The games industry remains one of the most prominent, and growing, entertainment formats in the modern world. It’s no surprise then that as more traditional industries shudder due to economic circumstances, many investors are looking to put their money into the more ‘bulletproof’ world of video games. There’s many groups doing so, and one of the most recent to be launched is Round Ventures, by gaming solutions company GXC.
Round Ventures was founded to deal with studios and game related companies already in business that are in a position to grow and expand their operations. To find out more about the perspective of investors we interviewed founding partner Rick Nahm about what the global outlook is on the games industry, how studios can appeal to investors and where he believes the next big market is going to be.
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PocketGamer.biz: I’m sure many of our readers want to know how they can attract venture capital to their businesses in the mobile gaming industry. Can you tell us what investors are looking for in this market?
Rick Nahm: Investors want a developer that isn’t just thinking about ‘the now.’ They want to see strategies and plans for future growth. The project should be scalable, and it’s best for developers to have short and long-term goals that show this. All of this does translate into a developer’s passion for their mobile game, which investors love to see.Team experience and being able to show early traction of the product are also things that can help getting investors’ attention. Of course, it’s important to have something the investor can either get their hands on or see in action. Just a concept on paper may not appear too attractive to a venture capital firm.
Where do you think the future of games funding is going? Do you think venture funds are going to be playing a major part in the future?
More and more smaller development teams are popping up, and they aren’t working out of well-funded studios. Tools like Unreal Engine 5 (and Unity) are making it increasingly easier for these talented teams to churn out viable products that look AA or even AAA, but they’re still missing the money and business expertise; the right partners to value add and evolve their amazing product into a complete consumer-facing experience and help them scale. Venture capitalists will be increasingly important as they will be able to fuel these teams and their core ideas to enhance their product and market them to the audience they’re reaching. Round Ventures intends to be a hands-on investor and not passive like other VCs.
Are there any properties in the mobile industry at the moment you would have chosen to invest in, if you had the option at the time?
We can’t look at the past but are very eager for the future. We have a few mobile projects we are considering at this time but can not disclose which ones. There are a fair amount of interesting games in the mobile industry that look cool at first glance but we like to do due diligence before investing. So we don’t just look at what’s out there and how shiny it is. We get to the bones of development, assess if the foundation is something worth investing in, and then make a decision. With that said, we know the mobile industry has tons of these kinds of opportunities we’ll be considering.
Which would you say is a country or region for investors looking to break into the mobile gaming industry to watch?
Though China makes up the biggest market share of mobile gaming revenue, ongoing changes to regulations on investors can make it a volatile market to try to invest in. There has also been remarkable growth in mobile game spending in the United States and Japan, as both countries have been outpacing China. We obviously will keep an eye on South Korea as recent years have shown a trending growth of at least 23% year over year. (please make sure that 23% pertains to Korean market growth) South East Asia and Latin America are also regions where we feel have huge growth potential. Luckily, we have good access points into these markets and regions, and feel we are in a good position to maximise cross border investments and business execution.
Have you seen any major shifts in the attitude of investors towards gaming in general, and perhaps to mobile in particular?
Mobile and console gaming are growing markets, and it’s no surprise that venture firms have been paying close attention. In 2021, investors spent upwards of $4.5 billion funding games at all stages of development. Maybe even more indicative of just how invested in gaming these firms are is that they spent over $3 billion in 2020, despite much of the world shutting down due to the COVID pandemic. It’s becoming a very competitive market, partially because it’s relatively easier today for a small team or even one talented individual to develop amazing looking, fun games than it was years ago. As the concept of the game developer becomes more grassroots, it opens up the door for smaller-sized studios seeking funding from venture firms.
How do Round Ventures make a decision as to who to invest in? Is it all based on their presentation or are other factors taken into account too?
We like to take a 360-degree approach when considering investing. First, what is the founder’s vision and the team’s track record? If it’s looking good, we move to the next step. Then assess the idea and market for the project. If we believe it’s capable of driving growth, it will pique our interest. Lastly, we look into the data. With modern analytic tools and our in-house solution G.Round, we assess if it’s a fit for gamers. If the community receives the product well, we are thrilled to consider investing. We take all of this into account and put it together to analyse whether it’s worth an investment or not.
One of your criteria for investment was that a company would already be making revenue, or that they would be close to releasing their first game. For the latter, do you look for any key signifiers that a developer is making a game that will be a big hit?
We think games that either bring new ideas or take an existing idea and make it fresh have somewhat a high chance of succeeding. We like to see developers try new things, even if it means the game might not stick at first. Because studios that try new things are the ones that move the industry forward. That’s one of our main markers for investing.
In terms of monetisation, is there anything your investors look for in terms of stability? Would they prefer more ‘traditional’ interstitial ads for example, or be willing to deal with companies that try more bold approaches to monetisation?
It strictly depends on the game genre and game design. Ad monetisation or other bold approach models that can maximise revenue and ROI are ideal. But they can not disrupt game play. First and foremost, games have to be fun. If ads are popping up consistently to the point where it disrupts the gamer from having fun, then that’s a huge miss. Round Ventures will look at and encourage various monetisation models as long as they make sense.
