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Monday, May 27, 2013

GameFounders : Full of GameFailures

GameFounders : Half a Million Euros Wasted


Does Estonia really need another incubator, paid for by the taxpayer?

GameFounders was launched last year with great fanfare, billing themselves as "The First Gaming Accelerator in Europe", a claim disputed by some in France, where a gaming accelerator was launched the year before that.

GameFounders attracted a lot of attention, and in the end, 122 gaming startups from 41 countries applied to join the 3-month program in Tallinn, which provided funding of up to 15,000 euros per company, along with coaching and access to a mentor network.

Speaking about the high interest in the program, Dimitri Burnashev from Enterprise Estonia said "I am happy to see that so many gaming startups see the benefits of bootstrapping in Estonia." (Apparently his definition of bootstrapping is different from ours.)

The Teams


While there was talk that up to 10 teams may be accepted in the first intake, in the end only 6 out of 122 applicants were selected.

With all that interest, and such selectivity, the teams must have been pretty good, right? That selection took place last summer, so let's see where they are now.

Our friends over at PocketGamer wrote their own analysis of the teams in November. They know a lot more about games than we do, so their analysis is helpful from that perspective.

So it's been been about half a year since these teams finished up at GameFounders. How are they doing?

  • Akira Mobile. Last update to their website was in September 2012, when they joined GameFounders. No updates since then. We tried to find their game online, but no luck with that either.
  • Bad Seed Entertainment. This is an interesting one. Their apps are listed on their website as "Coming Soon!", and what did they do after GameFounders? They joined another gaming accelerator, this time in Silicon Valley. This accelerator appears to have provided some benefit, as their app was finally released on Apple's App Store about 2 weeks ago.
  • Baila Games. This Estonian company makes a physical game (yes, some people still play those) and also has an app. Their app has not been updated in over a year and ranks below the top 200 in the gaming category in their home country (Estonia). On another note, they also received 6,092 euros from Enterprise Estonia. 
  • GlowForth. No game released. They did receive 4,000 euros from Enterprise Estonia, which apparently they used to make a trailer video that reminds us of only a slight improvement over Super Mario Bros on the original Nintendo.
  • Mind on Games. Their Manager Mania product was supposed to be released for Android, but we couldn't find it.
  • Plan B Labs. On the plus side, this company has actually released some apps. On the minus side, there doesn't seem to be much success. Based on App Annie statistics, their apps rarely make it even into the top 1,000 in their category and also by revenue. We have not heard of ThinkInvisible nor LearnInvisible (their apps) before. Have you? Oh, and they received 5,000 euros from Enterprise Estonia.
So let's re-cap. These were the very best teams that GameFounders could find, after carefully reviewing 122 applications from 41 countries. What did GameFounders provide to these teams, in terms of experience and mentorship? Based on the results, not much.

Inexperienced Management


We've had a lot of requests from readers to write about GameFounders, including from some teams who were planning to apply to the program. One reader pointed out that none of the people behind the GameFounders organization actually have any experience in the gaming industry!

The only member of the team with real experience and a successful track record is Paul Bragiel, who does not even list GameFounders on his LinkedIn page. Perhaps he doesn't want to be associated with them any longer?

A Risky Business


Some may say we're being too critical. After all, isn't the gaming industry risky to begin with? Sure it is, and we even wrote about that in our profile of Creative Mobile, which is an example of a successful Estonian gaming company. Not only are they successful, but they did it without taxpayer money.

Others may point out that we looked only at the first batch of GameFounders teams, and they have since accepted another cohort of teams that is currently being incubated. We feel that it is too soon to look at their success, compared to the first batch which have had at least 9 months (a lifetime in this industry) to produce something.

Bring in the Taxpayer


What do we have? An incubator with little to no success in nurturing successful gaming companies, with an inexperienced team running it, and in a country with plenty of incubators already.

What kind of project does that sound like? One that EAS (Enterprise Estonia) would eagerly fund, of course!

We said the management of GameFounders was inexperienced, but not when it came to riding the taxpayer-funded gravy train. Here's a tally of all the funding they were able to obtain:

  1. 501,000 euros from the Start-Up Estonia program via EAS.
  2. 5,305 euros for Summer of Games program from EAS (section VII.3.2)
  3. 7,700 euros for IGDA program from EAS (section VI.3.2)
  4. 1,900 euros for start-up from Tallinn city government.
  5. 1,500 euros for start-up from Tallinn city government.
That brings us to 517,405 euros of taxpayer money, just for Gamefounders.

Then add in the EAS money for their incubated companies and that's another 15,092 euros, bringing the total taxpayer money wasted to 532,497 euros.

Should incubators receive taxpayer money at all? The co-founder of TechStars thinks they shouldn't, and he's probably a lot smarter than the people who decided to give money to GameFounders.

An EAS Cover-Up?


One reason it took us a while to get this post written is it took us a while to track down all the numbers. Let's just look at the EAS funding for GameFounders, so numbers 1-3 in the list of funding above. A search on their database of funded projects will reveal no results related to GameFounders.

Other incubators, like the Viljandi incubator we reported about earlier, are listed there.

Let's just give them the benefit of the doubt for a moment. They would probably say that the GameFounders funds were provided via a special program, so were not loaded into their standard database of funded projects.

Surely then, they would mention it in their press releases about the program instead, right?

The answer to that would be no and no. They do mention how the funds are provided by ERDF (EU money), but not how much. Isn't that an important fact? Why was it left out? Are they trying to hide how much money is being wasted?

Well those are old press releases. Maybe they've learned from their mistakes (perhaps even from reading this blog - imagine that!).

Sadly, nothing has changed, and in fact it's gotten worse. Earlier this month, EAS announced a second stage of the same program that provided funding for GameFounders. They must have liked how well GameFounders is doing, according to the press release:

"In the summer of 2012 Enterprise Estonia provided financial support to launch the first gaming accelerator in Europe, Gamefounders. Positive results of the first batch of start-ups completing the Gamefouders [sic] program have proven suitability of vertical accelerator format." (emphasis ours)

Again, EAS never mentions the amount of money involved, but luckily that can be found in the public tender. They have increased funding by 40%, to 700,000 euros!

Is EAS trying to cover up how much money they waste? Wouldn't it be better just to stop wasting the money in the first place?



16 comments:

  1. W O W Is there anyway to find out if the founders, co-founders, and angels that started it, are pocketing money away? Do they have to show reporting of where the money went, and who got it?

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  2. I think you're misdirecting your anger. Are you really trying to say that failure is greatest sin? That you're not allowed to fail? I don't think so.

    Wasting taxpayer money is the root cause. Who does that? How it can be prevented? It's obviously has very little to do with GameFounders. It probably has to do with EAS. It probably can be fixed by having more transparent allocation of public money. Or may be lowering taxes, so that less money is (inevitably) wasted.

    In any case, I don't see how lack of overnight successes from GF is such bad/wrong thing. Unfortunate, yes, but quite typical in startup land.

    Max

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    Replies
    1. I agree - it would be important to shed light on the decision making process and the people involved in that. However, it's probably difficult to squeeze a lot of information out from EAS/Arengufond/...; therefore public/political pressure needs to be aimed at them. For this purpose, exhibiting failed projects is very helpful.

      Delete
    2. I don't think the post is saying that it's so bad to fail. They're saying that it's bad to fail with taxpayer money.

      I know when I walk about the streets of Tallinn, I see a lot more better ways for them to spend money then to give it to incubators.

      Delete
  3. Wait the fuck! Each of those selected six teams got 15k cash. That's 90k total. Not an unreasonable investment. But where was the rest of the money spent? I mean, that's 442k overhead and management expenses. What the hell kind of a project has 83% management overhead?

    Seriously, is this some kind of a scam by Sven Illing, Andrei Korobeinik, Kadri Ugand, and others to enrich themselves while only giving 17% to the actual projects?

    Is it a coincidence that Sven Illing and Andrei Korobeinik are both well-known members of the Reform Party? And how the fuck is Andrei Korobeinik a board member at both GameFounders as well as EAS, which funds GameFounders?

    ReplyDelete
    Replies
    1. That in fact was just one round out of four (second batch just finished and the third is coming in September). So you should devide 442 by 4. Andrei Korobeinik is investor and investors do not manage the accelerator.

      Delete
    2. Ok based on what someone wrote below, it looks like GameFounders got some private money too. So was the 501k just to actually _run_ the incubator?

      How much do the "managers" take in salary every year?

      I met one of the guys involved with it a couple years ago and he seemed a bit too slick to me. I'm betting these people are taking big salaries to "run" this thing.

      Delete
  4. It's not my intention to defend GF or EAS, but here's a couple points worth noting:
    - it's not all taxpayer money. At least a dozen private investors added between €15k and €60k each, maybe more
    - Glowforth successfully raised money after GF
    - BadSeed joined that other accelerator at an insane valuation
    - in this industry, one team that truly makes it can justify a thousand failures
    - I'm sure that an important goal of this accelerator is to try to create a gaming industry in Estonia. If this is indeed the case, it partially or fully justifies use of taxpayer euros. There's a lot of money in gaming, but not much of that money is heading to Estonia. Unfortunately, it may take years to see the results (or lack thereof).

    ReplyDelete
  5. How is it even possible to get such an enormous amount of money selling nothing but air and having no knowledge of the industry.
    Just sad.

    ReplyDelete
  6. why not demand and track where this tax money went?! Should be transparent, and realize all the money is spent on paying staff like 00zero Sven Illing and his playboy travel fun lifestlye -- hit on everyones girl, your tax money pays for his drinks, vs actually helping the startups. I say we open a new incubator, call it infinity, and incubate ourselves a new job, and provide no advice that would equate to success, and claim we need, more money for travel, wine, and chasing women. weeeeeeeee no roi gaurenteed !

    ReplyDelete
  7. I hope you guys will apologize to GF team, start-ups and EAS, should they be successful. A bit of information from GF team about the matter: http://www.gamefounders.com/#/blog/what-has-happened-to-batch-1-startups/

    ReplyDelete
    Replies
    1. You gotta be kidding right? Looks like GF published that (dated May 29) in response to the blog post here.

      Notice no real success, and no specifics on numbers of the supposed investments some teams claim to have received.

      Delete
  8. I looked over the tender for this. With most EAS projects, it's for specific tasks, and the company receiving money has to co-finance, so for example EAS will only pay 50% of the project cost. In addition, a variety of expenses are excluded entirely (office costs, general costs, etc). I know this because my company got some EAS money a while ago.

    With GF, they were basically given a blank check. It's a tender, with no accountability. As long as they provide the loosely-defined "services" in the contract, there is no limit at all on how they can spend the money. If they want to spend it on parties and travel, they can do so. They don't really have to show receipts (unlike a typical EAS project) as long as they provide the "service" detailed in the tender.

    Makes me furious, to be honest. How do people get away with this?

    ReplyDelete
  9. Their "co-founder" is:

    http://www.illing.ee/et/elulugu/sisu.html

    A former "deputy mayor". The closest he's been to the gaming industry before this is probably playing Angry Birds on his smartphone while on bus to Tallinn.

    He probably just used his Estonian "slap my back, I'll slap yours" incestuous network to get the EAS cash register to open up for this.

    Once you get the EU gravy train money in hand, then it's not difficult to just bribe some Finns and Americans on board with free tickets, consulting fees, and the like.

    Nice scam, I mean gig, if you can get it.

    ReplyDelete
  10. http://www.balticbusinessnews.com/article/2013/6/5/investors-unhappy-with-their-investment-in-martinson-trigon

    BBN on Alan Martinson, who was so critical of this blog's beginning.

    I guess he was feeling a little bit crabby based on the bombs he's been investing in.

    ReplyDelete
  11. Watch this !! http://youtu.be/ieFM7y4G_E0

    The before and after expression on Alan Martinson's face when the speaker next to him says -- We only fund Enterprise startups that only monetize from businesses clients. He's like oooh shit -- How did I forget that part of the business model :) His facial expression is priceless !

    ReplyDelete