From pet project to investable games startup: How to become investor-ready

• Industry shocks have pushed many early game ideas into “hidden” pet projects developed part-time.
• Investors now prioritise real product data over pitch decks, including meaningful retention and monetisation metrics.
• IP ownership must be secured from day one.

Andrew Ermolenko is head of legal at StellarTech and Alena Patorskaya is head of legal at The Games Fund.

In recent years, the games industry has gone through several major shocks: the shift to remote work in 2021–2022, office relocations caused by regional instability in Eastern Europe in 2022–2023, IDFA deprecation and privacy-driven changes in performance marketing, and major headcount reductions and cost optimisations across leading games companies.

Together with the “investment winter” of 2023–2025, these changes have made early-stage founders much more cautious. Many new game projects now exist as non-public “pet projects”, developed by founders in the evenings and on weekends while they continue working full-time at established studios.

In the current high-risk environment, many potential entrepreneurs are postponing fundraising and public launches until market conditions improve.

For the games investment ecosystem, one of the key challenges is to identify these “hibernating” startups and help them become investable. This requires understanding how early pet projects should be packaged to meet investor expectations in today’s market, especially in mobile gaming.

Show me the money

The days when million-dollar checks were signed based on your pitch deck are, if not entirely gone, a rare exception reserved for founders with an exceptionally strong track record (unless you’re an AI startup, of course).

To have a meaningful discussion about the valuation of an early-stage product, it is highly advised to do at least the following:

• Gather key audience engagement metrics (retention rates for days 1, 7, and 30), acquisition metrics (CTR, CPI, conversion rates), and monetisation metrics (ARPU, eCPM) on a statistically significant cohort of users. This means your prototype should be ready and you should have already run test UA campaigns;

• Track of your bootstrapped investment invested in the product, including license costs, assets, outsourcing costs, and the founders’ personal time, valued at market rates;

• Prepare a team growth plan, showing the number and seniority of new hires, their onboarding timeline, and how each hire is tied to specific milestones.

A common mistake we see is founders running test UA campaigns on cohorts of 50-100 users and presenting those numbers as meaningful data.

Investors will immediately question statistical significance - especially for D30 retention and monetisation metrics, where small samples produce highly unreliable results. Make sure your cohort is large enough to draw defensible conclusions before presenting the data.

Based on this information and the product roadmap, you can build a simple financial model in Excel or Google Sheets to understand your actual burn rate and required round size. In simple terms, multiply your burn rate by the estimated development period until the next key milestone and your next planned round, then add a 25–30% buffer. Murphy’s Law still applies, so it is always better to have a cushion.

With this in hand, you can have a more meaningful discussion with potential investors about valuation, round size, and the equity share you are ready to offer. Just keep in mind that the era of super-high multiples, even for profitable and fast-growing products, largely ended in 2022 (except, of course, for the AI craze).

Tech stack

One chronic issue in many "pet projects" is the underestimation of the backend needs. This is understandable: a game startup’s priority should be finding the right core gameplay, appealing meta, and long-term retention.

However, weak backend infrastructure significantly reduces the product’s readiness for scaling, monetisation, and deep analytics.

The minimum "hygiene" standards that a viable project should meet include:

• Moving key game logic to the backend to support antifraud design and protections;

• Deploying game servers, data storage, and analytics on widely adopted cloud solutions such as GCP or AWS, ensuring reliability, compliance, and scalability readiness;

• Integrating a commonly accepted marketing attribution platform, such as AppsFlyer or Adjust, for analytics and scaling readiness. Avoid exotic, rarely used, or self-developed solutions.

Most of this can be done with free or low-cost subscriptions and selective use of outsourced DevOps and analytics support. These investments can materially improve the product’s perceived readiness and valuation.

Secure your IP early - or regret it later

Even if your project started as a weekend experiment, IP hygiene matters from day one. Investors will check whether all third-party work, including contributions from friends, former co-founders, or freelancers paid informally, has been properly assigned to the company.

Treat IP as a business asset from the start. Sign contracts early, because once people fall out, disappear, or move on, getting the missing signature may become impossible.

We have seen this happen: a co-founder contributed a core engine prototype, later fell out with the team, and refused to sign the IP assignment agreement.

The resulting legal uncertainty effectively blocked a fundraise for over a year – not because the claim was necessarily valid, but because no reasonable investor would proceed with unresolved IP.

IP ownership when you're in your “pet project” phase   

If you’ve been working on your project while also holding a full-time job elsewhere, it’s critical to ensure that your IP doesn’t accidentally belong to your employer.

Start by reading your employment agreement carefully. Most contracts include clauses stating that any IP you create in the course of your employment, or even anything related to the employer’s business, automatically belongs to them.

To protect your project:

• Document that the work was done independently and outside the scope of your employment:

• On your own time (outside official working hours),

• Using your personal equipment (e.g., not your employer’s laptop),

• Without using any employer-provided tools or resources,

• On a project that is clearly unrelated to your employer’s business or field,

• Without relying on or using any of your employer’s advice, guidance, findings or proprietary research materials.

• Keep basic evidence of independent development, such as time-stamped commits or private repo logs.

• Avoid involving colleagues from your day job unless you have written agreements with them and it's clear they’re acting in a personal capacity and following the same precautions.

When company culture permits, it may be wise to disclose your pet project to your current employer. We have seen cases where former employers became the first investors in new games businesses.

Another point often overlooked by early-stage founders is the use of non-compete, non-solicitation, or similar post-employment restrictions.

Investors will review these during due diligence, and unresolved issues can raise red flags. If you plan to leave your job to start a company, consider discussing these restrictions openly with your employer and negotiating a waiver or written consent.

We have seen this play out in practice. A founder built a mobile game on the side while working at a large product tech company, then incorporated and transferred the IP to a new entity. A routine legal due diligence ahead of a funding round surfaced a non-compete buried as item 17 in his employment contract – signed years earlier, never flagged, never noticed.

Whether the former employer would have enforced it was an open question, but it didn’t matter: the investor paused immediately. The round was delayed by several months while the founder sought a written release from their ex-employer. Read your employment agreement in full before you start building, not before you start fundraising.

Finally, keep original and digital copies of all signed employment agreements, termination letters, side letters, and waivers. These documents may be required during funding or acquisition talks.

Legal structuring

Finally, after spending sleepless nights, sacrificing your weekends and hard-earned money on your beloved pet project, assembling a team of trusted peers, calculating your finances, and ensuring technological readiness, you need to package everything into a legal entity capable of receiving investment.

At this stage, founders should consolidate the project into a newly formed company and decide where to register it. The jurisdiction should be neutral and reliable for international investors, as it affects banking, compliance, fundraising, and exit risks.

For high-tech businesses, Cyprus and Delaware are often attractive options due to their business-friendly legal environments, developed venture ecosystems, and relatively straightforward formation processes. Both are generally accepted by international investors and allow for efficient deal-making.

At the same time, founders should carefully evaluate ongoing costs. Maintaining a full team and office in these jurisdictions can be expensive at an early stage.

A common strategy is to register the parent company in a reputable legal hub, while placing non-core or development functions in more cost-effective countries, such as Poland, Serbia, Portugal, South-East Asia, or parts of Central Asia, to reduce burn rate without compromising growth.

Once the company is incorporated, any pre-existing IP must be formally transferred to it. This can be done through:

• An IP assignment agreement where the creators sell or assign their rights to the company,

• Or by contributing the IP as part of the company’s share capital.

The key point is simple: by the time you approach investors, the IP must be clearly owned by the company, with no unresolved claims from contributors who created parts of the project but never legally transferred their rights.

Cap table discipline: Don’t overpromise early

Early-stage founders often casually offer equity to friends, advisors, or freelancers for minor help. Over time, these promises can clutter the cap table and scare off VCs or strategic investors.

Avoid promising fixed percentages informally. Instead, issue a specific number of shares, ideally based on a valuation at the time of grant, or use a formal equity or stock option plan with vesting.

A messy cap table full of informal or excessive promises is a major due diligence red flag. Your cap table reflects your company’s future, so treat it with the same care as your codebase or financials.

A cap table we reviewed had a friend who helped with early UI holding 5%, a former advisor who gave three calls holding 8%, and an undocumented promise of “around 10%” to a contractor. Before approaching investors, the founders had already informally given away over 20% of the company – creating a cleanup problem that took months to resolve.

Other intellectual property considerations

Owning your IP is not enough. You also need to make sure that the tools, assets, software, and content used in the project do not violate third-party rights and are properly licensed for commercial use.

Basic rules:

• Licenses and assets: purchase assets, for example from the Unity Store, through an account registered in the startup’s legal name and select license tiers that allow commercial use. A product built on “free” or personal-use licenses is an immediate investor red flag.

• AI-generated content: use commercial-tier AI licenses, for example for Midjourney, and refine AI-generated assets with meaningful human creative input. A product built entirely on AI-generated assets may be difficult to protect and easier to challenge or copy.

• Open source: keep a register of all open-source libraries and components used in the project, including name, version, source link, integration method, and functionality. Prefer permissive licenses such as MIT, Apache, or BSD, and avoid copyleft licenses such as GNU GPL unless reviewed by counsel.

Conclusion

The games industry is changing fast, creating strong opportunities for new teams with fresh ideas, energy, and execution.

The path from a pet project to a real business is challenging, but founders who address metrics, IP, structure, and cap table hygiene early give themselves a meaningful head start.

If any of the topics covered here apply to your situation, it is worth addressing them before you start fundraising, not during.