The iFund

As with most start-up businesses, finding a source of capital to sustain a burgeoning studio until a revenue stream is established is always an issue. For those studios developing products for the iPhone/iPod Touch platform, noted venture capitalist firm Kleiner Perkins Caufield & Byers may have the answer. Kleiner's $100 million iFund specifically focuses on company's targeting the iPhone and iPod Touch.

It is important to note, however, that the creation of this fund does not mean that Kleiner will be handing out checks to any studio just because he is creating the next Flight Control for the iPhone. Like all investors, Kleiner's ultimate concern is its the ability of it's investments to produce a return that is a multiple (3X to 5X) of its original investment. This may seem like difficult when many game studio struggle to earn what would be equivalent to a 1X return on the investment , which is why Silicon Valley venture capitalists have historically shied away from the gaming industry; the gaming industry is primarily hits driven and the returns that most studios would historically generate are not sufficient enough to warrant investment. However new business models based on subscription payments and micro transactions have sparked the interest of some of these firms to make small strategic investments in development studios. Thus, the iFund money could go to an small studio or developer, if it can prove that it is a "very safe" investment from Kleiner's point of view. This means that the studio will need to convince the investor that, among other things:

1. the key employee's of the studio have a solid history and leadership skills;
2. that the business model can produce a satisfactory Return on Investment;
3. that there is a market for the studio's product and the studio can successfully differentiate itself from the competition;
4. if the product launch is unsuccessful, there is an alternative use for the studio's intellectual property; and
5. a gigantic investment will not be needed over the life of the business.

A great example of what the iFund is looking to invest in was recently highlighted in Gamasutra.