Game development often starts with passion before profit.

Many early projects rely on informal funding from friends or family. That support can make a dream possible, but it is also subject to some legal and regulatory requirements. And, it can create tension if the project takes off or fails. A handshake deal that seemed fine at the time can become messy when expectations differ about ownership, repayment, or credit.

Defining the Deal: Loan, Investment, or Gift

The key to keeping things clean is to treat even the most casual funding like a real business transaction. That means documenting what the money is and what it is not. Is it a loan to be repaid? Is it an investment in exchange for equity or a share of future revenue? Is it simply a gift? Each option carries different legal and tax implications, and the language used to describe it matters.

A simple written agreement, even a short one, can go a long way. (Of course: a better option is a formal agreement drafted by a professional!) It should describe the amount, purpose, and repayment or return structure, if any. If the funds are a loan, it should include terms for repayment and interest. If the funds are an investment, the document should identify what the funder owns and how decisions will be made. Even if it feels awkward, this clarity protects both sides and helps preserve personal relationships if things go sideways.

Developers should also separate personal and project finances. Keeping a clean ledger, even a simple spreadsheet for the most indie of indies, helps track who contributed what and avoids confusion later. Using a company entity instead of individual accounts further protects everyone involved.

When Funding Crosses Into Securities Law

There is also a layer of law that applies to investment deals, even when they involve only a few people. If someone contributes money in exchange for a share of profits or ownership, that transaction is likely a securities offering. In the United States, most small private offerings fall under Regulation D of the Securities Act. While this exemption allows companies to raise funds without registering with the SEC, it still requires specific filings and limits who can invest. Failing to follow these rules can expose the developer to penalties or investor claims, even if everyone involved acted in good faith.

Understanding when a deal crosses into securities territory is critical. If the contribution is meant as a true investment, it should be treated as one. Following the federal regulations (and state rules) are often straightforward steps that can prevent serious trouble later.

Conclusion

Game projects can create lasting friendships or strain them. Clear documentation, early communication, and awareness of securities rules help keep the focus on making the game rather than fixing preventable disputes about funding. The Odin team works with developers at every stage of the journey to help structure deals, protect investments, and keep projects on track.