So you're looking to create your own game development studio. Great. Where do you start? What happens along the way? How does it end? This session answered all those questions and more.

To begin, you have to first understand what you want to get out of starting this business. Do you want fame? Fortune? The ability to exercise creative freedom? Mike Sellers went and asked some colleagues what they would want or did want out of their own company and got responses like

• "work with great people on exciting problems... for at least a couple of years"
• "... look your family in the eyes and know that you did your best"
• "prove the experts wrong"

And although the respondents knew better, they couldn't help but say "$10M would be nice to have". Mark Jacobs, from Mythic, even gave Mike a rated breakdown from 1-10

• Autonomy: 9
• Income: 6
• Longevity: 7
• Great Team: 9
• Cashing Out: 5

Mark gave cashing out a 5 for good reason - this is a very rare occurence in the industry, and lends itself towards the easy money myth. Most startups never make it to this point, but rather exit in some other form discussed later.

When you're starting a company you have to realize that you're going to have to decide what you're willing to sacrifice, like maybe sleep, salary and benefits, and what you're not willing to sacrifice, like a spouse, house, your health or even your integrity. Even your "big idea" may need to be partially sacrificed. No idea goes uscathed and what you end up with will never be exactly what you started out with.

Speaking of big ideas, you sort of need one to get started. The type of idea you have will help decide how much creative freedom you have, and how easy it will be to get funding. If your idea is original, you'll have plenty of creative freedom but when you go to investors and start talking about this idea they've never heard of before, they're going to tiptoe. Whereas if you have an idea based around a licensed property, your creative freedom is limited by that property but investors will come forward easier if they are familiar with that property. Always keep in mind that an idea is worth absolutely nothing. In order to start making it into something you have to write it down. Use storyboards, sketches, mock-ups. A lot of ideas don't make it to this step. Also consider usage scenarios, figure out who will be playing this game. Teens? Casual? Once you have your idea down you have something that will attract other people.

Attracting other people means building a team. When building a team it's best to find those not like you. Don't look for, say, programmers who know the same things you know and think you're going to make a great team. Find people who's knowledge is completely different or only partially overlaps your own. A good question to ask new hires is "when the game ships, what title would you like to see by your name?" If the person resonds "lead art director" when he's applying for a Q&A position, throw up the red flag - it's important to hire people you know will be dedicated to their positions. Another good peice of advice is "hire who you need, not who you know". Don't hire someone just because you know them, hire someone who is fully qualified to fill the position you are looking for. Use equity as a means to attract people, but be aware that there is no formula to decide how to break down equity between team members. Be sure to also remember that companies are not a democracy. Companies that try and be democracies fail horribly, according to Mike.

Once your team is assembled it's time to start building the vision, culture and brand of the company. Ask yourself what your studio represents and stick to it. Don't decide you're going to make family-oriented titles buit then later on accept a contract to do a porn game. Clarity at this part of the game will keep you on track. Be ready for change as well. Very few initial teams ever stay fully intact.

So you have your team. Now you need money. There are several funding methods but the first question you have to ask yourself is what you need. $50K? $500K? $5M? Look at the type of game your developing first to help you get a rough idea of the range you're working in. Is it a casual game? A console game? A MMOG? Work out schedule as detailed as possible in order to help determine the amount of money that will be required, and also take into account how thin your shoestring is. Shoestrings can be pretty thin these days thanks to advances in technology, for instance some people have started wondering why they should have phones in their offices when they can just use cellphones, or Skype even.

The first method for getting funds is debt, and it's the most common. Everyone owns a credit card after all. Realize that no bank is going to touch you since you lack proper collateral, and the Small Business Administration takes forever and a day. Another method of debt besides credit card is a mortgage on your house. But do you really want to risk losing your house? This brings us back to the risk assessment we dd earlier. For some people, the risk is worth it and has payed off. For others...

The second method for getting funds is contracting, as a company - taking on small projects for some relatively quick cash. You have to be careful though to choose projects that are similar to what you originally wanted to do, otherwise contract work can become defocusing and demoralizing. But it certainly pays the bills and with the right contracts it can work very well to your advantage.

Another method is equity, or selling shares in the company. You can do this by taking on other owners, but be sure to look up an IRS form, the Section 83b Election, in order to avoid some nasty tax repurcussions in the future. Always start with your family before going to investors, because if your family won't invest with you then you can certainly bet investors aren't either. There are two types of investors, Angel and Venture Capital. Angel investors generaly invest $50K - $500K whereas venture capitalists typically invest at least $5M. Yes, that leaves quite a gap between the two, which you can fill possibly with more than one angel or by getting a venture capital to invest less. Either way when you approach investors the two things that they want to hear are

• how will you use their money to make money
• how much will they get back and when

Although it's slowly changing, investors are typically not interested in the "next big hit", so expect a tough battle if you are approaching them with a radical new idea.

The worst source of funding however is royalties, and these should be avoided at all possible cost. Royalties work where the publisher gives you an advance which you then pay back out of sales of the product. The problem is not every product is going to be a best-seller, and there's a good chance you'll never see another dime from that product once it ships. It's an easy trap a lot of people fall into - don't get caught.

When considering funding and cash flow is good to remember that no cash is fast. Investors can take weeks or months to get their acts together and cut you a check. And even after all that time they can just as easily change their minds and head in a "new direction". So remember also that money that's "almost here" isn't here. Also keep in mind the important distinction between revenue vs. profits. Revenue is the amount of money the company takes in, profits only appear when your expenses are less than your revenue. So although you're getting money you're not neccessarily making money.

The last stage after building a company is the exit. One of the most common exits is acquisition, or being bought out by a larger company. When this happens you need to ask yourself if it's the right time. How do you see the value of the company? Have changes in the market made a buy-out more agreeable? Are there any team issues that would prevent a succsseful merger? Are your goals still intact? Does everyone come along? Probably the most important is whether you are willing to give up control. Mike told of how he was part of a company that was acquired and a week later was shut down. Just like that. So be ready after the acquisition to adjust to a new reality, one where you no longer have complete control.

Other than acquisition there's going public, which is very unlikely, and shuttering the doors. Turning off the lights is always hard but can be avoided if you keep constant track of your goals and evaluate your focus. If it does come to closing down and you can't decide whether you really want to or not, think back to the decision you made about sacrifices. Are you really willing to hold onto a sinking ship and risk losing something you don't want to lose? Also be sure not to burn bridges on your way out. The most common event is the finger-pointing, the "it's all your fault!" scenario. With an industry as tight as this you'll probably be working for or with that person again in the future. Take time to grieve but don't wallow, it's always just a temporary setback and you should already be asking yourself "what's next?"

So is this route really for you? It can be lonely, with high stakes and risk. There is potential for a very high personal reward, but the path is filled with obstacles. You'll have to learn to live with uncertainty and work to maintain your own parachutes, or exit strategies, just in case something happens you won't be left high and dry. And you also want to be able to have some free time and have a life. The main points Mike raised were

• Get started - don't wait or dream
• Consider your goals carefully
• Keep moving forward

An idea is not a design, a design is not a demo, a demo is not a program, a program is not a product, a product is not a business, a business is not profits and profits alone is not happiness.

The slides for this presentation will be available online here at some point