It's Your Move

Entrepreneur, Oct, 2001 by Cynthia E. Griffin

Surviving a cash-flow crunch can take some creative financing. Just ask Troy and Yvonne McNair. The Aurora, Illinois, entrepreneurs started McNair Games in 1999 with one board game--Money Power Respect--and $120,000 from family, friends, credit cards and savings.

"Our initial printing was 50,000 units, and they were gone in 45 days," remembers Troy, 36, who formerly handled artist management for Def Jam Records.

More orders were pouring in, but the McNairs didn't have the cash to print more games. "People had 30 and 6o days to pay [for the games], so we got into a cash-flow crunch," says Troy.

After banks and VCs rejected their requests, the McNairs weren't sure where to find funding for their fledgling enterprise. Typically, game companies license their products to toy companies and then coiled the royalties. But the McNairs didn't like the idea of giving up control--and profits. Then they hit on an idea.

"Companies were asking us to develop games, so we decided to partner with them and develop games jointly," says Troy. "They put up the money to develop the game, and once it started turning a profit, we'd see proceeds."

The McNairs have made seven such partnerships, allying themselves with both service organizations and other game-makers, and now the bankers who turned them down call to offer lines of credit. With projected sales of $2.2 million for this year, the McNairs may not need those offers for quite a while.