Start of Something Special
|by Pavel Barter
Enterprise Ireland's Competitive Start Fund, which is currently seeking applications, offers a 50,000 investment to budding game developers hoping to take their business to the next level. How can a business secure the investment? What are Enterprise Ireland looking for? And how are participating businesses faring? Pavel Barter looks for answers.
Paddy Murphy felt as though he had hit a brick wall. Open Emotion Studios, his Limerick-based business, had released its first PSP Mini, Mad Blocker Alpha, and was starting to make money. The studio was on the brink of finishing another game, but their ambitions to graduate to PlayStation Network, PlayStation Vita, or PC platforms such as Steam, were thwarted by financial realities. "Even though we had revenue coming in, we realised the jump, from where we were to those platforms, was huge," recalls the developer.
Then, in March 2011, at the Games Fleadh in Thurles, he heard about Enterprise Ireland's Competitive Start Fund. Murphy and his colleagues applied for the award; by mid-May, they had 50,000 to help develop the business. "The Competitive Start Fund allowed us to be a bit more relaxed about things, get equipment, new staff, and also go to GDC Europe." At the games developer conference, Open Emotion secured a deal with a Swedish publisher to develop four PC games over two years. "We couldn't have got that publishing deal if we hadn't got the Start Fund," says Murphy.
Some of Open Emotion Studios at GDC Europe [L-R] Colm English (Lead Programmer, CTO and Co-Founder), Darragh Jennings (Senior Programmer, Head of Research and Development), Eoghan O Donovan (Senior Programmer, Managing Director of Open Emotion Studios Dublin), Manuel Honegger (Programming Intern from University of Limerick), Mike Naughton (Lead Artist, Co-Founder and Managing Director of Open Emotion Studios Tokyo) - In foreground on one knee - Paddy Murphy (CEO, Sound Director and Co-Founder)
Barry O'Moore, of Cellplay Networks, tells a similar story. The Dublin studio bootstrapped a game for Facebook and undertook consulting work for local companies. But although they were talking to angel investors, they were running out of money fast. In March, 2011, they received an EI investment of 50,000 for a 10% equity stake. O'Moore explains: "It provided us with a few months of funding, to the point where we could develop a prototype for a new game and get out to GDC [in the U.S.]. We pitched to seven or eight publishers and had a deal within two to three weeks. The timing was great for us. The budget for the game is bigger than what we received from Enterprise Ireland, but it's being funded by the publisher. We're busy working on that. We have three people in Dublin and three people in Bucharest."
Enterprise Ireland's [EI] Competitive Start Fund appears tailor-made for developers that lack the financial means to take their business to the next level. In creating the Fund, EI studied programmes such as Y Combinator, an American seed-stage startup funding firm, and consulted with Irish industry specialists, including Dylan Collins (DemonWare, Jolt), Ray Nolan (Worky.com), and Colm Lyon (Realex Payments), as to what kind of fund or input would make a difference to fledgling companies.
Tom Cusack heads EI's startup team for telecoms and digital media. "Ideally, we're looking to attract first-time entrepreneurs or younger entrepreneurs," explains Cusack. "We're looking at companies that have done an initial feasibility, but haven't done any market validation or product market fit. The opportunity is to use the 50k to build a prototype and validate the market. The 50k investment is in two tranches of 25k, against 5k matching funds from the promoter [applicant]."
EI's programme was originally dedicated toward the games and online space. After the initial Internet and Games Competitive Start-up Fund was launched, in late 2010, EI transformed the fund to include the wider Information and Communications Technology (ICT) sector. Cusack says that although other sectors compete for the investment, "50k can achieve a lot more for an internet and games company than it may do for an industrial company."
The fund is open to any team involved in the games industry - console, mobile middleware, QA, etc. Non-registered and non-national individuals can apply, but they must establish a registered company in Ireland prior to investment. "We're looking at companies that have the potential to employ ten or more people and have international revenue in excess of 1m by year three," says Cusack. "You must be pre-trading, or recently commenced trading, and therefore have revenues less than 60,000. You mustn't be involved in any activities that fall within the gambling area. Ultimately, we're looking at companies that have the potential to become long term projects."
What advice does EI give to applicants? "You need to demonstrate that you and your team are willing to put time and focus into it. The application has to demonstrate this. Be clear on the monetisation model. How is this business going to make money? How is it going to show 10 jobs within three years? How is it going to show 1m in exports within three years? I'd suggest, before you submit, to get somebody external to look at it and do a sanity check."
Open Emotion Studios has been in business since late 2009, developing titles such as Goldies Revenge and Ninjamurai. Murphy recommends that applicants have their finances, and commercial and technical milestones, in order. "Hash out figures from your previous sales or estimates," says Murphy. "It's best to be realistic. You get people who say, 'We'll be targeting 12m in two months'. When [the adjudicators] read that, they know that's not going to happen. Be realistic with your figures: 'We might turn over 150,000 this year, 400,000 the next, then over 1m in three to five years. "Use a good accountant, he adds."It might seem costly to some start-ups but it really is invaluable because they'll sit down with you and clarify everything. They will streamline the whole thing."
Cell Play Networks staff
[L-R] Doru Paraschiv, Radu Dita, John O'Kane, Marc Diamond, Barry O'Moore
Barry O'Moore, who is working on an iPad game for his new American publishers, says references help the application. "I started the Dublin subsidiary of Playfirst [San Francisco-based casual games publisher]," says O'Moore. "I had a lot of contacts in the U.S., in the social and mobile games space, and was able to get some of those people to give us references. This was helpful, because it showed we could build relationships with American publishers if EI supported us at an early stage."
As part of the evaluation process, Enterprise Ireland and industry experts - such as Collins, Nolan, and Lyon - study the applications for criteria, such as customer demand, long-term business potential, and product innovation. Companies are scored and ranked. The top 25 are then invited to pitch in front of an evaluation panel.
"It's even more intense than Dragon's Den," says Murphy. "There's a panel of between 12 and 14 people. We came prepared: four of us went up for the pitch. It's only a four-minute pitch, so you have to get your point across quickly. There are another four minutes for questions - anything that's unclear will be asked then. It was a bit daunting, but I'd just come from doing a talk at Games Fleadh in front of 500 students, so it wasn't too bad..."
At the end of the pitching process, 15 of the 25 applicants are selected for funding approval. Successful applicants get a development advisor, access to support programmes, such as Internet Growth Acceleration Programme (iGAP), and access to EI's international offices. "There's also 10 days with a mentor," says Cusack. "That can be face to face or over the phone: whatever works for the promoter. The promoter, as part of their application process, outlines the type of mentor they feel they can benefit from. We work with a panel of over 1000 mentors around the country and match the company with a relevant mentor."
The Competitive Start Fund is more than just an investment, says Murphy: "It's a foot in the door of EI." Successful applicants can also avail of further funding. "There was some confusion that if you've been successful in the Competitive Start Fund, you couldn't come back around for High Potential Start-Up [HPSU] funding," says Cusack. "That's not the case. We would be delighted to see companies who have been selected for Competitive Start Fund, and achieved their milestones, to raise further seed funding, including funding from Enterprise Ireland. It doesn't preclude them from further rounds. To date, some companies, which were selected for the Competitive Start Fund, have been approved for HPSU."
By the end of 2011, Cusack expects to have agreed 55 investments under the Competitive Start Fund. For some developers, giving up 10% equity share is a difficult compromise. Paddy Murphy, however, reckons it's a good deal.
"For the amount of investment, it's very little to give up," he says. "EI are essentially valuing your company at 500,000. A lot of people are very attached to the percentages, but as my accountant once said, 'It's better to have 20% of something than 50% of nothing'. If you feel you can do it on your own, in your company, then I'd say go for it. But if you think you need that little bit of investment to get off the ground, it's definitely worth the equity."
A new call for Competitive Start Fund applications is underway now, closing at 6pm on October 19, 2011. For more information: http://www.enterprise-ireland.com/en/funding-supports/Company/HPSU-Funding/Competitive-Start-Fund-CSF-.html
Bio: Pavel Barter is a freelance journalist based in Belfast and a regular contributor to gd.ie.
Note: Previous story on gd.ie about Open Emotion studios at http://www.gamedevelopers.ie/features/viewfeature.php?article=5642
A screenshot from Revoltin' Youth, the latest PSP Mini from Open Emotion Studios, which launched in Sept. on PSN in the US and Europe.