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Game companies as an investment 4.9.2012


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Presentation given at game seminar 4.9.2012 at OAMK. Talks about investors different business models and their wants when looking at game companies as investment target.

Published in: Economy & Finance, Business
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Game companies as an investment 4.9.2012

  1. 1. Game companies as an investment
  2. 2. Who we are, and what we doBUTTERFLY VENTURES
  3. 3. The TeamPartners Board of Directors Matti Kanninen Jukka Mäkinen managing partner Chairman of the Board Juho Risku partner, co-founder Jari Pasanen Member of the Board Antti Kosunen partner, co-founder, and Board member
  4. 4. Investing from pre‐seed to follow‐upUnqualified Qualified pre‐seed/seed Qualified expansion Financed – ExitAccelerating ”TechStars”  Scouting Go fast forward  Operationalization Follow or fail fast Scope of main interestStartUp Proof of  Idea Basics Preparation Scale‐up concept 15‐90 k€ 200‐400 k€ 1‐2 M€ xx M€Financing First time  Follow up  Investment Exit Investment Σ < 500 k€ Σ < 2.5 M€
  5. 5. What early stage investors look for  in a gaming companies?
  6. 6. Innovation, creativity.
  7. 7. Great gaming experiences.
  8. 8. All the investors are not the same.
  9. 9. Two models for venture financingEXIT VS. CASH FLOW
  10. 10. Exit driven model Cash from stock sale Expectations Exit 10 * Valuation Investor • Money • ExpertiseInvestor • Money • Expertise Cash flow Company Valuation
  11. 11. Exit driven startup• Has a very large market potential – Most of the potential not realized in a form of  positive cash flow at the exit• Is easily scalable, usually globally – Smart customer acquisition logic built into  business model is a plus• Has strong IPRs or a business model that  accumulates value over time – Customer retention can be clearly articulated
  12. 12. Cash flow driven model Product launch End of life 1‐x% cash flow Company• IPRs (value) Product x • Money • Expertise Investor x% cash flow = 10 * money invested
  13. 13. Cash flow driven product• Requires less capital over life cycle, can accept  more market behavior related risk• Has well defined, easy to understand product and  clear simple business model• Has short time to market  – Straight forward development, no technology related  risk• Generates large positive cash flow fast – Has short sales cycle – Are usually consumer market products
  14. 14. Most game companies fall into “cash  flow model” ‐category
  15. 15. How to choose the right modelExit driven model Cash flow driven model• The grand vision is large  • Company is based on idea  enough to fill the purpose  of multiple products of the company alone • IPRs are mostly creative • IPRs are patents or  content based and different  accumulated during longer  in each product period of use (information) • Founders like to keep the • Founders ready to sell the  options open for future company or IPO is a realistic  • Successful product can be  option used as a future reference
  16. 16. Venture capital is expensive.
  17. 17. What we’re looking for and whyTHE RIGHT KIND OF STARTUP
  18. 18. Positive black swans.
  19. 19. Scale of opportunity.
  20. 20. Customer acquisition.
  21. 21. Customer retention.
  22. 22. Startups where in addition to money  we can add value.
  23. 23. Investment criteria• Needs to have or plan to have some  operations in the Oulu region• It’s scalable• There’s global demand and market• Driven by one of the market trends• IPRs are involved• There’s the Team
  24. 24. We like to get involved early on, preferably well before you need the  money.
  25. 25. Here’s the front line, lets rock!