One of the questions I am most often asked is how to raise capital in North Carolina (or some other place that does not have many venture capitalists [VCs]) or whether the company should just give up and move. Until recently, the only advice I could give was “Keep plugging away and once you get traction you will be more attractive to non-local investors.” But given the success—some would say dominance—of game companies outside the San Francisco area, I have a more positive outlook. A recent blog post by Mark Suster also does a great job of providing tactical advice on how to raise money if you are not located in a major VC area.
Suster, a serial entrepreneur who is now a partner at GRP Partners, provides a lot of practical suggestions that improve your chances of raising capital. Suster points out that yes, it is easier to raise money if you are in a major VC center (San Francisco, New York, LA or Boston), and if you do not have a strong tie to the local area it would be easier to raise capital if you relocate. That said, he pointed out that some great companies have raised large sums outside these regions and provided some very useful tips for doing so. Continue reading
Below is a presentation that I gave yesterday on lifetime value (LTV) to the portfolio companies of YetiZen. It covers the importance of LTV, key variables (monetization, virality and retention) and how to affect them, importance outside gaming, cohort analysis and the predictive nature of LTV. Other than the final section on uncertainty, which echoes my blog post on Tuesday, the presentation is largely consistent with the one posted earlier that I gave at Groundwork Labs a few months ago. Here is the one from last night:
The key to using customer lifetime value (LTV) effectively is the understanding that it is a prediction, not a value. In my previous eight posts on LTV, I stressed the importance of LTV to the success of your game and company and the key components in determining LTV. After reading Nate Silver’s The Signal and the Noise, I realized that it is crucial to understand that LTV is a prediction and suffers the same risk as other predictions (e.g., elections, weather, sports scores).
The Uncertainty Principle
Many people mistakenly believe (and I may have inadvertently implied this in a previous post), that LTV is an exact function of virality, monetization and retention. It implies you put those variables into a formula and get out a number that shows precisely how much a player is worth. That would be the case if you did it with historical information after five years and then calculated how much that player had been worth to you. However, you are calculating how much the player will be worth, which is inherently different because you are predicting their future value.
The uncertainty principle, a key tenet of quantum mechanics (as popularized by Stephen Hawking), postulates that perfect predictions are impossible if the universe itself is random. Since you cannot have a perfect prediction, your LTV cannot be a distinctly quantified value. You are predicting future events (how much the player will monetize, how viral they will be and how long they will stay in your game) based on the available data. Your LTV model is a simplification of the world the player is in; you are looking at several variables but you cannot look at everything (e.g., chance of war, plague, everyone switching to Blackberry devices). In effect, your LTV calculation is very similar to a sportscaster’s estimate of how many home runs Albert Pujols will hit or a weatherman’s prediction on the likelihood of a hurricane to hit Cape Hatteras. Continue reading
Great article about the importance of thinking about your customer when growing your product.
I recently read a column by Robert Eckert, the former CEO of Mattel who engineered its turnaround, and he highlighted two words that were crucial to his success leading the company. Although not as cool or trendy as some of the other topics I have discussed in this blog, looking at my own successes I realize these two words are as important or more important than many of the strategies I evangelize. Those words are Thank You. Continue reading
A recent Harvard Business review post by John Coleman about “old-school” business practices worth bringing back highlighted several traditional office habits that still improve productivity.While I love posting about the cool new trends (growth vs marketing , lifetime value-driven ad spending, etc.) that can have a huge impact on your business, I agree with Coleman that you shouldn’t abandon everything from business pre-2005. The four suggestions from Coleman’s post that I most agree with (he had five but I was not sold on one of them) are:
- Make meetings distraction free. This to me is the most important practice Coleman highlights, and it’s not necessarily “old school.” Meetings are not as productive if half (or even one) attendee is looking at their phone or playing with their laptop. Getting rid of these distractions make meetings more focused and productive. Although those using their devices may be doing something productive, if they have something more important to do they should not be in the meeting in the first place. (This brings to mind another good practice: make sure everyone in a meeting needs to be there.) Continue reading
While the focus and glory is on an ability to quickly pivot your business model, a more important skill for entrepreneurs is being able to pivot inside your business. We encourage and fête leaders who change their business model to deal with changing market conditions or adjust their original plan when it meets reality. As important to growing your company and reaching an exit (or more important), but often unseen and unsung is the ability to change the way you do business, your processes, technology, etc. The success of my first company, Merscom, is often attributed to our pivoting from value core games (CD-ROMs sold at stores like Target and Best Buy) to casual downloadable games (e.g., hidden-object games downloaded from sites like Big Fish) and then pivoting to social (i.e., Facebook) games. Equally important—but more difficult—was pivoting from licensing content to creating content, pivoting from using external developers to building an internal team and pivoting from a European-focused marketing strategy to a domestic strategy. It was the latter pivots that paved the way for Merscom’s sale to Playdom and subsequently through Playdom to Disney. While all the attention and board meetings are focused on whether or not to pivot your business model, you should spend as much or more time analyzing how you are doing business and whether it needs to change. Continue reading
The most important lesson from yesterday’s national championship is that to be truly successful, you must always be working to improve. Last year, when Kentucky won the national championship, I wrote a piece on how it highlighted the importance of recruiting great talent. This year the lesson is that great leaders (and I definitely put Pitino in that category) never take a break on working to make their organizations better.
What was particularly illuminating was Rick Pitino’s (the coach of Louisville) comment this morning during a radio interview that he “broke down” tape already from the game. For those who are not sports, or basketball, fans, a coach spends the majority of his time watching tapes of his games so he understands what his team is doing right and wrong and tape of opponents so he knows their strengths and weaknesses. Pitino’s need to break down tape highlights several things: Continue reading
A recent article in the Harvard Business Review, “Three Rules for Making A Company Truly Great,” pointed to three elemental rules that were consistently followed by exceptional companies. There are a lot of hyperbole and clichés about how to create great companies, but the research by Michael Raynor and Mumtaz Ahmed (in the HRB article) shows that three fundamental principles are the keys to success. This finding was based on a statistical study of thousands of companies, so it is much more analytic than what business book happens to be at the top of the charts in a particular week. It is also apparent that these principles apply to social and mobile game companies.