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      [LEVEL UP KL] EXCLUSIVE: Navigating the New Normal: Justin Berenbaum on Game Funding

      Ralph by Ralph
      9 months ago
      in All, Event, Exclusive, Interview
      Reading Time: 5 mins read
      0 0
      [LEVEL UP KL] EXCLUSIVE: Navigating the New Normal: Justin Berenbaum on Game Funding

      Justin Berenbaum | Image Credit: Digital Braves

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      We had the opportunity to interview Justin Berenbaum, VP of Strategic Planning and GM at Xsolla Funding Club, during LEVEL UP KL. With his extensive experience in the gaming industry, Berenbaum offered valuable insights into the current state of game funding and the challenges faced by developers in today’s market. 

      The Maturing Gaming Market

      Berenbaum began by highlighting the shift in the gaming market from a growth phase to a mature phase. This transition has led to increased competition and a more selective investment landscape. “Games have become a commodity,” Berenbaum explained. “There are so many games now, and so much competition for attention. Because of that, investors and publishers are reverting to the old ways.”

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      He further elaborated on this shift, noting, “Our industry is similar to any other that transitions from a growth phase to a mature phase. As that happens, people get picky.” This maturation of the market has significant implications for developers seeking funding and recognition for their projects.

      Image Credit: Digital Braves

      Berenbaum also pointed out the changing dynamics in the industry: “The game market experienced a shift from a road market to a mature market, leading to fewer games and less playtime. The playtime has decreased by 26% from its peak in 2022.” However, he noted an interesting trend: “Despite this, indie games are seeing a resurgence, with more players engaging with them. However, the increased number of games makes it harder for individual titles to stand out.”


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      The Evolving Funding Landscape

      The funding landscape has changed significantly in recent years. Berenbaum noted that before 2017, there weren’t any game-specific investors. “Before 2017, there weren’t any game-specific investors. We had some general investors who also invested in games, but not exclusively. London Venture Partners, founded in 2017, was really the first VC firm specialising in games,” he explained.

      The market saw a surge of interest, followed by a retreat of many investors. Now, the remaining VCs can be more selective in their investments. To illustrate this point, Berenbaum shared some striking statistics: “Team17 received 2,500 submissions last year and signed only three games. Griffin Gaming Partners received 1,500 and signed four games.”

      Justin Berenbaum | Image Credit: Digital Braves

      He drew a parallel to the film industry, stating, “It’s like Hollywood scriptwriters; thousands submit scripts every day, but only a few get chosen. The same thing is happening to game developers. It’s back to how it was before the market went wild.” This heightened selectivity presents a significant challenge for developers, especially those new to the industry.

      Berenbaum also highlighted the impact of recent global events: “The game industry saw an influx of money during the pandemic, as people focused on games due to the halt in movie and TV production. This led to inflated investments that have since decreased, returning to pre-pandemic levels (similar to 2019).”

      Opportunities in Southeast Asia

      Despite these challenges, Berenbaum sees opportunities, particularly in Southeast Asia. He praised the region for its lower development costs and the high-quality games being produced. “I think over the next two or three years, we’ll see some incredible games coming from this region,” he predicted.

      He elaborated on the advantages of the region: “I think, like in any emerging market, the cost of development here is much cheaper. You’ve got great programmers, great artists.” However, he noted that the area still lacks senior-level design expertise with a global understanding and senior-level production skills. “The one thing that’s often missing in emerging markets is senior-level design expertise with a global understanding, along with senior-level production skills to tie everything together,” Berenbaum explained.

      Justin Berenbaum | Image Credit: Digital Braves

      He further emphasised the potential: “We’ve seen great games coming out of Thailand, Indonesia, and Malaysia. Obviously, companies like Larian wouldn’t set up a studio in Malaysia if they didn’t have confidence in this market.” He also highlighted the support available: “There are a lot of resources available here, and I’ve been really impressed with what MDEC is doing. There are also other companies offering support, so the opportunities are there. It’s just a matter of knowing when and where to ask for help.”

      Balancing Creativity and Business

      Berenbaum emphasised the importance of developers focusing on the business aspects of game development, not just the creative side. He acknowledged that many creators find tasks like financial projections unenjoyable but stressed their importance: “Sometimes, the difference between success and failure lies in doing the ‘unfun’ stuff — those small, tedious tasks that no one really wants to handle. Often, that’s what separates a good studio from a truly successful one.”

      Justin Berenbaum | Image Credit: Digital Braves

      He empathised with developers’ preferences: “A lot of creators just want to create. They don’t want to deal with the other aspects of the business. To them, looking at spreadsheets and putting together financial projections isn’t fun. And honestly, it’s not even fun for us, and it’s part of our job to do that.” However, he stressed the necessity of these tasks: “But sometimes, the difference between success and failure lies in doing the ‘unfun’ stuff — those small, tedious tasks that no one really wants to handle. Often, that’s what separates a good studio from a truly successful one.”

      The Importance of Preparation in Seeking Funding

      When discussing funding strategies, Berenbaum advised developers to be well-prepared and do their homework before seeking investments. He expressed surprise at how little research some studios do before pitching to potential investors or publishers.

      “If you’re not serious enough about the business to spend a little time doing your due diligence, why should I take you seriously enough to give you money?” he questioned. He further explained, “These small things add up. They can make the difference between signing a deal or not. We’re all looking for reasons to say no, and the more little reasons you give me, the more likely I am to say no.”

      Justin Berenbaum | Image Credit: Digital Braves

      Berenbaum emphasised the importance of thorough preparation: “Would you go into a job interview without knowing anything about the company or the person interviewing you? If you were conducting an interview, wouldn’t you at least look up some information on who you’re interviewing? So why would a studio pitch to someone without knowing anything about the games they publish, the developers they work with, or even who they’re meeting with?”

      Future Trends in Game Funding

      Looking to the future, Berenbaum sees a shift towards more innovative funding models. While traditional financing methods will remain relevant, he predicts growth in community-driven models and blockchain-based financing. He also noted the evolution of crowdfunding, emphasising its role in building a supportive community around a game.

      “Crowdfunding has also evolved, but it’s no longer just about raising money—it’s about building a community that will support your game long-term,” Berenbaum explained. He advised developers to diversify their funding approaches and consider these emerging trends as they look ahead.

      Berenbaum also highlighted the changing investment landscape: “Late-stage investments have reduced significantly, but early-stage funding remains stable. Startups are still receiving money, but deals are taking longer to close, with decision-making timelines stretching from months to years.”

      Conclusion

      Berenbaum concluded by expressing his enthusiasm for the Southeast Asian market. “I’m a huge fan of the Southeast Asian market. I believe there’s a significant opportunity in this region, but people need to be willing to put in the effort to seize it,” he stated. This optimism, tempered with a call for hard work and dedication, encapsulates Berenbaum’s perspective on the future of game development in the region.

      Justin Berenbaum | Image Credit: Digital Braves

      He also offered some final advice to developers: “Developers should not overestimate their funding needs or promise more than they can deliver. Being realistic about budget and goals is critical in gaining investor trust.” 

      Additionally, he emphasised the importance of long-term thinking: “Developers should focus on building a game business, not just individual games. Investors and publishers are looking for studios with the potential for long-term success.”


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      Ralph

      I currently have a degree in communication and have been in love with games ever since playing on the SEGA Dreamcast. Nothing but JRPGs and fighting games in my bloodstream.

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