hurting… The equity share in the Incubator/Studio itself is a way to reward teams to be an active part of the family, supporting each other, sharing knowledge with the younger cohorts in the incubation phase, etc.

Also, by having the Studio side, this is where pre-existing indies/teams that are established but haven’t quite hit it with their project (and don’t need the incubation process per se), could come directly into the Studio under the same deal. This would allow them to be a part of the collective, get some guaranteed survival funds, benefit from the mentoring/coaching and gain access to the Studio’s business connections, collective marketing muscle, funders and so on.

The outcomes of being on the Studio side could look like:

1. Complete failure: despite the extra time to bake, it just doesn’t work…  you pack up and go home (or reintegrate as noted above).
2. Massive success!: Your stars align and your game is a success so you spin out into your own company
3. Games is selling comfortably (but not massively), so just stay put in the Studio for now…

In the last option, it is reasonable that if your game is doing well and you are happy hanging out within the Studio and you like the 70% of revenue + $2k/month deal (and/or you are completely terrified at the idea of running your own fully fledged business), you could choose to simply hang out in the Studio. And, to clarify, you could hang out as long as you want (assuming you are generating at least as much revenue as you are costing the Studio to host you). Also, I could see a situation where your project in the Studio is on cruise control and you are not needed day-to-do, so you decide to jump into the next Incubation cycle to start another project (while still collecting your share of revenue from the first game).

Longer term it is reasonable to think that housing a bunch of talented developers with reasonably successful games all under one roof would be more valuable (via economies of scale, shared resources, communal vibe) than forcing each team/project out the door to fend for themselves.

In the case where you are succeeding and want to spin out, either right after the incubation phase or with some extra baking within the Studio, the project would get transferred to a new corporate entity especially formed to house your game IP. The team takes control/ownership of that new company, with a 20% share in the equity of the new company given to the Incubator/Studio (along with an ongoing share of revenue, but reduced down to 20%). [Side note, I’d say these percentages are not set in stone as I’ve yet to fully model the financial implications. Side, side note, wherever revenue sharing is mentioned, the cut for the Incubator/Studio comes AFTER Apply or FB or whoever take their share off the top.]

Ideally, the Incubator/Studio would actually maintain an extra reserve of cash as a “sidecar” fund that we could choose to double down on the especially promising projects/teams that spin out. But, perhaps that’s getting a bit ahead of ourselves ;)

The final part of the system, The Commons, would be a space where developers could come hang out, jump on free wifi, work on their own projects, mingle with incubatees or folks in the Studio, take in a mentoring session, etc, etc. This could be helpful for really green indies or students just starting out, and could also represent a more casual way to find/foster fresh talent. Stephen Johnson’s insights on the environmental aspects of innovation, and the effect of building spaces for ideas to collide, weigh heavily on my thinking here…

Regarding IP ownership, the feedback was loud and clear that owning/controlling your IP is a must. So, I will commit to making that happen. There would likely have to be some contractual language that would allow the Incubator/Studio to benefit from the sale/proceeds of the IP it helped to incubate, but regardless, the IP will always be owned by the developers and in theory they could walk away with the IP at any time (though rev share, etc, would still be in effect). I still need to discuss with the lawyers and figure out how it would all work legally, but that would be the intent.

OK, wow, that pretty much covers the new hybrid style model. Still lots to figure out. And, sigh, gets a lot more complicated to budget this, and model the potential financial outcomes due to all the different entry/exit points. Hmm…

And, the biggest question remains: If we build such an Incubator/Studio, will the talent come?

So, I’ve been noodling with the idea of setting up an incubator dedicated to games. In part it is driven by my sense that Canada’s current approach to supporting the game industry is not comprehensive enough (especially in Montreal, where the focus is on big foreign publisher-owned studios) and we need more indies – this lead me to write about the current state of indies in Canada in a Gamasutra feature article .

More importantly, there are so many talented developers that given the right nudge would leap at the chance to execute on their dream idea and dive into “indieness”. Of course, many do it without the nudge (or when their big studio shuts down), but I don’t mind providing encouragement to jump!

Incubators and accelerators are proving to be a successful model for building and validating tech/web start-ups in general. In fact, there are several hundred web/tech incubators in the USA alone, with y-combinator and TechStars being two of the more prominent ones. Yet, none of them focus on games and very few game projects have gone through those programs. In Canada, some are geared toward supporting student talent (eg, Ryerson Digital Media Zone, Concordia/Dawson Montreal Game Incubator) or are more general in nature (e.g., GrowLab in Vancouver, Year One Labs in Montreal). A commercial incubator focused on games has yet to emerge in Canada, as has been seen in the USA (eg, Joystick Labs).

My thinking is there must be a way to customize the model to create a system most conducive to the way games are made. My model would look something like this:

• Application: Simple application process focused on history of team members and proven ability to execute. Would be less about the idea itself (who am I to predict if zombies will do better than ninjas or better than cute pets, etc) and more about technical feasibility, business potential, art style, etc.
• Selection: 5 projects/teams are selected, teams would have to be at least 2 people, but no more than 5 members.
• Platform: Any platform is acceptable as long as it allows for digital distribution (ie, we couldn’t support physical/retail projects).
• Timing: All teams would start at the same time, and the program would last for 6 months.
• Funding: Each project would receive $2000 per month per member (ie, a team of 4 would get $8000 per month for 6 months for a total of $48,000).
• Resources: A shared space would be provided for all teams to work in (along with all the furniture, etc), plus free wifi, and importantly development workstations (eg, with Max, Visual Studio, Unity, etc, preloaded), backup server, etc.
• Mentorship: Every week there would be a guest mentor that would visit the incubator, lecture about some specific area (like cohesive art direction or trends in monetization models) and would get a demo from each team, giving targeted feedback on each project.
• DemoNights: Along with the mentor visits, every other week teams would demo their game to each other and take feedback, etc. Doors would be open for anyone else in the community to pop in…
• Marketing/Outreach: The incubator would pimp the hell out of the teams and their projects, applying to festivals like IGF, coordinating trips to PAX, providing guidance to build online presence, reaching out to the media, etc, etc.

Also, in addition to the mentors, the incubator itself would have a core team to provide support and coaching to the projects. Someone biz oriented, someone operations/production oriented and someone creative/design oriented. This core team of the incubator would serve the projects and do whatever it takes to ensure their success.

The goal of the program would be for teams to build and validate their ideas, and to more rapidly move onto the “next phase”. What that next phase is depends on the type of project, and what the team wants to do… could be going straight to market with an iOS game, could be seeking a publishing agreement with EA Partners, could be scoring larger-scale VC investment for a social game, could be selling the whole project/team to Zynga ;)

The main value that the incubator provides (beyond the seed funding and resources) is to fill the business gap that most teams would likely have. Assumption is that teams would be primarily made up of programmers, artists and designers. So, the incubator would surround the teams with business expertise and coaching, both in terms of starting/running a new indie studio, but more importantly in connecting with the business side of the industry, opening doors with publishers or portals or VCs (as appropriate), helping with the marketing and so on.

One possible spin on the usual incubation model (where team members co-found and incorporate a new studio on day 1 of the program and the seed funding is inserted into that new corporation), instead would be to delay the incorporation process until the end. Teams would come in, and members would be individually on contract to the incubator and be paid the $2000 directly each month. Assuming the team members don’t shoot themselves and/or bail from the program, then we spin-out the project at the end and create a new corporate entity to hold the IP (in legal terms this is often referred to as a “special purpose vehicle” or SPV). The team members take ownership of the SPV and any deals with EA or VC funds taken in are done with the SPV directly.

There are several benefits to that approach. First, it allows teams to focus on game execution from day 1 instead of shareholder/incorporation/etc papers. Next, there is real time and cost involved with incorporation, so best to delay until the end, when we know we have something real. Finally, since the incubator itself is engaging development labor, it can file for the 37.5% Quebec multimedia tax credits, rolling the dollars back into the program.

Another alternate model could look more like a co-op or partnership, whereby teams stay within the collective and get a share of the overall pot of the incubator and all the other teams. Teams would have to earn their way into the partnership, and would be motivated to help other teams succeed… I need to give this approach more thought…

In return for all this awesomeness, the incubator would keep 20% equity/ownership in the SPV when the IP is spun out, along with a 20% share of revenue from the project. Note, the rev share would come out of the developer portion, not gross sales (eg, on the AppStore, Apple takes 30% and the developer keeps 70%, meaning the incubator would take 20% of the developer’s 70% chunk, or effectively 14% of gross).

Oh, quick note on geography: it would start with Canada only just to keep things simple, but would eventually open up to teams from anywhere (as long as they can legally work in Canada for 6 months). Either way, it would require all teams to physically relocate to Montreal to work in the shared space, get the mentorship, participate in the demo nights, etc.

Hmm, well, that pretty much summarizes my current thinking.

So, what do we need to make this happen? Rough budget puts the set up, first year of operations and initial five teams at about $1million, give or take. We’d need a core team to help me run the incubator (ie, I would take on the biz role, but would need co-founders that were more ops and creative oriented, as noted above). We’d need a bunch of awesome advisors and mentors.

And, we’d need some sense that if we built it, experienced developers come!

Anyway, would be great to get some feedback on any specific aspect outlined above or on incubation in general. Plus would be great to hear from devs who have recently gone indie or are planning to go indie, and how this might (or might not) appeal to them. Please feel free to comment below, or you can email me directly at Jason (at) PerimeterPartners (dot) com.

I generally don’t dwell on the past. I’m very much a “live in the moment” kind of guy and as such I don’t do a good job of celebrating anniversaries. But, the 10 year milestone for the Montreal chapter of the International Game Developers Association seemed like something important (and luckily, others from the advisory committee were smart to push for us to do something special).

Past/Present/Future Panel Discussion: Standing = me. Seated (from left to right): Martin Lizee (Gamerizon), Sebastien Ebacher (Ubisoft), Denis Lacasse (Behaviour Interactive), Reid Schnieder (WB Games), Francois Dominic Laramee (freelance writer/journalist). On Screen = first ever chapter photo with Francois Dominic Laramee, JF William, Sebastien Ebacher, Christine?

I barely recall the first meeting back in January 2001. It was well attended by a few dozen folks and all we did was drink and network. It has been a fulfilling ride along the way, helping to drive and grow the chapter along with the growth of the game dev scene in Montreal overall. And, in small, often intangible ways, serving as a critical nexus point for the progress of game development in the city. It’s been fun.

Some photos from the anniversary night are posted at IGDA-Montreal’s Facebook page. Also,one of our long time chapter members wrote a little summary note. A full report covering the panel discussion and a video will go up shortly…

Alright, gotta run off and plan the next event!

Luckily, was able to pop into the final day of the Assassin’s Creed art exposition at the Yves Laroche art gallery in Montreal. I’m a huge fan of digital/pixel/concept art, and the gallery did not disappoint with a splendid array from the AC franchise.

My only criticism is I wanted to see more! I think I’ll have to push my son to whip up a few more scenes…

Was super fun putting together the “Indie Space/Time Continuum” article for The Escapist. I had some general thoughts and insights on the topic, but figured it wise to check in with a few of my indie friends to get their input. Not a big surprise that they were all very open and super sharing with their thoughts and opinions - some of them waxing eloquent longer than the actual article! A quick thanks and props to everyone who replied:

• Deniel Benmergui
• Jenova Chen (thatgamecompany)
• Tracy Fullerton (USC Game Innovation Lab)
• Chris Hecker
• Heather Kelley (Kokoromi)
• Gorm Lai (Global Game Jam)
• Dino Patti (Playdead Games)
• Petri Purho (Klooni Games)
• Jason Rohrer
• Randy Smith (Tiger Style)
• Jonatan “Cactus” Soderstrom
• Nathan Vella (Capybara Games)
• Douglas Wilson (Copenhagen Game Collective)

Was actually a bit of a challenge to weave in the thoughts/perspectives from all 13 of them! The only one I didn’t incorporate a quote from was Randy Smith from Tiger Style (of Spider: Bryce Manor fame). He provided great input on how Spider was produced and how the team borrowed production processes from their AAA experiences, but scaled down. Also, Randy noted on how “normal” he and his team are. Or as Randy put it:

“The members of Tiger Style like to think of ourselves as a reasonably-well-adjusted, social, spirited, often outgoing and friendly group of men and women with acceptable hygiene.   we are a studio that works remotely over the internet without a single office, but we don’t just hole up at home.  we visit friends, we work from coffee shops, etc..  all of us have other hobbies and pursuits - there are indie rock band members, bikers, painters, karaoke singers, world travelers, photographers, etc..  when we’re not working we go to bars, parties, museums, beaches, rock shows, mountains, the movies, camping, etc..  most of us have fabulous taste in music, display a decent fashion sense, and have sex with other people.  no one in Tiger Style has a life that focuses primarily around playing and creating video games.”

I really wanted to work in the “have sex with other people” line, but couldn’t make it work without seeming totally gratuitous ;)

A recent interview I did with Mathew Kumar on tax breaks and game industry economic development was posted to Gamasutra, and got some good comment traction. A related article by Nicholas Lovell was posted as well, questioning the true value of tax breaks.

As I clarified in my own comment to my interview, I’m not opposed to tax breaks. They are a valuable tool. I’m opposed to thinking that providing a tax break is the only way to build/grow the game industry in your country/region. For example, listen to the language that Singapore uses with regards to building an ecosystem, creating original content, supporting education/talent, having players involved in all aspects of the value chain, etc.

In the UK, they just can’t stop complaining about Canada being a threat and fighting for a “level playing field”. I’d say their number one threat right now is their attitude! Instead of fighting for something they will never get and complaining about it, they need to look at the bright spots and clone those. Who is succeeding; who is persevering; who is growing; who is being innovative? How and why are they able to do this, despite not having a “level playing field” with tax breaks. Figure that out, then emulate. It’s more about amplifying the positive than getting stuck in the negative.

For example, I’m a big fan of incubation - in all its various forms. At the end of June, Joystick Labs was announced. Based in North Carolina, they are currently taking applications for their game-focused incubator program (deadline is August 13th). I was so pleased/impressed to see this initiative happening that I agreed to serve as an advisor/mentor.

That said, the UK has one of the best incubation programs around: Dare to be Digital. Instead of wasting energy complaining about some figurative “playing field”, get behind that and drive it even farther. Similarly, instead of complaining about UK culture minister Ed Vaizey’s non-committal language on tax breaks, folks should be jumping all over the fact that he announced a £5m investment fund.

There is no reason why the UK cannot return to its game industry powerhouse status. They don’t even need tax breaks or government support (though, sure, would be nice) to do it. They mainly just need a new, more positive mindset.