Los Angeles Convention Center — June 20, 2016

Gambitious Co-Founder On Why Crowdfunding Is Broken

by John Gaudiosi

Gambitious Digital Entertainment co-founder, Mike Wilson, is making his 22nd annual pilgrimage to E3 this year. The long-time game industry veteran is wearing two hats at the show, also serving as co-founder of Devolver Digital. Devolver will be set up in trailers in a parking lot across the street from the Los Angeles Convention Center, and is also hosting Gambitious for its meetings. Additionally, both companies are championing independent games. Wilson talks to [a]listdaily about his newest company and explains why Gambitious’ approach is best for both developers and investors in this exclusive interview.

Where did the idea for Gambitious come from?

We’ve been thinking about this for many years, even before we started funding in 2013. We started in 2012 when Obama signed the JOBS Act, funded our first game (Train Fever) in 2013, and started publishing in fall of 2014. We’ve funded 11 games to date and have released seven.

What differentiates Gambitious from Fig and other crowdfunding initiatives?

We’re not doing public-facing crowdfunding. We’re working with 10, 20, or 50 accredited investors at a time who are putting up $2,500 or more each for any given game project.

We’re slowly building out a network of accredited, or “sophisticated” (as they say in other parts of the world), new game investors. Hard Reset: Redux just became the fifth of seven titles shipped thus far to earn out in under a month, and it’s the third of those to earn out in under a week.

I feel like we’re the only ones trying to look out for these new game investors. Everyone else is trying to figure out how to get just money from the general public.

Why is your approach good for developers?

It’s too much to ask up and coming indie developers try to make a great game and also deal with a bunch of investors, not just as a community, but as partners with a legal responsibility to report and pay their dividends out according to regulations.

It’s not that they are dumb or can’t handle money, but that isn’t and shouldn’t be their focus as a small team trying to do a very hard thing in the first place.

Also, a public-facing equity crowdfunding raise requires a huge investment into legal fees (as much as $100,000 per project) and setting up all the entities and mechanisms currently required. This is an unworkable amount of money for indies making games whose total budget is under $1 million. It’s also just a waste of money versus other ways to get funding. This is part of why you see other platforms having great go for bigger raises, which also often means the developer needs to already be famous. And if they are famous, established developers and/or one working with a well-established IP, it begs the question of why they can’t just get funded from the existing “smart money” investing in games, i.e. publishers and VC’s.

We are focusing on indies who really need a path to funding, along with some support from a publisher. And for these smaller projects to make sense, the publisher has to be operating in a similarly “indie” way. These are not projects that are big enough to feed old-school overhead-intensive publishing machines.

What about companies like Fig, which focus on well-known game developers to help generate awareness and funding?

We’re not focusing on famous game developers. We feel like the indies who need this sort of help and friendly financing, also often need mentoring from a publisher. That’s a huge part of our job. It’s like we have two separate pieces of the same company. We run the business like an indie game publisher, and then another team is going out and raising the money behind each game.

Will you ever allow average people to invest in these games?

The rules came out May 16 that allows people to do that. We’re just not focusing on that. We’re letting the dust settle on that to see what happens with the other companies. As I mentioned, it’s still pretty cumbersome.

We think there are plenty of people in the world who can better afford to possibly lose money on games—the same types of people who buy stocks or mutual funds. We’d rather let other people make the mistakes in public equity crowdfunding first, to put it bluntly.

You mentioned two games haven’t made back their money yet. What are they?

Our worst case is Breach & Clear: Deadline. It’s the one-year anniversary and it’s at 35 percent return on investment. That’s pretty good as a “worst case scenario,” as it still gave you one-third of your investment back. Normally, when an investment goes bad you get nothing back. We still have four years to bundle and promote the game to get that number up to 65 percent.

Don’t get me wrong, we’re still mad about it. Devolver has a track record of not losing money on any games. And Gambitious wants to be just as successful.

What’s your company’s best success story so far?

Train Fever is up to 200 percent return and there’s still another three years to go after September.

But the biggest difference is our games are actually shipping. There are no elaborate schemes of shares being exchanged and shell companies being set up, and no sharing of equity or IP from the developer.

I don’t want 1,000 or 100 partners in a legal entity. We employ pure profit sharing. Our investors receive the exact same profit share as we do as individual investors.

Why have we seen so many high-profile games crowdfund huge amounts, only to not ship?

Everyone knows the Star Citizen story all too well. Even great developers like Double Fine blew through four times the money they raised and still didn’t finish the game on time. It’s not like they’re bad people. But you need to pay out on milestones as people achieve goals, or deadlines will never be hit. It’s also still the case where people are not raising all the money they actually need—they’re trying to raise what they think they can. And then they try to find a publisher to pay for the rest.

What’s your strategy for building franchises?

Train Fever is still selling at full price on Steam and we’re coming out with a sequel this September. When they came back for the sequel we raised that money in less than a week. We’re not into tying up studios to long-term or sequel deals. We’re trying to do what Devolver does; making it a frictionless experience that makes developers want to come back.

How are early investors liking it?

If you gave me $5,000 and I give you back $6,000 and mailbox money for five years of profit participation from the date of the original shipment, it’s not a bad deal. You earn out immediately because the publisher is the one paying out the dividends, and like pretty much any investment in entertainment, the investors get repaid first for taking the risk.

After a while, you have this catalog of 10 games, and maybe eight of those are hits and you get mailbox money out of them. Some people are doing it because they dig games, and others are just taking some money and looking at it as an investment.

What’s the involvement of Gambitious and Devolver executives in these deals?

Gambitious and Devolver are investing in each game, and several of the principles of each company are also investing in the games individually. We’re on the same side of the table to fight to get that money back to the investors because we are them, and we have same terms as they do. And obviously, we’re trying to provide a very positive experience to those new to investing in games.

What’s your latest investment?

Crush Your Enemies, which is a fast-paced, tile-based RTS from Polish developer Vile Monarch, shipping on PC and mobile on July 13 was the most recently closed investment raise, and we’ll be announcing another one next week that just closed.

Back to News