GamesBeat: There was a broader question about whether to invest in gaming because you believe that’s where the next big companies are going to be, or to invest in things outside of it, in things like consumer, because that’s where you find the next Uber, the next gigantic platform. How do you balance what you’re interested in based on the size of the opportunity? Maybe you won’t get the world’s biggest IPO out of gaming, but maybe this is an interest-driven thing.
Chen: I think it has to be both. If you invest robotically, without a passion for the kinds of products you look into–we invest in teams and entrepreneurs at our core. If we can’t relate to the entrepreneurs, if we can’t get excited about what they’re building, then the reality is that we’re not going to do a very good job. I’m not going to do a very good job. I have to be passionate about the things I’m investing in. Luckily, gaming is something that’s easy to get excited about. That’s great, number one.
The second thing is that I do think the whole ecosystem has changed. In the past decade, we’ve seen that you can build a multi-billion-dollar venture-backed game company. You see that in Riot’s case directly, which was VC-backed, and Supercell and some others. But you also see it in games that got to huge scale. Minecraft got to huge scale. Although it’s taken some time, obviously Epic is now worth quite a lot. Each one of these companies that I could mention would be very formidable tech companies, if you just view them as part of the overall consumer tech landscape. I’m very excited about that.
Not only am I excited about that, but if you go out to the next adjacent set of categories–if Twitch were an independent company right now, how much would that be worth? You could speculate, but it would probably be more than $10 billion. That’s a pretty incredible property just on its own. Discord and Roblox and a bunch of these companies have also done really well. For the first time, a lot of these companies are truly venture-backable, and I think that’s the most important thing. It allows and enables these brand new teams that are spinning out of these companies to be able to take the risks and start something.
When we talk to a lot of these teams coming out of the Riots and Blizzards and so on, the traditional way to do it would be to finance their game using publisher money. As you know, the whole problem with publisher money is that by the end of it, they’ve funded a game, but they own all your IP. They have the crown jewels. Number two, if they don’t like the creative direction you’re taking–they have a lot of creative control over what you might be building. And number three, they sit in between the game company and their customers.
One of the interesting things that bringing tech investing into the games industry will allow–I certainly hope that it’s not just us. It’s hopefully many of our venture capital peers, many of our seed investors and angel investors, as we continue to try to bring new people into the games ecosystem. But 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. Then they can build it into potentially a multi-billion-dollar outcome. That’s what everyone wants.
The more of this type of risk-taking, creative risk-taking, that investors like us and others would hopefully enable, the better it is for consumers. These are hopefully the games I want to play and my friends want to play. As you can tell from how I talk about this, it’s something I think is a good business opportunity, but it also comes from a place of passion from many of the folks on the Andreessen Horowitz team.
I wanted to also mention a couple of short things about the current environment, things I’m excited about. We may see in-home VR making a comeback. Obviously with sheltering at home and the success of the Oculus Quest, I’m hopeful that a lot of the game studios that put their VR plans on hold end up re-engaging in that world. If you do the research on how many units are being sold, it’s pretty impressive.
The other interesting thing about games right now is that there’s a lot of industries that have been negatively impacted by COVID, but one of the most interesting things about the games industry across the last couple of months–there’s even more engagement. So many products are at all-time highs. The desire for us to back teams continues to be very strong.