Written by: Robin Guo, Game Investor at a16z
Compilation: Deep Tide TechFlow
Game venture capital is an emerging field, and VCs need to use different methods to find entrepreneurial projects and make investment decisions. In this article, we'll look at the author's one-year experience and lessons learned at a16z, as well as the different factors and approaches a VC needs to find investment opportunities.
**Indicators > Team > Creativity. **No matter how many genius insights you have on a certain market, if a startup is growing rapidly, everyone will know that strong user retention, high growth rates, and high volume of deals are indicators . The tricky part is sorting out a sustainable game from a blip.
After metrics, we look for great teams (production, design, technical and artistic). They can be 2nd/3rd time entrepreneurs, executive producers of great games, young founders...they come in many shapes and sizes, but teams and people are at the heart of great companies .
An important point: Early ideas don't matter that much because companies often make transitions . Slack/Discord started out as an MMO video game, Twitter is a podcast app, and Fortnite is a PvE tower defense shooter. However……
Step into the maze of creativity. Product ideas are not as important as the process by which founders explore details to arrive at an idea . Have you thought deeply about your audience, backend, GTM, core game innovation? This is an assessment of the generosity and depth of the founders.
Have you picked up some secrets from the industry that could give you an edge over the competition?
The best VC investors are right there with you in the maze, pushing you to dig deeper and beyond your level of competence.
VC is a self-motivated and entrepreneurial profession. How to find investment opportunities? How to create a market map? How to build a brand/reputation? These methods are not immediately obvious. Game investment is an emerging field, so it requires a lot of thinking on basic principles.
At the end of the day, there is only so much we can control, and we work hard, commit, and support entrepreneurs moving forward. This is very different from a consulting firm, where every project, every day, and even every page of a presentation is structured and framed.
VC is about finding the truth with incomplete information.
Startups fail for many reasons: co-founder disputes, marketing issues, product execution issues, and more. This is different from the public markets, which have clear margins/ARR/cash flows to evaluate and construct DCFs. This risk has been priced in.
VCs need to find truth through other means: founder references, market arguments, competitor data mining, etc. These methods do not guarantee success, but they can increase the odds of success in investing.
There are many ways to win investments. Every VC has different preferences, biases and strategies. Retention rate, LTV/CAC, founder profile, valuation, etc., each VC values them differently. Just as there are many different types of founders, there are also many different types of VCs.
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