Gamedev Startup Timebombs and How to Defuse Them
Basic Mistakes Which Ruin Lives and Cause Chaos!
We are living in a boom time for new gamedev startups - it's great that new graduates particularly are jumping into building their own companies. Creating your first games is always an exciting process but it's also easy to make basic mistakes which can come back to haunt you later on: this is a quick guide to several of those and how you might avoid them.
If you want something more comprehensive then I strongly recommend Michael Futter's The Gamedev Business Handbook published by Bithell Games - it should be required reading for anyone starting a commercial game studio of any size.
It's important to point out that non-commercial games are valid as well - I've worked on a couple and enjoyed it immensely. Games as a form of creative expression don't need to be entirely in thrall to the ever-extending tendrils of capitalism, as long as you're clear about your objectives. If you do want to start a sustainable company though, then you'll need to refocus.
Think you hate business and you're completely unsuited to it? I was the same initially (especially when I emerged blinking into the harsh light of reality after my English degree) but you will quickly find that - even if you are lucky enough to find a co-founder who will take on the core responsibilities for you - having a good grasp of these areas will become essential over time.
There will be some UK-specific stuff here as that's my direct experience but it should be easy enough to translate that to your specific region. Do your research, consult professionals etc.
That's enough caveats - let's begin the parade of disasters…
Isolation
Surely the first thing on this list should be about business planning or IP issues? Those are important - and we'll get to them - but context, advice and support from other human beings are likely to be the elements that make or break your career.
Even if you are very new to games, you deserve that support and advice. If you're beginning work on a game project of any kind, you are a game developer. Your personal background, educational level, experience level and objectives do not matter and there is no certificate required to prove your status.
As a game developer (or even an aspiring one), you now have every right to join in with an online community, come to a live industry event or introduce yourself to people in the games industry who you might happen to meet.
Initially, just seek out people who you might want to make friends with irrespective of status: peers, people less experienced than you or more senior "important" people - it doesn't matter. Zero agenda, zero "networking". Try to meet people in games who are different from you or your normal social group - you want to avoid limiting your perspective.
As time goes on, you will want to meet others for specific business or career reasons - that is completely legitimate and you should never be scared of politely asking for an intro or even introducing yourself. Again, treat these as human interactions: yes, you may want something but there is never an excuse for being entirely transactional.
Make sure you talk to publishers, representatives from platform holders, investment firms and people who run events: build those relationships early (before you think you need them) and when you have a real project on the go, reach out and ask for their insight. They might not be interested in what you're doing immediately but they certainly will be if you come up with something cool later in your career - it never hurts to make connections.
If anyone talks down to you, makes fun of you in an unpleasant way or deliberately makes you feel uncomfortable then get out of the interaction quickly, seek support from others you trust and move on. Games is an unusually friendly and considerate industry but do stay safe and maintain common sense awareness in your dealings with others.
Obviously, many people struggle severely with social situations of any kind. If that's you, then try to find one trusted friend who can help you - maybe they can join with you to work on this side of your business or perhaps just accompany and support you in the communities you're choosing to engage with. You will need to "get out there" in some form, so push yourself to a sensible limit of your capabilities and then seek help when you reach that point.
While commercial solo dev efforts are certainly possible, they really are Game Development Hard Mode and you'll need a lot of endurance to stay the course. Strongly consider involving other people in your work but if you don't then make sure to keep up your personal relationships and industry connections. Be patient with yourself - you're trying to do everything and that means you'll inevitably be bad at some things initially. Take time away from work to socialise - it will pay dividends in multiple ways.
Finally, there are now a huge variety of incubator and accelerator-style programmes for games - making contacts and building a peer network can be a major perk of engaging in one of these, particularly for brand new devs, so consider having a look in your area.
Administrative Chaos
Chaos begets chaos. You need structure in order to be safe and operate effectively, so here's a quick overview of the absolute basics which all combine in chorus to prevent disaster…
Company Setup
Set up a proper company structure as soon as you start working on something remotely serious. In the UK, this will be a Limited Company. It's not particularly hard to do this yourself, but an accountant will be able to help you if needed (more on that later).
Congratulations - you are now a company director! Take some time to thoroughly read through your responsibilities: in the UK, take a look at this guide.
If you want more than one person to have ownership of the company, you will need to understand how equity works and then eventually execute a shareholder's agreement. This can get quite complicated so find a games industry specific lawyer to help with this - do this stage slowly and patiently as people have lost huge chunks of their life's work and suffered decades of pain due to getting it wrong.
Banking
Once you have a company, you can get a business account with a bank - a simple current account will be fine to start. When your company begins to make money in earnest, you will also likely need a USD account if you are based outside the US, as many platform holders and distributors pay in dollars.
Unbelievably Important Note!
One critical thing to mention is that any money in the company does not belong to you personally - you can't just put money in and take it out at will. It is the company's money and must be handled in specific ways. Yes, some people really don't know this!
Again, talk to an accountant and read through your responsibilities as a director and shareholder.
You'll need to keep proper financial records which means, among other things, book keeping and submitting any tax returns necessary to the relevant tax authorities correctly and on time. I strongly recommend finding a friendly games industry accountant and seeing if they will kindly give you a bit of a discount initially with the understanding their rate will ramp up when your company grows. Ask them what your company needs to do (and what you need to do personally) in order to remain compliant, then make sure you set up reminders to get all of that done every year.
Bookkeeping and Tax
Your accountant will likely set you up with a system like Xero. You should learn how to use this and do basic book keeping tasks yourself initially - the learning curve is not too steep and if you keep the system clean and up to date (a few hours once a month is usually enough to start with) everything will be much, much easier. Also, later on if you're lucky enough to be able to pay someone else to do this for you, you will be able to understand their work and manage them much more effectively.
Do not mess around or cut corners with tax issues ever at any time - it's not worth it. Make a consistent earnest effort to get it all right, check it, ask your accountant about anything that is unclear and submit your returns on time. If you or someone in your business makes a compliance mistake, own up to it quickly and bring it to your accountant so that you can get it rectified and work out a solution with the tax authorities.
Keep it Clean
If your accountant starts to let things slip or you are unhappy with their work, sanity check the situation with an experienced friend who runs a company or (even better) another accountant. Don't be slow to leave an accountant who is not up to scratch - you will thank yourself in the long run.
This side of running a business can be stressful especially if you don't have a personal affinity for organisation and admin. Find ways of setting reminders, taking time to do things properly and learning to accept it as part of the wonderful texture of life. If you really can't manage that, it's completely essential to find someone to work with you who can.
Legal Mess
Legal naivety or basic slip-ups can be catastrophic - you can't always avoid issues and disagreements but you can take a number of steps to protect yourself from escalation.
You likely will have made contact with a lawyer to help you with your shareholder's agreement - if you liked working with them then you get back in touch and ask them to give you a rundown of things you need to look out for in general as your company goes forward.
Good lawyers will tell you (for free) if they think you should use them or not in specific instances, but here are some things that should always flag a more thorough legal evaluation:
Any type of exclusivity language or transfer of intellectual property
Any situation where the ownership of intellectual property is vague or uncertain
Licensing clauses which give the licensee a lot of leeway to do things beyond your control
Any type of significant liability or uncapped downside for your company
Anything - at all - that you don't understand completely in an agreement
If in doubt, always ask. Ultimately though, the greatest protections against legal issues are:
Making sure to use formal written agreements
Approaching agreements carefully, thoroughly and with full understanding
Making sure the other party has done the same!
Checking thoroughly into the backgrounds of entities with whom you are entering into a relationship
Sanity checking with people who already have an existing contemporary relationship with that entity
Sensibly protecting your ownership of intellectual property
Understanding licensing agreements for any libraries, assets, fonts or anything similar you use in your work
Never using copyrighted material without permission under any circumstances
Forming real, enduring, mutual, committed, human relationships which extend beyond business
Never working with anyone you don't trust completely
Insurance
You should also look into relevant liability and indemnity insurance for your business, particularly if you are taking on employees when it can be a legal requirement - here's a useful guide for those of you in the UK.
Data Nightmares
As a palette cleanser after all that business admin, here are some ultra quick tips for keeping your valuable data under control…
Use source control!
Back up your work and important company documentation regularly both locally and online
Back up your individual machines with a service like Backblaze
Use strong randomly generated passwords, a password manager and multi-factor authentication
If you rely on a service like Google Drive or Dropbox, make sure you also have local copies of anything important which you store on there - treat them as if you could permanently lose access at any time.
Hiking Without A Map
A business plan - even a very brief and vague one - can work wonders to prevent confusion and clarify everybody's intentions.
The root question here is: what type of work do you want to be doing now or in the future? Many companies start out with "we just want to make games forever" but people's priorities change as they age and so you need to take that into account. You might love being the sole coder and designer on your projects now but as you gain experience and find that you're repeating very similar work every few years, that may lose its shine.
You may also truly believe that you never want to exit your company, however the truth is that almost everyone thinks about it at some point. Spend a while trying to project yourself forwards in time: for example, if you don't currently have a long-term partner or children, think about how those things could shift your world.
Talk to your family and older friends about their experiences if you are able to do so. Any unexpected change in life situation can affect this trajectory as well, so think about what might happen if you or a loved one experiences health issues or another destabilising event.
Talk to your co-founders! It’s surprising how much of a disconnect can exist even early on.
Also, allow yourselves to think about what will happen if things go really well! What if you have a ridiculous hit game and become a multi-millionaire overnight? Granted, it's not very likely but pondering the possibility of absurd upside is a good way to figure out your direction.
I recommend the book Built to Sell even if you're not considering selling. Having a plan to take care of your assets and employees at various different growth stages is critical. This shouldn’t be purely an exercise in financial planning: establishing and maintaining a diverse, positive and healthy culture in your business must be at the forefront of your strategic thinking.
Here are some valid paths you could consider:
Stay Small, Never Sell
Many people think they want to do this initially - and it can absolutely work - but it does come with some pitfalls. Small companies can be vulnerable, as they often live project to project and a single mishap can take them out. They are very reliant on key talent, so if someone leaves or becomes unable to work for a period then that can be devastating.
Also, staying small with no assumption of exit is an active and conscious choice to do business in a specific style, not a default or an absence of direction.
If you think there is any chance of you selling your company at any point (including retirement) then I'd urge you to do some basic preparation.
All that said, a truly successful lifelong lifestyle business is a wonderful achievement. Getting paid enough to live happily from the work you truly love is a rare and joyful human experience, so don't feel like you need to strive for anything else just to satisfy the expectations of others. Make sure to share the upside with your employees and co-founders (if you have them) though - you don't want people to feel like they are just supporting your personal whims.
Stay Small, Build IP and Sell
While your company may not have huge turnover or many employees, you plan to build some original titles that do really well in the marketplace and then - eventually - sell off the rights to those and possibly also the company itself in the process.
This can be hard to accomplish - unless you have an insane mega hit of Among Us proportions, unique technology or a team with absolutely stellar experience it is unlikely that acquirers will come knocking. However, it doesn't hurt to prepare for this - make sure all the protections you need are in place, have the conversation with your employees and co-founders early on and make experienced contacts who could help you rise to the challenge of riding a success if one lands in your lap.
You might plan to have an individual game acquired by a partner (usually a publisher) as opposed to selling your entire company. If you head down that road, make sure you are both extremely well compensated ("beyond your wildest dreams" is a good rule of thumb) and completely happy about losing control of the IP in perpetuity. If you're lucky enough to have a shot at this then do not rush the process.
Grow, Stay Private, Keep Ownership
In this model, you plan to scale your company up, building talent and capacity while perhaps cultivating revenue streams and creating multiple IP's, but want to continue expanding your empire while retaining maximal control.
Valve is perhaps the ultimate example of a huge private company in the games industry, proving you do not need to sell up or go public to achieve unbelievable world-shaking success in terms of money and influence.
Plan to build up scalable revenues over time: you will need even more cash than you think to make this work. Research the issues that companies experience at different growth thresholds and strategise around how you will overcome them. Consider the upside of staying at the helm of your company without ever needing to satisfy the whims of the financial markets.
Grow, Get Acquired
Acquisitions of game companies have become increasingly common over time. They also tend to happen in waves based on overall market sentiment - we have just been through one in the last few years as I'm writing this in 2023.
Financially ambitious devs often think they want this: if you're in that category, you need to have a long hard think about why you might truly want a sudden influx of money in exchange for a loss of control, whether you can tolerate working for someone else for a long time post-purchase and what you plan to do when you get out.
Playing this game purely for cash is likely a waste of time: there's plenty of unhappiness to be found down that road, particularly if you're doing it to impress others or sate your ego. You might hit your goal eventually but without a sense of purpose you could come unstuck at that point. If you truly know where you're going and you love the process of getting there, however, then feel free to be ambitious and confident with how you approach your goals.
Your talent and IP will be your true assets here - figuring out how to sustain and nurture that growing workforce will be the entire game. Make sure you have concrete plans in place for how you are going to care for and manage everyone in your organisation as you grow - understand that, if you remain in charge, your time and energy will increasingly be spent on serving their needs rather than on your own personal work.
Get Big, Go Public
If you are aiming to IPO (list on the stock exchange and become a publicly traded company) then you are essentially saying that you want to create an institution - a monolith that will be around long after you depart the planet and will continue to make a contribution to the global economy. To get there, you will need a serious business plan, specialist advice and eventually bankers who can work with you to position the business for sale.
If you are serious about this direction (but don't already feel like you're well beyond the advice in this post!) then I'd recommend spending some time researching public games companies and how they got there. Team 17 in the UK is an interesting case, as are many of the larger publishers. As a studio, you will likely need ownership of several monster IP’s to even enter this conversation.
Public companies are a different beast - if you love building startups then there is quite a low chance you actually would enjoy running one. Seek out mentors who have taken companies public before and get their insight early on.
Changing Plans
Your business plan - like your business - will evolve over time. Even your headline goals might change and you may shift between the categories I've laid out above, or invent a new category - that's totally fine and you should go with the flow. As you sense it happening, make sure to re-plan and keep an awareness of the horizon: many companies sputter out due to inflexible plans or lack of direction.
Zero Management
In many companies, true management is completely neglected leaving employees confused and feeling unvalued. There is a real risk in creative businesses of the work itself taking precedence over the needs of staff - this is particularly prevalent in small games companies and most founders have been guilty of it somewhere down the line.
If you are in charge of freelancers or employees at any point, then you've just become a manager and you should own the responsibility. This can be a real struggle, especially if you're not ready for it - it's another huge topic but one critical piece of advice is simply to take it seriously. Read up, talk to others who have experience but most importantly keep the channels of communication open with those who are working for you. One final tip is to make sure your expectations are clear: a "finished" piece of work can mean many different things in different contexts.
Running Out of Oxygen
Whatever your business objectives, you need cash to pay the bills.
Start by controlling running costs early on. You don't need to begin with a rented office in this age of remote working and there is no need for any type of extravagance out of the gate. Focus only on what you truly need to get your work done. Limit travel budgets and anything which isn't core expenditure.
Staffing costs are critical and you need to think long and hard about how many people you employ initially. Don't forget that there are significant costs on top of just salary for anyone you take on as an employee. If you're working with freelancers, you need to be careful about the rules around that.
Once that is sorted out, you need to think about prioritising revenues initially. A stable income stream is a huge help so look into anything which can provide a regular influx - many new studios incorporate work-for-hire and co-dev into the mix, so I recommend looking into that. Don't give up on your dreams but understand that if you launch into a long-term commitment to an ambitious project then cash anxiety will arrive at your doorstep in short order.
If you are looking for external funding, each flavour comes with varying upsides and downsides - debt, project, equity and grant funding are all hugely different. Here's a very quick primer (as ever, please do your own research before taking on financing):
Debt comes in the form of a loan from a bank, an individual or other entity. The core advantage of debt is that you retain control of your business - you don't need to give anything away in order to secure the financing. The downsides however, include the possible effect of loan repayments on your cash flow, the risk of default which ultimately could result in the seizure of your business assets, the effects of rising interest rates and other issues. You will usually need to show that your business has consistent revenues already in order to be considered for a loan.
Project funding is usually offered by game publishers: they provide you with funds in return for a revenue share of a particular game. Working with publishers is a complex topic best saved for another time and deals vary but suffice it to say that this is a standard method of de-risking a project as well as - hopefully - securing additional services and expertise which will make your game a success. You will need to choose your partner wisely and be comfortable with giving up a sizable chunk of revenue from your game, however. Publishers will expect you to pitch something that is well budgeted, relevant to them, has a clear market fit and is demonstrably within your capabilities as a dev team.
Equity financing is where you sell shares in your business in return for cash. In most forms, there are no repayments required and you will be sharing risk with your investors. You will be giving up partial ownership, however, and there are now more stakeholders in your business who will need to be satisfied. Those providing equity financing, such as angel investors and venture capital firms, will be looking for consistent growth in your business, so this is not likely to be the direction for you if you want to stay small and focus solely on your own creative projects. I recommend The Power Law by Sebastian Mallaby if you are interested in this direction, as it will give you a good insight into the dynamics and motivations of VC's.
Grant funding is where your government or other organisation (sometimes a charity or government-backed funding body) provides funding via a programme which has specific aims. Grants can often be a great way to secure no-risk or low-risk funds but applying for them and ensuring you are compliant with any reporting requirements may be time-consuming. Grant funders are looking to make sure you are a good fit for their criteria, so do your research before applying: it's worth looking at material that the funding orgs put out and going to any events or seminars they may provide. If you are in the UK, I recommend checking out UK Games Fund.
It's also worth pointing out that tax reliefs are available in many countries. In the UK, you should get familiar with Video Games Tax Relief: this can be a real benefit for your early dev projects.
Consistency is key when it comes to revenues and that is very challenging in a creative sector like games which is frequently hit-driven. If you have an idea which could lead to consistency, or you are lucky enough to have a successful product, do not let it slide in favour of cool new opportunities: keep working as much as possible to maintain that revenue stream, whether that means releasing additional content, ports, spin-off products or similar. This may not be attractive in the short-term but you can always find partners who will do these things on your behalf: don't let the opportunity go to waste.
Coding Crimes
Another rapid-fire section now - this time on technical tips:
I said it before and I'll say it again: use source control
Write code that others can feasibly read, even if you don't think anyone will
Strike a mature balance between elegance and pragmatism - talk to experienced people who actually ship games about this
Document your code
Avoid non-standard game engines (unless you're just prototyping or you really can't switch - better to make games in a weird way than never make games at all)
Strongly avoid major engine updates mid-project
Never switch engines mid-project (seriously, if anyone out there has a single example of this being a good decision I would love to hear it!)
Think about localisation
Think about porting and optimisation
As a parting shot on this topic, I really recommend checking out the brilliant Alex Darby's presentation "A Practical Guide to Being Less Awful At Programming" which has a lot of practical tips for organising code in a game project
Competition Carnage
Working in games is a balance of competition and collaboration - if you start off with the wrong attitude then you are likely to either fizzle or burn out.
Your game will sit alongside all other products out there on the marketplace, so it needs to stack up against them in the eyes of the audience. You need a healthy sense of competition to achieve this: keep striving to be good at what you do and be realistic about how your work is likely to be received. Learn the genres you are working in deeply and make valid positive contributions that push them forwards; focus on your strengths and passions you share with your audience; drive through and ship projects which connect with people. If you never give up on your desire to ship a truly great game - one which can stand alongside the classics - then you will go to some interesting places.
At the same time, being competitive is not an excuse to behave badly towards anyone else. Never belittle another game developer's work or look down on anyone: you don't know the constraints they are under or even their objectives. When press coverage was the major currency for attention in games, and we were fighting out for space alongside AAA titles, I definitely developed a silly us-and-them mentality about the games industry: if you find yourself falling into a similar trap then the faster you can grow up the better.
You can learn from everyone, so don't miss the opportunity to do so through snobbery or arrogance. Don't post stupid stuff on social media!
Choose objectives which suit your experience: overreaching will end in a failed project that never sees the light of day, but underachieving will cause heartbreak when nobody wants to play your game. Small failures are good though - learn to love them and keep moving forwards.
Play the long game: there's nothing wrong with working hard but passion is no excuse for neglecting your health and the wellbeing of those around you. Winning slowly can be far more satisfying: often teams who have success early on struggle to capitalise and become overwhelmed when trying to live up to it.
Bomb Defusal
Please don't get put off by anything you've read here! Games is a phenomenal creative field which continues to grow and bring huge amounts of value to millions of people around the world: working on a game project might well be the most exhilarating and fulfilling thing you ever do in your life. With your direction determined and your setup correct, you're free to focus on the creative and technical aspects which really matter to your team.