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Literally anyone can invest in Fig's next game

Six months and more than $400,000 in legal fees has all led up to this

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Charlie Hall is Polygon’s tabletop editor. In 10-plus years as a journalist & photographer, he has covered simulation, strategy, and spacefaring games, as well as public policy.

This month the crowdfunding start-up Fig will fulfill a promise it made when it launched this past August by opening equity investment in indie games to everyone, not just high net worth individuals. Previously Fig had only allowed accredited investors — those making more than $200,000 a year or with more than $1 million in assets — to take part in its campaigns. This next effort, Fig's third, will open the opportunity to everyone and allow individuals to invest between $1,000 and $10,000 in the success of an indie game.

Justin Bailey, formerly of developer Double Fine and now Fig's CEO, told Polygon that the acceptance of unaccredited investment removes a kind of "tension that was not about what we are at our core, which is always the idea that fans should be able to invest."

"I think it plays into a larger movement that’s happening," Bailey said. "I like to call it the democratization of society. They include the Uber movement [and other kinds of] on-demand economies. The investment piece is now being taken out of the hands of professional investors hands and it’s being opened up to everyone. Everyone is going to have the opportunity in the future to invest in things that they’re interested in, things that they follow and they know a lot about. ... They could probably make a better decision on which game they want to support, instead of going to the stock market and just picking a stock."

The JOBS Act

Under Regulation A+ of the Jumpstart Our Business Startups (JOBS) Act, signed into law in 2012, Fig will essentially form a publisher with the ability to raise investment from multiple sources — including unaccredited investors — for its next several games.

"That publisher has the right to raise up to $50 million," Bailey said. "That's in aggregate. We’re doing our first title in December, and the money we raise through unaccredited investment will come out of the maximum we're able to raise of $50 million. And the people who invest in that will then be tied to returns of that game. Then, when we do another project we just amend the filing [with the U.S. Securities and Exchange Commission] and we get to raise unaccredited money for that [game] as well. We keep on doing that until we've hit the $50 million cap."

Fig's next crowdfunding campaign, the third in its short history, will open up at least $1 million to unaccredited investment, which will represent an unknown fraction of that game's total budget. Neither the developer nor the game's title have been publicly announced.

When users arrive at Fig's site, they'll be able to use a custom-built calculator to predict the potential return on their investment. Users will be able to select an investment tier, adjust the suggested retail price of the game, and then use a slider to change the units sold. The calculator will then crunch the numbers based on the deal terms and output a return on their investment.

Fig was not able to release the deal terms to Polygon at this time. Bailey said they're still working on the language, and trying to make it as clear and concise as possible.


Third time's a charm

So far, Fig is one-for-two with its campaigns. The award-winning space exploration game Outer Wilds was successful in August, but rewards-based backing was lower than anticipated. Developer Mobius Digital was initially willing to accept only $50,000 in investment, but Bailey told Polygon he eventually prevailed on the team to accept $75,000 — half of its total $125,000 ask — before the campaign closed in mid-September.

What the Outer Wilds campaign proved out for Fig was the tremendous amount of untapped capital interested in the games market. Bailey said that more than 80 individuals expressed interest in the game, representing a total of more than $900,000.

That total makes the failure of Fig's second campaign, a free-to-play title from Scribblenauts developer 5th Cell, all the more unexpected. Anchors In The Drift earned slightly more than $100,000 of its $500,000 ask. Since it did not meet its goal, no money changed hands.

"What I think happened last campaign," Bailey told Polygon, "is that we had some time on our hands before we could make this Regulation A+ filing [for our next campaign] and we wanted to experiment. We had so much investment interest in [Outer Wilds] that we wanted to take on a developer who was willing to take the whole campaign total in investment.

"We know that free-to-play games don't perform that well with rewards-only crowdfunding. So, we wanted to see if investment would work better — if that investment was available. And we just found out from the accredited investors that there just wasn't much interest in free-to-play games."

While Bailey wasn't able to share the next campaign with Polygon, he did reassure us that it would not be free-to-play.

"I don't think we will be putting a free-to-play game on the site for some time," Bailey said. "I'm not saying we won't ever do that again, it just doesn't seem to be the opportunity or the interest is on for crowdfunding. So, the other game is an indie, premium title."


Red tape

Fig itself has used investment capital to bring its crowdfunding service to life, including seed funding from Spark Capital, a venture capital firm that's played a key role in funding Oculus VR, Twitter and Slack. That investment was necessary, Bailey said, specifically for this next campaign. That's because the SEC filing alone cost his company more than $400,000.

"This is very much like going through an IPO [initial public offering]," Bailey said. "It's actually been referred to jokingly, and actually pretty accurately, as an IPO-lite. So we have to get fully audited, we have a law firm [and] very detailed financials. It's taking over 6 months to get this done."

Currently Fig's Regulation A+ filing is pending with the SEC, and it's not expected to close until after Fig's third campaign has ended. That means there may be some delay, Bailey said, before the developer actually gets the money investors promise. The risk of the filing being rejected outright by the SEC is extremely low.

"I don't have a percentage," Bailey said with a chuckle, "but it hasn't happened yet. It's more likely that the SEC would come back to us with questions, and we'd have to answer those questions."

If any further review of their filing is required, Bailey said, it would be to educate the SEC about how the games industry works.

"They would have industry-based questions is basically what it comes down to. We have very competent lawyers that have done this and worked very closely with the SEC for many, many years and know how to structure this stuff to minimize this risk."

Next steps

Bailey said that Fig has at least two more campaigns in the works, one of which could come as soon as January. He's very excited to extend the equity investment model to all of Fig's efforts, and sees it as part of the future of crowdfunding generally.

"We don’t want this friction between fans and investors," Bailey said. "We view them as one and the same. It was always something where we looked at Kickstarter, we knew they didn’t have any plans to allow investment, and so for us this is where we think crowdfunding is evolving to. It’s evolving to people that participate in these very early crowdfunding campaigns getting an opportunity to participate in the return of the games that they helped support.

"I think people are going to take interest in wanting to invest in other verticals, and probably start to wonder about all these things they're supporting on other crowdfunding sites. They're going to start to ask, 'Hey, why don’t they give me the opportunity to invest in those as well?'"

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