Venture capital and other private equity, bonds, business loans, and the granddaddy of all capital … making a profit and saving it yourself. There are very successful companies of both types. Don’t be fooled into thinking unless it’s a public company it’s worthless and can’t grow.
There are a lot of advantages in being a private company versus a public company but there is a time and place for both.
The point I thought stupid and naive was the position that shareholders give a damn that random gamer dudes rather the value of their investment go down than layoffs and such happening.
Unless you’re a major shareholder, the statement “I’d rather their stockprice go down then to see them layoff people” might as well be wishing for puppies and rainbows. First, your say in the matter is squat, second to think that market cap of a publically traded company and its employment practices aren’t interrelated is foolish.
On investors caring about he games, any serious investor in securities doing it because they care about the games is an idiot. Invest in the publically traded market to make money. If you care about games so much, then fund a small studio, start your own, or at least have a controlling interest.
Hating capitalism for being capitalist is a fool’s endeavor.
I do hate capitalism. At least, nihilistic capitalism.
And the point is that we shouldn’t care.
No, it’s not skin off our backs and neither is it skin off their backs, either.
Why should we feel for the shareholders? Unless you’re a take2/EA employee and being paid in stock options, you shouldn’t give a fuck, either.
At the end of the day people buy and sell without any sort of rationale or reason. They just do.
And while development doesn’t affect the price share so much, the price share does affect development - which shouldn’t happen and is all the more reason to not give a rat’s ass or like it.
That’s working really well now, isn’t it?
That’s a very simplistic view. For example how do companies generate the profits used for subsequent investment? Somebody has to foot the initial capital required to generate those profits.
And when credit markets freeze up, what do you do? Not that that ever happens, of course :)
No, you have a simplistic view. You think that every company start up gets public funding to raise money when that’s not that case, or that the only way to get funding for big projects is via stock release? Seriously there are tons of already well defined pro/con arguments on public versus private companies. Many of us here on the forums have worked for both during our career. What we are trying to point out here is sometimes there is a bad side to being a public company. That Motley Fool article on take-two reads like the poster story for what happens to the little company that goes public but has mediocre results.
That ‘somebody’ is not the stock market, that’s for sure.
Venture capital - if you take venture capital, then the people who gave it to you are your shareholders. They don’t just show up with a truck full of money and tell you to have at it. They sit on your board and tell you what you’re going to do.
Bonds - Nobody will buy your fucking bonds. If you try to start a game company and issue bonds, what kind of idiot is going to buy them? There’s no reason to believe you’ll ever get your money back.
Making a profit - It takes money to make money. You have to get funding from somewhere in the beginning, and unless you are independently wealthy, that money is going to come from somebody else, and that somebody else is going to put conditions on it. Whether it’s a bunch of disaggregated shareholders who don’t really pay attention to what you do or a bank or some VC, you are not free to do as you please.
Actually, I’m pretty sure I never said any of that. My point was that your comment about Wall Street isn’t as much about raising capital as organization of ownership.
Seriously there are tons of already well defined pro/con arguments on public versus private companies. Many of us here on the forums have worked for both during our career.
Uh, you’re not the only one that’s had a job with both public and private co’s in this world. Some of the people that disagree with you have too :)
What we are trying to point out here is sometimes there is a bad side to being a public company.
I agree. I just think you and others are doing a poor job of explaining the pros and cons.
Dude are you kidding me? So, if I may here, you’re telling me the only way you are going to get money is by going public with a stock IPO? If you are not saying that, then why are you pointing out all of the above as though it doesn’t raise money, because it does. You can trash talk all of the options above (as well as standard loan financing) but it’s done every day by companies that need money. Not every company can even go public. Not every company should. Some could very easily and choose not to.
As for a say in your business plan, nearly ANY financing has a say, either directly (major stock or bond holders on your board) or indirectly (the guy at the bank approving your business loan based on your company P&L statements.)
To Grifman, I think you’re talking about Wabbo’s statement on funding. The pros and cons are many, and I’m about to relaunch Fallout 3 (it keeps crashing on Win 7) so to be brief, here are a few:
http://www.allbusiness.com/business-planning/business-structures-corporations/972977-1.html
I really don’t want to muck up this thread with too much of a diversion though. If you guys are saying there is a point where some public companies can work, yes I completely agree with you. Even in the case of some game companies. What I’m saying is that going public doesn’t have to be the only measure of success, and going public does not in any way guarantee success. And sometimes, going public brings things like this, where they get a takeover bid, a bad quarter or two and a stock that is very deflated. This is a company with good IP’s here, hell if Bioshock 2 is half as good as the first game, they will do well in upcoming quarters, especially if the economy helps out a bit and entertainment spending rises. But stockholders are all about the payday here and now. “You didn’t take the buyout.” “Your recent quarters have sucked.” Boom, 31 whopping percent decline in a day. That doesn’t help fund future company growth.
I hope they weather through. I would like to see more of what they could make.
What I’m saying is that all financing options mean giving up full control of what you’re doing, how you run your business, etc. What option is best is, of course, highly dependent on what you’re doing. With every option, you have to perform up to some type of expectation: hitting your earnings, earning out your advance, paying back your loan, whatever. I don’t know why we’re sitting around bashing shareholders when they’re really no different from banks or publishers.
In 99% of cases, YES. Banks cannot dictate and direct what you do unless you actually run out of money. Stocks on the other hand, actually give the owner a claim to ownership and direction. And what they will demand is cutting costs, firing people, and delivering the worst product you can possibly get away with - all while giving them a bigger share of profits.
I’d MUCH rather pay interest, thank you very much.
And that funding is done through credit and banks (ie Loans). It’s not a “simplistic” view, it’s the TRUTH. It just isn’t what most people think.
Uh, If credit markets freeze up you know DAMN SKIPPY nobody is gonna buy stocks! Stocks are WAY riskier than credit, obviously.
I’m the one who made the comment, and I stand by it 100%. Stock markets have existed for hundreds of years, and for all the centuries they’ve existed they’ve NEVER been particularly good sources of capital for investment. Instead, the main purpose they serve has been to organize ownership (ie determine exactly who can claim to own what.) Most capital raised for investment comes from credit markets, which by the way, have been more socially and economically significant thank stock markets, despite what most people think.
Despite everything I just said, I actually don’t hate the concept of the public company (public or private, it’s all capitalism, and capitalism always sucks. At least the public company form offers a tiny chance for worker/public participation, the private form is totally in the hands of management). However, the bitterness and disdain people show for Wall Street “investors” is perfectly justified.
Because shareholders very often recommend/force changes to businesses that make them money in the short term, while damaging the overall industry/company. More profitable does not = better quality, but it DOES = higher stock value.
As evil as bankers can be, at the end of the day they (usually) just want their interest payments. I know IRL it’s a lot more complex, and ultimately every payment plan comes with some strings attached, but shareholders can be a much bigger problem.
You’re 100% correct that loans offer more control than equity (private or public). But you fail to address why banks don’t demand control: loans need to be secured, investments don’t.
Control is the reason why equity is willing to take greater risks.
So yes, get loans if you can. Which means having collateral to secure those loans with.
I’d be very surprised if a game studio could be started with just loans by anyone other than some one who is already successful.
So you think you can get a large loan (say, $20 million, or whatever it costs to develop a game these days), without convincing the bank that you have:
A rock-solid plan on how you are going to make that money back within a very specific amount of time, meaning you aren’t doing anything too ambitious.
Security. Like your house. And all of the team members’ houses.
So you’re no more free than with shareholders, but you’ll have to risk a lot more.
You should also understand that shareholders are not these ever-present forces sitting behind the employee’s chair, vetoing every interesting idea they have. Shareholders interact with a corporation by voting their shares once a year.
I don’t really care about what happens to Take 2 in a general sense, but there are franchises and studios, Firaxis in particular, that I do have an interest in. And if they end up elsewhere or in some sort of limbo, that’s a bad thing.
Ya’know, back in the boom boom days of credit, asset backed bonds backed by a couple of games or movies were in fact released to the market. Would be surprised to see them come back.
Did you know that:
63% of the worlds 150 largest economies are corporations?
Walmart’s GDP/revenue is greater than that of Saudi Arabia?
Sony’s GDP/revenue is greater than that of the Ukraine?
20% of companies in America are corporations.
81% of the American GDP is from corporations.
Shareholder ownership is a wonderful way to:
Protect the owners from a failure of the company (limited liability).
Generate money for investment. Corporations do seek loans for small (comparatively speaking) things, such as McDonalds putting an expresso machine in every store. But the major fund raising comes from stock releases. Its hard to dismiss the impact of the release of 10 million shares at $50 each on a company looking to grow. $500 million of cash to work with that doesn’t need to be paid back. This is the primary reason the largest companies in the world are publicaly traded.
Because corporations are bound to the mandate of the public shareholders instead of a single owner they must serve the needs of those shareholders. Sometimes that comes at odds with management (who may desire a different direction for the company) but single owners are as likely (if not more) to spin their company in a bad direction and ruin it. So though we may be at odds with the profit/margins push of stockholders, we have plenty of examples of single owners causing just as many company failures.
Employees can share in the companies success through stock grants. Although this is possible with privately held companies too (through profit sharing) it is most commonly seen in public corporations.
In short I don’t think shareholders are the enemy, and the shareholding model offers substantial benefits for everyone involved.
That’s usually a bank, VC or the founder’s own capital rather than issuing stock.
Then the profits.
Then a stock fund raising round.
EA is prime example.
Trip Hawkins incorporated and established the company with a personal investment of an estimated US$200,000. Seven months later in December 1982, Hawkins secured US$2 million of venture capital
…
Hawkins was determined to sell directly to buyers. Combined with the fact that Hawkins was pioneering new game brands, this made sales growth more challenging. Retailers wanted to buy known brands from existing distribution partners. Despite this, revenue was $5 million in the first year and $11 million the next. Former CEO Larry Probst arrived as VP of Sales in late 1984 and helped the company sustain growth into $18 million in its third full year
Actually, I think that (if I understood it correctly) according to Eric Petersen’s lawyer, you are legally BARRED from doing that. Or something similar.
Basically, you can’t sell 1,000,000 stocks to your company at $10 each in order to fund it, like Obama did for his election campaign fund.