5 lessons startup founders can learn from the gaming industry

The gaming industry has evolved into one of the largest and most innovative sectors in the world. Worth over $200 billion worldwide, it has shaped entertainment and pioneered new business models, user engagement strategies and product development methods.

Here are five lessons from the video game industry that can be applied to startups in any field.

1. Use iteration and rapid prototyping

The gaming industry is built on rapid iteration and prototyping. Game developers often test early versions of their games, called “alpha” and “beta”, to gather feedback and make changes based on user experience. This iterative approach ensures that by the time it is officially released, the game will have been tested, refined, and improved based on real-world user feedback.

For first-time founders, this mindset is crucial. Too often, startups spend months or even years perfecting a product before bringing it to market, only to discover that it doesn’t meet customer needs. By taking an iterative approach – developing a minimum viable product (MVP) and releasing it for feedback – startups can make data-driven improvements, reduce the risk of failure, and better align their product with market demand. Iterating quickly on real-world data, as game developers do, can help startups achieve more effective product-market fit during the discovery and validation launch stages.

2. Focus on user engagement and retention

In the gaming industry, success is not just about acquiring users, but about keeping them engaged. Popular games like “Fortnite” and “League of Legends” maintain a huge user base by constantly updating the game with new content, challenges and features that keep players coming back. Developers track metrics like daily active users (DAU) and monthly active users (MAU) to gauge how well they’re retaining their audience.

For startups, user retention is as important as user acquisition, if not more so. A product that attracts users but doesn’t retain them is unlikely to be a long-term success. Startups can learn from gaming companies by focusing on creating a product experience that keeps users engaged. This may include making regular updates, offering new features, or simply ensuring that the product provides consistent value over time. Analyzing user behavior through metrics such as customer retention and churn rates can help founders understand why users stay or leave and make the necessary changes to maintain high engagement.

3. Monetization through multiple revenue streams

Gaming companies make money through multiple revenue streams. Instead of relying solely on upfront sales, many modern games offer in-game items or premium features (usually called microtransactions). For example, mobile games like “Candy Crush” generate millions of dollars in revenue through in-app purchases, even though the game itself is free to download. Some games also make money from advertising, subscription services, or downloadable content (DLC).

For startup founders, adopting a flexible monetization strategy can be key to maintaining growth and is especially important during the efficiency and growth stages of a startup.

Founders can explore subscription models, affiliate marketing, and even strategic partnerships to generate additional revenue. The key is to align monetization with user behavior, ensuring customers feel they’re getting value from paid options without being overwhelmed by upsells.

4. Build a strong community around your product

The most successful games are not just products; they are communities. Games like “Minecraft” and “World of Warcraft” have built thriving ecosystems of players who interact with each other both in and out of the game. These communities not only keep users engaged, but also drive organic growth through word-of-mouth recommendations. Game developers often invest time and resources into cultivating their communities, listening to user feedback, and developing a sense of belonging.

For startups, building a community can significantly increase brand loyalty and customer retention. Whether it’s social media, forums, or in-app interactions, creating a space where users can interact both with your product and with each other creates a sense of shared purpose. This can be especially valuable in industries with a strong network effect, where the value of a product increases as more people use it. Encourage user-generated content, host community events, or actively engage with your customer base to build a loyal following around your product.

5. Scale infrastructure to meet demand

When a game goes viral, as “Pokémon Go” did in 2016, developers must quickly scale their infrastructure to cope with the sudden influx of users. Failure to do so may lead to failures, delays and reduced user experience. The gaming industry has become adept at dealing with scalability challenges, using cloud services, content delivery networks (CDNs), and scalable server architectures to meet the growth in demand.

Startups, especially tech startups, can learn this by planning for scale from the beginning. Even if your product currently only supports a small number of users, it’s important to have a roadmap to scale your infrastructure as your user base grows. Leveraging cloud services such as Amazon Web Services (AWS) or Microsoft Azure can help startups scale their operations quickly without major upfront investments in physical infrastructure.

Moreover, ensuring systems are flexible and scalable from the outset can prevent costly technical debt. By preparing for growth, startups can avoid the pitfalls of slow load times, server failures, or degraded user experience that can turn off potential customers.