Virtual reality
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YC’s latest VR bet is a team building a cyberpunk anime MMO
There are niche startups and then there are VR companies going after fans of the “cyberpunk fantasy anime aesthetic.”
Ramen VR is one of only a few virtual reality startups that Y Combinator has bet on in the past few years and is only one of two in the company’s most recent batch of bets. It has a niche approach, but it’s hoping to build an MMO that can leanly grow alongside the slow-but-steady virtual reality market. Like any content play that’s hoping for VC dollars, Ramen VR wants eventually to be a platform.
“Long-term, our goal isn’t just to create a game, but we’ve seen the issues of VR platforms that tried to be platforms before they had a meaningful use case. If you’re just trying to be a chat room or platform without any users, that doesn’t work,” CEO Andy Tsen tells TechCrunch.
The company’s first title is called Zenith, and it’s an anime-inspired fantasy title that plays with cyberpunk themes as well. The founders are really aiming to give VR geeks the game that they want, one that taps into the 80s futuristic aesthetic with gameplay that pays tribute to popular sci-fi books, movies and games of the era.
MMOs are attracting quite a bit of inbound interest in the venture-backed startup world. Part of the reasoning has been because of people seeing the scope a title like Fortnite was able to achieve so quickly after going virall; the other part is the prevalence of developer tools that gaming startups are able to easily plug into their tech stacks. Ramen VR is using Improbable’s SpatialOS to bring persistent online gameplay to its users.
The company just rolled out a Kickstarter to gauge interest for Zenith; they launched a week ago and have raised $132,000 in the crowdfunding campaign thus far. Backers get access to a VR version of the title as well as a desktop PC copy. The startup plans to roll out across VR devices, including PC systems, PlayStation VR and Oculus Quest.
“The whole point is that it’s not just on one device, it’s a world, it’s literally the Upside Down from Stranger Things layered on top of your entire world. At any point, no matter what screen you’re on, you can access that,” CTO Lauren Frazier tells us.
The startup still has a bit of development ahead of them, but the current plan is to launch an Alpha in six months, a beta in nine months and to go live broadly a year from now.
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Minecraft to get big lighting, shadow and color upgrades through Nvidia ray tracing
Minecraft is getting a free update that brings much-improved lighting and color to the game’s blocky graphics using real-time ray tracing running on Nvidia GeForce RTX graphics hardware. The new look is a dramatic change in the atmospherics of the game, and manages to be eerily realistic while retaining Minecraft’s pixelated charm.
The ray-tracing tech will be available via a free update to the game on Windows 10 PCs, but it’ll only be accessible to players using an Nvidia GeForce RTX GPU, as that’s the only graphics hardware on the market that currently supports playing games with real-time ray tracing active.
It sounds like it’ll be an excellent addition to the experience for players who are equipped with the right hardware — including lighting effects not only from the sun, but also from in-game materials like glowstone and lava; both hard and soft shadows depending on transparency of material and angle of light refraction; and accurate reflections in surfaces that are supposed to be reflective (i.e. gold blocks, for instance).
This is welcome news after Minecraft developer Mojang announced last week that it canceled plans to release its Super Duper Graphics Pack, which was going to add a bunch of improved visuals to the game because it wouldn’t work well across platforms. At the time, Mojang said it would be sharing news about graphics optimization for some platforms “very soon,” and it looks like this is what they had in mind.
Nvidia, meanwhile, is showing off at Gamescom 2019 in Cologne, Germany a range of 2019 games with real-time ray tracing enabled, including Dying Light 2, Cyperpunk 2077, Call of Duty: Modern Warfare and Watch Dogs: Legion.
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Virtual reality game-streaming platform Vreal shuts down
Vreal, an ambitious game-streaming platform that aimed to let VR users explore the worlds that live-streamers were playing in, is shutting down and laying off its staff after raising $15 million in venture capital. The startup announced the shutdown on its website’s homepage.
The Seattle startup raised cash from investors including Axioma Ventures, Upfront Ventures and Intel Capital. Vreal raised an $11.7 million Series A in early 2018.
Vreal’s tech let game streamers share the entire 3D environment of the VR world they were inside, something which allowed users to walk around streamers as avatars or explore on their own as passive observers while listening to the live-streamer blast their way through zombies.
The startup, which was founded in 2015, spent VR’s most hyped years building out their live-streaming tech. By the time they closed their Series A early last year, their platform was still in the pre-alpha launch stage. The platform launched in Early Access on Steam a few months later in June.
“Unfortunately, the VR market never developed as quickly as we all had hoped, and we were definitely ahead of our time. As a result, Vreal is shutting down operations and our wonderful team members are moving on to other opportunities,” a blog post titled “Moving on to new realities…” on the company’s hollowed-out website now reads.
As I noted after the Series A announcement, the Vreal platform was “a product for a pretty tight niche: streamers with VR hardware broadcasting for viewers with VR hardware.” The company’s religious allegiance to VR hardware being the only way to enjoy and produce the content likely limited the platform’s reach too much. Two months ago, the company announced it was adding an experimental web browser view to its platform to expand its reach, but that move seems to have been too little, too late.
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Calling all hardware startups! Apply to Hardware Battlefield @ TC Shenzhen
Got hardware? Well then, listen up, because our search continues for boundary-pushing, early-stage hardware startups to join us in Shenzhen, China for an epic opportunity; launch your startup on a global stage and compete in Hardware Battlefield at TC Shenzhen on November 11-12.
Apply here to compete in TC Hardware Battlefield 2019. Why? It’s your chance to demo your product to the top investors and technologists in the world. Hardware Battlefield, cousin to Startup Battlefield, focuses exclusively on innovative hardware because, let’s face it, it’s the backbone of technology. From enterprise solutions to agtech advancements, medical devices to consumer product goods — hardware startups are in the international spotlight.
If you make the cut, you’ll compete against 15 of the world’s most innovative hardware makers for bragging rights, plenty of investor love, media exposure and $25,000 in equity-free cash. Just participating in a Battlefield can change the whole trajectory of your business in the best way possible.
We chose to bring our fifth Hardware Battlefield to Shenzhen because of its outstanding track record of supporting hardware startups. The city achieves this through a combination of accelerators, rapid prototyping and world-class manufacturing. What’s more, TC Hardware Battlefield 2019 takes place as part of the larger TechCrunch Shenzhen that runs November 9-12.
Creativity and innovation no know boundaries, and that’s why we’re opening this competition to any early-stage hardware startup from any country. While we’ve seen amazing hardware in previous Battlefields — like robotic arms, food testing devices, malaria diagnostic tools, smart socks for diabetics and e-motorcycles, we can’t wait to see the next generation of hardware, so bring it on!
Meet the minimum requirements listed below, and we’ll consider your startup:
- Submit your application to TC Hardware Battlefield 2019 by August 14th
- You must have a minimally viable product to demo onstage
- Your product has received little if any, press coverage to date
- Your product must have a hardware device or component
Here’s how Hardware Battlefield works. TechCrunch editors vet every qualified application and pick 15 startups to compete. Those startups receive six rigorous weeks of free coaching. Forget stage fright. You’ll be prepped and ready to step into the spotlight.
Teams have six minutes to pitch and demo their products, which is immediately followed by an in-depth Q&A with the judges. If you make it to the final round, you’ll repeat the process in front of a new set of judges.
The judges will name one outstanding startup the Hardware Battlefield champion. Hoist the Battlefield Cup, claim those bragging rights and the $25,000. This nerve-wracking thrill-ride takes place in front of a live audience, and we capture the entire event on video and post it to our global audience on TechCrunch.
Hardware Battlefield at TC Shenzhen takes place on November 11-12. Don’t hide your hardware or miss your chance to show us — and the entire tech world — your startup magic. Apply to compete in TC Hardware Battlefield 2019, and join us in Shenzhen!
Is your company interested in sponsoring or exhibiting at Hardware Battlefield at TC Shenzhen? Contact our sponsorship sales team by filling out this form.
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A guide to Virtual Beings and how they impact our world
Money from big tech companies and top VC firms is flowing into the nascent “virtual beings” space. Mixing the opportunities presented by conversational AI, generative adversarial networks, photorealistic graphics, and creative development of fictional characters, “virtual beings” envisions a near-future where characters (with personalities) that look and/or sound exactly like humans are part of our day-to-day interactions.
Last week in San Francisco, entrepreneurs, researchers, and investors convened for the first Virtual Beings Summit, where organizer and Fable Studio CEO Edward Saatchi announced a grant program. Corporates like Amazon, Apple, Google, and Microsoft are pouring resources into conversational AI technology, chip-maker Nvidia and game engines Unreal and Unity are advancing real-time ray tracing for photorealistic graphics, and in my survey of media VCs one of the most common interests was “virtual influencers”.
The term “virtual beings” gets used as a catch-all categorization of activities that overlap here. There are really three separate fields getting conflated though:
- Virtual Companions
- Humanoid Character Creation
- Virtual Influencers
These can overlap — there are humanoid virtual influencers for example — but they represent separate challenges, separate business opportunities, and separate societal concerns. Here’s a look at these fields, including examples from the Virtual Beings Summit, and how they collectively comprise this concept of virtual beings:
Virtual companions
Virtual companions are conversational AI that build a unique 1-to-1 relationship with us, whether to provide friendship or utility. A virtual companion has personality, gauges the personality of the user, retains memory of prior conversations, and uses all that to converse with humans like a fellow human would. They seem to exist as their own being even if we rationally understand they are not.
Virtual companions can exist across 4 formats:
- Physical presence (Robotics)
- Interactive visual media (social media, gaming, AR/VR)
- Text-based messaging
- Interactive voice
While pop culture depictions of this include Her and Ex Machina, nascent real-world examples are virtual friend bots like Hugging Face and Replika as well as voice assistants like Amazon’s Alexa and Apple’s Siri. The products currently on the market aren’t yet sophisticated conversationalists or adept at engaging with us as emotional creatures but they may not be far off from that.
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LIV, a startup making VR gaming more interactive for audiences, raises $1M from Oculus founder and Seedcamp
LIV, a Prague-based company that wants to make VR gaming more fun to watch, and in turn bring players and spectators closer together, has picked up $1 million in funding. That’s a pretty modest raise as far as ambitious upstarts go — and LIV is certainly ambitious. However, the list of backers includes noteworthy names, such as the founder of Oculus (and designer of Oculus Rift), Palmer Luckey.
Other investors in LIV include Jaroslav Beck, CEO and co-founder of Beat Games (the studio behind VR streaming hit Beat Saber); early-stage VC Seedcamp; accelerator Techstars; Prague’s Credo Ventures; VR company VIVE; and mixed reality production specialist Splitverse.
Founded in 2016, LIV is betting on the premise that VR gaming represents an entirely new platform, and it is new platforms with nascent ecosystems where the biggest opportunities lie. Furthermore, while the watching of video game live streams shows no signs of abating — made popular via sites such as Twitch — the spectator experience hasn’t transitioned very gracefully to VR.
“Creating content in VR is incredibly hard, there are no tools for it, and no shareable content form factor that conveys the experience of being in VR,” says LIV co-founder AJ Shewki, who was previously a competitive gamer under the moniker “Dr Doom.”
“LIV empowers developers and content creators to grow their audience through shareable VR content. Developers integrate our SDK, and content creators are then able to create content with those games and experiences using the LIV App. The content format is called ‘Mixed Reality Capture’ (MRC).”
The “Mixed Reality Capture” experience is inevitably best watched rather than conveyed through the written word (you can see an example below). However, what MRC essentially does is inject a live video or, alternatively, a 3D avatar of the player’s body, inside the video game stream so spectators experience not only what the player sees (the classic VR first-person perspective) but can also follow the “real-world” movements the player makes to execute moves within the game. As a player moves their arms, for example, their avatar can be seen replicating the same moves based on sensor data pulled from the VR gear the player is wearing.
It is this ability to closely watch and potentially learn from the best players that has made video game streaming so popular. But, argues Shewki, the move to VR was initially a backwards step in this regard, as it required additional technology to close the gap between player and spectator.
“The LIV App gives streamers the tools to broadcast themselves as themselves, or as their favourite avatars, inside any of the 100s of games that we support. We support hundreds if not thousands of avatars, including the popular Japanese VRM avatar format,” says Shewki.
“The LIV App also brings utilities like stream chat, stream alerts, scene controls and camera controls natively into the headset using our proprietary 3D overlay system, built specifically with performance in mind (which in VR is already a scarce resource). The LIV SDK is integrated by developers to get their games LIV-ready. We support Unity, Unreal as well as custom engines, and have done integrations with all of them.”
Longer term, Shewki says he wants LIV to not only enable a better live-streaming experience but to evolve into what the company is describing as a “real-time audience interaction platform” for VR streamers and games developers. The thinking here is that spectators of VR can also become participants beyond the simple chatroom experience that exists today.
Dubbed “LIV Play” and targeting a closed alpha release by the end of the year, the idea is to give audiences the ability to influence what happens in-game and in real time, such as purchasing health potions when a player most needs them or spawning extra monsters when they least expect it.
“Our hypothesis was: If we give viewers more engaging ways to participate, as opposed to what you have today with chat, polls and donations, they will,” explains Shewki. “We ran experiments with Beat Saber where we let audiences replace cubes with bombs and do more fun donations. Our experiment results over 120 days were incredible. Week 1 and 2: 700% higher revenue/minute through higher engagement. It petered out to 300% higher rev/min at 120 days, where it’s stayed.”
In other words, take the same monetisation approach that we have seen in games like Fortnite and apply it to the audience side of live-gaming spectatorship. “Creativity is our only limit here,” enthuses Shewki.
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3 lessons from Roblox’s growth to gaming dominance
Our recently published EC-1 on Roblox recounts the origin story and growth prospects of the company. But there’s one more piece to the story: what Roblox’s impact will be on gaming and the broader startup industry, if the company manages to multiply its current 90 million users.
Sources: TechCrunch, VentureBeat, Roblox
We’ve distilled three key ideas out of the EC-1 — lessons that may apply not only to game developers and gaming entrepreneurs, but also to the broader startup industry.
Lesson 1: UGC is a missed opportunity in games
Roblox has shown that user-generated content (UGC) is a missed opportunity for much of the game industry. The company aspires, in a way, to be the YouTube of games. And it is succeeding, with 50 million experiences from 2 million creators to date.
The game industry generally has two problems with UGC. One is the games themselves: AAA games today are too complex, and lack the flexibility and simplicity needed for robust UGC. Roblox shows that a simpler look and feel is a valid alternative to today’s super-sized, beautiful AAA games. (Minecraft proved much the same.)
The other problem is the greater complexity of making games than, say, videos or music. Roblox solved this problem by building its own game engine, which is designed solely to output Roblox-style experiences.
But increasingly, engines like Unity are capable of accomplishing similar feats: games are getting easier to build. It’s now possible that savvy entrepreneurs could build a platform like Roblox, without building an entire game engine.
Lesson 2: New opportunities in gaming are still coming
The game industry is infamously cyclical. New platforms emerge, become promising, then grow overcrowded and competitive. Usually, this cycle relates to hardware (the iPhone, virtual reality helmets, game consoles like the Nintendo Switch) or massive changes in consumer behavior (the emergence of Facebook, the early growth of the internet). But Roblox, a pure software play, shows that exceptions could exist.
It’s still early days. Roblox reported that it paid out $30 million to game developers in 2017, doubling to $60 million in 2018. Developers receive a quarter of the revenue made from their games, with another quarter covering payment processing and another quarter covering cloud hosting. Its top 10 developers made about $3 million on average each. Seven of its games have also entered a “billion plays” club:
- Meep City – 3.7 billion visits
- Jailbreak – 2.8 billion
- Royale High – 1.7 billion
- Murder Mystery 2 – 1.7 billion
- Work at a Pizza Place – 1.6 billion
- Adopt Me – 1.3 billion
- Welcome to Bloxburg – 1.0+ billion
Adopt Me, a newer game, hit 440,000 concurrent users in June, a new record for the platform.
When a new platform appears, it’s usually found by amateur developers first. That’s certainly the case with Roblox: its successes are being created almost exclusively by first-time game developers in their teens and twenties. At some point, professional developers are likely to conclude they can do at least as well. The current market is particularly exciting because many games are fairly simple and lightweight — recent breakout hits like Camping 2 and Weight Lifting Simulator 3 are significantly smaller than comparable games on other platforms.
For entrepreneurs interested in creating new platforms or portals Roblox’s success as a combined game engine and self-contained platform also shows that opportunities still exist — if you have the patience to wait for them to mature.
Lesson 3: Patience can create amazing growth cycles
It took Roblox 15 years to grow to its current point. But most of that growth is recent: as seen in the chart above, Roblox experienced 10x growth in about 3 years, from 9 million users in February 2016 to 90 million in April 2019.
So what went into the decade or so during which Roblox was a much smaller platform? As we tell it in the origin story: a great deal of work, and very little paid acquisition.
In its early years, Roblox did buy users, to seed a user base while it worked on an impossibly large vision that included a game engine, platform, social features, a creator community, and its own games. But after a few years, it stopped buying users.
All of its growth since has been organic. That’s from two main sources: word of mouth, and YouTube users who watch one of the many Roblox streamers. Of course, any company can try to do the same. But Roblox had the patience to build a unique product — one which took years of work to even reach partial completion.
The key to it all was long-term adherence to a long-term goal: the creation of a new category, which it calls “human coexperience”. Today, Roblox still can’t be called part of a new category; it’s a game platform. But with more years of work, it may eventually get there.
For more on the Roblox story, see Part 1: The Origin Story, and Part 2: The Business Plan.
Update: TechCrunch corrected “2 million experiences” to be 50 million experiences from 2 million creators. We also provided more context of the revenue breakdown of payments made on Roblox to developers.
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Digging into the Roblox growth strategy
Could Roblox create a new entertainment and communication category, something it calls “human co-experience”?
When it was a small startup, few observers would have believed in that future. But after 15 years — as told in the origin story of our Roblox EC-1 — the company has accumulated 90 million users and a new $150 million venture funding war chest. It has captured the imagination of America’s youth, and become a startup darling in the entertainment space.
But what, exactly, is human co-experience? Well, it can’t be described precisely — because it’s still an emerging category. “It’s almost like that fable where the nine blind men are touching and describing an elephant.
Everyone has a slightly different view,” says co-founder and CEO Dave Baszucki. In Roblox’s view, co-experience means immersive environments where users play, explore, talk, hang out, and create an identity that’s as thoroughly fleshed out (if not as fleshy) as their offline, real life.
But the next decade at Roblox will also be its most challenging time yet, as it seeks to expand from 90 million users to, potentially, a billion or more. To do so, it needs to pull off two coups.
First, it needs to expand the age range of its players beyond its current tween and teen audience. Second, it must win the international market. Accomplishing both of these will be a puzzle with many moving parts.
What Roblox is today
One thing Roblox has done very well is appeal to kids within a certain age range. The company says that a majority of all 9-to-12-year-old children in the United States are on its platform.
Within that youthful segment, Roblox has arguably already created the human co-experience category. Many games are more cooperative than competitive, or have goals that are unclear or don’t seem to matter much. One of Roblox’s most popular games, for instance, is MeepCity, where players can run around and chat in virtual environments like a high school without necessarily interacting with the game mechanics at all.
What else separates these environments from what you can see today on, say, the App Store or Steam? A few characteristics seem common.
For one, the environments look rough. One Robloxian put the company’s relaxed attitude toward looks as “not over-indexing on visual fidelity.”
Roblox games also ignore the design principles now espoused by nearly every game company. Tutorials are infrequent, user interfaces are unpolished, and one gets the sense that KPIs like retention and engagement are not being carefully measured.
That’s similar to how games on platforms like Facebook and the App Store started out, so it seems reasonable to say Roblox is just in a similarly early stage. It is — but it’s also competing directly with mobile games that are more rigorously designed. Over half of its players are on smartphones, where they could have chosen a free game that looks more polished, like Fortnite or Clash of Clans.
The more accurate explanation of why Roblox draws big player numbers is that there’s a gap in the kids entertainment market. So far, only Roblox fills that gap, despite its various shortcomings.
“The amount of unstructured, undirected play has been declining for decades. [Kids] have much more homework, and structured activities like theater after school.
One of the big unmet needs we solve is to give kids a place to have imagination,” explains Craig Donato, Roblox’s chief business officer. “If you play the experiences on our platform, you’re not playing to win. You go into these worlds with people you know and share an experience.”
Games like The Sims tried to do the same, but eventually faded in the children’s demo. Roblox’s trick has been continued growth: it provides kids with an endless array of games that unlock their imagination. But just like we don’t expect adults to have fun with Barbie dolls, it’s unlikely most adults would enjoy Roblox games.
Of course, it would be easy to point at Roblox and laugh off its ambitions to win over people of all ages. That laughter would also be short-sighted.
As David Sze, the Greylock Partners investor who led Roblox’s most recent round, pointed out: “When we invested in Facebook there was a huge amount of pushback that nobody would use it outside college.” Companies that have won over one demographic have a good chance of winning others.
Roblox has also proven its ability to evolve. At one time, the platform’s players were 90 percent male. Now, that’s down to about 60 percent. Roblox now has far more girls playing than the typical game platform.
Evolving to new demographics
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How Roblox avoided the gaming graveyard and grew into a $2.5B company
There are successful companies that grow fast and garner tons of press. Then there’s Roblox, a company which took at least a decade to hit its stride and has, relative to its current level of success, barely gotten any recognition or attention.
Why has Roblox’s story gone mostly untold? One reason is that it emerged from a whole generation of gaming portals and platforms. Some, like King.com, got lucky or pivoted their business. Others by and large failed.
Once companies like Facebook, Apple and Google got to the gaming scene, it just looked like a bad idea to try to build your own platform — and thus not worth talking about. Added to that, founder and CEO Dave Baszucki seems uninterested in press.
But overall, the problem has been that Roblox just seemed like an insignificant story for many, many years. The company had millions of users, sure. So did any number of popular games. In its early days, Roblox even looked like Minecraft, a game that was released long after Roblox went live, but that grew much, much faster.
Yet here we are today: Roblox now claims that half of all American children aged 9-12 are on its platform. It has jumped to 90 million monthly unique users and is poised to go international, potentially multiplying that number. And it’s unique. Essentially all other distribution services offering games through a portal have eventually fizzled, aside from some distant cousins like Steam.
This is the story of how Roblox not only survived, but built a thriving platform.
Seeds of an idea
(Photo by Steve Jennings/Getty Images for TechCrunch)
Before Roblox, there was Knowledge Revolution, a company that made teaching software. While designed to allow students to simulate physics experiments, perhaps predictably, they also treated it like a game.
“The fun seemed to be in building your own experiment,” says Baszucki. “When people were playing it and we went into schools and labs, they were all making car crashes and buildings fall down, making really funny stuff.” Provided with a sandbox, kids didn’t just make dry experiments about mass or velocity — they made games, or experiences they could show off to friends for a laugh.
Knowledge Revolution was founded in 1989, by Dave Baszucki and his brother Greg (who didn’t later co-found Roblox, but is now on its board). Nearly a decade later, it was acquired for $20 million by MSC Software, which made professional simulation tools. Dave continued there for another four years before leaving to become an angel investor.
Baszucki put money into Friendster, a company that pre-dated Facebook and MySpace in the social networking category. That investment seeded another piece of the idea for Roblox. Taken together, the legacy of Knowledge Revolution and Friendster were the two key components undergirding Roblox: a physics sandbox with strong creation tools, and a social graph.
Baszucki himself is a third piece of the puzzle. Part of an older set of entrepreneurs, which might be called the Steve Jobs generation, Baszucki’s archetype seems closer to Mr. Rogers than Jobs himself: unfailingly polite and enthusiastic, never claiming superior insight, and preferring to pass credit for his accomplishments on to others. In conversation, he shows interests both central and tangential to Roblox, like virtual environments, games, education, digital identity and the future of tech. Somewhere in this heady mix, the idea of Roblox came about.
The first release
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Northzone’s Paul Murphy goes deep on the next era of gaming
As the gaming market continues to boom, billions of dollars are being invested in new games and new streaming platforms vying to own a piece of the action. Most of the value is accruing to the large incumbents in a space, however, and the entrance of Google and other big tech companies makes it difficult to identify where there are compelling opportunities for entrepreneurs to build new empires.
TechCrunch media analyst Eric Peckham recently sat down with Paul Murphy, Partner at European venture firm Northzone, to discuss Paul’s view of the market and where he is focusing his dollars. Below is the transcript of the conversation (edited for length and clarity):
Eric Peckham: You co-founded the hit mobile game Dots before moving to London and joining Northzone last year. Are you still bullish on investment opportunities in mobile gaming or do you think the market has changed?
Paul Murphy: I’m bullish on mobile gaming–the market is bigger than it has ever been. There’s a whole generation of people that have been trained to play games on mobile phones. So those are things that are very positive.
The challenge is you don’t really have a rising tide moment anymore. The winners have won. And so it’s very, very difficult for someone to enter with new content and build a business that’s as big as Supercell or King, regardless of how good their content is. So while the prize for winning in mobile gaming content big, the likelihood is smaller.
Where I’m spending most of my time is not on content, it’s on components within mobile gaming. We’re looking at infrastructure: different platforms that enable mobile gaming, like Bunch which we invested in.
Their product allows you to do live video and audio on top of mobile games. So we don’t have to take any content risk. We’re betting that this great product will fit into a large inventory ecosystem.
Peckham: New mobile game studios that are launching all seem to fall under the sphere of influence of these bigger companies. They get a strategic investment from Supercell or another company. To your point, it’s tough for a small startup to compete entirely on its own.
Murphy: It’s possible in mobile gaming still but it’s really, really hard now. At the same time, what you’ve seen is the odds of winning are lower. It is hard to reach the same scale when it costs you $5.00 to acquire a user today, whereas when Candy Crush launched, it was $0.05 per user. So it’s almost impossible to achieve King-like scale today.
Therefore, you’re looking at similar content risk with reduced upside, which makes that equation less attractive for venture capital. But it might be perfectly fine for an established company because they don’t need to do the marketing, they have the audience already.
The big gaming companies all struggle with the challenge of how to create the next hit IP. They have this machine that can bring any great game to market efficiently, with a large audience they can cross promote from and capital they can invest to build a big brand quickly. For them, the biggest challenge is getting the best content.
So it’s natural to me that the pendulum has swung towards strategic investors in mobile gaming content. Epic has a fund that they set up with Improbable, Supercell is making direct investments, Tencent has been making investments for years. Even from a content perspective, you’re probably going to see Apple, Google, and Amazon making more content investments in mobile gaming.
Image via Getty Images / aurielaki
Peckham: Does this same market dynamic apply to PC games and console games? Do you see a certain area within gaming where there’s still opportunity for independent startups to create the game itself and find success at a venture scale?
Murphy: The reason we made our investment in Klang Games, which is building an MMO called Seed that people will primarily play through PC, is that while there is content risk–you’re never going to get rid of the possibility that the IP doesn’t fly–if it works, it will be massive…an Earth-shattering level of success. If their vision comes to life, it will be very, very big.
So that one has all the risks that you’d have in any other game studio but the upside is exponentially larger, so the bet makes sense to us. And it so happens that it’s going to be on PC first, where there’s certainly a lot of competition but it’s not as saturated and the monetization methods are healthier than in mobile gaming. In PC, you don’t have to do free-to-play tactics that interfere with the gameplay.
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