In- depth knowledge of the industry
At least: We have found two investors who operate from Germany – even if their investment objects are mostly abroad. One of them is Robin Houben with his company Aeronaut Invest. Houben, who lives in Frankfurt am Main, knows the games industry inside and out: Since 2007 he has worked as an IP and IT lawyer for companies such as Frogster, Crytek and Deck13; from 2009 he worked as general counsel for Travian Games. Houben later began investing in start-ups in the fintech, legaltech, games and fashion industries himself; in 2019, after successful exits, he joined various start-ups as an investor and business angel. Houben is currently invested in two games companies: Thera Bytes from Munich, which develops the game Global Farmer, and the Swedish publisher Jumpgate. “Games are a very risky segment,” says Houben. “If you invest in startups as a business angel, you are already risk-averse. But it is an additional big step to go into the games segment and invest there.” The last two years have not been easy for startups, especially in the games sector. “There have been an incredible number of layoffs. This peak phase of investment, when absurd valuations were also given, is simply over,” observes Houben – and praises the fact that “a certain degree of realism and rationality” has returned to the industry.

When Houben invests in a project, he always invests around 100,000 euros – but in the medium term it can be up to 500,000 euros. “The most important criterion for an investment is the team,” he says. “That may sound a bit banal now, but ultimately you are investing in people.” He himself has also learned from mistakes, reports the expert: “I have invested in the most amazing products, the team looked great at first glance. But then the chemistry wasn’t right and the team fell out – and that’s how the whole thing fell apart.” However, if a team works hand in hand and there is a good atmosphere in the studio, then from Houben’s point of view the actual product is almost secondary. “Even if the product doesn’t work at the beginning, people will learn along the way and then maybe find the product that is successful,” he emphasizes. The first project of a development studio may still be a flop. Over time, however, a unit can form, a team that brings together different strengths. This makes success more likely.

The most important criterion for an investment is the team

A closer look
Because team chemistry is crucial, Houben takes a very close look at his investments. During the Corona pandemic, this was of course more difficult, as he was unable to look behind the team facade without hindrance – and promptly lost a lot of money because he backed the wrong team. Fortunately, this phase is over, and now people can get to know each other better again. “If the pitch convinces me, if the product convinces me, if the team convinces me, then I say: ‘Okay, let’s do a deep dive, let’s go deeper,'” reports Houben. When meeting the developers in person, he sometimes asks a few uncomfortable questions and tries to lure the team out of their shell with sensitive topics – simply to observe how they deal with stress. “Who steps in for whom, who tries to balance out who somehow – and how do they communicate in situations for which they are not prepared?” explains Houben. “It has a bit of the character of an assessment center.”

There was clearly a spark at the meeting with Thera Bytes. The Munich studio is currently developing the top-down management game Global Farmer, which will soon go into early access on Steam. “With Thera Bytes, we are trying to bring realism into the games,” says Houben, describing the USP. The key here is real data, which can be used to adapt the game to the real world to such an extent that it becomes a simulation. “In Global Farmer, for example, we do this with an agricultural manager who is fed with real weather and soil data,” explains Houben. This realism gives the game that certain something.

Different models
Bertrand Vernizeau is also an investor in the games industry. In 2019, he and a Swedish partner founded the company Game Seer, which is based in Aschaffenburg; a Frenchman is on board as a publishing producer and scout. “We had a company for the digital distribution and monetization of games that we sold in 2015,” reports Vernizeau. “That’s why we’re reinvesting.” Game Seer is a company with no limited partners and primarily finances indie games for PC and console. “We can finance games with or without publishing,” explains Vernizeau, who grew up in Germany but lives in Geneva. “In addition, on a third level – usually when we have an established relationship with a studio – we also invest in shares in the studio.” Game Seer’s most recent investment is Half Sword, a physics-based medieval single-player fencing game for PC. “Half Sword is now our new flagship,” says Vernizeau proudly. “We announced the investment about three weeks ago. We will publish the game in full and are currently helping the team to structure production and work towards early access.” The game already has 160,000 wishlist entries, 24,000 Discord followers and a very stable number of concurrent users, reports the investor. Above all, the game has a Steam demo that has already been downloaded more than half a million times. “Most of the games you see are in a very early stage and cannot show such numbers,” emphasizes Vernizeau. Half Sword, however, already has a lot of traction.

Vernizeau sees the great advantage of the fencing game in that it immediately captivates users. “If you can generate satisfaction in a five-second game sequence, that’s great,” says the expert. “The brain doesn’t need 60 minutes to know whether it’s interested in something or not. So when we look for games, we look at games that can trigger exactly that.” In Half Sword, the satisfaction comes from the precise controls and various game elements, such as roguelite mechanics and loot. Vernizeau sees the decisive metric not in wishlist entries, which are generally very hype-dependent, but in the number of demo downloads – and also in concurrent users. Luring players into the game every day is one of the most difficult tasks of all. “You can pay influencers and trigger a boom in one day or in one week, but then the player base can shrink and basically drop to zero,” warns Vernizeau. He sees the fact that Half Sword is played so consistently as a promising sign of success.

Getting to know each other is a must
During his time as an investor, Vernizeau has also made mistakes. For example, he did not invest in the – later extremely successful – PowerWash Simulator because he could not meet with the development team to clarify an equity issue. “This shows how important the human factor is when investing in games: You have to meet with the teams, get to know them and coordinate with them,” Vernizeau agrees with his colleague Houben. When he is on the lookout for projects worth investing in, Vernizeau is not impressed by track records, for example – after all, the dynamic of a team changes with every addition or departure of personnel. “The best games do not come from well-financed teams that have great, renowned VCs and a lot of money behind them,” he knows. “Most of the best games are created through pain, stress and excessive bootstrapping. It’s no walk in the park.” Vernizeau chooses pithy words to describe the search for suitable teams. “When we look around, we’re looking for killers,” he says, “because video game production is chaos and hell.” Partnering with a team is supposed to calm development and shed some light on the situation. “If we’re not able to tame the chaos with the team and structure it, then the partnership doesn’t make sense,” says Vernizeau.

Vernizeau advises anyone interested in pitching their project to Game Seer to visit the website. “There’s a form there that you can use to apply for a pitch – and there’s also an article called ‘Warm up your cold start’ with lots of tips,” says the investor. But when does it actually make sense to contact an investor, in his opinion – and when is it better to contact a traditional publisher? “If you’re a really small team, already have a lot to do and are struggling with production, then it makes sense to team up with a publisher,” advises Vernizeau. “But if you want a freer approach to publishing and want more control over production, then you might want to look for an investor.” Publishers often bring in an executive producer – which of course reduces the studio’s autonomy. “We have a publishing manager who follows the development of the game, but we don’t have an executive producer,” emphasizes Vernizeau. “The studios we work with are closer to self-publishing than to full publishing.”

Pooling resources
In addition to individual business angels and investors, there are also corresponding networks in the industry. One example from Sweden is PlayCap, a network that consists exclusively of female business angels. Bibbi Wikman (see p. 20ff.) set it up “to encourage more women with a strong understanding of games and the industry to get involved in investments,” as she says. By pooling resources, members can also invest smaller amounts and spread the risk across several investments, says Wikman. “This also leads to cleaner cap tables for the companies that receive the investment.” Other investor networks that are not women-specific include the Indie Fund and Outersloth.

This shows how important the human factor is when investing in games

But how is Germany actually perceived as an investment location? What do the experts say about the local conditions? We first ask André Bernhardt, who as an “Indie Advisor” advises small and medium-sized game studios when they are looking for a publisher or investor. “In my opinion, ‘risk-taking’ is not Germany’s middle name,” says Bernhardt. In this respect, he sees a big difference between German and international studios: “The international developers are better at selling the vision – and the German developers sell the more or less finished product.” The problem then, however, is that this product still has to be built. A vision, on the other hand, can be presented to investors at an early stage and tried to be sold. German companies are not particularly risk-averse when it comes to external investments either, says Bernhardt – and reports on his work for the Global Top Round. “I have been promoting their offer since 2015,” he says. With the accelerator program, indie studios can take a big step forward and possibly find a publisher, but they have to give up five percent of the company to do so. “Global Top Round’s business model is that they sell the shares at a higher value once they have advanced the entire company,” says Bernhardt. However, he notices that “many companies are still very hesitant when it comes to selling company shares.”

Not willing to take risks
Robin Houben has had similar experiences in Germany. “American investors say: ‘First get the horsepower on the road. If the car then has problems, we can take care of it while we’re driving.’ But German developers often want to bring out the perfect, bug-free game.” As far as the willingness to involve external people is concerned, Houben sees a gradual change in thinking: “Federal funding has been frozen, so the studios need money and are more willing to bring in external people.” From Bertrand Vernizeau’s point of view, there is a fundamental lack of federal willingness in Germany to consistently promote games production. “It seems that Germany is not particularly focused on games,” says the investor. The country has such a large export economy and such a strong industry – and is used to excelling in fields such as engineering. “So the creative aspect of games may not fit quite so well with German culture,” Vernizeau says quite clearly.

In France, there are tax credits – and not just grants like in Germany. “The tax relief is granted automatically in France,” says Vernizeau. “If you, as a private investor, invest a million US dollars in game production and the game is published, you can be sure of getting 30 percent of that investment back.” In Canada, the system is structured similarly. “So I think Germany could do more to support the creative industries,” says Vernizeau.

Who knows, maybe one day there will actually be tax credits for German games. It could then become much more interesting for investors in this country. (Achim Fehrenbach)