Startups I Like

Even before COVID, gaming and virtual entertainment was a rapidly growing and innovative industry. Today, gaming is a $150B industry globally with mobile games representing $70B of the market. The global lockdowns and work from home for many has served to pour rocket fuel on the industry and accelerate a number of trends in gaming and interactive media that I am following:

A Person’s Community is in Game: The next wave of social media, networking, and community is being built in and around games as seen by Roblox, Fortnite (millions of people watch their virtual concerts), and Animal Crossing. COVID has just served to accelerate this trend of game communities becoming people’s Third Place. Epic Games realized this trend early on and pivoted from the legacy gaming business model of selling the actual game, to offering the full featured game for free and monetizing based on virtual goods within the game itself. This insight has made them wildly successful with most not realizing that Fortnite’s revenue per user ($96) is double that of Google, Facebook, Twitter, and Snapchat’s revenue per user combined.

Dramatic Shifts in Advertising Spend: Viewership of traditional sports is aging dramatically (the average age today of a baseball fan is 57) and younger generations tend to watch eSports in lieu of traditional sports while spending more more time in games. Expect to see new monetization methods in games based purely around advertising as advertisers desperately seek to reach that coveted younger demographic. Advertising dollars have already started entering the space and will grow rapidly in the coming years.

Cloud Gaming’s Rise: Cloud gaming is initially facing a host of challenges, with the technology just not being good enough yet, and the business model not figured out (a lot of publishers push against the subscription business model since you cap your whale customers). Google’s Stadia offering has publicly had a very rocky start as Google wrestles with these challenges. Over the coming years these challenges will be ironed out with 5G adoption strengthening the case for cloud gaming as it goes mainstream. Cloud gaming enables greater scale, turns games into ever-changing live entertainment platforms, and enables infinite complexity in games while removing the hardware constraints.

Apple as a Catalyst: The leaks from Apple are that their first VR/AR headset will be out in ~2022. I expect this will act as a catalyst for VR and AR gaming, and bring these games to a mass-market consumer, just as Occulus brought VR games to the hardcore gamer demographic. Mobile games existed before the iPhone, but it acted as the primary catalyst for mobile game adoption by the mainstream.

Game Infrastructure & Tools: Roblox and others have shown that by providing tools and an environment for creators to create games, amazing things happen. I am very excited at the new wave of startups providing game makers infrastructure and tools for everything from enabling competitive multiplayer to in game economies with unique virtual goods built around blockchain technology.