Panel: Where is the Money at in M&A?

you are now having stun your own talk done a fireside and you're now i understand gonna be sharing the panel as well yeah i intend to do a lot less talking on this one but yeah i thought it would be fun no you're doing very well you can have my jobs for us i'm sure i'm sure your job's pretty better than mine but fair enough um to close off the um to close off the uh the micro track so yeah we're gonna have a panel focusing on um yeah the the exciting and very hectic uh world of m a at the moment insane is the amount of deals and and investment flowing around so you've got a great panel i think they're joining us now with some uh found some fantastic folk there uh some some friends of pocket gamer well hello shanti and alexis love to see you too um god it's nice it's good it's looking great so i think everyone's here so i'm gonna gonna shut up and let you let you take it one final time and after this

you can stop working for a bit but over to you martin thank you chris uh cool well welcome everyone to um our third session on the cfo summit track uh my name is martin mcmillan i'm the ceo and founder of poland vc we provide uh credit facilities to game developers to help them scale um in a non-dilutive way so typically uh people we're working with can can borrow up to four times their monthly revenues on a revolving credit line basis to help um fund user acquisition if the well is open for drinking um so this um i'm really excited about this panel so we wanted to to put this together we've been uh stewing on something over the last couple of months around um you know on the on the m a side obviously there's a red hot market for m a uh going on just now and uh we uh we we worked with um and used some data from uh the guys at invest game so we had this sort of hunch around the sorts of

studios that were being acquired and some of the trends that we were seeing in in the market more people coming to us saying hey i've been working with a publisher of my last game but i want to self-publish my next game and you know looking for um looking for capital to do so so we thought we'd see if we could try and um just do a do some analysis on on on the market and see what type of companies were being acquired and then um put some interesting kind of uh people together to to to try and sort of comment and and you know shoot it around with the the objective really from from founder point of view is uh what lessons can i learn what kind of studio am i building how should i think about financing some of these um some of these the these stories so um let everyone maybe just just go around and do uh do a quick intros maybe just um who you are where you're from and then just a like a like a couple of sentences on uh on on where you sit and then we can uh we can sort of get into some of the some of the topics here so um sean

you're you're first on my on my zoom list do you wanna you wanna kick off yeah yeah i'll definitely kick off i'm the only one without a virtual background as well so i'm feeling like a little bit left out anyway uh my name is sean rutland i'm the ceo of hutch uh we are a automotive mobile free-to-play focus studio i guess the relevance for us on this panel or me as we recently exited in december last year yeah that's me cool uh kartik do you wanna go yeah my name is kartik i'm a partner at uh arim which is a gaming focused investment bank you know we've had the pleasure of working with sean and alexis on on various deals so we are um so we've executed something like 35 plus uh gaming transactions um and uh you know there are 17 of us across london san francisco and most recently

moscow cool how many hours sleep are you averaging per night at the moment i i try between six and eight uh cool thank you chancy do you wanna guys hi my name is johnson burgel i'm the founding general partner of a venture capital firm called transcend so we focus on the digital entertainment space my background is games i've been in games for about 30 years half production half corporate development and investing um so we focus on early stage games investments around the world primarily in game development but also in game related high-quality businesses great and then alexis jones randolph yeah sure uh thanks martin for invitation first of all but very quickly so i'm alexis bond uh when i was 16 years old my child dream was to have a games company uh so by the time i was a little older i started a company called republic labs back in 2007. sold it to a swedish company called still front which

is probably traded on the nasdaq and i think i was the fifth studio to join still front and since then we've done about 15 acquisitions plus one asset acquisition so we're now a group of 20 uh game studios fantastic cool so um well thanks guys for taking the time to to the panel hopefully we'll have some interesting uh uh interesting and lively discussion so one of the things that um just to kind of like frame it a little bit when um when we were looking uh at the research we wanted to look and see obviously what kind of studios were were being acquired and that and what the what the tea leaves basically in the m a market were telling founders both at a very early stage in terms of you know who do i want to be what do i want to be remembered for which path do i want to take and then also if i'm doing so then if i'm going to go and raise you know venture caps with my business and what are my vcs going to expect down the line and and so on to try and sort of like you know think it forward so um we were a little bit surprised by by what the invest game research told us but on a on a sort of

high level analysis of um the m a data from 20 of january 2020 until uh end of march um there were well 17 transactions so it's 83 of all acquisitions by uh by uh by value if you like were studios whose primary business model was self-publishing their own games um 15 were third-party publishers themselves uh and just two percent so one transaction was a studio whose um whose kind of route to mile primary route to market was through um third-party publishers so i just wonder and obviously everyone's got a different kind of um viewpoint around the table but um maybe uh kartik to sort of you know you're sort of like super close to this you're seeing it all kind of uh every day what what would you what would you say the kind of like the the key driver is the the market conditions and so what's what are the the deals that are getting done and maybe we can sort of unpick the dna um sort of high level of those deals

yeah sure so i think look maybe as a general comment i think the uh first half of 2021 in terms of deals we're probably at you know twice the level that we saw in 20 to 2020 and 2020 was itself a fairly active year in terms of m a uh but it's not just m a it's you know it's uh public market uh more companies that have gone public either through stack or direct listings you have more larger late stage financings that have taken place so in general the momentum that we saw last year around uh general deal activity has continued to accelerate and we aren't seeing that change um despite you know headwinds like idfa and so on so so i think part of it is that i think one um m a actually works and creates value um and there are different approaches of course with the acquirers but in general

you know because it's work um there's acquirers get more credit for executing successful transactions and you know what the flavors of deals of course come you know there are different approaches to this but by and large uh you know there are larger studio acquisitions where uh you know there's a fair degree of autonomy the studios can continue to operate the way they have and increasingly you know having a bigger portfolio of games is is key from an overall public markets perspective in terms of just diversification but also growth opportunities so i think in that context particularly on on mobile you know self-publishing as you said is is key um because it's uh it's the ip it's the expertise that really creates the the kind of uh appetite from acquirers to potentially acquire a studio so so i think you know the backdrop is

really really really healthy and i don't think we're going to see any slow down in terms of activity that we've seen um over the last year and a half cool thank you thanks for that maybe move to sean you've been through you've been through the process we knew each other back in the back in the early days and it was great great to see the the the kind of journey and so but um when did when did you make you know when and in starting off did you always want to we could you consider publishers with self-publishing sort of key from the start would be great to just get essential maybe of the of the sort of height high level journey and the way you thought about things so the background of hutches we started um with the founders we met at playstation and we had a really interesting challenging but quite a informative stage of learning about working with a big sort of corporate and um so when we founded the business

it wasn't really a question about self-publishing or not we wanted to publish ourselves we wanted to be closer to the to the player uh we wanted to learn about it we wanted to to really um broaden our skills in terms of in terms of publishing now um back in 2011 that was a lot easier to do than it is today um but we did have like the limits of um like capital in terms of investing in a broad team the board skill set um and i think actually thinking back to that early stage i did a lot of partnerships um worked with a lot of people in order to get what we needed to in in order to improve and um iterate um a business so i think that that still is a thing that should be done and is done um especially as as as businesses take investment and they only have a certain amount of money um but for us i guess our focus uh tenacity and just share kind of might

to try and do things ourselves and learn and fail and and you know dust ourselves off and and keep going i think that's what really really worked out for us but there wasn't really ever a question about whether we self-published or not it was i mean ios and android just offered the most incredible environment in terms of um being able to get content out there to players and then the app store as well obviously easier to to to get users from in the early days when it came to featuring but we knew that those days were we're going to be limited um when the engine started firing in terms of us really learning how to do performance marketing and that sort of stuff so yeah um cool and then we'll we'll come back to sort of like the later part of your journey um you know perhaps a little bit later on um in terms of maybe over to shanti likes in terms of sort of the studios you're looking again the sort of the dna the fit um and the the kind of the founder ambition

um that you guys are are looking for and investing in chance maybe you can talk to that a little bit around around the sort of the the sweet spot for you guys in terms of the uh the the can the companies you like to back yeah so the companies that we like to back are as you say ambitious early stage digital entertainment companies going after high growth opportunities so you know we're investing globally across all platforms and all the gaming interaction models so that allows for a pretty broad um kind of place to kind of look for those types of opportunities um you know to unpack the word ambitious i think like i said has been said you know the possibility in in gaming has has quickly shifted from you know kind of being you know a bit of a hobbyist niche environment to being a huge global audience um that you know kind of spectates plays um and creates in fact um so the the types of things that we see that have scale has changed quite a lot um particularly

over the last five years uh and so you like we see businesses that were kind of considered you know somewhat niche in the past becoming super investable these days um and so when we look at the type of approach that folks take to questions like publishing i would say you know of course the long-term economic results are you know super primary but we view that decision as part of the company's overall approach to its audience and its fan base so we we often find that you know self-publishing results in the tighter feedback loop as sean was saying with the um with the company and its customers so there's that said there's there are a lot of cases where publishers can add you know a great deal of value um and we don't rule out you know partnering with with companies that choose that route but we tend to view it through the authenticity of audience as a primary filter meaning that you know like how are you going to develop a you know a true scalable audience

for the type of service or product that you're building as the games business has shifted to more of a service model over the last 10 years it is i think more and more the case that you need to look at ways to authentically interact with your audience over a long period of time um and whether you call it self-publishing or community or you know kind of some other aspect of keeping in touch with your fans you know that tends to be something that we spend a lot of time with when we assess like what ambition means and whether it's really credible that's super interesting so so connection with you know and again whether you call it self publishing whatever it's that connection that came through from you as well sean how do you how do you reach the players how do you keep in touch and they're so they're yours they're not someone else's and it's that direct line of connection um just to add to that so when when we worked at a big corporate we literally made a game threw it over the fence marketing took it and then went and sold it to retail right so um that is a pretty crazy divide like how

do you get the feedback from the players how do you how do you iterate who your audience is and how do you get closer to to you know hitting goals i guess um so i think it's really important it's not just about cutting out margins or getting funding from publishers it's about really making better games faster and quicker and more focused yeah i guess the world's changed you know from the traditional world of you know publisher effectively pays for a lot of the game development through in advance it's then recouped over time and they ship cd-roms and stuff to you know walmart and best buy and stuff obviously the democratization of the app stores means that anyone can go publish and some some of the companies we enjoy working with the most of the real underdogs two or three person teams in fairly remote corner of the world have exactly the same power as you know anyone sitting in the us or the uk or whatever maybe so we we love that about it um no super interesting and um the so so alexis in terms of maybe

moving over to you um talk about obviously you see lots and lots of deal flow you've been obviously very very active and stuff as well is there a is there a kind of secret source dna or some sort of commonality about you know what makes um what makes a studio attractive to um to be welcome into the into still front family i mean uh it's not really i mean a secret sauce is if you think if you think about it you know it's about people it's uh it's still about great teams you know great teams will build great games you know teams that have the experience they've done this before that's really the key thing there that we're looking for you know people that have the humility of having failed many times and having had a few successes uh that's really the key key thing that we that we're looking for obviously it's always better to be the you know to have the full package uh you know being you know developer publisher i mean the reason i went into games like you know i came from the internet world and to me in 2007 it made no sense that

people were still selling you know you know games in boxes and with anti-piracy stuff you would lose the paper you can't use your game anymore you had to upgrade your computer you know every time you wanted to play a new game all this sort of stuff that made no sense to me so to me like the fact that you know sean was saying that you're able to have this direct connection uh with your players i think is is a key thing so for us it's you know if you're the full package that's always better and that's why you're seeing more transactions being done you know with uh with studios that are the full package because it is a competitive energy there is a competitive advantage to have the full package so obviously we look for that but also quite honestly you know sometimes as sean was saying it's becoming more and more and more difficult to scale so there's uh i mean there's companies like yours martin that you know help the smaller guy scale but sometimes you know you also need a bit more humph uh than that as well and that's kind of you know so when we're looking at uh a potential you know potential new students who join us we look at okay what are the things they're really good

at what are kind of maybe the the product verticals that they have that are really interesting how strong is the team and then more more importantly as well we see okay where can we help them you know what are the things where we can help them scale faster so that we can create value and also potentially what are the things that they're that they know how to do where they're stronger than we are that they could help our other studios uh to basically also scale faster so we're kind of always looking for these sort of things and these potential collaborations but if i to summarize it to one thing team team great uh makes a lot of sense i think i mean the what one of the interesting things we're seeing is like when you look at a look at companies who are like yours who are acquiring studios and the primary model seems to be and this is i don't know maybe this is something unique to sort of game development and sort of the dna of the of the the founders and the teams that build these sorts of companies but you know if if we were in uh sitting in a different world and there was that sort of traditional private equity roll-up play where you

smash companies together and you strip out finance and hr and user acquisition whatever and have central services whatever it it seems to be the that that no one's well i'm not really aware of anyone carter you're probably closer to me but no one's really adopting that model right so maybe alexis stone you for a second talk about the talk about the kind of model post acquisition how you arrived at that and how you how you create that environment where people can still kind of grow but they still um they still sort of you know keep keep control of of of destiny as well i'll try to be very brief i mean it comes from the fact that my previous company i was a part of the founding team of a company called lastman.com that was kind of a the expedia of europe you know big online travel agency and we made 15 acquisitions um um and actually of the 15 acquisitions and you know 16 acquisitions of the 16 acquisitions we killed 14 companies and what did we do we did exactly what you were defining we forced them to use the same technology we got rid of the finance team we told them

how they were supposed to run their businesses and we basically destroyed 14 businesses so i promised myself that today i would you know do something similar i would never do that again and jorgen who's also you know the founders still from at the similar experience before so we were very clear about what kind of model we wanted for still front but that doesn't mean that we're just adding up studios and not doing anything between them we have what we call a distributed approach uh where basically we make sure that there's a lot of collaborations between the studios and every single studio that joins our group is really a piece of the puzzle it's an essential piece of the puzzle for either there's a you know product expansion reason why we're doing it either there's a geographical expansion reason why we're doing it um or something like that we're really not in the business in just adding up studios just for financial reasons it needs to make sense so so it's actually pretty it's actually very very kind of organized and very thought through in terms of how we make everything work together and we're increasing more and more the types of collaborations we do between our studios there's about 75

collaborations right in our studios and there's lots of adventures you can you can get from that like you know faster go to market you know superior ua firepower um access to geographies you won't have access to there's a really long list of things you can do but for that you don't need a big centralized team because when you have a big certainty team you become slow um and then you're not leveraging what i say what's most important is the talent the real talent the best talent is in the studios so why not leverage that talent that's in one studio across all of our studios where that makes sense instead of trying to build a separate talent in a central organization yeah that makes a lot of sense uh and then so kartik so you're you're sort of you're advising your hand-holding you know us through the process how do you sort of prep them in terms of you know what to expect afterwards what sort of typical questions do you get around what what is life like going to look like you know the the day after yeah so so maybe you know building on some of the things that alexis said i think

you know look a lot of the gaming uh it is hard to break out whether it's in a particular category so when companies are able to do that uh you know they tend to be growing they're profitable so you know the m a is is a choice largely for the team um which is you know what what kind of uh setup do they want to be part of right and i think um clearly acquirers just as alexis just mentioned uh you know there's clearly a secret sauce whether it's the culture the way the approach of the team so maintaining that not breaking something that's working is is key and i think that's the reason that's also the reason why a lot of deals have worked right so um so so i think you know when when we start working with companies very often there is uh there's a process of just

understanding what uh what the founders and the management teams of these studios actually want and uh you know so beyond you know the deal the value a lot of it is is about is about the fit uh because inevitably if you look at the deal structures everything is set up so that there's long-term alignment between the company that's being acquired but also the acquirer so as a consequence it's a longer-term partnership so we tend to see that founders management teams have have clear views on on what what is it that they that they want and the process of engaging with with buyers is also finding whether that's the right fit um yeah the other point i'd make is that you know there's different types of deals certain i mean it's incredibly difficult to scale so whilst certain studios are at a scale where you know they they can run pretty much

independently there's also uh certain studios who will say you know we've gotten to the scale but if if we're part of a larger firm where there's other pockets of expertise then we can leverage that to accelerate growth and to do better than what we're doing right so i think that's again another consideration that oftentimes management teams have which is you know what do we expect the buyer to provide is it this total independence or is it a total independence plus certain capabilities or sometimes it's it's you know it's a more deeper involvement um so that so that's the process that we run through early on which will then help determine what the right home for the for the business is um and through that process right and and if the if the process is working well then from the acquirer's point of view you've got the scenario where the the whole is more than the sum of the parts right you can leverage this you know without having to smash together hr and finance you can

you can get you can extract the goodness from it by by keeping people kind of you know in in their lane if you like in terms of what they're doing but with uh with a wider network of people they can uh they can support sean you've recently been through the process it'd be cool to maybe understand what what your what your journey was as a founder and and um you know how you sort of evaluated uh you know different potential um sort of long longer term partners for your your what what the key things were maybe for you going through that process yeah i think um it kind of echoes what alexis and kartik was saying which is so much m a fails then you really have to ask the question why am i doing this and we built a model around home purpose and value so value is how much you know is the deal worth purpose what's the purpose of this organization and then home in terms of can we team flourish is it a safe place for us to to join with the team be proud um

that triangle kind of helped us but as we got to the crunch point of making decision it was very very tough still um because there are some great great acquirers out there um i think for me personally like i love this job i love this business i want to keep going um so i was looking for a long-term home that i can keep personally growing and learning um you have a lot of voices in your like coming at you from founders or co-founders investors needs then also the acquirers needs it's a pretty i would say business-wise it was the toughest choice i've ever made um and it was pretty exciting and it was a really weird it's quite a weird feeling when you make that choice there's like a there's a happiness but a sadness it's like the best and worst day of your life um sorry somebody gloomy but but it was it was it's very emotional because your

you know the business kind of represents you and everything you wanted out of the business and and you've i've been building it for 10 years and then you get to this point um i will say the bank like working with a ream i had a lot of fun working with them i thought they would be like just just spreadsheet guys and not really talking to me much and telling me to shut up when i say too much but um but i actually had a lot of fun you know it was during a pandemic so we were kind of stuck in hotels that you couldn't leave after 9pm and it was a it was a surreal experience because i've only done this once but um i thoroughly enjoyed it i got to meet a lot of good people i got to meet alexis um and jurgen and and you know he had some good times there and um you know it was uh but it comes to an end and you've got to make a choice so you've got to step up and um yeah it was it was quite tough and then life life post transaction europe you're you know you seem to be just getting on with what you were doing before obviously just part of that part of a kind of wider family are you getting the the benefits of uh you know the the uh the whole more than the sum of the parts benefits from

absolutely there are things i think in this business you think you've almost done it all the time and you get to the top of the tail and you're like yep i've nailed it oh there's another hill to climb and um and that's that's what i'm doing with a bunch of other people sort of holding our hands going oh don't go down that cul-de-sac we've been down there before this is what we did and this is what what failed it's oh that's interesting so i think for us when we were when we were selling while we were selling is exactly what cartoon was saying before is like scaling up when you get to a certain point you want to go faster and your team start to get anxious that you could take a risk that could jeopardize the business because the stakes are getting very high so you want to do that with a partner um and that's what we're doing now we're really expanding our marketing and really getting to understand um that piece of the piece of the business a lot better um there's a lot of reporting when you become part of the public listed

business i don't think anyone should shy away from from from saying um this is a necessity it's natural but i'm actually really enjoying the learning from it like it's a new phase of the business for me um and then there's you know everything has changed but nothing has changed so i know that's a kind of answer but it kind of is true it's like there's lots of reporting there's lots of this and that but actually i'm still accountable i'm still i'm still sean with with four other co-founders thinking oh this is still up to me to make this as a success like i haven't got i haven't got people telling me what to do in terms of what product to make and when to make it and how to make it um so that for me is really important and really exciting and um and and it kind of rolls down to the rest of my team that they are still accountable and um so so life is apart from a pandemic which is where because i've only met my my new owners like once i think um the rest has been on zoom so it's hard to build you know you know relationships through a screen um you know i i would i would yeah selling

a company during a pandemic is quite tough um alexis must have lots of experience behind companies and kartik as well so um so so yeah it's a very very unique unique time to try and sell a business interesting chapter in the book right um chanting so in terms of your of portfolio companies do you try and engender the same sort of you know sharings caring type of philosophy dude do you try and uh you know help people share best practices and and experience obviously it's like an earlier stage obviously post acquisition but be interesting to to kind of think about there's obviously there's the capital raising process and then there's the value-add process i think a lot of people are are considering as part of the sort of you know who's a good partner earlier on as a as a as a venture capital provider as well maybe maybe talk a little bit about how how things work you know within portfolio companies with you guys yeah for sure um yeah so there are some similar dynamics as you say you know

like between being part of a vp portfolio and being part of a big company where you see some learnings shared across lines and founders you know kind of getting a lot of value from other founders in the portfolio sometimes as opposed to you know kind of the vc portfolio managers like me um so you know specifically i think we find that you know like as we have folks who have challenges around whether it's fundraising or hiring or scaling you know like some of the most relevant feedback they can get will be from other folks in the portfolio who've just done that because i think one of the things that is um a very salient point around um service-based models is that you know your knowledge needs to be very current in order to be valuable and so you're like the last person or a portfolio to kind of experience something is usually you know kind of uh the most popular um so everybody wants to talk to the ceo who just raised that big series b um everyone wants to talk to

the the person who figured out you know kind of some growth technique um and so we do you know kind of do our best to share across across lines um so i think one of the reasons that you know like the the dynamic that we're you were talking about before exists where um companies are not necessarily um forced not smashing one another together and and not forcing everyone to centralize models um you know track suit to this but it a lot of it has to do with the the differences in where the conversations end up so it used to be that you know you would have a central services company in a big company because you needed to talk to retailers um so the sales organization needed to talk to retail and the pr organization needed to talk to um the magazines and that was basically you know kind of the core centralization you know methodology that organized the rest of the company and now because you know the development team can be in close contact with their customers

through you know a variety of online methodologies you know it creates this uh multivariate um touch point with you know directly with the the consumers um which is where a lot of the value gets created it's where a lot of the complexity happens as well and where we see the most sharing inside our portfolio um is like what did you do on tick tock what did you do on reddit what did you do on imgur you know like there are a lot of like little techniques that turn out to be valuable that can be shared kind of more excuse me portfolio company to portfolio company that's interesting yeah no for sure it seems to be there's the whole sort of like the secret sauce and if someone you know someone has something that's working for them they don't want to go and openly share it because then it's going to stop working but work but sharing that within a smaller you know unless you're after the same place and that's that's exactly the sort of data would be really value the so so one question and i i got asked this the other day on a on a podcast um and

i'm not sure i'd really sort of like thought through things but i guess you guys will have a view on it um you see increasingly you know people who are raising like very very substantial amounts of money um so you know the game's good they've got they've raised 15 million whatever and then they raise 50 or 70 or you know just crazy amounts of money so i i open up um techcrunch and and i read it and say you know these guys raised this x months ago and now they're raising 5x now and the funds will be deployed into user acquisition now like for for me you know the way i'm going to play this right i'm an ex-banker capital efficiency you should use debt not equity whatever and then the other way to look at it is like well yeah but maybe you're saying a clear signal so we've got we're putting a moat round here for an acquirer to say like ah i'm really gonna have to pay up for these guys because they just raised blah from blah i don't know if you guys have got a have got a uh like a a view or anything um anything you kind of share around those sort of like

those big sort of mega rounds that might you know that might follow with an acquisition within you know within relatively short spaces of time and and what it means for founders as well as the thing i guess i would i would anchor back to um i don't know who wants to take that alexis yeah so i think right now there's a there's a race for size uh very clearly uh there's a race for size i know in terms of consolidators you know um consolidating in terms of my name there's a race for size in terms of startups you know trying to grow their games as quickly as possible as fast as possible to get to a size where they're you know they're really you know strategic and attractive the reason for that is and this heaven for companies like kareem is there there's more buyers right now uh there's a lot more buyers so if you're uh if if you're starting a games company or you're skating games company it's a great time for you um if you're if you're a buyer you know it's it's getting a bit harder right now and uh we've uh at still front you know as you know we have a this this big m

a engine and we've been very very cautious uh these past few months uh in a few on a few deals where we think that the prices are getting a little bit out of whack uh and that's probably going to hurt the short term but medium too long term we think is the right thing to do is like sometimes you just have to be careful and and not overpay because in games you know if you overpay for uh for a specific target uh short term you might look good but medium to long term you're going to end up with a lot of egg on your face and you're going to pay for that i think a bit of that is happening as well in the vc markets to be honest uh i think there's a bit of um you know overpaying uh like rounds that are a bit too too high uh and um and i think it's it's it's um it's it's a bit overheating uh the market right now uh so that's kind of my feeling but maybe others will disagree with me uh what do you think of that no

so look i think i think two things one is um you know experienced operators like shanti running specialist funds i think that's been a big difference in last few years even at the early stage there are a lot more sector specialist investors which i think which i think sets companies up way better and i think then there's a natural progression because you know for the for the companies that are doing these uh big rounds you know there they're automatically taking the view that uh you know it's a standalone strategy and that they can they can get big right and i think now there's been enough evidence that uh you know if you can scale a game we you know it's hard to break into into that to be a top game but if you if you can there is uh there's value because you know these games aren't going away ip sticks around

uh liveops are important so i think some of that there's there's a lot more evidence as a consequence i think more later stage investors have have uh have the confidence to to back uh what is then you know a much bigger outcome that you're targeting right so it happens but that that doesn't mean it happens every you know there's still a lot of uh bootstrap businesses that you know get great uh outcomes um there are ones who consciously are more cautious about how much capital they're taking precisely for the reasons you outlined so that they're in the zone where you know from an exit perspective there are a lot more optionalities because the bigger you get there are fewer the uh the buyers um but but you know i i i'm not you know i i'd almost argue i see what alexis is saying but actually i think if you compare gaming as a sector relative to others i still feel that it

is uh fairly if not undervalued at least fairly priced i believe in the current markets uh the listed companies um you know there's growth uh they're highly cash generative so on a relative to if you look at other pockets of of tech i would argue that it's you know undervalued and the same thing i agree with you on public companies i'm talking about private companies you're seeing private companies go at higher multiples in public companies private companies with higher risk and less five portfolios and that's why i see when there's a disconnect on that side where there's a little bit of overheating that's all but which is which makes sense because a lot of buyers that need to make those acquisitions so yeah and i think and i think look it's it's also you know specific deals always right i think you can't draw broad stroke conclusions because um you know if the trajectory is there it just depends on what the investors see and how much of that plays out so the deal that appears to be you know very rich

depending on the on the performance can can seem very fairly priced uh 18 months later but that's always uh that's always um but i think your your point uh martin about you know does everybody think of the most capital efficient way of scaling ua i mean ua is and performance marketing is a big part of the spend but does everyone say we've analyzed it and we know what the right optimal supposed to decide i don't think that happens all the time um so surely you know there's room for room for improving that because it will mean a better outcome we're certainly trying shanti what what do you think of that yeah i mean i i definitely am you know intimately familiar with some of the questions that have been brought up here of course um i mean we've seen you know like fairly insane graduation rates from our portfolio into follow-on rounds at multiples that we didn't expect um just because of the the hotness of the market and there's so much capital particularly at

the later stages that wants in on games so like games have been recognized all of a sudden you know seemingly as you know kind of where you need to have allocation and you know like at the very significant kind of billions of dollar schools of capital level like people are under allocated in games um and so there is a lot of movement at that level into games and particularly in places where you know it has been proven to be you know safer so like if you look at later stage rounds of course you know there's going to be a lot of attention there from more um kind of private investors at the earlier stages things aren't as frothy but they are in specific markets so you're like we i you know i'm based in london now in no small part because we want to have access to a broader geographic spread of deals some of which are lower valuations um so but our portfolio tends to be concentrated historically in california which is the highest valuation place you could probably look at and so some of the frothiest deals you

know one or two european deals accepted um are in california um so there's one in particular that came up recently where you know it was raised on the back of you know kind of some founders in the decks essentially and it was stratospherically high but it was an outlier um and it probably won't be repeated you know kind of time ago and again unless you see that particular pattern again um but it's not universally you know kind of across the board um and i would say you know to kartik's point the overall trends behind gaming you know like have been you know for the last you know several waves and now are extremely strong so even if you just look at the demographic trends of like gen z plays more games um than like any other generation before them gen a looks to be even more you know like if you just hold those trends constantly against the current kind of gaming environment it's going to grow big time um and so again like against that you know like m a buyers

um you know kind of measuring themselves private money measuring themselves it's not completely irrational you're like is ua money going in the wrong place perhaps um but usually you know if you see a 50 million dollar round it's not here marked exclusively for ua they're going to build out an international publishing function they're going to invest heavily in community they're going to hire some more engineers engineers are more expensive because we're all bidding up you know the ecosystem in parallel with amazon google and facebook who are competing for that same engineering talent um and i would say like for us as a fund that tends to be the place that we you know kind of you know when we are you know play looking at what keeps us up at night it's definitely the talent that keeps us up at night um you know looking at you know like how are all our portfolio companies going to get access to the things they need over the long arc of their development cool um right we are i think we're running pretty short in time sean very very quick answer from you do you wish you'd gone out and raised some crazy crazy mega around or i was

i was quite glad to have only raised about 5 million that kept me quite focused but just because you raise 50 million doesn't mean you're worth a billion right you fundamentally have to build a strong business and i think like a rheem can't do it they can't just make stuff up and sell sell a business because it's raised so much money so you talk about building a moat and i've got one tip for founders early years on and afan told me this a lot for marine stop talking to m a buyers i spent so much time talking to all these different buyers thinking as somehow at the end of the meeting they're gonna offer me you know to to buy the business and all i ever did was send the early stage people i used to speak to a bit of a brand signal of who i was a scrappy startup of 20 people when we grew to 120 all the all the real contenders in the market didn't have those judgments from early on so it's actually just just just build a fundamental business put your head down um yeah make friends

have drinks don't get too drunk but don't but don't go too deep with some of these buyers because they fundamentally cannot get past a point that you were when you're in your first few years and i think it's really it was the biggest thing i learned because all the people i thought would be would be up there for for the purchase couldn't get past the fact that we weren't the 15 person scrappy team and we're now 120 people and i think they found that very very hard so that's that's that's my founder's tip that's great um cool listen guys thank you so much i think we're we're probably out of time just waiting for chris to hop on and uh oh oh hello hang on that's fantastic i was letting you guys let you talk for hours on this i find it incredible um really interesting to listen to the personal stories from from both sides as well and uh so thank you so much for for sharing that really really appreciated i i've got a couple of questions if you've if you want my hang around for a couple of minutes there's loads of new audience but i'll pick it to couple out that i'm i'm most interested in

it's the kind of perks of being in charge right so um um yeah i won't some of you kind of answered really about the the whether there's gonna be a slowdown in sight for the m a sort of uh activity i think shanty just answered that kind of very nicely just uh so it's good about you know you see his playing movement in it but but another question here is where do we see is the next exciting growth areas you know um obviously mobile has been an engine that's driven driven the game's industry as a whole for for the past you know five six years a decade or whatever and and great i'm very grateful for that as well being part of that but um what do we see next is it return of kind of xr is it metaverse is it streaming is it some new genres that we're just starting to start now where where do where are people looking or is it or is it just kind of piling still into the big boys obviously a lot of the consolidation is big companies buying middle-sized companies at the moment but is there the new exciting areas you're looking at i know shanty you probably are yeah no we're we're seeing um a lot of

very innovative things happening you know kind of a whole bunch of different vectors at once um so you know we look all the way from expectation and creations game development platforms and the tech that supports all of them and i would say in each of those buckets there's there's definitely super interesting stuff going on i think the discipline to remain focused on things and teams that have the potential to actually scale to businesses that are interesting enough that folks like these will consider buying them you know like remains a filter for venture uh investors um and so you know in terms of flagging specific areas you know i think it's actually quite difficult i can tell you the areas that are super hot um that doesn't mean that that's where a real business will be built um and so you know that's always the interesting part for me is to try and discern the difference because like there are a lot of trends and fads and things that come and go um but the one true thing i think in games is that you know things that people play frequently and

care about and make part of their life on a regular basis that's where real value is you know like franchises and ip and teams that underpin them like this is where we i think you know call home as an industry um alongside that you know yes there's you know kind of things being discussed around nfps and you know instant games vr and the metaverse um like whether any of those will scale to kind of what mobile has become um i think is still a bit of an open question um although you know like a lot of you know inside our fund we we talk about the pre-metaverse for example the metaverse just because we you kind of think that there's a lot of inception um of some of these concepts and we're interested in seeing where they land from a commercial perspective um but we don't yet kind of um commit to the you know kind of full you know uh interlocking you know kind of ready player one you know player owned economy of of of that um because you know we think that

there's actually a lot of complexity that goes into just building a great game franchise um and frankly you know if you look at the mma data as martin has done like that tends to be where the buyers are right now yeah they're fair enough thanks for that looking forward i'm going to ask alexis uh something like if i can here there's a question here that's um just says can you speak a little about the flood of games companies onto public markets it feels like the number of games related companies has doubled or more in the last 12 months thanks to industry growth and new vehicles like like the spax which a lot of companies is this is this a great encouraging sign or something to be worried about i guess is that you obviously are uh you know a listed business um or partners yeah yeah we've been in this business for a few years now uh and just really quickly to to bill one shanty said i think the whole nft blockchain space is really interesting especially for game teams because if you look at a lot of things there um the games aren't very good but some of those so so if so if you have a really good game team that understands nfc blockchains and is able to you know to do something that

is really interesting and allows place to earn and you know do there's a lot of interesting things you can do i spend a bit of time on the testos board which is one of the of the of the leading blockchains and i'm making i'm looking at that base really space really correctly so anyway so that part i think is if i was doing a startup today i would look at that really seriously basically that would be my piece of advice as a founder um in terms of you know more no more companies coming to the public markets i think i think it's it's a healthy sign that the industry is growing and um and and doing well you know it's uh it actually is very hard to become a public company i mean it's a bit different if you do it through a spec but if you're doing it you know the proper way it means that you really need to have all your things lined up you know in the proper way you need to have you know all your finances in order and a lot of things need to be so it's it's a pretty challenging process to get to and as a sean was saying you know once you're a public company there's a lot of things that you need to do in terms of reporting and all that so i think it's just a sign that the industry has grown up uh first of all the second thing the

second part about that is maybe some companies are coming a bit too soon and are underestimating what it means to be a public company uh i think you need to be a certain size you need to have liquidity uh you need there's a few things that you need to have uh so so maybe that's also one of the reasons you're seeing some of those companies you know really being very aggressive in m a maybe a bit late to the game to try and grow uh fast because reality of it if you're a public company uh that has a very small market cap and low liquidity with your share price normally what you what you're using which is you're using your shares as a currency in terms of m a but if they're not liquid then there's not much you can do with it so i think there's a there's really good size to it but there's also negative sides to it okay and final question i'm going to ask and sorry i'm not going to but just i know it's it's to spit off what shawn was was saying that someone says he was really interesting listening shawn about experience is selling his business and he talks about talk looking at different stages i i this is quite a big question but how do

you know when is the right time to sell are there obvious kind of right or wrong reasons to to to sell i think it's i think it's really personal it's about what you want to do i mean like if you just want to sell and retire then you need to enter the m a space saying that's what i want to do if if you kind of that point then you're just going to have a miserable time and the business is going to be bad for everybody and it's going to be a lose-lose situation if you want to if you want to sell well specifically for us we wanted to take more risks in areas that we felt we could do quicker with a partner um so whether that's raising from an uh from a vc or if that's actually exiting the vcs and getting with um with a public listed business that has expertise in what we wanted to do then that was the right route uh for us so it really you've got to be really

clear about it and i think and i know it sounds cheesy but it can't just be about personal wealth it's you've got to look well personally i think you're going to live your life with some purpose and you know i enjoy my job i don't want to finish making games i've still got lots more to achieve our best years yet to come so that was my sort of angle and viewpoint on it like we had we've got way more to do like you guys mentioned nfts my heart keeps racing every time that word's mentioned because i need to you know like we're thinking we're working on stuff all the time about this so um just because you sell a business doesn't mean it's it's game over it's actually the next phase of your sort of business career um as a founder fair enough um yes well okay i i'm sorry to go to absolutely but thank you so much i'm glad to move on so i've i've taken it taking it to you on thank you so much for your time and sharing your your insights to kartik and sean and shanti and alexis and of course martin for the last 14 hours of speaking i really appreciate that

bucket game of triple now i feel like yeah you can do that you get a special still i'm i'm glad you guys uh shoot off into the ether and uh have a enjoy the rest of your day i'm sure you've got plenty of work to do um thank you very much we are thanks so much