Investment Project Updates
October 25, 2009 Posted by Tyler CruzIt seems I completely underestimated the cost of Flash development.
As I mentioned in my last post, I had never commissioned any Flash work before so I was not familiar with what the costs were.
I have contacted dozens of flash game and design studios and am still waiting to hear back from most of them since it’s the weekend, but it seems that the cost for this project is looking to be more towards the $20k-$40k mark, which I was not expecting. Some people even quoted me $80k-$250k! Maybe I should get into the Flash development business.
So, there is no way I’m going to do this for $5k anymore as I wouldn’t get anything of decent quality for that. I’m not even sure if I want to continue with this anymore since the costs (and thus risk) are pretty much 2-3 times what I was expecting. But I’ll have to wait to hear back from more studios before I can get an accurate median quote.
A studio recently quoted me $10,000 for the development of a video game project. This studio has an impressive portfolio, having worked for large clients such as Nintendo, and I believe they can produce a high-quality game within the budget range of $10,000-$15,000. However, based on their level of expertise, I doubt they could produce anything decent for as low as $5,000. At this point, I am considering either abandoning the project or exploring commercial multifamily REIT offerings to see if there is any interest in investing at higher levels, enabling me to fund the project adequately.
That’s the reason for this post – to see how many people are interested at these new levels. Since the level of risk in this has increased by quite a bit, I have increased the return rate %, the length by 2 months, and included a new clause to compensate.
I am basing the following options on the project costing $15,000:
Investment Options
| Investment | Return | Length | Buyout |
| $2,000 | 10.6% | 20 months | 5x |
| $3,000 | 16% | 20 months | 5x |
| $4,000 | 21.3% | 20 months | 5x |
| $5,000 | 26.6% | 20 months | 5x |
| $10,000 | 53.3% | 20 months | 5x |
If you do the math, the site would need to make a total of $18,750 during the first 20-months in order for you to break even. This works out to an average of $937.50 a month.
Here are two sample scenarios:
| Investment | Site makes X during first 20 months | Your Return | Profit |
| $2,000 | $12,000 | $1,272 | -$728 |
| $5,000 | $12,000 | $3,192 | -$1,808 |
| Investment | Site makes X during first 20 months | Your Return | Profit |
| $2,000 | $36,000 | $3,816 | +$1,816 |
| $5,000 | $36,000 | $9,576 | +$4,576 |
Guaranteed 100% Return Clause
If, after 20-months, the investor has not received back 100% of their original investment, they will continue to receive their 80% share until they do. This effectively guarantees that the investor will make back 100% of their original investment. The only question is how long that might take… if the site ends up making virtually nothing then it could take years.
Buyout Clause
There is a buyout clause in which at any point I can buyout the shareholder for 5x their investment. This buyout will be on top of any return they have received so far. For example, if an investor invests $2,000 and after 5 months I want to buy them out, they will keep whatever Returns they have made so far, plus $10,000 (5x) for the buyout.
Notes
- I will only accept investors up to when the cost of the project is met (Ex. If 3 investors want in at the $5,000 level then it will be closed there).
- The 20-month Return timeframe will begin once the site is finished its development and goes live to the public.
- The Return is based on site income, whether it be from advertisements on the site or paid memberships and will be paid back to investors once a month until the 20-month timeframe has finished.
Other Information
I did not include the FAQ and other information here since that can be read in my previous post.
If you’re interested in investing or have any questions, please contact me.
Sigh…
Still no comment on the type of game, huh?
This is a little better. Chances of making any money is now even though remote because of the cost increase though.
Have you tried getting a quote from SayDesign.com? They are very very good.
I e-mailed them, thanks.
Is this FreePuzzleWorld by anychance?
What’s FreePuzzleWorld?
Have you thought of sorting through the profiles at oDesk to see if you can find a good professional that charges much less? I know less than nothing about Flash, but at least oDesk.com doesn’t require you to pay your contractor upfront, you can negotiate to pay when the job is done.
While i have to say, ODesk is better then the majority of freelance websites out there. There is a reason these people are un-employed.
Not only that, its often so hard to tell just through ODesk how these people operate and what your project will be like. I mean ofcourse its obvious when people offer $2 per hour to complete a project like this, but when you get average bids by several people. Often its impossible to tell good quality freelancers from just another idiot wanting to make a quick buck.
It gets even better. Good luck to everybody who wants to bankroll this for Tyler.
I’ve used flashgamelicense.com before, for great prices,
I just look for the similar type of game listed on there
and email the owner.
I’ve gotten games for $50 – $5,000 from there.
I’ve even got awards for a game that i’ve outsourced.
But it sounds like your project may be too complex
for this site.
Good Luck ~
Thats a huge amount of money, it should be nice and good. even though it’s expensive, the return is very nice. Wish i can engage myself in this kind of business someday.
thanks for that info.
Looking forward to seeing how this project pans out. If it doesn’t, though, take a break! You’ve certainly got enough going on- and you’re bound to be busy once I send you photos from our Halloween Olympics.
And to think, I was just about to ask where the Halloween parties were going to be at!
Jay
Seems pretty risky. Good luck.
I can’t understand this at all. Are you borrowing the money or asking for an investor? Really. If you are borrowing you should offer repayments as part of the plan, a potential interest rate to evaluate the risk involved.
If you’re looking for an investor, then you really ought to be looking for someone who can bring both cash and expertise (ideally). If not expertise, at least cash. But then you must sell them part ownership.
I can’t understand, from a potential client’s position, what you are looking for, nor can I see any real reason to invest. You don’t cap my risk, but you cap my profits. It really seems like you want to have your cake and eat it, with respect.
And given the relative small size of the investment, why don’t you just pony up the money yourself, and avoid all this hassle?
I don’t get it. If I had to listen to this, I would reject it out of hand for the reasons outlined.
I’m in agreement with this. I have the financial resources to invest in this project but if it’s successful, I’ll be bought out even if I want to stay in? No thanks.
I really don’t think you’ve thought this through…taking on investors is an extremely serious business, not something you enter into by putting together a simple table with percentages in it. The legal logistics are huge, and given that you were soliciting before you even had a decent idea of the cost, it all points to this being a slapped-together project that is high on ambition and low on preparation.
The problem is that however this turns out the investor will always lose out.
1) Deadpool – The investor loses his $
2) Next Club Penguin – Investor gets a very small return for being a seed investor
I think that should it ever become a big hit, you will most likely end up in a court room requesting a far bigger chunk of the cash pie. I would suggest you rethink this one!
I wouldn’t ever get myself into borrowing money or lending money. When it comes to other peoples money you are playing with the devil. It is unlikely your investors will be happy unless everything goes perfectly as planned. You will have to also have a lawyer draft loan papers to make sure you don’t get attacked. Guess what happens if people don’t get their money back after 20 months? Law Suits and lawyers will burn through $20,000 in no time.
What is the most likely scenario on how this turns out? Say I give you $2,000 what kind of return can I expect?
What can you realisticly expect in return? Zero. Nothing. Zip. $0.00.
Good point I would rather keep trading in the stock market.
LOL, Tyler Cruz is a funny guy. Any real investor would laugh in your face.
You want the money and you don’t want to take any risk. You’ve got no skin in the game, thus nothing to lose. Your projections and returns are jokes. People don’t want a 100% return off their 5k investment in 20 months, they want a stake worthwhile.
Nobody will agree to your retarded clauses. You’re looking for a loan, go to a bank, put up your car as collateral and get a loan, but I doubt they’ll even give one to you for the business plan you presented.
For those that are talking about lawyers and lawsuits, Tyler personally can’t be attacked for it cause I believe he incorporated his business so in essence, he won’t be held liable.
It’s the company that will be affected, I believe.
Jay
If only that was true. Incorporation does not provide 100% protection to directors, just google “neteller” for an example. You can go down the line of using nominee directors and make the shareholders trusts and all sorts of other stuff but at the end of the day if the person chasing you is determined enough then the buck will stop with any beneficial owners.
I guess we’re not going to get any answers here.
That’s cool, if I had 2k play money and could wait on a return in 2+ years I’d do it, otherwise I’d gamble in reno or in stocks.
Ill take a guess… I look into my crystal ball and see…
A rpg type game that will be released on facebook and be promoted heavily on the social networking sites.
Maybe I am way off but Id figure I would take a crack at it.
Cheers and gl on your project if you do go ahead with it.
Hey Tyler, I am interested in helping you with your project? Can you email me?
I like everything about your proposal except the buy out clause. People want to invest in a company at start up so they can reap the benefits and possibly get rich if and when the company really takes off. Your buy out clause eliminates that possibiilty.
That’s the point, though. He wants to have everyone else invest the money and then if their money has done well for him, he’ll decide he wants the entire site. The way I think things should go is that, if you invest, you become a lifetime partner of it and that percentage is yours. So, none of this “Merendi Networks” owns the entire site. If I invest 40% of the total needed, I should own 40% and do as I wish with it. Granted, I can’t go against the other 60%, but it means that there is more to gain and lose for the investor. The way it is now is that I give you my money, I make some money, and then you make a ton of money.
Update: I’m going to fund the whole thing myself 🙂 Thanks for all those who were interested.
You mean cause you figured out your terms were ridiculous and no one would finance you under those agreements. LOL 😀
There’s nothing wrong with changing your mind, I think you’ve done the right thing with this. Getting people to invest in any start-up (or even an established business for that matter) without offering any capital is a no goer from the start.
We just went into purchasing a lot of flash games and we also got quotes up to $15,000. However, we found some hidden places where we could get it for as low as $2,000 for the same type of work.
-Mike
Investment is always risky, but Tyler I believe that you would try your best to make profit for the investors who invest in your project.
What is the minimum amount to invest in your project? $1,000?
Regards,
Lee
Thats a huge amount of money, it should be nice and good. even though it’s expensive, the return is very nice.ike everything about your proposal except the buy out clause
Network Marketing
I don’t get it, Tyler, why don’t you DELETE or DISAPPROVE all these negative posts? Isn’t this a blog? Why do you allow them?! As far as I am concerned, most of them are just too negative. You should delete them! I would, if this was my blog!
This is precisely what I think many of us love about Tyler:
He rolls with the punches. He’s absolutely genuine. He listens to comments and has no trouble admitting mistakes. I don’t know many bloggers that WOULDN’T delete some of the aforementioned comments but I know Tyler will leave them be.
I’ve been reading Tyler’s blog since it started and he is one of the most sincere and open bloggers around.
Rock on, man.
Good luck, lol.
investing big amount of money is sometimes risky, that is why we should brainstorm and planning before investing that huge amount of dollar money flash development
Those sure are some interesting investment numbers. If I had to deal with those kind of numbers i know it would take me hours upon hours to figure out what would serve me best.
-Jack
It gets even better. Good luck to everybody who wants to bankroll this for Tyler.
Seems pretty risky. Good luck.
Sigh…
Still no comment on the type of game, huh?
Success in your project
Hello Tyler, What type of game is it?
I can’t understand, from a potential client’s position, what you are looking for, nor can I see any real reason to invest. You don’t cap my risk, but you cap my profits. It really seems like you want to have your cake and eat it, with respect.
And given the relative small size of the investment, why don’t you just pony up the money yourself, and avoid all this hassle?
I don’t get it. If I had to listen to this, I would reject it out of hand for the reasons outlined.
Is the book selling only in Amazon? How about MPH bookstore? I’m staying in Malaysia, so $20 is not applicable? And what is the charges to ship it to Malaysia?
Thanks,
Lee