Hunting Godzilla
- An Investor’s Perspective on Games -
Ben Holmes, Index Ventures
11/13/2015 1
Slush / Helsinki / Nov 12th 2015

Slush / Helsinki / Nov 12th 2015
• Founded 1996
• 65 People
• Offices in London, Geneva & San
Francisco
• Active at Venture and Growth Stages
• Invest across tech spectrum …
• … but especially active in games and
mobile games
Games Portfolio

Slush / Helsinki / Nov 12th 2015
• Partner based in London Office
• Index Ventures since 2002
• Most actively invest in online
marketplaces and games
• IGN: indexben
• benh@indexventures.com
About me What I’m playing …

Slush / Helsinki / Nov 12th 2015
Games is the best but most
misunderstood sector within tech

Slush / Helsinki / Nov 12th 2015
(Mobile) Games – best sector in tech?
Capital Efficiency
• Launch on Seed
• Scale on Series A
Audience Potential
• >1bn mobile gamers
Rollout Speed
• Limited localisation
• No local presence required
Margins
• 50%+ margin achievable
• Small teams can support big audiences
Competition
• Just a bit…
Monetisation
• CC on file / Click to pay
• Price discrimination
• Multiple business models
Testable
Engagement Potential
• All 24hrs attackable
• Notification channel
• Multiple play patterns
• 3yr+ retention possible

Slush / Helsinki / Nov 12th 2015
RealityMisconception
“…it’s doing well today but
the game could be gone
tomorrow…”
Enduring 3+ yrs (and counting)
franchises…

Slush / Helsinki / Nov 12th 2015
RealityMisconception
Supercell, King, Kabam and others
>> multiple games in top 20 top 50
“… they have had one hit
but chances are they will
never have another”

Slush / Helsinki / Nov 12th 2015
RealityMisconception
“... Investing in games
companies is a total
gamble...”
A select few VCs have managed
incredible hit rate in the sector

Slush / Helsinki / Nov 12th 2015
Gaming’s valuation gap
Valuation / DAU $
2.0
Valuation / Rev
52
nm nm 7 4
100
Valuation / EBITDA
• King & Supercell valued at
massive discount to social media
businesses
• Zynga’s long shadow…
• Zynga was rated in line with social
media platforms
• Market is now unduly wary of
games co’s
Valuations are Q3 2015 public valuations for Twitter, Facebook. 2011 IPO Valuation
of Zynga and acquisition valuations for Supercell, Whatsapp and King

Slush / Helsinki / Nov 12th 2015
What next for mobile games?
Audience (MAU)
Monetisation(ARPDAU)
• King $2bn revenue > 474 MAU / 133 DAU /
$0.05 ARPDAU
• Supercell $2bn+ revenue / Smaller
audience / higher monetisation
In the next 5 years we will see a
“Godzilla” game emerge
Massive Reach > 200m+ DAU
High Engagement > 40% + MAU/DAU
Monetisation > $0.1-0.15 ARPDAU
$10bn revenue / $5bn Profit
• Successful in Asia and the West
• Bridging across core and casual

Slush / Helsinki / Nov 12th 2015
Onboarding
D1-7
Engaging
D7-30
Loyal Base
D30+
• Pay Upfront
• Level Unlocking
• Decorative items
• Functional Items
• Social Currency
• Accelerators
• Boosters
• Extra Stats & Data
• Tournament Entry
• Etc…
CPI Features TV OtherMarketing
Acquisition
Conversion &
Retention
Monetisation
• What is the pitch to Apple / Google?
• What games may look similar?
• What do the ads convey about the game?
• What does icon & app store imagery convey
about the game?
• Appstore > Download conversion
• Bounce rate on download = expectation
mismatch
• Is it comprehesible / familiar?
• Does it look feel and sufficiently new
upfront?
• Are there moments of delight?
• Is there always something to achieve in a
session, day, week, month?
• User vs. Content or User vs User?
• How is editorial and storyline added?
• What are the social structures?
• What is the update cycle?
• Does monetisation support retention?
• Is monetisation abusive and harms retention?
Evaluating Games Concepts – Key Questions

Slush / Helsinki / Nov 12th 2015
Evaluating Games Concepts – “the Model”
Metrics Economic Viability

Slush / Helsinki / Nov 12th 2015
Evaluating games teams
• Passionate about games
not “tourists” entering
market chasing $
• “Telepathic” connection
between key people
• Art, Dev, QA,
Community, Design,
Analytics
• Lots of mistakes and scars
• Ideally long history of
working together
Gaming DNA
• In depth understanding of
latest game design
principles
• Great at gathering and
understandng metrics
• Make the right tech
choices to enable scaling
• Fast design and QA cycles
Technical
Talent
• Focused on creating a new
experiences for consumers
• Not afraid to make creative
leaps
Creative Risk
Takers

Slush / Helsinki / Nov 12th 2015
Europe can win
• We are already ahead - many winners were built from Europe
• King, Supercell, Mojang, Goodgame, Nordeus, Rovio,
Playfish, etc.
• Most Silicon Valley companies and entrepreneurs are “tourists”
in the gaming sector
• Winning is about quality of team and product, not about who
can raise most money fastest

Slush / Helsinki / Nov 12th 2015
Thank You
Please get in touch!
benh@indexventures.com