Interactive Ontario chose a novel subject for its inaugural iLunch 9.01 digital media event: business failure.

Or more precisely, understanding business failure and avoiding it when growing an interactive business, whether in its earliest or later stages.

“Start with enough money, and plan not to receive new money,” until your business is firmly off the ground, Don Henderson, studio general manager and COO of Bedlam Games, told the gathering.

Deborah Esayian, founder and co-President of software developer Emmis Interactive agreed that start-up producers needed to ensure they had enough financial runway to take off and avoid an early business failure.

“Whatever you think your start-up costs are, ask for three times as much,” she advised when tapping financing sources.

Esaynian, whose Chicago-based business is now nearly three years old and expanding into either Toronto or Montreal, said early-stage companies without three years of runway savings to sustain them should consider pausing before take-off.

“Otherwise, go live with your parents,” she said.

Jason Krogh, founder and director of kids new media producer zinc Roe design, like many young entrepreneurs recalls early on under-bidding to win projects and giving his wisdom away for free to build relationships.

Then he realized that wasn’t working for him.

“If a client says, ‘We have someone who can make a game for $600,’ rather than bargain, I say ‘Have fun,'” Krogh told the iLunch 9.01 audience.

Another pet peeve: clients who say doing a project for them on the cheap will look good in their portfolio.

“That’s a conversation-ender for me. Not interested,” Krogh insisted.

Ryan Henson Creighton, president of Untold Entertainment, similarly warned budding digital producers not to sell themselves short when bidding on projects, however competitive and cyclical today’s digital market is.

“We no longer take salvage work,” he said, referring to clients who hire junior game makers to ultimately fail before turning to a veteran player to fix the mess ­again for a few dollars.

And returning to the theme of ensuring adequate runway, Creighton warned digital producers feast is often followed by famine.

“Hold onto every red cent, and don’t spend it unnecessarily,” he said of watching costs and maintaining a rainy-day fund.

That said, a failure to fail can be bad for business, warned Emmis Interactive’s Esayian: “My best client is someone who’s been burnt. The more pain, come on over here, baby,” she said.

“The reason you have to have three years of runway is your customers have to make enough mistakes before they buy your product,” Esayian added.

The iLunch 9.01 panel also addressed the 800 lb. elephant in the room: the pitfalls of tapping government funding, whether from the OMDC or the Canadian Media Fund.

The consensus was public funders requiring development plans to be etched in stone before production can start can often hand-cuff digital producers, as opposed to allowing for a more agile development and production process.

At the same time, panelists agreed that OMDC backers confident that a producer has sufficient financing and expertise behind a project can prove surprisingly flexible in allowing innovation and experimentation.

Emmis Interactive’s Esayian went further, insisting that establishing a comfort level among clients is crucial to a project’s development, and so a company’s survival.

“You want to get to the point where the client doesn’t feel the need to spec out the project before they talk to you,” she insisted.