[MUD-Dev] Evolutionary Design

[Matt Mihaly]

On Wed, 19 Jun 2002, Derek Licciardi wrote:

> I'd beg to differ, but that's probably why I am working with VCs
> to secure funding.  Name me another game that can last 5+ years,
> earn monthly revenues during the whole time, and scale the way an
> MMO does.  You'll be hard pressed to find any games other than
> MMOs capable of making the money a properly implemented MMO can
> make.

The ratio of graphical MUDs that are financially unimpressive to the
handful that are making a lot of money is quite depressingly
high. Furthermore, VCs aren't comparing your project to other types
of games. They are comparing you to other opportunities generally.

> Certainly the $90M Lineage brought in last year is enough to
> entice a VC into thinking its worth a further look.  It can be
> easily shown that the many recent purchases by NCsoft into the
> genre means that there is a significant profit margin.  NCsoft is
> a public company after all so all M&A and financials are publicly
> available.

VCs make their generally excellent returns by having huge hits. They
stick 20 million into a company hoping to get 600 million back upon
IPO (granted, I'm referring to the pedigreed VCs here. There are a
lot of them that look for smaller opportunities, but then, of
course, you're dealing with VCs who don't have access to the same
caliber network of contacts, which is certainly one of the big
things a VC is useful for besides money.)

They have to do this, because most of their businesses fail, and
they need those massive hits to support the businesses they throw
their money away on.

> Besides, there is a huge precedent for MMO companies to be
> purchased three years down the road and other than an IPO that is
> a major exit strategy for many VCs.  The response to our plan
> hasn't been entirely negative.  Like I said, I believe they have a
> hard time evaluating these games because most of them have never
> participated in the business side of making games and certainly
> fewer of them have participated in making an MMO.

There is a huge precedent for graphical MUD companies to be
purchased three years down the road? This has happened to what, 3 or
4 of them? There are 60 or so in existence. That's not exactly a
huge precedent.

 
> I simply can't believe the venture opportunity can't be stated
> properly to attract VC funding.

I'm sure it can be done, but these are some of the obstacles you
have to overcome:

  1. Most graphical MUD projects that got as far as beginning
  development are financial failures. Most of the ones that finished
  development (I've got no hard numbers, but I'm willing to bet it's
  a relatively small minority of the ones that began it.) are
  financial failures, or barely supporting themselves.

  2. The amount of money a graphical MUD can make for a VC isn't
  that large compared to opportunities in more traditional tech, or
  biotech, for instance.

  3. It's difficult to quantify a competitive advantage that you
  would have over, say, SOE. Personally, if you came to me and said,
  "We're a new games company with no institutional experience in
  making these games, but we're going to go up against SOE, EA, and
  Microsoft." I would probably pat you on the head and send you on
  your way. That's not to say that you absolutely COULDN'T compete,
  just that I'd wonder what makes you think you have a reasonable
  chance of competing with them, given a new team with no experience
  (as a team) making games and no infrastructure backing you up like
  the aforementioned teams have. Mythic may not be big, but they had
  team experience and an infrastructure already there. These are
  very big things.

Personally, I think you'd be better off finding a few (or one
particularly rich) angel investor who gets off on games. They aren't
going to have to justify the investment to their partners who might
not give a damn about games themselves, even if the VC partner you
are pitching to is a big fan of them.

--matt

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