RipTen Inteview: Paul Hanraets
On February 8, 2012, Tim Schafer and Double Fine announced a pioneering use of Kickstarter, and an earthquake shook the gaming world. While crowd funding existed long before its relevance to our industry, on that day it was as if millions of voices cried out and their wallets suddenly emptied. It was a beginning, but it certainly wasn’t the beginning.
Over six months prior to that momentous announcement, Paul Hanraets, a veteran of the gaming industry, began work on Gambitious, the first crowd funding platform exclusively for the gaming industry. Hanraets’ background includes creation of two development studios, co-founding a gaming-focused marketing agency, producing an interactive entertainment-oriented television show on MTV in the Netherlands and organizing a consumer convention called GAMEXPO. Now, he’s poised to help bridge the gap between grass roots and investor-driven funding models.
“There is this belief that we’re jumping on the bandwagon. We’ve been planning for this since six months before Double Fine,” Hanraets was eager to share. “We’ve been getting IP lawyers, ex-publishers, ex-developers and some icon figures together to create our advisory board so we can have a sprinting start.”
We spoke with Hanraets about his plans and aspirations for bringing Gambitious to the EU starting this year and opening the process up to investors in the United States as early as 2013. For those that are scratching their heads and wondering why another platform is necessary, many of the core principles are the same as the websites we’ve been talking about for months. The big difference is that Gambitious is equity-based. This means that every contribution, from as little as €20 all the way up to €2,500,000, will net backers’ shares in proportion to the amount invested. Just like Kickstarter, you should only spend money you are willing to lose. However, should projects come to fruition, there may be some money in it for you.
“It’s all legal,” Hanraets emphasized. “For now, funded studios need to form a Dutch legal entity. We’ve been approved by the Dutch Bank.”
Gambitious is still evolving, having just finished the legal work to allow studios in the United States to participate. Starting in 2013, those developers won’t even need to go through the process of forming a corporate organization in the Netherlands, but they might want to.
“There is a good tax climate in the Netherlands, especially with regard to revenue sharing,” Hanraets told us.
Gambitious seeks to bring two disparate communities to the table for a common purpose. They will be tapping into the crowd funding faithful; those gamers that are ready to take the risk on putting cash behind an idea. They will also appeal to traditional game investors. Every Gambitious project will also appear on Symbid, the first hybridized crowd funding/investment website. The site went online in 2011, and drew praise from Carl Esposti, the founder of Crowdsourcing.org.
In a video discussing the different models of crowd funding, Espoti states his belief that these blended approaches are the “real future” of the phenomenon. Symbid, and Gambitious by extension, differs from traditional investment in subtle yet significant ways. It comes down to motivation. Traditional investment burdens new businesses with debt held by those that are most interested with the security of their money. With Symbid’s model, there is also an alignment with the mission and purpose of the new business. Backers are “wedded to the success” of a venture that goes far beyond realizing a return on investment.
According to Hanraets, “This is about more than ‘angel investors.’ It’s about gamers, followers and traditional investors. They’ll still get the game for free and all the things that come with crowd funding, but they’ll also get revenue shares.”
It’s also important to understand how processes differ from traditional crowd funding. In between the successful completion of a project and the money being released to the developer, a due diligence analysis is conducted by BDO, a reputable accounting firm. A group of investors are tapped to create a board to oversee the project. This doesn’t preclude the kind of broadcast updates that we’ve grown accustomed to seeing after backing Kickstarter projects, but here, input is weighted based on investment. Once the legal entity is established and the oversight structure is in place, shares are distributed minus the 5% “success fee” that goes back to Gambitious. For reference, this is identical to the fee charged by Kickstarter.
Is it more complex than simply backing a project via traditional crowd sourcing mechanisms? Clearly. It is also incumbent upon the investors to understand the tax ramifications of revenue secured down the road. Just as with any investment, whether it’s stocks, bonds or other securities, you should never spend a dime until you fully understand what you are getting into. It is also important to note that you can have your investment refunded, just like with any other crowd sourcing vehicle. Contributions are held in an “Electronic Money Institution,” which is similar to an escrow account. These are accounts that must conform with rules set forth by the European Parliament. Up until the project is funded, you can request your money back with no questions asked.
There is most certainly risk, just there is with Kickstarter, indiegogo and others, but because of the nature of the contributions to projects on the Gambitious platform, there are also extra layers of protection and confidence.
“Our rules state that you need to be a studio with a track record. You must have published titles or, if you are a new studio, you must consist of industry veterans. We will be looking at every project,” Hanraets assured us.
Additionally, once a project is successful, the developers will have access to advisors and consultants. In addition to being a vehicle for funding, Gambitious will be an incubator. Among the services available, will be assistance with securing the resources necessary to approach Microsoft and Sony for inclusion on the Marketplace and PlayStation store. As you may have noticed, most crowd funding projects are focused on PC, Mac, Linux, iOS and Android. Xbox Live Arcade and the PlayStation Network have more stringent certification and publishing requirements that developers will need assistance with. By providing access to individuals with these particular skill sets and relationships, bridges can be built enabling release in these more challenging environments.
The advisory board can also make picks for projects to highlight, but you won’t see any sort of rating system in place that will provide insight on viability.
“We’re not allowed to rate projects,” Hanraets explained. “We need to be careful not to provide investment advice.”
Hanraets is aware that Gambitious needs to come out of the gate strong. ”I know we need to show a proof of concept,” he admitted. He’s confident, though, that when the virtual doors open in a few weeks, gamers and investors alike will see just that in the first slate of projects.