Game Investor Conference: 'Who's Funding What & Why'

Taking place last Friday at the Hotel Nikko in San Francisco, CA, the ‘Who’s Funding What & Why’ Panel at the 2nd Annual Video Game Investors Conference was moderated by David Higley of UBS Investment Bank and paneled by Byron Deeter of Bessemer Venture Partners, Ion Yadigaroglu of Capricorn Management, and Mark Stevens of Fenwick & West LLP. While rife with investor jargon such as “optionalities,” “multiples,” and “exits,” and catering to a entrepreneurial audience, the session was not without benefit to game developers, as it discussed what possible investors are looking at and looking for in channeling their assets. Beginning with their thoughts on where the opportunities are, Ion Yadiagaroglu spoke about the Hollywood film model applied to games, and how serving as an intermediary between various parties and putting a project together could yield financial dividends for smart investors. Among the ideas of what the “next big thing” might be, Byron Deeter opined that a MySpace-type community for video games was just beyond the horizon. He also suggested that there are great investment opportunities in game-related hardware such as semi-conductors and chips, which are more universal than software SKUs. He warned, however, against MMOs, as in his opinion, it is simply too risky to try and pick a hit. Fellow panelist Mark Stevens concurred that it is nearly impossible to predict a hit based on original IP. On getting the best price for your company, Mark Stevens advised that while game industry publishers were unlikely to pay a premium, mainstream media companies such as News Corp. would be more likely to return two or even three times your investment, if you were a valued game development house looking to be sold. Byron Deeter also had some choice words regarding selling your game company for the highest valuation, especially if it was the case where you still owned some part of the company after the sale. He advised the audience to look beyond just valuation, in that case, and asked them to think about who they wanted to work with. When asked where the panelists saw the opportunities, some gems gleaned were: while mobile and casual games are somewhat mature, there are still opportunities for later stage investments, and there’s definitely a space in the market for a “mass market Second Life". In addition, software tools that are not directly games, but are related to them, such as Massive Inc's ad serving solutions (recently acquired by Microsoft) and XFire's IM-style game communication software (recently acquired by MTV Networks) were considered good things to look at, alongside gaming leagues, hardware components, and, on a wishful note, VR peripherals. All of these offered possible investment opportunities, and the panelists indicated that market consolidation will offer further opportunities, ending an intriguing panel where it often seemed that investments based in the video game sphere were more enticing to the businesspeople gathered than investing in actual games themselves.