Rovio and Supercell are household names among entertainment users and investors all around the world, a couple of others like Next Games, Fingersoft, Red Lynx and Seriously could perhaps follow their footsteps. But the group is not as big as it could be regarding that we have in Finland dozens of aspiring game companies with lots of creativity and technical skills.
”Merely being Finnish doesn’t help even though we have these great success stories. It is more important to have a particular work ethic, spirit and capabilities. Those are the things that are respected around the world”, says investor Christian Kolster.
There’s one real problem with Finnish game companies: because of several notable success stories the valuations have skyrocketed.”
Kolster knows what it takes to be investable, because he has a long background in venture capital business. He has also attended Game Executive training program by Aalto ENT.
His present company Kuuhubb is going through a merger with a Canadian listed company. Kuuhubb is a company in the digital space that focuses on lifestyle, eSports and mobile gaming industries. They have hired Finnish experts with a long experience from digital entertainment and Asian markets. Now Kolster and Kuuhubb are looking for potential investment targets in the field of women's lifestyle.
”There’s one real problem with Finnish game companies: because of several notable success stories the valuations have skyrocketed. There are certain fashionable fields like women’s lifestyle apps that haven’t really lived up with high expectations just yet.”
Venturing: Leadership and the team matter most
What Kolster values in his investments is the teams with complementing skills.
”For me good leadership and a good team are more important than the business idea – I have seen so many good ideas get screwed up by bad management. I value good people, entrepreneurship and knowledge from various fields. What is required is the right mix of deep graphics, analytical and user interface development skills.”
Kuuhubb is a relatively small player so its strategy cannot be to compete of the same companies that the big names want to invest in. However, offering public shares, help with strategies, funding and go to market, especially in Asia, have already won Kolster and his team some very promising portfolio acquisitions.
When a game such as Candy Crush in 2012 or Pokemon GO in 2016 breaks out and really creates a new genre, it spawns thousands of imitators. Kuuhubb is not looking for copycats of past blockbusters but the leaders of tomorrow.
”I always try to find areas and businesses that are undervalued in some respect, not yet in the limelight. When it comes to game developers, we are looking for rapildy growing niches with robust revenue growth and fiercely loyal core audience - and future potential for mainstream success.”
Arto Käyhkö from Pollen VC also wants to help game companies accelerate their growth, but the method is different. Pollen gives mobile developers early access to their app store and advertising revenues. This funding enables them to invest more in marketing earlier, which is crucial to their success.
A typical free-to-play game makes 90 per cent of its revenues within the first four months from launching. So using the early revenues to remarketing in Facebook or Google as soon as possible accelerates growth very efficiently”, says Käyhkö. He is the country manager of Finland and Nordics in Pollen and also an alumni of Game Executive, which he regards invaluable for learning the business side of the industry.
Fundraising: Is your marketing ROI positive?
Of course, the prerequisite of this remarketing and Pollen’s funding is that getting new customers is profitable. Pollen as well as the best game companies use analytics very skillfully to determine whether investments in marketing pay off.
An important thing is to know your audience, know where to find them and what gets them hooked.”
”We talk about ROI-positivity, meaning that if a company invests, say 10 000 euros in a marketing campaign, it should get more than that back in revenues. We also talk about the lifetime value of the customer, which is the total amount of money a company gets from him.”
Käyhkö has noticed that many game companies in Finland haven’t yet learned the importance of marketing and analytics.
”It is a faulty fixation that you just need to launch a good game and that is enough, its reputation spreads virally. Those are very rare occasions when this happens. Hundreds of games are launched daily, you have to stand out from the crowd and find your customers. An important thing is to know your audience, know where to find them and what gets them hooked.”
Pitching: Are your skills up to date?
Pitching is an important skill to have if you intend to impress investors and Kolster admits it usually doesn’t belong to the strengths of Finnish game entrepreneurs. But he thinks there is more than one way to do it right.
”I see it as a positive thing to have some kind of personal touch in pitching, it doesn’t have to go exactly by the book. And the substance behind the talk is important too. I can see quickly if someone is merely a good speaker and facts and figures don’t correlate with the pitch.”
Wish to learn how to build even more successful gaming business? Aalto ENT’s program Game Executive helps participants to learn about business, leadership, strategy and entrepreneurship in the gaming industry. It prepares them to deal with the challenges of managing and building a successful business and offers them an opportunity to forge meaningful connections with experts in the industry, venture capitalists and other potential partners. Learn more