What we haven’t done, though—in our conversations, I haven’t thought that there will be one metaverse, for example. If we’re lucky, it will look more like the internet, where there’s a shared set of protocols and standards, but everyone can build their own piece, and users have a lot of ability to choose, versus the Oasis construct in Ready Player One. That’s a bit funny in that it’s this monolithic thing owned by one company.
GamesBeat: That feels like the most unrealistic outcome, just one company dominating.
Chen: Yeah, yeah. It’s kind of a dystopian outcome. I’m more excited about the idea that instead of having “the” metaverse, we all move further and further toward a world where there’s a set of standards and we view that–there’s going to be identity and avatars and a payment processing layer. Blockchain gaming is obviously very interesting too. We backed Kevin Chou’s company. We also have the CryptoKitties investment. That’s what you would need in order for different games to be able to interoperate with each other, something like a blockchain to intermediate it.
There are a lot of trends that potentially point toward that. But today, in my personal view, that might be a decade or two or more in the longer term. Today what I’m more interested in–the fact is, more and more people are playing games than ever. It’s a huge industry. And then just the talent level, the talent that’s spinning out of Riot Games, Valve, Blizzard, starting to spin out of Epic. The fact that you can build a game startup–I mean, Riot showed that you could build a very valuable game startup. Supercell also showed that. It makes it all of a sudden very attractive to start a studio from scratch using venture capital dollars rather than publisher money. All of that unlocks a new generation of entrepreneurs, which we’re very excited to back.
GamesBeat: It looks like a half-dozen or so investments in games is where you are now. Is that about right?
Chen: We have a couple that are unannounced. The number is slightly bigger than that. But that’s about right.
GamesBeat: Are there some that you want to talk about here, where you’re calling out particular trends that guided the investment?
Chen: Let’s talk about two in particular, and then we can dive into some others if you’d like. Mainframe is worth talking about. That’s very much the core type of company that we love to back again and again. You have some of the EVE Online co-founders from CCP, just an amazing team that’s built a real game that touched millions of people. Looking at the cloud gaming trend on the horizon, the fact that now, for the first time, it’s technically feasible to stream games. That’s very exciting. Thinking about what new game mechanics and new game designs that this enables, and putting together a group of people that are both from the mobile side of the house, as well as from the PC and console side, to build this new game. They’re early in the process, but they’ve unveiled some details.
What we love about this is that it’s a solid team intersecting with this incredible technology trend in cloud gaming. As a consumer, there’s nothing better than to get rid of the 30-gig download and patch updates and all that stuff. The idea of being able to watch someone stream on Twitch, when they’re in the middle of some amazing boss fight, and you just click on it and all of a sudden you’re in the game, is an incredible idea. Being able to jump right in and have that right at your fingertips. We think that we’ve backed the highest-end triple-A team to go after this new platform, and we’re very excited about it in that regard.
As you know, when you have either a new console or a new mobile platform, a new computing platform, if you’re early on the platform, magical things can happen. We think that this is going to be the team that makes this happen in cloud gaming. That’s one I wanted to highlight.
GamesBeat: In that space, the fact that Microsoft will have xCloud soon, and Google launching Stadia, how does that affect your thinking about Mainframe’s opportunities? With Stadia in particular, it looks like they’ve had a mixed launch. More things have to happen before that particular kind of cloud gaming is going to be a success.
Chen: That’s right. That was a big part of our investment discussion. When you’re betting on a platform, you want to know how likely it is that these folks are going to continue investing. I think it’ll turn out that cloud gaming is–my prediction would be that they’re not going to nail it in year one. It might take an iteration or two to get there. I view smartphones as a nice metaphor, where for iOS, it wasn’t the first smartphone. Blackberry had already existed for years. What you needed was one company to come up with a version that worked for people, and then off we went. Then the growth is explosive, because the experience is that much better.
My personal view, as someone who’s spent a fair amount of time playing with it–certainly being able to load instantly and being able to move from one load state to another quickly is pretty magical. The obvious thing they need to do is build out their exclusive content library. That will make studios like Mainframe even more attractive to partner with.
The second one, there’s a bit less about it, so I might let the team describe it in more detail. But I wanted to also mention Singularity 6. Singularity 6 is working on—they’ve described it, in their launch press, as experimenting with building a virtual society. The way I think of it, there’s a lot of games right now, and a lot of metaverse aspirants, where their basis is in shooters. They’re competitive in nature. That’s why a lot of people are spending time with it. What’s really cool, and we saw this with Animal Crossing this year in particular, is that there are many different kinds of non-competitive gameplay, social and cooperative gameplay, that people love. There are huge markets for it. People will spend hundreds or thousands of hours on those games as well.
Singularity 6 is a team that spun out of Riot. There’s a bunch of great Riot teams right now. They’re tackling that type of gameplay, cooperative social gameplay. They’re thinking a lot about Animal Crossing and The Sims, trying to unlock the basis for this hangout experience that isn’t fundamentally about shooting and competition. That’ll be great in the sense that it unlocks a lot more demographics.
GamesBeat: You mentioned teams a few times. At our conference, [March Capital Partners’] Gregory Milken pointed out that he likes to invest in teams as well, but during the pandemic, he hasn’t been able to go out and meet these teams. It’s slowed down the process of trying to vet investments, because it’s harder to do that assessment of whether a team really likes working together or not. How do you try to address that?
Chen: There’s a couple of ways that we’ve been addressing that at the firm. One is that there’s a team internally at Andreessen Horowitz, folks that are deeply interested in games. We have folks that are ex-Riot working with us, ex-Tencent, ex-Electronic Arts. We have a mix of folks that are from mobile gaming as well as desktop gaming and PC gaming. That helps a lot in terms of–we’ve made multiple investments in the alumni of the Blizzards and Riots of the world. We hope to do more. That’s one way of triangulating the talent, from that standpoint.
The other one is, we’ve wanted to spend our time primarily with folks that have built and shipped major products. In that case, we’re just here to–they’re well-known in the community. We want to assemble not necessarily the largest portfolio of game studios, but we want to assemble the very best set of people who want to build big games. That’s been the focus.
It’s harder to get to know people via Zoom, but a lot of what we’re doing with some of our CEOs that we’ve met–for example, we just did an unannounced investment, but one thing we did was a bunch of folks in our team played Teamfight Tactics with the other team, for hours and hours, as part of the getting-to-know-you process. That was a great way to get to know them. It’s been observed that if you’re calm under pressure while you play TFT or League or StarCraft or whatever, you’re probably pretty good at startups as well. I would bet that the two correlate.
GamesBeat: There’s another big thing in front of us with the challenges around Black Lives Matter. A lot of people are looking at what they can do to help here. I wonder if you’ve thought about this. I know that black-owned startups and game companies are very rare. They haven’t always had luck getting funding.
Chen: We just announced a new fund called the Talent Opportunity Fund, where we’re trying to reach people that maybe wouldn’t typically be able to get VC financing. Before that, Chris Lyons heads up our Cultural Leadership Fund, which we announced two years ago. But the firm is definitely making some inroads. CLF is actually almost three years old now. We’ve been working on this for a while.
For almost all of the game studios that we’ve invested in, we have been–step one is, through the Cultural Leadership Fund, we’ve had quite a few African-American investors join as co-investors with us in these game studios. That’s been fantastic. Sleeper, which is fantasy sports, we have quite a few folks from music and sports and different parts of the ecosystem joining us as co-investors. That’s what happens at the very beginning of the relationship, which has been great. They have often then been bringing users and using social media to bring attention to the companies that they’ve invested in. That’s been great. In many cases they’ve also referred employees and new team members for companies. This is a whole area we can follow up on, but it’s an important one for us to address.
GamesBeat: Are there other gaming trends that you’re interested in? I remember talking with you about esports and how it was hard to come up with the kind of company you’re interested in.
Chen: I’ll give you two or three trends that are interesting. We can start with esports. It’s also interesting to talk about modding and user-generated content, so I’ll spend some time there, and then we can talk about new demographics as well. On esports, it’s obviously very exciting. We’ve been less oriented around investing in teams, just because we want to go to the place where the software is built. We’ve leaned in on studios more than anything else. However, it’s clear that esports is a key part of every one of these game studios and their go-to-market plan. They have to think about influencers. They have to think about Twitch streamers. They have to think about esports. They have to think about team owners and how to work with them. Those are all very interesting.
There are quite a few companies that we’ve admired from afar and not invested in, but they’re doing things in tools and platforms for esports. Player performance and that kind of thing. Those are interesting. We continue to follow them. PlayVS is a very interesting company. The high school esports angle is interesting. We want to continue following that. But we’ve been more focused on the studios themselves.
On the modding front, you know this, but so many of the biggest games over the last several years have originally been developed as mods. DotA leads into League of Legends. You have the whole succession of games before Fortnite, PUBG and DayZ and all that stuff turning into battle royale. We’re interested in how you create games that are moddable, and how you take these–they’re almost no-code developers. They’re very amateur software engineers who are building games under these platforms. How do you reward them? I’ve been very interested in that.
I’m fascinated with what Manticore is doing. We have a big investment in Roblox for that same reason. The kinds of games that people are able to develop in Roblox are just incredible, and the kind of revenue that these small studios are already seeing is impressive. That’s been a big area of focus.
The third thing I mentioned was new demographics. This is a bit related to what I was saying about Animal Crossing. After battle royale took off, every single game needed battle royale. As you know, battle royale is such a niche thing. Only a certain type of person is going to be into it. If the goals of building the new metaverse-like social hangout, virtual spot, whatever you might call it–I think the basis of that may not be a shooter. It may be something that looks more like Animal Crossing at its core. You build up from there.
If you think about Stardew Valley, one of the cool things about that game–at first glance it’s a farming simulation, but all of a sudden, oh, there are caves. You can explore these caves. There are bad guys in the caves. You’re able to layer on more and more. It could be that, similar to what Epic is seeing with Fortnite’s creative mode, you maybe have to get to something that feels more like a social hangout in order to unlock a broader audience for this.
For a long time, people used to ask things like, “Why do I need a Facebook profile? Why do I need a website?” Eventually people realized that they did need one. A lot of people right now maybe don’t feel like they need a Fortnite profile. But give it 10 or 20 years and all of a sudden maybe everyone has one. Maybe it becomes as important as having a social network profile. If the historical trends persist, that’s what’s going to happen.