Venture Capital: Andreessen Horowitz’s Thesis – “Multiplayer Game Experiences are the Next Social Networks”

June 15, 2020 | News, Venture Capital
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Andreessen Horowitz, or a16z, the billion-dollar venture capital firm, is stepping up investments in games.

Worldwide gaming has become serious business with the number of gamers estimated to run in the billions and industry revenues topping $160 billion. In February, a16z led an investment of $150 million in Roblox, an online game platform and game creation system that allows users to program games and play games created by other users.

A16z has interests in other games startups such as Singularity6, Forte, SandboxVR, Mainframe, Improbable, Elodie Games, CodeCombat, and others. (VentureBeat)

Partner Andrew Chen has a lot to do with the firm’s interest in game investing. VentureBeat interviewed Chen on this new trend at a16z.

Key takeaways:

  • How to pick out the next set of social products – check: what are young people using?
  • Games are like a social network. You hang out with your friends there and talk with them.
  • A key part of my thesis: multiplayer game experiences are going to be the next social networks.
  • Further, games have now become career options, e.g. a YouTuber or game streamer, content creator, influencer, tutorials, reviewers, etc.
  • In the new games “economy,” there are entire marketplaces that allow gamers to find other gamers
  • On whether we’re headed towards a “metaverse” – a virtual-reality universe in which users can interact with a computer-generated environment and other users – and does a16z have a strategy here? Chen: “It’s an interesting question. I don’t think it’s come up very much in our investment criteria.”
  • Moreover, blockchain gaming is very interesting. “That’s what you would need for different games to be able to interoperate with each other, something like a blockchain to intermediate it.”
  • “Riot showed that you could build a very valuable game startup. All of that unlocks a new generation of entrepreneurs, which we’re very excited to back.”
  • (Mainframe game studio) It’s very exciting that it’s technically feasible to stream games through the new cloud gaming trend.
  • (Singularity 6) Experimenting with building a virtual society which has to do a lot with shooting and competition
  • Meanwhile, there are other new exciting trends: (a) esports, (b) modding, and (c) user-generated gaming content
  • Demographics: Soon it would be de rigueur for everyone to have a gaming profile, just like a Facebook profile or a personal website. “If the historical trends persist, that’s what’s going to happen.”
  • The gaming ecosystem has changed – you can now build a multi-billion-dollar venture-backed game company, e.g Riot and Supercell
  • VCs moving onto game investing from tech – “it allows young teams with a lot of hustle, teams with a lot of creative vision and impact, to be able to build the games that they want on their terms and bring them to market directly, where they have a direct relationship with their customers.”

COVID-19

  • On the difficulty of vetting startup teams during the pandemic: (a) a16z has a lot of internal games talent and experience with funding games previously – all that helps, (b) we’ve wanted to spend our time primarily with folks that have built and shipped major products, the very best set of people who want to build big games – Zoom not needed here, and (c) we played Teamfight Tactics with the other team, for many hours, as part of the getting-to-know-you process.
  • In-home VR could make a comeback after shelter-in-place
  • In the current environment, a lot of industries have taken it on the chin from COVID. Not so with gaming – “across the last couple of months – there’s even more engagement. So many products are at all-time highs.”

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