Each year, our funds define specific areas of investment focus for the year. We then do a mid-year review of each of these and adjust our approach if necessary. Most often, this mid-year correction is modest, just a tweak or lane change.
But this summer, we felt that changes in our immersive experiences and content areas of focus were significant enough that we created two major new sub-categories that we are going to seek out actively for the rest of 2019, and, I suspect, beyond.
The first big shift relates to Esports.
We’ve been interested in Esports for some time, but we haven’t actually invested much here. The games themselves seemed like hit-driven businesses, at core, which we don’t like. The tournaments and teams are attractive, but we have seen few that have the strong business fundamentals we seek.
Now, though, we’re seeing a new phenomenon in Esports we think may represent our first broad path in this arena. These are companies that, while definitely centered on Esports, look more like SaaS businesses than game studios. These companies combine the DNA of both segments: Iterative, recurring revenue, highly creative, but not hit-driven or organized around a bounded narrative. Basically, they create games to use their scale and intensity to shake down and prove their innovative middleware and monetization schemes, and then focus the company around those business models. That’s pretty brilliant.
With this new insight, our Esports focus now looks like this. We seek companies that:
Facilitate social interactions via voice, chat, and more.
Let users express identity. Fortnite, for example, is a blank canvas of IP.
Appeal to power-users and newbies alike by being easy to learn and hard to master. Built with streaming in mind so the casual user can discover it. Ability to become an “expert” and therefore develop skills and economic advantage that comes from this.
Contain an economic engine that grows the pie for all users.
Rethink traditional publisher / gamer roles via innovative governance methods (such as crypto) and keep gamers involved in the narrative.
Incorporate specific / novel infrastructure such as CV, etc. Interoperability between virtual worlds (game engine and other tools) ensures an “open” metaverse. Examples: 3D Assets (Sketchfab), Game engines, Crypto.
Have state of the art mechanisms to maintain integrity of play.
Deliver community moderation and player matchmaking to ensure more users have a good experience.
Integrate streamers, viewers, players from the web, and 3D engines into an immersive experience.
Use virtual worlds as testing-grounds and data-inputs for AI applications (real and virtual).
Recognize that measurement and analysis of complex behavioral data in 3D worlds requires new infrastructure.
Recognize that 3D development needs a whole new set of tools (analogous to web development 10 years ago).
As a result, build tools to easily personalize assets and experiences that will help developers keep users engaged
That’s a high bar, for sure. But we see great value for those companies ready to hurdle it.
Our second major mid-year shift involves Digital News.
News still matters, in fact, more than ever. Digital news, today, remains… news. Humans want to know what’s going on around them, what matters specifically to them. The rising generation has an intense interest in news and views it through the lens of activism and creating the society this generation feels its needs and deserves.
Today’s news focus is not merely on the finding and dissemination of information, but also on the establishment of the veracity of the information; the market craves a BS meter for fake news, or at least a way to measure the degree of fakeness or special interest in any news information.
In short, news now is as much about truth as reportage. So, for this year, we are going to:
Increase focus on startups channeling the power of digital news toward Millennials and those younger.
Look for platforms with novel news delivery methods and business models not based on ads.
Put a special emphasis on Truth Meters and other ways to call out fake news, especially crowd generated truth measures.
Seek out auto fact-checking platforms, whether done by professionals or crowdsourced.
Evaluate platforms that generate bad actor identification on the news front.
Digital delivery and the ubiquity of the worldwide network helped create today’s crisis of confidence in news. Now, we feel the signs show the time is here for those of us on the digital side to bring forward the platforms that can help clean up that mess.
By Managing Partner Mike Edelhart