Our Updates

Founders and Mental Health

Recently, our Venture Partner, Cris Reed, speak to Matt Zerker, Founder at Tethr, about his startup focused on mental health for men.

They covered things from founders burnout to how to bounce back from the most difficult times of our lives. More often than not, founders face the most pressure when running their business, and it is a solitary journey (as our partners who are/were entrepreneurs can tell you).

We strongly believe in building a sustainable business when we invest in companies. The last thing we want is a burnt out founder who can’t run the business well. We will be preparing a transcript of the interview and uploading it here.

Founder Resource Center

We have had a number of founders who ask us how we evaluate companies. Check out some resources that you can use here.

Biz & Beer with Alvin Poh

Today, our Founding Managing Partner, Mr. Lance Quek had a discussion about venture investing, entrepreneurship and business in general with Mr. Alvin Poh, the founder and former CEO of Vodien Internet Solutions. They covered scaling businesses, when to and not to take venture capital and what founders should look out for in VCs.

Discussion with Sutton Capital

Our Founding Partner, Lance Quek, had a great conversation with Dr. Joel Palathinkal from Sutton Capital from New York City yesterday evening. It was a great session and we are glad that to be able to add some value to the attendees. Looking forward to work together on deals real soon.

Check out the recording here:

Trendhunter 2020 Report: 3 Key Areas for Esports & Gaming

Our team recently went through the Trendhunter 2020 report and found 3 key areas for growth in esports and gaming. We would love to share them here. If you are in these areas, please reach out to us and we would love to speak to you.

If you are in these areas, please reach out to us and we would love to speak to you.

How COVID-19 is taking gaming and esports to the next level

This post was originally published on World Economic Forum, written by Stefan Hall. It is used in accordance to Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with WEF’s Terms of Use.

Summary:

  • The COVID-19 lockdowns have boosted user engagement with video games and esports.
  • Revenues for many gaming companies and platforms have increased during the pandemic.
  • The pandemic is accelerating existing trends within the gaming industry – here’s a guide.

The global video game industry is thriving, despite the widespread economic disruption caused by the coronavirus. With the practice of social distancing reducing consumer and business activity to a minimum, gaming offers an engaging distraction for people at home looking for social interaction, and initial data shows huge growth in playing time and sales since the lockdowns began.

The gaming business model

The global video game market is forecast to be worth $159 billion in 2020, around four times box office revenues ($43 billion in 2019) and almost three times music industry revenues ($57 billion in 2019). The biggest market by revenue is Asia-Pacific with almost 50% of the games market by value. North America accounts for a quarter of revenue.

The gaming industry's revenues far outstrip other entertainment sectors
The gaming industry’s revenues far outstrip other entertainment sectors.
Image: Newzoo Global Games Market Report

Gaming revenues are almost entirely driven by consumer spending, but the business model has evolved significantly in recent years. Consumers today buy fewer games than previous decades, but spend more time with those games, shifting the business model from single-unit to recurring revenue generated from a base of active users.

As a result, the industry is laser-focused on increasing engagement per user. Aside from making video games as compelling as possible, the strategy for doing so has been the adoption of in-game monetization opportunities. This additional downloadable content (DLC) can include expansion packs, new features, tools and characters, and “loot boxes”, which are effectively a lottery of virtual items.

This business model has come in tandem with improvements to gaming hardware, bandwidth and mobile internet, which have made high-quality games more accessible across devices and platforms. Indeed, close to half (48%) of the industry’s revenue now comes from mobile gaming.

A separate part of gaming is esports, which refers to organized, multiplayer video game competitions. This sector is forecast to grow to just over $1 billion in 2020. Business models in esports closely follow professional sports – though competitions are far more fragmented – with the majority of revenue coming from advertising and broadcasting. Although relatively small in comparison with the overall gaming market, esports is relevant here because it appears connected to the continued growth of gaming.

COVID-19 has boosted engagement with video games, but has complicated hardware and software development

Like many companies, the gaming industry is supporting community initiatives to mitigate the effects of COVID-19. These include charitable pledges worth millions of dollars, the donation of surplus computational power to help researchers better understand the coronavirus, and solidarity response funds to help medical workers, children at risk and employees who have been adversely affected.

Social actions aside, the consequence of COVID-19 on gaming has been a massive enlargement of the audience available to publishers. Gaming is typically an at-home activity, and a steady stream of headlines has shows that it is flourishing during the pandemic.

Asian gaming giants Nintendo and Tencent both saw sales increases during the first quarter. The former sold almost half of its games digitally, a record that helped increase profits by 41%, while Tencent’s year-on-year online games revenue increased by 31%. Analysis from GamesIndustry.biz shows that sales across 50 key markets rose by 63%. Even games released during the pandemic are performing well, with titles as varied as Doom Eternal (a first-person shooter) and Animal Crossing (a world-building simulation) both breaking sales records after launching. This is reflective of data from Comcast that shows how new game downloads have increased by 80%, compared to a rise of ‘only’ 50% in total gaming downloads.

Looking at downloads and sales in isolation does not paint a complete picture, since many games are now available for free (and then monetize in-game). But other metrics for engagement tell the same story. Verizon has reported an increase in gaming traffic during peak hours of 75%, compared to increases of 12% increase in digital video traffic and 20% in web traffic. Meanwhile, data from Streamlabs shows that platforms like Twitch, YouTube Gaming, and Facebook Gaming have also experienced a surge in growth, with around a 20% increase in usage hours reported across services.

“Unique to gaming is that it has both interactive and linear consumption models, and the activity of watching gaming video streams and video on-demand has become nearly as big as gaming itself,” says Mike Sepso, co-founder and CEO of Vindex, an esports infrastructure platform. “In the COVID-19 era, all of this activity has increased dramatically because of both the new time available to people and their need for social interaction, which gaming provides.”

The popularity of online streaming platforms has shot up during the pandemic
The popularity of online streaming platforms has shot up during the pandemic
Image: Streamlabs

This said, gaming is not immune to the coronavirus. Esports, with its reliance on live events, has been one of the first parts of the industry to be affected. Most esports events have been cancelled or postponed, though some are taking place without audiences.

“We have directors, producers, broadcast engineers and professional gamers all working remotely to recreate the excitement and quality of a live event,” says Sepso. “Esports has been able to continue while traditional sport has not because the playing field is virtual and can be replicated online; however, nothing can truly replace the social richness of the live experience.”

The short-term impact on esports is expected to be limited. Although close to 75% of esports revenue comes from advertising and broadcasting, most of these deals were agreed before the outbreak. If restrictions on mass gatherings continue, esports-related income would certainly fall. But considering that esports accounts for less than 1% of the gaming market, this would not represent an existential threat to the wider industry.

Despite this, esports may be growing in prominence as a result of COVID-19. Sports leagues around the world have turned to the sector to find new ways of engaging with fans. Several esports competitions are being shown on live TV, as broadcasters look to fill hours of scheduled sports content that were cancelled in the wake of the pandemic. NASCAR has been one of the most successful sports to augment cancelled events with its iRacing Series, with one event attracting a peak of 1.3 million viewers. Although esports revenues may have declined, the value of the sector more broadly has risen as a result of the low-cost marketing it has benefited from during the crisis.

For the wider gaming industry, coronavirus makes temporary delays in the production of gaming hardware more likely as factories around the world face supply chain interruptions. Furthermore, game developers are preparing for a loss in efficiency as more employees work remotely. Nintendo has issued a warning that a situation of prolonged remote working will impact its processes, and the New York Times reports that developers as large as Sony, Amazon and Square Enix are facing difficulties. Others appear to have adapted quickly, with Epic Games (the makers of Fortnite) still providing regular updates and patches to games.

Long-term transformation

Looking to the long-term, there are several takeaways from the recent spike in gaming that indicate future transformations in the industry.

The greater interest in gaming may accelerate a shift – already underway – towards the delivery of games via mobile and cloud-based platforms. Increasingly, even blockbuster titles are available on mobile devices. Cloud gaming, meanwhile, enables consumers to play streamed games across devices, often without the need for expensive hardware.

The industry clearly now sees potential in this distribution model. Activision Blizzard reported earnings 50% above analyst expectations, largely based on the mobile edition of its popular Call of Duty title. Google recently removed a $130 sign-up fee for its cloud gaming service, Stadia, hoping that the value offered will convince consumers to stay for the long-term. Challenges – particularly to bandwidth – remain, but there is great promise.

The second long-term trend is the widening of monetization avenues through subscription and free-to-play models. Subscriptions provide a reliable path to monetization for smaller, quality games that otherwise lack the marketing or monetization nous to break into the mainstream. Demand for ultra-high-end gaming is likely to remain popular, but services such as Arcade (Apple) and Game Pass (Microsoft) provide gamers with a large library of video games – often without the need for advanced hardware. Meanwhile, free-to-play games allow developers to monetize without needing to convince consumers to make up-front purchases. Instead, they offer in-game upsell opportunities such as upgrades and expansion packs.

Such buffet models may even encourage consumption. Microsoft has reported that subscription gamers increase play time by up to 40%. With evidence showing that cheaper entertainment tends to prosper during recessions, these low-cost, high-value offerings are a serious way for the gaming industry to expand.

Thirdly, we should expect to see the gaming industry increase its partnerships with other entertainment sectors. Some video games become so popular that they spill over into cultural discourse. The most obvious recent example is Fortnite, which has made its mark on music, sports and television. The game has hosted live concerts, premiered new albums by major artists, and featured content from movie directors. During the pandemic, Fortnite hosted a live rap concert that attracted almost 30 million live viewers.

Other exceptionally popular games, such as Roblox and Grand Theft Auto, have adopted similar strategies in the past. The pulling power of the 120 million active users and 1.5 billion hours of playtime they generate each month are hard for other entertainment sectors to ignore. Going forward, there will be more partnerships with the wider entertainment industry, as media companies seek to take advantage of the momentum gaming has produced. Reports have surfaced in the past weeks that Sony is building an immersive media team to work at the intersection of music and gaming. These in turn create opportunities for supporting industries, such as technology companies that supply the infrastructure for such experiences.

Finally, the pandemic may lead to the normalization of esportsAnalysts have described esports as being “popularized and legitimized in an unpredictable and profound way”, thanks to the unprecedented (and accidental) adoption of esports by broadcasters, leagues and athletes seeking to engage fans. “Among younger demographic groups, a prolonged shutdown for traditional sports leagues may drive more fans to esports on a regular basis – which globally would represent tens of millions of new consumers for the industry”, says Sepso.

At the very least, the pandemic has reminded media companies and brands that there remains an addressable market of highly engaged consumers. Recent developments will likely inch esports towards the mainstream. The earliest proof point is the state of Nevada, which legalized betting on competitive gaming just two weeks into confinement measures in the US.

[Webinar] Navigating the VC Space in Esports: Will There be a Profit?

In this webinar, our Founding Managing Partner, Lance, discusses his viewpoints about the esports and gaming scene globally with a special focus on Southeast Asia. He also shares tips for entrepreneurs trying to raise venture capital for their companies and advises them on what to look out for.

This webinar is jointly brought to you by The Gym Esports Centre and Gamerforce Ventures.

Mobile + IoT + Cloud + VR: The Next Gaming Revolution?

Recently, a whole slew of interesting gaming-related exits has boosted the profile of gaming in the venture capital space. Zenimax has been acquired by Microsoft for over US$7.5bn while Unity has made its debut on the NYSE with a US$22+bn market capitalization.

The rapidly growing community of online gamers has found ways to use the technology available via social media and live streaming platforms to attract a large audience. Whereas gamers used to be a specific group of nerds, eSports is evolving to take in literally any person from any background. As technology advances from the spectrum of connectivity, it helps in spreading eSports to traditional communities.

We are seeing a boom in mobile gaming thanks to the power of the Internet-of-Things (IoT) and the cloud. IoT has enhanced the growth and development of mobile games in the market. Modern smartphones come with advanced hardware and software capabilities that developers can make use of to make gaming on these devices enjoyable and seamless. Consumers can have easier and better access to the games, and many of them are free. Even the premium games come with less costs and enthusiastic gamers are willing to spend on them. Before the internet, access to mobile games was a bit limited.

Developers did not have any platform to plug their new games, so the gaming industry was a stagnant one. Now, things are different and the rapid increase in the number of individuals playing mobile games all over the world gives a clear picture of how mobile gaming has grown greatly in popularity. This has bridged the gap between developers and consumers, thereby creating more ancillary revenues for the developers and the community alike.

The demand for immersive gaming by eSports enthusiasts is insatiable. Even though virtual reality (VR) will be one of the ways to satisfy this demand, 3D technology will also come in handy. You might be surprised to learn that 3D films have been around for centuries. The only impeding factor that made them not to pick up was the high costs of development and adoption. However, recent times have seen the technology revived in films such as Avatar and also in gaming screens. We can expect that video games will have better quality graphics to the extent that it will be impossible to differentiate them from real-world scenes.

The eSports industry is gradually adopting virtual reality. There are dozens of VR only leagues that are being launched on a yearly basis. Even though most eSports enthusiasts are yet to adopt VR as widely as it would be expected, it is quite interesting to see how far the technology can take eSports.

VR in sports involves a player putting on some headset and holding some kind of controller to play a video game. Since the headset cover the players’ eyes and ears, they are completely removed from the physical world and immersed into the video game world.

The essence of VR is to be immersive so that the player has a deeper connection to the video game. It is every serious developer’s wish to make their games feel more real and have little differences with the real life. By including virtual reality features in their games, the developers are a step ahead in achieving this objective.

The fact that virtual reality has already proven to be useful in other sectors does not imply that its adoption in eSports is smooth. As a matter of fact, the technology feels like a glorified niche among its best athletes. Even some of the leading games are yet to incorporate VR components in their design.

The VR League is one of the most prominent virtual reality eSports leagues and is a part of ESL. Evidently, ESL is of the opinion that technology has a place in eSports, hence the decision to create a product solely dedicated to it. Some of the games that are currently being played in VR include Onward, Echo Arena, Space Junkies, and Echo Combat. Developers will need to continue developing games that the general public enjoys in order for their games to grow beyond their current standing.

We would expect the growth of eSports in a much more immersive ecosystem, where competitors can engage themselves into the virtual environment and have a 3D feel of the entire game. Audience can also expect much better graphics with the power of streaming and better computing power.

If you are a gaming founder or an investor who is looking to tap on this massive opportunity for growth, feel free to drop us an email here.

This article is created based on references to the following articles:
1. IoT Gives the Mobile Gaming Industry a Facelift, 15 June 2020, The Katy News (accessed October 5, 2020). Archived Link: Main | HTML | JPEG
2. Investing in Esports Startup Ventures (research by Gamerforce Ventures), 2nd ed. (23 June 2020).

[Portfolio Update] Resurgence and Vividthree in Discussions to Produce Esporting Events

[For Immediate Release]

SINGAPORE, 28 SEPTEMBER, 2020 – Vividthree Holdings Ltd (SGX:OMK) (the “Company”) is in discussions with RSG RESURGENCE ESPORTS PTE. LTD. (“Resurgence”) to co-create new esports events that will raise the bar in gaming and esports content development.

Vividthree Holdings Ltd, a diversified entertainment company specializing in the production of immersive experiences with mixed technologies, and Resurgence, a Singapore-based, Southeast Asian-focused professional esports organization, will combine their strengths to co-produce immersive esports events that will redefine the esports fan experience in Southeast Asia.

The potential partnership will leverage on Resurgence’s expertise and network across Southeast Asia’s esports industry and tap on Vividthree’s technological expertise in augmented reality (AR) and computer-generated imagery, to bring top quality content to a broad audience in Southeast Asia.

These events include live environments for gaming, garnering crowds akin to the world’s biggest sporting events, with fierce fans and competitors forming highly immersive experiences that cannot be replicated in front of a computer screen. The events, which are slated to begin from 2021 onwards, will integrate state-of-the-art immersive technology into esports content production, such as displaying high fidelity statistics, visualizations, and data-driven stories that give them deeper insights into the live game; offering unique esports experiences for offline and online attendees.

“We are proud to be partnering with Resurgence to push the creative frontiers of digital technology content in the esports space. We are excited about the application of VR and AR technologies to transform the e-athletic experience for participants and audiences and to create new kinds of experiences that will, in turn, transform the sporting world. We look forward to creating highly immersive and interactive events that will digitally transform esports content together with Resurgence,” said Charles Yeo, Managing Director of Vividthree.

Jayf Soh, Founder and CEO of Resurgence said, “As part of our regional expansion plans, we are targeting to reach 150 million gaming audiences in Southeast Asia by 2021. The partnership brings together the best of esports content and technological innovation to elevate the content quality and engage audiences like never before. It aligns well with our goals to create exciting stories and sustainable careers for professional esports players and content creators, and we are excited to scale new heights with Vividthree.”

Shareholders should note that discussions and negotiations are at a preliminary stage, and are ongoing. The Company will make further announcement(s) if and when there are any material developments as appropriate.

Taken from Vividthree’s Press Release

Disclaimer: Gamerforce Ventures is the first institutional investor (through Gamerforce Global Ventures I) in RSG Resurgence Esports Pte. Ltd. with the round closed in February 2020.

[a16z Podcast] What’s Next in Gaming

Recently, I was listening to this podcast by a16z, a top tier venture capital / investment advisory firm in Silicon Valley. Quite interesting insights.

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