Jason Chapman: How Konvoy Ventures Invests in Gaming

[Music] hold up [Music] hi everyone and welcome to the metacast by novik a podcast in which we explore the business and future of video games I'm Aaron Bush and in this episode I'm excited to host a conversation with Jason Chapman Jason is a co-founder and managing partner at Convoy Ventures and fun fact he was also one of the very first people in the games industry to stumble upon my my early work with Master of the meta which is now navic digest two three years ago and he was a great source of encouragement at the time that I'm still thankful for so Jason I'm really looking forward to catching up today and learning more about all things Convoy welcome thanks for having me Erin I I have one

question for you though what subscriber was I what was the number do you know I think you were probably within the first like 100 or 200 you were very early oh I I love that yeah I love that very early I was I was mainly writing to myself for quite a while and then it eventually started picking up but you were one of the very first people in there which I I was celebrating at the time it was awesome I remember uh going through the backlog too and I sent that to my whole team um and I remember how I got connected with you is somebody quoted you in another newsletter which I cannot remember what it was and I was like who's this Aaron Bush guy um and man I have been reading your stuff ever since so if you don't subscribe to navic they put out a lot of great content so this is my Shameless plug it's an early supporter of the navic ecosystem well I appreciate that and I'll let you put a Shameless plug for your stuff um in in a bit but maybe to to get the conversation started let's go ahead and

and set the the foundation of um what you're working on today how you know how Convoy came to be and then we can dig into how you're thinking about investing you know future Trends all that kind of stuff so to start let's just start with what what was the story of Convoy how did it get started yeah um we have a very untraditional story for launching a fund um you know typically when you hear of groups that launch Venture funds there's kind of two more more common known stories one is I was at Sequoia I was at Excel I was at a big fund and you know I was a principal or partner there and I had a slightly different perspective on where I'd want to launch my own you know thesis-driven fund and so I rolled out that's one pretty common story the other very common story is I'm a Founder at a huge exit and I love my space and I either want to invest into people that I know personally and start that way or I have

a thesis of where I think the world is going I want to watch fun those are both great stories those just happen to not be our stories at all um so personally I grew up as did my two other co-founders Josh and Jackson oversees his kids so we grew up moving every two three years in mainly the developing World across Africa Latin America and Asia and part of our upbringing that was huge was you know in some of these countries gaming is extremely popular also it was also a source of entertainment for us and some some more remote regions so I'll tell you gaming is a near and dear to my heart for a lot of reasons but one is it's a huge part of the way that all three of the manatee Partners grew up and it's a slightly different unique lens on life so I like to highlight that too is you know we grew up in places where games was often the way that we connected with people that we didn't and speak the same language as right you know moving every two three years to different countries um that was a big part of our story

so that's our backdrop you know all three of us came to this to the states for for college uh we stayed we all went in different directions um post college but my my own story and personally was I went into IBM I went into a product and Engineering role and also in some research functions and while I was there I focused predominantly on machine learning applications within Enterprise and I was on some of the early products and research teams for that deployment and happened to get to interact with a lot of games companies while I was actually at IBM and that was sort of the Genesis for what is uh Convoy today and not too similar to you Aaron me and my partners we watched a newsletter where we started writing about the industry and we did this in 2016. we started writing this newsletter to get our thoughts on paper a lot harder than I initially thought it would be I have a lot more respect for Avid writers than I did before

um and we started writing and one thing kind of led to another and similar to you Aaron I had a bunch of people start reading our content that honestly um I felt like I had no business writing to these people um they were you know you know Aaron you were more qualified to write to your audience than I was um we're writing to this this group of cohort of people saying hey look we think games um you know it's almost a Surefire bet more people are going to play video games tomorrow than they do today and we think a lot of people are focusing on the wrong wrong side of that that we think people are taking unnecessary risk in extremely focused on content investing and we think there's a massive play for a technology driven firm to invest into the underbelly of this massive and growing ecosystem and uh you know honestly a lot of our first LPS came from that newsletter and you know I I would be lying to you Aaron if I ever told you I thought it'd be a fun manager I thought I was going to probably be an engineer or a product the rest of my

life and I loved it I still love that it's a huge part of like my my story in DNA but that's what what led to the eventual launch of Convoy in 2018 yeah I love how you just never know where life will take you and and some in some of these directions but really happy that life took you down this path because it's been fun to watch the development of Convoy over the past few years um I guess next I would just ask what is the state of Convoy today you started in 2018 but Zoom us forward four years where are we in 2022 man a lot A lot has changed since the newsletter uh launching in 2016 and the eventual fund launch in 2018. so fund one uh for us was just about 11 million bucks uh which was you know in in the Venture Capital world is is quite small um 11 million dollars still sounds like a lot of money to me personally so for those listening uh that that still brings true for me as well um we've then launched fund two in 2020 uh that was a 65 million dollar fund

um and then we just did uh launched fund three actually this summer which is 150 million dollar fund um and so across those three funds and then also we have a couple other special purpose vehicles um which is you know to to simplify that for listeners who aren't as familiar with that essentially it's a vehicle that stood up for a high conviction opportunity um we've done that four times uh we have a you know total AUM of about 270 million across the firm so that's kind of our Capital basis um the next thing I would highlight is you know we've got a team of seven full-time team people on our on our roster thankfully you know we have been hiring people are a lot smarter than the three original Partners so we're getting better and better which is always what you should do um and I'm really proud to say we've had zero churn um so in the four years since we launched the firm uh every single person that we've brought on it stayed and that has been fantastic so we've loved that it's a huge part of our culture we're based here in Denver Colorado which I always shocks people

um I'll tell you the dirty secret of why we're based in Denver um is all the partners were actually kind of all over the place at the time we were all three in New York City I knew New York City was not for me long haul personally but I married a girl from Colorado and she uh she was the impetus for us moving to this wonderful State and I don't think we're going anywhere and so what does that mean as a gaming fund based in Colorado um it means we travel a lot so that's that's kind of the the honest honest take there other than that you know we're really proud of our team that we've accomplished we've done you know roughly about 40 deals to date we're doing roughly about you know we're going to talk about pacing later but we've done about 11 deals a year which has been fantastic and I don't see that slowing down awesome yeah that's great to hear your story and congrats on all the success so far let's dig into your investing strategy and how you how you think about running your your fund a bit so your

website says Convoy Ventures is a thesis driven Venture Capital firm we invest in the platforms and Technologies at the frontier of gaming so let's go ahead and break that down into a couple parts to start what exactly do you mean by thesis driven does that mean that you take concentrated bets like I was looking on your website and you've invested in five new businesses this year um or do or do you have a different way of thinking about that what does it mean to be thesis driven yeah to be thesis driven in our definition of it you know you probably get you know 10 answers if you ask 10 people but you know our definition of thesis is we have guard rails around what kind of fits the parameters of an investment that we're going to Target right and so you know there's some really easy ones like for instance if you know somebody came into here and pitched me a you know food startup I would tell you hey that's just out of scope that's out of thesis that's a pretty common response for us to tell people hey it's just not in scope um those are the easy ones the the

harder ones are typically when you see things that you know maybe it's ten percent of what they're doing is in gaming and then 90 isn't it's like is that a thesis fit right um and so for us we Define our thesis as a fund that is focused on any technology platform uh that is that is supporting the underbelly of the ecosystem um and so for us we look at you know how do we find the next Discord how do we find the next Unity how do we find the next twitch that is the type of stuff that we're focused on as a firm um and so that's how we Define thesis um things that are out of out of scope and out of thesis for us within games as well is you know pure content Studios and I know we're going to talk a little bit about this later but you know if you come pitch us a you know free to play mobile studio um that's not going to be in thesis for us at this time we've decided to shy away from content investing and there's a lot of reasons for that but I'll save that for a later bit in our conversation okay so just to clarify it um thesis

driven in this case it's more about um scope more so than concentration right yeah so for us this from a definition of thesis it would be like kind of the profile of investment more so than like the structure um if we're going to talk about you know pacing and structuring like this is something that we actually obsess over is um and we look at this as kind of like the Cornerstone of your business and operations right um a lot of firms have different opinions on this um and I honestly think that the best answer I can give you on it is do what works well for your investment team um we have done a deal about every four to five weeks um over the last uh close to 36 months now and that that has been the pacing that has worked for us a lot of people allocate a lot faster than that some allocate slower and I'll tell you you know we we had a big team meeting on setting pacing for this next year and it'll be comparable to what we've done in the last year or the year before this is obviously a really

um topical thing to discuss for most Venture funds as we enter into a recession which you know we as an opinion as a firm believe that we are in one um a lot of people do not believe that but we believe that the signs are pretty clear that we are in it or have been and actually for longer than most people want to admit um and so for us this is a huge part of our structuring for what we think we're going to do as a firm going forward right that makes sense um and then the second part of what it says on your website that I wanted to break down was the the platforms and Technologies side uh which is your focus um so yeah I just want to ask why that Focus but also why is the industry now ready to support a VC firm that specializes in the non-content side of Gaming yep absolutely absolutely this is a great question and one that I get asked a lot of the time from perspective LPS into our fund and so Aaron I'm just going to pretend like your perspective LP I didn't know right getting money out

of this conversation that's great um so all right so let me just break this down our Logic on why we think this is merited at this time um so there's about 7.98 billion people so 8 billion roughly in the world three billion of those people today play video games so it's about 38 of the World plays plays games we think right there and then uh 38 of the world doing just about anything merits and Demands a fund that is focused not on the content but on the picks and shovels of that industry so just on on underbelly to get even more detailed on this about 10 000 games were released on Steam last year about 984 000 of the apps on the App Store are games I think it's 442 000 of the apps on the Google Play Store are games there is a lot of content out there in the market it is really hard for us to see or justify that that says you're entering into a blue ocean with content

it is very rare it's not unheard of but it's very very rare and for us we look at that as the most crowded side of this market right and and it's very logical for why it's crowded right it's it's because if you hit you hit big you know look at fall guys look at fortnite you know look at Call of Duty there's these are all great you know piece of content rocket League that you know some of them kind of came out of nowhere especially like a fall guys or a rocket league right those came out of absolutely nowhere and took the World by storm and were incredibly scalable games today are incredibly scalable which is amazing we take the approach that hey most people in this industry focus on this industry on this side of the industry which is content and the next thing we'd say is it's also the most red part of of our industry and we kind of have a joke internally we say that content is redder than the Red Wedding in Game of Thrones and I think that is for those who have watched it uh you know I'm gonna give you homework go watch this this TV series it is fascinating

um but for us that is why we focus on what we do so it kind of to give you just like the the one-liner it's it's less crowded and this industry demands it because so many people in the world play these games gotcha and what type of platform and technology companies around gaming are you looking for are you looking at like the bleeding edge with web3 around traditional games um like do you have common attributes or checklist items that you're looking for like what what type of companies make an ideal Convoy investment these days oh man okay there's a lot there uh the answer would be we look at all of it um so you know last quarter for instance we saw just under 700 deals hit our desk and these are deals that aren't you know non-like just kind of nonsense opportunities hitting us on LinkedIn we're talking about actual opportunities within games um you know about 50 of those are

content first deals so Studios and the rest would fall into what our thesis is right so within those roughly 350 opportunities that we saw last quarter that hit our thesis um we're looking at everything from you know what's at the bleeding edge of what we kind of call gaming and X so we spent a lot of time on gaming intersecting with another industry so this is something we've invested into quite heavily like you know we can talk about like gaming and education is one that we love so we have a thesis personally that gaming will eliminate the textbook and you know the way that Aaron you and I probably learned how to do just about anything in in you know Academia will look dramatically different in about 10 years because these kids today are spending more and more of their time and in Virtual Worlds why shouldn't their real world education emulate how they choose to spend their free time and so we've pushed a lot of money into this we have several bets in this one I'll highlight to you is Legends of learning

this is a group that about five percent of elementary schools in the US use today and they send us sit as an intermediary that teachers can select content that is produced for their platform and it it just works I think that you know for us we think gaming can teach a lot of Industries how to manage engagement better and that's something that we've spent a lot of time trying to figure out and we think education for instance is one of the perfect places to start so that's that's an example of like one thesis that would be great for us I would tell you this is true across real money games this is true across Healthcare something that we've spent a lot of time in as well gaming at its Crux and what I've tried to Define for people more often than not is get out of your head and the the concept of a person in their basement playing you know Halo 2 by themselves or whatever it is like I love Halo 2 one of the best franchises ever made um but personally like that is where most

people think games are today and I think that is so limiting in scope and I say no games games is about engagement it's about fun it's about learning it's about building skills that can impact your real life too and I love that about games right and so that's always in scope for us um here at Convoy right and I guess putting Trends aside for a moment are there you know for the deals that do make you excited and that you you generally do um fund are there any common attributes or like checklist items that like really stand out like if there's a team um or a few teams listening to this episode that are interested in having you as investors like yeah what are those common attributes that that you would love to see for all of these um startups to be thinking about man uh right you know right before they sold on with a founder and I told him you know the vast majority of the reason we will pass an opportunity is we typically do not think that it's either one of two one of two things one is we

do not believe the market that you're going after demands Venture dollars and so I always I always kind of clarify that is that for us we are hunting for massive returns you know my team is not hunting for uh you know I gave you a dollar you gave me 10 back you know that's a that's a good outcome that's not what we're hunting for we're hunting for I give you a dollar you're handing me a hundred back right and so I always clarify saying it doesn't mean it's a bad business it just means it's not the right business for us but that is a common reason we will pass the market opportunity is not big enough the second reason we often pass um is the team pursuing it we do not believe is the best team in the world to pursue that opportunity and so I could go pursue and start a lot of things and do okay at it for instance I love pizza can I open a pizza the shop maybe but am I the best person to do that I have no professional culinary training absolutely not you should never give me money to launch a pizza pizza spot often you know we see a lot of Founders doing

something comfortable where they see a great Market opportunity they're not wrong but they're not their best group to go after it right and that happens a lot so we look at Market op we look at the background of the founders which is honestly everything I will also tell you we we like to back people that uh we want to win so I know that sounds a little simplistic but um it is often hard to help people that might be brilliant but uh you don't want to necessarily see when in the world um and so we we do have this policy at Convoy that we want to see these Founders win um and that that is different from funds some funds right some funds don't take that approach um so that's another thing that we like to focus on the next one like these are the more boring ones we do look at you know Revenue traction Revenue multiples for the at this area the sector area that you're going into we test product heavily um we typically like to get involved when you know our sweet spot is you know

products in Market you've got two or three clients that you're kind of you know beta testing with or pocs with and you need you know two to five million bucks to get going and you know that's where we want to get in right we want to come in hot and say hey look we're going to partner with you we have this BD pipeline for you we can help you out and we can help you with hiring and think about constructing your team because especially two of The Three Gps come from product and Engineering that's that's kind of like our sweet spot and kind of the things that we're looking for initially when we want to get in how does um product testing tie into your due diligence how do you think about doing that because it's so different from like most games teams where like you can look at you know new builds of a game but you're pretty focused on the you know the tech and infrastructure side of things how do you how do you manage that and and that side of the industry yeah I think it really helps I mean you know similar to those who specialize in content investing you know a lot of them have run Studios uh or I would hope they

had right like because there's a specialty that comes with that right um you know we've got several friendly firms in in the space that are excellent content investors and you know when they test a product and test a game I think they have more knowledge on what they're looking at than I do I hope I have the same when I'm looking at um I'd say a more technical product like an engine or like a tool for a developer because guess what I I am a developer right like I was you know Hands-On keyboard 15 16 hours a day before this right so that's a huge part so that's a high level more granularly um I'll tell you that we sit down with the CTO and the engineering team at length and have pretty in-depth conversations I've done GitHub repo reviews as well actually looking through what has been submitted what is what is committed to um and honestly I just use the products I mean a lot of times you don't need to be a technical person to use these products and to understand if they're good or not because often the technical community is making these products for non-technical people you know and

use the product tell them if you think it's good or not um there's there's several Frameworks that we run through and we're doing product reviews with these Founders and I'll tell you off often often more often than not the CTO and engineering team appreciates it because they often don't get a lot of Limelight in the capital raising uh process um because most people just want to assume that this thing is built and done I'll tell you what we've saved by ourselves and our investors a lot of money by not investing to vaporware which often happens um in the high flying and I think the word uses bleeding edge of Technology there's a lot of vaporware there right and a lot of teams building stuff that honestly just doesn't Merit any money um gotcha yeah that's really interesting and it's all really well said um to kind of um segue a bit where does web3 and you know the the aspect of blockchain gaming tie into to your thesis is that a big emphasis for you guys so I'll answer with a cup a couple ways

um so I'll tell you that this is not a core focus of our fund and it wasn't the core focus and fun too and it wasn't it wasn't a core focus in front three you know for better for worse Aaron we could be sitting here in five years and you could be telling me I'm totally wrong um but you know we were given the opportunity to go raise a dedicated blockchain gaming fund we had a group come to us to launch that and uh we decided as a firm to not do it at this time um and the main the main reason we decided not to do it at this time is because if you look at the gaming Market as I highlighted there's three billion Gamers um even on the most bullish of estimates that I've seen um you're looking at no more than 30 million players right realistically there's probably a lot less than that yep um you know internally I think it's probably close to around 10 um and and for that you know right there you know you're operating at point one percent of the market or less um that just screams early to me right like and sometimes being really early is

great sometimes being really early is just as bad as being really late um and so we think there's a lot of parallels here to other exciting parts of gaming we can talk about augmented reality and virtual reality which you know VR in particular I think is finally emerged to the spot that we thought it would be 10 years ago um and we're really excited about that so for for a lot of those reasons we choose a shy away um the the thing that initially and we do have some bets in web 3 that got us really excited um and I think we still are excited about these things so my backdrop here is it's not a core Focus do I see opportunity and and does some of these teams Merit money today 100 um is for instance we we invested initially in our first uh play into web 3 was a team called Sky Mavis which is the parent company of x infinity um I sit on the board as an observer there um is we looked at profit sharing with your player base this is something that

really fascinated us because you know games companies today often bleed a lot of money to the Apple App Store and the Google Play Store we looked at this I mean like the way that games have to grow today is so uh so inefficient it is such a such a high cost to grow your user base tons of paid UA and there's so much turnover and we looked at this and he's like huh I wonder if games would breed more loyalty and long-lasting loyalty if you shared shared with your players based off of achievement and time spent in game and we saw them as the pioneers of this new model and I think they've tried a lot of things and I think some of these things will stick in games Long Haul and I like that um so that's what that's what kind of was the best investment there was this business model Innovation but then also um so to this day I mean the Ronin network was kind of the main reason we wanted to invest because it was one of the most used protocols not even just in game just just period

um you know they still have comparable levels to polygon today right just this one title and this one you know one layer two with with Ronin um and so we for for all those reasons that's what made us jump into it and the sky made of this team I gave Alexander and Geo and Truong and Andy a lot of credit um they got a guy who was extremely skeptical to make make the jump uh which was me uh and you know I was probably the biggest bear at the time on our team about web3 and being involved in games and so for me that's why we're excited about web3 uh and what I think web3 can do for games I will tell you I am a firm believer that game that that web3 needs gaming more than gaming needs web 3 um at this time because we've got three billion users web3 does not have three billion users right nothing even close um you know this is why you've seen all the you know solanas and the polygons um turn their heads towards gaming because they think this is going to be the digital onboarding Revolution for

the digital native kind of user and I think there's there's a lot there I think way too many dollars came into blockchain gaming you know I think the stat I saw was about 11 billion dollars have been put into blockchain games I can't this might have actually been from you guys I can't remember if that's right or not Aaron but um you know I regurgitate a lot of stuff you guys right um and and honestly I looked at that I'm like 11 billion dollars for less than realistically 10 million users doesn't make sense to me like that doesn't make sense so that's that's the part I think and unfortunately I think because because of all the dollars that chased in from investors you know in the industry I think that the good Founders got lost in the Myriad of people that were just hunting for an nft drop to walk away with a couple million bucks and that that to me is the thing that you had to watch out for as an investor and it got very very crowded um at the end of 2021 and I'll tell you

we paused allocating to the sector after we sort of made our initial bets because um we thought you know when it when it's it's kind of the joke uh was it the 19 the the early the 20s crash when you know they said that you're getting advice on stock picks from the guy that was at your barber shop or you know helping Shine Your Shoes right like you know that a uh a crash is coming because it's it's now you've got non-experts commenting on the space um and I think you know we had a lot of people who weren't privy to you know the the happenings of games peanuts being like Oh have you seen this new cool like free to play this or that and I was like oh no that's that was the moment where we were like this is this is going to be a problem and so you know we haven't made this a focus for us and we're not we haven't done anything in web 3 in 2022. uh okay yeah that's interesting and honestly I think what you've said is pretty wise I mean obviously web3 including you know

blockchain gaming you know that that sector of it um it rolled through the hype cycle but not just rolled through the hype cycle but because of how financialized it is it rolled through the hype cycle and like a super extreme um Way That You Don't See with all Technologies and um yeah if you're facing the opportunity to have you know an investment fund or you know some type of investment vehicle dedicated to just like a hyper specific area you you really have to make sure that your timing is right um so I admire your discipline um on you know what to say no to but also your ability to stay flexible too because it's not as if you haven't made Investments or that you're not not looking at these things from what I can tell you're still you know thinking hard about it and you know constantly learning so that you know if you change your mind um you'll you'll be ready to to jump back in um and and also too I know some teams

you know when like when you launch something like this it sort of is a new asset class in a lot of ways and it's kind of hard to tie into existing fund models um um but yeah I guess I'm curious yeah um like where where do you think we are like in this market cycle of of web3 and then after a week I'll ask that question again more more generally but um yeah where do you think we are in web3 and like what are you looking for to get more interested in it again yeah I think uh you know as an investor and one of the biggest gifts you can give yourself is time um and you know in 2020 and 2021 this was something that a lot of investors did not have a heck of a lot of because you were rushed to make decisions there was a lot of fomo investing happening because everything was going up and the right you know and that's just what it was and you were like gosh like if I sit on cash today like that's like a disservice to myself and my investors like I gotta deploy deploy deploy and

you know you saw groups um in web 3 doing 50 plus deals a year you know and that that to me is quite a strategy when you have such a small team to deploy that Capital um and so for me you know where do I think web3 is today um my honest take is I think it got gut punched um rightfully so there were a lot of people starting question kind of like hey how many people are actually using your product you know like a simple question like that um how many people are here purely to invest and try to make more money on those assets versus actually enjoy your title and this is this is kind of something that I think a lot of groups didn't think about right some great groups did right and I do want to highlight this there's some really great Founders actually thinking through the next kind of evolution of web 3 in games but all those Founders were thinking first from the games perspective you know they're thinking how do I deliver a fun experience to my players right how

do I leverage this technology to give something net new to create a blue ocean um that isn't just you know another red ocean and I always kind of make the joke and I'm like it's it's like if you asked me to launch a a fund that I only used gcp for my back end it's like why would I it's a technology you know it's a technology leveraged by game developers at the end of the day the problem you're trying to solve for is the same which is how you deliver an experience that is compelling enough to demand that I spend my time there and that's what game developers understand so well and I think that most in web 3 have totally missed that they've like they thought like I'm gonna make a financial product that's more fun than using a bank and therefore you're going to spend time in it um so anyways that's largely where I think we are today I think you're going to see dollars um dry up here pretty quickly for new web 3 funds especially in you know 2023 um I think a lot of funds raised a ton of money at the end of 2021 and so

you're gonna see they have a lot of dry pattern to deploy so you're going to continue to see allocations occurring we've already seen dramatic slowdowns right especially from web3 funds that off can put a lot of their money into these digital assets directly right so you know if I took a 500 million dollar fund I put all that into East at the end of 2021 I'm hurting pretty bad right now right like and a lot of groups do that right and and that that to me is gonna you know slow down New Capital so like what's what's the top down here on this um you know new funds aren't going to raise as much money for web three um especially for web terrain games and then second you know that's going to slow deployment down and then thirdly like that's going to attract less Founders because it's harder to raise money all of a sudden um which then leads to my fourth point which I think is the Silver Lining here only the uh only the dedicated survive uh in this either existing companies and also new companies who are like I know this is not a good time to raise money

here but I'm gonna Pursuit anyways because I just have to and that's that Gusto is what you're looking for as an investor right um and I'll tell you I look for people that have gone through tough Cycles before and this is one of the huge reasons we loved the sky Mavis team right is they went through a pretty tough cycle and they're like nope we know we've got something here like we're going to continue forward they did not raise money in an easy cycle they raise money in a pretty brutal cycle like after the 2017 crash right and so so that's that's the kind of stuff I look for and I love that about people is like show me your conviction show me your fortitude um as you're launching company how about more more generally Beyond web3 where do you think we are in the cycle today obviously we know um you know 2021 was super hot uh and you know maybe we peaked earlier this year you know and you know it's announced that Microsoft's buying Activision and take two is buying Zynga Etc and maybe things have cooled down but but what are you seeing there today

yeah I think you know largely like more largely generally like and this is something I I did a tweet about with you know um you know kind of the deal flow that we've seen over the last year and this is you know mainly based off of CB inside data and a little bit of you know supplementation from us from stuff that we see um you know largely like year over year deals getting done like seed is unaffected today uh it's literally one deal off you know 77 deals were done last um you know last year at the same quarter and 76 were done this quarter series 8 financings in gaming specifically not in Venture as a whole are down about 14 series B is done down about 47 series C is done about 67 so well huge drops honestly um and the reason being is because you know when a macro hits like this you know couple things happen you either freeze you freeze like you're just like

I'm gonna pause and I'm gonna wait to see how this shakes out which is totally a fair response the other response is oh no like I'm at the tail end of my cycle of allocating Capital I've got no fresh dollars to deploy and guess what raising money right now is a fund just like it is for startups is not easy right it is so much harder this year to raise money than it is last year and so those are kind of two things slowing it down the third thing I'd tell you is you can respond at this juncture um and can and jump in and allocate which I'll tell you is the response that Convoy has taken um we we like to strike and allocate when others freeze up um and the main beads and bean is that guess what valuations go down right it's not it's not rocket science for us we know we get more for our dollars at these in these times because we're being paid to be risked on and not risk adverse right and so again going back to my quote of like fortune favors the Bold and the risk on uh that is a hundred percent um you know 100 how we feel so as

everyone is shine away just like what happened during covid by the way um so we were watching this very carefully and you know March April and May of covid we made some pretty great best of the fund which are going to make you know our firm and our investors hopefully a lot of money um and for us we see this as a similar time a similar opportunity to strike because a lot of people are pausing until they get more clarity on the macro which um I think we already have Clarity on the macro which is it's pretty bad um and so like what are we waiting for it's not going to get better for a while um and so we are we're taking the a more aggressive approach during this time which honestly I would encourage most investors who are dramatically driven especially if you're investing into an industry like games which we have a lot of data on doing very very well in the last recession um called you know the Great Recession in 2008 2009 we think we're going to do even better this time yeah no I think that's smart and I would say it even extends Beyond venture too like I was

looking um even at just some stock market data and I think the S P 500 is down it sounds like 25 30 from its highs or something but I saw some some data that basically looked at all the times the S P 500 had gone down 25 or more over the past you know like 50 70 80 years or something and every time without fail the next three years generated pretty exceptional returns and even the next year generally was quite positive so yeah I think it's it's smart to you know I think as Buffett says you know be fearful when others are greedy and greedy when others are fearful and and you know sometimes it's hard to do in the moment but if you if you know what you're doing and you have your your Theses down and your your tactics set I think it's it's wise to you know attack when others are being fearful that's how a lot of you know it's oh go ahead it's it's a way to do it I mean it's it's you know like I think

you know generally it's funny you hire highlight Warren Buffett so like a great exercise I would tell for anyone who's listening um our whole team read through um Warren Buffett is famous uh for for writing a letter um every year um and walking through kind of the year um in review um and we did as a team we read through all those going back to the I think like early 80s um and I'll tell you that there I learned more in that than I think you could possibly learn almost any business book right like that is a PhD in in macro economy right and I would tell you like everyone go do that if you're studying if you're studying investing as a as a profession that that is that is one of the all-time greats and I don't think we'll ever see a greater one so 100 we've definitely tried to embody his his fortitude which is not easy because at the end of the day every person who's allocating money is an emotional being we're not robots

right and it is totally natural when others are fleeing to want to flee as well right and you know something that you know as a firm we decided pretty early on is you know 80 of deals are led by about 20 of funds and that always blows my mind because when I when I hear that I'm like okay so 20 of funds are potentially making decisions for 100 of the capital that's essentially what the answer is and to me like that that as a fund like we're not going to be part of the 80 of that we're going to 100 be part of the 20 um and I think you know we're gonna see a shift going forward where generalist follow-on funds are going to struggle right because at the end of the day I think a lot of people are going to look and be like well you know shouldn't we just put our money with dedicated funds that specialize in something specific um so I think if you're going to try to launch like a general fund right now that's a really tough Market to do it and I honestly I think a really tough value prop for them right because you

know I think we're well covered in generalist Venture across you know the the greats in you know like the excels and the the bessemers and the Sequoias right like those groups have got this and reasons right they've got that covered right like you don't you know we don't need the world doesn't need another one of those um so there's a lot there's a lot there on the macro specifically within Venture um but I think to just kind of summarize like we're risk on and we're allocating um and I think I think we're gonna see who makes more money over this next cycle but I think you're going to see a really really strong performance for 2022 funds and 2023 funds that chose to allocate and chose to continue pushing and not to freeze right I think that's that would be a death sentence as a fund right now great um maybe in our last you know five to ten minutes together I want to talk a bit about just what you've learned running and scaling Adventure business um and so I'm curious you know now that

you've been doing this for I guess you know four years now um what have you learned any any notable lesson oh man oh man oh man Aaron uh I think we need another hour um one to two things um so I'll tell you a couple lessons I've learned um as a met mistakes I've made you know as a fund manager which uh you know I I think you have to learn as an investor so maybe I can save some people some money on this call um one is uh never assume due diligence has been properly done by another investor and so what I mean by that is never invest because another person is investing out apply that to us too so if you're following us into a round like you know I hope I hope you think we did our work because our homework because then otherwise I got other problems but um I would tell you like never make that assumption we've made that mistake one time and fund one um when we were following a much bigger uh group into a an opportunity and uh

that ended up not being a great outcome for us right and so I'd tell you like that's one two uh never underfund your companies you know don't be too greedy up front where you don't give them proper Runway um if it's a B2B company give them 24 months don't even think about 18 months don't do that just just don't do that to yourself you're you're investing in a company that you're gonna that you almost guarantee will be a problem for you later um so that's another mistake I've made and I've learned from as an investor um other lessons I'd tell you and this is more on the good side um again shocking Aaron I'm not perfect so I had to highlights for you I I know I know I know that you're you know your listener thought this as they jumped on to this this interview but um I I tell you um good things we've done is we've obsessed about our business or our deal flow pipeline process we are obsessive about this moving

moving companies through the pipeline quickly either in or out right you only have so much mental capacity as an investor whereas any human being get things off your plate that you're not going to do just get them off don't let them stagnate um and so we try to pass quick um this is something I think we're very very good at um this is why you know a team of seven can process almost 700 deals a quarter so we're you know each individual person on our team uh you know we have six on the investment side we have one non-investment team staff member they're processing over 100 deals you know themselves a quarter and that's that's a lot of time and a lot of effort and there's there's the process flow is important there um the other thing I'd tell you is uh you know we meet in person we're an in-person firm every day we're in person and I'll tell you uh we think that is a huge Edge um and to my knowledge we're the only gaming Fund in the world that's 100 a person well um and and I think that we meet every day same office debating vigorously

through opportunities together and I will tell you uh I think the wisdom of a collective unit can help you make a really really great decisions and also save you from a lot of bad ones um so that just can't be replaced on Zoom to me so this is something I firmly believe and I know I'm in the minority on that one because you know I sound like I'm 95 years old and if you can see a picture of me I'm definitely not um that in person just is better for investing and I think that's a firm belief for us interesting yeah I know that is interesting I didn't realize you guys were the only um to my knowledge unless somebody unless somebody else I you know I don't want to misspeak here to my knowledge I know that some groups meet part partly in person and partly not um and I've talked to you know I'm you know thankfully I consider most the other uh uh funds in gaming to be friends um and I you know I I am the minority on that Viewpoint and uh I think you know we'll see our data in 20 years right like I think this is an impactful thing

and you know the point I always say is that you know there's a lot of data on funds that met in person for a very long time that have been successful uh we don't quite have the data yet on the remote funds yet so we'll see um I would rather bet on historical precedence on that one cool well two two final quick wrap-up questions um first Jason what's next for Convoy anything you want to call out all right what's next for us um if you were building a a product um or a platform that is trying to onboard the next billion Gamers um which is either a Geo Focus or an age Focus get in touch with us um so we're very excited about that we think that um there are yeah 38 of the world are Gamers uh we're going for 100 that's what we're betting on and I think that that is where we will end up is that every single human being on this planet will be part of the gaming ecosystem give us you know give us 20 years um so I think that's where we're going

so that's one what's next for Convoy also is uh we know we've we've kicked off our fun three with two opportunities we've LED both of them um we're gonna probably lead if we can 100 of deals out of fun three um okay if you're raising money we're allocating come to us um you know doors are open we're excited we're moving forward I'm also hiring people so if you want to work in the games industry either on our platform team or on our investment team reach out to us I'm always looking for someone who's hungry um every single person on our team is a killer and uh you know we'd love to to bring more people on that's right and final question if listeners want to learn more about Convoy or follow along with your thoughts where can they go to to learn more two areas oh man I should have thought this through more um the the process funnel for the plug here but uh one thing to do is you know go follow me on Twitter um I'm not as cool as Aaron I'm not as active on Twitter but I promise you I'm

trying to get more active and uh you can go subscribe to my newsletter on there we send this out every week um we spent a lot of time as an investment team writing this together um yeah it's really good to have three thoughts oh thanks Aaron appreciate it we we have a firm belief we will not write a newsletter if there's not some sort of opinion in there right it's not a regurgitation of news I'm not just reading all of novik's great stuff and then trying to regurgitate it to my own offering that is not that is not the move for us we're trying to actually you know produce some original thought and uh yeah man uh go go subscribe and you know go follow me on Twitter and DM me if you have got an idea love to love to engage with you awesome well Jason thank you again so much for joining me today this was a lot of fun to be able to to catch up on everything that you and Convoy are up to and I look forward to seeing you crush it in the years to come thanks Aaron yeah huge huge Mutual fans of navik um and appreciate you having me on today awesome and so all of our listeners if

you enjoyed this episode please make sure to give us a like subscribe five stars it would mean a lot we'll put the links to all things Jason and Convoy in the episode description below and of course if you want to check out novice um content as well links to all of that will be down there too so thanks for listening and we'll catch you next time [Music] hold up [Music]