Inside Indie Fund: The Business of Backing

A look at one of the only major funding organizations for independent game developers


Credit: Timothy BanksCredit: Timothy BanksIndie developers strapped for cash have limited options for raising capital. Without name recognition or heavy game festival accolades, it’s tough to attract interest from a publisher, venture capitalist, or angel investors. Even if you do, those deals come with red tape regarding royalty rates, who owns the intellectual property, and how much control investors have over the content and mechanics of the game. Crowdfunding is another alternative, but without a substantial audience already in place, the chances of getting sizable sums are low. Currently, less than half of Kickstarter campaigns get successfully funded and one in 10 never receive a single pledge. There is another way. Indie Fund, an investment organization driven by heavy hitters from the independent game development world, offers capital to cash-hungry game studios along with the opportunity to get advice from seasoned developers who have weathered the indie trenches. Here’s how it works.

Making a Deal

Helmed by indie game superstars including Braid creator Jonathan Blow, Journey co-creator Kellee Santiago, and World of Goo creators Ron Carmel and Kyle Gabler, Indie Fund packs a triple punch, offering monetary and mentoring support as well as a promotional platform to developers trying to get their games off the ground. Game makers selected to receive funding through the organization’s pseudo-mysterious application process receive no-creative-strings-attached dollars in exchange for forking over 100 percent of revenue until the amount borrowed is repaid, then a 25 percent revenue share that lasts until two years after the game’s first launch date or until the developer has paid back twice what they borrowed, whichever comes first. Should the game fail to generate 200 percent of what was borrowed within two years, Indie Fund takes the loss, allowing the developer to walk away debt-free. If the game generates more than 200 percent in two years, the developer keeps all surplus revenue and everyone walks away a little bit richer. You can read Indie Fund’s full contract right over here.

200 percent of initial investment over two years is steep by traditional lending standards. Many small-business loans under $100,000 come with interest rates between 7 and 10 percent, though few if any fund game development. The average business credit card comes with an interest rate of just over 13 percent, reports A $30,000 loan through Indie Fund would charge the borrower 100  percent of their game’s revenue until they paid the full loan back, plus an additional $30,000 in interest over two years. Comparatively, a small business loan with an 8 percent interest rate would tack on under $5,200 in interest charges over the next two years while putting that amount on plastic would cost an extra $9,000 in interest within that time frame. The difference is that business loans and credit card debt keep charging long after the two-year mark is up. Indie Fund cash comes with an expiration date and requires no cosigners or collateral.

If you go to a bank and get a loan and your game doesn’t launch, you still owe the bank and they’ve [probably] taken some collateral, so maybe they own some of your house or they own your car,” says Aaron Isaksen, an Indie Fund partner and developer of the mobile puzzle game Chip Chain. “You’ve got to work for the next [several] years to pay off that loan, whereas we completely forgive the loan if the game doesn’t launch, so it’s a huge amount of risk being transferred from the developer onto our shoulders. That’s one of the main reasons why our revenue share is a little higher than what a bank would do.”

Fernando Ramallo, Berlin-based developer of Panoramical, was financially supported by Indie Fund in 2013. He says that the organization’s revenue sharing model makes them less of a lending institution and more of a partner with the development team, one that has a strong financial incentive to help the game to perform well.

Since they are interested in recuperating the investment, they will also be interested in making the game a success,” Ramallo says. “It’s a mutual feeling that we’re all in the same boat in terms of trying to make the game work and trying to get press for it and making it a success.”

Indie Fund’s model doesn’t make sense for all development teams. For developers who only need a small loan that can be paid off in a reasonably short amount of time, self-funding is a smarter financial choice.

A lot of times someone will come to us for a small amount of money and we’ll say, ‘You’re better off putting this on your credit card,’” Isaksen says. “If you’re asking us for $5,000, it doesn’t make sense to pay us 100 percent when you can ship your game and pay your credit card 20 percent.”

The Intangibles

Money is only part of the driver behind why Indie Fund dollars are so attractive. Promotion and mentorship sweeten the deal, two factors that are crucial to an experimental game’s success, says Asi Burak, president of the nonprofit Games For Change and developer of PeaceMaker, a peace-building game based on actual events in the Israel-Palestine conflict. Burak funded PeaceMaker through private investments. 

A small percentage [of indie games] is really financially breaking even,” Burak says, adding that these are exceptions. “When you want to do something that is a way to express something you care about, sometimes you have wide audiences for that, but sometimes you don’t.”

Partnering with bigger industry players helps get the word out. Of the 15 games Indie Fund has or is currently backing, nearly all released games received coverage from major industry publications and several have gained coverage in more mainstream press venues including the The Guardian and Wired UK. The long-term, multi-pronged press and publicity strategies enacted by both developers and Indie Fund have turned several games into immediate successes, some before they were released. The heist game Monaco: What’s Yours Is Mine recouped its $100,000 investment four days before the game even hit the market. Antichamber recouped its funding within an hour of launch. Dear Esther, a game originally created as a mod to Half-Life 2 then later released as a standalone work in February, 2012, sold more than 16,000 copies in its first day.

We do blog posts about games we’re funding that get picked up by the media everywhere. It’s not really the same impact if you said, ‘Oh, I just got a loan from Bank of America.’ That’s not going to get Polygon and other press out there,” says Isaksen. “Getting your game noticed is really one of the hardest problems and because people know Indie Fund and they know the partners of Indie Fund, when we are able to help promote a game it really does get picked up in a way that’s bigger than before. That’s an important part of what we do. If money was the main thing, these days money is easier to get, but the discovery part is still difficult.”

Guidance is the other piece of the Indie Fund pie. Mentorship is offered as much or as little as developers need. Niv Fisher, an Israel-based developer who received the organization’s help in 2012, says that his team made the mistake of enacting a marketing strategy before seeking Indie Fund’s guidance. When Fisher and his business partner wanted to update their XBox Live Arcade game, The Splatters, and expand it to PC and Mac platforms, they sought the organization out for help. Super Splatters, Fisher’s revamped game, launched on Steam in June and recouped Indie Fund’s investment within four months of release.

By any reasonable metric this is a very good outcome for a new team releasing their first game, just not enough to fully fund the team’s next game, which is what we hope for when we back a project,” Indie Fund stated in a blog post several months after its release.

Fisher calls the experience a worthwhile endeavor, but agrees. “Our promotion campaign wasn’t focused enough on creating stories and delivering those stories in a way that’s interesting for everyone to write about,” he says. “It was more taking the position of let’s release material [rather] than announce things. Indie Fund in this case suggested more than once that it’s not an approach that usually works and they were correct.” 

Getting In

Getting Indie Fund’s cash and help starts with getting their attention. The group does not have a formal application procedure or tell developers how to submit their work, but they do keep an eye out for games that are making waves at festivals, conferences, and in the press.

The first thing we want to look for is does the game have something that’s special about it?” says Isaksen. “It’s so hard to get your game discovered that if your game has something different and special and unique, people are more likely to share that information and talk about something new. That’s a really important piece.”

Ramallo believes that one of the reasons Panoramical was chosen for funding is because of the project’s ability to connect with an audience outside of the strictly game community. Part game, part artistic tool, Panoramical allows both newbie players as well as established visual and audio artists to construct “hand-crafted musical landscapes” either alone or in tandem with other artists.

It’s a very weird thing to sell as a commercial product but I think they were very interested in seeing how selling something like that would work, how turning an installation into a commercial game would work,” Ramallo says. “One of the reasons they saw an opportunity in it, they saw that it could be something successful, is that we were showing it at several festivals. It had very good attention from the audience that were playing it and also the fact that we were talking with these people about making it more than just our game, making it a collaborative effort with other artists. I guess they saw some interest in that sort of thing.”

Whether seeking help from Indie Fund or any other backing group, having a clear idea of the game’s budget, how much money you’ll need, and how the funds can be spent most efficiently helps too, says Fisher.

I think what [Indie Fund is] looking for are teams that have shown that they can deliver quality, that are trying to do interesting things in the realm of indie game development, and have shown that they can live off low overhead and are really committed to this task, to becoming a fully independent developer,” he adds.

Finally, you’ll need a killer sample of gameplay, a thorough understanding of the selling points of your project, and an elevator pitch that whets gamers’ palates.

One of the best things to do is to really know how to make a good trailer for your game, because in that one minute it’s how you know how to pitch everybody why this game is amazing and why they have to play it. If you can’t do that in a minute, it’s really hard to get people’s attention,” Isaksen says. “That whole mental process of saying what’s the best thing in my game? What do I want to show? I think is really helpful for developers.”

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