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Chapter 3. Financing a Game Development ... > How Much Money Do YouNeed to Raise? - Pg. 55

Financing a Game Development Venture 55 The development business model is a difficult one, requiring developers to assume a lot of execution risk. Furthermore, payroll keeps burning even if a team isn't engaged on a project, which makes the end of every engagement pretty scary. Even when you've got a contract in place, getting paid can require some effort, not to mention your project can be terminated. For these reasons, developers need to maintain a cash reserve big enough to buffer against harsh conditions. Even a well-managed company can hit the skids, so this chapter will cover both pre- ventive measures and financial triage. There is also a discussion of winding your company down in a humane and civilized manner, should it become necessary. If you manage your company well, and produce some great products, you may find yourself on the right side of a buyout offer. Should you accept it? If you do, what terms do you need to negotiate? This chapter will cover these topics and what else to expect during the sales process, including a sample letter of intent from a purchaser interested in buying a company. How Much Money Do YouNeed to Raise? There is bad news, bad news, and good news about financing a start-up development shop. The bad news is that, unless your team has worked together before on a successful release, you are The author would like to thank Li Reilly of Morrison & Foerster LLP ( for her heroic assistancein preparing this chapter. unlikely to get a publishing contract without a playable demo or prototype. The other bad news is that you can expect to spend $50K to $200K putting together something good enough to get a deal. The good news is that most of the "cost" of building this demo is labor, which is a lot easier to get on layaway than, say, manufacturing tools. Note TIP