Interview with a16z partner: What kind of chain games should the US$600 million game fund invest in?

This is a compilation of podcast notes. The host is Michail KatKoff, and the guest is a16z GP Jonathan Lai, who is in charge of investment in the game sector. The notes are organized by Cloudxgmf and 0xkapitalk, and Deep Tide TechFlow is authorized to compile and publish.

Jon’s background

1. Jon has always been a fan of the game, hitting the top 1% of servers in World of Warcraft’s Arena mode, eventually selling his account on eBay for $400.

2. In the early days of Riot, he worked as a product manager, building and delivering the “Riot API” to support companies such as Overwolf, Curse, Twitch, and more.

3. After Riot was acquired by Tencent, he joined the Tencent team full-time, responsible for mixed publishing, business development and investment. They launched the Wegame gaming platform, Steam’s main domestic competitor. He also leads the North American game investment team and has worked with Epic Games, Discord, and others.

Joined A16z 4.3 years ago, focusing on game investments such as Roblox, Singularity 6, Overwolf, RTFKT, etc.

About Games Fund One

1. It marks A16z’s long-term commitment to the gaming field for the next 10+ years through bull/bear markets, technology cycles, and different market transitions.

2. Double the size of the team and recruit people from Twitch, Discord, Youtube and more. A16z also has a strong team of functional experts providing value-added services in GTM strategy, business development, financing, talent acquisition and more.

3. The focus will be on seed and Series A rounds, but Game Fund One will not hesitate to double down on future rounds if the portfolio companies go well.

4. Games Fund One also has a strong LP (founder of Roblox, Discord, Riot Games, Blizzard, Skymavis, Twitch, Zynga and King). Portfolio companies can receive further assistance in:

1) manage their virtual economy;

2) Get in touch with Twitch streamers;

3) Performance marketing;

4) Test your game

5) Offers similar functionality to traditional game publishers, but without any standard commercial/revenue sharing agreements.

Verticals focused on by Games Fund One

  • game studio
  • Platform (Game x Consumer)
  • infrastructure

macro view

Games were originally a single-player entertainment product, and have since evolved into “online services, virtual worlds, creator economies, and social worlds, etc.” However, the good news is yet to come, and there are more innovations than ever happening in the Web3, Metaverse, etc. , AR/VR.

From the perspective of the game’s technology stack, there are multiple levels:

  • hardware
  • Infrastructure layer (eg game engines: Unity and Unreal)
  • Application layer (eg: the game itself)
  • Consumer layer (eg: Discord)

How does A16z choose to invest?

Focus on founders vs. focus on creativity

When Jon was at Tencent, they had a team of 100 people (Game Evaluation Center). They are all very smart and very good at playing games, their main job is to play every game well and write a detailed report, but 95% of the time they misjudge the success of a game, such as PUBG, Fortnite and Auto Chess.

The most important part of a successful company is the creative change of the team and the rise and fall of game types, good founders/teams can adapt to the market, so what makes founders and how do you evaluate them?

New Teams vs. Veteran Teams

The freshmen team is good at product innovation. As the so-called freshman calves are not afraid of tigers, they have no preconceived notions about what they can and cannot do. The key point here is to pay attention to their progress and speed.

1) Freshman teams make mistakes, but can they learn quickly and fix them?

2) Can they extend a funding round and launch multiple prototypes?

3) Does the founder have the recruiting ability? (Example: Zucc is a nascent founder but has the ability to recruit Sheryl Sandberg et al as COO of FB)

For senior teams (who have released games before), they know what they are doing, have strong recruiting skills, and have financing and product execution capabilities. The key here is to see if they’re willing to learn new things, or if they’re still stuck in the same playbook, and if they can fit into a startup environment (given that many have worked at large game studios/publishers before) .

For example: Given that they no longer have the unlimited resources of previous studio/publisher closed betas, if they created AAA games before, do they now play the games that people are currently playing?

How fast are they creating? Do they have a GTM (Go to Market) strategic plan?

at the macro level

A16z are long-term investors and market cycles do not change their investment strategy. The gaming industry has a better chance of surviving a recession/bear market, Jon sees gaming as counter-cyclical. Why?

As people’s incomes drop, they have more free time to play games, the cheapest form of entertainment.

Gaming is also a great form of keeping people connected.

So on Web3, regardless of the bear market we’re currently seeing, A16z is still bullish for the long term as they see this as the next big thing for the internet. Jon’s personal assumption about Web3 is that it will eventually become a technology stack that will be a long-term part of every game, just as cloud storage is part of the main technology of every multiplayer game today.

For chain games to be accepted by players, what needs to happen in the short to medium term?

Chain Games, which eventually attracted 100 million players, is an innovative game that focuses on entertainment, and it is also a new game category and mechanism that just works on the blockchain.

Jon’s personal assumption is that this is not a P2E game where people come in and make money as one would expect, but just because it’s fun and some part of the game is running on the blockchain (such as trading NFTs, etc.). The revenue of the game may come from the decision to sell some advanced weapons or rare skins in the game to other players after you understand the game.

If you go back 10 years and ask investors what was the most successful mobile game, no one would imagine a game like Pokemon: people walking around in reality, using AR technology to capture Pokemon.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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