Delivered at Casual Connect Asia 2016 Decisions you make about your game, your company structure and your customers can radically affect the interest you receive from partners, acquirers and financiers. It can also affect your negotiating power. In this session we'll focus on techniques which have been used to bring high valuations to independent games. We'll also discuss how to maximize the strength of your game and studio on a small budget.

1. Planning Your Exit
How and Why Some Studios Get Bought
James Kosta
Operating Partner
Signia Venture Partners

2. Make ‘Exiting’ Part Of Your Startup Plan
Paid-In Capital
• Are Founders ‘investing’ in the company with money or time?
• Did Founders bring equipment or IP into the Company?
• Does the Company truly own everything?

3. Make ‘Exiting’ Part Of Your Startup Plan
Human Resources
• Do Founders know how to hire and delegate?
• Is Employees’ work product legally owned?
• Flat org charts feel great, but can’t scale.

4. Make ‘Exiting’ Part Of Your Startup Plan
• Focus
• Is the Company going to be tech, IP or consumer focused?
• Trim the ‘fat’.
• Build vs. Buy: Does it add value?

5. Why Are Some Studios Worth So Much?
• Users are your single greatest asset.
• Understanding them multiplies value.
• Sell pre-launch = lower risk.
• Sell post-launch = Better have TRACTION!

6. How Studio Valuations Are Calculated
(LTV * # Users) + (20% * Payroll/yr) + (X Factor)
X Factor can be:
• IP value
• Acceleration of development
• Opportunity cost
• Value to competitor

7. Attracting Investment Capital and Partners
Partners:
• How much are your users worth at your competitors’ LTV?
• How attractive would your IP be to competitors’ in-network users?
• What tech have you developed that can enhance a competitors’ LTV?
Your LTV
$
Your
Marketing
Your IP
Their LTV
$$$
Their
Marketing
Your IP

8. Attracting Investment Capital and Partners
Investors:
• Focus shows in hiring, operations and community management.
• Depth of Board
• Fair valuation
• LTV has been optimized
• Can it scale?

9. Evaluating an Offer
Use a third-party advocate/consultant to assist and advise.
• Can say things you can’t.
• Should be connected into the M&A community.
• Plausible deniability

10. Evaluating an Offer
Tips:
• Don’t over-negotiate or negotiate by red-line.
• Use the phone or meet in person.
• Despite rumors: Investors and Partners don’t want to beat you down.

11. Win-Win FTW
• Retention
• Holdbacks
• Earn-outs
• Control of IP Litigation
• Indemnity

12. Barriers to Execution
• Invention Disclosure/Ownership
• Open-Source Licenses
• Retention
• Potential Litigation

13. Summing It All Up
Build your company in a way that makes sense.
Start with the mega-scale. Work backwards.
Spend time on your HR documents. Be reasonable but firm.
Get to know your competitors. Take comfort in your shared challenges.
Don’t build a xenophobic/nepotistic Board.
Set milestones and HIT THEM! Publish them to create urgency.
Check your ego when negotiating. No one owes you anything.