The investor fund and digital game design dilemma

As usual, I was perusing some subjects on my LinkedIn and once more I found some people ranting on why investors don't invest in small unaccomplished firms that have a great digital game design made until the game is actually completed. 

Here is what I responded, roughly, but edited so people that didn't follow the thread can follow.

Click Here for the actual LinkedIn thread if you wish.

There are different types of investors that are willing to put money down, let's not forget that. VCs in the game space will typically fund on design only with the strongest studios with a well proven track record of generating sales. That rings true of Publishers like EA and others which act a bit like VCs. 

If you are a studio that doesn't have a multimillion dollar franchise under your belt, you need more than a design for VC money, you need at least a prototype, and in some cases, a finished product you wish to pitch to get the $$$ to publish properly etc... 

However, if your project is small enough, Angel investment can be a path for a startup, as long as you have a demo OR you have a design and a super strong team with really high class management. 

Friends and family or Kickstarter money can be used to raise small budgets on an idea with a strong team behind it. 

The business model here is simply to match the "story" you are telling to the investor with the amount that needs to be raised to match perceived risks. 

This is true in ANY business, anywhere. 

The advantage I see with Kickstarter is that if you need more than a little, and you have some strength in the team and a few moderately successful titles, you can actually raise funds without giving away equity and you have some pre-sales which is really awesome. 

Sure the bigger companies will also use the system and draw lots of attention and $$$. As a small firm, you just have to ask for less, make your first title a success, then next time you have a better "story" and experience, thus you can ask for more. 

Of course in our industry, we would love to receive $2million for our awesomely designed idea, but that'll never happen if you have never spent $2million in the business making a game yourself with the same team and making a higher ROI off of it. 

Instead of criticising reality, we must create great business "stories" and raise funds that match it, then move on. 

There are LOTS of ways to increase the appeal of a "story", but that's the subject of perhaps another blog post if people want to read up on that.