Before You Work for a Start-up Game Company, Part II

So, you're about to take the plunge and work for a start-up video game company?

You've been asking the right questions - you know the executives are sharp (or at least didn't manage a hedge fund previously) and the team that's assembled looks like they can ship a product. What else do you need to ask before you take the plunge and jump on board the start-up?

Who doesn't work there?
Almost as important as who works there is who doesn’t work there anyway. If you can, you’ll want to check the people who have left a company. Check your network specifically for those who have left the company. Often, it’s more telling than who is still at the company.

That’s not to say a few departures are a disaster – in fact, its probably a good sign. It takes a while for a start-up to work out the kinks and get its culture to gel. Those that don’t quite fit in, right or wrong, end up leaving. Start-ups are inherently volatile, so a bit of churn is to be expected. That’s often a painful process but it’s not necessarily a bad sign for the company’s future. The question when considering departures is one of scale. Unless you are living in Egypt under a Pharoh, mass exoduses are generally not a positive sign. If people are leaving in droves, it’s in your interest to find out why.

What about the money?
Finally, you need to understand the company's bottom line. How much money has the company raised? Is this money that's actually in the bank or is it just promised? Where did the money come from and how likely are you to get any more? You need to consider the company’s ambitions in comparison to its means. As a wise philosopher once said, don’t let your mouth write a check that your butt can’t cash. If the company is trying to make a Halo-killer, do they have $25 million available to them?

Scratch the surface and all too often, "we've raised $25 million" actually means the company has a half million in Angel investment seed money and a 'cross my heart and hope to die' promise for the rest – spread out over the next three years. Maybe, if everything goes well and economy doesn’t tank and I don’t come across a better investment. The thing about promises - until the money is actually in the bank, they're worth exactly what you think they are. 

Even if there's a big check in the bank, you want to know if that's all the money. How much of the promised $25 million is in the bank today? When does the rest come? Typically, investments are divided into tranches (or slices) that are awarded at certain times. And there's usually a few strings attached to getting each new payment. If you want to be a real boy, Pinocchio, better understand how to get free of your strings. 

You also need to know how much money has been spent. Ask what the company's current burn rate is - that gives you a timeline until disaster or the necessary next round of funding. This is the lifespan of the company – and you need to know if it’s a fruit fly or a sea turtle.

And speaking of new funding - can you get more money? Every company needs rainmakers. Can you get more money from the publishers or VCs or whoever? Or will you all be asked Aunt Violet to put up her IRA to keep the company afloat? With your rainmakers, there's also a fine art to identifying which ones are the real deal and which are hot air. The best advice there - ask around and find out what deals they actually closed. Again, money in the bank is the only thing that matters at the end of the day. 

All this advice comes with a huge caveat. Almost guaranteed, you’ll find something you don’t like with any start-up you would consider. The nature of start-ups is that they’re funky and imperfect. If you want low risk, go to work for...well, frankly, another industry. Video game development is volatile and start-ups are doubly so.

Really, it’s the start-up that seems absolutely perfect and too-good-to-be-true that should be handled like an Ebola infected radioactive kitty litter box. I remember interviewing during the height of the dot-com boom with a company that was ‘perfect’ – it had the founder pedigree, the VC funding, the splashy cover stories on all the right magazines. But something seemed amiss when everybody I  interviewed with asked the same question - could I figure out how the company was supposed to make money? It struck me that the business should probably have some inkling already as to how to generate a bit of cash. Fast forward and you can guess that company’s eventual fate.

Working for a start-up can be the adventure of a lifetime. The excitement of working for a young, aggressive company that wants to change the world is undeniable. But if you want to keep your heart from getting broken, be sure to go in with your eyes wide open.

Image via Wikipedia Commons


  1. Hmm, there's this start-up I'm thinking of joining, let's see:
    It's being started by executives with a track record of successful games, check.
    It's working on one project, but has enough actual money to make four AAA games, check.
    Right then, I'm off to join Flagship games! What's the burn rate? Oh, wait...
    Flagship was a pretty good example of the burn rate being a real studio-killer. (Although I understand Flagship had a number of complex problems, of which that was but a symptom.)

    I have to say, having worked for three failed start-ups, I still don't really know why any of them shut down. In all cases, the companies were foreign funded; in all cases the money stopped flowing, but not because the funders didn't have the cash. Being dependent on a foreign company complicates things enormously: the financial health and nature of the management of the parent companies was obscured by language barriers and distance. Unexpected changes in management and ownership of the parent companies played a major role in some of the closures. I often, however, got the impression that the foreign companies came into the situation fairly blind, not having done any research into US game development. Asking the right questions is vital - for *everyone* involved.

  2. Flagship is a great example of a company that looks good at first blush but is worth scratching the surface before working for it. The Diablo series was a big success in the market but they were games that tended to take a long time (and a lot of money) to produce. That's a dangerous production model for a start-up. I think most of the folks that worked with the Roepers would say that strong creatively but probably not your go-to guys for a rigorous production process.

    Your point about the foreign disconnect is also very well taken. Actually, I think a good rule of thumb is that the farther away the money guys are, the more dangerous things can get. Miscommunication or a simple lack of can result in a major rug-yanking.