泥中蟠龍's Game愛歌
[A love song for games of the dragon waiting for an opportunity]
Video game development and investment
I have mainly written about domestic video game developers hoping that they will be able to commercially successful with a good-quality game. But, it may sound like an excuse, I'd like to make harsh comments for game makers this time. Recently I went to a conference-like meeting for content producers and developers. There were a large number of manufacturers and content providers complaining about investors. In short, the complaints can be summed up in four ways.
Firstly getting investment is no different from taking out loans with high-interest rates due to overly conservative investment conditions. Secondly, in spite of detailed explanations, investors cannot well understand a good point of the content because they lack the ability to evaluate it. Thirdly investment firms mostly refuse to invest in new content whose sales performance is hardly expected. Lastly, they don't willingly use their funds in the interest of the public, although a large portion of the fund is from government money.
I'd like to give them convincing explanations about the above in my defense.
First of all, investing in a small business is high-risk so that an investee can think that investment conditions are too conservative. To be honest, the reason a developer raises money from a venture capitalist is not to make a lot of money for the investor but to find a new way for the studio which has encountered difficulty in securing loans. In spite of the investment seen as being conservative according to the internal regulations and conditions, investors often make great losses in a considerable proportion of cases. And the more strict conditions the investee is offered, the less the investment earnings rate the investor take when the company is doing great. If it is visa versa, they will probably complain about a little profit.
Furthermore, most VCs are veterans who have been involved in a particular activity for a long time. I also had ten-year experience in the gaming field as CEO of a game studio for three years, game designer, project manager, and worker for a video game publisher. Most investors actually have much longer experience than I do. If an investee can't win an investor to consent with the beauty of the product regardless of a period when the VC has left the gaming industry, he/she is not good at explaining or the game has no merit to invest in.
Thirdly a venture capitalist externally evaluates the possibility of investment, however, he/she internally have to persuade the people in charge. In the investment committee, VC should convince the insiders to see a chance of success from the point of view of the developer. Unpredictable performance means that it's difficult for the investor to convince the other VCs on behalf of the game maker. The case that the investor is less certain about is very likely to be rejected.
Finally a venture capital investment runs public funding, however, it's a financial company which has to create revenue. The government doesn't leave the management of assets up to the venture capital firms to promote public interests. Each branch of the government uses a fund, named what is called a support project, to serve the common good. And the investment firms cannot run the public funds anymore if profit margin falls. Therefore a developer shouldn't expect a venture capital to invest in it for the common good.
In conclusion, venture capital is a company that invests money in a profitable business and expects to generate more returns than it has invested in. I hope that developers can understand the investment world better and they will get investment with high-quality content. They complain about the difficulty of getting an investment, however, investors also struggle to find a good company.
※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.
(http://www.khgames.co.kr)
Translation by Kim Ki-hui
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