Raising money
A bigger dream
Kai and Remy have a plan for Hyper Shards 2, the sequel to our space shooter: three times the levels, a full soundtrack and an artist for a whole year. In this example, that costs $120,000. Our games earn enough for servers and tools, but not that.
There are two paths. Bootstrapping means growing only with the money our games earn: slower, but the studio keeps full ownership and control. Raising money means bringing in outside money to grow faster, in exchange for something.
Quick check
Remy pays a composer with money that Garden Defense ads earned last month. Which path is that?
- Bootstrapping
- Raising venture capital
- Selling equity to an angel investor
Show the answer
Bootstrapping
Paying for growth with money the games already earn is bootstrapping. No outside money came in, so nobody else owns part of the studio.
Equity or debt?
Outside money comes in two main kinds.
- Debt: a loan, say from a bank. It must be paid back with interest (an extra charge for borrowing), even if the game flops. But the owners keep 100% of the studio.
- Equity: an investor gets new shares, a slice of ownership (the Shares and ownership lesson explains them). Nobody pays it back. The investor only wins if the studio grows in value or pays out profits.
Banks rarely lend to a young studio with no steady profit, so game studios more often raise equity.
Who invests?
- Angel investorA wealthy person who invests their own money, usually early and in smaller amounts. Often someone who built a company before.
- Venture capital (VC)A firm that invests money pooled from other investors. Bigger amounts, for companies that could grow very large, often with a say in big decisions.
- Friends and familySometimes the first money comes from people you know. It is still a real investment and must be written down properly.
Money usually comes in rounds: pre-seed and seed first (often angels), then Series A, B and so on (usually VCs). Very early deals often use a SAFE: money now, shares later (the Term sheets lesson explains how it works).
Quick check
An investor who buys equity in the studio must be paid back, like a bank loan.
- True
- False
Show the answer
False
Equity is ownership, not a loan. The investor gets a share of the studio and only makes money if the studio grows in value or pays out profits.
How a round really works
The price of a round is the studio's valuation, and the new shares dilute the owners (How studios are valued and Shares and ownership do the maths). The rest is hard, patient work:
- Founders often talk to dozens of investors to get one yes. Introductions from people the investor trusts work far better than cold emails.
- One lead investor usually sets the terms, and others join.
- A round often takes three to six months, so start long before the money runs out.
- Raise enough to reach the next milestone, plus a buffer of a few months. Too little runs out early, and too much gives away more of the studio than needed.
How much to ask?
1Hyper Shards 2 plan (example)2 3Costs to reach the demo milestone $120,0004Time to get there 12 months5Current bank balance $10,000
How much should the studio try to raise?
- About $120,000 plus a few months of buffer, tied to the demo milestone
- $1,000,000, because more money is always safer
- $40,000, and hope sales cover the rest
Show the answer
About $120,000 plus a few months of buffer, tied to the demo milestone
The ask should reach the milestone with some room for surprises. Raising far more means selling a bigger slice of the studio and more pressure to grow fast. Raising too little means running out of money before there is anything new to show.
Why investors want huge wins
Investing in young companies is risky. Most startups fail or never make their investors' money back. So investors, especially VCs, count on a few big winners to pay for all the losses. One winner that grows a hundred times can cover dozens of losers.
That is why VCs look for companies that could grow ten times or more, and why they push hard for growth. That pressure can clash with a small studio that wants to make careful, fair games. Taking investment changes who you answer to.
Quick check
Why do venture capital firms push the companies they back to grow very fast?
- Most startups fail or never make their investors' money back, so the few winners must be huge
- The law says every investment must double each year
- Fast growth automatically gives the founders more shares
Show the answer
Most startups fail or never make their investors' money back, so the few winners must be huge
A VC fund expects most of its bets to lose or barely break even. It needs a few huge successes to come out ahead, so it backs companies that aim very high.
Contracts, adults and lawyers
An investment is a serious legal deal. It often starts with a term sheet, a short list of the main terms: amount, valuation and investor rights. Then comes due diligence: the investor checks the numbers, contracts and who owns the code and art.
Selling shares is covered by securities law, rules that protect investors. Contracts need someone of legal age, usually 18, so a parent signs for the company, and a lawyer who knows startups reads every page first. You still play a real part: know the numbers and ask sharp questions.
Bolt says: Next lesson: term sheets, the short list of deal terms that comes before the long contracts.
Fact-checked 9 October 2026
- SBA: Fund your business sba.gov
- SEC small business glossary sec.gov
- Y Combinator: The SAFE ycombinator.com