With crowdfunding sites such as Kickstarter reporting steep declines in money pledged toward the development of video games, it’s clear that campaigning for funds isn’t what it used to be. However, Fig might have the solution. Founded by some of the biggest winners from the Kickstarter video game crowdfunding movement, the crowdfunding publisher’s advisory board includes Tim Schafer (CEO of Double Fine Productions), Brian Fargo (CEO of inXile Entertainment) and Feargus Urquhart (CEO of Obsidian Entertainment)—who are all looking to change the system so that fans see more from their investments. To that end, Fig is making extensive use of Title IV of the JOBS Act, which allows everyday citizens to participate in equity crowdfunding and investment of startups and small businesses, and to include Game Shares to go along with crowdfunding campaigns.

To date, some of Fig’s successes include Outer Wilds, a game from Kevin Smith called Jay and Silent Bob: Chronic Blunt Punch (which features the comedy duo), and Tim Schafer’s Psychonauts 2. Only two of the six games the company has helped run crowdfunding campaigns for have failed to reach their funding goals.

Justin Bailey, CEO and founder of Fig, talks to [a]listdaily about how the company is out to shake things up by being one of the few crowdfunding programs dedicated exclusively to co-publishing video games and how focusing fan investors will shape the future of the evolving market.

Justin Bailey 1 - small
Justin Bailey, CEO and founder of Fig

How is co-publishing a better alternative than traditional crowdfunding?

[The way] I see the normal process with Kickstarter and Indiegogo—those are tools which go across industries. So you can organize your community around them, and the people who bring in 97 percent of the traffic participate in the campaign. It’s nice in one way because, hey it’s free money. Everybody likes free money. But after that, they’re on their own, and it’s up to the creator—as far as accountability and visibility—to show how the money is being spent and how development is going.

What are Game Shares, and how do they work?

With Game Shares, we enter into a licensing agreement with the developer, and that gives us a right to a revenue share from the title. What we do is tie the stock to that rev share, and through Title IV of the JOBS Act, sell that stock during our campaign. It’s important to note that the money from that goes to our general funds, which is where we provide development proceeds to the developer.

There are a number of different crowdfunding publishers right now, including Square Enix’s The Collective and Gambitious. How does Fig differ from these publishers?

There are a couple of things we do differently. We’re ambitiously moving forward to embrace the fan investor—non-accredited investors. That’s our passion, my passion, and the passion of our advisory board. We want to get the fans involved and we want them to get returns for the games they’re supporting. We’re aggressively using Title IV to do that, and nobody else is.

Also, we’re very public about what we do. We don’t take games in and do something behind-the-scenes. We’re all about getting everybody involved and being fully transparent. That’s a huge difference from how other people are approaching it.

What does Fig look for in the projects it supports?

For us, we’re not only concerned with it being an awesome campaign. I’ve turned down many projects that I knew were going to be awesome campaigns, but sometimes there are concerns over whether a developer can actually deliver on what they’re putting out there.

The other concern is that the game will have to sell well, because they are investments. We’ve done some surveys with people participating on the investment side of things, and their main reason for doing it is for the game to exist, and that’s the same with traditional reward-based crowdfunding. But they would like to get some of their money back in a modest return. They’re not really looking at this as an avenue to get rich, but there still has to be some commercial viability to the ideas we take on.

What are some of the biggest challenges with crowdfunding a game right now?

The atmosphere, in general, is kind of like an unkempt garden. There’s a lot of potential, and I think it started off as a very interesting concept. But when there are multiple millions of dollars going through to developers, then it becomes a business. I think there needs to be some oversight when that happens. It’s kind of like the Wild West right now. A crowdfunder might get your money, then who knows what happens? Some projects are delivered with not-so-great standards, like what just happened with Mighty No. 9. I think sometimes developers want to deliver a certain experience, but they’re unable to because they haven’t done it before and don’t know the budget they need.

For us, we try to get involved, but barely. The premise for us is that a lot of the games that fail crowdfunding campaigns—and the ones are successful but fail to deliver the game—a majority of them can be caught upfront. Sometimes it’s in a thirty-minute conversation. People who have delivered, and have industry experience, can spot how they’re underestimating by 2-3 times what the budget is actually going to be.

What do you see as the ideal future for crowdfunding?

I think Kickstarter is really cool, but there has been a lot of goodwill and outpouring that has been built up for a lot of these fan bases, and they had no way to participate directly with the developers. It was really cool to open that up with Double Fine’s adventure game [Broken Age] and then later with Brian Fargo [Torment: Tides of Numenera and Wasteland 2]. There was a huge outpouring of support, but what I think happened was that Kickstarter is exactly that—you get your one-time boost. As these campaigns get bigger, and the creators want to do more ambitious games, they will want to push toward the AAA budgets. I’d love to see that happen.

One of the other things I’d like to see is that if people are participating years early, I think it’s right for them to expect to have the option to invest the money and have a financial return if it’s a commercially successful project. All the creators that we work with feel that that’s appropriate. Right now, the share price is $250. I’d love to get that down to $50 and say that would be the lowest tier, and everybody who participates [at that level] would get a rev share and a free game. I think that’s where things are heading with the evolution of crowdfunding games.

Are there specific challenges to marketing a crowdfunded game?

If you take the top 50 crowdfunded games from the last three years, they’ve done very well from a commercial standpoint. Some of them are turning 2-3 times of what their dev budget was. The interesting things is, the vast majority of them didn’t have marketing funds. In fact, they defined marketing as doing PR, using social channels, and things like that.

One of the premises of starting Fig is, if we can get involved and help on the marketing side of things, can we make these titles even more successful? So far, we’ve done a few experiments. We marketed the Psychonauts 2 campaign and saw a 600 percent ROI with those efforts. Then we did marketing for Hyper Light Drifter, where we had tracking all the way down to Steam so we could track conversion—that turns out is over 300 percent ROI.

One of our advisors who just came on, Aaron Isaksen, is the co-founder of Indie Fund. So we’ve been talking to a number of projects they’ve supported, and they’ve recently done the marketing launch for Duskers. We’re proving out that we can do marketing capabilities outside of the campaigns with live products. We’ve already had very good results with that, and that comes from our approach. We’re creating a custom indie marketing segment.

Fig has had some major crowdfunding successes, like Psychonauts 2, and campaigns that don’t get funded, like Rock Band 4 for PC. What lessons do you draw from the successes and failures?

I think, with the successes, we’re finding two kinds of trends right now. One is that there is a downward trend in video games for reward-based crowdfunding. There are a large number of reasons for that. [At the same time] We’re seeing a lot of interest in investment-based crowdfunding, but it’s new, so it’s smaller right now. The insights received from Psychonauts 2 are the tip of the iceberg on the investment side. I think a lot of people want to see the whole cycle play out from investment to return, and you’ll potentially see nine times the activity you see already on the investment side. But what I think will continue to happen is, as investment picks up and catches on, people will be less inclined to participate on the rewards side.

For Rock Band 4, I actually think that would have been a successful commercial product. I still think it will be if they [Harmonix] decide to go forward with it. We’re trying new things out, so I don’t even look at it as a failure. Kickstarter has about a 17 percent success rate on video games. We have a 67 percent success rate. I think somewhere between 60 and 90 percent is healthy. I don’t think you want to get rid of having some failures because then you’re not pushing the envelope.

With Rock Band 4, we were trying to get the community to support it because it has been asking for years about having Rock Band on PC and bringing back the Rock Band Network. One thing we learned from that campaign was that the community wouldn’t get behind it if didn’t have the ability to transfer their music libraries to the PC version. There are a lot of reasons why that’s complicated from a licensing standpoint, but a lot of those people have thousands of dollars put into those libraries. So the most passionate fan base would not have had the feature they wanted, so they didn’t fund it. I think the people who did fund it were new to the community and hadn’t built that back library.

Some critics have said that only a small pool of people are willing to help crowdfund projects. Is there a danger of overextending this audience, or can it be significantly grown?

The main risk right now is on the rewards side, continually going back to the well and not cutting people in for anything more than T-shirts, posters and copies of the game. Those are all fine, but I think that your earliest and most passionate fans think they should have more, and that’s what we’re trying to give them.

I think you’re seeing a lot of early adopters on the investment side right now. As it proves itself out, I think you’re going to see a lot more potential. I think you’ll see on sites that are focusing on rewards—just talking about the video game sector—an increasing number of failures. We’re already seeing campaign totals starting to go down and people trying to raise less money, which will make the problem worse because a lot of the reward-based campaign raises have almost zero correlation with the game’s budget.