GDC: Gameplay Holdings' Le Merle Talks Angel Investment

A packed room on a Thursday evening is difficult for any session to pull off, as Game Developers Conference attendees tend to have their sights set on entertainment to end the penultimate day of the GDC week. Matthew Le Merle, CEO of Gameplay Holdings, had little trouble drawing a large crowd as many individuals representing independent developers sought out advice for tackling the difficult world of early stage funding. Le Merle began by noting how often developers make the mistake of pitching products rather than businesses. “We’re equity investors,” he said, “and we want to hear about your company.” Developers should be prepared to describe a concept or idea that will exist for much longer than any one specific game idea. A solid business plan is essential, and a single game idea doesn’t answer the investor’s most lingering question: how am I going to get my return? A clean presentation of everything from product to revenue stream to exit strategy is key. Another surprising situation he found is many developers looking to angel investors or venture capital before searching out sources closer to home. Finding money in family and friends and friends of friends is a mandatory step before meeting professional investors. On professional investors, Le Merle told the audience that as electronic entertainment they should pursue angels well before seeking VC. Besides angels contributing far more to early stage funding than VCs in the last year, angels are much more viable targets for the types of numbers that game developers look for; where VC tends to deal in millions of dollars, game developers can get funding in tens and hundreds of thousands from angels. Le Merle noted that he as an investor tends to look only at the executive summary of business plans as they come across his desk. Rather than read through the remainder of the document, he calls the CEO if he thinks that first page or two is interesting. While developers shouldn’t spend an inordinate amount of time in crafting the business plan, CEOs should make sure the executive summary is well formed and cuts to the meat of the company’s opportunity. He also noted that many angel investors are not totally attuned to the video games industry. “Take the time to build some little things and show them,” he said. Things like rigging a skeleton or prototyping a level might feel ordinary to game developers, but showing the investors or potential investors a little slice of what is happening or will happen is a worthwhile thing. Pitching a company has an enormous learning curve, and the ones who are good at it can be absolutely fantastic. Sitting in on a company pitch and seeing what happens, both the good and the bad, can only help as you formulate your own company pitch. Even before the actual pitch happens, the investors will have done their due diligence in investigating what the team and company is about. For developers, it’s important to get buzz out early by building a reputation for being good and reliable developers. Being spoken of well by peers or receiving awards can only help investors be more confident in an investment. For students who plan to start a company as soon as they finish their education, a lot more emphasis is placed on the quality of their body of work, but investors will still find out as much as they can about you, from talking to professors to chatting with former fraternity buddies. Throughout the talk, Le Merle referenced web sites like Garage Technology Ventures’ Garage.com and Guy Kawasaki’s blog. These sites offer invaluable advice, especially in the form of common mistakes that should be avoided while seeking out funding. When these mistakes, such as the ones found Kawasaki’s Top Ten Lies of Entrepeneurs, are made, huge warning flags are raised for investors, telling them that someone hasn’t prepared enough in forming their pitch or business plan. For all of this focus on the plan for how angels will make their money back, investors are interested in the stories of the company and the people behind the company vision. Le Merle advised the audience to tell good stories that are passionate, personalized, and entertaining, making the pitch simple and giving clear substance to not just the company but the people there to make the company vision happen.