Greycroft | Venture Capital Funding of Game Companies

every one venture capital has been integral to the founding and formation of some of the most successful gaming companies today from Riot Games to supercell to Electronic Arts and companies like twitch and discord some of the most successful gaming companies as well as game ecosystem companies were founded on the back of venture capital so how does one raise money from a venture capital firm how would you reach out to them what do those companies look for - for investment well today we speak with Joey Juan who is an early stage investor at gray croft which is one of the most well respected venture capital firms focusing on the gaming space and so with that let's take it - Joe you on right now [Music] everyone I'm here with Joey one from great crop capital Joe I thought we could first start by having you just introduce yourself a little bit and then talk about very crossed in terms of what does great cross do yeah sure they so as

an interruption in show I grew up in Atlanta and then with a school in Chicago worked in finance for a couple of years and then went to business school on the west coast in Stanford and then came down here and joined Greer Croft Greg Croft is an institutional VC fund based in New York in LA that looks at generalist Series A and growth opportunities for funding I spend most my time on a separate vehicle called the GC tracker fund which focuses exclusively on gaming eSports and via VRA are at the seed stage level so this variety of different stages of funding available generally start off at the seat or pre seed stage and then you move on to your Series A Series beginning additional stages afterwards so I like to spend my time on earlier stage companies as you get more exposure to management and you get to shape the future of the company a little bit more so it's been fun awesome and can you

talk about like a new great product has invested in a few game companies could you talk about some of those investments yeah so I think the biggest company that great craft has invested in on the gaming side that's been scoped Lee so a mobile game studio based up here in LA the investment was made before I got here but I think they started off really early on with the company and followed on through a couple of stages as well and some of their nervous nobo games are the Star Trek mobile game they've done a Walking Dead mobile game and Looney Tunes mobile game as well so that's kind of the biggest claim to fame and create froth from a gaming side and then there have been variety of others on the sea state side which are still developing their product or silver Lee in the collage as well and for our audience you may not understand you know the sort of the influence or the impact of a lot of venture capital companies in starting new game companies could you talk about maybe something more well known game companies that have received

venture financing and like what rule does venture or how how often do venture companies get involved in in starting like the bigger game companies ever yeah I would say ventures biggest role in gaming has been on the mobile gaming part I would say the biggest success stories are companies like supercell Rovio even companies here in LA still play in gem city pocket gems up in the Bay Area so I think the biggest success is for gaming venture capital it's been in mobile and that's partly because there was an introduction of a new hardware that disrupted the way players interacted with content other success cases have been Riot Games now here in LA what's venture back PC and console has been a little bit trickier because the revenue streams were traditionally very well tool you enough a couple years of nothing as you were going through game development and a massive spike in sales and that's just something that most

venture capital funds are not really comfortable with I would say they like steady state revenue your your growth and that's just in predictability and that's just hard to have within the traditional gaming model so PC and console has not been super disrupted by venture capital I would say and then the other aspect companies like discord twitch secondary not related to content it's interesting to see venture has played a pretty big role on the gaming industry but it's been in certain scenarios and non-mothers got in it in terms of like you know during that really days of social there was like this big wave of investment and social gaming companies and to your point a lot of mobile gaming companies there was this big Russian investment itseif there was a period that investment kind of slowed down from a venture perspective now there are you know a few you know southern california-based companies whether it's bonfire or second dinners and companies that are getting that you're financing or you know at least big corporate

financing can you talk about the current state of venture investment in gaming companies what were the current trends and what is the current environment like yeah I would say I think when the the stage you were talking about where there was a rush of investment capital that flowed in I would say there are probably a couple of people that were unsophisticated and probably didn't understand and just saw all the rush come in and decided to jump on board and realize quickly that maybe this isn't something that they should get involved in once they realize that dynamics related to the opportunities I think it's a lot healthier now where it's the people that understand what they're getting into especially on the mobile side where metrics are proven out customer lifetime value you can kind of solve for customer acquisition costs and so I think it's made for a healthier environment now and there are now being dedicated venture capital funds which probably didn't exist five six seven years ago ourselves on the seat stateside there's firms like makers fund

and big craft is solely focused on eSports and so there's a few more opportunities for people to invest that are solely focused on the industry and understand it really well so I think it's a healthier dynamic now and then you also have different players in the space now with kind of banette ESA's and the $0.10 of the world getting involved early as well so I think it's a great time it's a great time for the industry and it's certainly something interesting for us to look at and for us maybe some folks in the audience who are interested in raising financing for their you know for the game studio what are some of the things that as an investor that you look for like what does it take to raise venture financing or to be attractive to you yeah I would say the biggest thing overall is when you're looking for funding is to make sure you're able to get the investor to understand your broader vision your message and what success looks like for you as a company that's like the the

overall goal of what you should try to target with your pitch in terms of like key factors that we look for specifically I think prior history of success in terms of launching a game or being a part of the team that has launched a game because it's not easy to get to that finish line and it's something that people can talk about and say oh we have this plan but when push comes to shove and it's kind of launch date sometimes people deliver and synthetic people don't and we want to see it a track record or that the other thing that we really like to look for is we don't want the company to go into an oversaturated market so we look for the competitive dynamics around that particular genre game that they're trying to build or a type of company that they're trying to create and making sure that there's not a bunch of large players out there already for example if you were to go out and pitch I'm gonna make a shooter battle royale is like why would you why would you try to do that or a match 3 game right now there's a

lot without my fee it's tough right now and so those are some of the key elements that we look for making sure you have some sort of different make sure they're creating value and then you have a differentiated approach to capturing and maintaining that value for your organization then you mentioned this trackers fund where you're focusing on sort of early-stage investments can you talk a little bit more about the opportunity that you're seeing and what what kind of companies are specifically looking for yeah so in general we're pretty flexible there's no well the verticals were focused on our gaming eSports in VR AR and traditionally it was built around looking or continent developers but it's not solely focused on that and so for VR a are actually as Hardware adoption has proven to be a little bit more challenging although there have been positives around off this quest release last week or two weeks ago or whenever it was that has actually become more of a b2b investment platform where we're looking at investing companies that are transforming healthcare or training or

other aspects within businesses and then on the gaming and eSports side you know we like content developers but we don't have to we've invested in companies that are for streaming for example a company called sliver who the message a company called robot cash which is helping with game distribution and so we've done a variety of different things but I would say the core focus has been content development and that's what we try to look for when we look for teams and then in terms of how you're sourcing you finding companies to invest in what's your general what does the process look like yeah so part of it is there aren't that many gaming investors out there so a lot of it does kind of flow in Bown but in terms of sourcing for me when I look for content developers I check steam Kickstarter I'll go to all the conference events like hacks and games comedy 3 which is coming down to LA soon

so that'll be great and GDC and we'll go out and we'll try to meet as many developers and continue to build that Network and find talented game developers it's not easy but it's something that we work at every day and it's it's kind of a new thing within the gaming go system traditionally you would just get funding through your publisher and you give up a royalty we offer a kind of a different value proposition that I think a lot of developers don't 100% understand we've talked to a few where they they're like okay how much money you're gonna take away from us every time we sell the game and it doesn't really work like that you know we get equity ownership in your company so we win when you win and so it's a different value prop so we kind of have to go out there and sell a different model than what's traditionally been out there and so it is kind of there's kind of a learning process associated with it but it's been fun it's been great reaching out to all these talented game developers and trying to help them think through their next phase of growth and development maybe we could talk a little bit more about that aspect in terms of sure

there's like the financial component of investing in companies and helping them out but you talk about other you know other benefits of having you know sort of a sophisticated venture fund invest in a company what are some of the benefits whether it's beautiful relationships or whatever yeah so I would say the the biggest things that we help out with our introductions to partnership opportunities My partner jungle woman that I work with Ren Foundation Nine Entertainment which was one of the largest independent game studios in North America and today it's a wealth of connections within the industry can open door so many different people and also help out with the hiring process because it's pretty important you can outsource a lot of stuff but you gotta have the right management in place and right key key personnel and so oftentimes will also help introduce two key hires the other thing we kind of help out with is we do share relationship with Skybound

and so alongside funding if you need marketing or publishing support we can kind of lean on I've got down a little bit for help and help introduce different aspects that benefit the game developers and then I mentioned that we don't just invest in content creators we have a variety of different companies the other benefit is that there could be mutually beneficial relationships within the portfolio that we can help introduce people to so for example one of our companies helps with matching games with influencers and making sure they can help market the game and build views and help sales and so if some of our content creators games fit a profile for Twigg viewership or youtube viewership it's an easy way for them to and it's put marketing dollars to work and enhance sales for the organization so there are synergies within the portfolio that we try to help introduce to as well so those are a few we got in for kind of going back to like maybe someone in the audience has a game studio of watts funding wants to contact

you how would they kind of contact you and what should they actually prepare in terms of materials whether it's a presentation or whatever to present to you so that you have a better sense of whether you want to testify yeah so I would say if you want to reach out to me find me on LinkedIn jo-eun or you can email me at Julia necrocraft comm but what we typically look for in terms of materials from an initial meeting would be an investor presentation where you have gameplay video or graphics or pictures depicting what you're making kind of understanding what your team is what your backgrounds are and with overall vision for the company is and funding needs associated with that and so just the basic presentation to understand the nuts and bolts of what's going on we oftentimes it also asks for a game design dog if it's well banked and far enough along for us to review and then if the process continues sometimes was for reference

calls with people that you've worked with before or teams that need work with prior so we can get an understanding of who you are as a as a person as well as a CEO or management team member and so those are a few of the key elements that we look for but a lot of times your body of work will speak for itself as well so if you've published a game or I'm sorry to develop the game beforehand that's oftentimes a lot of what we dig into as well so we'll play what you've done before and get a overall view of your body work and then just thinking a little bit more high low more strategically as far as a venture capital industry relative to games can you talk about where do you see this play out in terms of you know like key trends or how the industry may change with respect to venture capital for investigating games yeah I think it's it's it's a I wouldn't say there's a great answer for that it's hard to say how things are gonna shape out for

overall venture capital the gaming ecosystem I think people got really excited about gaming you can see that in the public markets as well over the last couple of years when people start talking about games as a service and recurring revenue and the ability to monetize players really well I don't know if that's necessarily the healthiest thing for the ecosystem as you're squeezing a lot of valued other players and some of them are starting to get a little bit upset about it if you look at reddit you look at what epics game store has done and people have been a little bit upset about that as well and so it's interesting we'll see how things progress I will say that there is an abundance of capital available if you are a talented developer and so you can raise money if you are skilled and talented and can create a great product and have shown that before uncertain about how it's gonna shape out in the future I really don't know you have 10 cents and that eases of the world coming

in at the late stage and also wanting to get involved in the early stage then you have major capital funds that are looking to finance you at the seed Series A Series B or even growth level and so this variety of different funding sources I don't know what's and then there's a traditional publishing funding as well and so really I'm sure how it's gonna work out but I think whatever it is it's going to be great for the content creators cuz you're just gonna have a variety of options to choose from it you can kind of pick and choose how you want to fund and feel with the growth of your business and then just kind of going back to you you know you talked a little bit about through your background career but could you talk more specifically about how did you wind up at great economy why did you want to join the company yeah so for me before coming here I mentioned I was in business school I went to business school so that I could transition out of that industry that I was in before so I worked in the oil and gas industry doing this and making in private equity so focusing on the financial side and I enjoyed it

but it was an industry that I was particularly passionate about or felt connected to and so I went to business school and wanted to kind of figure out you know where I saw myself in the next five or 10 years and things kind of always came back to game I was always watching twin chimes all over million video games and they were a lot like I mentioned earlier there are a lot of interesting things happening in the sector whether it was a sports or games as a service stabilizing revenues and growth in Asia and mobile and then now we're talking about cloud gaming and ding screaming so there was always a lot of interesting trends emerging so I got really interested in it so I did a summer internship doing product management for a mobile gaming company and then decided I wanted to kind of bring what I had done before school with what I loved and so wanted to bring investing and gaming together there weren't a lot of people out there that are doing that and so the options were

kind of limited but I will say like I noticed grey cloth was doing some stuff in gaming and then I found John was you know a seasoned gaming operator and had a role like recrop as a partner and so I reached out and this opportunity worked out and so that's kind of how I chose it was more based off of you know there weren't that many options to choose from if you wanted to get involved on early stage investing in gaming there were only a few companies out there and so fortunate that things did work out but yeah it was more just a few opportunities out there that allow for something like this at last question for people in the audience who are interested in the venture capital industry and especially with respect to like a venture capital firm investing in games what advice would you have for them to be able to transition into the better role that you have now yeah it's it's hard to give a perfect answer because my path was a little bit non-traditional I

would say most venture capital firms prefer people that have experience on the entrepreneur side so maybe going and trying to build your own game or start your own company understand how companies are run and then the other side of the way in the venture capital is through traditional consulting or investment banking where you kind of buildup evaluation or an analysis skillset and then afterwards transition the industry kind of narrow in on your vertical focus that you want to spend time in so you can kind of pick and choose which route you want which route you think is better suited for your individual skill set but those are kind of the two more traditional methods for people that get involved in venture capital and investing but you know there there is no perfect path I would say I think everyone has a pretty unique way that they've got into venture capital most of time so especially in the gaming side of things because it is so new and so different okay great well those are all the questions I have thank you very

much for attending [Music] [Music]