Financing a Game Development Venture 54 Dana called Jamie and explained the situation to the attorney, who worked in NorthernPacifica. "Our old company just closed down. I don't think that the owners have any plans forthe IP, since most of it is pretty useless without the people who created it--that's us, by theway. I don't know if they're in debt, or even if they're still in the country, but what we want isto buy all the rights to certain tools, and preferably to be able to pay it over time." Jamie asked Dana if she had a good relationship with the owners of Defunct. "Yeah, verygood." "Well, you can have me contact them first, or you could do it, or we could do it together. Let them know what you are interested in doing. If what you are saying is correct about theasset not having value to anyone else, they probably won't want an outrageous amount ofmoney. You will need me or another lawyer to handle the transaction, not just because it's apretty specialized contract but also because you'll need to do due diligence on the tools--doesa publisher have any rights to them, for instance--and make sure that the company is legallyable to enter into the transaction." Jamie continued, "If they are in bankruptcy or about to enter it, you'll need to have yourtransaction blessed by the court to be sure that the bankruptcy court won't unwind the sale inthe future." Dana fretted about her tight timeline, "These port people are going to be sniffingaround in a couple of weeks." Jamie commented that odds were good that Defunct's ownerswould also be motivated to close the transaction quickly. Dana and the rest of the founders decided on a price they could pay for the engine and thetools, and agreed that an installment plan would be best. They agreed too that they would bewilling to borrow money from friends and family for the interim if Defunct insisted on a lumpsum payment. Dana took Defunct's owners Malachi and Edward out for dinner, where they toldher that they had decided to move to Hawaii to teach scuba diving and to an ashram inOregon, respectively. Dana told them about what Double D was trying to get together, and theyseemed genuinely enthusiastic and concerned for her health. Dana mentioned Double D's interest in buying the old IP from Defunct and the price that she could offer. Malachi and Edwardsaid that they would think it over and call her in the morning. The next day, Malachi called to say that he and Edward, as the sole shareholders of Defunct,would approve a sale of the IP to Double D for half of the cash Dana offered and 10 percent ofDouble D's equity. They would even give her first choice of the remaining office equipment.Dana ran this idea by her cofounders and Jamie and Michael, all of whom agreed it was asound arrangement (pending due diligence). Michael warned Double D that research intoDefunct's financial condition would be required to make sure that any sale wouldn't be undonelater by a bankruptcy court. Introduction Given the choice between addressing financial strategy and snorting shards of glass, many game developers would have to pause. Unfortunately, development shops require active, constant finan- cial oversight to thrive. This chapter addresses the three main financial issues developers face: raising money, handling a financial crisis, and selling the company. A developer may want to raise money for start-up costs, including building pitch materials, but it may also pursue outside financing for an independent development or an R&D project. The process of raising money can be broken down into four questions: · · · · How much money do you need? Where do you get it? How do you persuade people to give it to you? What do you exchange for it?