Panel: VC in Games

[Music] good morning thank you all for coming to the VC panel we know you have a choice in conferences and we're glad you selected this one to be able to show i'm eric goldberg i've been in the games industry since dinosaurs roam the internet first as a game designer then as a then as a start-up guy and lastly as an advisory board member to to venture-backed companies exits have included played them to dizzy place banned to visa and pixel barrage annex on so I'm now working obviously P is the right letter of the alphabet so I'm now working with playable worlds which is in which bet bit craft is invested the

panelists we have an unusually distinguished set of panelists they are all these they are all VCS who raised funds in 2019 so the good news for those of you is they haven't spent it all and they all come out they all come out of the games industry so as as two of them observed if they ask stupid questions they will ask informed stupid inform stupid questions in any event just to give you some background on on your left and on on your left far left is Paul Murphy who is a general partner of North Zone Paul was previously head of dots which was which had the the best-selling and globally successful successful mobile game and now is that North Zone where his investments his investments include bunch as a seed Co investor and clang as a series a lead investor next to him is Malta Barth a founding partner bit

crafty Sports ventures Malta was previously head of ESL the very successful eSports firm that was sold to MTG maltose investments in maltose investments and his partner's investments include Manticore Network next and been next to him is is david gardner who is a general partner at London Venture Partners David was one of the was one of the very first employees at Electronic Arts a start-up that seems to have done well in the intervening 35 35 years and you had you headed the European you head of the European office correct London Venture Partners is now on its third funds and their recent success their recent Pro high-profile companies include havean bunch and singularity six and the next name is Ian Livingstone co founding partner of Hiro capital ian has ian is British games history he is co-author of

the of the final fantasy game books a founder of Games Workshop and more recently and here ok more recently in hero capital his investments include flavor works and live in any event these gentlemen are going to cover starting with the first question which is what are venture capitalists looking for in game companies now there's a difference over here between game companies that may be perfectly viable and those that are venture worthy can you start criteria that you require sure well to look but I guess you mean to invest trying to get into the mind of you know when an investor wants to actually write the check or wire the money I think it definitely for me at least has changed

over time I some of my early investments have been because you know you may really like the people and you believe in what they're doing and you want to support the effort and as LBP has developed and we have other people's money now in addition to our own that we're investing in and things so we're we're trying to have a kind of level of return that makes sense for a venture fund so if you if you you know Eric was I think alluding to the fact that you can have a profitable lifestyle business as a really great business and it's what you want to do and that's fantastic but it may not have the kind of profile to do venture size returns so you know one rule of thumb is if you put a dollar in you need to get at least $10 back so if you're in a in a particularly small market niche that's you know fun and healthy for what your team size is and your profit one you can operate great but if it's not gonna become more you know if you're if you're starting something at a five million dollar valuation you have to believe this

company is gonna be worth 50 million in you know five to ten year kind of timeframe so that's that's kind of one financial filter but it's super hard to forecast those things you know startups at centralize supercell is a famous investment story from us but honestly when we invested we did not know they were going to be worth six billion dollars one day and then trade to $0.10 for 10 billion I mean it was not anywhere in our mind yeah we just knew that the the team were hard-working they had a lot of smart ideas they were very systematic you know they had they had an experienced team it's a experience is pretty useful first time entrepreneurs yes but you usually have a lot of experience from the games industry something that kind of builds that credibility but product you might think is gonna be really important actually for me as I've gone on product is is the last important that's an expression of you and your team but it doesn't have to necessarily line up with what I think is gonna be a success the market will tell you that so

I actually put product lower down and team really high up on top okay let's talk about sectors Malta when big craft was started as a seed fund of around 20 million it was bit craft eSports and focused on one sector now that you are a hundred and forty million dollar fund you've diversified into into other sectors are there some particular sectors that are are particular are hot or the areas that are most interest to you yeah and so for us eSports is a bit of a lighthouse a pinnacle that you know essentially guides us the way of next gen entertainment per se and we see a lot of things being driven by eSports and that we take advantage of with our founders to actually go in and take eSports and then branch out from there so there's a lot of interesting technologies you know being built out of the games universe which change the

landscape of entertainment and these sort of look at this the same way for for eSports whether it comes to live streaming or you know 3d simulation engines or a big data streaming services it's etc and this is actually where we like like try to you know identify investments which really tell of sports at large and then you know drive out in other addressable market sizes give you one example we invested in a haptics company called roofer the deep tech company out of Berlin which enables essentially a new sensory dimension of the Internet so like you know in now being largely visual in to some degree auditory and they enable a technology that you know adds another layer on top of the sensory sensations and that yes we go in and that company goes in after gaming and eSports per se but obviously this is is in the process of being applied at or cars its employed in to mobile phones it's applied in to

other devices including you know everything you touch in a connected world and that is obviously pretty beautiful because we can drive it with eSports building with the lighthouse and then scale it in much much different verticals can you quickly touch on your non eSports investments because you've now made a number of them so I guess if we don't we don't really have a full non eSports investment so a few cases in a very early day it is sometimes very hard to to state whether that wherever be eSports it may become eSports or started eSports and a branch said a little bit a little bit also give you one example there's an amazing team out of San Diego which build the technology that lets essentially the community on a no-call world build their own application including games and games is a strong is a strong proposition to go after but

essentially it enables an entire new generation to very easily build build a new better tools build their own digital experience and share that with friends so it's it's a cool matter out of San Diego and yes that is to some degree our thesis is the community in eSports they want to build their own stuff they want to build their own eSports right and the tool enables that for eSports and games but it's obviously where they go so it's sort of borderline it started out to be eSports and then branched out into a more general no code a proposition for for Millennials if you so wish and said that you can sort of argue whether it's like these sports or not let's go to thank you Malta let's go to Ian who has done what appear to be more traditional investment so now you can contradict me and tell me why they're completely Wilding if you tell us briefly about what drives you in terms of the investment you're looking for yes I mean of course I agree with

David that DC's are looking to make multiples on their investment but for me the most important thing what two things the team and also the game there are so many I mean over 2000 games use in the UK not all of them all was business investor ready and what I look for and I think have a shining example within this room is a great creative on an equal footing with a great business leader and that partnership will help get them through which is a very tricky landscape navigating the very competitive games world and so enough to embarrass them they're the back the room there but some play to make it rich who I invested in as a as a seed investor creates a golf class you may know hugely successful game monetizing north of over 100 million dollars per annum without

disclosing actual numbers but they had it a team where Paul gue CEO understood the business of games and is able to assemble a great team but he was on an equal footing with the creative director Alexes at the back was able to create a great team and so the understood not just the game developments how to make it compelling experience but how to scale architecture to be able to self publish to a global market and understanding that this if you are to scale it needs financing and so for me that is absolute number one requisites not just a creative person because a lot of creative people can't actually run a bath in myself included say sometimes but need to understand the business of the industry so for me there's a kind of a multiple things I look for the team game because

when people say what's most important thing I will say gameplay gameplay gameplay and the ability to scale so not being afraid of failure but failing fast the usual things we've heard a million times but they're all important having skin in the game where you personally invest in it what I paid you actually Oh what technology do i scale and do you understand what business model ii do i do you have as well so there are multiple things to consider and they don't really change for me from whether it's a and an angel investment that I make or as a part of a pharoah capital so we've here our capital what we are doing is follow-on funding we're over prolific in making games in the UK particularly and in Europe but we're under invested as a sector so through hero we're trying to redress that balance so it's typically go for the kind of gap funding the follow-on funding is quite a lot of incentives to start a game company in the UK but that gap funding is is yet to be filled so

we're trying to fill the gap between between one and three million for a seed a and three and seven million for us first series big thank you let's go everyone who you've heard speaking eighty to a hundred and forty million dollar fund poll represents a 500 million dollar fund which operates at the next look usually the next level take off it also is different in that you are general investor that games are only one sector so what you look for to decide to invest in games rather than let's say a SAS place yeah so I mean the first thing we sort of we're down streams so we get to these guys do the hard work and then we get to look at the portfolios and then make make bets and we've done that twice at least since I've been in or soon with LBP but I think it is it is different so we you know all of the series day funds in in Europe and it's fairly true in the US as well might have three to five

investments gaming investments in the portfolio that last sort of three two to three years so it's not a portfolio approach to gaming which is how I think if I was gonna build a gaming fund it's that's how I would approach it I would say I'm gonna back the very best teams in this sort of space that I think is hot I have no idea what's gonna work but I'm gonna back great teams and interesting spaces and something will pop for me it's not enough you know I came from Eric spent a lot of time with us at dots in New York and you know we we had recruited I think one of the best game teams in the u.s. anyone that we wanted we were able to get to move to New York we had a game that had 150 million downloads we were profitable amazing investors so all of those as prerequisites was still not enough for a generalist fun like noir stone to come in and maybe lead a series be for that company because you know you can see a

path for that company maybe three to five X but not the sort of 10x that David was talking about they may still get there and they're certainly doing great but I think what we're looking for is something that has some outlier KPI something that really just looks very different from all the other Studios that we that we've met the challenge and this is why I think it's very difficult to do the stage investing that that norson does in gaming is by the time you find that spiky metric that really is exceptional usually you don't need our money you're kind of past at that stage so then you look at doing you know large secondary transactions like indexed it was with supercell or has happened in other game studios in the past and and then also you start to question you know what are we really what value are we are we providing that's that's really unique um so it's it's hard I guess is the bottom line we still have made investments we've mentioned - we've also invested

seriously which we stole last year and space ape which is not part of supercell so you know we do we do make them but I think generally speaking what we're doing is we're moving slightly away from content and more focused on platform technology now that you've got this really big mature ecosystem in gaming things that will help power that in the future so David observed earlier that most people look for 10 X + 10 X on the sort of money that you put in is about 4 is 40 X is 40 X on the standards that these gentlemen are putting it at you mentioned in the pre discussion that one of the things that makes BC is most likely to do things is whether there's a platform change can you discuss that briefly yeah I mean I think that's that that is the stability yeah the golden time to both start and invest in games videos so obviously we had the shift you know the shift over to social web Facebook Zynga sort of pop out of there he then had this shift to mobile and you

King and space ape or supercell and many others sort of pop them there and then you have the shift from premium to free-to-play and so each each of those sort of platform our business model shifts you know you could have been a really good team and you'd catch this phenomenal telltale and that just you know rising tides everyone's gonna sort of do well so those are great times to invest I think right now my view is we don't really have one of those happening I hope maybe you ask educate me and tell me why I'm wrong but I think that's why you're seeing a lot of the funds at our size you know dial back their gaming investments and I think you'll see that kind of dial back up again when when the next wave or shift starts happening so there have been three candidates for platform shifts because the VC industry is always looking for that VR which has crashed and burned of these four now it may be a wonderful future but it's not going to be it's not going to be in the next several years eSports now there's a

case of something that is clearly a good business but it's not yet proven as a mentor as a venture proposition in terms of delivering you know huge numbers of huge numbers of companies that return and then most recently blockchain for the rest of the three of you do you have candidates or or multiple you want to explain why eSports is going to have ten exits in the next two years before us I mean there's a different obviously very different perspectives to look at eSports right so there's a very narrow of view which is sort of a predominant view out there and then in the media the analysts and everybody looks at it and takes sports and then translates this into video games and that is then what people define as eSports it's very different from the way we look at this because we have a very peripheral view into eSports and vs all sorts a question you know what is it that's gonna be driven by this fundamental change of two

generations you know living and breathing and and and and and you know entertainment that is the this is like this grounds where we trying to catch with various investments with too many people are the look sort of awkward because like they were not like why is that eSports how is that eSports right but that enables us to take advantage of of this office of this swing of two entire generations totally redefining the the landscape of entertainment yes and actually one of the things as volta hints at is that there is a huge change which is spectating when everyone in this room is growing up we thought games were interactive but now in the West as much as 20% of games are consumed by watching them by spectating by people who are 25 and younger there may be someone who's in that group over here but it doesn't look like the majority of you are David you've taken a fair number of unusual investments do you want to talk about

your more unusual investors that you think have a high upside well and also on the top one thing I think I think the big the traditional pop-up changed PlayStation three to four for now can be a fun mobile of course is a massive shift but it kind of is constantly upgrading so there's no big step like there has been in the past so the the continuous growth of the market actually provides enormous opportunity particular one of the things I'm excited about is games that are in non-traditional game sectors so games for girls or you know things that are going to be expanding the the player base because virtually everyone has access now for mobile phone so it's time to get content out for the the players that are not well served and I think two enormous market one of the long range things were we're investing in is the whole shift with you know what is streaming of course is the buzzword because because Google has been pumping you know big money into that space but I think what it really is talking about is

what can you do with all this compute in the cloud how maybe is delivered streaming locally we bifurcated between devices etc but some very exciting to think if you can deliver such incredible experiences that have never been achievable before on the kind of platforms we've had I think that's exciting so we're investing in Hadean which is an operating system for basically doing this enormous computers cloud it's a london-based teamwork and some protocol stuff we've been investing in the social space for mentioned budgets you know kind of bringing a different social layer for people to play together and have fun and communicate and build new friendships so I you know I just sort of see this this gaming layer going throughout all of our normal activities and the generational shift I was also gonna bring up what I learned from eSports isn't so much the arena based head-to-head combat which is exciting and thrilling but it's the viewership aspect it's the massive growth in in people consume games as

less active participants so can you just briefly highlight the things that would be game changers unfortunately intended for cloud gaming in other words well I think we clapping is able to deliver an experience that nothing else can deliver so therefore enormous compute simulation even graphical fidelity is done at the cloud side and then is delivery to you on whatever your client devices I think that's going to be a really exciting moment and of course the social side of connected yeah if you have the connection you essentially have more computing power than anyone has and its equivalent of having a supercomputer yeah or what interesting frontiers are you looking at well platforms as well but there's another area that we're looking at is data games and sports are throwing off huge amounts of data which were being able to monetize that the way Google recently bought Fitbit for 2.0 billion

pounds so we're looking at that some companies that are aggregating data and then it being able to monetize that pencil so for those of you who are unfamiliar about the value of data that's essentially where Google lives there is Kathy O'Neill's wonderful weapons of mass destruction ma th destruction which describes just how data is used it's a scary book but it also tells you why these gentlemen are chasing enormous data opportunities what about in games are there genres that you see that maybe that have been under explored for example storytelling games were under explored for a number of years and then episode and choices came out and obviously the best in flavor works are there are there other sectors that you think are back on the rise or coming back well I think recognized if it's got a huge upside if it's done well I think Bandersnatch proved that Netflix were very happy but I mean essentially it wasn't that many choices available to it but a lot of cameras out moving into the

branching narrative I mean there's always a huge up taken any new new concept that comes out in games and they're all successful I mean every as you quite rightly pointed out VR is still a bit of a false dawn it's been around for you know decades but it's not until it becomes a pair of still very clunky still it till it becomes a pair of oakley it's that all people people begin to take it as seriously becomes not a not a hassle to actually experience and not the people being shut off from the world entirely but yeah there's always new games concepts coming up and being in gaming myself yeah always playing on huge amounts of games and looking for the next opportunity but yeah I'm sure if anyone in this room who's got some great ideas there'll be some people he'll be delighted to listen to your new ideas the thing is we've seen a 350 opportunities in the last few months we're going to put three investments down but some you know it's forever

Angry Birds probably 10,000 dead birds out there so the messages there'll be a medium company all right now it won the pre-conference in pre discussions we talked about many entrepreneurs just want their VC not to cause damage let's talk about let's give these gentlemen chance to tell you about how VC's can add value why why is working with the Decius operational games experience going to an advantage to a venture back company let's see the inner David have been doing it for me so far I'd like to think we've accumulated some knowledge that we can then pass on to people we're investing in and help them avoid falling into easily made mistakes so it's not just a question of giving money it's being able to give business advice games design advice advice in the market there are multiple ways which you can add value and help scale their businesses in the most risk-free way I

mean there it's so easy to make a million mistakes you know I've made so many mistakes in the early days of Games Workshop and never thought they would become a two billion pound company today which it is so you know it's choosing your exit point it's quite careful it's but we should also I'd like to think we can add a lot of value in multiple ways yeah well I like to say that I have a 35 year repertoire of spectacular mistakes I am my peer group have made that you want to avoid so we can enable you to make all new mistakes pull at a later stage how can you how can a VC be helpful or do you just try and get out of the way yeah I mean I approach is to is to mostly get out of the way and I think that you know any any sort of credible investor is gonna be able to connect a founder to whoever they want to speak to so I think that the rolodex is good and useful but not I don't think all that differentiated relative to other VCS but to me what I think of is and it happens it's just so amazing epidote this job now full time for two and a half years and it's the

it's the late sort of Saturday night phone call that I get from a founder and I think that's I've been there the nights that I I can't sleep I'm up at 2 a.m. multiple times a week having sort of true empathy and understanding what that person is going through help just giving them an outlet to talk about it I think is where you know of all the things that I've done just actually being quiet and listening I think is where I've added the most value to my founder so I think that's that's one and then I think the other bit is it is it is helpful I feel like for especially gaming founders to have a peer group that they can talk to and so what we try to do is get as many of our companies to share best practices and experiences as possible yeah I would jump on that because we've done 35 investments and then that community yeah people in the portfolio are so great to each other that was something I didn't really think about in the beginning but now I see spectacular benefits of people

sharing supporting trying to work things out together so we've realized okay we need to contribute to helping organize events around learning or whatever the key topic is whether it's growth or higher we so we have regular founder calls where we every month to go through topics that people love and that that's one of the really cool things about for me our and since be a bit more narrow and focus and be as team they've been operated and founded in the space that we in touched I think 60 companies in eSports and so we I think they have a very unique view indie in depth in the industry and see what's moving so it's really hot or too too fast to miss things and we actively share with our founders to directionally shift you know left right and see where the big movements really are and you can also tell that half of our deals of market deals so we typically bank on relationships we had for a long time and that is very deep trust we start with typically our founders and then yes we're not you know you know overall

founders but we super actively collected if there's anything that can be helpful that is to largest degree also recruiting so we know people and we know who could be a great fit guys we work with in the past we see teams performing or like having issues in certain areas super easy for us to make connections because we get an operator mindset or three gPS being found us and in operators ourselves and and and that is super important and the other thing is that you know beef when it comes to esports we as a team we too last degree build the ecosystem over the last 20 years and that helped us a lot to like have a view on how the ecosystem evolves and then plucking you know in helping to pluck the the founders we and the team to back into that ecosystem in the right way we were outside were running it we're running out of time so I have to wrap up so the advantages that you bring our operational experience the ability to connect but also John Doerr kleiner perkins the most successful VC

of his generation said what Paul said being therapists being people who listen who deal with the lonely at the top because all of you entrepreneurs are building something from nothing with that we're going to we're going for questions we're going to we're going to be outside the room if you want to ask questions still be there for about five minutes in the meantime I'd like to thank you all for coming I'd like to thank Paul Walter David and Ian for sharing their knowledge thank you so much you [Music]