Interpretation of a16z's $600 million Games Fund One: Why choose to bet on games?

Source: 0xmin, TechFlow Research

On the occasion of the one-year anniversary, Andrew Chen, the manager of Games Fund One, disclosed the fundraising deck from 2022, which was interpreted by TechFlow and included Andrew Chen's current comments. For instance, in Andrew Chen's view, if he were to write this deck today and discuss why now is the time to invest, he would definitely write "AIAIAIAI" and highlight AI as a new investment theme.

Overview: Why Games?

The main points are:

A vibrant consumer ecosystem has developed around games;

Games are often the largest killer applications on new platforms;

Today's games are also a massive social network;

Games have undergone tremendous changes today.

Andrew: Games are driving the GenAI revolution, showcasing their cultural power during "miracle moments," as some games, like The Last of Us and Super Mario, are expanding entertainment IP into movies and more.

Why Now?

a16z elaborates from four aspects.

Emerging Markets: There are over 3 billion gamers in the world today.

Younger Generation: 250 million children are becoming lifelong gamers.

COVID-19 Pandemic: Accelerated the entry of non-traditional gamers.

Web3/VR Wave: Web3 gaming exploded in 2021, and VR/AR is at a turning point.

Andrew: This is the slide explaining "why now," but today we will update this slide with AI AI AI AI AI AI :)

Core Investment Areas:

Game Studios: Investing in the next generation of games, such as cross-platform games with business models driven by online revenue, led by players.

Game-related Consumer Applications: For new platforms, games are often the largest killer applications, from PC to MOBILE to VR/AR, and now to Web3.

Infrastructure: In a16z's view, software and tools built for games will become the building blocks of the Metaverse.

Andrew: Last year, we primarily focused on game studios, Web3, and infrastructure. This year, we continue to maintain this focus but are starting to genuinely shift towards the AI field.

In just the first quarter, we encountered over 100 AI x Games companies, and by 2023, 80% of the investments from the games fund have a significant AI component—reshaping core gameplay or creating tools. We need to balance our investment approach to cover all key areas of gaming while adapting to new trends.

What Advantages Does a16z Have in Investing in the Gaming Sector?

a16z believes their advantages lie in the following areas:

A seasoned investment team with extensive experience in the gaming industry, including partners from major gaming companies like Riot/Tencent;

A specialized operational platform for gaming companies;

Cross-game communication and integration, such as between gaming and Crypto/FinTech/Consumer;

a16z has a decade of experience investing in games.

Among these, a16z highlights a platform they have built to empower game founders, providing assistance from early-stage financing, publishing, and marketing to growth, recruitment, and commercialization, and they have established partnerships with the world's leading gaming companies.

Strong post-investment support has always been a hallmark and advantage of a16z, with a significant portion of their operational staff dedicated to this, leading many to view a16z as more of a company or media outlet than a VC.

Andrew: A major part of a16z's differentiated investment strategy is that we can help the operational teams of the companies we invest in. In fact, the vast majority of a16z's employees focus on this, with only a small portion dedicated to investment. Game startups need this kind of help: recruitment/creators/distribution/publishing.

Last year, we hired @DougMcCracken from Supercell to lead marketing, @Chen from YouTube to lead the "creator" space, and @justmazer from Riot to lead talent recruitment. Everyone has an entrepreneurial mindset, and we all act like owners, working without explicit instructions. (And more people are joining!)

Andrew: Given the economic downturn, we have spent countless hours managing our portfolio to maximize the likelihood of its long-term success. This is when the operational team is so powerful. Builders need help from builders, and we formed the team in the first year, hiring talent from Blizzard, Supercell, YouTube, Riot, Twitch, and Unity to join us!

In recent months, we have also established SPEEDRUN, our game startup school, to make it easier for new founders to get started.