600 million new "bullets", which Web3 gaming teams will a16z invest in?
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600 million new "bullets", which Web3 gaming teams will a16z invest in?
The blockchain game that ultimately attracts 100 million players will be an innovative, entertainment-focused game—an entirely new genre and mechanism that just happens to run on the blockchain.
Navigating Web3 tides with focused insightsNote: This is a整理 of a podcast transcript. The host is Michail Katkoff, and the guest is Jonathan Lai, General Partner at a16z responsible for game investments. The notes were整理ed by Cloudxgmf and 0xkapitalk, and authorized for translation and publication by TechFlow.
Jon's Background
1. Jon has always been a passionate gamer. He once ranked in the top 1% of his server in World of Warcraft’s arena mode and eventually sold his account on eBay for $400.
2. In the early days of Riot Games, he served as a product manager, building and delivering the "Riot API," which supported companies like Overwolf, Curse, and Twitch.
3. After Tencent acquired Riot, he joined Tencent full-time, focusing on hybrid publishing, business development, and investments. They launched WeGame, the primary domestic competitor to Steam in China. He also led Tencent’s North American gaming investment team and collaborated with companies such as Epic Games and Discord.
4. Joined A16z three years ago, focusing on game investments including Roblox, Singularity 6, Overwolf, and RTFKT.
About Games Fund One
1. It represents A16z’s long-term commitment to the gaming industry over the next decade-plus, through bull and bear markets, technological cycles, and market shifts.
2. Doubled the size of the team by hiring talent from Twitch, Discord, YouTube, and other platforms. A16z also has a strong group of functional experts who provide value-added services in GTM strategy, business development, fundraising, and talent acquisition.
3. Focus will primarily be on seed and Series A rounds, but if portfolio companies are progressing well, Games Fund One will not hesitate to double down in future financing rounds.
4. Games Fund One boasts influential LPs (including founders of Roblox, Discord, Riot Games, Blizzard, Sky Mavis, Twitch, Zynga, and King). Portfolio companies can receive further support in:
1) Managing their virtual economies;
2) Connecting with Twitch streamers;
3) Performance marketing;
4) Testing your game;
5) Providing functions similar to traditional game publishers—without any standard commercial or revenue-sharing agreements.
Verticals of Focus for Games Fund One
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Game studios
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Platforms (gaming x consumers)
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Infrastructure
Macro View
Games began as single-player entertainment products, then evolved into “online services, virtual worlds, creator economies, and social platforms.” But the best is yet to come—with more innovation than ever happening in Web3, the metaverse, AR/VR.
The Game Tech Stack Has Multiple Layers:
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Hardware
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Infrastructure layer (e.g., game engines: Unity and Unreal)
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Application layer (e.g., games themselves)
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Consumer layer (e.g., Discord)
How Does A16z Choose Investments?
Founders vs. Ideas
When Jon was at Tencent, they had a 100-person team (the Game Evaluation Center). All were highly intelligent and skilled gamers whose main job was to play every game thoroughly and write detailed reports. Yet they were wrong about whether a game would succeed 95% of the time—games like PUBG, Fortnite, and Auto Chess caught them completely off guard.
The key component of a successful company is how teams adapt creatively and respond to shifting game genres. Great founders and teams can adjust to market changes. So what makes a founder great—and how do you evaluate them?
New Teams vs. Experienced Teams
New teams excel at product innovation. As the saying goes, “new calves aren’t afraid of tigers”—they have no preconceptions about what is or isn’t possible. The key here is to observe their progress and speed.
1) Do new teams make mistakes? But more importantly, can they learn quickly and fix them?
2) Can they stretch one round of funding to build multiple prototypes?
3) Does this founder have recruiting ability? (For example: Zuck was a first-time founder but managed to recruit Sheryl Sandberg as COO of Facebook.)
Experienced teams (those who’ve shipped games before) know what they’re doing—they’re strong at hiring, fundraising, and product execution. The key question is whether they’re willing to learn new things or stuck repeating old formulas, and whether they can adapt to startup environments (given many previously worked at large studios/publishers).
For example: Since they no longer have access to the infinite internal testing resources of their former studio/publisher, if they previously made AAA games, do they still play the kinds of games people are actually playing today?
How fast is their creative output? Do they have a GTM (Go-to-Market) strategy?
Macro Perspective
A16z is a long-term investor—the market cycle does not alter their investment strategy. The gaming industry is better positioned to weather economic downturns/bear markets. Jon believes gaming is counter-cyclical. Why?
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As people’s incomes decline, they have more free time to play games—games are the cheapest form of entertainment.
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Games are also an excellent way to maintain social connections.
So in Web3, regardless of the current bear market, A16z remains bullish long-term because they believe it represents the next major evolution of the internet. Jon’s personal hypothesis is that Web3 will ultimately become a technology stack that is part of every game long-term—just like cloud storage is now a core technical component of every multiplayer game today.
What Needs to Happen in the Short-to-Mid Term for Blockchain Games to Be Accepted by Players?
The blockchain game that eventually reaches 100 million players will be an innovative, entertainment-first game—a new genre and gameplay mechanic that just happens to run partially on the blockchain.
Jon’s personal view is that this won’t be a P2E game where people join primarily to make money, as many expect. Instead, it will be a game that’s simply fun to play, with some components running on the blockchain (such as trading NFTs). Revenue may come from players who, after mastering the game, choose to sell high-level weapons or rare skins to others.
If you went back ten years and asked investors what the most successful mobile game would look like, no one would have imagined something like Pokémon GO—where people walk around in real life using AR technology to catch digital creatures.
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