---
title: Financial modelling
description: Introduction to financial modelling for game development cooperatives
category: strategy
tags: []
accessLevel: public
author: Jennie
publishedAt: 2025-11-10T10:42:09.224Z
---
# Navigating Capital

## Financial Modelling and Investment Readiness

**The topic of fundraising can be fraught for folks struggling against capitalism's destructive influence.** This series will walk you through the steps you need to take to be ready to raise money in whatever form you plan to use—bank loans, grants, investments, revenue sharing, preferred share offerings, and more—without losing sight of your collectivist values.

There is much work to do in Canada to transform the funding mechanisms themselves to be more collectivist, such as promoting community funding models, mutual aid networks, and reinvesting profits directly back into communities and worker benefits. This is Weird Ghosts' mission. **In the meantime, game cooperatives implementing practices that align with their values can create better conditions for all workers now.**


## Why do financial modelling?

Financial modelling is one of those things that sounds incredibly complex to many folks outside the investment or finance space. But *every* business can benefit from the exercise, not just those seeking investment—and not only for-profit corporations. The skills you'll develop learning to create a financial model will help you build a sustainable foundation for your studio, whether you're a co-op or share corporation, non-profit or social purpose organization. And it's really not that hard! Hang in there and be patient with yourself. We'll break down everything as simply as we can. If there's something you're not familiar with, you can easily find [definitions online](https://www.investopedia.com/).

In the first section of this series, we'll cover our relationship with money and introduce financial analysis. We'll focus on the investment readiness aspect of the social finance ecosystem, so if you're preparing for impact investment, you're in the right place!

In the other sections, we'll focus on exploring capital-raising alternatives, building a pitch, and learning investor strategy. All of this will lead to investment readiness. Our goal is to leave you with the confidence you need to pursue an impact investment opportunity.

> Investment readiness for us means having the structural capacity to support *collective and community impact* by building autonomous collectives that operate independently of capitalist market pressures by *prioritizing social returns over financial ones*.
> 
> Some parts of this series may also be helpful if you are preparing to pitch to traditional investors, VCs, or publishers. Just keep in mind that they will have *very* different expectations of your financial performance.

## Our Relationship with Money
We need to explore our relationship with money before we get into investment readiness. As founders serving a broad audience that includes marginalized folks (e.g., worker-members, players, and communities), we need to start by understanding biases and barriers.

Most marginalized founders will encounter *systemic and interpersonal biases* (related to gender, race, ability, and other factors), which will limit their access to capital, inclusion, agency, power networks, and confidence. **These are not just obstacles but are inherent features of a capitalist system designed to maintain class divisions and inequalities.**

Cultural programming and narratives reinforce the regressive and binary idea that "women shop" and "men invest," which affects the way we perceive money, especially when we have experienced a lack of it. 

Marginalized founders tend to have a more complicated relationship with money. This issue can affect your willingness to seek funding, even if the timing is right. Many systemic factors hinder marginalized founders from accessing financing:

1. A lack of underrepresented people making investment decisions
2. Bias from traditional investors, who are mostly white men
3. Historical exclusion from financial education and generational wealth
4. A lack of industry understanding of worker-centric studio structures and sustainable growth
5. An underrepresentation of the types of games marginalized founders want to make

… and more.

This is compounded because less experienced folks tend to be more conservative and pragmatic when pitching their ideas, while those with years in the industry are more likely to sell a vision or a dream. Unfortunately, the scales usually tip toward the latter with investors. 

> If you're not selling [hockey stick growth](https://www.investopedia.com/terms/h/hockey-stick-chart.asp), it will be challenging to get a traditional investor to understand your value proposition and impact. 

This isn't meant to scare you! But the reality of Canada's funding system is that you will face headwinds. 

### Biases and Anxiety
In recent years, funders' mindsets have shifted toward recognizing the challenges faced by marginalized founders and alternatively structured companies. More support is available now, and organizations like Weird Ghosts, Marigold Capital, EDC, Women in Technology Fund, Disruption Ventures, and many others are leading the way. These groups understand the struggles cooperative and worker-centric businesses face in a world that rewards individual entrepreneurs. Unfortunately, these issues are still prevalent, so let's take a look at these biases.

#### Reflection

*Use the following reflective questions to tease out your assumptions, anxieties, and biases.*

- What words come to mind to describe your feelings about investment?
- What pre-existing assumptions do you have about investment and raising capital?
- What words come to mind to describe what success might look like for you after the investment readiness journey?

You won't become an expert overnight. But you can identify your uncertainties about the process of raising capital. Take a step back and understand *why* you feel the way you do.

You may feel nervous about pitching because of your experiences with perfectionism or your relationship with money. **Lean on your support network and resources**, including bookkeepers and finance experts, to help navigate the jargon and provide support and encouragement. Remember, raising capital is possible, and others have done it. Don't be afraid to ask questions, Google, and search Investopedia!

Failure is a natural part of the process. But we can redefine what we consider failure and focus on impact as our goal. 

## Accounting

Let's start with **financial statements** and the accounting process. *Accounting* refers to the practice of *recording, tracking, and reporting financial transactions within a business*. Financial statements are a tool to communicate this information. We will cover three types of financial statements: income statement, balance sheet, and cash flow statement.

You might wonder: *I have an accountant – why do I need to know this stuff?* Here's why:

- To understand your studio's operations so you can make informed decisions
- To analyze trends over time and make adjustments to the studio or game
- To communicate clearly with stakeholders and investors

Good news: You can do all of these things by *analyzing financial statements*.

### What are investors looking for?

Investors will ask for your financial statements within their first round of reviews to determine whether your business model makes sense. But as a cooperative (or shared-ownership) studio, your financial statements reflect a commitment to equitable distribution and collective benefit rather than merely generating returns for external investors. This is why carefully selecting the investors and lenders you approach and understanding what kind of return they are looking for is critical.

Some questions they may ask:

- **Net profit:** Are you making money now? If not now, when do you expect to?
- **Revenue:** Are people willing to pay for your game or services?
- **Cash flow:** Do you have enough cash on hand?
- **Burn rate:** How much does it cost per month to run your studio?
- **Margin:** What's the cost of making a sale?
- **Growth rate:** How fast is your business growing? (*Growth is likely not something you are pursuing—be ready to answer this by emphasizing how you can scale your **impact***)
- **Debt:** What's your current debt level?

Knowing how investors ask questions and demonstrating your knowledge of relevant terms shows that you are capable and ready to raise capital. Being educated on terminology prepares you to frame community-centric growth and sustainable practices over traditional profit motives.

## Financial Statements

> Looking at your financial statements from the perspective of an investor or lender, what would they think?

Your financial statements will transparently reflect how revenues are reinvested back into the cooperative and the community.

### Income Statement

Your **income statement** (or statement of operations) is a financial document that reflects your operations over a specific *period*. It tracks all the revenue generated from the sales of your games or services and deducts the associated costs. Additionally, it subtracts other expenses that you incur, like general and administrative costs, utilities, and rent. By subtracting all these expenses from the revenue, you arrive at your *profit*, which is the amount of money you've made over that period.

### Balance Sheet

The **balance sheet** represents a specific *point* in time, unlike the income statement, which covers a period of time. You can create a balance sheet or statement of financial position for the end of a fiscal year or any other important date. The standard way to set up a balance sheet is by using the formula: **assets = liabilities + equity**. (Not-for-profit organizations use net assets instead of equity.)

The three categories on the balance sheet are **assets**, **liabilities**, and **equity** (or net assets). 

- **Assets:** Assets are tangible items that you own.
	- Short-term assets include cash and accounts receivable.
	- Long-term assets include equipment and property.
	- Investors in traditional businesses prefer you have assets in case of bankruptcy.
	- Assets on the books don't determine whether a studio is good or bad! But they can increase investor confidence.
- **Liabilities:** This is what you owe to others.
	- Short-term liabilities include credit cards, accounts payable, and lines of credit.
	- Long-term liabilities include debt that takes longer than a year to pay off, like bank loans or mortgages.
	- If you have a significant amount of debt, creditors with priority have the right to your assets before others. This makes it riskier for investors or lenders who are subordinate to senior creditors, who will receive what is left over after they have been paid.
- **Equity (or net assets):** Equity balances the balance sheet and represents the amount available for an organization to use in the future.
	- This amount depends on how you capitalize revenues and includes accumulated retained earnings.
	- The yearly profit or loss and any decision to use these funds for future operations can change the net asset account balance.

### Cash Flow Statement

The **cash flow statement** is a core document for investors. It focuses exclusively on cash and shows how it is generated and spent.

If you're paying cash for all your expenses but not seeing revenue immediately (e.g., deferred payments from distributors or platforms or milestone payments from a publisher or investor), you will quickly run out of funds to keep the studio running and pay wages. **You should always know whether there's enough to make it through to the next period.**

The cash flow statement points out exactly when additional capital will be needed. Identifying when and where the cash gap will exist will help you talk to investors about how much cash is required. For example, saying that $50,000 will be needed in one year and $100,000 in two years will help investors understand how they can help fill that $150,000 gap. 

## What is a Financial Model?

A financial model is *your best guess at how much money you'll make or need in the next three years.*

A good financial model shows the following:

::list
- Your business model
- The cost to deliver your games and/or services
- The cost to run your studio
- How many people you need
- How you plan to finance your studio
- How much money you need to raise
::

If you've applied for arts council or other government grants, you'll notice that applications and investor requests are similar. 


# How to Create Your Financial Model

Financial modelling and scenario planning are the core tools we'll focus on in this section. Getting a handle on them will help you reach investment readiness, project future financial performance, and plan for different ways your studio's business might unfold over months or years.

## Three-Statement Method

The three-statement method for financial modelling is a widely used approach that involves creating three interconnected financial statements: the income statement, balance sheet, and cash flow statement. This isn't the only way—there are many different approaches to financial modelling, with varying degrees of technical and financial complexity. We're focusing on the three-statement method because it uses documents you likely already have (or should create) and because it is foundational to other methods. 

Staying on top of your accounting practice—with the support of a professional, ideally—is extremely helpful for identifying trends over time, making informed decisions, and demonstrating financial knowledge to potential funders. It also lets you gauge the viability of a particular revenue model and the potential for a return on investment (ROI), which can guide you in making sound business decisions (and impress investors!). We encourage you to involve everyone in your studio in the process of analyzing and maintaining these documents, so that everyone is educated and able to contribute to financial and investment decisions.

## For Existing Studios

Let's get to creating your model! (New studio? [Jump to the next section.](#for-new-game-studios))

### Step 1: Choose Your Tool
First, pick your tool: Excel or Google Sheets. Whichever you're most comfortable with is fine.

### Step 2: Enter Your Historical Data
Next, in three separate sheets, enter up to three years of financial information for each of the three financial statements: income statement, balance sheet, and cash flow statement.

### Step 3: Analyze Your Financial Statements

So, how do you make sense out of all these numbers? Financial statement analysis involves examining *trends and relationships*.

**Horizontal analysis** (also known as trend analysis) compares financial data over several accounting periods to identify trends and growth patterns.

1. Think about periods that include major events for your studio, such as game launches, funding rounds, or marketing campaigns.
2. Calculate the percentage change from one period to the next for each line item on your income statement and balance sheet. Subtract the old value from the new value, divide the result by the old value, and then multiply by 100.
3. Look for items that show substantial changes and try to correlate these with events in your studio's history (or external events). For example, a spike in revenue might correlate with a showcase featuring your game.
4. To help you pinpoint trends, it may help to create charts and graphs to visually represent these changes over time.

**Vertical analysis** represents each line item as a percentage of a base figure, such as Revenue on the Income Statement and Total Assets on the balance sheet. This helps an investor compare your studio to others of different sizes.

1. Determine the base figure: For the income statement, use Total Revenue; for the balance sheet, use Total Assets.
2. Convert each line item into a percentage of the base figure. For instance, if Total Revenue is $500,000 and marketing costs are $50,000, marketing costs are 10% of Total Revenue.
3. Compare across periods or benchmark against industry norms (if you have access to that type of data, which can be tricky).

**Financial ratios** provide insights into performance. For game studios, which generally don't hold inventory and are rarely profitable in the early stages, the **current ratio** is most relevant. The current ratio assesses your ability to meet short-term obligations (such as salaries and loan payments). To calculate your current ratio, divide your company's total current assets by its total current liabilities.

### Step 4: Forecasting and Assumptions
Create a new sheet and calculate drivers (such as development costs and budget, funding, sales, release timing, and operating expenses, including wages) and ratios as detailed in the previous section. Based on these drivers, create assumptions (scenarios) for the next three years. You'll want to detail the best (unexpected runaway hit), worst (total flop), and most likely (somewhere in the middle) scenarios using information like industry trends, comparables, and economic downturns.

Don't write an essay on your assumptions or reasoning behind your comps. Just be diligent in the way you present this data.

### Step 5: Build Your Financial Statements
Complete your income statement. Your revenue streams likely include sales, subscriptions, grants, and service work. To arrive at net income, include calculated depreciation, interest, taxes, etc.

Build your cash flow statement using cash from operating, investing, and financing activities to determine the closing cash balance.

Finalize the balance sheet. Add the closing cash balance from the cash flow statement.

### Step 6: Linking and Integrating
Link your statements using formulas—changes in one should affect the others appropriately:
- Net Income from the income statement is added to Retained Earnings on the balance sheet, impacting equity.
- The opening line item on the cash flow statement under Operating Activities should be linked to Net Income from the income statement.
- Balance sheet items, such as loan liabilities, are reflected in the cash flows from financing activities on the cash flow statement.
- Asset transactions on the balance sheet, like purchases or sales, are represented as gains or losses on the income statement.

### Tips
Review the financial model from an investor's perspective, questioning your assumptions and changing figures to understand their implications. While traditional investors are looking for your path to profitability, social impact investors are looking for sustainability, the realism of your projections, and how you re-invest profits in the community.

Some common pitfalls to keep in mind are over-optimistic revenue forecasts, underestimating costs, and improper cash flow timing. These mistakes can affect the *realism* of your model and how investors perceive it. Avoid them through sober analysis, diligent research, and periodic reviews.

## For New Game Studios

📊 [Financial Model Template for New Studios](https://docs.google.com/spreadsheets/d/1SIrgtsRBtXY3d6AwkZS18Jes2AvRNOO4IMcEuk2ChoA/edit#gid=**0**)  - choose `File > Make a copy`

If you're a brand-new studio (congratulations! 🎉), you need to build a foundation for investment readiness from the ground up. Here's how to do it:

### Step 1: Choose Your Tool
Select either Excel or Google Sheets based on your familiarity and comfort level. Create four separate sheets within your document for the income statement, balance sheet, cash flow statement, and assumptions.

### Step 2: Establish Your Initial Data
Since you don't have three years of historical data, start by estimating your initial costs. **Document all startup costs**, such as wages/salaries, legal fees, software licenses, computer purchases, and any other upfront payments needed to get your studio running. **Detail your funding strategy**, including any initial capital from personal savings, loans, or seed funding you expect to secure. **Estimate revenue streams** from game sales, in-app purchases, subscriptions, and advertising. Analyze market trends and comparable games to make realistic revenue projections.

You can break things down in whatever way makes sense to you—monthly, quarterly, "seasonally" (considering tradeshow season and launch windows), or annually.

### Step 3: Forecasting and Assumptions
Even without historical data, you can estimate future revenues based on market research/comparables, and expected sales trajectories. Consider revenue streams like direct game sales, subscriptions, or in-game purchases.

Budget for ongoing costs such as salaries, rent, marketing, and development expenses. Don't forget to include recurring expenses like software subscriptions and server costs.

Plan the best, worst, and most likely financial scenarios. Use industry benchmarks and market analysis to gauge potential outcomes for game launches and other revenue-driving events.

### Step 4: Build Your Financial Statements
- **Income statement**: Start by forecasting revenue and deducting estimated expenses to calculate your expected net income or loss for each period.
- **Cash flow statement**: Model your cash inflows from operations, financing, and investing activities. This statement is crucial for understanding cash burn rates and when additional funding may be needed. 
- **Balance sheet**: Project your assets, liabilities, and equity. Initially, assets might include cash on hand and initial capital investments, while liabilities could include startup loans or credit lines.

> Remember! **assets = liabilities + equity**


### Step 5: Linking and Integrating
Use spreadsheet *formulas* to ensure that changes in one statement are automatically reflected in the others. This will allow you to adjust assumptions and immediately see the impact on all financial statements. For example:

- Net income from the income statement affects both Retained Earnings on the balance sheet and is the starting point for Cash Flows from Operating Activities on the cash flow statement.
- Purchases of assets in the cash flow statement should reflect as asset increases on the balance sheet.

### Tips
Constantly review your model to ensure it realistically reflects possible financial pathways and shows a clear route to sustainability. Regularly challenge your projections by adjusting the assumptions based on new market data or feedback from potential investors.

Be conservative with initial sales forecasts and factor in ample time for development and marketing work. Buffer for unforeseen expenses, such as protracted development time. Finally, new studios often struggle with cash flow timing; meticulously plan for when cash inputs and outputs occur.

You're on your way! Your financial model will be a massively useful tool when you approach lenders or investors and for internal planning. Don't worry about your model being perfect—most indies don't do this work, so you're well ahead of the game. You can and should revisit your numbers often, and you'll learn along the way what aspects serve your studio best. 


# How to Prepare for Investment

In this section, we'll focus on investment readiness and preparing to talk to investors. We'll cover creating a pitch deck, building a deal room, and developing an investor strategy. We'll also walk through the stages of investment readiness, from initial preparation to pitching and engaging with investors.

**Set your expectations:** This section won't make you fully investment-ready. We'll focus on preparation, strategy, and pitches, but we won't cover term sheets and negotiations. There's lots to learn, and this is just a starting point.

## Prep

Your first step toward investment readiness is **preparation**. By reading this series, you're already on your way! 🙌🏻

You might be wondering:

::list
- When is the right time to raise?
- How much should we raise?
- What type of security should we issue? 
- Wait… what exactly *is* a security?
::

You probably also want to know about the different types of investors and how to prepare your deal room. Let's get to it.

### When

Ideal times to raise funds include when you are planning to scale your dev team or prepare in advance (6-9 months) for your studio's roadmap. Investors look for studios with *validated* ideas, which you can show through community interest, successful demos, or early revenue streams. We can't stress this enough—an idea and a pitch deck are ***very, very rarely*** all you need to land an investment or a publishing deal.

Seeking funds because of an emergency cash shortage or undeveloped idea can telegraph a lack of planning and will likely be unsuccessful.

### How Much

Using your financial model, estimate your cash flow requirements to predict how much you need to raise. Identify all operating costs and milestones leading to your revenue goal. The expenses incurred to achieve these milestones will determine the capital you need to raise.

Traditional venture capitalists (VCs) are looking for big returns. Social impact investors don't seek this level of growth, but they still require you to map out major milestones and outcomes and calculate the capital needed to achieve them.

Ideally, you'll raise enough capital to secure an 18– to 24-month runway. Otherwise, you run the risk of constantly being in capital-raising mode. You want to avoid going back to your investors every year looking for more money.

Make sure you cover everything:

- Salaries, benefits, bonuses
- Rent, utilities, overhead
- Computers, equipment
- Legal, accounting, insurance, supplies
- Working capital, operating cash flow
- Contingency (10-20%)

## Securities

In finance, when you raise money in either private or public markets, you are issuing a security. 

> Using traditional financial instruments can perpetuate capitalist norms and practices, even when used by cooperatives. Whenever you can, consider alternative financial practices that reject traditional tools, focusing instead on solidarity economy principles like bartering, shared resources, and common ownership.

The Ontario Securities Commission defines a security as a *financial instrument that is negotiable and holds some monetary value*—typically either debt or equity your studio issues. If you are considering issuing securities, it is essential to comply with the regulations of the security commission in your jurisdiction (e.g., [Ontario Securities Commission](http://www.osc.gov.on.ca/) ) and seek legal advice. There are various exemptions for accredited investors, offering memoranda and crowdfunding, under which you can file your securities with the OSE, allowing you to raise capital from different groups of investors.

### What type of security should we issue?

To simplify things, we'll cover two main types of capital here: traditional debt (a loan) and equity (where an investor buys shares).

While cooperatives cannot access equity capital from outside investors in the same way as traditional share corporations, they do have avenues to raise capital through member shares, investment shares, or preferred shares. The specific options available depend on the individual cooperative's structure and the relevant federal and provincial legislation.

| Debt (loan)            | Equity (buying shares)               |
| ---------------------- | ------------------------------------ |
| Lower risk             | Higher risk, higher potential return |
| First money back       | Lives and dies with company          |
| First lien on assets   | Unsecured                            |
| Negative covenants     | Board governance                     |
| Inexpensive to company | Expensive to company                 |

So why is debt considered a lower risk for an organization to issue? 

#### Debt considerations

Debt financing is **predictable** and **finite**. When you take on a loan, the terms are clearly defined from the beginning, including the duration and the interest rate, which is often fixed. This clarity makes forecasting much simpler. You are obligated to repay the loan amount (principal) along with interest over a set period of time. Once you fully repay your loan, the obligation ends – you only owe the principal amount and the accrued interest, nothing more. The lender does not gain any ownership in your company.

The primary source of loan repayment is generated cash flow. Lenders typically engage with businesses during the validation stage, assessing the likelihood of repayment based on projected revenues. Lenders consider the "Five Cs of Credit" when evaluating your creditworthiness:

1. **Character:** This refers to your track record of repaying debts. Lenders will look at your credit score.
2. **Capacity:** Lenders will consider your income and debts to determine your capacity. They want to ensure that you have the cash flow to cover loan repayments in addition to your other expenses.
3. **Capital:** This refers to the funds you've invested in the studio or personal assets that could be used to repay the debt if needed. It is sometimes referred to as *skin in the game*.
4. **Conditions:** The broader economic picture, including industry trends and market competition. During economic downturns, they may tighten lending standards.
5. **Collateral:** These are assets that the lender can seize if you fail to repay the loan.

#### Equity considerations

Equity financing means giving up a part of your studio for capital. This often leads to sharing control and profits. Equity investors typically seek higher returns than lenders and can make financing costlier, especially during periods of strong growth. An investor with a 5% stake in your studio will get 5% of profits or the sale price. Selling equity dilutes your ownership stake in the studio, which can impact your control over business decisions.

Equity investors differ from project funders (like publishers) as they focus on long-term potential rather than immediate project outcomes. These investors, including angels, VCs, and corporate venture funds, seek studios with scalable, exponential growth potential. 

Equity investors sometimes come with more than money. They may have resources like industry contacts and strategic advice, which may open up new opportunities for your studio, depending on your goals.

You don't have to repay investors, but they aim to earn dividends and reap share value increases. Dividends are paid periodically from profits, while share value grows as the company succeeds.

You need to find the right funder at the right development stage. Both angel investors and VCs invest during the concept validation stage. As the project matures, publishers and investors become more viable, offering larger sums but often requiring a share of revenue or equity. Crowdfunding is also an option, ideal for validating market interest and securing funds without giving up equity. For earlier stages like ideation and discovery, many studios rely on self-funding, jams and competitions, arts council grants, and accelerator or incubator programs like Baby Ghosts. These are opportunities to build and validate your demo.

> **The most effective way to fund your business is through sales revenue.** Using profits for growth is the least expensive form of capital. If you can swing it, this is the way.

> [Jason Della Rocca](https://dellaroc.ca/) is a wonderful industry resource on the topic of funding and pitching to mainstream VC studio and project investors. Search for his articles and videos if this is the route you're interested in. [Here's a list of game-industry VCs.](https://nextgengamingclub.com/#investors)

### Types of Securities

Here are a few of the many different types of securities you might consider. Some are more relevant to co-ops ([investment shares](#investment-shares), [preferred shares](#preferred-shares), and [SEAL agreements](#shared-earnings-agreement)).

#### Debt
A lender provides capital with the expectation that it will be paid back in a specific time frame (term), with an agreed-upon markup to compensate them for their risk (interest rate).

#### Convertible Debt
A type of debt that can be converted into other types of securities (i.e., equity) based on predefined criteria.

#### Preferred Shares
Preferred shares provide dividends at predetermined rates ahead of common shareholders. They typically lack voting rights and do not confer the title of co-ownership but provide greater security during liquidation. Your articles of incorporation should outline the specific terms of the preferred shares.

#### Investment Shares
Investment shares are a relatively new option that provides cooperatives with an additional means to raise capital beyond traditional member shares. Investment shares can be issued to members and non-members, although you can specify that they are made available only to members in your coop.

Unlike member shares, which grant democratic voting rights, investment shares generally do not confer voting privileges. This maintains the cooperative principle of democratic member control.

Provincial legislation may limit the percentage of investment share capital that can be held by non-members. This ensures the cooperative remains primarily owned and controlled by its members. You can allocate a portion of your surplus as dividends on investment shares to provide a financial return to investors.

[Information Guide on Co-operatives](https://ised-isde.canada.ca/site/cooperatives-canada/en/information-guide-co-operatives) from [Innovation, Science and Economic Development Canada](https://ised-isde.canada.ca/site/ised/en)

#### Community Bonds
Community bonds are a way for community organizations to raise capital from local investors to invest in local issues. They are useful for organizations with a community-centred impact. One prime example of this is the [Center for Social Innovation's Community Bond](https://socialinnovation.org/product-service/community-bond/), which was one of the first community bonds that became notable in the Canadian ecosystem. 

#### Social Impact Bonds
Social impact bonds (SIBs) are a type of security where investor returns depend on achieving social impact outcomes. Investors provide upfront capital, and the government is the outcomes payer. If positive changes are demonstrated, the government pays investors a return based on the level of change. SIBs are most suitable for organizations with broad impact and measurable social return.

#### Revenue Share Loan
Revenue share loans are a type of security that's not listed on your books as a traditional loan. Instead, repayment is based on the revenue you generate. Funders that offer this type of financing include Clear Bank, Marigold Capital, and Youth Social Innovation Capital Fund. Revenue share loans may be suitable for organizations projecting stable revenue flow.

#### Common Shares
Common shares represent equity ownership, providing shareholders with voting rights and the potential for dividends. These shares often reflect the company's value, fluctuating with its financial performance. Shareholders benefit from company growth but also bear risks, including potential loss of investment.

#### Simple Agreement for Future Equity
A Simple Agreement for Future Equity (SAFE) is an investment tool for startups that offers future equity in exchange for immediate funding. It's simpler than traditional convertible notes, as it doesn't accrue interest or have a maturity date. Investors receive equity based on the company's future valuation, typically during a funding round.

#### Options
Options are contracts granting the holder the right, but not the obligation, to buy or sell an underlying asset (like stocks) at a specified price before a set expiration date. They're used for hedging risks or speculative investment strategies, often included in employee compensation packages for startups.

#### Shared-Earnings Agreement
Similar to a revenue share loan, a shared-earnings agreement (SEAL) is repaid through revenues. However, the total amount that can be recouped is capped, and payback only triggers once founder salaries have been paid. [Weird Ghosts uses this type of agreement.](https://weirdghosts.ca/blog/how-we-make-investments)

## The Deal Room

Get all of your documents ready for the deal room. (You should also create pitch materials that cater to different situations that you may encounter during the capital raising process.)

A deal room is just a collection of documents that are associated with your offering. It could be a virtual folder on a platform like Google Drive, Proton Drive, Dropbox, or your own secure website.

The deal room typically includes:

::list
- Your pitch deck
- Financial history
- Financial model
- Team bios and resumes
- Competitive analysis
- Business plan
- Impact model
- Testimonials, reviews, and press releases
::

Keep your deal room organized with clear subfolders and document titles. It is good practice to include the document title on each page (in a header or footer). Imagine an investor printing it out!

## Pitching

So! Your deal room is ready, and you are keen to approach investors. But how do you create the perfect pitch? Sadly, even with all the templates and tips out there, no formula for guaranteed success exists. The style and content of your pitch will depend on your studio, impact model, and even your personality.

Something to think about: A pitch is more than just a presentation—it's a dialogue. Open a conversation, and don't get defensive about your studio. If it feels like an investor is pushing your buttons, remember that any critique is *valuable and constructive*.

### Types of pitches

You'll find yourself pitching in many different situations. There's the elevator pitch, the platform pitch, the quick pitch, the investor pitch, your leave behind, the community pitch, the demo pitch, the conference pitch, and more.

Be prepared to present your studio in different time slots. Have various pitch variations ready in case an investor has either five minutes or an hour to hear you out.

We won't dig too deep into what slides you should include—online resources are abundant:

- [Glitch's Video Game Pitch Decks](https://heyglitch.notion.site/Pitch-Decks-f56e38c13fe6417f8379859e74367e1a)
- [Rami Ismail's Pitch Template](https://ltpf.ramiismail.com/pitch-template/)

## Investor Strategy

You're finally here. You're ready to talk to investors. 🙌🏻

In this section, we'll cover getting ready, finding investors, and tracking leads.

### First Steps

Start getting ready for your capital raise at least **six to nine months prior to the actual need for funds**. 

#### Are You Ready?

The first step is to psychologically prepare for this process. It can be deflating to face rejection, and that is more than likely what you will face for *months to years* as you pursue funding. Protecting your mental health is more important than anything. 

One strategy is to remember that **"No"s are valuable opportunities** to refine and tune your offering. They are not judgments on whether your studio is a good business (or if your game is worth making), but reflections on the state of the funder and their own evaluation framework. That's it!

Another difficult but useful tactic is **decoupling your sense of personal value** from what you're pitching. This will help you separate inevitable rejections from your sense of self. 

**Ensure you have a support system in place:** A therapist if affordable, family if feasible, friends outside the industry, peers such as other studio founders, advisors, and industry mentors. Don't go it alone. Consider an approach where investment decisions are made collectively by all members of the studio.

Finally—and this may seem sort of sad—**prepare for the worst.** While you're optimistic about securing funding, you need a backup plan in case things don't go as planned. Think about what you'll do if you're unsuccessful within three months, six months, one year, or two years. Will you pivot your strategy, close the studio, or put it on hold and return to your career? Being clear-eyed about these worst-case scenarios will help you make informed decisions and stay in control of your studio's future.

So… are you ready? And how would you know if you were? 🤔 Here's a rundown of things you should ***know*** before you go after your first investor.

#### Is Your Studio Ready?

**Is the business set up?**
- Have you incorporated your cooperative?
- Do you need to register in additional jurisdictions?
- Do you have a [business plan](/articles/6.business-planning)?
- Does the studio have its own bank account?

**Is your game ready?**
- Do you have a working demo?
- What is its initial feature set/scope?
- Do you have a roadmap or project plan?
- How does this initial game contribute to your studio's overall strategy?

**What's your marketing approach?**
- Who is your target player?
- How do you plan to reach them?
- How does a customer's life cycle change over time?
- What are the potential player segments to explore?
- Do you have a reliable player feedback loop?

**Have you achieved traction/validation?**
*e.g., feedback from playtesting or beta/pre-early access, attention on announcements*
- How are you measuring traction?
- What traction have you achieved to date?
- How can publishers amplify your traction?
- How will your current traction translate into long-term growth?

**How will you position your game in an oversaturated market?**
- What is your target market/audience? Why does it appeal to them?
- How will you reach your target market initially?
- How can your game fit into a publisher's marketing strategy?
- How can your game work with a platform's distribution strategy?
- How will you gain and protect your market position?
- How is your game different from others in your target market?

#### Is Your Team Ready?

**Do you have the right team?**
- Are all members' or founders' values aligned?
- Do you trust each other and work well together? Have you collaborated before?
- Does anyone on your team have prior experience with raising money or shipping games?
- Will you hire contractors, or is that counter to your collectivist values?
- Have any team members garnered critical acclaim?
- Do you have a producer to help with the publishing process?
- Do your collective skills cover creative, technical, and business areas?

**What is your planned governance strategy?**
- What is the appropriate governance structure for your company?
- How will you incorporate diversity, equity, and inclusion from the ground up?
- How will you ensure your values are incorporated into operations?
- How do you plan to adapt your company's culture and structure as your team and company scale?
- How do you plan to compensate members?

**What impact does your team hope to achieve?**
- What motivated your founding team to start this studio/produce this game?
- How do you [measure impact](/articles/results-flow)?
- What impact have you achieved to date?
- How do you hope that your customers and community will respond to/contribute to your impact goals?

#### Are Your Financials Ready?

**How much money do you need?**
- What is your target fundraising amount?
- How will the funding be applied to your milestones?
- How will you return value to your community, members, and/or investors?

### Networking

The bad news is that finding investors takes work and is not an equitable or accessible process. Warm leads (connections to people who know about you through their network) are the standard way to approach money people—but if you don't already have those established networks within the industry, what can you do?

Lots of indies hate hearing this, but you're going to have to network. There are all sorts of virtual investor events, community events, and industry events (local and international) where you can meet potential investors. (These events are not *just* for catching up with friends, although that is a lovely perk!) You may need to step outside your comfort zone and practice new skills to create and nurture business relationships.

This means:
- Researching and approaching people you don't know
- Asking acquaintances or second- and third-degree LinkedIn connections for introductions
- Getting involved in industry associations (e.g., Interactive Ontario, New Media Manitoba, DigiBC) and getting to know its board members, advisors, coaches, and members
- Working on your conversational and soft-pitching skills
- Being diligent about follow-ups and using the right channels (email, phone, Discord)
- Listening and responding when investors tell you what they're looking for

> **Share the wealth:** Being open and generous with your connections is a way to break the cycle where only those already connected or privileged enough to have such networks can easily find investment. 

### Researching

Once you have an idea of what type of investor you are looking for and where to find them, you can start your search online using Google, LinkedIn, Twitter, and any other social or professional platforms you're on.

Use these tools to identify the investor's investment history and get a sense of their preferences. Ask people in your network about their history and relationship to gauge their track record and the types of investments they are more likely to consider. 

You can also look into an individual investor's personal and professional interests, recent events they attended or spoke at, and their relationships with others. You can find this information on LinkedIn or through pictures to identify them if you meet them in person. While it may seem a bit intrusive, you want to gather as much information as possible about the investor before meeting them to make a good impression and tailor your pitch to their interests.

### Tracking

**Stay organized.** Implement a system to keep track of who, what, when, where, how much, stage, last interaction, likes, connections, and other relevant information. You can use a dedicated CRM like Pipedrive or HubSpot, an Airtable base, or even a Google Sheet.

**Tailor your materials** to the investor you are meeting. Make slight alterations to your deck based on who you're talking to. Add the investor's logo to the first slide of your deck to show that you have tailored your presentation to them.

**Arrive over-prepared.** On the day of your pitch, come with your deck ready in USB form, on your computer, in your email, in a link you've shared with the investor, and in a hard copy if your pitch is in-person. Bring something to write with, and be early. These are table stakes.

**Decide how you plan to frame the conversation**, whether it is an introductory chat or a formal pitch, and who will lead it. How do you want to end it? Is it with a specific ask?

**Follow up immediately.** Be gracious and succinct in your email, and state your next steps. Keep the to-dos on your end.

**Update your tracking system!** After you walk away or click End Meeting on Zoom, note down everything you can remember about this person. Articulate what milestones you need to trigger that next meeting with them.

In your CRM, you can set a reminder for the timing of your next follow-up.

### What to Expect

- The goal of your first meeting is really to get them to like you and want to meet with you again.
- The second meeting is when you'll get through that official pitch.
- Then, the third meeting is when you really dive into the details.

This process requires nurturing and many meetings over months or even a year, depending on the funder.


We covered a *lot* of ground, and you may be feeling overwhelmed or nervous. Remember, this is a long-term process, and you don't have to do it all at once (or all alone!). Take your time, [reach out to us](mailto:hello@babyghosts.fund) for support, and remember the values and principles you're buiding on as you navigate capitalism as a cooperative.

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*With thanks to SVX and Adaora Ogbue for the inspiration for portions of this section.*