The half-hearted investment approach

How do investors react to chance meetings with games companies that turn into investment pitches?

In the first of our blog series on reasons that games studios raise money, let’s look at the familiar scenario of a studio running into a possible investor, then asking for money.

Under normal circumstances, approaching investors needs preparation and a strong rationale, but sometimes an opportunity seems to drop in your lap. 

We’ve been there. Perhaps you informally met a seasoned games investor at GDC who made you stop and think about taking up their offer to ‘give me a call if I can help’.

Maybe someone you know offered to introduce you to an old friend who’s now angel investing.

Or perhaps someone you used to work with had a great experience with an investment company which is looking for prospects and has asked if you want to be hooked up.

Do you pull a pitch together, show them around the studio, and start a more serious conversation? 

When I was last in this position, I needed some straight-talking advice:

A good intro is not a good enough reason to raise a round, neither for them nor for your studio.

Their track record and success can be dazzling and their money can be tempting. But their scrutiny can be razor-sharp so you need to be ready.

What investors want to see
Investors will want to hear your rationale for bringing them in. It should be robust and targeted to what they bring as an angel or as a fund, which is never restricted to just the money. 

“We happened to meet” won’t cut it.

Their due diligence into you will almost certainly be more rigorous than a friendly coffee at Gamescom.

Investors tend to know if they’ve found what they’re looking for after a first detailed look, and often very early into a pitch. 

They will ask you why they should invest, where your studio is going, how you will use their funds and so on. A robust and concise pitch deck is an almost inevitable requirement. Financial projections justifying the valuation are a must.

Lasting impression
Going in half-hearted with a less than compelling pitch could leave a lasting impression. We write a lot in these posts about how important that first impression is.

Miss the mark by a long shot and it could be a long time before - if ever - that investor invites you back.

Their judgement about you and your team can have a long shelf life, especially in the pigeonhole marked ‘not for me’.

Funding rounds and the teams seeking funding can “go stale” when pitched and then re-pitched repeatedly with changes as obvious failings are corrected.

‘Going stale’ is the exact expression investors use about a pitch they’ve seen more than twice.

You really do not want to be put in this category, it’s a label that tends to stick. 

Is this really the right time for your studio to raise a round?
You need to stand back, look at your studio and ask what you actually need. Put yourselves in investors’ shoes and ask what they’d like to see before they drop hard cash into a games studio.

They want to see a plan for a company to make great games, build a profitable company, grow its valuation and build a strong team.

So if your financial projections aren’t costed, realistic and showing momentum, again, the answer’s at the very least ‘we’re not ready’.

No sugar coating here - raising finance is an onerous, stressful and time-consuming process.

You could be tied up for months preparing plans, producing forecasts, meeting potential investors, negotiating valuations and wrangling with lawyers. That means whoever is leading the round for your studio will likely have little time to do much else for 3-6 months.

We’re often called in after an investor has taken a look and wants a closer look, which can be 2 or 3 months down the line. CEOs may have met 10 VCs in that space of time, several of which might be interested.

You might read this and not be deterred. 

Strike while the iron is hot and so on…

That’s fine.

Our much repeated advice - Be prepared.

What this means to the investor: Chance meetings or reunions can definitely lead to investment opportunities but any experienced investor will want a well-thought through reason for a company to raise money and a plan for what to do with it. Without these, this could be a waste of their time so they will quickly spot a half-hearted or half-baked pitch. They would far rather talk to you when you’re ready than disappoint you when you’re not prepared.

What this means to the studio: Decide if you really need to raise funds and also whether you are in the right position to raise funds. Look at the alternatives and take a call about timing. If you were lucky and chanced upon an investor just when you were ready to talk to one, knock yourself out. If you don’t have your investment deck, strategy, pitch and forecasts ready, then put that card in your pocket, and follow up with a ‘pleasure to meet you’ email. The investor is probably not going away and you can almost certainly be there when you are ready. They can be your first, friendly port of call when you have everything lined up and ready to pitch.

Key takeaway: Don't blow your chance with a good investor by pitching before you are ready.

Happened to you? Join the discussion with us by commenting below

Sound easy?

No?

It’s not easy but it’s doable with the right advice.

We’re here to help.

You can access some of our products like our Pre-investment checklist (10 reasons to raise money for the first time and when to act on them), 5 ways to plug skills gaps in your top team’s experience, our forthcoming Games Investor Profiles, our Games Investment Deck template (with explanations and advice for creating a strong pitch deck), the Art of the Pitch (10 pitch recommendations to read BEFORE you do your first investor pitch)

You can also book an Investment Deck Review, conduct a Practice Pitch Session with us before you face the investors as well as a range of one to one advice from a team that has reviewed hundreds of games investment pitches.