Few people possess the sort of insight into indie game development that industry veteran Jason Della Rocca does. Having headed the International Game Developers Association (IGDA) for nine years, he’s been involved with independent game development long before it went “indie”.
Della Rocca’s Execution Labs now funds and mentors indie start-ups, and he is the first games industry representative on the ICT (information and communications technology) advisory board of Canada's foreign and trade ministry. It is this advisory role that brought Della Rocca to India recently, where he attended various investor conferences, visited game studios, and spoke at two local chapter meetings of the NASSCOM Gaming Forum.
In between this tight scheduled, however, he managed to squeeze in some time for us. We spoke with Della Rocca at length about the growth of indie game development, the challenges facing the Indian industry, the right approach to seeking investment, and the dos and don’ts of pitching to investors.
You’ve been involved with independent game development for the longest time, and it must be heartening to see the indie community flourish the way it has. Can you talk a bit about how the industry developed during your tenure at the IGDA and since then as well?
“Indie” is a more recent label. Certainly there were indies back then; they just didn’t call themselves that. I think part of it has to do with the lowering of the barrier to entry. There was a point when if you wanted to make a game, it was a console game, and you needed 100 people and $10 million – it just wasn’t approachable. Before broadband internet took off, even on PC, which was an open platform, there was no path to market. So a combination of broadband internet as well as digital platforms like Facebook, iOS, etc enabled developers to find a market on their own and circumvent the traditional gatekeepers and publishers.
I don’t recall when the label “indie” really became a thing, but certainly back in the day there was a sense of being an independent studio, meaning not a part of the publisher regime. It’s a bit blurry to me.
Do you think that going independent has also become more necessary for creators now because publishers didn’t dictate the development and design of games as much back then or that the games weren’t developed based on what would be more marketable?
I’m not sure that’s the case. If you go way back to the Atari 2600 days, maybe there the marketing wasn’t involved; it was just the crazy programmers that came up with wild stuff. Since that point – we’re talking twenty-plus years – games have, to a certain extent, been driven by marketing and companies like EA, Ubisoft and Activision had to sell product into retail channels like Walmart and Best Buy. They had to think about what they can sell to the buyer, so I think that was always part of the equation.
Now you get a different kind of thing, where analysts for free-to-play games are looking at metrics and driving the design in certain directions. So even if you’re indie, you may not have a marketing boss, but now you’re at the mercy of the data to a certain extent to help massage the game to make it economically viable. So it’s really hard to be completely indie – the artsy indie - where you have this creative vision without any regard for market or audience. Jason Rohrer does stuff like that, and many others, like Anna Anthropy. These games are more about self-expression without necessarily intent for it to be economically viable.
Would this explosion of independent games have been possible had it not been for digital distribution?
Digital distribution was one of the major things that unlocked it all. It reduced the cost of goods. As soon as you have to put it on a disc, the disc in a box, the box on a truck, and then to the warehouse, and stuff like that, the cost barrier just goes through the roof. So it really is thanks to digital distribution and the lowering of cost of goods.
In parallel, you now have faster hardware, so you don’t need specialised severs to crunch 3D graphics. The tools of development become way more powerful, software like Unity and Flash become free and much more accessible, so the means to create stuff is open to many more people. Then you’ve got universities that are generating students that know game design and programming. So you train up game developers, you give them inexpensive tools that are more accessible and hardware that’s more powerful than ever before, and now they have a digital channel to go straight to the consumer. That doesn’t guarantee success, but it means that there’s a flood of real independents.
There are two common, confliction notions about gaming in India that have so far prevented the market from growing as much as it could have. One is that gaming is for kids and so isn’t worth spending on, and the other is that games are too violent so they should be avoided. What is your view on this and how can this mindset be changed?
It’s more of a social and cultural issue, but it’s also a generational issue. The older generation doesn’t understand or appreciate the popular culture, pastimes or interests of the younger generation. So we just have to wait for the older generation to die off, and that won’t be an issue anymore. More seriously though, we’re starting to see that shift in other parts of the world, where with the diversification of games and games being playable across all sorts of devices, you do have older people playing Candy Crush or other kinds of games. So the idea of games being these foreign, unknown, scary objects starts to diminish.
I think the whole violence debate is getting tired at this point. Yes, games like GTA and Call of Duty are huge sellers, but if you look at the entirety of games, on aggregate, they (violent games) only represent about 15%, so the ones that are way more predominant are the other genres, like sports, puzzle and causal games. It’s much more diverse, but it’s Call of Duty and Grand Theft Auto that get all the media attention, so the perception is that that’s what games are – hookers, war and mafia. Yes, those two are popular, but they’re just a piece of the overall puzzle.
The NASSCOM Gaming Forum represents the interests of the game development industry in India, but the country doesn’t really have an organisation that looks at gaming beyond development – consumer engagement, retail and distribution, regulations, etc. Would that hold the industry back?
There are lots of pieces and lots of moving gears, and the fact that NASSCOM has a gaming forum, has chapter events, and hosts a games conference in Pune is super valuable to have. The reality is there are many different needs at different levels, so even in more mature markets like Canada or the US, you have different kinds of entities in different roles.
For example, in Canada, we have the IGDA and several local chapters in major cities. The IGDA’s focus is only on the individuals – designers, artists, programmers. Then, there’s a provincial trade association, whose members are the companies – EA, Ubisoft, etc, and they’re primarily dealing with the business interests within that region and working with the local governments. You additionally have a national federation of all the provincial bodies – the Canadian Interactive Alliance, which coordinates national-level initiatives and gets those provincial bodies working together. So they all have their roles; an IGDA local chapter can’t handle national-level initiatives.
Now, if those entities did not exist, would the games industry in Canada still be doing great? Yes, but to a certain extent those entities and relationships help to optimise and accelerate the process. So it’s definitely nice to have, and if they work well, it really helps advance the sector and the industry. That said, in no way can we blame the lack of an association as the reason why things are not progressing. Fundamentally, it comes down to the creators and the designers, and the entrepreneurs to have the courage to start stuff and do things. It starts there and all the other things help it move forward.
There’s a tendency among new developers in India, and maybe internationally as well, to seek external funding before putting out a successful game or even coming up with a game concept. Can you talk a bit about how investors approach a start-up seeking investment?
It’s tough to pitch to investors as a start-up game company, because most investors will ask you to come back when you’ve already released the game on the app store and are showing some degree of traction. What an investor essentially wants to do is give you money to scale up, and not to gamble on ninjas or robots or dinosaurs. They don’t want to do concept development. They want to see that you decided that dinosaurs, for example, was the best bet, and that given your analysis of the market, you built a prototype of a dinosaur game, released it to the app store in a test market, and your user acquisition costs are below a dollar, your virality factor is through the roof, you’re able to retain users past one week, 5% are converting at certain average revenue, etc. So it doesn’t have to be big. You don’t have to make a million dollars, but the ratios have to look good. If the ratios look good, they know that you can scale because the arrows are pointing in the right direction. Then they’ll give you a million dollars or half a million dollars to build that scale.
If you don’t have that prototype released to a test market and showing the initial metrics, then they’re just gambling. Most investors will wait. They may like your dinosaur idea, but they’ll want you to do it first and come to them when you want to scale. So it’s very hard to get investment from VCs as a start-up, unless you’re some superstar and you can say, “My last game was Candy Crush and it made a billion dollars. Give me some money.” That’s rare.
Aside from the game itself, what do investors look for in an indie developer – the team and the people in it? Is there a certain kind of developer that investors are more likely to back or not back - for example, someone like Jonathan Blow, whose method of working is unconventional.
Jon is one of the most disciplined developers I’ve ever met; he’s a genius. He wouldn’t take VC money, and VCs wouldn’t give him money. He does great things and I’m sure his next game will be amazing, but he takes five years to perfect every little detail. VCs wouldn’t have the patience, and there’s no sense that that game could scale or that he can scale. So they wouldn’t touch that kind of a project, and Jon is a tough character, so I don’t think VCs would survive working with him anyway.
That’s him in particular, but when we pick teams to invest in, it’s the team that we’re really looking at. We’re looking at the team dynamics, how they communicate, and their history together. Have they gone to hell and back together? Do they have the perseverance and resilience? What experience do they have that’s relevant to what they want to do now? So if they have no mobile experience and all they’ve worked on is console games, and now they want to make mobile games, you have to see what they want to accomplish and if they have the right mix of skills. Whether the game is pirates or dinosaurs isn’t really that critical to our decisions. Even the best of companies can’t predict whether it’s birds and pigs or candy or Vikings that’ll succeed, so we don’t even waste our time with it. It’s about the team and if we believe that they can do the game they’re proposing.
Can you talk a little bit about Execution Labs and what it does?
Execution Labs is like a talent platform, where we take game developers and give them funding, mentorship and development resources in order to create game start-ups, specifically making mobile games. The majority of the talent that we support is coming from the large studios – the Ubisofts, EAs, etc. They’re leaving that environment of huge teams, large budgets, and long development cycles because they want creative independence to work on their own ideas. We provide them funding and work with them for roughly nine months, where they spend six months going from concept to beta release. Then we spend three months working with them on marketing, doing PR, building awareness, acquiring users, and helping them scale the project. At the end of nine months, they leave the program and hopefully get some follow-on investment so they can continue to do well.
Many indies are sceptical of external funding because they are afraid of losing creative control. What can developers do from a legal perspective to protect themselves in such a scenario and to help them negotiate better?
This is a common fear since most indie developers are not lawyers and don’t have a finance or business background. When you do take external funding, that means that you have partners and you have to work together, but it’s extremely rare that an investor would step in and start designing your game. In fact, part of what they’re investing in is their faith in you as a creator, and they realise that as banker-types, they don’t know the first thing about game design.
In most cases, when you take external money, you’re only selling a portion of your company, and to the extent that you retain more than 50% of the company. Then you’re the one in control. So the first rule is to hold on to the majority of the company, so you have the final say. In a company, there’s a board of directors, and when you get external investors, they usually enforce a certain amount of governance and rigour in how you manage your company. So you might have one or two investors on the board along with you and the other founders. Usually, you’d be more founders than investors, so even there, if the investor is one of five, or one of three, it’s still you and the co-founders than maintain control.
Realistically, what you should do is find investors that you feel comfortable with and who believe in you and have faith in this field. It should be more of a partnership; they should be supporting you by opening doors for you that they, as bankers and financial institutions, can.
What makes better business sense for an indie developer in your opinion – project-based financing or company funding? Is there a time when one sort of funding is better than another?
That is the most critical thing you need to decide when you’re looking for funding. Are you trying to fund your company or this particular project? The answer to that question dramatically changes who can fund you, who you go after, and how you present yourself. A lot of people don’t understand that and just go, “We’re just going to... get money... somewhere... because we need it,” and they don’t present it and package it in the appropriate way. So if you’re looking for company-based funding, this is when you generally go to VCs, angels and other institutional investors. Here, you’d be exchanging funds for a board seat and equity.
For project-based finance, depending on what country you’re in, this is often where you have government programmes, granting agencies, prototype funds, or crowd-funding like Kickstarter. So you don’t go on Kickstarter or Indiegogo and ask people to fund your company. Here, you’re generally not giving up a share or control of your company, since they’re only financing a project. Usually what you’re giving up is revenue. It’s the same with publishers – they might want to release your dinosaur game globally, and they’ll give you a million dollars upfront as an advance against the money the game will make. So every dollar the game makes goes to the publisher until they get their money back, and the revenue is split from then on. The publisher doesn’t really care about the company; they like the dinosaurs. Although some publishers may want control over the IP, in which case you’re not giving away a share in the company, but you’re relinquishing the company’s most valuable asset.
So you have to think about what you’re giving up in exchange of the money, because there is no free money. One of the traps in the games industry is that most people are thinking on a project-by-project basis. So they may have a great idea for a dinosaur game, which will take a million dollars to make, so they go looking for money so they can get that game made and share the revenues. VCs aren’t interested in that. They want to know that there’s a ten-year roadmap of dinosaur games and merchandise and the empire you can build based on the market trends of interest in dinosaurs. They want a wider vision so they can see the company grow.
For smaller teams that are just two or three developers, is approaching banks advisable?
Approaching banks is never an option. Banks are probably the most conservative sources of funding, and generally require some form of collateral or security, whether that’s your house or a revenue stream. So it’s hard as a start-up with no revenue and no assets because you have nothing to secure against the loan. If you’re a large company with millions of dollars in revenue and you need $10 million more, they securitise it against the revenue stream and/or assets.
Can you talk about some of the dos and don’ts of pitching, and what investors look for in a pitch from game developers?
It’s interesting to watch, this whole pitching process. Pitching is basically a unique style of presenting, where the assumption is that you have investors in the room and you’re trying to get them excited to give you money. But before all of that, being able to fundamentally communicate what it is that you’re doing, what’s special about your game, who you are, and what motivates you in a compelling, succinct and engaging way is so hard for developers. These are designers and programmers who just don’t have experience with that. So a lot of what we do with the teams we have is work on those elements.
Before getting in front of investors and pitching to them, figure out what’s special about you - why are you doing this game, what’s this game about, how do you tell the story of this adventure you’re on as a start-up. What most developers do is get way too caught up in the nitty-gritty game mechanics of their games. Like, “Oh, we spent so much time modelling the skin of the dinosaur, and we have two layers with anisotropic filters, and we used pixel shaders for the right effect.” All this while the investor is sitting there wondering what the game is about. So a lot of developers fall into that trap and they don’t take the time to cover the basic stuff. Like, “Hey, we’re five guys. We left Ubisoft/EA. Ever since we saw Jurassic Park, we’ve loved dinosaurs and it moved us, and so we want to make a game that will do the same for others. So here’s our dinosaur game.” This makes it a lot more relatable and it’s inspiring, and you still get to show the dinosaur skin you made. So it’s about telling your story rather than getting bogged down in technical specifics.
The other mistake developers make is not touching upon the business stuff. Most developers are not business-oriented, so they’ll get in touch with business people and talk about the game itself, but they won’t talk about the platforms it’s going to release on, how they’re going to monetise, what the plan is to acquire users, or what their metrics are. Now, you don’t want the whole presentation to be about metrics because that would be too boring, but you have to give some sense to the investors that you’re thinking about money, acquisition, key metrics, etc.
Start-up developer Nautilus Mobile mentioned that they were told by potential investors that a mobile RPG wouldn’t work. Are investors more likely to invest in a company pitching a game that’s in line with the current trends as opposed to something unique and unconventional?
It would have been an interesting conversation to be a part of. It’s legitimate for an investor to say, “An RPG is too hardcore so the market is niche, but for a Candy Crush-style puzzle game, the market is much wider, so we want to do more casual games. Sorry, but your game is too complex”. That’s actually pretty sophisticated from an investor’s point of view. Now, whether or not they’re right is another question. I do think that more complex and more core games have a chance to succeed, and in fact, most of the games we produce at Execution Labs through the teams that we fund are generally not casual. They’re more mid to hardcore; they’re not just word games or puzzles.
If a developer pitches an idea and gets external investment, what happens if the game doesn’t actually make the money that the studio or the investor thinks it will?
They shoot you [laughs]! Essentially, when you take investment, you have to think about how far that money is going to take you. In the very early stages – angel and seed investing – it’s rarely to hit profitability. Mostly, it’s to get you to the point where you can attract a larger amount of money. So the initial funds should enable you to make your prototype, build your first release, do a soft launch in Australia maybe, validate your metrics, and do your global launch. At that point, if the metrics look good, you go and get a million dollars from the next round of investors. With that million dollars, you scale, and now the revenue comes in.
The biggest trap in investment is when the initial money doesn’t get your far enough to convince the next guys who have money to give it to you. You plan for it, but maybe it takes more time, or you make a mistake or two, or you had unforeseen expenses. That’s when you have to scramble. So you’re always managing what you call your ‘runway’. How much runway do you have left with the money you have, and will your plane be able to take off before you run out of runway? Again, that’s not so much an issue with your very first investment, but it’s to get you to the next round of investment.
For example, at Execution Labs, we took some seed funding from a bunch of VCs in late 2012, and they didn’t expect us to become rich and profitable within a year. They expected us to demonstrate that we could attract the right talent, and mentor and guide them through good games, so that they could feel that if they gave us more money, we could grow and succeed. So it’s really all about setting expectations and it’s your job as the developer and recipient of the funding to set or discuss what those expectations are. That way, it’s very clear to you what goal you’re trying to achieve with the money you just got.
What are your impressions of the Indian games industry based on what you’ve seen and heard?
I think the market here is very nascent. The development talent is making a transition from a purely service and work-for-hire base to having the courage to do their own products. That’s a big leap to make, and it’s an important transition to make, but it’s also a hard one. There’s a lot of failure that’s going to happen, because everyone is going to try all sorts of different stuff. Most of it is not going to work, and hopefully one or two will. So there’s going to be a lot of failure in the system, but I’m encouraged by the degree of new start-ups that are happening in the games space.
For example, Shruti (Verma, NASSCOM) was telling me that for the 10,000 Startups program, after filtering, they had 85 proposals from game companies, half of which she didn’t know existed before. That’s a lot of start-ups! Then you look at GDC in Pune, and year over year, it’s been doubling in head count. It’s huge and that’s great. These 85 start-ups, I want to see them, but I haven’t seen them, so are they all junk? Are they all amazing? Is there a nice variety of ambitious, less ambitious, core and casual stuff? I don’t know, but it’s exciting. My sense is there is a real momentum here and lots of action, which is great.
India is largely seen as a source of cheap labour and isn’t taken very seriously in the Western world as far as game creation is concerned. What needs to happen for this perception to change?
The idea is just to keep creating. If there are more creations that are original Indian creations and have some degree of success, the country will get noticed. Finland wasn’t on the map two-three years ago. Then with Rovio and Supercell, everybody knows about Finland. Canada, maybe ten years ago, wasn’t really on the map. Then Ubisoft created Assassin’s Creed, and EA is in Vancouver, and Bioware’s there, and now Canada is considered a powerhouse in game development. That’s the case because we created games that got people’s attention, both commercially and critically. So it’s India’s turn to prove itself.
The dominance of engineers in the country is both a good thing and a bad thing. Obviously, central to games is programming, coding, and engineering, but you have to marry that with art, design and the creative side of things. The fact that India was seen as an area for inexpensive engineering labour is good thing on one hand, because it meant that guys like Gameloft and others came to town to train up people and build games. That said, now you have to prove that you’re more than just a bunch of coders; that you have that creativity, artistry and design mentality to build something truly compelling. It’s super handy that you have great engineers, because there are other regions that have artists and designers but are lacking quality programmers.
There’s this constant debate in India about developing games for the global audience versus creating games for the Indian audience. What’s your take on that?
It’s hard for one company to do both, but I think both directions are viable. Square Enix is a global entity and has massive success, so they probably see India as a potential goldmine and thought, “Hey let’s put a studio there and see what we can cultivate”. For a start-up in India, with making money in India being a little less certain, you can’t take that gamble, so they probably think, “Let’s release a game in the App Store in North America, and hopefully we can get some success”.
Both directions have their challenges, but what people often forget is that games are a form of culture – an art form and a form of personal, artistic and cultural expression, so it’s not easy to just take something and throw it over the bridge and expect the person on the other side to relate to that content. In some cases, it’s very obvious. Like if you were to make, say, a game about the Mughal empire, maybe it’s fun and everybody around the world would enjoy it, but it’s really the Indian sensibility that would really appreciate it. So that’s more overt and obvious, but there are other differences, like gameplay. For example, if you were to put Chinese MMO players in front of an American MMO, they’d be disoriented and wouldn’t be able to play it well and the mechanics wouldn’t be suitable for how they like to play. On the face of it, they may look similar, but the feel of the game and the game mechanics are localised for those respective audiences. It’s hard to overcome these subtle gameplay differences because not everyone realises that they even exist, but it’s definitely a challenge.
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