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Andreessen Horowitz debuts $600 million sport fund with a watch on web3

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Silicon Valley enterprise capital agency Andreessen Horowitz, which has spent the final decade funding tech startups starting from Airbnb to Soylent, is debuting a brand new $600 million fund for investing within the online game trade.

The fund (named “Video games Fund One”) can be cut up between three forms of corporations: sport studios, corporations creating player-targeted apps like Discord or Twitch, and firms creating instruments and providers for sport builders. Discord cofounder Jason Citron, Riot Video games cofounder Marc Merrill, and Blizzard leisure cofounder Mike Morhaime are among the many trade veterans collaborating within the fund.

This is not Andreessen Horowitz’s debut within the sport trade. The funding agency’s portfolio already consists of corporations like Riot Video games, CCP, and Epic Video games, and newer corporations like Sandbox VR and Bonfire Studios are additionally benefactors of the agency’s funds.

So what’s driving curiosity on this fund? Video games companion James Gwertzman, who most not too long ago bought PlayFab to Microsoft in 2018, instructed us that the corporate’s focus is on reside service video games. With elevated participant excited about video games like Fortnite, League of Legendsand MinecraftAndreessen Horowitz apparently is starting to consider these video games as one thing that resembles social networks, and scale like shopper expertise corporations.

Gwertzman suggested us that builders excited about searching for cash from Video games Fund One shouldn’t solely be fascinated with reside service video games, but in addition in regards to the world of user-generated content material. There’s additionally curiosity in video games the place “the group is inspired to take part and assist create” utilizing that user-generated content material.

As one instance, he pointed to sport developer Singularity 6 as being a developer that is began to construct group curiosity in its upcoming MMORPG Palia nicely prematurely of the sport’s launch.

A lot of Andreessen Horowitz’s announcement for Video games Fund One makes point out of the metaverse, a digital futurist idea that is turn out to be a part of the corporate visions for Epic Video games, Meta, and past. Gwertzman admitted that there are nonetheless plenty of unknowns on the prospect, however he offered key benchmarks that Andreessen Horowitz is in search of in metaverse tasks.

He described the metaverse as a spot the place gamers can have a number of experiences that come collectively in a seamless trend, and {that a} participant’s id could be maintained shifting from sport to sport. He pitched the thought of ​​in-depth sport worlds with excessive ranges of element which can be able to supporting many sorts of sub-games.

His elevator pitch was the thought of Learn Useless Redemption’s wild west open world being usable for a number of video games. “Is not it a disgrace that you would be able to’t go and play different video games within the identical vibrant world that Rockstar created?” (We should always word that Purple Useless On-line vaguely helps this concept already, although it clearly has been a bit gradual on content material updates recently).

Transferring between these games-within-games would contain letting gamers haul their private avatars or beauty objects with them. “You’d need to share your id throughout environments, you’d need to share your avatar throughout these environments, and doubtlessly some objects you purchase alongside the way in which.”

Gwertzman raised the notion of decentralization as being important to make metaverse tasks actually match that imaginative and prescient. Decentralization after all, is the watchword for the world of cryptocurrency and blockchain expertise, which has been a giant focus of Andreessen Horowitz’s large bets within the final yr. In January the agency introduced its intent to take a position $4.5 billion in crypto-informed startups.

Not all of Video games Fund One’s investees can be cryptocurrency or blockchain centered (Gwertzman quipped that it is funding many “web2” corporations, together with web3 corporations), however the agency does appear to see “web3 tokens” as an important a part of reside sport development .

It isn’t stunning to see Andreessen Horowitz proceed to wager large on crypto applied sciences (the agency did simply launch a really rosy State of Crypto report), it’s notable that it is nonetheless pushing on crypto in sport growth whereas the trade is presently expertise a really dramatic market crash.

We quizzed Gwertzman about this, and in regards to the statistic produced by Recreation Builders Convention (disclaimer: GDC is our sister group) that indicated that as a lot of 70 p.c of sport builders will not be excited about blockchain-based video games. “There’s enormous curiosity on behalf of sport builders who need to study extra in regards to the area,” he mentioned, citing his personal experiences his at GDC 2022 the place web3 fanatics in attendance rendered blockchain talks “standing room solely”.

Gwertzman did state that cryptocurrency’s involvement in sport growth would want to depend on video games which can be centered on enjoyable and long-term retention first, with decentralization and participant possession “on prime” of these experiences. He conceded that early crypto gaming centered on “facets that have been frankly a bit extra vulnerable to hypothesis.”

“It was extra about folks making an attempt to generate income and fewer folks making an attempt to have enjoyable,” he mentioned. “That in some methods, gave builders a bitter style about the place this area goes.”

As for the crypto crash, which has even hammered “stablecoins” like Tether, Tether, and DEI Coin, Gwertzman chalked that as much as regular market fluctuations. “These markets are so dynamic and so new, they are going to be going by all types of gyrations,” he mentioned.

A protracted-term thinker may have a look at Andreessen Horowitz’s new fund as one other product of the COVID-19 pandemic. With curiosity in video video games skyrocketing throughout numerous phases of lockdown, traders of all stripes have immediately jumped into the area, enticed by rising revenues and long-term person retention.

Andreessen Horowitz clearly is not a brand new participant in video games, and it would not be honest to name this a bandwagon fund effort. However this monetary muscle being thrown into the sport exhibits that with new cash comes new expectations. Financiers will need returns on investments, and greater returns come from large, reside service video games that border on social media-level development.