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Vlambeer pours cold water on GameOn's €10 million development fund

Could hurt stability and creativity, says Ismail

Vlambeer pours cold water on GameOn's €10 million development fund

Vlambeer's Rami Ismail has expressed disappointment with GameOn– the €10 million fund designed to invest in game startups across the Netherlands – claiming the venture could end up harming rather than helping the Dutch development scene.

Taking to his blog in response to an interview with the Dutch Ministry of Economic Affairs published on VentureBeat, Ismail argues the fund is only interested in 'scalable' and largely free-to-play focused outfits, shunning the leagues of indie studios operating within the Netherlands that could benefit from the cash.

"Vlambeer and myself get mentioned over and over as examples of what's right about the Dutch development scene, but then discarded as non-scalable when the question arises why not to invest in independent games," Ismail notes in the post.

"Non-scalable? We have an average ROI of over 500 percent, we've never made a game that earned less than the previous one by a margin of at least 150 percent, we've been stable, we're visible and we're a respected, award-winning company.

"Every game we made added a tiny slice of money to our monthly revenue, and we were already way in the green when Ridiculous Fishing launched. Vlambeer can scale, we just opt not to."

Superstar schooling

In the VentureBeat article, Bertholt Leeftink and Jan Dexel of the Dutch Ministry and iQU founder Reinout te Brake make repeated references to the Finnish development scene and, more specifically, Supercell.

It's claimed the F2P-focus of such outfits gives them an advantage over Dutch developers that have been 'schooled' to focus on paid releases.

"We could have anticipated better on things like when free-to-play kicked in full force," details te Brake.

"Developers were trained in schools – we have very good schooling, very good incubators – but they were all trained to become number one in pay-to-play games. That's a completely different model.

"It's less scalable, because if you do free-to-play well, you have companies that may fail on their first or second game, but if they're agile enough, with the right mentors, they can grow.

"You can see all these success stories on your radar, whether it's Kabam or Supercell or Rovio."

In reply, Ismail says that focusing the fund on free-to-play – which, he points out, is currently "undergoing scrutiny in the European Union and has the same amount of problems that premium has with becoming sustainable" – means the studios making waves with premium games are set to be neglected.

"It's nice to use Rovio, Zynga and Supercell as examples, but you're glancing over the thousands of hopeful investors that fall under that 2012 figure with a 94 percent industry mean income of less than $1,200 a year," he adds.

Outside investment

Ismail also calls into question GameOn's intention to spend a portion of its money on attracting foreign companies to set up base in cities like Amsterdam.

"Not only is that a terrible way to foster a local development scene, it also means that the money is directly headed out of the country, creating temporary jobs that will last as long as the money is there, instead of structurally supporting a burgeoning independent scene," adds Ismail.

"The Netherlands have great entrepreneurial support, but if I want to support independent game dev, I still have to ask foreign companies."

Ismail rejects claims Vlambeer is a 'single hit game' studio

Crucially, Ismail points out that Vlambeer itself isn't seeking investment from GameOn and isn't looking to scale beyond its current set up.

Rather, his concern is that the fund is focusing on turning the Netherlands VC hub, encouraging venture capitalists to pour cash into studios looking to serve up the next Clash of Clans before cashing out, rather than injecting much-needed money into the wider independent development scene.

In short, GameOn's fund is doing the opposite of what it should be doing – investing in sustainable businesses that could offer the Dutch development scene a sense of stability longterm.

"I understand the need to grown the industry economically, but there are ways to do that without essentially forgetting about local companies and then creating competition for them from outside of the country," he concludes.

"This isn't how you create 'creative startups', this is how you stifle them.

"I'm happy that the government is spending money on games, and I'd like to congratulate the people that made this possible on their efforts and hard work.

"I'm just fundamentally disagreeing with how the entirety of this extremely valuable money seems to be spent, rather than distributing it over potential and obvious growth sectors in our industry – both economically and culturally."

[source: Rami Ismail]

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.

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Reinout te Brake CEO
With GameOn we would listen to founders, learn them better. We believe 60% of our decision to invest is based on founders, their vision, ability to adopt/be agile and attract talent. Our team and connected mentors (industry proven track record) is there to help when needed. When it comes to recruitment, intro's etc.

As said to Rami, we like the sexy F2P and do know that lots of companies have gone down in the process, but lots have been learned every since. If you give the company runway to learn/fail from game1 and maybe 2, then with the right founders and talent I am sure some success is possible.
Aaron Oostdijk Co-Founder at Gamistry
We've looked into GameOn, but had similar issues with the focus on scalability and free to play. We'd be open to investments from such a fund, but our policy is that such an investor invests because they like the ideas we have, and wants us to execute them to the best of our ability.

This means we retain full autonomy, meaning the investor in essence has nothing to say about what we make (and by extension, the monetisation model we implement), beyond our commitment to make the things that we were planning to make anyway.

This is of course a luxury position to take, but it's the only reason we'd consider that kind of situation. Our company is geared towards being self-sustaining anyway, so it's not like we need to compromise in that regard.

As for F2P, I think there's a huge survivorship bias on the business side. It's nice these super successful F2P companies exist, but for each of them, there's plenty of similar ones that went out of business.
Reinout te Brake CEO
Why GameOn?

I saw a post of Rami and a few things came to mind.

1. Did we say that we would get companies to Holland? No, we said that we will help companies land in Holland if they want an European office. Then Amsterdam is a good city to land.
2. Did we say that you cannot be an indie that doesnÂ’t want to scale up? No, we said that indies that want remain small in terms of employees should do that, we reach out to people/companies that want to grow their business with the use of funding
3. Did we say we will not invest in dutch based gaming companies? No, that is the whole aim of the fund
4. Did we say there is no talent? No, we said that we would love to connect all the initiatives in the different cities to grow the gaming industry in Holland
5. Is the fund only interested in F2P? No, not just only, but it remains a sexy area where we do see scalability
6. Does the fund need a ROI strategy? YES, of course, for shizzle, who doesnÂ’t!
7. Are we proud on the Dutch Game Developers who win prizes? Yes again!
8. Did the Government of Holland invest 10mio? No, 5mio and that needs to come back to them. Rest is private money to stimulate gaming in Holland
9. Do indies approach us at this moment? Yes, we just only started and some are reaching out. We are a programme, so if Indies need something we might be able to assist with the help of our close contacts with the dutch government
10. Is F2P unstable? The gaming industry is learning and GameOn gets assistance of people that have build up significant experience on that level. We want to put that experience to work.
11. Why GameOn is the title, so why? Pure passion to make sure that if people and/or companies want to start gaming companies that they can with the help from initiatives such as GameOn. I hope that there will be more and that education in school fits the trends of the gaming industry. I hope my kids will benefit from what I tried to build hereÂ…without getting any income unless when a company exits!
Nicholas Lovell
I agree with Rami on the dangers of focusing on inwards investment, but (perhaps predictably) not on the F2P point.

Vlambeer seems like a difficult investment case to me. It has (I suspect) solid cash flows from its historic titles, which provide an underpinning of valuation. The upside is predicated on Vlambeer's ability to produce new hit games. They have an amazing track record, but it is still a creative risk.

F2P studios have similar creative risk. But IF they work, they create more sustainable opportunities to make investors happy:
- the game can be adapted on the fly, rather than relying on its initial launch (see Supercell's Boom Beach which has been in soft launch for nearly six months now)
- the game can continue being towards the top of the top grossing charts for months and years. (According to Distimo, not one of the top ten grossing games on iOS in 2013 were released in 2013).
- the ongoing relationship between F2P players and the games they play create enormous cross-promotional opportunities which creates sustainable advantage.

There are enormous risks in F2P development. As an investor (not necessarily as an indie), there are many more levers you can pull to reduce the risks in Games-As-A-Service, than Games-As-A-Product.