How To Start A Game Studio

Ep 18 How to Start a Game Studio 
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Alex: [00:00:00] Welcome to the fourth curtain, everyone. Thank you for joining us again this week. Today, we're doing a special episode, uh, that we're calling how to start a game studio. Obviously, uh, I have thought about quite a bit having started, uh, four studios. All of those have been very different. So we thought it might be cool, uh, to talk about that process, uh, what it's 

Aaron: like.

But also it's, it's other topics. So the context is we have, uh, we did another episode that had like six topics in there and like of the six, like four of them were really interesting. And the episode felt weird. So we shelved the episode and thought, what if we just do topic, the topic, one topic, 

Alex: one interesting topic, as opposed to six random things.

Some of which they can be generous that four of them were interesting. I think they were.

Okay. But before, before we get [00:01:00] rolling, um, what was your first job you 

Aaron: ever had? The first job I had was selling newspapers. In front of the grocery store. I was 13 years old. 

Alex: Oh, okay. I think I've heard this. 

Aaron: I think you mentioned it in the Patrick Curry episode. It was amazing. One of the best jobs I ever had.

Yeah. Like people were very, like, people would feel sorry for you because you're like this little scrappy kid. And sometimes it'd be 

Alex: freezing outside, and I'd be like selling Would you wear like, like shoes with holes in them, and uh I'd put coal on my 

Aaron: face, like coal ash. One of those fell cats, yeah, uh huh, uh huh.

So I would just look scrappy. No, but it was just neat, and then, and then what I would do is, uh, my mom to this day won't, will, like still kind of brags about it sometimes, so I would get paid in quarters, because the paper was a buck twenty five. Uh, and I would get to keep the quarter from every sale. And if I sold the Sunday paper, the Sunday paper was like 1.

[00:02:00] 75 or something, and I would get to keep three quarters from the Sunday paper. So you wanted to sell the Sunday paper, the Sunday special. Where did the rest of the money go? To the newspaper company? Yeah, they'd come by and pick up any papers you didn't sell. Uh, sometimes you'd sell out, and that was like, you could go home.

So, 

Alex: okay, as a distributor, you were getting 25 cents out of 1. 25, so that's, uh, one fifth, so your distribution fee was basically 20 percent of, uh, a weekday newspaper. Yeah, it was really good. Apple charges 30%. To do distribution that's way less work than what you were doing. 

Aaron: Well, the dollar was stronger at that time too.

What I was going to tell you is I would have like, Like, I guess a dollar and it's, you're selling like a hundred papers. What I say is, with the quarters, I would take my mom to the movie theater. So we would go to the dollar theater and I would buy like the snacks and stuff and she was all happy. 

Alex: Oh, that's sweet.

That's sweet. Okay. Um, I, I asked because we were just talking about, uh, you were saying you were watching the [00:03:00] bear and you told me, and I had never heard the story before that you worked at a Wendy's. A Wendy's and a Little Caesars. And, uh, you know, my son, uh, when he was in high school, worked at McDonald's.

Uh, a restaurant that I don't frequent, but I think the experience for him was excellent in terms of learning responsibility and having a job, earning his own money and taking care of his own money, this is all related, starting a game studio, I think, um, but did you get, did you get some of that sense of like, Well, you know, when you, when you work, I'm guessing you were older, you must've been older working at Wendy's because they weren't going to hire a 13 year old.

Did you get a sense of responsibility? 

Aaron: It did because you have a schedule, so they give you hours. Like you work Tuesday from 2. 30 to. And you had to learn when to say no, like, so there was a lot I learned there. Like you had to show up if you didn't, you'd get fired. And I saw a lot of people get fired. Um, and then if you showed up to work and you like complained and yeah, there was a lot, you could see the, there's a lot [00:04:00] of structure there that really helped.

Funny. You mentioned 

Alex: those two things because one of the, my favorite. Pieces of career advice I've ever seen was a simple post. I think some were probably, it was on LinkedIn. I don't know, but it was like, here's five things that you can do. Anyone can do TikTok wisdom, dude. It's the best. Is that what it is?

I don't know, but it's like show up on time. Yeah. Um, be polite, smile, be honest, you know, just easy things that I think probably a large percentage of the workforce never really got trained on. So good for you for having that job. So why don't we get started with our topic for today, which is how to start a game 

Aaron: studio.

Okay. So we have, we do have an outline that you suggested, which I think is really good. And the first one is, is why, so why do you want to start one? And what are good reasons to do so? Um, what's a game studio really? Right. So, but the, the first thing I would say is. When you start a game studio or ask, cause I, cause you're a business person, I would say, [00:05:00] so you really understand, or maybe you, you understood this when you started?

I understood nothing. When I, when, when I got started, I understood nothing. So the question is why start one? And I think we should also discuss, uh, who is starting one? Is it a, is it a programmer? Is it an artist? Is it a designer? Is it a musician? Is it a producer? You know what I mean? Cause I think that matters too.

Um, like in my opinion, 

Alex: really interesting. We just had Tim Morton on. Uh, so if you're listening to this one, it's just, it's last week's episode. Uh, and he was talking about when he was, uh, when he left Activision, I think it was active and yeah, he left Activision started Savage Entertainment. It's an independent studio.

And he. He was telling us how he, he, he didn't really think too much about the business aspect of running a studio. I just wanted to make games and that's what they were there for is to just make games. And that's usually the first question I ask somebody who asks me [00:06:00] if they should start a game studio, which is why?

Like, why do you want to start a game studio? Because a game studio fundamentally is a business and it's a business that makes video games. And if your dream is to make video games, yes, you could start a studio and do that. Um, but it might not be what you're hoping it is. Um, some, some folks I think end up, uh, perhaps stuck in a, in a situation where they, they can't focus on what they really want to do, which is to make, be creative and make games.

And I think your question, you know, are you an artist? Are you a programmer or you're a producer? I think that matters too, because. That will make a big, it will make a big difference in whom you surround yourself with in this new venture, if you're going to start a studio. So if you're thinking about starting a studio, that is the first question I would sort of ask myself or ask yourself is, you know, what's, why do I want to do this?

Do I want to start a business? Do I think I have something [00:07:00] to, um, create at a. At a, at a business entity level. Do I want to get rich? Am I doing this to get rich? Do I, am I doing this? Cause I can't work for somebody else. You know, it's like, I would need control. I'm not a good employee. I don't want to do what other people have to say.

Um, are you willing to work to grind? Having a business in a studio is almost always a grind. And I don't mean that in a horrible way. I just mean. There's nobody else is going to do it for you, you know, it's all on you. 

Aaron: You know, it's funny you say that cause I, it's, you have to wear many hats too. It sounds, it's like, it's what it sounds like.

Are you willing to wear many hats? It's kind of what you're saying too, right? Like in some respect, like the EA working at EA, you know, they're a giant corporation that has a position, a person for every like, Like position, I guess, where like, if, right, like if a [00:08:00] person like leaves the studio, there's so many other people that you never really, never really like suffers, I guess, you know, when that happens, but like in a startup, would you say it's like a little different?

Like you're everyone you're committing, everyone joining is committing. Would you say that's a, that's a, that's a thing at a small startup. Absolutely. Absolutely. Yeah. Maybe I'm jumping ahead. Maybe I'm jumping ahead. No, no, no, no. I mean, I think 

Alex: every time that I've gone for, from a, uh, entrepreneurial environment, um, to a corporate environment, like going from bungee to Microsoft or wide load to Disney or industrial toys to electronic arts, I have to take hats off.

You know what I mean? Like, it's like, I. I am so intertwined into all parts of the business. And I feel like it's not, it's not like I feel like I do feel a responsibility to, but I enjoy, you know, stepping back and looking at what the, the team or the [00:09:00] studio needs to be successful and jumping in wherever it's needed, learning a new skill, I find that, um, super satisfying.

And when you get into a corporate environment, you're right. It's less like that. There's. There are departments that, you know, they're usually have scale. So, you know, usually a studio doesn't need a publishing operation because it's already a publishing operation or, or there's integrating those things together, finance is usually managed centrally, you know, things like that.

Aaron: Okay. So I guess that kind of leads into, wait, so what is the why? So the, you, we've asked why, why do you want to do it? What are good answers for the why would you say? 

Alex: I think there are a lot of good whys. I think. Some, some of the, uh, folks who I've talked to want to start a studio because they want to make a game and they, that is a good and fine reason, but I think it has to come with the understanding that that's not all it's about is having, having a studio is having a business.

It has to make money. Well, yeah, to survive it does. Yeah. Um, [00:10:00] and to thrive and, and if there's a desire to build a business as well as build a game and to make both thrive. Usually you, you do have to tend the garden that grows the food. You know what I mean? Like you, the, the team really is the project that the company really is the project and that's what makes the creativity happen.

If you have that mindset or you want to have that mindset or you have a long, you, like you want to. Go into this with a long view, a strategic view. This is where the segue we're segueing into strategies. You know what I think is really funny is whenever, whenever somebody's interviewing some entrepreneur who's starting a company like Silicon Valley's tech bro entrepreneur, and they're like, why are you doing this?

It, their answer is always like, I want to change the world. Or I, you know, I have like, they always have some altruistic answer to it, which I think is kind of [00:11:00] bullshit. You know, I, I think most. Most people who are, who get into entrepreneurship and want to start a business are doing it because they think that there could be a better lifestyle, a better financial reward.

There's a lot of personal motivation for doing it. The folks that are altruistic and want to change the world usually go into fields that are. Altruistic business is not that. Um, so anyways, quick aside, but yes, so I think after, I think this is what you were getting at. Like if, if you're all in and you're going to start a business, it probably makes sense to think about what your long term strategy is, is to think Beyond just making 

Aaron: one game.

Okay. So that's, so the first one is you have a why, and then the second one would be, what's the strategy? 

Alex: Yeah, I guess it's like, it was sort of the, what, you know, like what, like what, why are you going to do this? And what are you going to do? Like, is it interesting? Is there a strategy behind it? And [00:12:00] yeah, it can be, it can be one game, you know, one game as in, uh, uh, a, a product that will.

You know, could, could live for a very long time, like, like a live service. It could be that. Um, but you know, some, some things that, uh, can, can grow and fuel a game studio are talent, expertise, you know, so expertise in a particular kind of game. Particular technology, um, technology of itself. And the.

Intellectual property. You know, like you make a game, an original game. I think the Holy grail for, you know, starting a game studio is you, uh, you have the best, most talented team that has built its own technology and created an original IP game that becomes exceptionally successful. That's very rare though.

That's very, exceptionally rare. I mean, it is what we ended up [00:13:00] doing. Um, At Bungie, but that's like, that's like a once in a, it's a, it's a long shot, you know, and especially, especially today, uh, but those are things to think about. It does relate to like how you start, where you get your money from, what kind of, what kind of game you're going to make genre technology IP.

There are decisions you can make at the beginning that give you, um, opportunities along each of those axes. 

Aaron: There's, there's also other something else too, because, um, I think. What we're talking about, what you're saying right now is, Hey, I want to start a game studio, I'm going to make a game. And there's also, um, studios that are like work for hire.

Like, that's what Tim was mentioning, right? Like he thought he was just going to make his game, but he ended up just making games for like publishers. 

Alex: It's a very good point. Like there's nothing wrong with doing work for hire projects is a great way to get revenue in the door at our [00:14:00] studio. We are doing projects with partners for that very reason, because it is a great way, uh, to, to help fund the growth of a team and, and recruiting and all that.

But. That's all you're doing. You're getting hired to do stuff. All you're getting out of that is that revenue, which in the, in, in the context of a game studio, which has to pay employees every month, that revenue disappears fairly quickly. Um, so there's no enduring long term value there. So that's what I mean by like strategy is like, how do you make your company better month over month, year over year by the work that you're doing work for hire will make you better because.

You will get experience. And if you're doing good work and you have good partners, hopefully what you're producing is good. I think that's the trap that Tim fell into at Savage was that they were just going project to project and. weren't really moving the, the needle. 

Aaron: And eventually it caught up with them.

Yeah, I've worked for studios that do that. We're both, two kinds actually. [00:15:00] Where they're studios that start out as like, art houses, but they're trying to do their own thing. You know, on the side. Um, and we've worked with studios like that. We, we just recently did. I've actually met you through a studio like that.

Um, as an animation 

Alex: farm when you're down in those contractions. Yeah. And then there are good examples of that working really well. Like our buddy Max over at certain infinity. They, he started, he, you know, spun out a bungee and he started by doing maps for halo. So he had a really good partner working on tools and things like that.

Yeah. High profile games. He need leveraged that into working on call of duty and working on more halo and other, other stuff. And he's been able to grow that. Team very successfully. So there's, there's definitely examples of that working and he's got to, you know, I think the way he's made his studio better is they've got a really good expertise in multiplayer and FPS, which is in high demand.

Aaron: It sounds like, okay, you figure out why you want to do it. Then you have a [00:16:00] strategy, a plan, and you could enter that way, that creation of the studio from many different, uh, like angles, you could focus on making one game you have worked for hire. You have, uh, like a service. Like maps, tools, um, even like an art house or something.

So there's different avenues to create a game studio or a strategy to have a strategy, to get funding, to have money, to have revenue, to 

Alex: have, I think there are two, there's two different things, right? There's a strategy to get started. And then there's a strategy for, I think the way that makes sense to think about a long term strategy is how is your company getting better month over month, year over year.

You know, are you building property that you own? Are you, do you, have you created technology that's unique? Um, have you built a team that is better today than it was yesterday? Um, all of those things. And you can accrue that, [00:17:00] that strategic value over time by doing lots of different things, racial games, work for hire can contribute to it.

Um, some things are more powerful than others. If you own stuff, that's more powerful. You own a hit 

Aaron: IP is the most powerful probably. So then that that would that's a good segue into getting it off the ground. So funding. I would say the good news is 

Alex: that the game industry is so is More mature and more sophisticated today, certainly, than it was back even five years ago.

Um, so that means that there are more opportunities, uh, to finance a video game operation. So the primary ways that, uh, studios get funded are through a interested party. An interested party is like a publisher. So this was pretty much the standard model, you know, back in the day, you, you make a demo or a [00:18:00] pitch and you go and talk to publishers who are in the business, but they're in the business of financing, they take that production risk, they finance the game, but then they also take most of the revenue, right?

So that's one way to get a studio started is if you have a compelling game pitch or demo that you can sell to a publisher for funding. Another way, uh, of getting started is bootstrapping bootstrapping is kind of like, okay, we've got a group of founders, uh, and we have some other means of support and we are going to invest our time.

And that's sort of the funding is like, if there's five of us and we each could be making one, 200, 000 a year and whatever, whatever it is, that's real funding, that's real money, you know? So if you're doing that and investing that into your studio, 

Aaron: that's. That's how you got to fund it. That was bootstrap.

Bootstrappy could also be some students that are still [00:19:00] in college, you know, they're working at night and they're trying to make a game and they're going to put it in the app store. Like all of that is pretty much free in a way. That's kind of what you mean too, right? Yes, yes. So not in an actual location, like working from home.

Basement, garage band. Usually 

Alex: the domain of the young. You know, the, the industry has kind of cycled around like how possible that is because in the old days you can make a game in, in a few months. And so, yeah, a few months of investing my time in this is, uh, let's try it. And then things got more expensive and you got, you know, console games, forget about it, and even getting a PC game off the ground was just, it was expensive.

More, definitely way more expensive. And we've kind of come back around full circle today where the All the tools are free. There are platforms you can, you can distribute it on for free bending a dime and you can make a game in a couple of months and there's a ton of bootstrapping [00:20:00] going on right now.

Um, and so it's very exciting to see that. I think it's going to open up just a lot of accessibility to games and distributing games, and we're just going to see cool stuff for sure. The third method of getting a. Uh studio funded right now, which is kind of new and actually, um, uh, mitch lasky who we had on the podcast He on his podcast game craft.

He did a whole episode about this funding topic. I recommend you listen to it. If you want to get a deep dive, um, is, uh, raising venture financing. And, uh, venture financing is different from publisher financing, the interested party, because the interested party is going to give you money basically in advance on what the game is made, so they don't own your company.

Um, they, they're basically just giving you money to make a game in exchange for the lion's share of the revenue. But if you take venture financing, if you raise money by selling a part of your company, you now have a business partner, usually they're not really involved in running your [00:21:00] business, but you now have somebody who owns part of your company.

So you're, you're kind of tied to that investor forever. There are different reasons to do that, you know, and that capital is, you know, we went through kind of a season during COVID where that capital flowed very freely. Like the, the cost to investors to invest money, like interest rates were very low. So.

You know, investors are very eager to put their money into places that would have higher returns than what they could get. This was like a 2020, you know, 20, 2019, 2020. Um, you know, it's just a lot of activity in the game industry. And there's just a lot of venture financing, uh, going into the game industry.

So there's a lot of studios that got started, uh, in that timeframe. That raised a lot of money, um, by selling equity in their company. And it's, it's still a very significant way for new studios to get funded. [00:22:00] The burden, the burden or whatever, the, the effort you need to put in to get that kind of funding is I would say the bar is higher and it's, it's a little different.

You sort of really do have to think about that long term strategy, you know, cause venture investors are kind of less interested in investing in this one great game idea and more interested in investing in that machine. The goldmine, the golden goose, you know? Yeah. Great, great. We like the, the eggs, but it's really the goose, you know, that, uh, that we, we, uh, wanna invest in.

Aaron: Can I say something about that? It feels to me like that is the pro way to do it, just from all the people we've spoken to and just watching. It feels like it's very, like it, there is a, there is an, a pro a, like you kind of said it right now, like. The way you explained it feels very like you gotta, you gotta really have everything in check.

You have to do a lot of really professional things. So when you present [00:23:00] yourself, they're not like, yeah, this guy's a joke, you know? 

Alex: So when you say pro, you mean, you mean the folks that are, uh, that are pursuing this way of getting in their studio funded, you usually are what, like just more polished, have a.

Aaron: Yeah, better plan better plan or thinking about it in a in a different way You know like a long of more of a very long term I think it'd be interesting to talk about a little bit like why you would choose one 

Alex: of those Over another what's that? What's left? We we had that's three Is there like another one?

I think those are kind of the primary ways that folks get their games or studios funded is, you know, either you bootstrap it yourself, you get money from an interested party, like a, like a publisher, um, or you get venture financing. There are other interested parties out there like with blockchain, but that's really.

When a blockchain company is, is funding a game, they're, they're kind of taking the role of a publisher where they're, they're an interested party. They want that Kickstarter, 

Aaron: [00:24:00] we 

Alex: would Kickstarter be. Oh, that's actually good. Good call, right? I think that's a fourth way. That's crowdfunding. Yeah. It's a little bit like bootstrapping.

Yeah, because you don't get that much from that, right? Well, I mean, you get what you get. If you're Chris Roberts and starts this, you get it all, you know? 

Aaron: What did he get? Like 60 millioners? What was it? It was millions, right? Oh, 

Alex: put another zero on there, friend. I think he's up to 500 million raised. Yeah, Lee, that's insane.

Through crowdfunding and, you know, the advanced sale of assets in that game. It does show the game is pretty good. Beautiful. Um, but yes, crowdfunding is 

Aaron: another, is another way. And then mixing it too, right? Like mixing the, mixing these, like, I think Tim was saying that mix and match. Yes. He, Tim, Tim raised venture 

Alex: funding and they did a Kickstarter to, to help, uh, pay for a collector's edition, which I think is super smart.

Aaron: And they're going to do the other thing too, to get more money. 

Alex: They're going to do some publishing [00:25:00] deals in, in Asia and Europe. 

Aaron: Yes. But the steam thing, the early access is also going to bring in revenue. I think. Right. 

Alex: Early access is kind of like pre sales. I guess, you know, crowdfunding usually is like pre sales, you know, it's like getting pre orders.

Okay. Which is pretty associate, it's pretty, Similar to, to bootstrapping. Um, but you know, if you look at those three things, like bootstrapping is great because you don't give up anything, you know, um, if, if, if you can do things on your own dime, it's sort of the best of everything with the exception of.

How much capital you have at your disposal, but you don't give up any control over what you're building. Um, and you don't give up any equity in your company, in your studio. Um, the downside is, yeah, I mean, you're, you're going to eat ramen. And it's going to be, it's going to be hard to recruit more people when you need it.

Um, it's hard to be predictive on how long things are [00:26:00] going to take. Um, it's got those upsides. Getting money from an interest from a publisher is pretty, is pretty great because you don't give up any equity. You know, if you're successful, you still own what you have, but often it's hard to keep control over things.

Um, it's hard to keep control of your IP. If a publisher is going to give you enough money to publish your game, usually they are going to acquire or have the rights to your intellectual property, which in the long run is that's. If it's successful, it's a big deal. The way to get publisher funding is to put together something compelling to show, um, the game is, uh, a game the market wants.

And you as a creator or your team is a team that can deliver that game at a high expectation. That's sort of the burden to get publisher funding. And then you have to find a publisher that. That [00:27:00] serves the market you're building the game for and has money to spend. So that's kind of a challenge right now, because a lot of the big publishers that fund things are kind of scaling back a little bit.

Really? Yeah. Um, so upside, you keep your, the equity in your company downside. You're usually giving up the IP rights to your game. Not always, but usually, um, and you're giving up the lion's share of the revenue, um, in exchange for, um, For the publishing and fans, you know, and then when you, if you're, if you go to the route of venture financing, there's a real upside there because you have control, control, creative control of your game, usually kind of aligned.

If you're, if you have a long term view for a business, you're kind of aligned with your investor because that's what everybody wants, you know. I think depends on who you are, but the investor wants you to, to make this company super valuable and sell it because that's how the, [00:28:00] that's the investor's business is like, I'm giving you, not giving you this money.

Cause I want you to want to play your game. I'm not giving you this money because I am going to make money off your game. They're giving you money because they, they want this company to get sold or go public period. Um, so if that's your ambition, if you're starting a company. Starting a studio, cause you got a game idea, you got 10 game ideas, you got an idea for building a studio, and you're gonna sell it, and get rich?

I know that sounds crappy, but if that's your, if that's your M. O., then go talk to some VCs, cause it's their M. O. too, if you wanna make a game, and get it in front of all the people that play, This other game you love, you might want to, you know, just, just, just, um, you know, from a culture fit perspective, you might want to talk to a publisher that's in that market.[00:29:00] 

Um, the other thing I will say is that as you go up that scale, things become more durable. So if you bootstrap your studio, you still can do anything you want. Cause you haven't given up any rights. If you have a publishing deal, you know, your next game, you can get a different publisher. Um, you know, you can, you still have a good amount of control of your company.

If you go the VC route, you, you, and you do end up with a partner that you're going to have for a long time. And they're probably going to be on your board of directors. And they're probably going to make you vest your ownership over your own company, which means if this doesn't usually happen. But if things don't go well, it's just more challenging as a, for you, as a, somebody who's running a studio.

So, so there's that escalation, you know, you, Usually there's more money involved as you go up that [00:30:00] tree and there's, um, less control. 

Aaron: Now, everything you just said, everything, fantastic by the way, very good nuggets, um, But I wouldn't even know where to start with a lot of that stuff. So if it's like, like for you, it's, you're like, Oh, okay, we're going to start a company and you already know, these are the documents we're going to need, they're going to need to sign this.

And even depending on if it's a publisher bootstrap or whatever, let's say it is bootstrap. You're a bunch of friends. And there is an IP, like, you should probably discuss who's gonna own the IP, right, like, or how that IP is distributed amongst all of you, uh, or if you're working with a publisher, and I guess that's like the next thing, it's like, what is it?

Right. Okay. So we're going to get funding. What kind of like, yes, the, the, the 

Alex: operational stuff, the nuts and bolts, which is very important. It's not a sexy topic. They're, they're very [00:31:00] important. Uh, and some things you, you, you do need to take care of at the beginning. Uh, and if you forget to take care of can cause you real headaches later.

Um, so there's just, there are legal things like, okay, you need to have a, uh, an entity, um, if it's just yourself. That's one thing, but as soon as there's other people, that's at least a partnership and almost always you want to have some sort of entity that protects you from a liability standpoint. And that's either like an LLC or a corporation.

Um, the forming those things has become very easy now because there's lots of places like LegalZoom. They're not a sponsor, but if you'd like to sponsor, you should reach out for your, or, or places like that, where you can kind of self set up an entity that will give you. Liability protection. And what that means is if you, if your business does something that, uh, somebody, uh, sues you [00:32:00] for, uh, having an LLC or a corporation, it's like, it's funny, the word corporation, corporal, it's like a person, it's like, this is a concept that is like your business is an actual entity and it's up.

A disgruntled person can sue that business, you know, and not necessarily ruin you, your personal life. Um, it's not a magic shield, but it's protection. So you usually need to form some sort of entity. I'll tell you the only one little bit that I learned the hard way is if you're going to raise venture financing, you want to be a corporation because, um, VCs you know, invest in LLCs and S S corps, they.

Invest in C Corps. So if that's the route you're going, save yourself some headache and just register as a corporation. Um, probably the most important thing to get, uh, figured out is exactly what you [00:33:00] were saying, Aaron, is like, if you have partners and I do recommend that. Because having a company is like the loneliest thing you could do.

Having partners is, it's just good for your health, mental health. Um, if you have partners, you need a agreement. You need a, an operating agreement or a partnership agreement or something that. Basically lays out, this is the company. Here's who owns what, here's what ownership means. There's lots of different ways that that could be written.

Like, what if somebody leaves? Um, what if somebody leaves now versus leaves later? What happens to their ownership of the company? Those are all things that it's easy to like kick the can down the road. You know, we're just going to try this out. Um, but it can get complicated if it's not figured out at the beginning.

So in addition to sort of having a legal entity that. Your studio is based on having that agreement between the founders and putting it down on paper and everybody signing it, um, [00:34:00] is, is 

Aaron: critical. That's, that has to be done. How do you recommend, but whenever you have that, how do you recommend getting that going?

Right? Cause I think, I think what you're saying, I think is pretty obvious. To you because you've done it many times and I've made mistakes on all of those things too. So . So what would, what would you say? Yeah, but see, but you also started when we, there was no legal Zoom. It was like, you know, you'd go to the LA lawyer, Larry, that was like down the street.

You had a little off little practice. Yes. So would you, what do you recommend people do? Because like what you just said, if I were to do it tomorrow, I would need someone that. Cause I've read contracts and they don't make sense, man. Get a mentor, you know, get a mentor or 

Alex: talk to somebody who has had a business.

It doesn't have to be a video game business, um, but who has had a business because that, I mean, when I was, you know, started Bungie when I was like 21, [00:35:00] I didn't know anything, you know, you're asking like, you're saying, you know, I know, I didn't know. I didn't understand, didn't know anything. Um, and a lot of things we learned the hard way.

But, um, You know, at a family friend who had a successful business, uh, and just. Asking questions, you know, that there wasn't legal zoom, but there, there, there was a freak, I think it was called the company corporation. I think that's actually what it was called. They would help companies get set up, you know?

And it's like, do you mean that you don't want to be a lawyer? You know, it's like, you're making video games. You don't want to be a lawyer. It's a necessary part of the, part of the deal. So find somebody, friend, family member. Somebody from the school wherever you are who can at least point you to somebody who can kind of help guide some of those things do the other thing I would say is like, you know, it making a game studio is a super [00:36:00] set of making a game, you know, you may know what the roles are for making a game, but you need to also consider what the roles are for making a studio.

So in addition to having programmers and artists and designers, he, somebody needs to do the, the stuff, the operation stuff, the legal stuff, the accounting. HR. HR is it, there's, there's like kind of two bits of that. One is probably the most important fundamental job of an entrepreneur. And the, and the other sort of the technical elements of, of HR, which are important, but are, you know, you can get help with, uh, you know, There's lots of payroll services that can make sure that employees get their W fours filled out and, and that you're withholding taxes correctly and all that.

Again, nuts and bolts, very important, probably something you shouldn't have to figure out on yourself, go find ADP or some service like that to do it, but the soft, soft skills. The, the soft part of HR, the, [00:37:00] this is a, you know, we had Christian Circus strata on, and he talked about, he talked about how his primary job at his company is designing the operating system of the business, the culture, the, the, the way we relate to each other, the things that we consider sacred, you know, what are, what are our unspoken rules?

You know, like, how do we. How do we hold each other accountable? Um, how are we build trust and, and responsible to our mission? What is our mission? I'm not a huge fan of mission statements, but, you know, having, you know, a big part about, of managing teams is about, you know, agreeing on where we're going. And then making everybody believe we can get there because often where we're going is someplace we've never been before.

And none of us have traveled the road yet. That's not, that's not HR though, right? That's CEO, would 

Aaron: you say? I guess, I guess. I mean, I think it's related. I think it's [00:38:00] related. I think it's necessary to have someone, right? Like, even if you're bootstrap, like, and you get into a big fight with each other, like there needs to be, I don't know, it just, it feels like there's, it's, it's, there's so many things that like I take for granted.

You know, like just everything we've talked about. It's not a bad point. 

Alex: I mean, when you have a studio, nobody else is going to do any of this stuff for you. There are a lot of things to do making a game and making a studio, and somebody is going to have to do those things. And the buck is going to stop with whoever is that it was in charge.

Um, And, uh, it's why it's good to have figure, not just figure out that partnership agreement about, you know, who owns what and what happens in all these situations, but also who's going to do what, because this, all this operational nuts and bolts is a job. 

Aaron: And who does that? The CEO? Cause we're segwaying into like team roles now, like [00:39:00] 

Alex: yeah, I mean, it, it, it kind of depends on the, the skills of those around the table, um, and how many people there are, uh, sometimes those rules get split up, you know, in industrial toys, when we started to Tim and I played a kind of a game of Rochambeau for some of these things and, um, you know, he, he ended up with some of them, I ended up with some of them and, you know, in, in our studio now, you know, Oh my gosh.

I am so thank Patrick, Mary, and I'm so thankful for you. Um, makes everything work. Uh, but somebody has got to do that kind of stuff, you know, and that's, that's kind of the role that role is, is an operator, you know, um, I think you have to know how to do it. It's a skill. It's not like. It is, yeah, it is absolutely a skill, and some people like doing it, some people don't like doing it.

There's deadlines too, like you can't just like wing it, like you Yeah, if the insurance bill doesn't get I mean this happened once to me, you know, back in the old Bungie days. You know, we used to pay the bills by writing a physical check and mailing them, got [00:40:00] lost in the mail on our insurance. They kind of canceled our insurance.

And can you imagine how stressful that is when you get a call from an employee is like, my insurance card doesn't work. And you call the insurance company and they're like, Oh, we, you didn't pay your bill and you're like, Oh my God, the fucking world's on fire. Everybody's going to come in and, and kill me, you know?

Um, but that's, you know, That's a reality of having a studio, things 

Aaron: like that. So, okay. So I kind of feel like this point should have been at the beginning, the team part, only because that's how I think about it. Well, 

Alex: I, 

Aaron: that, that 

Alex: is kind of like the most important part, but I, but I, I think intentionally, I thought it would make sense to talk about all the other parts because the making the game is not exactly the same, but it's got a lot of similarities, no matter where you're making a game, you know, if you're, if you're at You know, if you work for Microsoft and you're on a game team making a game or [00:41:00] you're at an independent studio, your own studio with the game team making a game, there are a lot of similarities there, but all the operational stuff, all of the things to consider about the financing of it, about the relationships you have with your interested parties and all that doesn't exist.

Unless. It's your own studio. Okay. But yes, let's talk about the team, 

Aaron: the magic. This is a big one, I think, right? It's, uh, you said you sprinkled in a few comments earlier that, I mean, they're all big, all the topics are big, but this one to me feels like you kind of hinted at some stuff, like the HR, like you mentioned some people that help out and take roles.

And, um, I guess the question is, You also said like people are going to leave early or late, like, do you, because when you start there, I have this idea that you get everyone to agree, because like, if you're, [00:42:00] if you're doing this in college, right, with friends, no one's really committed, right? It's kind of like, well, I'm going to move back to my home and like across the country.

And now we have internet, so it's a little bit easier to work together, but they're not really like there, they're not committed, you know, maybe. So I'm assuming that when you get the team going, like, how do you get everyone to just agree like, all right, we're all gonna do this, right? Is the CEO, like, who, like, do you, like, you know what I'm saying?

Like, the person that's gonna be the CEO. Like, even when we started this one, the roles and how we were, like, defining roles, like, that's a, that's a typical, that could be a hard, I'm assuming that could be hard with some people and easier with others. Oh, for 

Alex: sure. That's, I mean, Maybe that's a part that we didn't, we didn't really talk about yet, but, um, figuring out a contracts and things like that is that's easy in comparison to building a team of [00:43:00] individuals who have personalities.

And there's a, there's a culture that emerges from that and you want everybody to be, you know, motivated and to get along and trust each other that that's hard. That's, that's hard. That's leadership. That is, it's kind of like, you know, it's a couple parts to it. It's like what I was saying before is getting everybody pointed in the same direction.

Hey, we're, we got together because we're going to do this. And does everybody, you know, can, does everybody agree that this is actually what we're going to do? How well is that articulated? How, how well has everybody bought into it? How excited is everybody about it? How much ownership and, um, uh, interest does everybody have in going where you want us to go and the role I get to play in getting there and the reward I'm going to get when we achieve it.[00:44:00] 

Those are all really important things to think about at the beginning. And it makes a big difference, like who you're doing it 

Aaron: with too, you know. Let's say we start another company, and I'm starting it. Doing this podcast has really motivated me to start my own game company, and I want to, I want to start doing it.

And I'm doing it. But I don't want to do everything you just said. I want it. Cause then there's, I'm sure there's people listening to this now that are not the CEO. They're the lead programmer and they want to start a game company. Right. You see what I'm saying? Or they're the art director. That's, that's where the team building, I assume it can be like, okay, you're the CEO.

You're the, you know? Well, you know, not, not 

Alex: everybody has the same style. And I think the way I'm describing forming a team is my style. Um, There's other ways to do it, for 

Aaron: sure. What's that guy from Marvel with the eyepatch? Samuel L. Jackson? Fury, Nick Fury. You're not Nick Fury, you're Wolverine, but you want to start the X [00:45:00] Men.

You need your Professor Xavier, right? Like, you know what I mean? Yeah. 

Alex: There are folks who are just so driven. Think this about, Steve Jobs and Elon Musk to do a thing and do a thing a certain way that they, it's just called the personality. And, you know, there's, there's a, a lot of people who will follow that because they really buy into the, to the vision, you know, some people won't, but a lot of people will, and that's also very powerful.

There's different ways to, to manage and motivate a team, but I mean, think about who you're, you know, if you're going to start a studio again, like you're, you're not going to probably not doing it alone. Um, and I wouldn't recommend doing it alone and think about who you're doing it with and just depending on how well everybody knows each other, usually people that start to start a thing together, team together.

Know each other, have some history with each other. That's a huge advantage because there's already, uh, [00:46:00] an element of trust, but you're right, you know, people don't, you know, it's like any relationship you go into it thinking it's going to last forever, but it doesn't always. 

Aaron: It changed. Don't people change, um, like right after.

Like what, okay, we're going to start a company and then the serious things start happening and it, I, you know what I mean? And like people start to like, 

Alex: yeah, here's, here's a couple other little, little bits that, that really matter. It's like, no matter how well you plan, things will not go to plan.

Especially making a video game, which is very difficult to do, you know, so your best intentions, uh, will often go sideways in terms of how long things we're going to take or how, uh, how much money things are going to cost. Uh, things like that. Um, so. Often you're gonna need a fair amount of flexibility and you're gonna need to, you know, when you're, if you're managing a [00:47:00] team or you have partners, you know, you're, you're gonna have to think a little bit about what happens in various different scenarios and outcomes.

The other thing I would say, and this is definitely something that I've learned the hard way, is, is because things don't go as planned, try to do the important things first. VCs, I think of Silicon Valley people have this phrase fail fast. And I'm not a fan of the phrase because. I don't, I don't like the direction of go fail, but the, I think the intention behind it is right is get, get to an answer quickly, you know, get to iteration quickly, figure figures, figure out the important stuff as quick as you can.

Cause if you try to build the whole battleship, it's unlikely your first boat's going to float. So get the, get the crappy dinghy out of the way and let it sink, you know, and get to, uh, bigger and better. I think that is good 

Aaron: advice. Yeah. So let's say people are going to listen [00:48:00] to this and the people that listen this far are probably really interested in either the topic or have considered it or maybe now they're motivated and what would you say to them?

Like you can only say one thing to them. I would say if you want to make a 

Alex: game, think about it. If you want to start a studio, do it. You know, the difference there is, is what we've just been talking about. Yeah. You know, it's a difference between making a game or making a business, um, being persistent and just figuring out a way to survive is, I know it sounds super basic, but things don't ever go as planned us to say again, just not just on the game side, but on the business side as well, like.

You know, we had vendors that went out of the distributors that went out of business owing us hundreds of thousands of dollars. And when that kind of money vaporizes off your cashflow, it's like, you've got to think how do I make this shit work? Um, [00:49:00] and having a studio is, is a lot of that. Um, and so there's a, there's a bit of survival planning.

That's really important to do along the way. You know, you're going to make a game. If you got your money from a publisher, you're going to be done with that game. And there could be more money from that publisher for a while, you probably, your team is probably bigger than it's ever been at that point.

You got to think about how you're going to transition. So all those things are, are, um, important to think about at some point, maybe not necessarily on, on day one, but as you sort of start charting that path, important to think about, think about the long term. 

Aaron: And for people that are like, okay, I'm doing this, you know, I'm going to do it.

Darn it, I'm doing it today, you know? So, to those people, how would you guide them with regards to the studio's location? Like, work from home, hybrid, or an actual location, like a studio, [00:50:00] like a building with Rent and, you know, I 

Alex: think it really depends on the people involved. Um, I, I feel okay running our studio remotely because we've known each other for 20 years.

Um, all of us, you know, and we've worked together. Um, and I trust you all. Um, and that's, that's not something you, that comes for free. Now that takes time. building a team from, from scratch or with folks that maybe you don't have as much, um, experience with having presence. It can really be helpful. Um, it's more expensive though.

I mean, I, I gotta say it's nice not having the overhead of a physical location, um, and it's nice having the time of that commute back. So I would say pick one or the other. I kind of, I never really thought about it, but I kind of agree with Susan, Susan Cummings, um, POV that probably should go one way or the [00:51:00] other.

Hybrid does seem like it creates a couple of different classes of employee. And whether you're in person or remote, take some time to spend. Time together, um, apart from just like we're working on a game, but spend some time together to get to know each other. 

Aaron: I guess the, the only question I have left, how big should the first game be?

As 

Alex: small as possible. As small as possible. As small as possible. I think there's probably a question to ask before that one, which is, What kind of games should we be making? Like, what is the mission of our studio? Like, why are we, why are we doing, because if it's like, Hey, we're going to make, um, puzzle games, the answer is very different than we're making an MMO.

But I think that's the last question probably out of scope for, uh, this conversation today might be a good, interesting conversation for tomorrow. Uh, which is where are the opportunities to start a game studio 

Aaron: today? All right. Do you think people could start a studio now with this? I think [00:52:00] so. There's a lot here.

Let us 

Alex: know if that was motivating or terrifying. I don't know. One or the other, maybe some of each. Um, I, I have started a few studios and I have bootstrapped studios. I've done publishing deals and I've done venture financing. 

Aaron: You've mentored 

Alex: too, right? I'm on, I'm on a lot of advisory boards. Um, I've done some angel investing in studios.

Um, there's the business of video games is fascinating to me because it is always changing and I've never stopped learning. And I think that's why I'm still still doing this. If you asked me even just to like 18 months ago, if you asked me if I would be doing today, what we are doing today. I would be like, that's not a thing.

Um, and I also think it, you know, it's just bonkers. This is bonkers where the industry is in some ways this bonkers bad, but in a lot of ways 

Aaron: this bonkers [00:53:00] great, you know, I think it's bonkers great. And it's crazy. There's like even educational stuff now. And like medical stuff, there's like, like games as medicine, you know, like that's a crazy con there's money there, you know, There's UGC.

There's yeah, there's so many things. All 

Alex: right. Thanks everybody for listening. Thanks everybody. Tune in next week. We're going to be airing. Oh, it's so good. Our special episode about GDC called The Conference. It features, uh, Aaron's part of it. Our good friend, Patrick Curry's part of it. We get a chance to hang out with Geometric Interactive, who, uh, made the amazing game Cocoon, and I got to meet Chris Crawford, who I've never met before he started GDC.

One of the more fascinating folks. In prior in, he says he's not in the game industry anymore. Uh, but tune in to listen to his story and all the others. We're very excited to share that episode and we'll see you next 

Aaron: time. Thanks everybody. [00:54:00] Cheers everyone. Thank you for listening to the fourth curtain podcast.

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