GameFounders accelerator helps game startups take wing in both the East and the West

I complained a little while ago about how there aren’t enough government-funded incubators and accelerators for game studios in the United States. The folks at GameFounders liked that story, since they’re running one of these accelerators in Talinn, Estonia, for any game entrepreneurs who will travel to their country.

Started in 2012, GameFounders has funding from Enterprise Estonia. It invests a small amount of money in teams that agree to move to Estonia for the three months of the program. Since then, GameFounders has trained more than 30 companies. And GameFounders is also launching a new hub in Asia. The new location will be in Malaysia. The idea is to stoke the talent in both Europe and Asia, and have those people learn from each other through cross-pollination.

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I met with GameFounders cofounders Kadri Ugand and Paul Bragiel at the recent Game Developers Conference in San Francisco.

Here’s an edited transcript of our conversation.

GamesBeat: Is your focus on any particular country right now?

Kadri Ugand: Our focus has never been on any one country. So far we have applications from 67 countries. We’ve invested in teams in almost 20 countries. In that sense location doesn’t matter for us. But with the Asian expansion, it’s more about expanding our investor network and partner network. I’m sure that you’ve seen as well, at the western conferences in the last few years, there are so many Asian publishers and Asian investors popping up and trying to find something. We’re building a bridge, because game studios all over the world are reaching out to us. We can help other partners, because we only get to work with a fraction of them.

GamesBeat: The only thing I heard about Malaysia recently was when the PlayPhone guys moved into the market. They said the over-the-air bandwidth was so thin that they had to optimize their app to be the fastest-loading store. The whole mission was to get a store that loaded faster than anyone else’s. It sounds like a very different market.

Ugand: Yeah, but Estonia was as well. Nobody had even heard of Estonia before we started there. Now everyone in Europe knows that Game Founders is from Estonia. In that sense, for our model to work, we need an ecosystem where the industry isn’t structured yet. If we were to do the same thing we’re doing in Helsinki, it wouldn’t make sense. There are mentors in every corner. We can’t add value. But in countries like Estonia or Malaysia, we can add value not only in the country, but in the region.

Paul Bragiel: A lot of people have not been to these countries before. It’s a great excuse to get some amazing mentors to come out. We’ve had some quite big names come out where normally they wouldn’t show up. If they’ve been to a given country five times in the last year, they don’t care. But if you give them an excuse to hang out for a week somewhere new, they show up. It’s impressive. We’ll have guys from the United States flying over, from Japan. The Mixi founders are our friends. They’re coming out. We’re pretty excited.

Ugand: It was difficult to get them to come to Estonia, but Malaysia is so much easier. Opening a hub in Asia can help our startups that we’re working with in Europe. It’s not just that we’re expanding, but we’re bringing the whole game to a new level.

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GamesBeat: Do you think there’s a longer-term roadmap for opening more hubs?

Ugand: What we see right now is that it would be good to have one hub in Europe, one hub in Asia, and one hub in the U.S. Probably not San Francisco, but another odd place. That way we can be around all the time and build the best mentor network and the best partner network. But obviously right now our focus is on Asia and getting that running properly.

Bragiel: We want to go to a kind of nascent place, where we can put our fingers in everything and mold it the way we want to. If you go somewhere established, you play by other people’s rules. I like to make my own rules.

Ugand: When we started in Estonia there were less than 10 game companies. Now there are more than 30. More than half of them have had foreign co-founders or employees. All the people we bring in, they leave some sort of mark, so the industry is growing. Next to our accelerator program, we run a lot of events for the local teams. We’ve opened up some of our seminars. We do conferences and game jams. We obviously have an effect. Now we have to try to make it bigger.

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GamesBeat: I wonder what the right filter is for getting really good game companies created in an area. Do you need just one accelerator or incubator into the Nordics? Do you need one in each country? I wonder how many the U.S. actually should have. We have a lot of for-profit incubators.

Ugand: There are lots of different initiatives. The more global their reach, the better results they bring. If it’s only attached to a university, only working with the students of that university, it might not create the synergy it could if it were to open up.

One of the things we did last year was that we reached out to all the game accelerators we know and we started this network called Game Initiative. We did a survey and a one-day event. Developers came from Finland, Sweden, Lithuania, Georgia, all over and talked about what they’re doing, the elements of their program. We exchanged information. That’s never happened before. What we saw was that the more international and open they are, the greater the impact. The ones that are working in schools don’t have that much connection with the industry, too. The closer they are to the industry, the better the practical skills people will pick up.

GamesBeat: I remember Supercell saying that half the people they hire now are from outside the country. You don’t need an incubator in Finland anymore. You need it in other countries to feed them.

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Bragiel: Finland’s been going at it for 20 years. Remedy is 20 years old now. They took a lot of time to build it up, but they had a couple of companies that kept on growing and growing, and now it’s outgrowing the country. It’s not only Supercell. Rovio was the same thing. Next Games has a lot of team members from Latin America. You’re pulling in talent from everywhere.

Ugand: It’s obvious. When we’re in our three-month cycle, say we have 35 or 40 people from all over the world. You really see how the different talents come from different regions, how they approach things differently. Then they start mixing and matching and helping each other. This international environment helps them develop their products a lot better.

GamesBeat: Are you starting to pay attention to what countries need more game companies given the talent they have?

Ugand: Our vision is to have one pod per region. We don’t want to go crazy and have Game Founders Malaysia, Game Founders Singapore, and so on. We feel that because we’re working with a whole region, we don’t want to eat up our own market.

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Bragiel: We’ll recruit harder in certain countries, though. If we see that a region’s on fire, we want to work with those young people. It’s in our best interest. We’re businesspeople as well. We work in a bunch of countries besides Malaysia. We saw a lot of game companies and a lot of computer graphics talent. We said, “Okay, there’s a good base here. Singapore not so much. Indonesia is very big and scattered. There’s a potential for a good hub here to draw in talent.”

Ugand: The government had a similar vision. It matched really well. They want to elevate their industry and they realize the way to do it is to bring in some international flavor. There are already some international companies establishing there. We were in sync at the right time.

Bragiel: I had a meeting with the prime minister last year where he said, “Why don’t we have more entertainment stuff here?” I said, “We can fix that.” It’s cool when you see some of these countries have a real top-level vision. Resources come with that. Look at Finland. That’s a top-level thing. A lot of money went in there.

Ugand: [Finland has] had an official strategy for developing the game sector for almost 10 years. It’s kind of ridiculous. It takes a longer-term vision.

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GamesBeat: What do you think about job creation in games? Studying tech for a long time, there were books like Regional Advantage, about Boston versus Silicon Valley and why Silicon Valley won. It was more of a startup mentality here, versus the big corporations in Boston, and the startups had the advantage. I wonder if you can apply some of that same thinking to games. Which regions are going to win? Which regions need help? Where can you do the most good? A lot of ideas could affect where you want to invest.

Bragiel: Yeah, things like a critical mass of people. Also, if there’s not too much noise. In some places there’s already a dominant industry. Why is there not more tech going on? Because there’s already a big, dominant industry. You have to go to a place where you have a fresh, clean slate, and where there’s resources behind you. Silicon Valley won in part because a ton of government money came in here. It was a 60-year project in the making. You look at a region like Israel, with a lot of military spending concentrated. That took 20 or 30 years. You see Helsinki popping up quickly, but there was nothing to compete with it, and there were good resources put in over a period of time.

Ugand: Estonia is bringing the same sort of game on a government level, opening up residency and bringing everything online. It’s acting as a company itself, even if it’s the government. It’s fighting for citizens, in a sense. Every country has their own approach to what they do.

Bragiel: I think about this a lot because I’ve started things in other parts of the world. How do you optimize? How do you go out there and get that initial spark going? How do you inspire people? Like everything else in the world, though, it’s going exponentially faster.

Ugand: And the world is getting smaller. You can go anywhere quickly.

GamesBeat: Were there any other options you considered in Asia?

Bragiel: Sure. We had a lot of governments approaching us.

Ugand: We also had a lot of options in Europe, just like we were looking at places here. We had negotiations in many places.

Bragiel: You were talking about job creation. A lot of these countries say, “Hey, we want to go out there and get involved in something that’ll attract new growth. We want to create jobs. We want to create global products.” Gaming is a sexy industry right now. A lot of countries are approaching programs like us.

Ugand: It’s more or less 100 percent export. That’s always what they like. There were statistics released last year regarding the Nordics. One job in the game industry — and we’re only talking about making the game, not just in merchandising — created something like a quarter of a million in turnover. That’s not something you can find in many industries. It’s so quick to grow as well. It doesn’t need too many conditions fulfilled.

GamesBeat: There seem to be some things stopping this in the U.S. We had the Curt Schilling thing in Rhode Island with $75 million down the drain. There’s a concern about “corporate welfare.”

Bragiel: The United States is really against this. I don’t know why. People have this idea that Silicon Valley came out of nothing. Like I said, there were tons of research funded and guys splintered off from those projects. People don’t think of it that way. They just say, “Hey, this magically happened here, so why should we put any money into other regions?” It’s unfortunate that this doesn’t happen more in the United States. I would love to see that. Some places are slowly working up to it, but it’s more grassroots stuff. We’d like to see big money coming in.

GamesBeat: Is the world really flat right now when it comes to making games?

Bragiel: I don’t think it’s super flat. There are some really tall mountains, right? Some places hold some key knowledge. But look at GDC now. I’ve been coming here since 1997. GDC now versus then, back then you saw no foreign developers. You saw a couple of random dudes from western Europe and thought, “Whoa, they came all the way here!” Now it’s ridiculous. I hear a new language every other conversation. The world is getting way flatter in terms of exposure.

Ugand: At the same time, every region has its own challenges. Even the entrepreneurial mindset isn’t the same in some countries. In some places the society requires you to have a well-paying job. You have to address that somehow.

GamesBeat: Do you find that investors might be willing to follow you guys into some of these countries?

Ugand: We’re hoping to find new investors there, I’d say. I see a lot of the Asian players coming to Europe and the U.S. to scout for investments. If we go there and take it to them on a platter, that should be easier. But we also provide more value to the existing ones we’re working with, connecting them with Asian talent.

Bragiel: Investors are opening up more and more in general. Even U.S. investors are investing a lot outside the U.S. Most of our investors are from all over Europe and the United States. If they see a brilliant company from Malaysia or Vietnam, they’ll come in alongside us. But also, the VC market in southeast Asia is really growing fast. I think it’s the fastest-growing VC market in the world.

GamesBeat: Do you have some success stories you can already point to? Do you feel like everyone’s waiting for you to find the next Rovio?

Ugand: We’ve worked with 28 teams so far. We’re investing in such an early stage that we’re not going to get a Rovio in six months. Our last final cycle just finished in June of last year, so it hasn’t been quite a year. But our most successful company in terms of investment has raised more than half a million euros, which is already a considerable amount. All of them are live. If you compare to most tech accelerators, that’s a huge achievement. About three-quarters have published original IP. 40 percent or so have some sort of investment or publishing deals in place. Overall we think we’re on track. We didn’t step into this in a naïve way thinking we’ll be zillionaires in six months.

Bragiel: It took seven years for Y Combinator to get their first billion-dollar company, right? Their first $100 million company was five or six years into it. It takes time. But there are some good trends.

Ugand: We have six teams here at GDC and they’re all from different places – India, Georgia, Italy, Ukraine, all over. They’re all here showing their games and having really good meetings because we’ve tapped them into the industry.

Bragiel: This is a long-term plan. This is not only something we believe in financially. We believe that this ecosystem—It’s kind of a meta-startup. We can go out there and transform an entire region. I’ve had a couple of startups, a couple of exits myself, so what’s next? I could step it up a little bit.

Ugand: It’s exciting. The whole Game Founders concept is like a startup itself.

GamesBeat: How big a staff do you have right now?

Ugand: We have a core team of three at Game Founders that keeps us operating, but we do look to establish a global presence. We want to have a year-round presence, not only in the time that we run the actual program. Then we can have a better impact on the ecosystem locally. When we’re at our final goal, we’d have that in all three regions.

GamesBeat: How do you feel incubators or accelerators for games should operate and be structured? What have you learned about that?

Bragiel: I approach everything like this. Our goal is to become something like an older brother. I don’t think accelerators should create a kind of VC-entrepreneur relationship, because that can be very antagonistic sometimes. I’ve had some nightmare experiences with VCs. I want to come in as almost a part-time co-founder. They can come to us in the good times, when things are on fire, and they can come to us when they’re saying, “One of my partners wants to quit. We’re about to go bankrupt.” Once you have that very open relationship, it helps a lot. Like I say, you can tell your older brother, “Hey, I met a cute girl, how do I ask her out?” You can’t tell your mom or dad that. We want to have a very open, collegial atmosphere.

Another thing that’s very important is that teams should learn from each other. I sold my last company a few years back, so I’m a bit removed. One team might have run into the same problem as another just a few months back. Having this kind of peer-to-peer mentoring is even more beneficial than we thought it would.

Ugand: That doesn’t end when they finish the three-month program, either. We’re doing weekly webinars now. We have our own teams giving others advice. One of them might have cracked something about how to do ads in free games and he can share with the others. That’s very strong. We’ve even had teams like therapists to each other. Like Paul was saying, a team will have a huge fire or they’re almost breaking up, so we tell them, “Okay, you talk to these guys. Let’s take a step back.”

GamesBeat: What about the question of ownership – how much equity to take, or whether to take it at all?

Bragiel: We believe in taking equity. I’m an entrepreneur. I want to be incentivized. I’m not a charity here. When I look at these government or university programs, I don’t feel like the people there are going to fight as hard. With one of my companies, I know I have a decent piece of it. I’m going to really scrap. I’ve become an entrepreneur with them.

It’s not free money, either. Sometimes people get grants and they don’t treat it like it’s worth something. Here, you’re giving something up to work with us. You have to really want it. I think it’s very important.

GamesBeat: Supercell pointed out something interesting. They said that the government gave them 400,000 euros at the start, and if they’d failed, they wouldn’t have had to pay it back. There’s no pressure.

Bragiel: But the thing is, it was a matching grant. They had to bring in and sell part of their company. It wasn’t free money. Then it multiplied. Some people are just giving away grants, and that—

Ugand: You can also find good examples of people making grants work. But in general I’d still say that—at least every week or two weeks, we speak with all of our companies. We have to be incentivized to be involved and work with all these companies, finding meetings for them, finding contacts for them.

GamesBeat: I went to a talk just now by indie developer Theresa Duringer about the economy of favors in the indie scene. We have all these meetup groups that help each other. That seems like a big part of it.

Bragiel: It’s a family, yeah. People help each other. Going back to Y Combinator, what’s one of the most valuable things about that? It’s the alumni network. You’re very proud to be associated with something and you want to help those other people out. It’s cool seeing our teams say, “Hey, if my team does well, Game Founders’ profile rises, meaning my profile rises, and I can get a better valuation.”

Ugand: Even the ones who haven’t met each other—Here we have six teams from different cycles, but they still all know about each other. They’re helping each other as well.

A third thing about best practices, a big part of mentorship is also making it useful for the mentors. They’re not just teachers, in a way. They also get something out of it. We always try to have mentors who would benefit from meeting each other come on at the same time. Two of our mentors who met at Game Founders created a company together. We’ve had mentors meet investors through us. They feel like they have some incentive to help us more.

In the tech scene I’ve been involved in some of these initiatives before. It’s all about how you take care of your mentors and how you make it interesting for them. They put in a lot of effort and they help you out a lot.