This article, written by AJ Glasser was first published on Inside Network on July 13, 2011.
Late yesterday at GamesBeat in San Francisco, game company accelerator YetiZen led a panel with top social and mobile game investors on the evolving dynamic of funding in the space. Norwest Venture Partners’ Tim Chang, Digi-Capital Managing Director Tim Merel and TinyCo CEO Suli Ali characterize an industry that’s both converging and expanding on a global scale.
“[Developers] need to think globally from day one,” says Merel. As an investor, he looks for developers that either offer a portfolio of existing games or that already have access to various channels in different countries. These companies have proven traction and very likely also have plans for multiple revenue streams beyond in-game virtual goods sales. He describes the potential behind Rovio’s Angry Birds, which now has a line of t-shirts and stuffed animals generating revenues in addition to actual paid downloads of the game. He also describes the nature of game concepts that can succeed in international markets versus those that have limited appeal due to cultural association; like the various Chinese multiplayer games based on the Three Kingdoms historical period that fail to find traction with Western audiences.
“There is a danger of false positives,” warns Chang. He talks about how many developers create a “red herring” for investors by basing annual revenue expectations on peak traffic months when there are no guarantees that the developer can retain those users, let alone monetize them. This is especially true of copycat games or developers that reskin their original game without investing resources into distribution channels.