Am I allowed to make my own VN engine (standalone and generic, so it'll probably work for other VN's) before the event or does that count for work into the VN?
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Yes, you're allowed to make an engine to make your VN in before the start date, so long as you're not working on the VN itself beforehand! Like no working on art assets and dialogue that will go into the game before the jam starts, but making sure the engine doesn't immediately crash on startup is another thing entirely.