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The Need for Speed
 

The Need for Speed

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With massive disruption happening in the game sector and fast growth of new mobile platforms, digital game companies need to move faster than ever to execute plans, launch games and innovate faster ...

With massive disruption happening in the game sector and fast growth of new mobile platforms, digital game companies need to move faster than ever to execute plans, launch games and innovate faster than the competition. This presentation will share some key points on why.

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  • good presentation Paul !
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  • Nobody are thinking about games to Seniors. (at tablets or smartphones) They want (like ) to play. Where are the developers to do this ?
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    The Need for Speed The Need for Speed Presentation Transcript

    • The Need for Speed23 May 2013© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • WHO AM I?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved2
    • – Advisor and Investor based in London for over 14 years– Strong game sector experience, knowledge and relationships– Advised on transactions in the game sector with a total valueof over $1 billion advising many companies including:– Shareholder in:Who am I?Paul HeydonPartner,LVP© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved3
    • WHERE ARE IS THE GAMESECTOR HEADED?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved4
    • First, some context© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved5
    • THE COMMERCIAL INTERNET IS NOW~20 YEARS OLD© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved6
    • As of year-end 2012: 2.5+ billion people online© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved7
    • ~35% of global population© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved8
    • © 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved9
    • Penetration of WW Population, 5 YearsAfter Launch1%3%4%8%PCs (1988) Facebook (2009) Internet (2000) iOS & Android (2012)8X 3X 2XSources: United States Census Bureau, International Telecommunication Union, Facebook, Flurry© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved10
    • Device sales are pushingpeople onto the mobileInternet© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved11
    • Smartphone growth continued, while PCshipments actually declined last year© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved12
    • And the disparity will only growWe are here© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved13
    • © 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved14
    • So, what do people doon mobile?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved15
    • Mobile consumers glued to games, facebook,and entertainmentSource: Flurry, April 2013© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved16
    • Downloads continue to grow franticallyApple justhit 50bn appdownloads!© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved17
    • And time spent in apps continues to skyrocket© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved18
    • Android has by far the largest platform forsmartphones© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved19
    • So Apple users are a minority … butits platform pays 4X better© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved20
    • Which is why it has developer’s attention© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved21
    • And why Apple has dominated apprevenues© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved22
    • Mobile advertising will grabthe spotlight in 2013© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved23
    • Many look at thisTripled since 2009© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved24
    • And thisSource: Mary Meeker (KPCB), eMarketer, IAB9% gap© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved25
    • A few big companies with good mobile adformats can make mobile ads pay© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved26
    • More mobile video ads and location-basedads will lift CPMs© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved27
    • More opportunities for TV-style video ads asconsumers watch more and longer videos© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved28
    • Tablets provide a boost to mobile ad prices© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved29
    • But advertising is now the most popularmonetization tool© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved30
    • Why Consider Mobile Ads in Game?• To make lots of money!• Some mobile games have 50%+ of revenuecoming from in-game ads, mainly video• One example is generating $100k+ per dayjust from ads31© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • Key disruptions in the game sector»Platform – From Console/ PC to Tablets/ Smartphones»Shift to mobile happening faster than many expected»Business Model – From Paid to Free»50% of the top 10 grossing apps in the US iOS Appstore are free gamesdeveloped by VC backed game developers»Operations – From Products to Services»Game developers need multiple types of third party services from analyticsto advertising to payment»Small is the new Big – From Big Publishers to Small Developers»Low development costs and faster development to minimum viable productfor Launch enabling millions of people to make games»Speed Matters – From Game Idea to Launch»Game development is planned in # of months vs # of years© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved32
    • EVER HEARD OF PUZZLES &DRAGONS?33© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • OR GUNGHO?34© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • Gungho Entertainment SharePerformance• $14.2bnmkt cap• +6952% inlast 12 mths• FromPuzzles &Dragonsgame• $113m revin April/1335© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved-500,000.000.00500,000.001.00mm1.50mm2.00mmMay-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13GungHo Online Entertainment, Inc. (JASDAQ:3765) - Share Pricing
    • Mojang• Founded in May 2009 by Notch in Swedenwith launch of Minecraft• Bootstrapped; never needed to raise money• Now– 3 games but Minecraft is on many platforms– 2012 Rev of 1.5bn SEK ($226.1m) & operatingincome of 584.9m SEK ($87.9m)36© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • Supercell• Founded in 2010 in Helsinki, Finland with seedinvestors• May 2011- Series A round with Accel Partners• 1 year ago– Little revenue with various games in pipeline• Now– $2.4m per day– From 2 games: Clash of Clans & Hay Day– Sold €100m shares at €600m valuation to Index Ventures,IVP and Atomico– Q1 $179m rev with $104m EBITDA– One of the fastest growing game companies ever37© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • SO WHAT DOES THIS ALL MEANFOR A GAME STARTUP?38© 2011 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • MASSIVE SUCCESS IS POSSIBLE;EVEN WITH FOCUSSING ON A VERYSMALL NUMBER OF GAMES39© 2011 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • »Game startups do not need the following at start:»Millions of dollars»Large teams»They do need at start:»Tens or hundreds of thousands of dollars»Small team of very talented people whom»Work fast»Create great games»Are innovative»Focus on»Making games for a large potential user base»Metrics»A decision on which platform(s) to launch with»Ability to think or imagine big»Research on third party services; which and whyThis means that:© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved40
    • If You Get Strong Traction• Then investors will call• You will have luxury of:– Raising money– Selling some shares– All of the Above– Doing nothing & focussing on your success41© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • But• Dont focus just on your success– Keep updating your game• Start developing more games• Ultimately you need a diversified portfolio• Success breeds copies• One game’s strong revenue will not lastforever; maybe a long time but not forever42© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved
    • WHO ARE LVP?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved43
    • David Lau-KeeGeneral PartnerDavid GardnerGeneral PartnerPaul HeydonGeneral PartnerPhil HarrisonAdvisor30+ yearsEAAtari25+ yearsRenderwareCriterionfounder15+ yearsING BaringsCommerzbankAvista Partners25+ yearsMindscapeSonyAtariMicrosoftLVPTeam© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved44
    • LVP: Our Value AddFor Entrepreneurs• Will be valued as a strategic investor but independent• Global relationships with potential strategic partners including• Strong experience in building fast growing world class companies• Extensive network of top sector people to hire as employees, advisors or consultants• Proven track record of success in the sector• Deep domain knowledge and insight• Very experienced with fundraising and M&A© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved45
    • Investments to Date© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved46
    • WHY INVEST IN THE GAMESECTOR?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved47
    • Global Exits/IPO’s in Game Sector0.02,000.04,000.06,000.08,000.010,000.012,000.014,000.016,000.018,000.020,000.01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012North America Europe Asia/ Pacific$44bn value created for VC/PE investors and/orfounders since 1997Source: Capital IQ, Company Filings, Brokers & Press(USD$ millions)© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved48
    • Largest Europe Liquidity Events inGame SectorTotal Value Creation: $6.4bn in Europe since 1997 Source: Capital IQ, Company Filings, Brokers & PressNote: Including secondary dealsExit/ IPO Deal Value (USD$ millions)TT GamesBigpointPlayfishBigpointSN SystemsBizarre CreationsEidosMental ImagesCodemastersCriterionRarePlayJamFuncomAstrumDigital BrosGameloftMindscapeWeka EntertainmentScoreloopSupercell0100200300400500600700800900Jan/00 Jan/01 Jan/02 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved49
    • Mobile Game Market Size$11.7$31.9$0.0$5.0$10.0$15.0$20.0$25.0$30.0$35.02012 2016Source: Gartner, IDC, Magid, Flurry & Goldman Sachs research estimates from "Mobile Monetization: Does the shift in traffic pay?" by Goldman Sachs June 4, 2012$31.9 bn total addressable market for Mobile Games by 2016CAGR 28.5%(Billions $ USD)© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved50
    • WHAT WE LIKE TO SEE INCOMPANIES TO INVEST IN© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved51
    • © 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved52
    • + +INTELLIGENCE INSIGHT PASSION© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved53
    • vs© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved54
    • LOW LATENCY IDEAS© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved55
    • FAST ITERATION© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved56
    • CURIOSITY
    • MORE THAN ONE GAME© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved58
    • WE LIKE TO UNDERSTAND WHY PEOPLE LIKE IT© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved59
    • GOOD CHEMISTRY© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved60
    • WHY WE DO THIS?© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved61
    • WHY WE DO THIS• Frustrated with bad inertia at big companies• Early investors at Playfish, Unity, NaturalMotion• Funding for “games” was hard• Love Europe• Love Entrepreneurs (that listen)• Love the industry© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved62
    • WHAT YOU SHOULD DO© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved63
    • © 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved64
    • “If Pac-Man had affected us askids, wed all be running around indark rooms, munching pills andlistening to repetitive electronicmusic.”― Marcus Brigstocke© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved65
    • Paul HeydonLondon Venture PartnersEmail: paul@londonvp.comWeb: www.londonvp.comTwitter: @pheydon66
    • Disclaimer• This presentation was prepared by London Venture Partners exclusively for the benefit and internal use of Recipient(s) in order to provide some thoughts onfundraising in the game sector. This presentation is incomplete without reference to, and should be viewed solely in conjunction with oral briefing provided byLondon Venture Partners. The presentation is proprietary to London Venture Partners and may not be used for any other purpose without the prior written consentof London Venture Partners.• The information in this presentation reflects prevailing conditions and our views as of this date, which are accordingly subject to change. In preparing thispresentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all the information available from publicsources or which was otherwise reviewed by us.© 2013 London Venture Partners LLP Confidential and Proprietary, all rights reserved67