At LVP, we have been watching and analysing the messenger gaming space since 2016. We have seen dozens of startups in this space, but none as exciting and visionary as Knock Knock. We are hugely excited to have Andrew & Andrew join the LVP clan.
At LVP, we have been watching and analysing the messenger gaming space since 2016. We have seen dozens of startups in this space, but none as exciting and visionary as Knock Knock. We are hugely excited to have Andrew & Andrew join the LVP clan.
Picked up by The Wall St Journal, Fortune, Reuters, Business Insider, and VentureBeat as well as all the specialist press and lighting up MMO boards and forums around the world, Bossa’s fundraising success is clearly of interest to both the business and gaming communities. As ever, the story behind the headlines is more complex and a case study in how to position your startup or indie games company for growth.
Having been first an advisor to the Bossa team, then a seed investor and now an active player in their A round, I want to share some insight into their journey. If it’s useful to other games sector startups and indies, or indeed other investors, then I’m happy.
But of course this is a personal view of a single journey. There are many paths to success and as much as they share some common traits they truly excel in their uniqueness and differences. There is no rigid playbook and, as in any creative industry, to copy is to fall short.
When I first started working with the Bossa crew they had not yet released their iconic indie hit Surgeon Simulator. Or fully formed the vision around developing games not just for, but with, the community. Or anchored their entire development behind a fabulously effective creative process. In fact, the company was just beginning to find its feet. It had tasted critical success with Monstermind, a game with many characteristics later displayed to formidable effect in Supercell’s Clash of Clans. But Bossa’s commercial misfortune was to release Monstermind in 2011 on Facebook, just as all the attention was switching to tablet and smartphone. Perhaps not even the leaders at Bossa can be quite sure about it, but I have a sense that it was from this close-but-no-cigar moment that the Bossa essence really began to form: it wasn’t sufficient to make a great game in isolation and then reveal it to the world. Instead, you need to find a way to include the world in your plan. This is Bossa’s secret sauce.
Surgeon showed some of this magnificently… it is a masterclass in harnessing a simple core mechanic and wrapping it into an amazing viewing experience perfect for streaming.
And Worlds Adrift is just the first of their games that demonstrates the complete Bossa vision: to not just build games to play, but to build games to play, stream, share and create. To build worlds that extend out of solo digital gameplay and into shared reality hobbies… and to engage the community not just as users but as participants. This is why Bossa is special, and why we were glad for the opportunity to help them on the journey from before their first funding round and now through their A round.
Emergent Stories: Worlds Adrift is an MMO Sandbox where thousands of players explore a physical and persistent world with the freedom to set their own objectives. This creates an unpredictable environment, rich with the potential for emergent gameplay.
First, some background. In Q2, 2016, I started thinking about some theories for our investment strategy here at LVP:
So with that in mind, I was researching the Influencer category to understand what was happening and to identify potential investment targets. Then in mid June 2016, I looked at one of the posts our firm had posted recently on our Facebook page. I saw a name that I did not recognise, Andrew Allison. So I clicked through to his profile and saw that he was a cofounder of Discovry. Then I clicked through to the website for Discovry and saw that they were doing influencer marketing for mobile game developers. Then I went to Andrew’s linkedin page (he is the company CRO) and saw that he had worked at Vungle for a few years. From there I clicked to Chris Brownridge’s linkedin page (Chris is a cofounder and the CEO) and saw that he had also worked at Vungle for a few years around the same timing as Andrew. This was interesting because I knew that that Vungle was the largest independent mobile video ad business at that time (turns out they made their revenue number of $300m public earlier this year with this press release).
I sent Andrew a message on Facebook messenger and we connected and our discussion started. Through the early conversations we had, I learned that they were in discussions with another ex-Vungle employee, Tony Chong, who ended up joining as their third cofounder and CTO.
They were revenue generating already which validated some of the potential but they were running campaigns in a manual way to build their customer relations and learning while their tech platform was being built. The early vision then was to build an automated platform to make it easier for advertisers to spend more on UA with influencers and measure it easier.
After many calls with the team, reference calls on each team member plus also with current and potential clients and most importantly meeting the team in person, we were confident that the team was very strong. They knew what they needed to do and they knew what they did not know plus they had experience working together at Vungle. Each team member brought different strengths to the table which complemented each other. The team had history together as they all worked together at Vungle and knew each other well. They already had close and trusted relationships with a few live customers and also with many potential customers who they already knew.
In December, 2016, the company closed their seed round led by LVP (I joined the board) with some angel investors including Jon Zweig, the founding CEO of AdColony and AppOnboard (LVP is an investor there too thanks to the intro from Andrew at Gawkbox in early 2017). The key part of our decision to invest was the team. The combination of their:
convinced us this team would be able to figure something out and find a way to win. It was very early and there were a lot of unknowns particularly around what their platform would be but this was the right team in the right category at the right time.
Five weeks after closing the funding round, we had the first board meeting and the team presented their idea to pivot a bit to a sponsored tipping platform for creators. My initial thought was that this was an amazing idea but where did it come from and wow that was quick. Now I was really impressed with the team! Turns out they had basically locked themselves in the office until they came up with the right platform business model.
It was this idea that became Gawkbox which is now the company name. Gawkbox is a monetization platform for live streamers. Fans can tip streamers by downloading an app or game and reaching new milestones within the game, such as levelling up a character or completing an in-app challenge. The app and game developers will then tip streamers on the fans’ behalf, allowing fans to show their loyalty for the streamer for free. GawkBox enables app and game developers to reach and engage with a receptive audience with the ability to measure the results while also enabling streamers to develop a new source of income that will make a material difference. The video below explains best about Gawkbox and sponsored tipping:
So why does this matter? The chart below from Kleiner Perkins says it all. China is leading the world in innovation in live streaming and this is driving revenues. Live streaming in China is driving more revenue per hour than all other types of entertainment combined!
Connie Chan, a Partner at Andreessen Horowitz wrote an insightful post on live streaming in China. There are now more than 150 live streaming apps just in China and half of the population are using at least one app. The really interesting estimate is that 5% of viewers are contributing 70% of virtual gift revenue. Gawkbox could enable the other 95% of viewers to sponsor tip their favorite streamers.
On Aug 10th, 2017, Gawkbox announced their Series A round led by Madrona Venture Group which includes follow-on participation from LVP as well as funding from Erlend Christofferson (Erlend was one of the first hires at Supercell where we were also invested in the seed round) and others. Daniel Li from Madrona joined the Board and here is his post on why they invested.
The Gawkbox team has achieved a lot quickly thanks to support from a growing number of streamers, fans and app & game developers. But this is just the first stage of a grand plan.
User Acquisition ("UA") is a category that our team has been looking at for a while. Having seen the inner workings of multiple mobile game developers as investors, we realised a few years ago that the largest expense of the largest developers is on UA. In some cases, developers spend as much as 50% of their revenues on UA to grow their user base. So when you look across the mobile game sector with tens of billions of dollars of revenue then it's not hard to figure out that UA is a multi-billion dollar opportunity.
We were introduced to Jon Zweig, co-founder, and CEO of AppOnboard, by one of the founders of a company in our portfolio earlier this year where Jon is a co-investor with us. Jon founded the company that became AdColony, the successful mobile video ad network, that was acquired by Opera Software in 2014 for $350 million. Given his background and the referral, we decided to have a call with Jon right away and we were impressed. Jon was a successful, driven and serial entrepreneur looking to do another startup in UA again but the plan this time was to build a much bigger company.
The playable ads category is one that LVP has seen in the past over many years but for various reasons have passed on as we did not believe the tech was right to build a large business around. This time is different. The AppOnboard team have developed technology that transforms any mobile app into a full fidelity demo for end users to experience an app before choosing to download from the App Store. Jon already had most of the round committed but was keen to explore how the LVP team could be of value.
We started due diligence right away. Meanwhile, the AppOnboard team was getting amazing feedback from many potential customers and soon started to sign up multiple large mobile game companies as customers.
We met Jon and some of the team at GDC in person and there was mutual appreciation of both parties. Amazing things do happen when you meet in person. We told Jon we wanted in as the combination of AppOnboard’s technology, strategy, team and timing made this an ideal company to invest in right now. Jon promised he would find room in the round for us.
After a few more discussions with the team, we were delighted that AppOnboard chose LVP to co-lead the round alongside Troy Capital Partners, with a syndicate of VCs and CxO luminaries of the mobile app ecosystem. Many thanks to Andrew Allison at Gawkbox for the introduction to Jon. AppOnboard is hiring for a number of jobs so contact them here. The HQ is based in Los Angeles with plans to build the team there plus San Francisco and London.
See below for the AppOnboard launch video:
LVP is growing and we are looking to hire:
Analyst - you will learn what the venture capital business is about and gain insight into many fascinating startups in the game ecosystem plus
See full info and apply here
When David Gardner, Paul Heydon and I started LVP we did so with a belief - perhaps borne of naivety, but no less valuable for it - that our success would come not through being great at picking startups, but being great at helping both our startups and the wider ecosystem.
To be sure, the ‘picking’ part is kind of crucial, but in all honesty, our secret sauce here is not so secret: we are obsessively sector focussed which, coupled with our previous operational experience (and thus networks), gives us a massive advantage when it comes to both sourcing and evaluating deal flow. And it remains a fundamental pillar of our thesis that we stay sector focussed - it’s how we ensure our picking stays sharp.
But we also need to remain operationally engaged. To be great at helping our startups, we need to be able to offer smart thoughts when we’re working with our entrepreneurs. Smart not just at a corp dev level, but also at a deep operational level, and that means we need to stay engaged and relevant, and keep our capabilities as renewed and as honed as those of our portfolio companies.
To do that, we need to ensure we shape LVP’s intentions accordingly, and nothing says as much about the intentions of an organisation as the nature of the talent it recruits.
This quarter, we aim to recruit 3 new colleagues. And I’m thrilled to say the first of these is already on board.
Anyone who has spent time with LVP will be familiar with our thinking around what we’re cheesily calling “the A-Team”. A is for Acceleration. We believe that we best serve our entrepreneurs (and therefore our LPs and ourselves) not by solely expanding our investment team, but by expanding our ability to assist our portfolio companies across very direct strategic and operational challenges. We aim to do this by recruiting world-class talent directly from the sectors in which we invest, and since that’s only the games sector, this is an entirely feasible objective (remember what I said earlier about sector focus conferring massive advantage?)...
Are joins us as VP Product Portfolio. For sure, he will be contributing greatly to our deal flow and investment efforts, but his expertise lies in helping build great games companies that build great games, most recently as VP Europe and Head of Western Business at Gumi, and previously as GM Electronic Arts Interactive Japan, VP Playfish and GM China Playfish, and founder of several other companies and games studios. Are’s studios have achieved top 10 Facebook social games, BAFTA awards, multiple top 20 games in Japan, including a number 1.
On a personal note, Are and I served together on the board of a European games company, and I was constantly impressed at the detailed, almost surgically accurate and appropriate help and feedback he was able to provide. I remember thinking: this is gold… I need to find a way to capture this thinking and apply it across LVP’s portfolio. What better way to achieve this than have him join us full time?
1 down and 2 to go. We’re not quite ready to post job descriptions, but let me say this: if you’re a games fanatic with encyclopaedic knowledge of what’s great and why, and you love nothing more than networking with developers, analysing games and championing the next big thing; or you’re a financial data guy who loves modelling almost as much as you love games, then you should think of getting in touch.
The three big questions we at LVP face is what will be the next big platform in the game sector, when is the best time to invest in it and which team is the best one to back. VR is all the rage now but large scale content revenues are still years away. AR is interesting but still too early to see material cashflows. And then there are robots........
This was not a concept our team was considering at all. In fact, hardware on its own is not something we would have thought about a few years ago either. But after getting contacted by two separate people respected by our team about a startup based in Bristol, UK, then we decided we had better take a look. We met Silas, the CEO and Co-Founder, of Reach Robotics and were very impressed. Silas was smart, focussed, passionate and determined and his product demo was fascinating. He was building a product called MekaMon with both hardware and software platforms. By combining Augmented Reality, Games and Robots, MekaMon is a product that is basically Robots fighting each other while controlled by users with smartphones.
The team had just come back from San Diego where they were the best company (out of 10) at the Qualcomm Robotics Accelerator. They had raised some money from Qualcomm, Techstars (which ran the accelerator), Kima Ventures, Hardware Club and some angel investors. We had another meeting with the team and started doing some due diligence.
A few weeks later, David Gardner, one of my partners, and I were in Tokyo for meetings and were introduced to a IoT accelerator there that the owners had invested over $10 million in. It was the dream place for any hardware startup with almost every possible machine or tool that a hardware company would need. Plus we also visited Akihabara which is an area of Tokyo which is heaven for gadget geeks. Just imagine a place filled with stores selling almost every possible gadget, robot, computer, phone or other type of consumer electronics. This is it. We also met with some of Japan's largest game companies some of which also have toy or other consumer electronic businesses. The insight we took away from this trip was that Japan on its own could be a huge market for MekaMon.
After multiple discussions with Silas and his team, we were delighted that the Reach team chose LVP to lead the seed round alongside Passion Capital, iGlobe Partners and Hardware Club. This funding round closed in early 2016. Many thanks to Soo Boon at iGlobe for the introduction to Silas. The company is hiring for a number of jobs which you can view here. The office is based in the Bristol Robotics Laboratory which is the largest robotics lab in Europe.
See below for the MekaMon launch video:
MekaMon is now available to buy now here
Earlier this month, we reached a new milestone in achieving our first exit from Seed Fund I (our first fund with outside investors). Last year we made our first investment in the US, in the PC games developer Radiant Entertainment, co-investing alongside Andreessen Horowitz and General Catalyst Partners. On March 8th 2016, just 11 months later, Radiant announced its acquisition by Riot Games.
This was a contrarian investment for us. Before this deal, due to the fast growth and exceptional returns we have received in the sector, we were primarily focussed on mobile game opportunities. But the Radiant team convinced us on our feeling that PC holds increasing opportunity. We met Tom, Tony & Seth at GDC 2015, where they shared with us their vision, game demos and previous experience. Their passion for games is huge. The key point reinforced by our discussions with them was that if approached in the right way, the PC market is a category of huge opportunity, coupled with far less competition than in mobile.
The one big challenge for us was their location. Radiant is based in Los Altos, California, far away from our base in London, England, and we like to be close enough to offer deep co-operation. Ultimately we decided to proceed as we would be investing alongside great VCs and angel investors with a much more local base. And we are very happy we did: eleven months from investment to acquisition is a new record for LVP.
Big thanks to the whole Radiant team on achieving this great milestone and for validating our belief in PC games.
This deal heralds the broadening our investment strategy to all digital game platforms. Digital PC Games was the fastest growing category in January 2016 - up 33% year over year according to Superdata. And our comfort in working transatlantically is much increased - going forward we have made specific allocations to fund further deals in North America. Watch this space!
David Lau-Kee spoke at the game investment panel at Casual Connect in Amsterdam together with Drew Boortz from Nexon America, Shum Singh of Agnitio Capital and Mark Stevens of Fenwick & West.
The speakers shared many insights into raising money from VCs and strategic investors, including some exciting details of the Supercell's success story from David Lau-Kee.
Key take away is that entrepreneurs should do their homework prior to approaching any investors. In particular:
Start doing your homework by enjoying the video above. ;)
The LVP team has been investing in game startups in Europe for many years now. Many people (especially potential LP's) have asked us over the years why games and why Europe.
Lets talk about why games first. LVP focuses on the game sector because we understand it and we have 70+ years experience amongst the 3 partners. We know it and have relationships that cannot be disrupted. But more importantly for investors, there has been $33.8 billion of value created just in the last 3 years globally across the game sector from acquisitions or IPO's.
Now that you understand that then why Europe? Well, we live here and that is where we want to spend our time. Oh and Europe just happens to have created the most value of all the regions globally in the last 3 years. During that time, there was $16.4 billion of value created by game companies in Europe vs $13.4 billion in Asia vs $4 billion in North America. So in relative terms Europe outperformed Asia by 22% and 4x better than North America. There are 4 key deals that drove Europe's performance: King IPO, Supercell (majority acquired by Softbank), Mojang (acquired by Microsoft) and NaturalMotion (acquired by Zynga). Our team was fortunate to be investors in Supercell and NaturalMotion.
Our strategy of investing in the game sector in Europe is contrarian to a normal tech fund in Silicon Valley but the facts speak for themselves. And the strategy is working as our returns have been incredible.
Today in San Francisco, I gave the above presentation at Casual Connect to give game founders tips on how to approach fundraising in a thoughtful way. Key sections of the presentation are:
•Readiness to raise money - starting before your ready can lead to massive loss of time
•Pitch deck template - short template to use for pitching investors. always be upfront with how much you are raising and use of the proceeds
•Targeting investors - insights on how to choose which investors to target and where to find them
•Contacting investors - tips on how to approach investors
•PR - ideally generate some corporate PR on your firm in combination with your fundraising
•1st pitch meeting - practise and be fully prepared before each meeting
•Follow up - Always do this in diligent and professional way to get to answer of yes want to engage or no thanks
Good luck to those looking to raise money and i hope this is helpful.
Esports is one of the fastest growing areas in the game sector and more importantly is likely the fastest growing spectator sport in the world now. Esports playing and viewing are very popular hobbies. LVP has been looking closely at esports for a while and learning more about what is happening and why. And in fact, when i specifically would find a potential interesting opportunity then i would ask Jens Hilgers, whom i have known for many years. Jens founded Turtle Entertainment in 2000 and its now the worlds largest esports company and 74% of the company was recently acquired by MTG for 78 million euros.
Earlier this year, Jens reached out and we spoke about about his new startup, DOJO MADNESS. Jens co-founded the company with Markus Fuhrmann, who co-founded Delivery Hero, which is the worlds largest network of online food ordering platforms and was recently valued at $3.1 billion after a recent funding round. The strategy for DOJO MADNESS is to use machine learning and build the best tools for esports gamers to learn and master their favorite hard core games through a combination of online and mobile products.
We spent some time with the team and realised they had the right combination of world class team & technology, warp speed execution and passion to revolutionise esports learning & playing.
We are very excited to have the opportunity to invest in the company alongside DN Capital, March Capital Partners, 500 Startups and the Hive as well as several angel investors including Kristian Segerstrale.
They have launched 2 products so far:
BRUCE.GG is a platform with data-enriched video and coaching features offering sophisticated match analysis, tactical insight and advice as well as all the top scenes from each match a gamer plays. This will enable gamers to get near real-time data and feedback. Currently BRUCE.GG supports Dota2 so if that is one of your favorite games then try it. See below for a Top Plays video example:
DOJO MADNESS is also hiring. See here for current available jobs.
We have reached a milestone on a textbook journey that has defined our team's presence in the gaming and finance industry. London Venture Partners made our first investment as a newly formed group in October 2010. That investment was with the other first investors, Initial Capital, Lifeline Ventures & Jari Ovaskainen into the success known as Supercell.
We wanted to reflect on the journey and blog about it. I've been trying to think through how to manage sharing our love and excitement for the company, our pride in achieving one of the most successful financial returns in business and staying relevant as the game industry moves through yet another transformation of itself, all without sounding arrogant or looking smarter than we are. We were fundamentally lucky to get everything right.
I had been involved in another incredible success with the Playfish team in London. I had just come out of 25 years with Electronic Arts and wanted to be involved in the shift from packaged goods to online. Kristian Segerstråle was introduced to me by his Cambridge roomate Jonathan Guiness, a family friend who as a teenager tested games at EA and then went into investment management looking at the media industry. Within minutes I knew Kristian had superpowers and I pushed to become not just an advisor but an investor. It was that success loop which made me want to turn into a professional investor and led us to meet Supercell.
We nearly didn't invest. We had just started the vile process of raising our own funding to build an investment warchest to back promising teams in the gaming ecosystem. We had to stay focused, stay on target and meet hundreds of money managers to sell them our story about how the games industry could provide above average returns without uncommon risk. We had our slide deck full of ideas, we had our database of contacts and we had our background as industry executives with real experience running game companies - but we had little money. Meeting after meeting we were told what great backgrounds we had and if anyone could make a success of it, that would be us. "Come back after your first close," we were told - which is private equity speak for go away until you've proven your worth.
The LVP team met Ilkka, Mikko and the handful of founders to see their production pipeline, their toolset and get to know their ideas for how to build a new company. We learned that they had built and sold companies before and now they wanted to build games for Facebook and had an idea called Gunshine. They had a toolset to help make development quicker and easier (we've heard that line before too) and were going to bring hard core gaming to Facebook.
After we experienced hundreds of rejections raising our own fund it felt like coming home meeting Supercell. We were actually talking about games and talent. We brainstormed genres and launch strategies, made introductions, coached and shared opinions - we felt skilled and appreciated. We knew we wanted to build this games fund to bridge the gap between money and the games industry. We dipped into our own savings and made the investment against our promise to stay focused on fund raising for our own business. We just wanted to do what we loved doing, getting involved in games. We wanted a break from being rejected and the toil of fundraising. Thank God we did. Now we look smart and can say I told you so to the naysayers about European game talent, games as an investment thesis and how you can build world class global businesses from scratch, in record time that create billions in value for shareholders.
Thank you Timur, Greg & Erlend for the jetlag in Japan, being incredible learners and using the "treat man" phrase which still makes me laugh and reminds me to motivate myself and others. Thank you Lasse for grappling with me over the art direction in Clash. I think a few hundred million people will agree that you got it right :)
Thank you Ilkka and Mikko for your wry sense of humour, your endurance and incredible, incredible laser like focus. Your understanding of when to say no, when to pivot, when to accelerate is like watching the best F1 drivers eat up the track as though they were born for it. Hey, why are there so many world class Finnish race drivers and game makers? Maybe I've just unlocked a new investment thesis...
We've enjoyed this part of the journey together and we will be cheering the whole company forward as you continue to try new things with grace, integrity and without fear.
Today in Berlin, I gave the above presentation at Quo Vadis to give game game founders some insights on what are the key points to consider to increase their probability of big success. I share examples of game companies like Supercell which have achieved massive success thanks to laser focus, speed and hiring the best people in the world while keeping lean. Keep in mind, Supercell generated $1.7 billion in revenue in 2014 with only about 150 employees. That is over $11 million in revenue per employee. Small is the new big!
Other key points, game companies need at the startup point is:
My partners and I have been investing in the game sector for several years now and the key issue for game developers is always discovery. We meet talented teams making great games but they do not know how to get their games discovered by users. Some teams realise this, but many do not (or will not) believe that it's a big issue and that they'll muddle through somehow.
In parallel, the top grossing charts for mobile on the various App Stores essentially have been frozen for over 2 years now, with relatively little movement in the top 100 grossing. And on PC & online, although more disparate and diverse, the same lack of volatility can be seen. Many people think there is some sort of secret sauce that the most successful game developers have to find new users. Here is one of the secrets: cash, and lots of it! The top game developers are extremely profitable and they use their profits as a weapon to keep others away from their chart ranking in the top grossing.
The LVP team thought there has to be a better way for new game developers to find new users, but we had not met the right team with the right strategy. Then we met the Shark Punch team. Shark Punch developed and launched a game, the Masterplan, and along the way had figured out that game discovery was not working, so they set out to make it better. Their product, Playfield, addresses the issue of discovery by combining data mining with artificial intelligence, and adds-in some video game community passion.
Playfield is a platform for players both to discover games and connect with other players and game developers, thereby becoming the crowd-curated repository for upcoming and newly launched games.
Shark Punch was founded in 2014 by a team that had worked together and experienced success before at Rocket Pack which was acquired by Disney in 2011. The founders were the key reason we decided to invest and lead their seed round. They have the humble attitude that we have seen in the team of our other Finnish investments, while also having the strong vision and dedication to winning.
The Shark Punch team has the right formula to disrupt game discovery. We expect that the Playfield platform will revolutionise discovery for both gamers and developers.
An added bonus for this deal was that the team is based in Finland and could apply for Tekes funding which leverages our investment. We are big fans of Tekes and the Finnish tech ecosystem. Every game company in the world should find some other local game companies and politicians and get on a plane to Finland to learn whats happening there. It’s a special place. Better yet go to Slush in November in Helsinki. We think it’s the best tech event in Europe.
In the late 80s through 90s I was leading a number of R&D projects sponsored by the great Japanese imaging & optical multinational, Canon. Every now and then, we’d stumble across a concept rather ludicrous at the outset, but which we felt - in an always-connected, always-on world in which personal and portable screens were entirely pervasive - made perfect sense. Remember, this was 15-20 years before the iPhone; analogue 1G mobile networks were the standard with 2G digital just beginning to appear; and IBM’s Simon, perhaps the world’s first smart(ish) phone, was tentatively and unsuccessfully launched. So hardly the world of ubiquitous digital visual connectivity we see around us today.
Yet through imagining the world that could exist, we were able to conceive of technologies, products and services way before they came to light. Alan Kay - my personal, all-time favourite computer scientist, inventor and philosopher, and of whom I am the world’s biggest fanboy (ask me about my, possibly apocryphal, anecdote about Alan Kay and Douglas Adams), famously said that the best way to predict the future was to invent it. And motivated by him, but in our entirely naïve and not remotely comparable way, this is what we set out to do.
In the mid-90s we invented the concept of broadcasting videogames. Ridiculous and unnecessary at the time. Even in 1999 when we filed a patent on the process (which was finally granted in 2007), it was greeted by our paymasters with a thunderous indifference. As is often the way of these things, it was all about being in the right place at the right time, and we were neither. Go Twitch, et al!
So when Adam Billyard, my co-researcher at the time, and co-author of the aforementioned patent, said he’d been thinking around 'this kind of stuff’ for the past couple of decades, and would I like to have a chat about it, I paid attention.
In January 2015, LVP backed Adam’s R&D stage startup ‘PolyStream’. PolyStream draws from a decades old fascination that both Adam and I have had in what might variously be thought of as virtual reality, shared virtual worlds, game streaming and cloud gaming. From our early days mixing with the likes of cloud gaming pioneer GCluster, through Adam’s stints as CTO & consultant at game streaming / interactive TV companies, and watching closely the rise and reinvention of OnLive and Gakai, we’ve known that the promise of cloud gaming is too great to ignore, yet the tech story not quite complete and thus the economic circle not quite squared. This is what PolyStream aims to solve.
“Invent the future”... This time, we’re a bit less naïve. This time, we’re not in a weird, left-field comp-sci lab at the far reaches of a hugely benign but largely disinterested multinational.
Personally, I love working at LVP; it’s the home I helped build and I could never conceive of leaving to join any of our portfolio companies full time. But if I ever renege on that promise, it will be with these guys… PolyStream reminds me of the time 20 years ago when I looked at a screen and watched the future.
Note: PolyStream is that oddest of VC-supported entities, an ultra-early, pre-revenue, pre-product vehicle. It has proof-of-concept (and some tasty IP), and is actively exploring partnerships to help it develop.
Paul, David Gardner (DG) and I (DLK) have been working together as LVP for over 3 years now. We formed as a VC firm, adopted formal VC processes and operated with VC diligence. But with two slightly unusual nuances.
Most VC funds have a relatively broad remit... it might be 'healthcare', or 'technology', or 'energy'. We choose to invest in only the video games sector, and almost entirely in the mobile, tablet, online sub sector, and only in startup and early stage companies. We don't do gambling (or anything that involves real-money out) and we don't do traditional AAA console businesses. We were convinced that by sticking to what we know, in the areas where technological disruption is bringing opportunities, and working with teams at a very early stage in their development, we would not only have a lot of fun - we get to work with the types of people we love to work with, on ideas and visions that we love to support, at a stage where we can personally and directly bring a lot of value - but we would also produce outsized returns.
Early is risky, but get it right and it's where phenomenal value is generated. But to get it right, we have to work with a laser-focus on exactly and only what we know... if we don't understand it, thoroughly, completely, we don't invest.
We don't believe this is narrow, we believe it is focus.
This was not as we had originally intended. We were in the long, drawn-out process of raising an 'external fund' - technically, we are what's called 'general partners' - we operate and manage the fund. But we also wanted 'limited partners' - these are the guys, often institutional, industry, sovereign, or family wealth funds, who bankroll VCs. Yes, VCs need funding too!
But guess what? Even with our backgrounds and previous business successes, no-one was uncontrollably leaping to back us. Most everyone we approached loved the message and our story & abilities, and they believed we could succeed... but not that we would succeed. In retrospect, it's clear we were asking them to believe not in our past, but our future - we were first-time fund managers, running our first fund, in what they perceived as a fantastically exciting, but uncertain, growth sector. We were full of potential, but with little to evidence that our potential would be realised.
We pushed on anyway, as a private fund investing our own money, without external funding.
There's nothing that sharpens the mind quite as much as having your own, individual, personal savings on the line. Each time we placed a bet - because that's what it is when we choose to invest - it was not just our reputation it was also our money, our future at stake. We didn't draw a salary (we'd have been paying ourselves), we didn't reclaim expenses (other than basic, direct, out-of-pocket expenses incurred as directors if we served on a board), we didn't get bonuses, freebies, per diems, healthcare, phone bills covered, travel allowances or any other recompense or personal benefits. Every penny we spent was our own. And the discipline this has instilled is priceless.
Now, with proven focus, evidence that we believe in ourselves, proof we can execute, some fairly fabulous success and a discipline borne of necessity, we're finding that the cadre of professionals and institutions who are our potential backers are keen and willing to engage. This set of proof points is precisely what we look for in our portfolio companies... gosh, this dogfood tastes great!
We are thrilled to be starting the next phase of our growth with investors who can bring to us the type of value-add that we endlessly strive to bring to our own portfolio companies.
We practiced what we preached and, as we believed, it has paid off.
The lifeblood of any VC is its deal flow, and what sets apart the leaders from the pack, the best from the average, is 'proprietary deal flow'... that is, deals only that VC can get to, or get to first, or get to on the best terms*.
Of course, as we all know, every VC is amongst the best and none of them are mediocre (or heaven forbid, below average), so just like 'value add' - which I'll touch on in a future blog - every VC has its own, fabulous, proprietary deal flow. Our secret sauce is not so secret. We've been in the games industry for an average of 20 years - making games, marketing games, financing games, funding games companies, growing games companies, buying & selling games companies. We are privileged to have been involved in some of the biggest, most loved (and most successful) games franchises ever, and lucky enough to have worked with many of the games industry's most creative, entrepreneurial, passionate and insightful teams. No surprise then that we're pretty plugged into the scene and get to know what's happening from an investment perspective somewhat earlier than more generalist VCs (and, I'd immodestly suggest, with a somewhat more informed analysis and assessment).
In late 2012 LVP, along with legendary Finnish investor Jari Ovaskainen, led a seed round in a very exciting startup with an incredible character IP pedigree but no previous experience running their own company. Now, almost exactly 18 months down the line, Boomlagoon has transformed itself - no longer "just" developers, Boomlagoon has successfully navigated itself to become a fully-fledged character IP games business. We're thrilled to have joined them on this journey, and very happy to be participating in their $3.6M series A, along with our friends at Northzone, Inventure and 360 Capital Partners.
So, with this in mind how in mid-2012 did we find Boomlagoon, the startup formed by 3 ex-Rovio superstars, including the character IP creator supremo Tuomas "Angry Birds" Erikoinen?
Extremely complex, in-depth and deeply proprietary deal flow, of course. Certainly not through just reading this article on CNN then giving Antti, Illka and Tuomas a call, no, certainly not...
*As an aside, a company called BrightSun is using fantastically sophisticated, quant-derived algorithmics to help VCs and others track and analyse oceans of imprecise data to help sift, sort and make sense of the incredibly complex and volatile startup world. [disclosure: I am a personal investor in BrightSun... they're obviously not a games related company, so they don't fit LVP's remit, but I loved their ideas so much I had to support them.]