The Next Big Platforms: Business vs. Venture Reality | Eric Goldberg

1. The Next Big Platforms:
Business vs. Venture Reality
Eric Goldberg
Casual Connect
17 January 2018

2. Context
Developed for and worked with series of new
platforms over >35 years
From dial-up services to Internet to mobile 1.0 and 2.0
to social media
Both business- and venture-side
Ran three start-ups
Participated in ~70 financings, >50% game-related
In consultation with top-returning investors most
active in games

3. Two Roads Diverged in that Yellow
Wood…
Game entrepreneurs and makers see the same
candidates for next game platforms as VCs…
…but they see these candidates through different
lenses
Not ‘blind men and the elephant’, just different rules of
the game and victory conditions
At an infrequent juncture with several plausible to
proven candidates for next big game platform
High-level roadmap toward choosing and
navigating a better ‘road less traveled by’

4. VR: business lens
Aggregate headset shipments are ‘slowly
improving’ – still far from console benchmarks
Unbundled sales <5MM/year
Platforms & manufacturers renewing investment
Content revenues appear to be significantly
lagging hardware shipments
Flashes of content greatness & originality arriving
with increasing frequency
Core propositions remain unproven (e.g.,
widespread acceptance of form factor)

5. VR: venture lens
Winter has come
New investment in consumer VR approaches zero
Experiencing classic VC / PE hangover from
overinvestment in failed thesis (on IRR basis)
Recovery times from this level of widespread
failures is generally 2-5 years
Non-trivial number of ‘1st wave’ VR start-ups
supported by 2-year maintenance rounds
New VR investment flows to verticals, simulation
& other industrial applications

6. AR: business lens
The 8,000-lb. Pokemon in the room
Which in turn trails Google Maps
Platform battle among majors
Magic Leap remains wild card
Low revenues
Relatively modest content development
Use cases remain to be established
Except perhaps for geospatial games
When in doubt with consumer technology, apply the
porn test?

7. AR: venture lens
Interest, but low investment to date
VR contagion
Strategic investment may be necessary to
jumpstart early-stage investment

8. Blockchain: business lens
Evolution from financing vehicles (ICOs) to
businesses built of the blockchain
First stage of land grab to ‘claim’ game genres
Games business has highly applicable
experience with establishing virtual value
Blockchain as guarantor
Authenticate virtual objects
Retention of value for portability & transferability

9. Blockchain: venture lens
First stage of games-related gold rush
Staking out claims
Genres, from social casino to virtual spaces
Stores and brokers of value
Distribution channels
The greater opportunity than ICOs
An opportunity to mitigate an existential threat from
ICOs
 And to co-opt ICOs for venture purposes
A significant but relatively small piece of a greater
blockchain investment opportunity

10. Intelligent Assistants:
business lens
Establishing -> established technology within
both start-up and venture time frames
Platform ‘game of thrones’ remains to play out
Platforms have little or no interest in games (yet)
Both constrained and radically different interface
(and apparently use cases)
Few and limited experiments
‘Blue ocean’ stage

11. Intelligent Agents:
venture lens
No use case with traction, no apparent path to
revenue
‘True believer’ or ‘thesis’ investment
Only earliest stage investment
Pattern recognition with conversational
computing and related fields
Look for ‘proof’ (with platform endorsement the
base case) and other risk mitigation

12. eSports: business lens
Rapidly establishing sector
Third wave of start-up formation
Divides into:
Businesses with wide moats (e.g., teams)
Good business, but not high-growth, opportunities
Niches with ventureworthy prospects (with possible
exceptions of mobile & community)
Explosion of partnership opportunities
Too much capital?

13. eSports: venture lens
Hot sector, hot money
Specialist funds
Professional sports investment
Validate market & growth opportunity
Confer substantial strategic value
Distort, and perhaps destroy, early-stage venture
Too much capital!
Investment flows starting to channel in response to
gravitational pull of rapid increase in capital
Exit planning

14. Some Rules of the VC Game
VCs generally operate on 7- and 10-year time
horizons driven by fund cycles (not investments)
A common target is 10x return
Most VCs can make a good living in the 2x-3x range
Right and too early – or, of course, too late – is
functionally the same as a failed investment
VCs are often herd animals
Venture firms are usually partnerships. Suss out:
“your” partner’s standing within firm
if other professionals have games domain knowledge

15. Up Your Game
Play the venture game when you must, but
always play to win the business game
That would be your business game, starting from your
rules…
…and changing those rules as you go to market and in
response to your audience.
When you run out of money, VC rules rule
When there’s an opportunity that can only be
exploited by venture capital, it’s a negotiation
VCs know that they only win when the business
wins. Make sure you don’t forget in time of crisis.

16. Thank you!
egoldberg@crossover.com
[See also:
http://usa.casualconnect.org/content
.html?speaker=ericgoldberg]