Istanbul Is Building Gaming Giants

Let's talk about Istanbul. So Istanbul had another crazy funding round and they've had quite a few grand games, Good Job Games, Spike, Just Out of My Memories, but now Cipher Games. So, oh, Bigger Games also launched. Uh, so Cipher Games is a Turkey based mobile games developer and they've secured a $30 million in series A funding round led by the Rain Group and of course Play Ventures. Their game Match Squad is company's debut title currently in test launch stage in Philippines, Indonesia and UK. The company has previously raised 13.2 2 million across two rounds which puts the total funding of this startup at 43 million. It was I think established in 2022. Now there are metrics in Philippines, Indonesia, UK and the UK metrics. I'm only looking at

those because the other two are assume presumably tech launch countries. According to Sensor Tower, 92,000 downloads and $900 in net revenue since January. Uh these numbers of course are not very accurate at these stages but you basically understand the ballpark and you can kind of assume that this is not a funding based on ROAS which typically goes in series A unless you're in Turkey but Laura what is Match Squad?
Okay so rolling up my sleeves here. This was fun. I haven't done this in a while. So I I started playing the game [laughter] I've been heads down in Minecraft making Minecraft great or continuously great. Anyway, so I started playing this game and I was just like, "Ah, this is another match three, you know, royal match clone. This is lame. I don't want to be playing this." But take that feedback because not you Mishka, but I hope they listen because actually I was wrong. And the problem is their differentiation just falls a little bit too late into the session, the first session. So this game actually offers quite a bit of differentiation and actually hits on kind of an area that I

think is very interesting to explore, which is match three meet slots. not true slots because it's a die roll, but my guess is that a lot of companies have tried to do this to try to fully integrate a match three engine into a game loop that includes this element of randomness and I have not seen it done in ways that work and I think they actually have something here, but they do need to make a couple tweaks. So, I can't remember some of like the in the preamble or the the document there was a comparison to coin master and then I got I got on my high horse and was like I actually think this is closer to Monopoly Go. So, I'm going to share some of the pre-work just a quick visuals. So, a comparison between the building visuals of the three games, Match, Squad, Monopoly Go, and Coin Master, and then the slot/roll visuals, and they actually took a lot of inspiration from Monopoly Go. The UI and visual flows are definitely Monopoly Go. They have the same thing that all the games kind of in this style have. You roll, you have the different You have the different modes. You have attack, you have jackpot, shield, stealer, or heist. But what's

super interesting about this that I have not seen is that in this True Match 3 game, they tap into loss aversion that when you lose a level by that endgame purchase, right? You're so close if you don't pay for the level. If you lose the level, you're going to lose your win streak. You're going to lose your progression in live ops. Well, you know what they did? They actually integrated a layer into the roll mechanic that has separate live ops. So now you have like doubleduty loss aversion. And so it I thought this was brilliant. Not only are you trying to go for win streaks with your normal level progression, you're now trying to go for like any sort of progression, kind of hyping that up for your die rolls, too. So, they are tapping into now different cohorts of player types and the different types of player motivations. So, I thought this was brilliant. Now, my advice to them if they want to see this take off is you got to introduce this mechanic earlier. I'm not saying level one, but the fact that the immediate reaction is like, oh, it's another match three game. I feel like they're going to lose too many players in the early that they could capture because it's actually a really interesting game. Anyway, that was my

two cents.
All right. Well, thank you for the quick breakdown. Let me do an uneducated breakdown of what's going on. So, Mad Squad game looks like every game coming out of Istanbul. And this is with [laughter] with all due respect because games out of Istanbul are [ __ ] amazing. It has the dream art style and it has puzzle. And if you are an investor, you're connecting the two and two together. You're putting in Wait a minute. It's Istanbul and it's puzzle. Fund it. That's it. It's a fund returner right right away. Due diligence is done. And then of course the hook in this is the the coin master style attacking. You set more monopoly go, but you would kind of put it into a coin looter category. Yeah, the game has a pig. Just to make sure that you understand that this is like coin master. [laughter] The question is always is like how in the hell are you raising so much without the right KPIs to justify the raise and I'm putting it the right KPIs in terms of

usually in series A you would expect there to be rorowass metric against which you'd be raising money to scale your game right Josh
that's nice to have yeah that certainly helps
exactly but in in this case presumably there are no less example I mean there could be but again it's a small amount of revenue.
It's going to be horrible. Yeah.
Yeah. Yeah. So mainly we're talking about probably retention metrics at this stage. And so I'm thinking that there's three reason why a Turkish company in this case and this is not the only one fifth this year is raising tens of millions in series A. And I think that the three powerful reason is first of all it's reference when we think about Istanbul we think about Graham that sparked the interest towards the uh the whole ecosystem. Then peak kind of showed the scale. Then Rolley came in and showed the repeatability. And then Dream opened up all the floodgates with 5.5 billion dollar exits for VCs. And through that essentially the heat is on.

And when we're talking about location, Istanbul really redot and you're seeing series A investors like Rain, like Menllo, like Goodwater Capital, they need a piece of this action. They need they need a piece of of Istanbul. And so these early stage investors like Play and Laton and others that are coming in in that preede and seed kind of kicking off these companies, they're probably fomoing the [laughter] the serious investors out of their mind, giving them updates on on every update of a game, saying now is the time to come in. Let's kick off the round. And that of course leads to these very nice big rounds which is very beneficial if you're an early stage investor because you get a markup valuation of your investment increases and of course it gives more chances for the company to succeed to scale because CPIs in puzzle are not cheap and ultimately I think the reason for big raises like these is because of

the founder. So I give all the credit to the founder or the two founders of cipher games because in the end VCs interview the founders if the location is right if the references are there but in the end they have to make the gut feeling like is this the founder they're going to make it is this guy hungry enough are they smart enough are they going to you know leave no sterns are turned are they working hard enough and the Turkish founders are just on you know top of the food chain I don't see anybody working as hard I don't see anybody being so product focused, so detail oriented, so you know, willing to break down and understand the business model on every aspect. So that's really really driving it in the end. So that's kind of my uneducated analysis on this big funding round that follows other big funding rounds. As we said, Good Job Games 60 million, Grand Games 30 million. Spike I think had a 30 million series A bigger games had a 25 million and now a 30 million. This is like 2022

back again in Istanbul.
Seems really [ __ ] early to spend $30 million. But I guess the only thing I could say is I'm glad that you know the the registered investment advisors like A16Z and Lightseed are not on this one. [laughter] So it's like let's the other real real investors real like venture capital for gaming are involved. So go for it.
I have trouble seeing how you can make a game like this without funding in this style. my brain works in terms of return. The size and the scale, like how much data you need to build these games, like how much tuning and balancing has to happen that you can only do with like couple hundredk users. You have to dump money in there if you're going to try to go and get that that billion dollar game.
Yeah.
In this genre. Well, honestly, like you should see another round for UA after they optimize this thing, right? I don't think they're done. Maybe they're done. I don't know. you know, like $100 million. Like some of these people are raising that kind of money just for UA.

I remember Super Play was doing a lot of UA funding. So the general catalyst who was on the podcast, they were actually UA funding Super Play at scale. And before that, there's plenty of UA funding available.
This wouldn't be an equity buy. This would be like just a a a kind of a debt financing type thing.
Yeah, you do. The hard thing with debt financing is that, you know, GCE gives very reasonable rates and when they get into the smaller ones, it can be much harder to even achieve escape velocity. You know, when you're paying 20 30% irr, how do you cash flow enough as a business to to scale in order for them to really scale to a level which they'll be competitive with Dream and others? It's like they they're going to need more money is what I'm trying to say, right? And they'll probably get it through one of these other vehicles. All right.