Investment Attractiveness: Factors Attracting Investors and Tips for Increasing Project Attractiveness
In the world of business and finance, investments are an integral part of successful development and achieving financial prosperity, especially in the entertainment and gaming industries. However, in order to attract the attention of investors, a project in the gaming industry must have not only fascinating content but also strong investment attractiveness. Investors seek to discover promising projects that promise high returns and minimal risks.
In 2023, the game development industry is shaped by rapidly evolving trends and demands. To enhance investment attractiveness for a game development company, a strategic approach that aligns with the current market landscape is crucial. One effective tool to guide this approach is the McKinsey Matrix (Figure 1). This matrix provides a structured framework for setting strategic goals and identifying key factors for success. Let’s delve into how to increase the investment attractiveness of your game development company using the McKinsey Matrix:
Step 1: define strategic goals
Start by clearly defining the overarching goal – enhancing investment attractiveness. This involves securing funding for expansion, innovation, or new game development projects. Understanding your company’s specific objectives sets the foundation for a targeted strategy.
Step 2: identify key factors
Market Growth Rate
Assess the potential growth of the game industry. Consider emerging technologies such as virtual reality (VR), augmented reality (AR), and cloud gaming. Also, evaluate new platforms like mobile, consoles, and PC gaming. Stay attuned to evolving player behavior trends.
Evaluate your company’s position relative to competitors. Identify your unique selling points (USPs), strengths, weaknesses, and areas for improvement. A thorough understanding of your market positioning informs your strategic decisions.
Step 3: create the McKinsey matrix
Utilizing the insights from Steps 1 and 2, create the McKinsey Matrix to categorize strategic goals into four quadrants:
High Growth and Attractive Investment (Invest and Grow)
Here the goal is to invest heavily and strategically. Possible actions could be:
- expanding into high-growth emerging markets;
- developing innovative games that align with trends and technologies;
- forging partnerships with technology companies for cutting-edge solutions;
- enhancing marketing efforts to capture a larger audience share.
High Growth but Less Attractive Investment (Harvest or Divest)
In this quadrant, the focus is on maximizing short-term returns and consideration of potential exit strategies. Possible actions include:
- monetizing successful existing game franchises;
- licensing out technology or game assets;
- exploring strategic partnerships for collaborative development;
- streamlining operations to reduce costs while maximizing profits.
Low Growth but Attractive Investment (Invest and Optimize)
Here, the focus is on optimizing existing resources and expanding profitability. Possible actions include:
- enhancing operational efficiency to improve margins;
- developing customer engagement and monetization strategies;
- exploring in-game advertising or partnerships to diversify revenue;
- expanding revenue streams through merchandise, streaming, or content creation.
Low Growth and Less Attractive Investment (Harvest or Divest)
In this quadrant, careful consideration is given to cost containment and potential exits. Possible actions include:
- scaling down unprofitable projects or ventures;
- focusing the product portfolio on core strengths;
- reducing overhead costs and non-essential expenditures;
- exploring mergers or acquisitions for synergies and efficiencies.
Step 4: develop action plans
For each quadrant, develop actionable plans aligned with your strategic goals. Ensure these plans are detailed, measurable, and time-bound. Tailor them to your company’s resources and capabilities. Below you can find some tips for increasing the investment attractiveness.
Tips for Increasing Investment Attractiveness
- Develop a detailed business plan
Create a detailed business plan that includes market analysis, monetization strategies, and financial forecasts. Be accurate and use facts and figures. A study conducted by Harvard Business Review showed that business plans based on facts and figures have a better chance of attracting investment.
- Show the Success of the Team
Present the experience and achievements of team members that demonstrate their ability to successfully implement the project. The qualifications and experience of the project management team significantly influence its attractiveness to investors. A survey conducted by AngelList found that approximately 72% of investors consider the project team to be the most crucial factor when making investment decisions. Investors want to see skilled and experienced managers who can effectively lead the project and achieve its goals. Investors also seek out projects that offer innovative solutions and hold a competitive edge in the market.
- Prepare a Presentation
Develop an attractive investment presentation in which you will emphasize the unique features of the project, growth potential, and ways of monetization. Show how investors can benefit from investments. It is important to present the information concisely and convincingly. A study by PwC showed that about 75% of CEOs view innovation as a key factor for future success. To attract investors, you must showcase the unique features of your project, its growth potential, and how it stands out from competitors.
- Conduct a Risk Analysis
Identify and show the main risks and provide a strategy to reduce them. This will help investors see that you approach risk management responsibly. Investors carefully consider the level of risk associated with a project. They aim to minimize potential losses and prefer to invest in stable and reliable enterprises. According to research by Ernst & Young, over 70% of institutional investors regard risk management as a critical factor when making investment decisions. This highlights the importance of conducting risk analysis and presenting a viable strategy to mitigate risks in your project.
- Emphasize the Potential for Growth and Innovation
Explain how your project can grow and develop in the future and demonstrate the innovative aspects that distinguish it from its competitors. A study conducted by the Boston Consulting Group showed that companies that innovate in their activities are more likely to attract investment.
- Project Demonstration:
If possible, create a demonstration of the game or gameplay so that investors can evaluate your product more clearly.
- Marketing Strategy
Explain how you plan to attract players and promote the game on the market. An effective marketing strategy can also increase the attractiveness of the project for investors.
Step 5: monitor and adjust
Continuously monitor the progress of your action plans, collecting data on key performance indicators (KPIs). Be prepared to adjust your plans based on shifts in the market landscape and evolving investor expectations.
Step 6: communication and transparency
Maintain open communication with potential investors throughout the process. Clearly communicate your company’s strategic direction, goals, and the steps being taken to enhance investment attractiveness. Transparency and a well-defined vision instill confidence in potential investors.
Remember, the gaming industry is dynamic and subject to rapid changes. The strategic approach outlined above, utilizing the McKinsey Matrix, should remain flexible and adaptable to capitalize on emerging opportunities and address challenges as they arise. By following this method, your game development company can increase its investment attractiveness and improve its chances of securing the funding needed for growth and innovation.