The Indie Team Startup.

Starting as an indie is a pretty daunting task. You don't have to just make a game, you have to make a business. You can't get away without knowing about your target markets, press release distribution or how to lodge a BAS. Ignoring any aspect of your business can very easily make the time you spend on game development moot, which is a scary notion when you're in this by yourself.

So at first you might think that bringing more people in can make things easier. Time to team-up! But creating an indie team has its own hurdles and issues that need to be considered before you start slapping high-fives and chanting "C-C-C-COMBO" with your best buds.

Here's the response I gave to some fellows over east looking to start up a medium sized indie team, similar to RocketHands in scope. I talked mainly about the issues that team start-ups face, although quite a bit is still relevant to the lone wolf start-ups. Enjoy, I hope it is helpful to you guys as well.


The first step in planning your start-up is deciding the business structure. This is a pretty complex topic!, and not one to be handled lightly. Individual situations call for individual solutions, so make sure to consult with your legal/accounting agents beyond whatever advice you receive from everyone else.

When dealing with business structure - the company structure vs. the partnership conundrum - there's three elements that separate the effectiveness of the two structures; overheads, tax and trust.

In terms of overheads, partnerships win out. They don't have the high registration costs of a company, you don't have the ongoing annual licence fees with ASIC and you don't need to declare official board meetings and spend time sorting out your secretarial volumes and meeting minutes. In terms of both time and money commitments, from start-up to business to closure, partnerships are on paper the cheapest.

Tax is a more complex subject, and one you should definitely bring your accountant in on before deciding. As a partnership, you will all be responsible for your own personal income tax. As a company, you will be responsible for your own income tax as well as the business' company tax (30% of the company's net profit). Looking at this from the most basic resolution, it would look like partnerships are easier to sort out the tax for, but realistically in the games industry we very rarely deal with net profit anyway; whatever spare cash we end up with usually goes straight into future development and continued support for the most recent releases. Dividends will be a rarity for your first years (unless you create the next Minecraft or Flight Control off the bat!), so you will either be looking at shareholders drawings or wages, both of which are fairly easy to manage tax-wise.

The last point, and most important, is trust. This isn't to say that you need to quantify your trust in the rest of your team - if you don't trust someone, you shouldn't be going into business with them in the first place! - but you all need to objectively sit down and talk about risk management and liabilities as a team.

As a partnership, each one of you is equally liable if something goes wrong. It doesn't matter if it is Team Member A that brokered the bad investment deal, or Team Member B that infringed on copyright material, or whatever the situation might be; if someone stuffs up, you are all equally responsible for the resolution of that situation. Large partnerships can also find it harder to continue operating if someone chooses to leave; this situation can take a lot of negotiation and potentially be more expensive for the business in time cost, especially if you aren't dealing with an amicable parting.

As a company, the company itself is its own legal entity, and in most cases will be the entity liable for any dispute resolution. (There are situations where the director of a company can become personally liable, but that usually involves either gross mismanagement or vast amounts of unpaid tax.) Also inherent in the company structure is the company's constitution - usually your accountant will use a standard company constitution template unless you request otherwise - that will objectively outline how internal disputes can be handled; from engaging or resigning a director, how shareholders can vote, to closing down and winding up the business. These two parts of the company structure, in my opinion, far outweigh the cost benefits of the previous two points that favour partnership over the long term of a business.

If you end up going the route of the company, you need to consider how you want to structure the shareholdings and the board. In a typical situation shareholdings will be equal amongst all members of a start-up unless clearly negotiated prior to association. Make sure that shareholdings, not directorship, dictate control of the company! You don't want all of the members of your team to be directors of the company, that just means you have to get every single person to sign every single form before you can get anything done. If someone is out of the office, away on holiday, whathaveyou, you don't want to have to wait for them to get back to sort out the paperwork.

Elect one person as director, another as secretary, and let them sign the forms. Control of the company instead should come from the shareholdings; to enable this, everyone should have equal shares of the same voting class*. This way each member has equal voting power when making important decisions during a board meeting, has an equal stake in the company's value and potential dividends, and they all own an equal portion of the company.

Beyond all of the business side of things, making a start-up with a medium sized team can be hard work. Preferably everyone will have the same kinds of hours available to work, similar work ethics and will try to make a conscious effort towards working as a team - this last becomes more difficult each time you add another person to the team, not because of their personality but because it is one more person that needs to make decisions and agree to act on someone else's. Timing of work can be pretty important as well; it is much easier to get things done when you can be in the same room, or at least on the same line of communication, at the time that you're doing your work. Time commitments inside and outside of the studio can make a huge difference on the quality and quantity of development that gets done.

Lastly, and most importantly, despite all of the above, make sure you make games! It sounds pretty simple, but I've had to stress this to a few start-ups now. It can get very easy to get caught up in the niggly bits of the business, but you have to remember that without games you won't have a business to niggle over. Making games should be first and foremost in your activities, and everything else can come after.

*It may be worthwhile asking for your shares to be created as multiples of 12, as this makes the shareholdings easiest to divide amongst a variable number of shareholders, but that's just a bit of number OCD on my behalf.


-Anthony

for what its worth, this still took just as long to edit than to originally write