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February 21, 2007
In response to MMO != VC
Over on Terra Nova.com, Dan Hunter commented on the sad state of funding for online games.
It frustrated me because the MMO development as a whole suffers from the scarcity of funding. Since I consult for one of the few venture groups that actually funds MMOs, I get a chance to talk to MMO developers. Specifically, I spend a lot of time hearing one thing: “VCs and I.Banks don’t get us.” I am a gamer. I want people to understand the industry. I want my colleagues to get the MMO industry, so they fund good games.
Obviously, this topic keenly interests me, as Heatwave is considering taking on some external funding in the near future.
Part of the problem is that MMO Companies aren't great at having a strong business plan that VC's can understand. I think this is widely true of the game industry in general. It's also a hit driven business and unlikely to support as many companies as the forecasted market numbers may indicate at first blush.
To complicate matters, it's really really difficult to find developers that actually have all of the right components put together for a likely successful liquidation event. I can't fathom the number of online games that I evaluated last year that were non-starters within 15 minutes. Wrong idea, wrong staff, wrong business plan, wrong technology...
MMOGs are hard. Perhaps the hardest thing to do in this business. I imagine it's a scary place for traditional VC's and banks to find success. I can only think of one major exit of an MMO company, and that's EA's purchase of Mythic. I'm sure there are others, and yes the industry is young.
In all honesty, I've assumed from the beginning that we'd get our funding from non-traditional sources. Mostly because of the kinds of stories many game developers tell of the difficulties associated with traditional VC's. Control issues and external pressures don't always mesh well with a highly creative, iterative process. So it's possible the problem goes both ways. MMO companies may not want VC funding in the first place.
Well, anyway, there's my perspective. I too bemoan the lack of funding in the game industry, but I also believe that it takes a special kind of backer to understand what it takes to find success in the MMO business. If you know any of those folks, feel free to send 'em my way ;).
Posted by SunSword at February 21, 2007 01:46 AM
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