Collyer Bristow Explore the Impact of Investment on Your Gaming Business

Collyer Bristow, a leading law firm based in London, is pleased to share an article they authored on the significance of investment for your gaming business.

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There are a wide range of options available for securing investment in your business, whether through specialised VC funds targeting gaming start-ups, industry veterans turned angel investors or even crowdfunding.

All these options and more have their benefits and drawbacks, however, the key concerns for your business often remain the same.

        Decision Making

The scale of the investment into your business could have significant ramifications for your control over decision making – assuming that it is structured as a limited company in England & Wales.

Looking at the significant rights at different shareholding thresholds (in privately owned companies), you can see from the table below how quickly control can slip away:

Level of Control	Rights
5%	Can require a shareholder resolution.
10%	All the above and can require a company audit.
15%	All the above and can object to variation of share class rights.
>25%	All the above and able to block special resolutions.
50%	All the above and able to block ordinary resolutions.
>50%	All the above and able to pass ordinary resolutions.
>75%	All the above and able to pass special resolutions.

A minority shareholder (or group of shareholders) with just over 25% ownership can block significant decisions and these rights extend further as their shareholding increases.

Nevertheless, retaining control of over 50% of a company’s shares does give control over board appointments, significantly influencing the day-to-day management of the business.

If you are in the early stages of the development cycle for your first project, working alone or as part of a very small team, you may have not set up a corporate structure for the business.

Although it can be seen as purely administrative, setting up a legal entity in conjunction with any business partners can help you to evidence that you are thinking ahead to the next stage of trading or investment.

        Key People

In many industries, sole traders or businesses focused around one individual can be a risky investment as the key business relationships, product knowledge and technical expertise can be inextricably tied to that one person staying put.

Establishing a talented and committed management team, engaging in succession planning and retaining senior employees are all vital contributors to a successful business in the gaming industry – and reassuring potential investors.

It is important to consider the impact pursuing third party investment may have on your management team and key employees.

In short, carefully consider which members of the team are vital to ongoing operations, retain them and be ready to explain your approach to succession planning as investors will be keen to understand the answers to these questions.

        Future Funding

When in desperate need of additional funds, securing any level of investment can appear critical, regardless of the strings attached, however, taking on board the wrong investor on the wrong terms can dramatically affect the direction of the business and the potential for obtaining future investment.

Assembling a development plan and roadmap for your business or even specific projects can help to identify funding requirements and what securing that investment means for the ownership structure of the business.

Large, established studios are not immune from funding concerns either and often must choose carefully how cash reserves are allocated, as the recent difficulties at Bungie show.

The takeover of Bungie by Sony places the financing and performance of Bungie into the orbit of the wider Sony Group, restricting management’s decision making both in terms of staff retention and the allocation of resources.

Player disengagement, as has been seen with Destiny 2, can cause a decline in sales, placing financial pressure on the business to choose between ongoing support for a historic game or diverting resources to the next project.

Crucial for any investment is making sure you have the right team around you to provide support throughout the process.

"If you have questions about what third party investment may mean for your business or what to consider around a potential sale of the business, please do get in touch with a member of our corporate team."

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