1. STARTING AN INDEPENDENT DEVELOPER MAX HOBERMAN, PRESIDENT/FOUNDER CERTAIN AFFINITY, INC. From Bungie to Bootstrapping March 25, 2009

2. Bootstrapping bootstrapping [ büt stràpping ] Building a business out of very little or virtually nothing.

3. My Background Mid-90’s – tried to start a game company in college

4. Goblin Games (R.I.P.) Summer between college semesters Me and one of my roommates Invested $3,000 of my own savings Paid ourselves hourly minimum wage Arcade-style space combat game for the Mac Lasted just a couple months Created the shell interface, one 3D model, and a broken audio system Decided I had to get a real job

5. My Background Mid-90’s – tried to start a game company in college Helped Aspyr get started Got hired by Bungie  Hired as Webmaster and Graphic Designer  Experienced all aspects of marketing and publishing  Started designing interface for Myth games  Managed Bungie.net online community  Acquired by Microsoft  Founded Bungie’s Community team  Multiplayer and online lead for Halo 2 and Halo 3 Founded Certain Affinity

6. Mission Statement “Create a hybrid Halo/WoW killer, sell it to the mafia, retire to a villa in the Swiss Alps.”

8. Mission Statement “Become an independent developer with a reputation for creating high quality games and original IP.”

9. Certain Affinity 2.5 years old  Founded in October, 2006  Austin, Texas Independently owned  S Corporation  $80,000 initial investment 29 full time employees  Started with 9 developers 4 credited releases  1 multiplayer map pack  1 downloadable title for XBLA, PSN, and Windows  Contributed to 2 full retail titles

10. Certain Affinity’s Game Credits

11. Accomplished Work in Progress Independent developer Strong business relationships Reputation for quality work and delivery Intellectual property ownership Financial independence Success Metrics

12. Lessons Learned and Unexpected Challenges We’ve done a lot of things right, but… We have not yet achieved financial independence! Work for hire business model makes this difficult We’ve learned the most lessons about team building and business relationships Economy also poses challenges

13. Business Sense

14. Profit Potential Profit Consumption Publishers are generally happy if you’re making 20% profit Not all staff engaged Downtime between projects Sick leave, vacation and comp time Development of own IP and pitch materials Work for Hire Business Model

15. Not Enough Margin Breaking even with “20% profit” is doing well! Bootstrappers need a lucky break in order to have financial reserves  Long term steady work  Bonus or royalties  Outside investment  Lottery proceeds Cost control is absolutely essential  Keep your overhead low  Focus on doing what you do best

16. Certain Affinity 2008 Expense Breakdown Cost control. Just 10% of our total expenses are for operating costs.

17. Development & Support Staff Over Time Keeping it lean. Majority of our employees are development staff. Development Operations

18. Internal Functions External Functions Software development Dev support and IT Outsourcing management Recruiting Self promotion Community management Vendor management Publishing Business development Benefits and HR consulting Accounting and payroll Retirement planning Insurance agent Attorney Real estate agent Business Support Relationships

19. Finding Good Support Learn what to do in-house vs. external  Unless you’re an expert in employment law, income tax, etc., get help from someone who is Ask other developers for references Business people know business people

20. Team Building

21. Lessons learned What we’ve done well Not everyone is fit for a startup Don’t take shortcuts in hiring Watch group dynamics Know when to let go Maintain high quality standards Hire experienced developers No communication barriers Team Building

22. Team Building: Lesson #1 Not everyone is fit for a startup  Talent doesn’t equal business maturity  Previous startup experience is a definite plus  People willing to take personal risk can help you get off to a good start  Look for people that always give 100%

23. Team Building: Lesson #2 Don’t take shortcuts in hiring  Establish a strong process for screening candidates  Don’t bypass process due to existing relationships  Don’t lower quality standards due to pressing needs

24. Team Building: Lesson #3 Watch group dynamics  Smaller the team more critical the dynamics  Leadership team dynamics are especially important  Get leads on the same page before communicating with team  Trusted advisors can convey the feelings of the team

25. Team Building: Lesson #4 Know when to let go  Recognize when the risks of retaining a problem employee outweigh the benefits  Act quickly and decisively to remedy this situation  Make sure the company is protected  Communicate with the team so the lessons aren’t lost and you’re not sowing fear

26. Team Building: What We’ve Done Well Maintain high quality standards  Set a high bar for candidates from day one  Communicate quality bar to everyone involved  Expect high standards regardless of role  Personally meet and approve all hires  Trust your gut

27. Team Building: What We’ve Done Well Hire experienced developers  Need a good mix of experience and fresh perspective  Lean towards experience early on  Fill leadership positions with experienced people  Experience with failure and success are both valuable

28. CA Developer Experience

29. Team Building: What We’ve Done Well No communication barriers  Everyone’s voice matters  Pay careful attention to who’s sitting where and next to whom  Open office layout solves problems for you  Don’t separate yourself from the team

30. Open Office Layout

31. Business Relationships

32. Lessons learned What we’ve done well Myth of long term relationships The speed of business Your own best representative Follow through on commitments Don’t waste other people’s money Don’t put all your eggs in one basket Business Relationships

33. Business Relationships: Lesson #1 Myth of long term relationships  Hard to get steady work from even the best partners  Publisher interest waxes and wanes based on their own circumstances and priorities  Factors external to your relationship can stall decision making (budget cuts, reorganization, mergers, etc.)

34. Business Relationships: Lesson #2 The speed of business  Contracts and negotiations take a very long time to complete  Likely you’ll start working without a full contract in place  Don’t rely on getting paid on time; have a backup plan

35. Business Relationships: Lesson #3 Your own best representative  Early on expect to spend half your time running the company  Expect to spend the other half generating new business  Avoid being critical path on development  Know when it’s time to get help  Hire people that you can delegate to with confidence

36. Business Relationships: What We’ve Done Well Follow through on commitments  Don’t commit without consent from your leads  Diligently work towards meeting deadlines  Always meet or exceed the expected quality bar  Communicate frequently and proactively with partners  Admit when you make mistakes and remedy them, even if it’s on your own dime

37. Business Relationships: What We’ve Done Well Don’t waste other people’s money  Publishers want to work with stable developers  Even the most well-off partners respect tight cost control  Everything makes an impression, from office space to your personal automobile

38. First Office, Exterior

39. First Office, Server Room/Kitchen

40. First Office, Security Guard Whew, security is sure hard work!

41. Business Relationships: What We’ve Done Well Don’t put all your eggs in one basket  Even the best partners can disappear at crucial times  Multiple projects can be a lifeline, but are difficult to manage  Multiple projects require stellar production management and enough leads to go around

42. CHALLENGES AND OPPORTUNITIES The New Economy

43. Challenges in The New Economy Increased competition  More developers willing to do work for hire  Developers willing to work for less  Startups forming from layed-off employees  Publishers offloading games and even entire teams

44. Challenges in The New Economy Everyone is trying to reduce risk  Budgets are tight  Most publishers are cutting back external spending  Publishers more likely to cut losses, cancel projects  Fewer publishers taking chances on new IP

45. Benefits of the New Economy Best time to be hiring  Lots of great talent looking for a home  Fewer illusions about stability of large corporations

46. Benefits of the New Economy Natural selection  Those that survive will be stronger for it  Better business practices will make the industry stronger

47. Benefits of the New Economy New IP for the win  Entertainment can’t be solely sequel-driven  Strong new IP will be valuable in the future

48. PLEASE INTRODUCE YOURSELF Q&A