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TIGSource ForumsDeveloperBusinessAlternative Sources of Funding for Indie Devs
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redpandagames
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« on: February 20, 2011, 07:17:08 AM »

I wanted to post this news submission as a resource for people looking for alternative sources of funding:

Red Panda Games, creator of Bipo: Mystery of the Red Panda, is currently in the process of developing the Curse of Slate Rock Manor, a visual novel game.  After struggling to secure traditional sources of funding, the studio decided to explore social alternatives.  Sites like kickstarter.com and IndieGogo help teams and individuals start small projects by creating a social network of creators and donors.  Creators pitch projects and offer incentives to donors in a reward system that encourages individuals to contribute to projects.  Rewards are limited to only the creators' imagination, and range from special recognition and T-shirts to the immortalization of individuals into game projects.
 
Q:  What kind of funding sources did you explore?
 
A:  We attempted to get traditional business loans from banks and credit unions, but business loans are very difficult to get in a down economy.  We also looked into publishing deals, but we felt that the publishers wanted too much for the small amount of money that we were looking for.  Plus, we really didn't want to give up control over the creative direction of the project.
 
Q: What is your project?
 
A:  The Curse of Slate Rock Manor is a visual novel game that plays like a choose your own adventure book.  The game is about three friends, one of whom goes missing while trying to photograph ghosts in a haunted manor.  The other two decide to investigate after a failed investigation by the police, believing that foul play or something much more mysterious is involved.
 
Q:  Is it possible to make money on a visual novel game?  The market seems very small.
 
A:  Our associates have assured us that it is possible to profit from a visual novel game.  The market is definitely a small niche, but we believe that this niche can be expanded and is a business opportunity.
 
 
You can find the campaign for Red Panda Games and their progress at http://igg.me/p/20036?a=90750&i=shlk.
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Evan Balster
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« Reply #1 on: February 20, 2011, 07:36:43 PM »

Kickstarter's pretty great unless you're centered outside the US.  I assume you are?
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redpandagames
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« Reply #2 on: February 21, 2011, 06:21:39 AM »

Yeah, we're local.  I'm still waiting for my project to be approved on kickstarter.  I think that they may have more traffic than IndieGogo and could be better, but I felt like I needed to get started.
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dongle
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« Reply #3 on: February 24, 2011, 01:23:06 AM »

Getting money from angel investors is weird and I wouldn't necessarily recommend it, unless the angels are well aware of what it means to fund a game studio (FWIW most angels will balk at funding a game studio anyhow).
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Radix
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« Reply #4 on: February 24, 2011, 05:39:48 AM »

All of the bone marrow in your body is worth about US$20,000,000. Just throwing that out there.
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Toom
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« Reply #5 on: February 28, 2011, 10:14:14 AM »

Selling your bone marrow's pretty great unless you're centered outside the US.
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Jay Margalus
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« Reply #6 on: March 03, 2011, 07:58:28 PM »

Kickstarter, and similar sites like the aforementioned IndieGogo, are fantastic resources for indie games, and I'm really glad to see more developers looking to them to help fund their games at the outset.  The entire idea behind thinking of your customers as investors for some reason strikes me as particularly unique, and makes me proud to be part of the community.

On a sidenote, there's also the newly established 8-bit funding, started by the guys from DIYGamer.
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Former co-owner of Lunar Giant Studios (game company), former gamedev faculty at DePaul University. Now: Teaching entrepreneurship and design at Washington & Lee. On Twitter @jaymargalus.
Richard Kain
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« Reply #7 on: March 08, 2011, 09:28:20 AM »

One very effective method is merchandising. The obvious downside of this method is the extra trouble you have to go to in creating and managing physical product. Physical products are far more reliable when it comes to sales, but they are also a much larger bother in managing and distributing them.

The biggest problem with merchandising is that it is reliant on existing branding. So its a much less effective method for small start-ups. It's great for funding sequels, and for expanding a brand beyond the game itself. But you kind of need some marketing in place already before you can jump on merchandising.

Personally, I'm developing on my own time with the most bare-bones budget imaginable. But I recognize that larger projects can't go the same route.
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Jay Margalus
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« Reply #8 on: March 08, 2011, 08:03:40 PM »

Richard,

I agree with you: merchandising is something you need existing branding for to even consider as a source of revenue... and even then, I'm skeptical.  So, I'd like to hear more about that.  The only way I can see most indies making any sort of scratch off of merchandising is through drop-shipping, as holding an inventory is almost completely out of the picture because it leaves your money tied up, when you _absolutely_ need it for other things (like the aforementioned marketing/branding).

I'm not saying it's impossible, I just haven't found a great way to make merchandising work as a revenue stream; we (Lunar Giant) mostly do it just because we want people who love our game to be able to grab a shirt for nerd-pride.  The money we make off of a shirt is barely even worth mentioning.

So, I dunno, I guess I see merch as just extras to give fans of your game to make them happier, not a serious source of revenue.  Maybe I'm not thinking outside the box.
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Richard Kain
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« Reply #9 on: March 09, 2011, 11:45:38 AM »

So, I dunno, I guess I see merch as just extras to give fans of your game to make them happier, not a serious source of revenue.  Maybe I'm not thinking outside the box.

Well, right here we see one problem. The "brand" you establish should never be limited to the game you make. Branding can be extended and expanded in all sorts of ways, outside of whatever originally spawned it. And then of course you should always consider further opportunities to distribute your merch. Sign up and pay for a booth at PAX, and use that as a way to promote your game while simultaneously hocking merch. Sell enough T-shirts at premium prices and you can actually make back the cost of the booth, and the exposure you get will likely improve your game sales while also helping to expand your branding. (which could translate into better future merch sales)

Or perhaps you could host your own mini-convention wherever you are located. If there aren't any major game conventions nearby you won't have any competition. There are any number of clever ways to market your games on the cheap, and expand your brand awareness.

Also remember that you should push your corporate brand as well as just your games. Do what you can to give your company "personality" in the public eye. A lot of companies these days are doing this through on-line videos, web-comics, and podcasts.
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Jay Margalus
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« Reply #10 on: March 09, 2011, 12:21:48 PM »

You're right about branding being more than just about the game you put out.  I also agree that there's some long-term return on shirts and other merch, as they're essentially walking advertisements and expanded branding.  The problem I'm still seeing with your suggestions is one of cash-on-hand, something most indies don't have much of.  I also think you're way overestimating how much merch an indie is able to sell, even at a huge event like PAX.

Numbers breakdown:

A 10x10 booth at PAX, in indie alley, is now up to $1300.  Let's say, for ease of math, that you're selling shirts at that booth.  That means you need inventory on hand.  In bulk, I can get 100 shirts at ~11.50/per, or $1,150.  So now my investment is 1300+1150=2450.  If I sell the shirts at $20, which I think both of us can agree is fairly standard (but on the high end), I'm bringing back in 20.00*100=$2000.  So, I'm out 2450-2000=$450.

Essentially, to break even, you'd need to sell ~130 shirts.  Highly dubious numbers for an indie company, and this isn't even accounting for all of the other expenses accrued in attending a convention and hosting your own booth, which as a conservative guess, would amount to about $5000.  I'd suggest reading this article on Gamasutra, which addresses specifically, at several points, the kind of merchandise sales you can expect as an indie at PAX.  To sum the article up, though, paying off the expenses of a PAX booth with merch is a pipe dream.

So, overall, I'd say that selling shirts is a great way to expand brand and name recognition, but there's no real number you can put on that.  But considering merch an actual revenue stream?  Doubtful unless you're a huge game like Castle Crashers or Minecraft.  If you're an indie looking to sell merch, I would still highly recommend _not_ holding any inventory, and not holding out for hope that you'll make big money on any of it.

EDITED for bad math.
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Former co-owner of Lunar Giant Studios (game company), former gamedev faculty at DePaul University. Now: Teaching entrepreneurship and design at Washington & Lee. On Twitter @jaymargalus.
Richard Kain
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« Reply #11 on: March 09, 2011, 12:42:41 PM »

A fine break-down of the figures. To address the issue of stock-on-hand, you could always try selling merch that is friendlier towards mass storage, such as posters or prints. (a stack of 100 of those will take up much less room than t-shirts, and will most likely have a better profit margin)

But I definitely see your point. Expecting to make it big off of merchandising is most likely unrealistic, and I don't think anyone should jump into that pool right off the bat. I do still believe it is a viable option for a continuous revenue stream once a brand has already been established.

And I do still think you should invest in a PAX booth, even if you aren't expecting to make a profit selling merch. The $1300 will probably be worth it for the exposure and publicity alone.
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dsilvers
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« Reply #12 on: March 31, 2011, 09:25:30 AM »

For those interested in Kickstarter, you can check out the Children of Liberty Kickstarter to see how we've been doing.

Basically, Kickstarter has been working for great for us at Lantana! If you have a project you're passionate about, can put together a good 3-4 minute video, and can think of some creative rewards for donators (hint: people love being able to buy the game early and get in on the beta too) then it's just a matter of finding the exposure to get people to donate. We were lucky enough to get picked up by GameSetWatch, IndieGames, and even the Kickstarter Blog itself, and are at 82% of the minimum funding we're looking for in under a month.

Keep in mind, though, that Kickstarter has some risks, like any form of funding. The main risk being that it's all or none, so if you don't hit what you're looking for, you're not going to get anything at all. This is where your rewards come in. Make sure they scale in awesomeness with the price of the donation, and make sure it's stuff you can afford to do (remember that posters, t-shirts, and whatnot cost money too, and you need to have money around to actually fund your game). Once you have it up, make sure to send the link around to your contact list and hope they do the same, and never be afraid to email the link to the press with a quick paragraph on what your game is.
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