Many backers who funded Psychonauts 2 on the crowdfunding site Fig are now considered ‘investors’, says a US regulatory body, paving the way for them to get a return in real money if the game sells well. Fig is a video games-focused fundraising site partly founded by a bunch of veteran developers including Brian Fargo and Tim Schafer. It lets you throw some quids into a project as a punter – just like Kickstarter – but also lets people invest in it. As well as welcoming serious accredited investors, it hoped to let any old mug invest by giving $1,000 or more at an ‘investor’ level – but the US Securities and Exchange Commission needed to have the final say on letting anyone have a crack. Now they have, and they’ve approved the whole thing. What does this mean? Can you invest in the next big project? More importantly: should you?
First of all, the ruling means that, if everything goes right for Double Fine and Fig, then those backers who dug deep into their pockets will now become the owners of special shares which pay dividends. There is a cap on that investment and you can only earn a maximum of 3 times what you put in. So if you handed over $1,000 you’ll only ever get as much as $3,000 back. And after three years, the dividends stop.
It’s an interesting angle and it’s something that the likes of Kickstarter and IndieGoGo don’t do. If all goes right, it will set up how Fig do things in the future. Plus, the ruling gives it something of a governmental ‘seal of approval’. It also seems to be well-timed, considering the company is launching its campaign for Wasteland 3 next week.
But before you go throwing your savings into the pot and strutting around the house in your only business suit, as if you’re Gordon Gekko, there are some things you should really consider.
Firstly, this does not offer you any protection from loss. You are listed as a ‘non-accredited investor’. That money, just like in any investment, is being gambled. Not only that, it is important to understand that you are not investing in a game, you’re investing in a company – two companies actually. The developer and Fig itself. Buried deep in this offering circular (a document for those who previously invested in Psychonauts 2) is a line that makes sure you ought to know exactly that:
“An investment in our Fig Game Shares – PSY2 is not an investment in any game, game developer or license agreement. Proceeds from this offering may be used to fund the development of other games, as well as other expenditures not related to Psychonauts 2.”
“The investment described herein is highly speculative and involves a high degree of risk of loss of all or a material portion of an investor’s entire investment.”
Not only that, but there is a health report and audit of Fig as a company. As you might expect, as a new company they are only making losses at the moment.
“…the Company has not generated any revenue, incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.”
That’s not surprising, given that lots of companies operate this way, trundling on and waiting for the cashout. Most of Silicon Valley does this and Psychonauts 2, the first real project, gathered $3.8 million in fundraising cash, making much of that a moot point for those particular investors. But there’s no guarantee that the next project will be a success. You would still be wise to look over this whole thing carefully if you were taken with the idea. It’s not a spontaneous splurge of sixty quid on Kickstarter for a game you’ll probably forget about. It’s a big chunk of money you might never see again. And you are not Gordon Gekko, you’re a punter with a suit.