How to presentation on raising money for a game company with: an overview on the game sector from financial perspective, why to raise money, funding readiness, how much to raise, types of potential investors and how to raise the funding. From Paul Heydon at Avista Partners.

1. Avista
Partners

2.  Investment Banker based in London for 11 years
 Strong game sector experience, knowledge and relationships
 Advised on transactions in the game sector since 1999 with
a total value of over $1 billion advising many companies
including:
Avista
2 Partners

3. Online Mobile
Technology
Social
& Services
Avista
3 Partners

4.  Quick sector overview
 Why to raise money
 Funding readiness
 How much to raise
 Types of potential investors
 How to raise the funding
Avista
4 Partners

5. $109.6 Billion: total public company market cap for global game sector
Distribution/ Outsourcing, Payment,
Accessories, $318 $3,280
$277
Online is
worth approx. Online, PC/Console
65% of $21,951 w/o
PC/Console Nintendo,
$33,783
Retail,
$3,924
Mobile,
$8,360
Nintendo,
$37,714
Note: USD$ millions and as at 31 May, 2010
Avista
5 Partners

6. Online Game/ Virtual Mail.ru Games Webzen
World Universe has Realnetworks Games Tencent Games
Viacom Online
260+ plus companies Yoyogames Wild Tangent
Kongregate AOL Games EA Online
with $13.4 billion+ in Zapak Spil Games
Miniclip Yahoo Games Gungho
iwin
annual revenue King.com Playfirst Ourgame Duowan Duniu GGL
6 waves
Roblox Games2win Cafe.com Ganymede
Most Diverse Feerik Big Fish Oberon
Microsoft Online Shanda Games
Alawar Fettspielen MLG
51wan
9you Gala-net
GameDuell Geewa Motion Twin Popcap Aeria Run Up Mgame
Gamania
Zynga Jagex
Moli Group Netease Games
Acclaim
Bigpoint Sony Online (SOE) NcSoft
Level Up Games
rockyou
Many Players Gameforge CJ Internet
Viwawa Playdom Sky Union Liveplex
Vector Macrowell Gamepot
Prizee Redmoon Gamigo Hanbitsoft
Portfolio Diversity Gigamedia Games
The9
Cubinet ESL
Vinagame Netdragon
Guangyu Huaxia
Weeworld
Sing-Gium Softstar Chinese Gamer Gameon
CIB Net Station
Lizard
Nexon
Snail Game GameCyber WeMade Entertainment Perfect World
Upjers Neowiz Games
Sonokong Roc Works
SGN Gonzo Rosso
IP e-games IGS Online Games DMII
High5 Asiasoft
Burda Interactive China Cyber Port
Userjoy Windysoft CDC Games
Slide M-Etel Mycnx Linekong SZ Network Actoz Kingsoft Games
Headlock Goorm GoodGame VTC Game Ferry Game
Aruon K2/ GamersOutspark
First
Lyto Gravity Garena Valve Online
Anipark Joymax Goa
OnNet Ongame
X-legend Innogames Artix Warner Bros. Online Games
Beemoov JC EntertainmentWeilai
Cubizone Barunson
Ini3 GamesCampus
Five Minutes Gameus Shiji Tiancheng Gamehi Travian Ndoors
Giant Interactive
Crowdstar Flowplay Unalis Storm Entertainment Logic Korea
L&K C&C Media
Ankama CyberstepImperia OnlineMygame.ph Dragonfly Ogplanet Games Masters
Owlient GCREST Subagames
Jumpstart Three Rings Kog Studios Ntreev Frogster
Apaja CITVC Netempire IAHGames Redduck Software
100sea Object
Exagame Wiseon EYA Interactive Dream Execution Gamasoft
Ymir Galaxy Gate
Hive7 Lager Network Northstar Imazic
Barunson Interactive G10 Softnyx InixsoftH-win Codemasters Online
Extralives Cipsoft Gamelabs Hi-win Dreamwork Power Challenge NetTimeSoft
Min Communications
Expotato Aramaru Taewool
Digitalic Nowcom Games CaveCrspace Blizzard
Sulake Young Internet
Gameart Studio Allm CCR F4 YedangOnline
Watagame Gaia Online Mediasite Radiance YNK Korea
Entropia G-Bits
Urban Rivals IMVU Cedar Online Digipark Ice Entertainment
Apeha.ru Gnisoft Maiet ESTsoft games Funcom
Seedc Wisecat Indy21 Entwell Changyou (Sohu)
Stardoll Tri-d Second Life
Atoonz Zwinky Wizard101
Rhaon On Soft Fusion Fall Softon Alt1 IMC Games
CCP
Mind Candy Combats.ru Ons
Cartoon Doll Emporium eRepublik
Club Penguin Webkinz
Least Diverse
Casual Casual to Hardcore Focus Hardcore
Avista
6 Partners

7. Total Deal Value (USD$ millions) Total # of Deals
2500.0 140
119
120
1910.7
2000.0
109
100
1563.1
1500.0
80
1223.0
69
60
1000.0
48
40 40
476.6
500.0 379.5 2010 is on
305.9 304.2 298.6 20 track for
18 23
167.7 136.8 12
$900m+
7 5 47.6 21.2
4 3
0.0 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year Avista
Source: Capital IQ as at 31 May 2010
Note: All in USD millions except where noted 7 Partners

8. Total Deal Value (USD$ millions) Total # of Deals
800.0 25
700.0 682.6 22
19 20
600.0
17
500.0
15
13 2010 is on
400.0 12 13 357.9
11 track for
324.6 over $1.2bn
10 10
300.0 in deals
8
200.0 6 156.8
5
87.1 99.6
100.0 68.0
43.4
10.8 20.5
0.0 0
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010
Year
Avista
Source: Capital IQ as at 31 May 2010
Note: All in USD millions except where noted 8 Partners

9. EV/Revenue EV/EBITDA P/E
Stock Price Price as % Price as Market Enterprise
(local currency) of LTM % of LTM Cap Value
(5/31/10) High Low (USDm) (USDm) CY 2008 CY 2009E CY 2010E CY 2011E CY 2008 CY 2009E CY 2010E CY 2011E CY 2008 CY 2009E CY 2010E CY 2011E
Online Game Companies
Netease.com Inc. 30.36 62.6% 120.3% 3,932.3 2,808.2 9.3x 6.2x 5.2x 3.6x 15.7x 9.6x 8.8x 7.0x 16.8x 15.0x 12.5x 10.3x
NCSoft 193,500.00 96.0% 173.5% 3,190.7 2,742.4 7.8x 10.0x 7.1x 5.8x 37.1x 49.8x 16.2x 12.5x NM 23.7x 19.4x 15.9x
Shanda Games Limited 5.48 42.2% 104.4% 1,578.5 1,235.0 3.9x 2.5x 1.8x 1.6x 11.5x 6.4x 4.3x 4.1x 11.0x 7.1x 7.3x 6.6x
Changyou.com Limited 26.56 54.9% 101.1% 1,369.6 1,104.2 26.2x 5.5x 4.1x 3.5x 180.4x 9.4x 6.4x 5.4x 11.7x 9.3x 8.2x 6.6x
Perfect World Co., Ltd. 26.48 52.4% 124.6% 1,325.6 1,053.5 11.2x 5.0x 3.4x 2.8x 21.5x 9.2x 5.9x 5.2x 16.6x 9.0x 8.0x 6.9x
Shanda Interactive Entertainment Lt 41.01 63.1% 107.7% 2,435.1 912.4 2.7x 1.7x 1.2x 1.0x 5.5x 3.7x 2.7x 2.2x 16.5x 12.1x 12.5x 10.9x
Giant Interactive Group, Inc. 7.09 74.1% 113.6% 1,609.9 874.5 4.2x 3.7x 4.6x 4.2x 5.8x 5.9x 6.9x 6.4x 10.8x 13.5x 12.7x 10.6x
Chinese Gamer International 331.00 63.8% 113.9% 888.9 802.8 21.5x 16.9x 12.5x 10.4x 43.2x 33.4x 18.8x 15.8x 44.5x 23.4x 18.0x 13.5x
NEOWIZ Games Corporation 41,300.00 92.0% 147.0% 729.2 716.3 3.7x 3.7x 3.0x 2.2x 13.8x 13.6x 9.9x 7.6x 40.1x 16.0x 12.4x 10.1x
Kingsoft Corporation Limited 4.40 46.5% 108.9% 629.0 444.5 5.8x 3.7x 3.1x 2.7x 23.8x 9.5x 7.0x 5.6x 13.9x 10.8x 9.5x 7.6x
UserJoy Technology Co. Ltd. 463.00 91.3% 263.0% 431.8 413.3 35.1x 27.0x 21.3x 8.6x 92.3x 83.3x 53.1x 18.0x NM 65.7x 19.3x 13.9x
China Communication Telecom Serv 2.10 85.4% 355.9% 322.2 350.9 127.0x 7.3x NA NA 633.3x NM NA NA NM NA NA NA
Shenzhen Zhongqingbaowang Netw 24.04 68.4% 112.3% 457.3 338.1 149.4x 43.0x NA NA 276.0x 64.0x NA NA 63.7x NA NA NA
Wemade Entertainment Co., Ltd. 42,500.00 63.5% 110.8% 271.3 271.3 6.3x 4.3x NA NA 17.0x 9.9x NA NA 1.6x NA NA NA
GameHi Co.,Ltd. 1,590.00 67.9% 161.4% 217.9 263.2 NA 7.4x NA NA NA 17.1x NA NA NM NA NA NA
Gamania Digital Entertainment Co., 58.20 84.6% 133.8% 281.5 253.5 2.3x 2.2x 1.9x 1.9x 13.8x 14.5x NA NA 35.4x 24.2x 23.5x 18.1x
CJ Internet Corp. 10,700.00 56.8% 109.2% 204.1 204.1 1.2x 1.2x 1.1x 1.0x 3.9x 5.2x 4.0x 3.4x 10.4x 8.6x 6.9x 5.5x
GungHo Online Entertainment, Inc. 193,000.00 61.3% 139.9% 244.0 203.3 3.0x 1.6x 1.6x NA 105.0x 9.2x NA NA NM 19.1x NA NA
Dragonfly GF Co., Ltd 16,900.00 70.1% 169.5% 173.3 174.3 NA 6.4x NA NA NA 10.6x NA NA 8.1x NA NA NA
GigaMedia Ltd. 2.52 36.7% 126.0% 137.4 102.4 0.7x 0.5x 0.7x 1.3x 2.3x 2.1x 11.1x 8.1x 4.3x NM 2.3x 9.0x
YD Online Corp. 4,860.00 44.4% 120.0% 61.1 69.9 1.0x 1.1x 1.3x 1.0x 4.4x 5.4x NA NA 6.8x 9.6x 5.5x 4.3x
Mgame Corp. 7,200.00 40.3% 112.5% 68.7 68.6 1.1x 1.4x 1.4x 1.2x 4.3x 5.9x 6.8x 3.8x 5.7x 16.0x 8.2x 7.0x
Barunson Games Corporation. 1,710.00 87.9% 161.3% 39.7 64.4 7.6x 10.6x NA NA NM NM NA NA NM NA NA NA
HanbitSoft, Inc. 3,800.00 67.6% 122.2% 69.7 57.3 0.9x 1.0x NA NA NM NM NA NA NM NA NA NA
Frogster Interactive Pictures AG 17.32 77.5% 240.5% 54.7 51.4 8.9x 15.7x 2.7x 1.5x NM NM 9.6x 4.6x NM 21.0x 10.3x 5.2x
Webzen Inc. 12,100.00 59.6% 123.3% 120.0 46.7 1.6x 2.1x 2.0x 1.5x NM NM 10.1x 4.3x NM 34.2x 13.8x 8.5x
Gala Incorporated 46,000.00 40.4% 129.4% 53.8 45.7 1.8x 1.1x NA NA 22.7x 6.1x NA NA 25.4x NA NA NA
ESTsoft Corp. 13,300.00 49.2% 110.8% 52.9 43.6 3.2x 2.2x 1.8x NA 10.3x 4.9x 4.3x NA 8.0x 7.8x NA NA
NetDragon WebSoft, Inc. 3.36 47.0% 103.1% 227.1 42.8 0.5x 0.5x 0.5x 0.5x 0.7x 1.2x 3.5x 2.5x 6.6x 18.9x 12.6x 16.4x
Softstar Entertainment Inc. 42.00 84.0% 168.3% 33.6 40.8 4.2x 6.1x NA NA NM NM NA NA NM NA NA NA
Joymax Company Ltd. 18,800.00 29.7% 129.7% 104.9 36.7 1.8x 1.4x NA NA 3.0x 2.3x NA NA 5.9x NA NA NA
Asiasoft Corporation Public Compan 7.05 94.0% 127.0% 64.8 35.8 0.7x 0.8x 0.8x 0.7x 2.7x 4.0x 3.4x 2.8x 11.3x 13.5x 11.0x 9.6x
Liveplex Co. Ltd. 2,585.00 79.8% 174.7% 48.4 35.4 2.8x 3.4x NA NA NM NM NA NA NM NA NA NA
Cave Co. Ltd. 135,000.00 57.5% 221.3% 30.6 29.2 1.2x 0.8x 0.8x NA 11.2x 3.6x NA NA 5.6x 14.3x NA NA
Actoz Soft Co., Ltd. 10,050.00 27.9% 112.4% 74.6 26.5 0.5x 0.4x 0.2x 0.2x 3.5x 1.8x 1.1x 0.9x 11.3x 9.3x 7.8x 6.7x
JCEntertainment Corporation 4,860.00 82.4% 169.7% 40.9 26.1 0.9x 2.1x NA NA NA NM NA NA NM NA NA NA
Ynk Korea Inc. 2,715.00 34.4% 108.6% 18.1 17.2 0.8x 1.5x NA NA NM 14.5x NA NA NM NA NA NA
GameOn Co Ltd. 79,000.00 59.4% 131.4% 86.7 16.6 NM 0.2x 0.2x NA NM NM NA NA 7.9x 9.7x NA NA
Funcom N.V. 5.00 67.2% 156.2% 40.8 10.9 NA NA NA NA NM NM NA NA NM NM NM 5.7x
M-etel Co., Ltd 9.00 57.6% 900.1% 4.6 10.0 2.0x 1.7x NA NA 22.9x 6.2x NA NA 17.0x NA NA NA
CyberStep, Inc. 55,100.00 55.0% 266.1% 12.0 8.6 1.0x 1.0x NA NA 2.9x NM NA NA NM NA NA NA
Star Vault AB 2.44 54.2% 125.1% 6.2 5.7 NA NA NA NA NM NM NA NA NM NA NA NA
Gravity Co., Ltd 1.84 70.0% 227.2% 51.1 (10.8) NA NA NA NA NM NA NA NA NM NA NA NA
The9 Limited 4.41 36.6% 106.0% 112.5 (132.5) NM NM NM NM NM NM NM NM 8.6x NM NM NM
Min 0.5x 0.2x 0.2x 0.2x 0.7x 1.2x 1.1x 0.9x 1.6x 7.1x 2.3x 4.3x
Max 149.4x 43.0x 21.3x 10.4x 633.3x 83.3x 53.1x 18.0x 63.7x 65.7x 23.5x 18.1x
Average 12.2x 5.3x 3.4x 2.7x 53.8x 14.3x 9.7x 6.3x 16.3x 17.2x 11.5x 9.5x
Median 2.8x 2.2x 1.8x 1.6x 13.8x 9.2x 6.8x 5.2x 11.1x 13.9x 11.0x 8.8x
Avista
Source: Capital IQ as at 31 May 2010
Note: All in USD millions except where noted 9 Partners

10. Total Implied Implied Implied Implied
Transaction Enterprise Enterprise Enterprise Enterprise
Date Target/Issuer Value ($mm) Buyers/Investors Value ($mm) Value/ Revenues Value/ EBITDA Value/ EBIT
05/27/2010 Gamehi (29.3%) 59.8 Nexon 204.1 6.0x - 21.0x
05/27/2010 Infocomm Asia Holdings (52%) 23.0 Gigamedia 44.2 4.9x - -
05/20/2010 XPD Media - Zynga - - - -
05/20/2010 Cyber Revolutionary Space Co. (48.94%) 10.7 NEOWIZ Games Corporation 21.8 - - -
05/18/2010 Acclaim Games - Playdom - - - -
05/18/2010 Runic Games (increase to majority stake) 8.4 Perfect World - - - -
05/17/2010 Perfect Storm Network Technology 8.8 Dokomo Network Technology - - - -
05/14/2010 Stunlock Studios (minority stake) - Funcom - - - -
05/11/2010 Nextplay (65%) - NCSoft - - - -
05/04/2010 Ndoors (67%) - Nexon - - - -
04/30/2010 Chengdu Ye Net Science and Technology - Perfect World - - - -
Development Co. (increase from 30% to 80%)
04/26/2010 Merscom - Playdom - - - -
04/26/2010 LabPixies - Google - - - -
04/21/2010 Irata Labs - News Corp - - - -
04/21/2010 Shenzhen Domain Computer Network Co. (29%) 20.8 Shenzhen Tencent Computer System Co. 46.5 - - -
04/20/2010 Turbine Inc. - Warner Bros. - - - -
04/15/2010 NHN Games 214.4 Webzen 214.4 - - -
04/12/2010 CIB Development Sdn Bhd 11.9 CIB Interactive Sdn Bhd 11.9 - - -
04/09/2010 Qian Wan Technology Co. Ltd. (80%) 0.1 Long Shapiro Core Information Services Limited 0.1 - - -
03/31/2010 Three Melons - Playdom - - - -
03/30/2010 Cyber Planet Interactive Company Limited (6.82%) 0.7 Hansathan Piyachatwongs 10.9 - - -
03/26/2010 C&C Media Co., Ltd. 21.0 Perfect World Co., Ltd. 21.0 - - -
03/22/2010 Red 5 Studios (majority stake) 20.0 The9 Limited - - - -
03/03/2010 northworks Software - Travian Games - - - -
03/03.2010 Mindjolt - Platform G - - - -
03/03/2010 Offbeat Creations - Playdom - - - -
02/24/2010 Big Six Games - Hi5 Networks - - - -
02/23/2010 Game Advertising Online 8.0 UBM TechWeb Game Network 8.0 - - -
02/22/2010 Raxco Assets Corp. 7.3 High Amuse Limited 7.3 - - -
02/18/2010 YNK Japan (31.6%) 3.9 Wemade Entertainment 12.5
02/11/2010 FileFront 2.0 Break Media 2.0 - - -
02/11/2010 Serious Business - Zynga - - - -
02/03/2010 Alawar (23%) 3.0 Almaz Capital Partners 13.0 - - -
02/03/2010 Seed9 Entertainment (56.33%) 6.5 CJ Internet 11.5 - - -
02/02/2010 YNK Japan (35%) 4.3 Wemade Entertainment 12.3
01/29/2010 Enemy Unknown AB - Linden Research - - - -
01/21/2010 Professional Interactive Entertainment (GGL) - PrismOne Group - - - -
01/13/2010 Thriller New Media - iEntertainment Network - - - -
01/11/2010 Mochi Media 80.0 Shanda Games 80.0 - - -
01/11/2010 Linden Research (undisclosed stake) - Saints Capital - - - -
Source: Capital IQ as at 31 May 2010 01/08/2010 Shanghai Hongli Digital Technology (Goldcool Games) - Shanda Games - - - - Avista
Note: All in USD millions except where noted 10 Partners

11. Implied Implied Implied
Implied Enterprise Enterprise Enterprise
Enterprise Value/ Value/ Value/
Date Target/Issuer Buyers/Investors Value ($mm) Revenues EBITDA EBIT
05/27/2010 Gamehi (29.3%) Nexon 204.1 6.0 - 21.0
05/27/2010 Infocomm Asia Holdings (52%) Gigamedia 44.2 4.9 - -
11/18/2009 Shanda Games (5.4%) GIC 3013.2 5.9 15.1 -
06/26/2009 Fueps S.p.A (51%) DADA SpA 3.8 4.2 - -
06/06/2009 Dreamwork net co. ltd. Chengdu B-ray Media Co. Ltd. 64.5 4.6 - 4.9
12/09/2008 Cryptic Studios, Inc. Infogrames Entertainment SA 74.8 4.4 - -
09/03/2008 Webzen Inc. (23.7%) NHN Games Co., Ltd. 163.7 7.1 - -
02/28/2008 Gamepot Inc. (SPSE:3792) So-net Entertainment Corporation 85.7 2.4 7.8 11.3
12/01/2007 Blizzard Activision 8100.0 7.4 - 15.6
11/08/2007 Gameon Co. Ltd. (41.3%) NEOWIZ Games & TStone Corp. 141.4 2.4 8.9 9.2
06/22/2007 Fun Technologies (47%) Liberty Media $99.3m 4.8
05/30/2007 Optisp CDC Games $10-12m 1
05/21/2007 The9 Electronic Arts $167m (15%) 8.4 18.3
03/19/2007 Neowiz Electronic Arts $105m (19%) 4 15
08/24/2006 CDM Fantasy Sports Fun Technologies $10m 1.3
06/13/2006 Jeuxvideo.com (88%) Hi-Media €22.9m 12.8
03/20/2006 WorldWinner Fun Technologies $23m 2.2
02/07/2006 Zylom Realnetworks $21m 2.6
11/22/2005 Fun Technologies (51%) Liberty Media $144m 5.6
09/08/2005 IGN Entertainment News Corp $650m 15.2
08/31/2005 Gravity (52.4%) Softbank related funds $389.9m 11.2 17.9x
06/13/2005 Fanball Interactive Fun Technologies $22m 4.8
06/01/2005 Cheatplanet Future plc $8.7m 9.7
11/29/2004 Actoz (29%) Shanda $91.7m 8.1 34.7
07/02/2004 Skilljam Fun Technologies $8m 2.2
01/26/2004 Gamehouse Realnetworks $35.6m 3.6
08/28/2003 IGN Entertainment Mgmt & Great Hill Partners $34.9m 3.1
06/02/2001 Uproar Vivendi Universal Games $140m 1.2
Average 5.4 16.6 12.4
Source: Capital IQ as at 31 May 2010
Avista
Note: All in USD millions except where noted
11 Partners

12.  Wrong answer:
▪ buy a Ferrari
 Interesting answers:
▪ to hire people/ management team
▪ to start a company
▪ to acquire a company
▪ to make a great game
 Best Answers:
▪ to support the fast growth of my company
▪ want an investor whom can bring money and value add
▪ to finish development of the disruptive technology that we are working on
that will revolutionize the sector/ the world.
▪ building the best game publishing platform ever and want great partners
Avista
12 Partners

13.  Good uses:
▪ Build out management, marketing & development teams
▪ Accelerate growth with marketing campaigns & customer acquisition
▪ Be able to offer compensation packages that are competitive
▪ Working capital
▪ Build a diversified game portfolio and more content for current games
▪ Take some risks without worrying about cash flow constantly
 Bad uses:
▪ Pay off mortgage or debt
▪ Tired of low salary
▪ Build a single game
Avista
13 Partners

14.  Your company should have most if not all of the following:
Content Already developed one great game or more?
Diversified More than one game now or in your future pipeline?
Portfolio
Financials Growing revenues? Profitable now or within 12 months? Cash flow positive now or
within 12 months?
Mgmt team in place now or how soon? Strong track record?
Management
Customers/ Signed deals with strategic customers or partners? How many strategic deals in
Partners pipeline
Business Is business model unique yet scalable?
Model
Avista
14 Partners

15.  Round size and purpose will determine potential investor to approach
 < 2m euros then angel investors, strategic investors, govt. funding
and VC’s (a few will invest in seed rounds)
 2m- 20m euros than vc’s & strategic investors
 > 20m euros plus profitable than private equity, strategic investors &
hedge funds
Avista
15 Partners

16.  Most important: do not lose your focus on running and growing the company
▪ Great execution will strengthen story and build comfort for investors
▪ Poor execution will scare investors and could destroy the company if run out
of cash
▪ Cash is always king; do everything you can to generate cash flow
▪ Work for hire at the beginning to pay the bills is not unusual but don’t get
addicted to it
 Be realistic on round size; very unlikely for an early stage startup to raise more
than 3m euros
▪ If you raise too much too early then dilution will be brutal on founders
 Raise enough to run company for next 18-24 months or to cash flow positive/
profitability
▪ Very time consuming to raise money
Avista
16 Partners

17.  Network!; start with whom you know and their network direct & Linkedin
▪ Try friends, family, ex-colleagues, lawyers, etc.
▪ Dial for dollars
 Many countries have some angel networks that invest as a group or individuals
 Venturehacks – growing list of top angel investors
 Seedcamp, Y Combinator and others are great ways to raise a little funding with
lots of value add plus build your profile
 David Gardner – invested in Playfish, Unity Technologies & Playfire
Avista
17 Partners

18.  Some countries do have:
▪ Federal programs to invest in companies in technology
or provide grants
▪ Regional programs to invest in local companies or
provide grants
 Time consuming to apply for and can be restrictive
 But in some cases it’s the best initial money as no dilution
Avista
18 Partners

19.  Look up the venture capital association for your country for a list of firms
 Also try EVCA – European Venture Capital Association
 Some firms who have been recent investors in the sector:
▪ Balderton – Codemasters, Wooga, Naturalmotion, Sulake
▪ Insight Venture Partners – 6waves, Jagex & In-Fusio
▪ Sequoia Capital – Unity Technologies, Challenge Games, RockYou, Baitianinfo, Gameground
▪ Accel Partners – Playfish, Tiny Speck, watagame, Mind Candy, Booyah, Gameforge
▪ Index Ventures – Playfish, Mind Candy, Stardoll, King.com
Avista
19 Partners

20.  Speak to local firms in your country
 Also try EVCA
 Some firms who have invested in the sector:
▪ Providence Equity – Zenimax Media
▪ Elevation Partners – Bioware/Pandemic
▪ TA Associates – Mythic
▪ GMT Partners – Bigpoint
▪ DST – Zynga, Mail.ru (Astrum Online)
Avista
20 Partners

21.  Many Hedge Funds have invested in the game sector in public companies via shares or
convertible bonds
 Some are open to investments in private companies and considering investments in game
portfolios
 Some firms who have invested in the sector:
▪ Bluebay – Atari/Infogrames
▪ GLG – Atari/Infogrames
▪ Trafalgar –Digital Illusions (acquired by EA)
▪ Deutsche Bank –Big Ben
▪ Tiger Global – Zynga
▪ Maverick Capital – Realtime Worlds, OnLive
Avista
21 Partners

22.  Consider any firm which can bring value add including
▪ Publishers, Content/ IP Owners, Licensees/ Distribution Partners
 Some firms who have been active in the game sector recently:
▪ Playdom - MetroGames
▪ Tencent – Riot Games & Outspark
▪ Miniclip – PlayDo
▪ Time Warner – Six Degrees Games, Turbine, OnLive, Trion
▪ Peacock (NBC/GE) – Bigpoint, Greystripe
▪ BT - OnLive
▪ Holtzbrinck Ventures – Wooga, Playnik, Young Internet
 Share options can be used to secure content or publishing deals
Avista
22 Partners

23.  Key issues are likely to be:
▪Choice of financial & legal advisors
▪Timing
▪Pre-money Valuation
▪Terms
▪Management of the transaction process vis-à-vis ongoing
business/commercial milestones
▪ Staff communication
 A successful outcome will be enhanced by
▪ Anticipation and consideration of major issues prior to start of process
▪ The creation of a disciplined and empowered fundraising team
▪ Proper use of advisors
Avista
23 Partners

24.  Raising money for game companies is as much an art as a
science where relevant experience is invaluable
Very important
▪ Relevant transaction experience
▪ Relationship with potential investors
▪ Strong industry knowledge
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25. Week of
Task Responsibility 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Updating of IM
due diligence (legal, financial and
business) AP/L/AC
drafting of teaser AP
finalise teaser AP/CL
drafting of Info Memo (IM) AP/CL
interim review of IM AP/CL/L
finalise IM AP/CL/L
Acquirors
review & confirm list to approach AP/CL
contact acquirors AP
Despatch of teaser AP
Despatch and signing of NDA AP
Despatch IMs AP
Deadline for non-binding offers
Select Short list for second round acquirors AP/CL
Prepare Data Room AP/CL/L/AC
Management presentations AP/CL
drafting of presentation AP/CL
finalise presentation AP/CL
practise presentations AP/CL
acquiror presentations AP/CL
Acquiror Due diligence AP/CL
Second Round Binding offers AP/CL
Review of binding offers AP/CL
Select preferred bidder(s) AP/CL
Enter final negotiations with preferred bidder(s) AP/CL/L
Prepare Sale and Purchase Agreement (SPA) AP/CL/L
Signing of SPA and closing of transaction AP/CL/L
Key:
AP Avista Partners
Plan for 6 months; can be longer or shorter depending on demand
CL Client
L Lawyers
AC Accountants
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26.  Leakage
 Loss of key team member(s)
 Delay in future pipeline
 Monthly financial projections/ milestones not being met during process
 Economic downturn
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27.  < 5 pages
 Key sections:
▪ Business Description
▪ Background
▪ Management & Board Member Bios
▪ Products/Services
▪ Proprietary Technologies
▪ Market Opportunity
▪ Distribution Channels
▪ Competition
▪ Awards/ Recognition
▪ Financials
▪ Use of Proceeds
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28.  Plan on 1 hour for an initial presentation
 Key sections:
▪ Mission Statement
▪ Team
▪ Problem you are addressing & Your solution
▪ Demo of Product/Service
▪ Market Opportunity
▪ Business Model
▪ Proprietary Technology/ Advantage
▪ Competition
▪ Marketing Plan
▪ Metrics to date
▪ Key Financials
▪ Use of Proceeds
▪ Exit Strategy
 Leave 15 min at end for Q&A
 Discuss next steps
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29.  Negotiation is imperative at this critical stage
 Strong financial & legal advisors will make a difference here
 Key terms for negotiation
▪ Pre & post money valuation
▪ Size of fund round
▪ Structure of deal
▪ Conversion
▪ Liquidation Preference
▪ Voting rights
▪ Structure of Board/ Observers
▪ Right of First Refusal and Co-Sale Right
▪ Down Round Protection – Say no!
▪ Warranties
▪ 20-30% dilution – if more than 30% then walk away unless you are desperate
▪ Exclusivity Period
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30.  Transparency is key; failure to do so will ensure a failed deal
 Investor due diligence is to ensure:
▪ Everything that you have stated to date is true
▪ There are no surprises
▪ No big debts not already disclosed
▪ No lawsuits not already disclosed
▪ Key mgmt do not have criminal records
▪ Key contracts are solid legally
▪ Financial assumptions are realistic
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31.  Can be very long
▪ Work with a lawyer experienced in VC funding
 An extension of the term sheet
 Additional key sections
▪ Matters requiring consent
▪ Indemnity
▪ Management restrictive covenants
▪ Share option plan for current and future employees
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32.  Push for closing ASAP after term sheet is signed
 Once shareholders agreement is signed then:
▪ Deal is done
▪ Cash in the bank
▪ Celebrate!
 Then start executing on the plan you sold investors on
 Agree with investors on content and timing for press release
▪ Will be one of the biggest events in a company’s history
▪ Great time to build the profile of the company
▪ May lead to interest from new partners wanting to work with you
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33. Paul Heydon
Managing Director
Avista Partners
Email: paul.heydon@avistapartners.com
Web: www.avistapartners.com
Twitter: @pheydon
Presentation is posted at:
http://bit.ly/pheydon
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34.  This presentation was prepared by Avista Partners exclusively for the benefit and internal use of Recipient(s) in order to provide some thoughts on fundraising in the
game sector. This presentation is incomplete without reference to, and should be viewed solely in conjunction with oral briefing provided by Avista Partners. The
presentation is proprietary to Avista Partners and may not be used for any other purpose without the prior written consent of Avista Partners.
 The information in this presentation reflects prevailing conditions and our views as of this date, which are accordingly subject to change. In preparing this presentation,
we have relied upon and assumed, without independent verification, the accuracy and completeness of all the information available from public sources or which was
otherwise reviewed by us. Avista Partners LLP is authorised and regulated by the Financial Services Authority.
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