Taking it to the next level – VGames VC on raising capital for your games
The business behind driving investing and raising capital is inherently high risk, but it also comes with high reward. We met with VGames’ principal Daniel Mironov to pull back the curtain on raising capital in the gaming industry.
VGames is a venture capital fund based out of Tel Aviv, Israel, and invests exclusively in gaming. Daniel and his partner Eitan both worked at Google and Facebook in the gaming sectors. With their experience and expertise in growing games, they teamed up to build VGames.
Daniel sheds light on how it’s done, what to expect and how to land capital for your gaming business.
1. As a VC that invests in game studios and the content of the game – how do you evaluate content for a financial investment?
We invest in teams that build content. In fact, that’s the most important aspect of our opportunity evaluation. We need to see that a particular founding team has the tools, as well as the experience, motivation, and the right ambition to deliver on their plan. We want to make sure that they are the right people to execute this plan. It’s not a decision based solely on the team, but when we evaluate their content we need to understand their benchmarks, such as:
What are the key bets?
What are they good at?
How do they weigh up against competitors?
How do they manage their community of players?
Can they create virality?
These are just a few of the initial questions that we ask when an opportunity to invest arises.
In general, the team is probably not going to change, but a game can change a lot. That’s why we look most importantly to the team, they are the most consistent factor in this journey.
2. When an opportunity lands on your desk, how mature is the product when VGames gets involved?
There are a number of different scenarios that land on our table, and VGames is unique in that we invest across all stages. We have founders who reach out to us with a freshly established team, looking to secure their first-round early on. In most cases, they are at the pre-seed stage and have just a deck or product demo to present. Others already have a playable demo, have deployed a soft launch and surfaced initial metrics. In these cases, founding teams are in search of a big injection of capital to accelerate growth. Some are already in the growth stage and are looking for more opportunities. These founders have already generated revenue and want to drive their growth faster, with the support of a VC.
Each opportunity for investment is unique in its own way – from the product to the team itself – we treat each one with proper attention and intrigue.
We always ask companies “what are you looking for, aside from capital? We are consistently trying to think of what we can give to the company and if our expertise is what will help them grow.
3. What do the typical deal flows and due diligence process at VGames look like?
For us to review an opportunity, we first need an investment deck. If there is interesting potential, we’ll invite the founders to pitch and present their content in more detail. To move forward, we will then ask for a more detailed business plan with any available data, market analysis, and relevant information they already have. With that, we’ll review the data on our side and benchmark it. Lastly, we will turn to references and enquire about their work, progress, and past achievements.
If everything checks out, we’ll extend the term sheets and then proceed to the legal due diligence. When cleared by our legal team, we will send the money.
Don’t be afraid - reach out to VCs. Don’t hold this moment for too long. It’s important to remember that this is a process and long-term relationship. It won’t necessarily lead to investing on the spot.
4. What are the typical mistakes that founders make in the process?
Securing a seed round takes time, preparation, an ambitious team, and a good product. We have seen some common mistakes made by founding teams along the way – ones that should be kept in mind before looking for your next funding opportunity.
Think long-term. Before pitching, founders need to have a clear plan or vision of what success looks like for them. They could have ambitious goals, but some just want to deploy their product as soon as possible, without focusing on the long-term forecast or bigger picture.
How much? Some founders might have the vision, but they don’t know how much they want to raise and why they chose a particular amount. Understanding your resources and capabilities helps to shape these decisions, but it’s key to come prepared and know exactly what your goals are.
Don’t fall in love with your product – pivots happen. There are also founders that focus too much on that one product and don’t offer a vision for alternatives. Not all games or projects are an instant success. Having the flexibility, agility, and plan B or C to pivot is crucial when building your pitch and your plan.
In an early-stage, no one knows if it will be successful or not. Some double down and go all in on this one game. As the saying goes - don’t fall in love with your product. There are times when you need to actually kill it.
Once developers and game studios understand their own needs, and learn what investors are looking for – their next hit game could be closer than they think.