Funding Terms Now Public!

As a followup to our panel at the Independent Games Summit where we discussed our desire for more transparency in the funding process, we are now making our funding agreement public. The purpose of this reveal is to give developers a measuring stick to evaluate other funding offers they may receive.

There are two significant ways in which our agreement diverges from the typical game funding agreement:

1.  It is short and simple. For smaller games, we see no reason for a funding agreement to be a massive document written by lawyers for lawyers.  Our agreement is 3 pages long, and comes with a companion document that explains what each section means and why it’s there.

2. It is developer friendly. We do not ask for any IP rights, we time limit the debt, we recoup at 100%, and take a revenue share that is proportional to the amount we put in (1% per $10k).

Below are links to the agreement and the companion document. Please note that these are documents that we will change over time to reflect what we learn about how to best work with developers.

Indie Fund Loan Agreement [Scribd]

Indie Fund Loan Agreement Companion [Scribd]

Comments and feedback are welcome, of course.

  • http://attractmo.de AdamRobezzoli

    Well done, Indie Fund.

  • http://www.facebook.com/tylerthedesigner Tyler Coleman

    Very cool! After this initial round of investing, is there anything you expect to change?

    • http://2dboy.com ron

      Yeah, we're likely going to decouple the payments from the monthly builds for reasons that Kellee discussed on our panel (briefly: it's condescending to the developer). We're also likely going to move away from monthly payments and pay out the entire amount in a few large chunks.

      • Carol

        paying out the loan in a few large chunks makes alot of sense – it reduces the admin burden on both sides. Also do you have a definition of what constitutes revenue? Gross or net?

      • Teknoarcanist

        It would be interesting to see some kind of system where a dev team might lay out their own milestones and the time they expect it will take to achieve them (ie, “by the end of the second month, we will have all character models finished”). Negotiation between the team and The Fund could then determine how much money will be rewarded, upon successfully meeting each milestone.

  • http://twitter.com/bengrue Ben McGraw (Grue)

    Indie Games + Silicon Valley startup mindset = Pure Awesome.

  • http://www.facebook.com/npfist Nick Pfisterer

    Simply amazing. I really love the initiative you guys are taking to make a difference. Making these terms fully public is one giant leap towards a more transparent industry!

  • Pavke

    You have two “making our” in the first sentence. ;)

    • http://2dboy.com ron

      gah, thanks for the heads up :)

  • OverReact

    What if you decide the release an open alpha or beta of the game, and receive revenue during this time period? Would this considered the point in which funding is terminated? Or would you still fund a project while it is generating pre-release revenue?

    Thanks

    • http://2dboy.com ron

      it's an interesting question, and we haven't faced this situation before, so we'll need to figure out how to handle it when we encounter such a situation based on what makes sense for that particular project. that said, if you need $2k a month in funding and your'e making more than that on pre-orders and no longer need funding, then you could stop taking funding entirely. if you need $2k a month and you're making about $1k a month from pre-orders, you could reduce the amount you take from indie fund to $1k a month just to cover the difference.

      • OverReact

        I see, this is what we thought was the case. Becuase lets say our game is online and we want servers. Our scenario was that the game might require another server while we are in alpha or beta. And we might not be making enough from our pre-release revenue to buy them. In which case we would still want funding from indie-fund to help purchase those servers.

        But let me get this straight, you say that if we do make more, then you will cut off funding? Or are you saying that we could choose to cut off funding? I just want to clear things up before me and my team apply.

        Thanks for the relpy

  • http://twitter.com/recharge_media Ryan Brooks

    Do you ever retain rights to re-license/resell the game(s) in case of acts of god, company default, primary dev getting hit by a bus, that sort of thing? I.e, if I go under, should I expect to see the Indie Fund trying to recoup their costs by selling the game themselves?

    • http://2dboy.com ron

      no. we're not interested in becoming a publisher and managing someone else's IP. it's too much work and we would rather focus on making our own games than publishing someone else's work.

      • http://twitter.com/recharge_media Ryan Brooks

        Interesting.

        Do you guys bring anything else to the table for the aspiring indies? Not to sound ungrateful, money is all well and good, but what about advice about promoting, marketing, publishing, gameplay ideas, experience with “gotchyas”, that sort of thing?

        • http://2dboy.com ron

          of course we offer advice! would be kind of silly to to not do what we can to help the developers we fund succeed :)

  • Sean Barrett

    I'm not a lawyer, but two things jumped out of me:

    1. There is only one appearance in the text of the word “Collateral”, in 9a, and it's capitalized as if it were a specifically-defined thing, but it's never explained. (The companion for this section almost seems to be describing a different document, since it talks about a lot of things that aren't mentioned specifically in the agreement.) Maybe you just meant “the Game”? Maybe there's some specific rule about contracts involving loans that defines Collateral? Anyway, it's unexplained in the companion, too.

    2. This is totally minor: “accrue interest at the rate of two percent (2%) per month or the highest interest rate permitted by applicable law” should maybe say “whichever is lesser”? Obviously “whichever is greater” is implausible, so it's kind of implicit, but I don't know how the law judges these things.

    • http://2dboy.com ron

      thanks for pointing that out, sean. yes, that should read 'game'. there was a longer version of this agreement that included collateral for the loan, but we haven't used that version and this mention is left over from that one. i'll update the agreement.

  • http://www.facebook.com/daakon13 Ed Lent

    This is such a great thing to see. I'm with a small independent company a few of us have started and hope to be able to do this same kind of thing down the road.

    Not sure if this is the right location, but I do have one question. What areas do you consider for funding? Everything on this site points toward purchased and downloaded games, but would it consider web/mobile apps designed to create revenue via micro transactions, ads and offers? (Zynga as an example)

    http://www.raeoflightentertain

    Thanks,
    Edward Lent
    Rae of Light Entertainment

    • http://www.facebook.com/daakon13 Ed Lent

      Was just hoping to get an answer to this about the web/mobile apps question. I know this doesn't follow most of the folks providing this fund, but its not a huge leap either.

      Is there perhaps a better location to be asking questions like this?

  • http://www.brainwormsoftware.com Darren Myatt

    Thanks for posting this, it's good to read through agreement and know the exact proportion of expected revenue and see that there are no skeletons hiding in the closet :)

    Are there any geographical restrictions for the fund e.g. US only? I'm based in the UK.

    • MatthewFBS

      We do fund games in the UK (the QUBE guys are based in the UK).

      In general we'll fund anywhere in the world, so long as it's legal for us to do so.

      • http://www.brainwormsoftware.com Darren Myatt

        Thanks for the prompt reply :) It may be worth adding this info to the About page.

        Right, I guess all I need to do now is work solidly for another couple of months until I can produce a video of the requisite sexiness level.

  • Slycrel

    I see I'm a bit late to the party here. I had a question about taxes that would be due shortly after the release of a product. If 100% of gross is being put back into paying for the investment isn't this going to potentially put the developers in a tight spot?

    Way cool of you guys to be doing this by the way!

  • http://www.facebook.com/profile.php?id=521285656 Sergio Aris Rosa

    I saw the GDC talk you have linked and I really like what you’re coming up with. My concern is basically the same as Slycrel’s, though. If 100% of your revenue goes into paying for the debt, and the game is slow at selling the devs would find themselves in a bad position because whatever you may earn to keep your indie company afloat (like paying bills and whatnot) goes into paying the debt.

    Unless they have a part/full time job and work on their game during their spare time, and if that’s the case they already have a source of income so why would they even need funding for their game if they can work on it on a “dev-when-you-can” basis

    • Anonymous

      The developer is in complete control of their budget.  I don’t expect there would be an issue if the budget included the first couple weeks -post-launch, especially since this is a very active period anyway (interviews, marketing efforts, 1.01 patches depending on platform, etc).

      That said, if the game is *so* slow-selling that recouping to 100% takes months (or more), then there’s a larger problem here.  The teams and games we’re looking to fund should recoup very quickly, both because of budget (small) and market (ie popular console).

      But yes, it’s definitely one of the sliders available.  The reason our terms are so favorable, percentage-wise, is that much of the risk goes up front like this.  We feel it’s the best route to financial independence–get your debt out of the way–instead of staying perpetually addicted to traditional publisher/developer deals.  There are other options available if your game/team/etc don’t fit with Indie Fund’s model!

      • http://www.facebook.com/profile.php?id=521285656 Sergio Aris Rosa

        Hi again. Well, my concerns may sound pretty basic for some, but please bear with me since I come from a country with almost zero game development so we don’t have any previous experiences and we’re pretty much the first ones trying to pull off a game of “certain complexity.”

        You made me wonder how one can “know” (if that’s even possible) if a game could recopu quickly. I’m guessing that your previous experience helps you there so you can go “yeah, this sounds like a game that can sell well” or “well this one, not so much, so we pass.”

        Someone already asked if you provide the devs advice on their games and all, and that’s a cool thing. But I was wondering if you help the teams you support in any way when it comes to promoting their game? Like, for example, being featured on Kotaku, IGN or whatever rather than having a “silent launch,” as there’s a chance some of them will possibly just ignore the news about some small dev team and game they’ve never herad about.

        As I said, this may sound pretty basic but please bear with me, this is the inexperienced dev with good ideas and technical knowledge but not so good games industry knowledge :)

        • Anonymous

          Well, nobody can ever completely and accurately predict how a game will do at launch.  If you could, you would have a very bright future in the games industry indeed :)

          But, we have a lot of data collectively from our own games, and a lot of data from our friends’ games.  Some platforms have a lot of chance/risk, but for others it’s harder to lose money (assuming a very tight production budget). This should be especially true in any country with cheaper cost-of-living.

          We haven’t had any of our funded games launch yet, but of course we intend to do everything we can to help them.  We don’t manage things for our developers–just provide advice–but we do provide contacts and introductions as needed. Keep in mind we’re (literally) invested in the games!  We want them to do well!

          • http://www.facebook.com/profile.php?id=521285656 Sergio Aris Rosa

            Great! Really thanks a lot for taking the time to answer my questions!

  • http://www.facebook.com/people/Michael-Spizzirri/1690981317 Michael Spizzirri

    This is a fantastic program you guys are running, you will definatly be recieving my submission within the next week or so. Hopefully it works out in my favor!!