Kicking the Kickstarter habit pays off for Grinding Gear

Kicking the Kickstarter habit pays off for Grinding Gear

New Zealand gaming studio Grinding Gear Games bucked the Kickstarter trend and instead brought its crowdfunding in-house, raising more than US$2.5 million towards developing its first game,Path of Exile.

The founders of Auckland-based game studio Grinding Gear Games met while playing the online role-playing game Diablo II. Chris Wilson, Erik Olofsson, Jonathan Rogers and Brian Weissman forged their friendship in between completing quests and dodging mobs of monsters, and it wasn’t long before they started on their greatest adventure yet: creating a video game.

In 2006, the quartet founded Grinding Gear and started development on Path of Exile (PoE), an online game inspired by the Diablo franchise. Grinding Gear now employs 22 staff, all working towards launching PoE to mass market later this year.

Up until last year, the game’s development costs were paid out of pocket by its creators, who quickly found themselves depleting their life savings. The studio looked towards crowdfunding to keep the game going, taking inspiration from successful campaigns by other indie game developers such as Double Fine and InExile.

In April 2012, Grinding Gear launched a fundraising campaign on its website. In return for donations, backers receive early access to PoE’s beta programme along with limited-edition merchandise. The bigger the donation, the better the reward. The top-tier pack, which costs US$1,000, comes with several access keys to the game, a digital soundtrack, T-shirt, and a rare glowing Kiwi pet for the player’s in-game character. According to Grinding Gear, more than 144 players have purchased this premium reward.

“Adding a beam of light is only a few hundred dollars’ worth of developer time, so it’s proving to be a great return on effort,” says Wilson, co-founder and lead game designer.

So far Grinding Gear has raised more than US$2.5 million.

Wilson says the studio initially considered using Kickstarter to capitalise on the platform’s popularity. Over the past three years Kickstarter has raised more than US$370 million for various indie projects, but its 10 percent success fee and difficult policies made it an unattractive prospect for the fledgling studio, says Wilson.

Kickstarter campaigns are only paid out if they reach their pre-stated target, meaning a project can fail if its goal is set too high. Conversely, if the goal is set too low the company might not get the money required to launch, which would be a waste of time and effort a small studio cannot afford.

“It’s a big guessing game,” says Wilson.

Additionally, until June last year Kickstarter was only available to companies in the US, making it impossible for New Zealand companies to use without going through the difficult process of incorporating in the States or using a proxy American company.

At the time, the studio was focused on building the game and didn’t want to divert energy towards starting an American company.

By not using Kickstarter, Wilson estimates Grinding Gear saved almost US$70,000 in fees. The studio’s in-house platform deducts from accounts straight away, giving the company certainty that money pledged is money received.

“And because we control the platform, we can keep the campaign running indefinitely to fund future development instead of stopping at some arbitrary date,” he says.

Wilson suspects Grinding Gear’s campaign would have had more publicity if it had used Kickstarter, but he doesn’t regret the decision, saying that being on the popular fundraising platform isn’t a guarantee of success.

According to Kickstarter’s own stats, less than half of projects launched on its site get funded and only a third of gaming campaigns are successful.

However, with all the benefits of controlling the fundraising system comes all its inherent risks, says Wilson.

“When we started the campaign our jaws dropped at how much money was coming through. And then everything died.”

Grinding Gear’s payment gateway overloaded on the first day, leaving customers with phantom charges on their credit cards. Wilson says the payment provider wasn’t prepared for the onslaught of purchases, and the problem could have easily been avoided by warning it beforehand.

The payment issues were resolved quickly, but not before hundreds of emails were sent to the studio.

“Our customer base was very understanding, and we got things sorted and kept in regular contact with them. If nothing else, this highlights the importance of having support staff for customers to talk to for when things go wrong.”

Despite earlier not wanting to incorporate in the US, the studio ended up creating an American entity in order to receive lower credit card processing fees than in New Zealand. Ironically, the $70,000 the studio saved in Kickstarter fees was spent on lawyers to set up the American company.

Wilson says Grinding Gear has kept up with 400,000 new PoE early access players as a result of the crowdfunding campaigns, and with only a few hiccups, has shipped physical goods on time. He stresses the importance of communicating with the backer community about the status of the game, and says Grinding Gear regularly updates its blogs and creates video interviews. But it’s the game itself that’s the best communicator of progress.

“The great thing about our campaign is that our backers get access to what is essentially the latest version of the game. They play Path of Exile and see it evolve over time, with their input and thanks to their backing,” says Wilson.