How to Prepare for Investment

In this section, we’ll focus on investment readiness and preparing to talk to investors. We’ll cover creating a pitch deck, building a deal room, and developing an investor strategy. We’ll also walk through the stages of investment readiness, from initial preparation to pitching and engaging with investors.

Set your expectations: This section won’t make you fully investment-ready. We’ll focus on preparation, strategy, and pitches, but we won’t cover term sheets and negotiations. There’s lots to learn, and this is just a starting point.

Prep

Your first step toward investment readiness is preparation. By reading this series, you’re already on your way! 🙌🏻

You might be wondering:

• When is the right time to raise?
• How much should we raise?
• What type of security should we issue?
• Wait… what exactly is a security?

You probably also want to know about the different types of investors and how to prepare your deal room. Let’s get to it.

When

Ideal times to raise funds include when you are planning to scale your dev team or prepare in advance (6-9 months) for your studio’s roadmap. Investors look for studios with validated ideas, which you can show through community interest, successful demos, or early revenue streams. We can’t stress this enough—an idea and a pitch deck are very, very rarely all you need to land an investment or a publishing deal.

Seeking funds because of an emergency cash shortage or undeveloped idea can telegraph a lack of planning and will likely be unsuccessful.

How Much

Using your financial model, estimate your cash flow requirements to predict how much you need to raise. Identify all operating costs and milestones leading to your revenue goal. The expenses incurred to achieve these milestones will determine the capital you need to raise.

Traditional venture capitalists (VCs) are looking for big returns. Social impact investors don’t seek this level of growth, but they still require you to map out major milestones and outcomes and calculate the capital needed to achieve them.

Ideally, you’ll raise enough capital to secure an 18– to 24-month runway. Otherwise, you run the risk of constantly being in capital-raising mode. You want to avoid going back to your investors every year looking for more money.

Make sure you cover everything:

• Salaries, benefits, bonuses
• Rent, utilities, overhead
• Computers, equipment
• Legal, accounting, insurance, supplies
• Working capital, operating cash flow
• Contingency (10-20%)

Securities

In finance, when you raise money in either private or public markets, you are issuing a security.

Using traditional financial instruments can perpetuate capitalist norms and practices, even when used by cooperatives. Whenever you can, consider alternative financial practices that reject traditional tools, focusing instead on solidarity economy principles like bartering, shared resources, and common ownership.

The Ontario Securities Commission defines a security as a financial instrument that is negotiable and holds some monetary value—typically either debt or equity your studio issues. If you are considering issuing securities, it is essential to comply with the regulations of the security commission in your jurisdiction (e.g., Ontario Securities Commission ) and seek legal advice. There are various exemptions for accredited investors, offering memoranda and crowdfunding, under which you can file your securities with the OSE, allowing you to raise capital from different groups of investors.

What type of security should we issue?

To simplify things, we’ll cover two main types of capital here: traditional debt (a loan) and equity (where an investor buys shares).

While cooperatives cannot access equity capital from outside investors in the same way as traditional share corporations, they do have avenues to raise capital through member shares, investment shares, or preferred shares. The specific options available depend on the individual cooperative’s structure and the relevant federal and provincial legislation.

So why is debt considered a lower risk for an organization to issue?

Debt considerations

Debt financing is predictable and finite. When you take on a loan, the terms are clearly defined from the beginning, including the duration and the interest rate, which is often fixed. This clarity makes forecasting much simpler. You are obligated to repay the loan amount (principal) along with interest over a set period of time. Once you fully repay your loan, the obligation ends – you only owe the principal amount and the accrued interest, nothing more. The lender does not gain any ownership in your company.

The primary source of loan repayment is generated cash flow. Lenders typically engage with businesses during the validation stage, assessing the likelihood of repayment based on projected revenues. Lenders consider the “Five Cs of Credit” when evaluating your creditworthiness:

1. Character: This refers to your track record of repaying debts. Lenders will look at your credit score.
2. Capacity: Lenders will consider your income and debts to determine your capacity. They want to ensure that you have the cash flow to cover loan repayments in addition to your other expenses.
3. Capital: This refers to the funds you’ve invested in the studio or personal assets that could be used to repay the debt if needed. It is sometimes referred to as skin in the game.
4. Conditions: The broader economic picture, including industry trends and market competition. During economic downturns, they may tighten lending standards.
5. Collateral: These are assets that the lender can seize if you fail to repay the loan.

Equity considerations

Equity financing means giving up a part of your studio for capital. This often leads to sharing control and profits. Equity investors typically seek higher returns than lenders and can make financing costlier, especially during periods of strong growth. An investor with a 5% stake in your studio will get 5% of profits or the sale price. Selling equity dilutes your ownership stake in the studio, which can impact your control over business decisions.

Equity investors differ from project funders (like publishers) as they focus on long-term potential rather than immediate project outcomes. These investors, including angels, VCs, and corporate venture funds, seek studios with scalable, exponential growth potential.

Equity investors sometimes come with more than money. They may have resources like industry contacts and strategic advice, which may open up new opportunities for your studio, depending on your goals.

You don’t have to repay investors, but they aim to earn dividends and reap share value increases. Dividends are paid periodically from profits, while share value grows as the company succeeds.

You need to find the right funder at the right development stage. Both angel investors and VCs invest during the concept validation stage. As the project matures, publishers and investors become more viable, offering larger sums but often requiring a share of revenue or equity. Crowdfunding is also an option, ideal for validating market interest and securing funds without giving up equity. For earlier stages like ideation and discovery, many studios rely on self-funding, jams and competitions, arts council grants, and accelerator or incubator programs like Baby Ghosts. These are opportunities to build and validate your demo.

The most effective way to fund your business is through sales revenue. Using profits for growth is the least expensive form of capital. If you can swing it, this is the way.

Jason Della Rocca is a wonderful industry resource on the topic of funding and pitching to mainstream VC studio and project investors. Search for his articles and videos if this is the route you’re interested in. Here’s a list of game-industry VCs.

Types of Securities

Here are a few of the many different types of securities you might consider. Some are more relevant to co-ops (investment shares, preferred shares, and SEAL agreements).

Debt

A lender provides capital with the expectation that it will be paid back in a specific time frame (term), with an agreed-upon markup to compensate them for their risk (interest rate).

Convertible Debt

A type of debt that can be converted into other types of securities (i.e., equity) based on predefined criteria.

Preferred Shares

Preferred shares provide dividends at predetermined rates ahead of common shareholders. They typically lack voting rights and do not confer the title of co-ownership but provide greater security during liquidation. Your articles of incorporation should outline the specific terms of the preferred shares.

Investment Shares

Investment shares are a relatively new option that provides cooperatives with an additional means to raise capital beyond traditional member shares. Investment shares can be issued to members and non-members, although you can specify that they are made available only to members in your coop.

Unlike member shares, which grant democratic voting rights, investment shares generally do not confer voting privileges. This maintains the cooperative principle of democratic member control.

Provincial legislation may limit the percentage of investment share capital that can be held by non-members. This ensures the cooperative remains primarily owned and controlled by its members. You can allocate a portion of your surplus as dividends on investment shares to provide a financial return to investors.

Information Guide on Co-operatives from Innovation, Science and Economic Development Canada

Community Bonds

Community bonds are a way for community organizations to raise capital from local investors to invest in local issues. They are useful for organizations with a community-centred impact. One prime example of this is the Center for Social Innovation’s Community Bond, which was one of the first community bonds that became notable in the Canadian ecosystem.

Social Impact Bonds

Social impact bonds (SIBs) are a type of security where investor returns depend on achieving social impact outcomes. Investors provide upfront capital, and the government is the outcomes payer. If positive changes are demonstrated, the government pays investors a return based on the level of change. SIBs are most suitable for organizations with broad impact and measurable social return.

Revenue Share Loan

Revenue share loans are a type of security that’s not listed on your books as a traditional loan. Instead, repayment is based on the revenue you generate. Funders that offer this type of financing include Clear Bank, Marigold Capital, and Youth Social Innovation Capital Fund. Revenue share loans may be suitable for organizations projecting stable revenue flow.

Common Shares

Common shares represent equity ownership, providing shareholders with voting rights and the potential for dividends. These shares often reflect the company’s value, fluctuating with its financial performance. Shareholders benefit from company growth but also bear risks, including potential loss of investment.

Simple Agreement for Future Equity

A Simple Agreement for Future Equity (SAFE) is an investment tool for startups that offers future equity in exchange for immediate funding. It’s simpler than traditional convertible notes, as it doesn’t accrue interest or have a maturity date. Investors receive equity based on the company’s future valuation, typically during a funding round.

Options

Options are contracts granting the holder the right, but not the obligation, to buy or sell an underlying asset (like stocks) at a specified price before a set expiration date. They’re used for hedging risks or speculative investment strategies, often included in employee compensation packages for startups.

Shared-Earnings Agreement

Similar to a revenue share loan, a shared-earnings agreement (SEAL) is repaid through revenues. However, the total amount that can be recouped is capped, and payback only triggers once founder salaries have been paid. Weird Ghosts uses this type of agreement.

The Deal Room

Get all of your documents ready for the deal room. (You should also create pitch materials that cater to different situations that you may encounter during the capital raising process.)

A deal room is just a collection of documents that are associated with your offering. It could be a virtual folder on a platform like Google Drive, Proton Drive, Dropbox, or your own secure website.

The deal room typically includes:

• Your pitch deck
• Financial history
• Financial model
• Team bios and resumes
• Competitive analysis
• Business plan
• Impact model
• Testimonials, reviews, and press releases

Keep your deal room organized with clear subfolders and document titles. It is good practice to include the document title on each page (in a header or footer). Imagine an investor printing it out!

Pitching

So! Your deal room is ready, and you are keen to approach investors. But how do you create the perfect pitch? Sadly, even with all the templates and tips out there, no formula for guaranteed success exists. The style and content of your pitch will depend on your studio, impact model, and even your personality.

Something to think about: A pitch is more than just a presentation—it’s a dialogue. Open a conversation, and don’t get defensive about your studio. If it feels like an investor is pushing your buttons, remember that any critique is valuable and constructive.

Types of pitches

You’ll find yourself pitching in many different situations. There’s the elevator pitch, the platform pitch, the quick pitch, the investor pitch, your leave behind, the community pitch, the demo pitch, the conference pitch, and more.

Be prepared to present your studio in different time slots. Have various pitch variations ready in case an investor has either five minutes or an hour to hear you out.

We won’t dig too deep into what slides you should include—online resources are abundant:

• Glitch’s Video Game Pitch Decks
• Rami Ismail’s Pitch Template

Investor Strategy

You’re finally here. You’re ready to talk to investors. 🙌🏻

In this section, we’ll cover getting ready, finding investors, and tracking leads.

First Steps

Start getting ready for your capital raise at least six to nine months prior to the actual need for funds.

Are You Ready?

The first step is to psychologically prepare for this process. It can be deflating to face rejection, and that is more than likely what you will face for months to years as you pursue funding. Protecting your mental health is more important than anything.

One strategy is to remember that “No”s are valuable opportunities to refine and tune your offering. They are not judgments on whether your studio is a good business (or if your game is worth making), but reflections on the state of the funder and their own evaluation framework. That’s it!

Another difficult but useful tactic is decoupling your sense of personal value from what you’re pitching. This will help you separate inevitable rejections from your sense of self.

Ensure you have a support system in place: A therapist if affordable, family if feasible, friends outside the industry, peers such as other studio founders, advisors, and industry mentors. Don’t go it alone. Consider an approach where investment decisions are made collectively by all members of the studio.

Finally—and this may seem sort of sad—prepare for the worst. While you’re optimistic about securing funding, you need a backup plan in case things don’t go as planned. Think about what you’ll do if you’re unsuccessful within three months, six months, one year, or two years. Will you pivot your strategy, close the studio, or put it on hold and return to your career? Being clear-eyed about these worst-case scenarios will help you make informed decisions and stay in control of your studio’s future.

So… are you ready? And how would you know if you were? 🤔 Here’s a rundown of things you should know before you go after your first investor.

Is Your Studio Ready?

Is the business set up?

• Have you incorporated your cooperative?
• Do you need to register in additional jurisdictions?
• Do you have a business plan?
• Does the studio have its own bank account?

Is your game ready?

• Do you have a working demo?
• What is its initial feature set/scope?
• Do you have a roadmap or project plan?
• How does this initial game contribute to your studio’s overall strategy?

What’s your marketing approach?

• Who is your target player?
• How do you plan to reach them?
• How does a customer’s life cycle change over time?
• What are the potential player segments to explore?
• Do you have a reliable player feedback loop?

Have you achieved traction/validation?e.g., feedback from playtesting or beta/pre-early access, attention on announcements

• How are you measuring traction?
• What traction have you achieved to date?
• How can publishers amplify your traction?
• How will your current traction translate into long-term growth?

How will you position your game in an oversaturated market?

• What is your target market/audience? Why does it appeal to them?
• How will you reach your target market initially?
• How can your game fit into a publisher’s marketing strategy?
• How can your game work with a platform’s distribution strategy?
• How will you gain and protect your market position?
• How is your game different from others in your target market?

Is Your Team Ready?

Do you have the right team?

• Are all members’ or founders’ values aligned?
• Do you trust each other and work well together? Have you collaborated before?
• Does anyone on your team have prior experience with raising money or shipping games?
• Will you hire contractors, or is that counter to your collectivist values?
• Have any team members garnered critical acclaim?
• Do you have a producer to help with the publishing process?
• Do your collective skills cover creative, technical, and business areas?

What is your planned governance strategy?

• What is the appropriate governance structure for your company?
• How will you incorporate diversity, equity, and inclusion from the ground up?
• How will you ensure your values are incorporated into operations?
• How do you plan to adapt your company’s culture and structure as your team and company scale?
• How do you plan to compensate members?

What impact does your team hope to achieve?

• What motivated your founding team to start this studio/produce this game?
• How do you measure impact?
• What impact have you achieved to date?
• How do you hope that your customers and community will respond to/contribute to your impact goals?

Are Your Financials Ready?

How much money do you need?

• What is your target fundraising amount?
• How will the funding be applied to your milestones?
• How will you return value to your community, members, and/or investors?

Networking

The bad news is that finding investors takes work and is not an equitable or accessible process. Warm leads (connections to people who know about you through their network) are the standard way to approach money people—but if you don’t already have those established networks within the industry, what can you do?

Lots of indies hate hearing this, but you’re going to have to network. There are all sorts of virtual investor events, community events, and industry events (local and international) where you can meet potential investors. (These events are not just for catching up with friends, although that is a lovely perk!) You may need to step outside your comfort zone and practice new skills to create and nurture business relationships.

This means:

• Researching and approaching people you don’t know
• Asking acquaintances or second- and third-degree LinkedIn connections for introductions
• Getting involved in industry associations (e.g., Interactive Ontario, New Media Manitoba, DigiBC) and getting to know its board members, advisors, coaches, and members
• Working on your conversational and soft-pitching skills
• Being diligent about follow-ups and using the right channels (email, phone, Discord)
• Listening and responding when investors tell you what they’re looking for

Share the wealth: Being open and generous with your connections is a way to break the cycle where only those already connected or privileged enough to have such networks can easily find investment.

Researching

Once you have an idea of what type of investor you are looking for and where to find them, you can start your search online using Google, LinkedIn, Twitter, and any other social or professional platforms you’re on.

Use these tools to identify the investor’s investment history and get a sense of their preferences. Ask people in your network about their history and relationship to gauge their track record and the types of investments they are more likely to consider.

You can also look into an individual investor’s personal and professional interests, recent events they attended or spoke at, and their relationships with others. You can find this information on LinkedIn or through pictures to identify them if you meet them in person. While it may seem a bit intrusive, you want to gather as much information as possible about the investor before meeting them to make a good impression and tailor your pitch to their interests.

Tracking

Stay organized. Implement a system to keep track of who, what, when, where, how much, stage, last interaction, likes, connections, and other relevant information. You can use a dedicated CRM like Pipedrive or HubSpot, an Airtable base, or even a Google Sheet.

Tailor your materials to the investor you are meeting. Make slight alterations to your deck based on who you’re talking to. Add the investor’s logo to the first slide of your deck to show that you have tailored your presentation to them.

Arrive over-prepared. On the day of your pitch, come with your deck ready in USB form, on your computer, in your email, in a link you’ve shared with the investor, and in a hard copy if your pitch is in-person. Bring something to write with, and be early. These are table stakes.

Decide how you plan to frame the conversation, whether it is an introductory chat or a formal pitch, and who will lead it. How do you want to end it? Is it with a specific ask?

Follow up immediately. Be gracious and succinct in your email, and state your next steps. Keep the to-dos on your end.

Update your tracking system! After you walk away or click End Meeting on Zoom, note down everything you can remember about this person. Articulate what milestones you need to trigger that next meeting with them.

In your CRM, you can set a reminder for the timing of your next follow-up.

What to Expect

• The goal of your first meeting is really to get them to like you and want to meet with you again.
• The second meeting is when you’ll get through that official pitch.
• Then, the third meeting is when you really dive into the details.

This process requires nurturing and many meetings over months or even a year, depending on the funder.

Conclusion

This section has covered a lot of ground, and you may be feeling overwhelmed or nervous. Remember, this is a long-term process, and you don’t have to do it all at once (or all alone!). Take your time, reach out to us for support, and remember the values and principles you’re buiding on as you navigate capitalism as a cooperative.

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With thanks to SVX and Adaora Ogbue for the inspiration for portions of this section.