When Cleveland investors listen to pitches for video game companies, skepticism is typically their first reaction. “I pitched everywhere I possibly could have, and I had to fight for every dollar,” CEO and founder of Handelabra Games Jeremy Handel told me. “In general, this area of the country tends to be more… conservative. There isn’t very much interest in software, because a lot of people here are confused or scared by next-world information economies.”
Handel’s experience isn’t unique, as my conversations with others revealed. Deeply-seated business convictions among area angels, perhaps seeded in Cleveland’s rich manufacturing past, has bred a wariness to intangibles. “One of the investors we talked to actually remarked, ‘I can’t touch the product,’” said Zac Sebo, CEO of app development company CitizenSync. Blue Frog Gaming founder Matt Maroon sought funds from venture capitalists in Silicon Valley rather than Cleveland because, he said, the terms were “way better” and “there was a lot more money out there.”
Some trepidation on the part of venture capitalists is warranted, especially where the video game industry is concerned — video game startups have a notoriously high rate of failure. However, financiers who choose to completely ignore the sector do so at their own peril; the electronic entertainment industry has the potential to uplift entire city blocks.
A shining example is Montreal’s Mile End district, a region that once suffered acutely from dilapidation. An influx of game development studios over the past two decades changed that, transforming the district into a bustling draw with high-end amenities. That’s not to mention the ancillary benefits, which include an increase in median income and downtown population. Collectively, the industry’s annual economic impact on the district is estimated at $1.7 billion.
In the absence of big players and high-profile infusions of capital, growth of the video game industry in Cleveland has proceeded almost surreptitiously. Small-time developers have quietly grown ideas into businesses, taking step after precarious step without the pecuniary fallback afforded by tech hubs on the East and West coasts.
Gary Nunley, Jr. and David Nunley, CEO and COO of SGM Games, respectively, sacrificed personally to fund their first venture, a mobile game for iOS. “I had to work numerous jobs just to be able to put money into the company, even to the point where I lost my home because I wasn’t paying my bills,” said David Nunley. The brothers also sought money from friends and family.
Before attracting local support in the form of LaunchHouse’s accelerator program and office space in Shaker Heights, Handelabra suffered a financial blow when its debut game, Uncle Slam, failed to attain profitability. “It never made back the money we spent on marketing it,” he said.
Both the Nunley brothers and Handel have managed to achieve a degree of success — the Nunleys’ company, SGM Games, employs five people and is pursuing several apps, while Handel manages a team developing digital versions of independently produced board games. All three acknowledge that fortuitousness played a big part.
“Many startups have a team already, but we didn’t,” said Gary Nunley. “It was interesting for us - we didn’t look for a programmer; our programmer came to us. We didn’t look for an artist; the artist came to us. Even our resident lawyer came looking for us,” he said. “In that respect we’re very fortunate.” Handel told me that LaunchHouse helped to refine Handelabra’s auspicious business model.
But entrepreneurs looking to follow in the footsteps of either company face innumerable challenges, chief among them finding talent. Besides funding, a paucity of skilled programmers is one of the Cleveland area’s biggest weaknesses. “Talent is kind of the drawback here,” said Maroon. “As far as programming goes, there aren’t many very good schools for [computer science.] Case Western’s program is very small, and not a lot of kids are coming out of Carnegie Mellon to work in [the area],” he said.
The phenomenon of what LaunchHouse terms “the brain drain”: young people who grew up or were educated in Northeast Ohio leave for more lucrative opportunities elsewhere. “The big thing is, the talent has to develop,” said Gary Nunley. “The awareness has to get out there. Tri-C has a game development degree program, but there must be jobs. Young people wouldn’t be looking across the Coast if there was a place locally for them to go.”
Talent that does reside in Cleveland may not have an interest in trading a stable job for a startup. Jarryd Huntley, a developer who has co-organized the Cleveland Game Developers organization for more than four years, says many of the group’s members create games as a hobby or a part-time gig. “Most have full-time jobs, and others have responsibilities and families,” he said.
When it comes to attracting skilled workers, investor money can go a long way. In that sense, reluctant venture capitalists are perhaps the biggest impediment to expansion the Cleveland gaming industry faces. Tax breaks, Maroon said, aren’t the problem, and low overhead costs are a boon. Handel, though, is hopeful the success of a few businesses propels others forward. “In Silicon Valley, people who grew up to start their own company are likely to turn around and help foster younger enterprises,” said Handel. “That’s why there’s a much more vibrant development community.”
There is cause for hope. Anecdotally, Huntley has observed encouraging signs Cleveland’s nascent gaming industry is maturing. “The quality of games is definitely increasing,” he said. After one of the Cleveland Developers Group’s “game jams,” 48-hour competitions that task spontaneous teams with developing a playable product end-product, “one team stuck together and is developing the game they created for release on [PC] and possibly mobile platforms.”
Handel is optimistic about the industry’s prospects. “One thing I’ve known about Cleveland ever since I went to high school here in 1995 is, it’s always 2 to 3 years from really hitting it. It’s something that everybody has been saying over and over for years. This is the first time I think it might be true.”