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Patrick McKenzie @patio11
, 18 tweets, 3 min read Read on Twitter
Quick little tweetstorm on why, if you desire to have a small software business, you should prefer doing Boring Business Productivity SaaS to writing a video game, even if you really like videogames:
Videogames are a hit-driven business. Discovery is largely up to aggregators of demand, principally Steam, Youtube, App Store, and (to a far lesser extent) the media and other marketplaces. You have to pray to the gods that you hit those at launch and you get *one shot*.
The budget for most videogames is invested in "assets", like art/etc. Market expectation for asset quality is a) judged against AAA games and b) constantly increasing, which means assets depreciate right off a cliff.
When a SaaS shop thinks of "assets", they think things like "an email list", "a customer account", "a guide which is a repeating source of new trials for us." SaaS assets generally appreciate, rather than depreciate. (Slight oversimplification because Twitter.)
I cannot underline enough the importance of the launch window for videogames, as a function of their distribution model. A game which sells $1k in its first week has already failed and will take the business down with it if it is the only product of the business.
When a SaaS app only gets e.g. $20 worth of paying accounts in the first month... that's totally fine. Plenty of SaaS apps start out that way. You simply start climbing the Long Slow SaaS Ramp of Death.
There exist repeatable, predictable technologies for climbing the Long Slow SaaS Ramp of Death which are available to undercapitalized companies, like most first-time single-member SaaS firms. There are none for videogames and pure hustle only works for some operators.
"Calling someone to ask them to buy your thing" is a repeatable and predictable technology. Content marketing is similar. "Hoping to get featured on the aggregator" is neither predictable nor repeatable.
The unit economics of SaaS are impossibly good relative to selling licenses to software products, which is what most first-time game companies will do (because they're not sophisticated enough to have a free-to-play microtransactions/etc model).
The lifetime value of accounts in boring B2B business productivity SaaS, even sold on the low-touch model, is $300 ~ $5,000++++. The LTV of an indie video game is $1 ~ $15.
"It must be harder to sell $5k software than $5 software, Patrick." What if I told you that the exact opposite was true, that purchasers of $5k software made rational decisions, that they were easier to reach in quantity, and that they were better customers to serve.
A word about piracy, for fellow SaaS founders: it's a thing which affects videogames. Basically more than half of their customers are thieves and happily steal the product, which they can't prevent because they give every customer access to all their source code.

Weird, right.
That's a bit sardonic but game companies spend a *distressing* amount of their mental energy budget on piracy, and SaaS companies spend *nothing* because it is *almost impossible* to steal a SaaS product. (Exceptions: credit card fraud and account takeovers. Rare-ish.)
Every company operates in an ecosystem. The ecosystem of partners/etc of SaaS companies largely is invested in the success of SaaS companies at the margin, because they get a percentage of the upside.

The ecosystem around video games companies? Hive of scum and villainy.
If you write SaaS for a living you will not find yourself drawn into any of the "the fights are so vicious because the stakes are so small" dramas which periodically sweep the videogame sector.
If you're doing a software business you will find yourself drawn into Business (TM) and you will find that every relationship you have with vendors/clients/employees/etc starts to take on Real Business (TM) characteristics... and that this is normal and expected in B2B.
Meanwhile, expect to have problems explaining to e.g. contractors for videogames "I need an invoice." "A what?" "A piece of paper, with numbers on it, corresponding to what you are charging me, so that I can put it in my books." "Lol make games not books!"
You don't have to feel comfortable with the business parts of running a software company as of day one, but you've got plenty of time to learn, and a SaaS business is a great springboard for doing it. A video game business... not so much.
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