Earlier this week I spoke at a founder’s event for a gaming VC.
Once a year a fund will do a roll call among its portfolio companies and have each of them talk about what they’re doing and how that’s going and, hopefully, provoke some new relationships. To be candid I’m not too well-versed in this part of the ecosystem yet. I have experience raising a round, yes, and I kissed all the frogs. But I don’t really speak finance. Not well, anyway.
From the outside looking in, venture capital always felt like a handsome bartender. As you’re standing at the bar hoping to buy a drink, you try to catch the eye of the person serving drinks. Their power is absolute. And so you stand and wait and smile in the hope that they will eventually serve you out of sheer benevolence.
But sitting on this end offers a different perspective. Two things stood out.
First, the showcases varied from figuring out what the ideal composition is for a creative team to leveraging AR for sneaker heads to reimagining the connective tissue between fans and sports. Interactive entertainment has ushered in an era in which consumers play with technology. It tells you that life online has only just started.
There was a deep consistency across the board with most attendees working on some version of an answer to the same question: how to channel digital creativity. Think of a VC as a graduate program. Your thesis or academic inquiry will fare much better if there’s enough other people in your program also working on related problems.
Second, being an entrepreneur is not a pissing contest.
I suppose on some level there’s a million startups competing over resources and trying to get funded. Therefore, as a small fry or starting business, you need allies both inside and outside your organization. Before you worry about product market fit and beating the competition, you need to be building relationships. That means keeping your promises and being accountable to your customers, your crew, and yourself.
In running the front of the house at SuperData I’ve always relied on my bullshit meter in conversations. Hearing some blowhard founder or corporate employee go off about how infallibly amazing their firm is offers a clear indication of imminent failure. You’re supposed to run a company, not a cult. To execute on your brilliant fucking idea you first need friends. So be the business partner to others that your company needs.
As I’m learning more about my new role, it seems that venture capital isn’t about just giving out bags of money in the hopes that a few make it big. It’s about building relationships between your fund and a group of like-minded people trying to solve adjacent problems.
Let’s call it friendly capital.
On to this week’s update.
Tabletop games bloom
With so much racket around Roblox and others it is easy to overlook analogue games. Sure enough, that Netflix series The Queen’s Gambit triggered a sales spike in chess boards. The US Chess Federation Sales now only has the $6,000 boards left in case you were hoping to impress all those people that can’t come to your house right now anyway.
According to its half-yearly report, Games Workshop delivered a “cracking performance” with revenues for the period ending November 29 reaching $256 million (£186.8) up +26% from $203 million (£148.4). What stands out is that Games Workshop normally relies on its retail network: its 529 speciality hobby stores are a critical analogue moat where novices and experienced players congregate to play. With its stores either restricted or closed during the pandemic, its fanbase ordered online instead which resulted in a jump of +87% via online channels. Dissemination is important, yes, but content rules all. Not unlike Disney, Games Workshop has invested in vertical integration and managed to open its second factory during the pandemic.
It bodes well for Hasbro which is scheduled to report earnings on February 8th. I fully expect subsidiary Wizards of the Coast to deliver on some record-breaking numbers; people everywhere have rekindled their love for playing tabletop games like Dungeons & Dragons.
CD Projekt Red’s impeachment trial
After over-promising and under-delivering, senior management at the Polish publisher now faces a string of five lawsuits by investors and is under investigation by Poland’s Office of Competition and Consumer Protection. Meanwhile its share price continues to limp around $16 after hitting a high of $31 just prior to launch. The firm promises to take “vigorous action” to defend itself by blaming QA. Imagine having spent all that extra energy into development instead.
Ubisoft collaborates with Lucasfilm on new Star Wars game
The French game maker announced that it’s going to be working on a new story-driven open-world Star Wars game. Massive Entertainment, best known for The Division franchise, will be doing the heavy lifting, while EA figures out why it doesn’t have an exclusive license anymore.
FTC eyeing Apple and Google for “squeezing developers”
In just four pages, the Federal Trade Commission set the tone for the year ahead. It reads:
“when it comes to addressing the deeper structural problems in this marketplace that threaten both gamers and developers, the Commission will need to use all of its tools – competition, consumer protection, and data protection – to combat middlemen mischief, including by the largest gaming gatekeepers.”
Platform holders have been put on notice.
Twitter’s two billion gaming tweets
I’m unsure how to interpret this rankings based on tweet volume. It translates to about 3,800 tweets a minute, which doesn’t feel like that much. Suffice to say that with this year-in-review Twitter is buttering up the games category.
Years ago, conventional firms would hire a 20-something intern to “do the social.” I predict the emergence of a new employment category (“Head of Gaming”) for people that manage the category for big brands. “Our data indicates…” Sure it does. But where, pray tell, is Among Us?
Sony unveils its secret plan with Epic
By sinking $250 million into his firm, Sony was likely looking to strengthen its ties with team Sweeney. As a consumer electronics firm that owns a wide range of content (e.g., film, music), it now plans to use the snazzy new Unreal Engine 5 to create immersive experiences that emulate large concert halls. The write-up is filled with self-congratulatory corporate hyperbole, but I must admit that a dedicated effort to create something that offers a high-definition, quality experience might just be what the doctor ordered.
Nvidia under scrutiny over Arm deal
As it is bragging about DLSS at this year’s CES (remember going to that one?), the UK’s Competition and Markets Authority is getting ready to investigate Nvidia’s $40 billion acquisition of Arm. The objective is to determine
“the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive or lower-quality products.”
The investigation is scheduled to start later this year. Nvidia is currently trading at $541/share, more than double what it was during its low point in 2020.
GameStop is back in style, momentarily
Last year I speculated that GameStop was up for grabs. Its share price skyrocketed from $2.80 to $36 yesterday. My prediction then was that GameStop wouldn’t make it until the end of the year. Okay. Fine. Covid and the new console cycle obviously changed a lot of that. And possibly there’s some merit still to its deeply entrenched skillset as a specialty retailer. What worries me is that the bulk of articles and commentary from GME’s leadership talks about shorts squeezes, share price fluctuations, and other investor gobbledygook. Their share price may be up, but I’m not convinced yet that they’re focusing on the right thing.
Money, Money, Numbers
Israeli game maker Playtika is eyeing an IPO valued around $10 billion. The company has nine games ranking in the top 100 highest grossing mobile games in the US. According to the company, 2020 was a good year: its revenue increased +28% to $1.8 billion, daily active users grew +15% to 11.4 million of which it converted 290,000 to spending (2.5%) for an average revenue per DAU of $0.57.
The UK’s Entertainment Retailers Association stated that the Brits spent $5.2 billion on gaming in 2020 (+14% y/y), which was split between $817 million in physical and $4.9 billion in digital sales. The latter category was up +16 y/y.
Play. GamesIndustry put together a list of individuals and organizations “working in diversity, accessibility, charity, mental health, progressive politics, uniting communities.” Worth a read!
Play. Well, it’s more of a want, really. But Razer’s ambition to design "the world's smartest mask" looks delicious and perfectly matches my shiny new Stealth Blade.