Fundraising 101 for the Game Sector

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Fundraising 101 for the Game Sector Fundraising 101 for the Game Sector Paul Heydon Managing Director, Avista Partners Who am I? Paul Heydon ● Advisor and Investor based in London for over 13 years ● Managing Director Strong game sector experience, knowledge and relationships Avista Partners ● Advised on transactions in the game sector with a total value of over $1 billion advising many companies including: & ● Shareholder in: Partner London Venture Partners 2 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Agenda ● VC’s and games: summary ● Fastest growing game sector ● Why raise money ● Funding readiness ● How much to raise ● Types of potential investors ● How to raise the funding 3 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved VC’s are investing where in games? ●Over $2.1bn raised in VC funds in 2011 globally Outsourcing PC/Console Game 0.5% 0.0% Hardware 3.5% Mobile 11.6% Game Technology 11.9% Online 63.0% Payment/ Offer/ Analytics 9.2% Source: Capital IQ, Company Filings, Brokers & Press 4 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved ●$2.1bn......wow!.......thats a lot of money ●How compare to previous years? 5 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Historical Global Fundraising (USD$ millions) 2,500.0 $8.4bn raised since 1997; 2,000.0 $2.1bn in 2011 is 25% of that 1,500.0 1,000.0 500.0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 North America Europe Asia/ Pacific Source: Capital IQ, Company Filings,Source: Brokers Capital & PressIQ, Company Filings, Brokers & Press 6 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved ●Why are VC’s investing so much now? 7 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Global Exits/IPO’s in Game Sector (USD$ millions) 20,000.0 18,000.0 $38.9bn value created for VC/PE 16,000.0 investors and/or founders since 1997; 14,000.0 47% of that was generated in 2011 12,000.0 10,000.0 This is 8,000.0 why! 6,000.0 4,000.0 2,000.0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 North America Europe Asia/ Pacific Source: Capital IQ, Company Filings, Brokers & Press 8 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved What is the fastest growing game sector? 9 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved ●Mobile! ●Ever heard of: ● Draw Something? ● Scaled to 10m+ DAU/ 35m+ MAU in 6 weeks ● Led to $183m acquisition of OMGPOP by Zynga. ● Deal went from 1st call to close in < 3 weeks 10 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Mobile Game Market Size (Billions $ USD) $35.0 $31.9 $30.0 CAGR 28.5% $25.0 $20.0 $15.0 $11.7 $10.0 $5.0 $0.0 2012 2016 $31.9 bn total addressable market for Mobile Games by 2016 Source: Gartner, IDC, Magid, Flurry & Goldman Sachs research estimates from "Mobile Monetization: Does the shift in traffic pay?" by Goldman Sachs June 4, 2012 11 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved #1 Activity on Mobile is Games! 12 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Mobile Game Universe Gree DeNA The9 Mobile 24mas EA Mobile CMGE Gameloft Gungho HandyGames KongZhong G5 Entertainment Animoca Bigfish Mobile NHN Mobile Games Papaya Mobile Mobicle Itsmy Mominis Magmic Digital Chocolate Most Diverse This chart has 240+ companies with $8.4 bn+ in annual revenue Herocraft Synphonie Bulkypix Portfolio Diversity Glu Mobile Voltage BoosterMedia Com2us Nijibox Ourpalm Sunstorm Interactive Warner Bros. Gamevil Magma Mobile Cyberagent Mobile Ateam WillArk Tylted Nexon Mobile Dwango Sega Mobile Neon Play Capcom Mobile Storm8 Tencent Games Neowiz Mobile JNJ Mobile Kairosoft Backflip Studios LunagamesAstraware Vivid Games Tecmo Koei Mobile Square Enix Mobile Alawar Mobile Andamul Jakyl Tequila Mobile Outfit7 Big Blue Bubble IUGO Cobra Mobile MobilityWare Namco Bandai Mobile Playfirst Gloops Green Mobile Gumi Zynga Mobile Crescent Moon Polarbit Gogii Games Crooz Disney Mobile Games Fishlabs Game Insight Ludia Gameprom Droidhen Colorbox Optime AceSoftware Viral Pocket Gems Ubisoft Mobile SGN Mobile FDG Realnetworks Games Lima Sky TekunodoNimbleBit Pictosoft Game Circus Fluik XMG StudioBoyaa Deemedya Revo Solutions Flipside5 King Mobile Mutant Games Imangi Studios Mixi Ayopa Games Top Free Games Gameduell Mobile App Minis Illusion Labs Klab Rolocule Games Halfbrick0.9 Studios Full Fat Hexage Gamerizon Adways Nubee Zenimax Mobile Kamagames NcSoft MobileBooyah The Mobile GamerSkyvu Future Games of LondonTinyCo Craneball Studios MunkyFun Infinity Pocket Naturalmotion Madfinger Games Breaktime StudiosKieffer Bros.Capybara TouchtenCybird Drecom DistinctDev Crowdstar Vostu Mobile Appy EntertainmentiFree Studio Mountain0.6 Sheep Supercell Spacetime Studios On5 6 waves DragonplayMobile PearlinPalm Creative MobileChukong Netdragon Team17 Activision Mobile Kronos GamesCgmatic Patchwork Games Pixowl Mozat Rovio JCE Cave Mobile Haypi YedangOnline Mobile Perblue Shanda Mobile SimogoC4M Mika MobileFresh GamesRubicon AstepgameMachineZone Take Two Mobile Caesars Mobile Snappy Touch Bolt Creativemobcast The Playforge Tagplay Hoolai Game Rodeo Games Zacozaco Matt Rix0.1 Mediocre0.1 Games Halfbot Something Big Asobism Epic Mobile Tiger StylePerfect World Funzio Muse BionicGames Panda Gamania GamesA Thinking Happylatte Ape Company 100 Changyou Mobile Red Robot Labs Aspyr Media Game Oven Studios Viwawa Robot Invader Wemade Mobile Media.VisionUppercut Games Grey Area Kabam Mobile Bertheussen IT Happy Elements Mojang ZeptoLab CygamesCJ E&M Netmarble Mobile Phoenix Age Least Diverse Press HighlinePlay Aps GamesBuzz Monkey LuckyLabs CAVE Powerhead GamesGet Set GamesBest Cool Fun Games Spilt Milk StudiosNordcurrent Abzorba Games On-5 Cytech Spooky House Studios Playlithium 3 SprocketsGodzilab Silvertree MediaPunchbox Twiitch Casual to Hardcore Focus Casual Mokus Games Wooga Mobile Geisha Tokyo Entertainment Hardcore © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved 13 Game sector is Big ●VC’s want Big exits with Big returns within 5-10 years ●Game sector is Big ● $94bn total market cap for all public companies ● $2.1bn funds raised in 2011 ● $18bn+ total Exits/ IPO’s in 2011 ●Sector is hot now thanks to Nexon ($6.3bn mkt cap), DeNA ($4bn mkt cap) & Gree ($4.4bn mkt cap) 14 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Largest Europe IPOs/ Exit Exit/ IPO Deal Value (USD$ millions) 700 600 Bigpoint 500 Astrum 400 Playfish Rare TT Games 300 SN Systems 200 Digital Bros Mental Images Gameloft Eidos Codemasters Bizarre Creations Scoreloop 100 Funcom Bigpoint PlayJam Criterion Mindscape Weka Entertainment 0 Jan/00 Jan/01 Jan/02 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Total Value Creation: $5.3bn in Europe since 1997 Source: Capital IQ, Company Filings, Brokers & Press 15 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Why raise money? 16 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Wrong Answer ●Buy a Ferrari 17 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Interesting Answers ●to hire people/ management team ●to start a company ●to acquire a company ●to make a great game 18 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Best Answers ●To build the most profitable game company ●To scale my company as fast as possible ●Want an investor whom can bring money and value add ●To disrupt the game sector with our new technology or games; change the world ●To build the best game publishing platform ●To be the biggest game company globally ●Think Very Big! 19 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Use of funds ●Good uses: ● Recruit best talent ● Accelerate growth with marketing campaigns & customer acquisition ● Build a diversified game portfolio and more content for current games ● Take some risks without worrying about cash flow constantly ●Bad uses: ● Pay off mortgage or debt ● Tired of low salary ● Build a cool game 20 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Readiness to raise money Your company should have most if not all of the following: Content Already developed one great game or more? Diversified More than one game now or in your future pipeline? Portfolio Financials Growing revenues? Profitable now or within 12 months? Cash flow positive now or within 12 months? Management Mgmt team in place now or how soon? Strong track record? Customers/ Signed deals with strategic customers or partners? How many strategic deals Partners in pipeline? Business Is business model unique yet scalable? Model Growing DAU, MAU, DARPAU, ARPU & ARPPU, Lifetime, Lifetime Value, Cohorts, Analytics K-factor? Diversified playing & paying user base amongst multiple countries 21 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Which Type of Investors ● Round size and purpose will determine potential investors to approach ●Seed (< €2m) - angel investors, strategic investors, govt. funding, crowdfunding sites, incubators and select VC’s ●Early Stage/ Series A (€2m- 10m) - VC’s & strategic investors ●Growth Stage/ Series B+ (> €10m) – VC’s(growth equity), private equity and strategic investors 22 © 2012 Avista Partners LLP Confidential and Proprietary, all rights reserved Other considerations ● #1
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