Possible investment opportunity - for EJ, Fed and the other Select members

[brent217]

Here is the demo kickstarter:

http://www.kickstarter.com/projects/...ef=ending_soon

For those that have no idea, an MMO is a large computer game where players pay approx $15 a month to pretend to be a hero run around in a fantasy world with several thousand of their closest friends. World of Warcraft is the gorilla in the MMO room.

The "free to play" model has also become a lot more common as of late, and appears to be quite profitable as well.

Either way, significant backing is required, with the patience to not release until the game is quite polished. A poor release and you lose all your money. A well done release and you are gold.

From the FAQ at the bottom of the page:

How do I invest in Goblinworks? Goblinworks is seeking accredited investors to join our team. We're interested in individual investors and institutions with a background in online gaming and social networks interested in startup company investments, with a minimum investment of $100,000. To arrange for a presentation on the Goblinworks business, please contact investors@goblinworks.com.
Last updated: Friday May 11, 6:39pm EDT



Disclosure - I am not involved at all, but I might be tempted to act as one of many venture capitalists for this. I have played enough of these games to have seen what works and what doesn't, so I will be looking at their demo with a lot of interest.

[jpatter666]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Here is the demo kickstarter:

http://www.kickstarter.com/projects/...ef=ending_soon

For those that have no idea, an MMO is a large computer game where players pay approx $15 a month to pretend to be a hero run around in a fantasy world with several thousand of their closest friends. World of Warcraft is the gorilla in the MMO room.

The "free to play" model has also become a lot more common as of late, and appears to be quite profitable as well.

Either way, significant backing is required, with the patience to not release until the game is quite polished. A poor release and you lose all your money. A well done release and you are gold.

From the FAQ at the bottom of the page:

How do I invest in Goblinworks? Goblinworks is seeking accredited investors to join our team. We're interested in individual investors and institutions with a background in online gaming and social networks interested in startup company investments, with a minimum investment of $100,000. To arrange for a presentation on the Goblinworks business, please contact investors@goblinworks.com.
Last updated: Friday May 11, 6:39pm EDT



Disclosure - I am not involved at all, but I might be tempted to act as one of many venture capitalists for this. I have played enough of these games to have seen what works and what doesn't, so I will be looking at their demo with a lot of interest.

Dicey. The gaming world is notoriously fickle -- as you state a poor release can sink you. Look at EA and Old Republic.

[c1ue]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Disclosure - I am not involved at all, but I might be tempted to act as one of many venture capitalists for this. I have played enough of these games to have seen what works and what doesn't, so I will be looking at their demo with a lot of interest.

As you are considering a venture investment, perhaps you can outline your process in identifying a good investment, and speak to how GoblinWorks does or does not fit into said criteria.

From my view, the questions that need to be answered are:

1) What makes this game different? specifically how it is able to compete against the gorillas and/or highly funded startup competitors?
2) Who is the execution/management team? And what is their pedigree?
3) How will this game reach its potential customers?
4) What is the market size and this game's potential within it?

Of course, if you're just investing $50 to get a secret decoder ring or extra badge in your GoblinWorks character, that isn't in any way the same situation.

An article on the economics of these MMO games:

http://www.mastma.com/Articles/a_loo..._mmo_games.htm

Monetary return is slow. Unlike a normal boxed game, sales of MMORPG’s are traditionally much lower than for boxed products (Everquest, probably the biggest game of it’s type at the moment, is reported to have sold in the region of 400,000 units – not a great number for such a big title). This is offset by the much higher cost per person (a typical charge of $10 per month, which comes straight to the publisher means that each player can end up paying in excess of $150 for the title).

...

The main problem with content is that it is expensive to produce if quality is high, and in the main the content is poor when compared to a single player game. This is only logical if you compare money spent. A single player game can have a budget in excess of £2 million, and deliver about 20 hours of entertainment. A cost of around £100k per hour of player enjoyment. MMO games are trying to deliver up to 50 times more entertainment for maybe a budget 5 or 6 times bigger. Even with economies of scale, and other benefits, it is difficult to deliver an equally enthralling experience. This is an overly simplistic way of looking at such development as it ignores a large number of issues, but it certainly shows a potential problem.

An obvious question, if the above is accurate, is how GoblinWorks can hope to put out a serious competitive product if its competitors are spending $15 million or more.

If we assume a $150 revenue per player average for Everquest, that game would have earned $60M. This more than justifies a $15M spend.

GoblinWorks has raised a bit over $265K thus far, with a bit over 3800 contributors, yielding an average investment of $70 or so per contributor. To achieve an equivalent investment, the number of 'investors' needs to increase over 20000% to even achieve half the budget of a typical MMO as outlined in the above article, or else the average investment will have to increase geometrically.

Equally if the 'investment' is just another way to get players to pay, the average amount of payment received seems low compared to what is noted above. This might not be true since marketing costs are no doubt a big factor, but from a larger scale investment point of view - it would be necessary for GoblinWorks to both show that the lower revenue per player is offset by marketing or other savings as well as have a strong and defensible plan to scale.

[CanuckinTX]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Either way, significant backing is required, with the patience to not release until the game is quite polished. A poor release and you lose all your money. A well done release and you are gold.
.

Ask Curt Schilling how easy it is to build an MMO, and his was critically acclaimed early on! He also failed after a large contribution from RI taxpayers. I just think the MMO area is tapped out.

[globaleconomicollaps]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

As you are considering a venture investment, perhaps you can outline your process in identifying a good investment, and speak to how GoblinWorks does or does not fit into said criteria.

From my view, the questions that need to be answered are:

1) What makes this game different? specifically how it is able to compete against the gorillas and/or highly funded startup competitors?
2) Who is the execution/management team? And what is their pedigree?
3) How will this game reach its potential customers?
4) What is the market size and this game's potential within it?

Of course, if you're just investing $50 to get a secret decoder ring or extra badge in your GoblinWorks character, that isn't in any way the same situation.

An article on the economics of these MMO games:

http://www.mastma.com/Articles/a_loo..._mmo_games.htm



An obvious question, if the above is accurate, is how GoblinWorks can hope to put out a serious competitive product if its competitors are spending $15 million or more.

If we assume a $150 revenue per player average for Everquest, that game would have earned $60M. This more than justifies a $15M spend.

GoblinWorks has raised a bit over $265K thus far, with a bit over 3800 contributors, yielding an average investment of $70 or so per contributor. To achieve an equivalent investment, the number of 'investors' needs to increase over 20000% to even achieve half the budget of a typical MMO as outlined in the above article, or else the average investment will have to increase geometrically.

Equally if the 'investment' is just another way to get players to pay, the average amount of payment received seems low compared to what is noted above. This might not be true since marketing costs are no doubt a big factor, but from a larger scale investment point of view - it would be necessary for GoblinWorks to both show that the lower revenue per player is offset by marketing or other savings as well as have a strong and defensible plan to scale.

Not to disagree with your basic point, but WoW has 12 million active users. Lord only knows how may people are paying $15/month and never touch it.
($15/month) ( 12 months) ( 12,000,000 users) = more money than I have fingers and toes.
I have even heard it said that WoW is sucking the air out of the gaming universe. Don't know, but if Diablo3 is anything to go by, there is ample room for new games. Also as far as possible funding goes, Pebble has raises $10,000,000 and counting for a watch. It is a nice watch, but that sounds like more than they could hope to ever make from selling said watch.

[globaleconomicollaps]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

When I look at kickstarter I see a dozen projects that look not only more viable, but more socially relevant than a new video game. Five or six 3D printers, a Geiger counter, several movies that look like goers. What is it about this particular game that you like?

[dcarrigg]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Ask Curt Schilling how easy it is to build an MMO, and his was critically acclaimed early on! He also failed after a large contribution from RI taxpayers. I just think the MMO area is tapped out.

In the MMO world there is

A) Blizzard
B) Everyone else.

So WoW and Diablo 3 will do well. Everything else is a complete gamble.

RI taxpayers are out $75M. Over $100M if you count lost interest payments. And they had Todd McFarlane (Spawn Creator) on art, R. A. Salvatore (Demonwars) on story, Ken Rolston (Elder Scrolls Oblivion and Morrowind) on game design, and Curt Schilling (Boston Red Sox) as the Chief Executive.

It's clearly a tough nut to crack.

[CanuckinTX]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Now that's an All Star lineup of talent. Having big names involved can also be problematic. Can you imagine anyone telling McFarlane, Salvatore and Rolston they are wasting too much time and budget on their areas so they better pick up the slack or else!? Even more concerning to me though is 'Curt Schilling, former MLB Pitcher' as CEO. Now that's the kind of experience you want running a multi million dollar game development company, amirite?

Great point though dcarrigg - even EA has had a very difficult time to break into the genre with their deep pockets and the Star Wars franchise behind them. I had a friend here in Austin that worked on their MMO for a while, then the expected layoffs came and he was swept out with the game only being about 3/4 done. I just heard another round of layoffs went through EA here in Austin. The difference is, they'll have a long and steady line of qualified people who will jump at the chance to join EA when and if they need to ramp up again.

[c1ue]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Not to disagree with your basic point, but WoW has 12 million active users. Lord only knows how may people are paying $15/month and never touch it.
($15/month) ( 12 months) ( 12,000,000 users) = more money than I have fingers and toes.
I have even heard it said that WoW is sucking the air out of the gaming universe.

Good information. And in the theme of VC investment criteria: how many actual total MMO users out there exist? What is WoW's share of this, and what are the numbers of people who pay for more than one MMO at a time?

This is the type of information that is needed to gauge an investment.

I also wonder just how much money has gone into WoW - from pre-launch to support.

Don't know, but if Diablo3 is anything to go by, there is ample room for new games. Also as far as possible funding goes, Pebble has raises $10,000,000 and counting for a watch. It is a nice watch, but that sounds like more than they could hope to ever make from selling said watch.

Boxed video games are a pretty well understood market, and have much the same dynamics as making a movie.

I don't know anything about Pebble, but if you're point is that crowdsourced funding is irrational, I would agree with that!

[c1ue]

Re: Possible investment opportunity - for EJ, Fed and the other Select members

Not to disagree with your basic point, but WoW has 12 million active users. Lord only knows how may people are paying $15/month and never touch it.
($15/month) ( 12 months) ( 12,000,000 users) = more money than I have fingers and toes.

Apparently however large World of Warcraft's audience is, the money that's gone into the product is also gigantic:

http://online.wsj.com/article/SB1000...googlenews_wsj

Activision Blizzard Inc. hasn't disclosed development costs for its "Starcraft II" videogame. A July 16 Technology article about the "Starcraft" sequel incorrectly said the company spent more than $100 million to develop the game; that figure referred to its "World of Warcraft" game.