After writing several posts on startup accelerators and incubators, I received an email from Jason Della Rocca. He’s been working on designing a game incubator in Montreal. It’s a good idea, and one that I believe makes sense for the city. As I’ve said before, you have to play to your strengths, and in Montreal there are tons of big game companies. These companies can (and do) create spill-off entrepreneurs and indie game studios (although not to the extent that I’d like to see.) These big game studios also attract talent and money into Montreal. And there’s executive-level talent and top-level mentorship available as well.

Montreal is a good place, and perhaps a unique place, for building a game incubator.

Jason and I have spent some time going back and forth on how a game incubator could work. The game space has some advantages and challenges versus the web-centric world that most of us live in. One advantage is that games can monetize right away. You can charge for a game and deploy it through key distribution channels (I’m focused almost entirely on mobile iOS and Android games), or you give the game away and monetize through advertising, virtual goods, etc. The mechanisms for making money in gaming are well-known, accepted and proven. That’s quite a bit different from the web consumer world where monetization often only happens after you have a critical mass of users, and it’s not always obvious how you can do it (a lot of web users shun advertising, for example). So game monetization is fantastic.

But there are also challenges. Building a single successful game doesn’t necessarily equate to building a successful business – at least not a venture-backable one, or one that can be acquired. Game companies need to build multiple games – or franchises – that can demonstrate repeatable success and ideally a technology platform underneath the game(s) that has value as well. I’m certainly not saying it’s easy to build a successful game or game company…

Here’s Jason’s post with his latest thoughts (and some of mine) on building a game incubator: http://www.realitypanic.com/archives/476. I’d encourage you to go read the full post.

Here’s a quick summary of how it would work:

1. There’s a 6-month incubation phase (not too dissimilar from what we see with Y Combinator or TechStars, with a bit more hands-on Year One Labs thrown-in)
2. Projects graduate to the Studio or break out on their own (or fail.) The Studio is an actual game studio, which serves as a place for incubated projects to go and continue developing their games. Each team at that point is like a department or “pod” within the bigger Studio entity. The reason for this is twofold: (1) some projects/teams will need more than 6 months to bake fully and prove (or disprove) that they can scale and grow successfully on their own; (2) some projects/teams may not be massively scalable, but may be viable (i.e. profitable) games. In the latter case, these projects/teams won’t necessarily be fundable, and it won’t make sense for them to break out on their own. But as part of the collective Studio, they can add significant value. The Studio is a business onto itself, with multiple departments or “pods” that are each creating value. The sum of the parts is worth more than the individual parts on their own.
3. In some cases, projects that go into the Studio may eventually break out, when it’s clear that there’s a (potentially) massively scalable business led by a solid, entrepreneurial team.
4. Projects that break out (either from the Incubator or from the Studio) become separate businesses.

So you have an Incubator that’s attracting talent, baking projects/teams and outputting games. The Studio is a holding ground for projects/teams that need more time to bake and a fully functioning game studio that itself is a business with significant value. And the overarching corporation (that runs everything) owns a piece of the projects in the Incubator, the Studio, and those that ultimately graduate.

Here are some reasons why I like it and think it can work:

1. It focuses on a specific niche, which means there’s leverage in a number of places. People can move from one team to another more easily. Mentors, investors, etc. are more focused. You can line up acquirers just in the gaming space and build all the necessary relationships to implement the full food chain you need.
2. People joining the incubator don’t have to be hardcore entrepreneurs. They need to be entrepreneurial, but the bets you’re making aren’t exclusively on the people’s ability to start and run companies. The Studio for example, is a great place for director-level type individuals to continue building and designing games, without being full-fledged entrepreneurs. This should hedge some bets in the gaming space, which is less entrepreneurial, but has plenty of talent.
3. The Studio (assuming the math works) is a unique asset that you don’t see with other incubators. You could have 10 individual games being developed inside the studio with 10 quality teams; the Studio should be profitable and therefore be attractive as an acquisition (based on financials and talent.)
4. I haven’t seen this done in the gaming space, which means there’s an opportunity to do something different and stand out. From the perspective of building a startup ecosystem in Montreal, this could be the kind of spark that really makes a difference.

There are lots of details to work out. Jason is now working on a financial model to see if this makes sense. And it’s not clear yet if there’s enough entrepreneurial talent in the game space to build a successful, sustainable (read: profitable!) game incubator/accelerator. But I have a feeling there is, and it’s a matter of evolving the model so it makes sense for everyone and then working like crazy to attract the best talent, mentors, investors, etc.

Once again, here’s Jason’s blog post – http://www.realitypanic.com/archives/476 – stay tuned for more details!

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