Over the last few months, we have had SPACs reach out to Konvoy to ask us for our opinion on which late-stage private companies in video gaming would be good targets. In those conversations, it’s becoming clear that the sustained presence of SPACs is going to be a new competitive dynamic/issue for late-stage VC and PE firms. This will likely have three effects: 1) companies staying private for shorter (not longer), 2) near-term price inflation before it corrects, and 3) late-stage VC will likely start looking a bit earlier in the life cycle of a company. Either way, the proliferation and staying power of SPACs is great news for early-stage VCs.
In video gaming, I fully expect companies like Discord or Scopely to entertain the SPAC route. As you can see above, there are 388 active SPACs with ~$123B in trust that are looking for targets. Also, it’s worth noting that the video gaming industry in the United States expanded ~24% y/y in 2020. Given that video gaming sits at the intersection of 3B global consumers, technology, and growth; I expect many of these SPACs to find targets in the video gaming space.
In video gaming, there is a plethora of game genres such as First Person Shooter (FPS), Multiplayer Online Battle Area (MOBA), Real Time Strategy (RTS), Role Playing Games (RPG) and many more. One genre that has been gaining more traction the last few years is Survival. Early versions of this were games like Eve Online or Everquest and more recent ones include Rust or DayZ.
Many games in this genre often include a gameplay aspect called “persistent world.” Essentially, it mimics the real world in that the map and virtual world keeps going even when you log off. For example, If I build a base during the day, other people could potentially destroy it overnight while I’m logged off.
Recently, I’ve been playing a fair amount of Rust and actually just tried out Valheim (watch on Twitch), which just hit 5 million players on Steam. I have two observations on this theme of persistent worlds:
1) Incredibly social: Building in persistent worlds is incredibly social and fun to do with friends. It has the benefit of being pretty uneventful most of the time (relaxing, social, conversational) followed by moments of high intensity (fighting other players in the hopes not to lose everything you’ve built). I expect this genre to expand and attract even more developers, players, and monetization opportunities.
2) Economic expansion: As virtual worlds continue to mimic the real world, there are increased opportunities for various business models, services, and marketplaces to essentially replicate into virtual economies. We have already seen this with various in-app-purchases, cosmetic items, or even the purchase of digital land. I expect this market to expand dramatically in the coming years and I’m confident there will be many fantastic opportunities surrounding this theme.