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.

1. Game companies as an investment

2. Who we are, and what we do
BUTTERFLY VENTURES

3. The Team
Partners 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. Investing from pre‐seed to follow‐up
Unqualified Qualified pre‐seed/seed Qualified expansion Financed – Exit
Accelerating
”TechStars”
Scouting Go fast forward Operationalization Follow
or fail fast
Scope of main interest
StartUp
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. What early stage investors look for
in a gaming companies?

6. Innovation, creativity.

7. Great gaming experiences.

8. All the investors are not the same.

9. Two models for venture financing
EXIT VS. CASH FLOW

10. Exit driven model
Cash from stock sale
Expectations
Exit 10 * Valuation
Investor
• Money
• Expertise
Investor
• Money
• Expertise
Cash flow
Company Valuation

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. 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. 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. Most game companies fall into “cash
flow model” ‐category

15. How to choose the right model
Exit 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. Venture capital is expensive.

17. What we’re looking for and why
THE RIGHT KIND OF STARTUP

18. Positive black swans.

19. Scale of opportunity.

20. Customer acquisition.

21. Customer retention.

22. Startups where in addition to money
we can add value.

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. We like to get involved early on,
preferably well before you need the
money.

25. Here’s the front line, lets rock!