topics on game developers - ulisboa · opportunity obsession tolerance of risk and uncertainty...

Topics on Entrepreneurship for

Game Developers

© Pedro A. Santos 2011

Summary

The Right Stuff

Ideas and Opportunities

Business Models

Founding team

Financing and Bootstrapping


The Right Stuff

"Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled" (Timmons, 1994)

Do you have what it takes?


Characteristics

Commitment and determination

Leadership

Opportunity obsession

Tolerance of risk and uncertainty

Creativity, self-confidence and ability to adapt

Motivation to excel

Entrepreneurs are social creaturesContacts with clients, employees, suppliers, financiers and partners is fundamental


Ideas and Opportunities

Ideas can be new inventions, technologies, gadgetsA Great and Innovative idea can wipe you outPeople won’t buy what they do not know, or never heard of

An Opportunity is an idea to solve a problem or a need of a particular market

For whom?What problem?

Is it an aspirin or a vitamin?Feasible?unique advantage?


Market Positioning

New ventures rarely win against established players even if entrepreneurs provide better and cheaper offering, because established companies have

DistributionAccess to capitalBrand EquityCustomer relationshipsGreat Employees

If you try to steal the giant’s lunch, the giant is likely to

eat you for lunch.


Business Models

FIND LOCAL BUSINESSES THAT CARE ABOUT THEIR EMPLOYEES.

Offer them a free water cooler if they allow you to refill it.Earn money by making deliveries on a regular basis.

MAKE THE FIRST REAL 3D FPS GAMEOffer the first part free over the internetSell the second part to hooked players

A business model is the way the company creates and captures

value from the Market


Business Models (cont)

profitable

Sustainable

Feasible with low resourcesConsole business isn’t!McDonald’s was!

adjustable

Scalable

Good to have an exit strategy


Founding Teams

Most high-potential ventures founded by teams

Team-based ventures have higher survival chances

Better decisions and more effective actions Ability to tap into more contact networksPsychological/emotional support

Investors expect to see strong founding teams in place (making it easier to obtain resources)

But:Dysfunctional teams is key reason for

death of early stage ventures

Entrepreneurship is a team sport


Assembling Effective and Cohesive Teams

Team Compositionfind complementary skills/knowledge (do not get people that know the same as you)

Ownershipproportional to contributions/commitment (unequal shares is fine if unequal commitment or contribution)Lack of fairness in rewards kills motivation

Role Allocationclear role definition (one founder for each key area, no more, no less)


Assembling Effective and Cohesive Teams (cont)

LeadershipImportant to have one who leads (especially in teams of 3+)

Decision-makingconsensus with qualification

after discussion, if no consensus emerges, leader makes decision based on the advice of the relevant functional manager

very strong or very weak leaders are bad for new ventures


Avoid the death spiral of conflict in start-up teams

Task conflict i.e.

disagreements related to the task at hand

Inter-personal conflict

i.e.

political behaviors

X

Intra-group trust

Effective decision-making Processes


Financing

Personal Funds and Sweat Equity

3Fs: Family, Friends and Foolsmost common source of funds. Should treat as other equity financing. Be honest about risk involved. It is easy to get but psychologically hard to manage

Business Angels, Venture CapitalVery important source of funding for new ventures

Bank Loan/Leasingit is difficult to get (requires assets and often personal guarantees are asked) but preserves your equity ownership

How to finance initial capital?(do not forget working capital requirements and cushion)


FinancingHow to finance initial capital?

(do not forget working capital requirements and cushion)C

ASH

FL

OW


Business Angels

• At startup level

• Ammounts from € 25k to €500k

• Smart Money

Associação Portuguesa dos Business Angels (APBA)http://www.apba.pt/


Public Venture Capital

• At startup level

• Ammounts from <€100k to >€1M

http://www.inovcapital.pt/


How About traditional Venture Capital?

• More common at later stages of start-up development

• Large amounts. Usually €1M to €10M

• Traditionally focused on high-technology firms in capital intensive sectors (IT, telecommunications, biotechnology, medical devices) which target large markets, have defensible IP, and are easily scalable. Nowadays a bit broader.

• Available to experienced and/or well-connected entrepreneurs

• Less frequent than what you may think from the news: only 1 in 500 newly created ventures is appropriate for VC funding

http://www.es-ventures.com/http://tt.ist.utl.pt/inovacao-e-empreendedorismo/istart-i/


How Venture Financing Works

Pre-money valuation: x 600k

New equity investment: y 200k

Post-money valuation: x+y 800k

% of capital owned by new investors: y/(x+y) 25%

Key for entrepreneurs is achieving high pre-money valuation!

Entrepreneurs need to demonstrate credibility and commitment, and convince potential

stakeholders of venture’s viability


Softare Startups in Portugal

Software startups have lower capital requirements

But are not considered “high Growth”


Bootstrapping

Do not borrow to cover expenses!

Do not give personal guaranties!

Strategy of lowering capital requirements to launch business by making other parties

commit to the venture

Bank Debt is bad!


Survival Guide to Bootstrapping

Free work from Founders

Share office/work from someone’s garage

A money-giving project is a good project

Borrow from the people who have most interest that you succeed

Your SuppliersYour Clients

Go to market as fast and cheapest as possible increase your experience and market knowledge

Leverage partner resources whenever possible


Above all

Don’t be afraid to fail


References

J.A. Timmons. New Venture Creation: Entrepreneurship for the 21st Century. Fourth edition. Irwin Press, Burr Ridge, IL, 1994.

Seth Godin. The Bootstrapper’s Bible. 2004. http://www.changethis.com/8.BootstrappersBible

Special thanks to

Filipe Santos,Professor of Entrepreneurship,

INSEAD, France

topics on game developers - ulisboa · opportunity obsession tolerance of risk and uncertainty...

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