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Crowdfunding for Gaming Startups: Interview with Fig CEO Justin Bailey
You know that when someone is able to raise $55,000 on a Kickstarter campaign for potato salad, we have reached peak-crowdfunding craziness.
But just because the campaigns on Kickstarter and Indiegogo seem to be getting more absurd and less beneficial to both backers and startups doesn’t mean that crowdfunding — as a fundraising and market gauging mechanism — has become less effective.
Take gaming as an example: The founders at Fig, a NextView-backed company, see huge opportunity for video game startups to use crowdfunding to their advantage, so much so that they launched the company around exactly that idea.
And this past Friday, Double Fine Productions began a new campaign on the Fig platform for the game Psychonauts 2. The sequel to an earlier Double Fine game, the Psychonauts 2 effort has already raised $2 million, more than halfway to its $3.3 million goal.
The Fig founding team consists of gaming veterans from Triple-A and independent developers such as Double Fine, inXile, and Obsidian, among others, and the platform allows game studios to raise funding through both a fan rewards system — similar to Kickstarter — and equity funding from qualified investors. Below, we hear from Fig CEO Justin Bailey, who offers his insights on why a crowdfunding campaign is a good fit for many gaming startups, in addition to sharing a couple foundational rules everyone should follow when going about group fundraising efforts.
So how did Fig, as a gaming industry-specific crowdfunding platform, come about?
As part of Double Fine, under Tim Schafer, we were responsible for one of the biggest Kickstarter campaigns, which became the game Broken Age. That really kicked off the video game crowdfunding thing.
We also wanted to be able to use the JOBS Act and give equity to backers. But Kickstarter didn’t want to support equity-based crowdfunding, and they weren’t amenable to making a site customizable just to games.
There was a group of us who knew each other — I’d even say it was a coalition of gaming industry studios — and we’d all done multimillion dollar Kickstarters. We had been comparing notes and asking each other for advice on campaigns. Eventually we found that Kickstarter campaigns have about a 5 to 6 percent success rate.
We also found that that the gaming companies that made up that 5 to 6 percent success rate had all come through us.
Recognizing that much of this is case by case, are there any basic principles that other gaming startups should think about before trying a crowdfunding platform?
I believe crowdfunding is the solution for many companies, not just in the gaming space. Anyone doing crowdfunding should do two things: First, they should go talk to people who have done it successfully before, and learn what they should and shouldn’t do. Second, they just have to try it and see if crowdfunding is right for their project. Raising money this way may not be right for everybody, and that’s okay.
Why is the gaming industry in particular so aligned with crowdfunding?
I look at what we are doing with Fig as a new way of game financing. I think it will become the de facto way that games can finance the future.
What we are doing is older than crowdfunding. If you look at the crowd investing or crowd support of older entertainment entities — even going back to Broadway plays a hundred years ago — the shows would find backers and investors who would do support a production for a percentage of the box office.
Something similar happened with the emergence of film financing about 40 years ago. A lot of things that were in play in Hollywood then, with basically all the innovation coming from independent studios, is happening with gaming today. Many of the most well-known directors and franchises, like Star Trek, Spielberg, and Scorsese worked with lower budgets and utilized film financing
Many people have compared what is happening with video game development today to movie production. Is the financing of these projects really the same?
In the gaming industry, we are seeing a pattern today where traditional publishers are doing what big movie studios had done in the past, and they are only fronting big budget projects and won’t take any chances on new ideas. And so all these independent creators are gaining followings.
We want to allow for the ability to invest in more video games, like the people who backed the early Broadway shows or the investors in independent films.
The word “backers” is used by Kickstarter, but I believe that isn’t quite accurate. Backers used to be the people who financially supported a play. The word has kind of gotten perverted to where, now, a backer is just giving free money without really expecting much in return. That’s really not the root of the word.
We are going back to its truest form.