Portalarium opens the books for equity crowdfunding

More than four years after its Kickstarter campaign for Shroud of the Avatar, Richard Garriott's Portalarium is returning to crowdfunding. However, this time around the company hopes to raise money through equity crowdfunding, offering some ownership in Portalarium itself in addition to backer rewards for a game.

The campaign is hosted by SeedInvest with a maximum of $2 million of equity available, or about 8% of the company. There's a $500 minimum investment, and Portalarium must raise a total of $500,000 to close the round, otherwise all money will be returned to investors. The money is being raised "to fund marketing and monthly dev updates around launch."

In the name of transparency, Portalarium's SeedInvest page gives greater insight into the studio's workings than is typically made publicly available. Since 2012, it raised $7.5 million in series A funding, $1.9 million in the Kickstarter campaign, and an additional $9.4 million through further crowdfunding on the game's official website. As of last month, the company had $528,000 in the bank, and a monthly burn rate of $230,000. However, Portalarium also noted that it was planning a "telethon" in the near future, previous installments of which have typically brought in more than $100,000.

Portalarium also provided quarterly revenue projections showing its expectations for Shroud of the Avatar. Over the game's first two years, the studio gives $20,000,000 in revenue as the game's base scenario, with a bullish outlook of $50,000,000 and a low-end expectation of $5,000,000.

The Risks and Disclosures section of the page could also make casual investors think twice, noting as it does that even with a successful campaign, Portalarium "will require additional funding after this offering to complete the development and then launch our product," and that there's a "substantial risk" that additional funding may never materialize. Raising that additional capital could also involve issuing more shares, thus diluting the value of the stakes purchased in this campaign.

What's more, even if Shroud of the Avatar is a success and Portalarium does well, investors may not see any money. The studio currently has no intention of paying cash dividends, and there's no public market for the stock. With no other options, investors may not get full value for a private sale of the stock, and with voting rights on these shares being limited and Portalarium officers and directors owning almost 72% of the company as it is, investors may not be able to find interested buyers. Their only options would be to wait for the studio to be acquired, go bankrupt, or have its shares listed on an exchange.

Shroud of the Avatar: Forsaken Virtues is expected to launch between July and November and sell for $45. New episodes are expected to follow roughly every 18 months.