Apr 27, 2018 · 55m · y-combinator
Gaming Studio Founders - Patrick Moberg and Holly Liu · Y Combinator
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this Y Combinator session, studio founders Patrick Moberg (Dots) and Holly Liu (Kabam) discuss mobile game development, user acquisition economics, live operations, and strategies for building sustainable gaming businesses in a competitive market.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The partners as informed peer 1.9 Guest teaching 4.1 Guest disagreement 0.8 The partners pushing back 0.5
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 48:24 Direct pushback on founding a game studio immediately
When Craig asks if new entrants should start their own gaming company right away, Holly immediately interrupts with an emphatic 'No, no, not start your own company' and advocates for learning inside an established studio first.
Hardest push from the partners ▶ 26:09 Host challenges progression tuningCraig presses on why developers cannot simply make later levels exponentially more difficult to prevent fast content consumption, prompting Patrick to explain that high difficulty spikes cause player churn.
Biggest teaching moment ▶ 14:04 Masterclass on CAC, CPI, and LTV unit economicsHolly systematically breaks down user acquisition mechanics, contrasting casual vs mid-core conversion funnels and explaining why licensed IP reduces acquisition costs.
The partners hold their own ▶ 22:06 Probing 24-month development and scale economicsCraig synthesizes the immense business risk, pressing the guests to confirm whether spending tens of millions on marketing is required simply to reach profitability on a two-year production cycle.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The partners as informed peer | Guest teaching | Guest disagreement | The partners pushing back | Why |
|---|---|---|---|---|---|---|
| Visual Inspirations and Prototyping Cadence | 2 | 3 | 1 | 0 | Craig asks exploratory questions about how game mechanics are derived and suggests a Damien Hirst parallel. Patrick politely clarifies his true inspiration was Yayoi Kusama in Japan and details the weekly prototyping cadence at Betaworks. | |
| Early Launch Marketing and Two Dots Evolution | 2 | 3 | 0 | 0 | Craig prompts Patrick on launch performance and marketing mechanics. Patrick shares the early Facebook ad glitch and explains the evolution from minimalistic 2D art to richer world-building in Two Dots. | |
| Cost Per Install, Lifetime Value, and Narrative Focus | 2 | 4 | 1 | 1 | Craig asks if minimalist visual styles still keep CPI low, and Patrick explains why higher LTV demands character and narrative investment to compete in current ad auctions. Patrick also outlines the three-week live operations content loop. | |
| Holly Liu Joins and Kabam Development Cycles | 1 | 5 | 0 | 0 | Holly joins the recording and explains the mechanics of mid-core games and how production timelines stretched from 3 months on Facebook web to 18-24 months on mobile due to 3D graphics and IP licensing. | |
| Monetization Metrics and Player Demographics | 2 | 5 | 1 | 1 | Holly breaks down CAC, CPI, and LTV calculations, explaining why licensed IP helps lower acquisition costs for mid-core titles. Patrick offers clear taxonomy definitions separating casual, mid-core, and hardcore players. | |
| User Acquisition Budgets and Soft-Launching Games | 2 | 6 | 1 | 1 | Holly reveals that mobile studios typically need $5M to $10M reserved for paid customer acquisition launches, eliciting visible shock from Craig. Patrick and Holly explain soft-launching in test markets to validate metrics before scaling ad spend. | |
| Project Cancellation, Content Velocity, and Level Balance | 2 | 4 | 1 | 1 | Craig asks whether ramping difficulty is an effective strategy to slow player progress. Patrick and Holly explain that overly difficult spikes cause immediate churn and emphasize the need for balanced progression curves and elder game loops. | |
| Community Building, Games as a Service, and Indie Studios | 2 | 4 | 0 | 0 | Holly compares free-to-play retention to episodic television series versus box-office spikes in film. Patrick and Holly then explain how indie developers utilize platforms like Steam and Fig to build communities early without multi-million dollar marketing budgets. | |
| Organic Marketing Strategies and App Store Featuring | 2 | 4 | 1 | 1 | The conversation examines Twitch streaming viability for mobile games, eSports, VR traction, and blockchain gaming. Holly notes crypto gaming suffers from usability barriers like MetaMask, while Patrick highlights potential secondary asset markets. | |
| Audience Q&A on Game Design and Career Advice | 2 | 4 | 2 | 0 | Answering audience questions on game ideation and career entry, Craig asks if newcomers should start their own company right away. Holly directly pushes back against jumping straight into founding, advising an apprenticeship model at established studios instead. | |
| Studio Pitfalls, Favorite Games, and Handling Clones | 2 | 3 | 1 | 0 | The guests share major studio mistakes, such as underfunding runway or misaligning IP with core mechanics. Patrick recounts how Threes was cloned by 2048, leading into a discussion on handling copycat titles in casual gaming. |
Statements from this episode (28)
Mobile game Dots began as an art project at Betaworks incubator
“Dots started as sort of this little art project that was born at Betaworks which is an incubator investor in New York City.”
Playdots accidentally blew its $10,000 Facebook marketing budget in one hour
“We had, like, a really small budget, and I think there was actually a mistake, and it all got, like, instantly, like, instantly bought a ton of players. But it was, like, 10,000 dollars, I think.”
Minimalist character design broadens a game's mainstream audience appeal
“I always felt like the less character a game had, the more like a wider audience could almost project whatever they wanted onto it. So it was like, maybe you won't find the most hardcore fan, but it's going to appeal to such a broader sort of audience.”
Facebook mobile game ad competition has intensified due to high LTV titles
“So because the sort of
game, mobile game industry has evolved so much.
There's like people with higher LTVs who are willing to pay much more.
So the competition on Facebook has gotten really steep.”
Clean, minimalist mobile games struggle to generate high lifetime player values
“I think it's like difficult to create high LTV games with that style.
Because I think you do want like passionate niche audiences, which can be large, but they want like to sort of gravitate around a sort of certain theme or something like that.
If they're goi…”
Kabam launched its early Facebook games in about three months
“Within about three months, we could launch a game, and that was really because I think our game mechanics were simpler, even for a mid-core game, like even.”
Kabam's mobile game development cycles stretched to 18 to 24 months
“But as we moved on to mobile, the cycles just got a lot longer to today. I mean, it takes us about probably like. 18 to 2418 months is on the short side, like 24 months, like two years.”
Using established IP like Marvel significantly lowers mobile game acquisition costs
“So for us the IP has been very helpful in reducing that CAC. Because I don't have to explain what Marvel is. Like, I could go after the Marvel fans, and it's so much cheaper than just trying to get them to understand what is, you know, Edge World, or Dragons o…”
Casual, mid-core, and hardcore gamers differ by how they structure their time
“I think one helpful sort of way to describe the different casual, mid-core, and then there's hardcore, it's like casual, you kind of play whenever you have free time. Mid-core, you'll schedule time to play, and then hardcore, you schedule your life around play…”
Patrick Moberg predicts Fortnite on mobile will spike and then fade
“Yeah, but it'll spike and then sort of maybe die off. It's really novel right now to play this on, like against other players on your mobile device.”
Mobile game studios must reserve at least $5 million for user acquisition
“If you're gonna spend money on
Customer acquisition reserve at least five million dollars. That was like a year or two ago, I know.”
Mobile games require massive scale because player value barely exceeds install cost
“The LTV is almost like just a little bit higher than CPI. So like you're not making that much money on each acquisition. So like that's why you sort of need that big scale to like sort of Profit from that launch.”
Developing mobile game Dots took three months and Two Dots took six
“Dots took three months, but it was very simple. Two dots actually took about six months.”
Mobile games must launch with far more content than developers expect
“On mobile,
What we call consuming content happens so much faster.
So that means, like, when you release a game, don't have just, like, 10 levels.
Like, you need, like, an order of magnitude larger than that, because you'll be surprised how much people just …”
Two Dots launched with 85 levels and players consumed them unexpectedly fast
“We launched two dots with 85, which is, like, seems like an okay amount, but we had such good, like, such a good sort of organic launch, like,
People telling their friends that we were sort of scrambling to add more levels because people were going through th…”
Overly difficult levels cause permanent player churn in mobile games
“Yeah, so then you'll get people churning out and just sort of, like, abandoning the game forever.
So we look at, like, really granular sort of win rates per level, and sort of see how, because you also want, you do want that sort of, like, nice difficulty cur…”
Endgame alliance leaders act as key organic recruiters for mobile games
“One of the things that's a bit unique about almost every, I think every one of our games, yes, every one of our games is we have social features of Alliance as well as like chat and those types of customers that, that are loyal and, you know, play every single…”
Playdots evaluates new game pitches by requiring a five-year team commitment
“Like big question we're asking with every new sort of pitch that comes now is like, would you, Be excited to work on this for like five years. Cause like you have to sort of think about them now as these sort of projects.”
Early-access pre-sales let small indie game studios profitably bug-test
“And that helps them sort of like bug test it for like a profit. And then just like also building that community that's gonna be their sort of champions when they do launch.”
Game studios with large budgets should not rely solely on paid ads
“Even if you have a big budgets, I wouldn't spend it all on customer acquisition. You're just not going to get like bang for your buck.”
High paid acquisition costs force mobile game studios toward organic marketing
“Because of the pressures of just straight acquiring, like, paid acquisition is the pressures are so high on there, that's when you see things move more towards organic, because you're always trying to reduce the cost of customer acquisition.”
Emergent gameplay like Minecraft drives steady, long-term game sales cycles
“I think games that have like emergent behavior, so like something like Minecraft where it's almost like the random chaos of things happening creates this narrative that's almost like fun to watch creates like a longer term sales cycle for a game. So it's a les…”
Blockchain games suffer from VR-like hype without mainstream consumer traction
“I think that blockchain games are kind of a little bit currently suffering from the VR type world. There's a lot of heat. There's a lot of you know, excitement around it, and you can make some great cash like CryptoKitties, but I think They only drove like a 1…”
Game developers are best suited to build cryptocurrency virtual economies
“In my world gaming gaming definitely pushes those types of technologies forward, or at least test those boundaries of like, how far can it go? And I, I'm always encouraging, I think in the blockchain world and with crypto, like what better people to really exp…”
Mid-core video game mechanics cannot be effectively tested in isolation
“There's so many things that happen in a mid-core game. That trigger all these other things that's very hard to, like, test on. Just one piece of it without the full context of the game to say, like, okay, is this thing compelling? Because it could actually be …”
Mobile game features should be designed around concentric rings of timescale
“If you think of it, sort of, concentric rings, if that's the thing you're doing every second, then what are you doing every 10 seconds, or minute or week, or month? And then, sort of, like, creating features that accommodate for those different, sort of, time …”