Game investment deals often borrow from venture capital but some carry unique terms shaped by creative risk and uncertain returns.
Sophisticated investors in this space know that the success rate for new titles and studios is low, but the upside can be significant. Developers, in turn, look for deals that provide breathing room to create while protecting long-term ownership of their work. Between those positions sits a set of “normal” terms that often frame negotiations.
Convertible Instruments
At the early stage, many deals are structured through convertible instruments. The two most common are convertible notes and SAFEs, short for Simple Agreements for Future Equity. Both allow investors to put money into a company now, with the right to receive equity later, usually once the company raises a larger round or hits clear milestones. This approach avoids the difficult task of valuing a young studio before it has meaningful revenue. For game developers, this can be appealing because it provides funding without the substantial dilution that would come from investment at a very low valuation. For investors, it creates an incentive to see the company grow toward a priced equity round, where their investment will convert at a discount or with other favorable terms.
Equity Investments and Stock
As companies mature, investors often prefer direct equity investments. Here, the investor buys shares of stock, which is usually preferred stock.
Preferred stock typically comes with special rights not available to common shareholders, such as protections on payout if the company is sold. One of the most common terms in this area is the liquidation preference. A standard starting point is a one-time, non-participating preference, which means the investor gets their investment back before common shareholders in the event of a sale but does not take a share beyond that. More aggressive investors may ask for multiple times their money back or a “participating” preference, which allows them to collect their preference and still share in the remaining proceeds. The details here can have a major impact on how much founders and employees ultimately receive.
Governance, Control, and Protections
Control is another key theme. Investors want to ensure that their money is being managed responsibly, while developers often want freedom to pursue creative vision without interference. Some investors ask for a seat on the board of directors, others ask for an observer right, and sometimes the company is able to negotiate for simply regular information rights, such as quarterly financial updates and annual budgets.
In addition to governance, protective provisions often appear. These are rights that give investors a veto over certain major decisions, like selling the company, issuing new shares, or changing the nature of the business. What is considered “normal” varies by stage and size of investment, but most deals include at least some protective provisions to give investors a voice in significant events.
For more on typical terms in venture deals, read up on nvca.org, and Investopedia.
Revenue Sharing
The game industry also sees structures less common in other startups. Revenue-sharing models are an example. In these arrangements, an investor might provide capital with the expectation of recouping their investment plus a return directly from a share of game revenue. Sometimes these deals cap the investor’s return at a multiple of the original investment, after which the revenue share ends.
Think of this like a publishing deal without the publisher. It can be attractive to investors who prefer returns tied to a particular project rather than the longer timeline of building company equity value.
Milestones
Milestones are another area where investment deals in games can diverge. Because development cycles are unpredictable, investors (especially project investors seeking a revenue share) may tie funding tranches to specific deliverables such as prototypes, vertical slices, or the launch of an early access build. This approach spreads risk for the investor but also puts pressure on the studio to hit deadlines, even in a creative process that often resists rigid schedules. Negotiating clear and realistic milestones can make the difference between a deal that supports development and one that sets the stage for conflict.
Sometimes, a strategic investor may want to both invest in the company and the project. Certain publishers may want to provide a portion of the funding as an equity investment to lock themselves into the company as a long term partner. This may also come with other terms attached, such as rights of refusal on territorial distribution for future titles.
Conclusion
Despite the variety, a pattern emerges. Early money often comes in through SAFEs. Larger checks usually arrive as equity with liquidation preferences and some protective provisions, as publishing deals, or a combination of both.
Often, deal terms are not inherently good or bad. What matters is how they align with the goals of both sides. A deal that gives investors too much control or upside can leave developers feeling constrained and undervalued. A deal that gives developers total freedom without adequate investor protections may scare off the funding needed to reach scale.
Normal in this context does not mean standard in every detail. Instead, it reflects a range of terms that repeat across the industry. Each negotiation shapes those terms to fit the project, the personalities involved, and the realities of the market at that moment.
Understanding the range of what is “normal” allows both investors and developers to focus on what truly matters to them, rather than fighting over points that are almost always present. That shared understanding can turn a deal from a source of friction into a foundation for long-term creative and financial success. Advisors that have seen these deals play out can help.
For additional context on funding strategy and legal preparation, our free Game Studio Funding Playbook offers an in-depth overview of the issues studios commonly face during investment and diligence.