How Game Funding Actually Works (According to a Games VC) | Ali Farha

Summary

Ali Farha, an investment associate at Behold Ventures, explains how game studios can match their financing needs to the right funding model. His central point is that venture capital, publishing, project financing, and user-acquisition financing serve different purposes. Founders should choose based on what they are building, where they are in development, and whether they need capital alone or broader company-building support.

Funding Models and When They Fit

• Bootstrapping and friends and family: Often fund the concept stage, such as early prototypes, concept art, and initial demonstrations.
• Angels and pre-seed funding: May help a team develop enough evidence or a playable build to approach later-stage funders.
• Venture capital: Typically invests in the studio through equity, rather than financing only one game. Behold says it usually looks for a team with something playable and backs founders it believes can deliver, adapt, and potentially build more than one game.
• Project financing: Can be a better fit when the need is tied to a specific game—particularly a shorter project without a clear follow-on studio strategy.
• Publisher or platform deals: Can provide distribution and other game-specific support. A publisher may take a revenue share on the game without necessarily requiring further studio dilution.
• User-acquisition financing: In mobile, financing may be used specifically to acquire players. Farha speculates that PC and console versions could develop, potentially using player lifetime value (LTV) to assess acquisition potential, but notes that the data and channels differ from mobile.

A hybrid funding approach may work well: build as far as practical with internal resources, use early funding if needed, bring in VC for studio development, and later use a publisher, platform deal, or acquisition financing suited to the game.

What a VC May Look For

• The team, not just the game: Farha says a VC pitch should explain why this team can build the proposed game, support it, and pivot if necessary. A strong concept or wishlist and Discord traction may help, but should not substitute for the team case.
• A credible studio trajectory: Be ready to explain what comes after the current game—for example, ongoing content or DLC, or a repeatable focus on a type of game. If the plan ends at one short project, project financing may be more appropriate.
• Evidence and track record: A playable build helps demonstrate execution. A proven creative lead or team with a history of delivering successful games may attract interest earlier.
• Fit with the fund: VCs consider their existing portfolio, including genre and platform diversification, available capital, pipeline competition, and the fund’s stage in its lifecycle. The right opportunity can still be passed over because of timing or portfolio fit.

Fundraising and Investor Relationships

• Tailor the pitch to the funding source. A publisher-focused deck emphasizing game data, user acquisition, and commercial performance may not answer a VC’s questions about the team and studio. Prepare different pitches for different audiences.
• Ask what the investor contributes beyond capital. Founders should ask how the VC will support them, what involvement to expect, and how decisions or difficult scenarios will be handled. Farha frames these as reasonable questions from a founder who values their company.
• Understand board involvement. Behold describes providing board or advisory support, expertise, and introductions. Meeting cadence can vary—monthly or every other month, with additional meetings when urgency or a release warrants it.
• Use the investor’s network where relevant. Farha gives an example of a portfolio opportunity being introduced to a strategic investor who trusted Behold’s judgment and joined the financing. He also cites potential introductions to publishers and service providers.
• Treat financing partners as partners, not categories to reject. Farha cautions against generalizing from a bad experience with a VC, publisher, or outsourcing studio. Assess the specific partner, terms, and support offered.

Investment Process Described by Behold

1. Review the pitch internally, including the opportunity and team.
2. Hold an initial conversation with the team.
3. Share internal feedback and assess further interest.
4. Arrange further discussions, potentially including founding members and in-person meetings.
5. Meet more of the studio’s team and evaluate its ability to execute and adapt.

Farha stresses that investment is not an immediate decision: due diligence takes time, and studios should account for that in their fundraising and runway planning.

Metrics, Terms, and Timelines

• Behold says it commonly targets enough funding for roughly 18 months of studio runway.
• Farha describes early-stage VC ownership as often around 10% or less, with some deals reaching 20% or more. He says he would be concerned about giving up a substantially larger share early on. These are his general observations, not fixed terms.
• He says fund lifetimes can run roughly five to six years, which can affect how selective a fund is as it matures.
• Publisher revenue shares were described broadly as 30–50%, depending on the deal.
• Mobile user-acquisition financing was described as carrying approximately 6–15% interest. Terms vary, and the conversation did not establish this as a universal rate.
• For potential PC and console acquisition financing, LTV is discussed as a possible basis for assessing the value of acquiring additional players. Farha presents this as an emerging possibility, not an established standard.

Practical Recommendations and Examples

• Make your professional presence support your pitch. Farha says investors may review a founder’s LinkedIn profile and track record. Keep profiles current and make relevant experience easy to evaluate.
• Build in public. He says he has noticed studios through public demos, videos, and explanations of their mechanics—even before they sent a pitch deck.
• Plan beyond the current release. Show whether the game has a long tail, future content, or a studio strategy that can continue after launch.
• Consider team-led studio stories. Farha cites Expedition as an example of a team leaving a large publisher environment and delivering a successful game, illustrating the appeal of experienced teams starting new studios.
• Be selective but open-minded about partners. Publishers can add distribution and localization support; VCs may add strategic advice and relationships. Evaluate what a specific partner contributes and what it costs.

Industry Outlook

Farha is optimistic about gaming’s size and player base, while expecting technology to lower barriers to entry and raise audience expectations. He anticipates more opportunity for independent and AA games, including smaller teams delivering more focused experiences. He also points to experienced developers leaving AAA studios as a potential source of new studios and projects.

Presenters and Sources

Ali Farha, Investment Associate at Behold Ventures; host Harry (as identified in the episode context); Hivemind World.