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Riot Games and Konvoy Ventures back games publisher Carry1st in $6M Series A
Africa is the last frontier for basically anything. Mobile gaming is no exception. For a continent that is home to more than 1 billion millennials and Gen Zers, mobile gaming has never really picked up, despite the continent witnessing rapid economic growth and smartphone adoption.
Two issues have proved detrimental to this growth: distribution and payments. With fragmented and unresolved distribution and digital payments ecosystems, game studios have found it difficult to serve African consumers and make a ton of money doing so. Carry1st is a mobile games publishing platform fixing this problem, and today it is announcing the close of its $6 million Series A round.
This month last year, we reported that the company had just raised a $2.5 million seed investment. CRE Ventures led that round, but this time, the company, which has offices in Cape Town and New York, brought in a blue-chip group of investors spanning gaming, media and fintech.
U.S. VC firm Konvoy Ventures led the Series A round. The firm is known for its investment in the video gaming industry’s infrastructure, technology, tools and platforms. Riot Games (developer of League of Legends), Tokyo’s Akatsuki Entertainment Technology Fund (the company behind Dragon Ball Z), Raine Ventures and fintech VC TTV Capital participated.
Carry1st was founded by Cordel Robbin-Coker, Lucy Hoffman and Tinotenda Mundangepfupfu in 2018. The company started as a game studio, developing and launching its own mobile games. But a projection on what it could be in the long run made the company switch tactics.
Instead of the studio model (quite popular among gaming companies in Africa), Carry1st sought to become a regional publisher, thereby opening the continent to international studios. Also, the company helps local studios that find it difficult to create games with a global appeal by pairing them with strong operators.
“We learned that African users don’t need their own games; they want to play the best games in the world,” CEO Robbin-Coker told TechCrunch.
COO Hoffman said that the company provides a full-stack publishing platform for its partners. It also handles localization, distribution, user acquisition, monetization, customer experience for studios and licenses their games on exclusive, long-term contracts.
“We fund user acquisition so that the games are played by as many users as possible, and then send our partners a royalty in return for the ability to leverage their IP,” Hoffman said.
L-R: Cordel Robbin-Coker (CEO), Lucy Hoffman (COO) and Tinotenda Mundangepfupfu (CTO). Image Credits: Carry1st
This is somewhat akin to how Tencent-backed Sea Limited (parent company of Garena) took off. The company was the publisher of League of Legends across Southeast Asia but launched its own game, Free Fire. Now, the company has built out the largest consumer payments and e-commerce platform in the region, which is now worth over $130 billion. Carry1st aspires to do the same for Africa.
Although there aren’t many details about its e-commerce activity, Carry1st is tackling payments and difficult monetization issues by partnering with some fintechs like Paystack, Safaricom and Cellulant. These partnerships have been pivotal to developing its in-house payments platform Pay1st, which allows customers to pay in their preferred way. “For global studios, this is the difference between making money and not,” Robbin-Coker added.
Demand for Carry1st has grown rapidly. Since its seed round last year, the company has signed seven games with well-known mobile gaming studios. They include Sweden’s Raketspel (the company has more than 120 million downloads across its portfolio), Cosi Games and Ethiopia’s Qene Games.
All these signups happened in 2020 and the catalyst for this growth has pandemic-induced lockdowns written all over it. The African mobile gaming market has always pointed toward a strong growth market, but being forced indoors surely skyrocketed mobile usage and gaming.
People who might not have previously needed a mobile phone have now come to rely on them to keep in touch with family and friends. For the average user using a smartphone for the first time, there’s a natural tendency to explore the fun things available on their device.
“Typically, the first things people do when they get their first smartphone is to chat with friends and play games. This is the same all over the world — Africa is no different. For that reason, we are seeing more and more mobile gamers across Africa,” remarked Robbin-Coker.
The company has also grown its team from 18 to 26 across 11 countries with recruits from Carlyle, King, Jumia, Rovio, Socialpoint, Ubisoft and Wargaming — a testament to the company’s global ambitions to be a top gaming publisher.
Expanding the team, which cuts across product, engineering and growth departments, is one way Carry1st will put the new investment to use. The company also plans to secure new partnerships with global gaming studios while launching and scaling its existing games like Carry1st Trivia and All-Star Soccer.
User playing a Carry1st game. Image Credits: Carry1st
With this investment, Carry1st has raised a total of $9.5 million. On the caliber of investors brought on, Robbin-Coker said their investment in the company would put them in a place to “delight millions of users across Africa and the globe.”
Carry1st is Konvoy Ventures first foray into the African gaming market (same can be said for Riot Games), and representatives from both teams (Konvoy managing partner Jackson Vaughan and Riot Games head of corporate development Brendan Mulligan) believe the company is unequivocally solving the continent’s distribution and gaming experience problems. Vaughan will also join the company’s board.
Africa’s gaming industry has lacked innovation in times past. While we’ve seen companies try to change the narrative, most have operated as studios. Carry1st is one of the few companies to operate a hybrid model, but the endgame for the company really is to be one of the region’s dominant consumer internet companies.
“We think social games and payments is the best first step to doing so, but we have very large ambitions. If we execute this, we will catalyze massive growth in the digital ecosystem across the region, creating tons of high-quality jobs in the process. We think all of the ingredients are in place — we want to be the catalyst,” Hoffman said.
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End-to-end operators are the next generation of consumer business
At Battery, a central part of our consumer investing practice involves tracking the evolution of where and how consumers find and purchase goods and services. From our annual Battery Marketplace Index, we’ve seen seismic shifts in how consumer purchasing behavior has changed over the years, starting with the move to the web and, more recently, to mobile and on-demand via smartphones.
The evolution looks like this in a nutshell: In the early days, listing sites like Craigslist, Angie’s List* and Yelp effectively put the Yellow Pages online — you could find a new restaurant or plumber on the web, but the process of contacting them was largely still offline. As consumers grew more comfortable with the web, marketplaces like eBay, Etsy, Expedia and Wayfair* emerged, enabling historically offline transactions to occur online.
More recently, and spurred in large part by mobile, on-demand use cases, managed marketplaces like Uber, DoorDash, Instacart and StockX* have taken online consumer purchasing a step further. They play a greater role in the operations of the marketplace, from automatically matching demand with supply, to verifying the supply side for quality, to dynamic pricing.
The key purpose of being end-to-end is to deliver an even better value proposition to consumers relative to incumbent alternatives.
Each stage of this evolution unlocked billions of dollars in value, and many of the names listed above remain the largest consumer internet companies today.
At their core, these companies are facilitators, matching consumer demand with existing supply of a product or service. While there is no doubt these companies play a hugely valuable role in our lives, we increasingly believe that simply facilitating a transaction or service isn’t enough. Particularly in industries where supply is scarce, or in old-guard industries where innovation in the underlying product or service is slow, a digitized marketplace — even when managed — can produce underwhelming experiences for consumers.
In these instances, starting from the ground up is what is really required to deliver an optimal consumer experience. Back in 2014, Chris Dixon wrote a bit about this phenomenon in his post on “Full stack startups.” Fast forward several years, and more startups than ever are “full stack” or as we call it, “end-to-end operators.”
These businesses are fundamentally reimagining their product experience by owning the entire value chain, from end to end, thereby creating a step-functionally better experience for consumers. Owning more in the stack of operations gives these companies better control over quality, customer service, delivery, pricing and more — which gives consumers a better, faster and cheaper experience.
It’s worth noting that these end-to-end models typically require more capital to reach scale, as greater upfront investment is necessary to get them off the ground than other, more narrowly focused marketplaces. But in our experience, the additional capital required is often outweighed by the value captured from owning the entire experience.
End-to-end operators span many verticals
Many of these businesses have reached meaningful scale across industries:
Image Credits: Battery Ventures (opens in a new window)
All of these companies have recognized they can deliver more value to consumers by “owning” every aspect of the underlying product or service — from the bike to the workout content in Peloton’s case, or the bank account to the credit card in Chime’s case. They have reinvented and reimagined the entire consumer experience, from end to end.
What does success for end-to-end operator businesses look like?
As investors, we’ve had the privilege of meeting with many of these next-generation end-to-end operators over the years and found that those with the greatest success tend to exhibit the five key elements below:
1. Going after very large markets
The end-to-end approach makes the most sense when disrupting very large markets. In the graphic above, notice that most of these companies play in the largest, but notoriously archaic industries like banking, insurance, real estate, healthcare, etc. Incumbents in these industries are very large and entrenched, but they are legacy players, making them slow to adopt new technology. For the most part, they have failed to meet the needs of our digital-native, mobile-savvy generation and their experiences lag behind consumer expectations of today (evidenced by low, or sometimes even negative, NPS scores). Rebuilding the experience from the ground up is sometimes the only way to satisfy today’s consumers in these massive markets.
2. Step-functionally better consumer experience versus the status quo
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CRV’s Saar Gur wants to invest in a new wave of games built for VR, Twitch and Zoom
Saar Gur is adept at identifying the next big consumer trends earlier than most: The San Francisco-based general partner at CRV has led investments into leading consumer internet companies like Niantic, DoorDash, Bird, Dropbox, Patreon, Kapwing and ClassPass.
His own experience stuck at home during the COVID-19 pandemic spurred his interest in three new investment themes focused on the next generation of games: those built for VR, those built on top of Twitch and those built for video chat environments as a socializing tool.
TechCrunch: We’ve been in a “VR winter,” as it’s been called in the industry, following the 2014-2017 wave of VC funding into VR drying up as the market failed to gain massive consumer adoption. You think VR could soon be hot again. Why?
Saar Gur: If you track revenues of third-party games on Oculus, the numbers are getting interesting. And we think the Quest is not quite the Xbox moment for Facebook, but the device and market response to the Quest have been great. So we are more engaged in looking at VR gaming startups than ever before.
What do you mean by “the Xbox moment,” and what will that look like for VR? Facebook hasn’t been able to keep up with demand for Oculus Quest headsets, and most VR headsets seem to have sold out during this pandemic as people seek entertainment at home. This seems like progress. When will we cross the threshold?
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