Yesterday I was able to attend and speak at The Information Summit in Palo Alto. Below are my four main takeaways from the conference:
1) A Softbank World: there is a growing mistrust in the market towards Softbank. They said they would be passive long term capital, yet their deal terms allow them to effectively take control at a moments notice. With the WeWork drama, Softbank is very much in the spotlight. It will likely take 3-5 years before we can make a true assessment of Softbank’s investment methods, yet right now they don’t have the best reputation. I noticed that whenever the Softbank topic came up, the VCs spoke up quickly, the founders dodged the question, and bankers stayed silent.
2) IPO Market: founders have multiple options if they choose to list on an exchange (Direct Listing, IPO, SPAC). There is no consensus from bankers, VCs, or founders on which is best, as each financial instrument may be a better fit for some companies than others. The future of the IPO is still alive and well, yet the companies that list may be more mature (# employees, revenue, earnings) than we’ve seen previously.
3) A Founder’s Market: even with multiple public listing options, we are in the midst of a founder-friendly market. Many startups are choosing to stay private for longer while also adopting financial discipline by focusing on profitability & earnings vs just revenue growth. For investors, there are an ample number of options if they want liquidity. I think the Founder/VC relationship may see some strain as VC’s seek liquidity sooner than the Founder, yet this is ok and shouldn’t be seen by the market as a negative signal. In reality, it’s a win/win for the Founder/VC dynamic.
4) VC Asset Class: the venture capital asset class is undergoing further maturation thanks to an influx of LP capital, family offices, private equity, and secondary funds. This influx of AUM is causing the asset class to not simply take more moonshot bets but to focus on rational valuations for businesses that can pursue true profitability much sooner than 10-15 years out. This is leading to enhanced financial discipline instead of just focusing on “growth at all costs”. Through the debacles of Uber, Lyft, and WeWork, I believe the VC asset class will see real change in the approach to company building in the near term. We’re focusing heavily on this here at Konvoy.
Riot Games are the owners of League of Legends, which has over 20M DAUs and 100M MAUs. Over the past 5 years, they have been working on a variety of new projects and games. Riot Games employs more than 2,000 employees yet only 20% of the staff works on League of Legends, and now we know why. This week they announced the following:
1) League of Legends: Wild Rift: A new version of the MOBA built from the ground up with a twin-stick control scheme designed for consoles and mobile phones and a focus on 15- to 18-minute games. Due on mobile phones in 2020.
2) Legends of Runeterra: A competitive card game set in the League of Legends universe. Cards will not be unlocked via randomized pack purchases, Riot said.
3) "Project A": Described as "a stylish, competitive, character-based tactical shooter for PC," this sounds like Riot's answer to Overwatch or Team Fortress 2.
4) "Project L": "A fighting game set in the LoL universe" that's "in early stage development." Likely being developed by the remnants of Rising Thunder developer Radiant Entertainment, which Riot acquired in 2016.
5) "Project F": "A very early development project that explores the possibilities of traversing the world of Runeterra with your friends," as Riot describes it. Brief streamed footage looked reminiscent of Diablo and other third-person action RPGs.
6) League of Legends Esports Manager: A team management game that lets players manage a team of simulated LoL pros that sounds similar to the Football Manager series. Planned to launch with League of Legends Pro League support next year.
7) Teamfight Tactics Mobile: A smartphone port of Riot's recent autobattler game mode, planned for the first quarter of 2020.
8) Arcane: An animated series set in the League of Legends universe, planned for 2020.
9) League of Legends Origins: A "feature-length documentary" highlighting the game's growth, available now on Netflix.
1) Non-Endemic Brands: there were 75 non-endemic deals done in Q3 in esports, up from 43 in 3Q18. The quarter’s deals included major global brands such as Bud Light, Honda, Red Bull, Adidas, Louis Vuitton, and Starbucks, among many others.
2) Gaming / Cybersecurity / Robotics: the video game industry is expected to hit $152B in 2019. According to Bloomberg, that is more than what the robotics industry ($32B) and the cybersecurity industry ($104B) generated in 2017. The video gaming industry is also growing at 13.2% annualized growth rate, expected to hit $196B by 2022 (Newzoo).