Noble & Co is aiming to raise up to £5m for Funds 4 Games (F4G) Software, an enterprise investment scheme that invests in the project management of computer games.
This EIS is not dependent on the games being hits. Its success dependent on F4G's ability to deliver games to publishers through sub-contracted developers. Projects will only commence where there is a contract between F4G and a publisher that the game will be bought at an agreed price. This is different to the traditional model for games development where projects are managed internally rather than outsourced.
The directors of F4G Software believe that outsourcing s is the key to success in this market because it allows games to be developed more efficiently and at a lower cost. In the traditional model, games are financed by the developers or publishers which may put a strain on budgets and reduce chances of completion.
F4G raised £1.3m in 2003 through a private placing and this money was used to fund two games, Urban Freestyle and Urban Warrior. Urban Warrior was subsequently cancelled by the publisher but F4G was still paid in full under the terms of the contract it had with the publisher. As F4G retains control of the game in situations like this, it is able to negotiate contracts with other publishers. This means that far from being a disaster, situations like this can enhance returns as the company is, in effect, getting paid twice for one game. Likewise, if a developer goes bust, F4G is free to take the idea to another developer for completion.
For investors looking for tax breaks through an EIS, the games industry looks promising. Research conducted on behalf of the Department of Trade and Industry in 2002 shows the UK games industry is the third largest in the world with an estimated value of £1.1bn, while PriceWaterhouseCoopers predicts the industry will grow by 11.3 per cent by 2007. However, as with all unquoted companies, the risks are still higher than investments in quoted companies.