Mitch Lasky: Venture capitalist, Jamdat founder explains how to snag financing for your indie game

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Mitch Lasky, a venture capitalist and Jamdat founder. Credit: Alex Pham / Los Angeles Times.

With the economy gone sour, independent game developers are probably wondering, ‘Where’s my stimulus package?’

We asked Mitch Lasky, a general partner with Benchmark Capital, whether games are being funded these days -- and if so, which ones? Lasky, who sat with us over breakfast at a cafe near his home in West Los Angeles, was chief executive of Jamdat Mobile, which he sold to Electronic Arts in 2005 for $680 million. You can check out his bio here.

How do you get funding if you’re an independent game developer?

There are traditionally three pools of money. The first is publisher money from the Activisions and Electronic Arts. They’ve acted like hedge funds, funding independent developers and investing in intellectual property without incurring the cost of having employees. The second is private money from wealthy individuals. These are typically hardest hit in a down market like we’re in now. The third is venture financing.

Do VC firms fund games?

Historically, no. Venture funds look for companies with disruptive business models that have a lot of growth potential. The problem we’re in now is that traditional development of packaged games sold at retail is just not viable.

Why not?

To launch that kind of game, you need TV ads, placement in circulars, distribution, marketing. Add to that development costs of $30 million to $40 million a game. It’s an increasingly expensive endeavor. You need a big army to fight that battle.

Is anything being funded by venture firms now?

There is money, but the venture money ...

... is for non-traditional plays -- casual games, light massively multiplayer online games like Club Penguin and Webkinz, social gaming companies like Zynga and Mob Wars. These are games that are completely off the traditional gaming grid.

What about iPhone games?

This is an area near and dear to my heart. But I have to say, it’s insanely fragmented. There are 20,000 apps for the iPhone. When I was at Jamdat, getting a deal with the carrier was the hard part. Today, the problem is getting noticed. If you look at ngmoco:), they’re often in the top 10 free apps. They’re using that to get people’s attention to draw them to build their brand and draw them to their other games. They’re building a relationship with their customers. It’s a sensible solution to an acute problem.

The open question now is whether someone can aggregate enough market share to build a business. History tells us that you need at least 5% market share to be viable. And we’re not seeing that yet.

So what’s a developer to do?

It’s tough. All I can tell you is that I would not try to develop a traditional packaged game in this environment.

-- Alex Pham