Overcoming Funding Challenges in the Era of Data-Driven Investing

The start of 2024 has been particularly challenging for studios seeking funding, with venture capital funds and publishers being cautious. However, the atmosphere at GDC was more positive, with new deals announced by publishers and VC funds. While funding is available, developers now face the added burden of proving their game's potential audience. This requires evidence, or traction, beyond a great prototype and strong team. The type of evidence needed varies, but key factors include social proof, community engagement, and funnel metrics. Social proof encompasses indicators like social media followers, trailer views, and festival selections. Community engagement involves building an active community around the game, such as through Discord, playtesting, and streaming. Funnel metrics analyze the cost and efficiency of guiding users through the awareness, evaluation, and purchase process. Each of these areas requires in-depth exploration, but understanding them is crucial for de-risking projects and attracting investors. There's a sweet spot where generating enough evidence creates buzz and leads to the 'deal zone.' For those seeking venture funding, it's essential to remember that company equity-level funding is best suited for multiplayer GaaS and free-to-play projects with exponential growth potential. Others should focus on project financing options like publishers, project funds, or Kickstarter. The first investor is always the developer themselves, and subsequent funding rounds require progressively more evidence. The cycle involves using current investors' funds to generate evidence for the next, larger investor. Speed-to-evidence is critical for studios seeking external funding, as making progress on the game build alone is often insufficient. The Games Capital Summit in May offers an opportunity for companies to pitch to over 20 venture investors. The deadline for applications is April 26.