Transcript
Speaker: About real money gaming, the only gaming successful outcome in India. It's just that the sector for me was too great. We never invested in RMG. India has millions of PUBG players. So why haven't we built a PUBG of our own? Anuj Tandan has spent over a decade trying to figure that out. He started his own game studio in India and later led investments at Krafton, the company behind PUBG. Today, he's a partner at Bitcraft Ventures, a fund which manages over a billion dollars and invests in gaming.
Speaker: AI, and interactive media. On this episode of Founder Thesis, Anuj sits down with Akshay to break down what India is missing and what it would take for an Indian game to make it big worldwide. What are your red flags when people are pitching to you? Things which, like, turn you off. Most recently, it is seeing all those cloud -built pitches. It's an orange flag for me. massaging the data then you have lost the trust even if you are an amazing founder
Speaker: Anush Tandon, welcome to the Founder Thesis podcast. ah You are a partner at... Bitcraft, a fund which invests in gaming and elite. domains you handle emerging markets uh would first of all ah like to know more about bitcraft itself how big is the fund what is the investment thesis. What spaces do you invest in?
Speaker: Thanks. Thanks for having me, actually. I think... ah First things, a bit rougher. almost a I think more than a billion dollars asset under management, the last one I checked. Uh,
Speaker: um as a fund. And how old is the front? What's the pedigree? Some background? I think ah seven years now. We've been ah six seven years that we have been investing. We have... ah Two.
Speaker: main strategies. ah from an investment perspective. One is our equity investments. um which is in which we break down into or different segments but we do ah we take up equity stakes and then we have...
Speaker: a token fund which also takes up. Well, uh... you know, web three beds and and token So those are the two large strategies within the fund.
Speaker: What's the AUM split between these two? ah Probably around 16. 70 % would be equity and 30 % would be the Yeah. Approximately. Yeah, yeah.
Speaker: so so So that's the large sort of, it's it's not like we just hold over. It's a different strategy that goes towards AI, crypto. Uh, blockchain It's a separate fund, separate team that manages that that strategy. and within the fund we have an equity team which manages the
Speaker: the equity investments, which is largely into three. main segments. One is gaming. Yes, it's it's ah it's it's a part of our... pieces, or our ah we do believe and in that, it's around ah typically 40 % of our investments.
Speaker: uh are in the gaming Oh. Oh. sector, ah or another 40 % is around applied giving mechanics. ah which is basically consumer AI apps. think of.
Speaker: stuff like Duolingo. ah Or, uh... say, this chord. ah which would come into this sort of category. and uh Then we have 20 % which is platforms and tech, which is... something like an Epic Games.
Speaker: would be part. which is a platform for building. ah you know, Andrea Lingen. or things like that so so that's our uh, focus thesis and like i said the the crypto team which all the about the web3 team has a very focused blockchain uh yes right ah You're part of the equity team.
Speaker: Yes. um as as part of Oh. the global. fund i'm part of the equity team taking care of pockets like India. Middle East. Okay. So. ah You know, I want to kind of understand the value chain. so ah You said the Epic Games which makes the Unreal Engine.
Speaker: As... one and then there are of course gaming companies and you work with Nazara yourself and and There are game studios and... um There are game publishers. You know, for... Someone who's not from this space, all of this is...
Speaker: Like... It's hard to differentiate who's what, who's doing what, how is the value captured? What does that value chain look like? Can you take me through that first? Sure, up of course. I think that's a great question. People need to sort of understand.
Speaker: the the ecosystem. as such first and then maybe ah we can go a little deeper on few of those. I think... ah from a fundamental perspective, um If you look at gaming, I don't macro level it.
Speaker: ah You have... the what we called as the traditional gaming which is the pc console gaming in which you had the hardware manufacturers which created uh you know the hardware for these companies to be played on which was the consoles and the of the software developers which are the gaming studios which created games Right. And I'm talking first about the AAA market or or the. um PC console gaming market, which we we would say was pre -2000.
Speaker: uh... 10 one of the largest segments or so still is one of the leisure junk software. Oh. gaming industry but it was more old uh prevalent that's how the industry started So and a AAA game would be like, say, a... Grand Theft Auto.
Speaker: Yes. kind of titles that people wait for a release and extremely graphic intensive big like a multiple gbs ah which you download and install and play Typically yes, but I would not just call it from a graphic quality as the barometer for judging a trickle a game it's also the cost input cost is a large factor people ah how much time and team size and that that people spent in creating
Speaker: Oh. uh games which typically these games have large multi -million dollar budgets uh under the parallel to that would be Oh. Hollywood movie franchises.
Speaker: ah like a Marvel franchise or or something like that, you have... large budgets input costs And then you expect that to outperform on the box office or in this case gaming sales on on pc console and different platforms Uh,
Speaker: as an output all right so so if you're spending a billion dollars as supposed for a game which is very massive but smart both those are not the typical budgets it can be it's ah typically smaller you generate an 5x or 6x outcome in the next three to four years and that's how you sort of make money and this and the value chain these are this is a game developer if someone is helping you publish that game or distribute that game.
Speaker: Um, again drawing paddler tool the movie industry for better understanding that would be the publisher or the distributor and they will take a cut ah from the...
Speaker: for for the helping. sort of distributing that game. So that's the typical value chain. and Give me an example of a game developer and publisher relationship, like a real live game in which so -and -so is the developer, so -and -so is the publisher.
Speaker: To be honest, I mean, I can give you an example from ah How? perspective of mobile gaming, right? so Uh, you have one of the largest game publishers is mini clip ah which is so which you know you have a carom game suppose a carom game on mobile up That is, say, for example developed by a local studio in India.
Speaker: right but it's published by mini clip across google play and apple app store that means they are doing the you user acquisition spend they are doing the Oh. uh the marketing associated with it. They're taking care of the server cost.
Speaker: for example. But it is being developed by a certain studio that that is building the graphics, the gameplay. the live operations they are doing it. So in this case,
Speaker: ah that studio will get a percentage cut, will have a certain deal. There are different business dynamics on on how this sort of relationship works and it's very dynamic.
Speaker: ah as ah as a process. so I'm assuming the publisher... Has... More. value capture. because they are different getting the users. and monetize they're running the monetization.
Speaker: Yeah, I mean... Yes, and more in some cases like in console, yes. uh the developers have more power and publishers also in some cases have more powers how you do the deal uh in in say pc console a lot of the platforms have the power like like for example uh sony playstation if if they're doing an exclusive deal with you.
Speaker: uh... for well launching a game on their new PS5. they would pay you an exclusive lump sum capital and then development cost and they would then make sure they have the economic interest aligned. to to make a return. uh similarly for mobile games the more power is with you know uh how much who is doing the user acquisition or marketing whoever is doing an we are you know holding that cost.
Speaker: uh on their balance sheet and spending they will hold the economic and most likely they will hold the economic advantage in the in the contract But this is a very dynamic process. it's It's very interesting when you're sort of on both sides. And I've been on both sides. I've been a publisher and I've been a developer and how the power dynamics.
Speaker: sort of change as an operator. it's it's it's ah It's a fun exercise, so to say. You've been a publisher and when you were at Nazara. I was, yes, and I was also ah worked for... a Chinese public listed company.
Speaker: yuzo games uh which was publisher of IPs such as Game of Thrones globally. In India, we published a very, very famous Ludo game.
Speaker: ah which was developed by others. ah and then taken internally. So there it's so it's a... pretty much like a dynamic. And I'll see you. what you can do and you can acquire games you can acquire studios for example uh recently uh Krafton, which is one of India's our largest gaming companies.
Speaker: originally from ah South Korea, but now in India, they are probably one of the largest movers and shapers in the market. They a acquired this company called Nautilus Mobile which was... building a cricket game.
Speaker: called Real Cricket. So in in this case now the publishing is with Krafton. But they also a acquired that asset because they feel that, you know, we need to have the entire value.
Speaker: out of the value chain. Okay. Uh, Krafton is what? Is it a publisher? or is Is it a... developer or it does both like I think it does both. It it was ah it was the developer for... ah Bumgee.
Speaker: Oh. and BGMI and it It is publishing. in certain markets. that's uh different games so it everyone tries to In my opinion, you you sort of...
Speaker: don't remain a pure developer if you get success from your IP. You also would want to get into publishing at some stage based on their strategy. Some people do decide to be, okay, I'm not good at distributing. I'm just good at building games.
Speaker: some stick to that their core skill. But. But like I said, like in the movie industry, there is an element of heat. it based as a business. So if you can... developer Good hit.
Speaker: can you develop the next big hit is is always a question. when you're a studio. So you want to sort of diversify the value we chain. So for Krafton, the hit was PUBG.
Speaker: Yes. And... ah ah How big is PUBG? Is it still big? like How much revenue does it generate for them annually or some numbers you can give me? like I think they they have a... They are a public company, so that's publicly available data that they have. But what I understand is as ah as a franchise,
Speaker: probably close to in its life cycle generated more than N billion. i'll zoom Wow. but So, I mean, don't quote me on it, please. hang and like like This is an estimate. yeah Estimate number, I would say, lifetime value of the franchise. Amazing. it Okay. And that game really made Krafton. So, PUBG would be a AAA game? What would it be?
Speaker: Yes, absolutely It's a triple A game. Okay. And it's transported well across formats. It was a AAA game on PC. And it... transported itself into mobile. So Usually, when I said what the large part of the industry earlier before 2010 was AAA console, one of the largest segments now in gaming is mobile gaming. which is very different and which has all these new different elements that they introduce free,
Speaker: ah to play with ads, free to play with in -app purchases. uh you know subscriptions all of these sort of monetization ah sort of experiments and and success in these ah came really with the smartphones and and that becoming a viable gaming platform.
Speaker: ah for a lot of lot of companies. and And very few games and companies have been able to transform from their traditional uh sort of triple -a gaming for console pc too to mobile Because mobile brought in and a lot of new...
Speaker: ah entrepreneurs building successful companies, something like a supercell, something like ah ah and from an India perspective, play simple. ah which ah which sort of became very successful in this. the specific field I created.
Speaker: ah billions of dollars in enterprise value. Wow. Okay. Uh, So besides AAA, what are the other game categories? and so I think AAA PC console gaming than you have as a segment. You have ah the indie indie developers, which we called, you know, there's a massive... Gaming is also a passion project for a lot of people, built built out of real love. when they create It's a creative outcome outcome of a lot of, ah you know...
Speaker: people who create uh new want to create new concepts and and give their creativity a vision and and interactivity and and in that sense ah independent developers who whose platform of choice usually a steam ah steam on PC That is where a lot of games
Speaker: AAA, AA independent developers ah sort of meet. Then a separate segment and which is sort of transformed into ah this separate platform as mobile gaming, like I said. And mobile gaming also has you know free -to -play games. um Completely free to play, free to play. through in -app purchases that is the has paid elements.
Speaker: Then you have ah paid games where you pay a certain amount of upfront cost. uh and and you were able to play the game so there are different elements to it but those two would be the large and i think there is what we called In gaming, there's a third segment, which is the e -sports, which is basically a lot of these games are multiplayer games are in a competitive format.
Speaker: and when they're in a competitive format. ah you sort of um are able to play Um, Compete. and and people love to watch you compete and that there is an ecosystem mini ecosystem created within esports.
Speaker: And... Your initial question was, what is the value chain? off off Awesome. of gaming i think the largest value chain um of the people who hold most power are the people who create successful hit franchises gaming franchises right a court of duty uh the FIFAs or EAs of the world which has been which owns and creates
Speaker: uh or or cross tones of the world which has created pubg right The other value chain is the guys who are able to build a massive amount of distribution.
Speaker: mode as their network. some Someone like us, say, uh tencent which owns uh say wechat in china and that's a huge leverage they have in terms of user base that they're able to become a very large publisher.
Speaker: ah and and then they become a choir as well but that they they own a lot of uh we have a lot of power, then then the hardware manufacturers like Sony and Xbox, they are Uh, there. in a way a duploy of of of uh owning consoles right and and then the storefronts I mean that is the most important aspect.
Speaker: People forget Steam, Apple App Store, Google Play. These are the gatekeepers in ah in a sense for... people to access a lot of the digital content. They have massive.
Speaker: ah powers And then you sort of start coming down, you know, the indies who are trying to break through, build an audience. Then you have the esports. um esports in in this entire equation sort of thumbs. has the most impacted number of users.
Speaker: but in terms of monetization Probably. uh There are elements. which are least impactful in terms of value creation or in the value chain. So.
Speaker: ah So that's that's the overall take of the industry. Okay, so Steam is like a... It's like a store where you buy individual titles or is it a subscription service to a buffet? Kind of a...
Speaker: so So it's like a storefront. they The monetization model is not an issue. You can buy, you can... play for free you can do subscriptions whatever it's like an apple app store but for pc console game So not console, just PC game.
Speaker: Be seagiving. Okay, okay, okay. And then there is this casual, hyper -casual. So these are within the mobile gaming. space. yet mostly casual gaming is done on mobile it's uh but there are it's not to say that there are not casual games people play on on their laptops which is through say uh you know platforms which you can Just log in and play casual games.
Speaker: But... ah what I'm trying to say is, usually casually gaming the massive audiences on smartphones. Got it. Okay. Okay, okay i understood. so ah
Speaker: Now, you said the hit game makers, they are the ones who have the maximum value. Franchise creators, legacy creators. okay yes In my opinion, and and the platforms. like like people who like team and steam and and people who create games like unreal engine which is ah used for creating games or Unity Engine.
Speaker: they also have massive leverage because you're using them as a software tool. to build gates and if there are millions of game developers. Out. And this is something...
Speaker: which is sort of also being disrupted by AI. a lot because there's new sort of technologies and innovation coming which is sort of changing the game development lifecycle.
Speaker: Okay, okay, okay. ah Who owns Steam? Or Steam is a company by itself. it's valve owns uh corporation on steam So Valve is a game studio which also owns a publisher.
Speaker: which was a game studio, I believe, and publisher, that's one of them. built this platform. okay and you worked at Nazara what is Nazara is it a studio is it a publisher what is it I think the best job which we describe as a riser. conglomerate.
Speaker: Oh. which has of multiple Assets. ah Rolled up. in into Oh. into or corporation.
Speaker: as a conglomerate. And those sort of... have different functions like you have an esports company stake they have a gaming studio mobile gaming studio they have a pc publisher.
Speaker: They have a Kills Entertainment app. they they have They have these multiple assets. And Nazarez. sort of a conglomerated. holstam To be I thought.
Speaker: But and they also must have... had one hit, right? Typically it's one hit and then you scale we beyond that one hit. So what was their one hit? i I... I think... ah That's not a cycle which Nazara followed.
Speaker: up So. I think Nazara ah from its ah Inception was a What's up? gaming company that dealt with telcos. more sleep. If you remember in 2000, the mass days.
Speaker: You wanted services in it. transformed itself into a game publishing company more than a game development company with two old studios that produce ah ah games and create games.
Speaker: but they didn't have a trajectory of a you know initially having a massive IP or a mobile gaming success. or at a global scale and then sort of building on top of it. They had multiple smaller successes.
Speaker: Oh. relatively. And. and the went on to become more of a Oh. like I said, a conglomerate, which sort of have ah acquires different assets and sort of...
Speaker: rolls them up. into one one entity of course there's strategic um sort of synergy across them. but But that's the business model that they sort of opted for.
Speaker: and then there are parallels for that it's not like this is unique to nazara there are parallels to that in the global markets you know you have uh global companies like mtg still front that did the similar thing in global markets.
Speaker: and Raza Rafon wrote that playbook. So would it be right to say that a game studio's mode is...
Speaker: creativity, visual designing, etc. The publisher's mode is data. They understand how to Uh, get users through smart data analytics to reduce the cost of acquisition basically they they have enough data to reduce cac to make it worthwhile and how to sweat the game to increase the lifetime value. That's what a publisher does.
Speaker: And ah would that be correct? And the studio is the creative brain. ah which can imagine a game. I think... ah If I have to give you a more nuanced take it will go take a at least a one -hour conversation or what a gay pub does uh but but yes too if you if i want to dumb it now yes that's the essential of it where the studio guys are the creative brain like you said but they're not just creating great visuals It's an element called create making
Speaker: it. interaction fun. It's creation of fun, which is very difficult. what an audience have oh wow this was fun the last let's i spent on this it put me on the edge it gave me different type of emotions a lot of to do with consumer psychology
Speaker: a creation of fun experiences that's what the studio does and yes a publisher would be more data guys okay i need to run my server at this cost i'm going to acquire user at this cost so that i'll make profit out of it Okay, I need the developer to build this feature so that I can make more money. blah, blah, blah.
Speaker: So publishers would also understand monetization, that whether to run ads, whether to do in -game apps, in -game purchases. A good publisher should understand monetization. I mean, if if you don't understand monetization,
Speaker: Probably another good publisher. Okay. ah Tell me a bit more on monetization. like the ah When you decide you want to monetize through ads, Is that like a... platform that you just plug in and it starts serving ads or how does it run?
Speaker: Of course, there are self -serving platforms. that are multiple ways but I think it's not as simple as every so I think what people fail to understand, gaming is very, very...
Speaker: deep like you have different sub genres of games like for example a shooting game or a or a survival game or a casual Candy Crush. will have two different expertise.
Speaker: ah someone building or monetization loops for a PUBG would have a different complete expertise than someone building monetization loop for a casual game. like a candy crush very different audiences, very different economies, very different people who played these kind of games and very different things that make them tick
Speaker: or either of these. For example, if if I were to give you an example, I want to put an ad in the game and it's a casual game. It's an experience where I play a level based game and I'm shooting bubbles, making bubbles and and the next level comes.
Speaker: uh where do i put if i have to earn a certain economy say if i have to earn 10 keys to unlock the next level if i want to get 20 keys to give it another shot maybe i'll put an ad over there.
Speaker: that watch this ad ah And you get 30 keys instead of 10 keys and you can play the level twice. We have two attempts to solve the next level. Now, That for example can be done much easier in a casual game.
Speaker: than say, a PUBG. or or or our a BGMI. in that aspect. That will be very difficult to to put it because it breaks the flow of experience so that's where the key in design skill comes in like how much can I push the user to have fun.
Speaker: without it being spammy. than ads. So you integrate with the ads company, you guess there are self -serving platforms, but where to put that ad? and how to get that experience right.
Speaker: uh is the is the tricky part. And these ad companies would be, say, like an Inmobi? Yes. And then we'll be Google. Metta. I'm loving it.
Speaker: Okay. Okay, okay. Okay. ah ah Typically, AAA games would not be ad monetized, right? They would be like a pay -to. like you up front payment to play. I mean... AAA is a game, like I said, it it does not just define on the... business model it is defined on the input cost the quality the the time taken for something Now, if I were to do a AAA game on mobile,
Speaker: um um And my... mean um sort of thesis as to uh built deep monetization loops ah that follow for users who are willing to pay me all up to a thousand dollars over a period of next three to four months. And typically, I would not spam those users with ads.
Speaker: i would I would rather... Build more engagement more core gameplay and try to extract money from a user. Who is more engaged in having fun?
Speaker: to other meats. through in -app purchases through other things than ads so yes but it's not a cardinal's rule that will not have. Add photo to click it. Okay, okay. Got it. and ah in -app purchases are typically like merch or like a skin or Like vanity.
Speaker: This is not just vanity. It can be content of lots. Like you can get more. content. to play if If it's an app purchase, you get... like skins like you said you get in -game powers ah which can make you or more powerful in a certain game that you can unlock. uh through through in -app purchases or what typical people use is timers basically up
Speaker: If I want to play a certain game and it's not letting me unlock something, I have to wait for 24 hours. If I don't want to wait for 24 hours. people just pay me something.
Speaker: or you don't want to wait. Get out. up. is um which doesn't work typically in markets like India because India is a Time heavy. Oh. cost.
Speaker: uh conscious country but works in US and Western countries really well. Got it. Okay. Okay. Understood. Now, the other thing that you invest in, you said is applied gaming mechanics and you give examples of do it and go and discard.
Speaker: Um, So Duolingo is essentially like... Gamification of. education or learning, giving back learning in a way. Exactly. So ah gamified ah consumer...
Speaker: products would be one category that you invest in. Yeah. And also interactive media, something like a microdrama, which ah learns a lot from Um, All right.
Speaker: sort of gaming, ah from from you know consumer loops to building engagements. is also a different media format but it is interactive in a lot of senses.
Speaker: Okay. Okay. And you said Discord. So Discord is... Like... ah Social media platform. Gamer engagement or... Okay. It's a social media platform. specifically targeted four gamers initially but now it's Aura. broader use ah But yes.
Speaker: It is for basically keeping your community. Anything to do with, you know, community because when you build a pretty decent game you have a pretty you know active community that is uh gamer communities are are very outspoken very very uh expressive about what they like and they don't like. keeping that community together so that you know you are able to have very good players for your games for a long period that's That's how Discord was sort of born.
Speaker: Okay. Got it. Okay. ah ah So what are... ah And the third is platforms and tech, which is... uh, Like, uh... Give me some examples of platforms and tech.
Speaker: mdl Unreal Engine. alarm. Yeah. it can be ad networks as well it can be sass tools for for uh gaming companies or interactive consumer a ai ah things.
Speaker: Okay. So give me some examples of like flagship investments you've made over your career in these categories. Sure. So I think From Mo. ah gaming perspective. Oh.
Speaker: we when I was Before even Bitcraft, I was in an investment gold with Krafton. actually. ah We invested in... game streaming platforms. We invested in esports. Not win.
Speaker: uh was uh one of our... my investments than knockless. ah which were eventually acquired by Kraft and was one of my investments. ah We've invested in a couple of gaming studios through BitKraft as well.
Speaker: ah ah in which I've... One is a company called AeroKlippen. mobile gaming studio in in bangalore another one is a very strong team out of bangalore it's called chaos engine labs they are still early but like i said nautilus in game publishing in middle east and invested in tomatum ah which was which is again going on to raise another round.
Speaker: in in the future so these are some of the investments that we've done as a firm I think... Some of our... uh Lodge ah investments in gaming is, you know, up ah companies like Circle, which is a Turkey based company. Oh. invested out by Jasper, my partner in the U .S. And we have other different uh give gaming companies. globally, which which which is in mobile and in PC console.
Speaker: So, These are some of the companies in content space. What we say is content. Then you have, you know, ah the consumer AI. stuff. ah We have a company in India called...
Speaker: go uh stock group which was a investment advisory firm started off as gamified investment advisory but now Well... purely moved into investment advisory and gamification.
Speaker: gamified illnesses. uh we have uh cuckoo uh ah which is I invested back then as well in Crofton. we have invested again in Bitcraft. uh there is a company in consumer ai which we call as a friend which is dating and gamification which I invested.
Speaker: Uh, And. I would say. platform wise you know loco was a game streaming platform that i invested in We have invested in a company called Actioneer.
Speaker: through this font which is a sass Uh... know for the AI. generation. so i mean i can give a list of intact portfolio vote but pretty poor.
Speaker: Why would you invest in a studio? It just seems like the riskiest bet is a studio because A, it's a hits -driven business. and be they are not necessarily capturing the real value of monetization because the publisher is the one who captures that monetization value.
Speaker: Not necessarily. A lot of game studios also become publishers themselves. Which is like after they've got some success as a publisher, right? As a... creator as a game studio as a developer then they would become a publisher right Yeah, so... they typically would want to first publish themselves for example play simple is an example right it's a half a billion dollar an exit by mtg now going public in india they did but They build the entire games themselves and publish themselves.
Speaker: uh so so Oh. they they are an example of of of studios being powerful and successful so Yes, I would not disagree with you that investing in gaming studios is probably the riskiest asset. And if you see in the last two to three years, it's not just BitGraph, it's globally across all gaming funds. ah People have sort of... ah not been doing enough.
Speaker: Uh... gaming studio investments that they did in back in 21 to 23. you know, when there was a huge content demand. I think largely because of the market is also realizing that there's an oversupply of content.
Speaker: uh the tweet which was investor act. I'll... insane valuations at and in that time due to the euphoria of the covid etc and which is sort of The market is correcting itself. where where you know There's lesser studio investments. So most of the studios that... I would invest in would have distribution chops.
Speaker: a very strong restriction channel. jobs and usually I would not invest. say, in a PC gaming studio in this market today. Um. it Having said that, it's not necessary that will not be the case next year or how the market changes. But yes, you're right. If I were to invest in gaming studios today,
Speaker: It'll not be a PC gaming studio vector. I will have in my portfolio at this point. it will be mostly mobile and people who are building ai native gaming and have very Good.
Speaker: edge in distribution. So in general, PC gaming is coming down as compared to mobile. our mobile is growing much faster. I don't think it's coming down from a consumer love perspective. It's not coming down. I think from an investment perspective, I've seen in the last one or two years, it ah there has been a correction. off. in investment into ah PC gaming. I would also say the model has staged i don't think it makes sense for a venture firm
Speaker: to be investing in a PC gaming studio. today. I would rather um Um, think of that as there are different options of getting financing.
Speaker: ah whether it is project financing publisher advances whatever that works But I think venture firms want to build companies which are generational, which are able to sort of build companies or invest in studios which have...
Speaker: a different mode And that is sort of. Oh. come down in the last one year at least. globally. Absolutely. Why not? ah like a PC gaming studio. ah I mean, why not invest in a PC gaming studio? Yeah yeah yeah.
Speaker: I think... ah as ah as a financial investor who ah We have not seen... a effectively across the board. massive returns being generated. of by investing in PC companies. This is not just me. I'm speaking as a market.
Speaker: Enthusiasts ah i We have not seen massive returns. Having said that, I'm not saying... Well... that's not the case i mean we have a very interesting company called core which is building a Very, very...
Speaker: world -class AAA. Uh, Yeah. you know, extraction shoot again. ah and and that's got immense potential. but Finding these kind of deals are becoming or wearer.
Speaker: Um, in sort of you would find one of these deals very good deals in a year So. if earlier you were doing five peels a year in Sonoff in 2001. 2021 to 2023, you would do 1 deal a year. so it's coming down from a from a market connection perspective not it's not like completely out of flavor.
Speaker: So there's a little bit of an oversupply problem over there. Yes. Okay, got it, got it, got it. Okay, understood. um the I want to understand the game streaming like a loco.
Speaker: ah kind of a market Um, I think other than Twitch, no other streaming platform has really taken off, right? Yeah, I think ah ah local...
Speaker: ah and game streaming as such. um had a lot of You know? cost structure issues where you know you know how do you sort of compete with a youtube or a twitch Oh.
Speaker: for ah for getting an audience Bye. I still believe that loco um as an asset ah was a very ah useful asset for a market like India which sort of a...
Speaker: you know, kickstarted the ecosystem of esports. Uh, it it it was a good uh... sort of a return for crafted as well in terms of an outcome.
Speaker: of ah I would not say... the best but But it it did what could. was we were number six. So was it acquired? I'm not aware of the exit.
Speaker: Hope it works out fine. Here's a quick. Bye. Well. I mean, there are they did declared it. I do not know the exact name. needs to prostrate post But they are doing well in other emerging markets such as latter now. Uh,
Speaker: as far as i understand so it's it's not an idea which is sort of not unconceived or from a venture returns perspective. I think it's still a viable idea of of of building it. I think there were structural issues and in in ah in the Indian market. It was too early probably at its to its time. I think a lot of these markets are very important to tying them correctly. For example, a similar...
Speaker: asset called Faceit. Uh, in the UK got a massive exit. Um, My sound is. So it's it's all... It's all wrong. A lot of macro factors are there.
Speaker: when when it comes to Market Slippies. startups like these so You know, the what is the India market opportunity? Because generally India is seen as a Daofang.
Speaker: And you know if you were to build something for ad revenue, then the ad revenue in India is very, very low. Uh, you know, it's pennies compared to dollars in the West ah in terms of per stream whatever monetization you will get.
Speaker: So what are the opportunities in India? I think in specifically if you If you think about what are we seeing as green shoots and in the the market, right? I think...
Speaker: building from India for a global audience. Oh. games in the casual category. in mobile gaming is ah still a very very viable and a large opportunity.
Speaker: um from a venture returns perspective. and that's specifically in gaming Um, i I would not invest. in esports in India. at this point.
Speaker: I think it's... There is a... There is Nodwin, which is a clear market leader and it's It's sort of captured a lot of the value.
Speaker: Uh -huh. that is there in the market so very tough to sort of dislodge and incumbent in that space. Oh. So from a venture returns perspective, that seems like I want to quit.
Speaker: good place to sort of put capital. Um, I would... ah I would still be a little more cautious. for pc console Oh. Gaming.
Speaker: ah studio investments in India. I think... we are still early in that ecosystem development. And I've been saying this for quite some time. Oh. it it is been relatively slower.
Speaker: wrote. from our what I would have expected. to be very honest. Even 10 years ago, I was like, okay. This is the moment for India, but I think it's studio building studios. is in credibly hard. There's more of the what to describe it.
Speaker: you know you cannot, cannot. turbocharged that process of building ecosystem and building more studios So I think we're still early in the pc console space Overall, ah building gaming studios and that.
Speaker: Um, from a venture returns perspective from an incubation perspective that's a good place to be in because the the incubation is still there you're seeing some really good new studios being formed but from a venture returns perspective it's still early I would say... Isn't that India doesn't...
Speaker: Have the. the the the paying market of people who actually buy consoles because they're the... Like, you know, you You need a certain disposable income.
Speaker: Yeah, I think there's a lack of a local market for console. But I think there's still a large opportunity for building global. uh content out of india right it's not like ah you can still export.
Speaker: Indian mythology, Indian stories, and that I am very bullish on that. Right, it' ah it's ah it's something which is... extremely undersold globally this massive indian diaspora that is ready to gobble up anything which is made with glass but the the challenge with that is you need to still have a world -class development capability.
Speaker: and India doesn't have that as of now at scale. There are pockets. like in Pune, Chennai is the developing into, which is which is building, you know, good quality PC console gaming capabilities. But ah it's not at scale. It's not like something I but i can give you a name of 100 studios.
Speaker: Um, which are breeding rake. really, really cool. Double A, Triple A games. Oh. It's just one day. It will take time. and and I've been...
Speaker: running a predictions panel and in the India Game Developer developer per Conference. And the last seven years, we've been predicting that it will happen next year, next year. It's just been... slow, I mean that's It's the honest answer.
Speaker: It's a... the ecosystem development takes time to Do it, man. ah PC console is still not there. We are still in the incubation stage. We are still not at the venture return stage. But I would say I can put it up. Check.
Speaker: in a company that will give me matured You said esports, Nordwind pretty much dominates that space. What is the esports monetization model? What does Nordwind do? I think the...
Speaker: you esports also is a mini ecosystem right there are In esports, I would say... That is... team owners and content creators like these are the professional teams that compete uh in in esports tournaments and then they have their monetization is through you know these players ah creator monetization. They can ah sell merchandise to fans. and and and stuff like that. And then they have prize money.
Speaker: where they compete to write. in In that aspect, I don't think Nodwin is is probably There's a company called Revenant which is dominating that aspect. There are different teams. ah ah you know ah which which sort of operator you have got like.
Speaker: ah you have. of different teams that run this. and these are Is essentially like an events business where you have these tournaments and you monitor those tournaments through participation fees, sponsorship fees? i might I'm guilty of, again, going on a very nuanced take on esports because I know too much of it to baby make maybe because give you an um three yeah a sort of 30 ,000 few to me. Yes, it's an events business. If you number down to a six fact, it's an events business. You have different teams. These teams have different owners. They monetize them differently.
Speaker: or events business organized differently they hold tournaments for different sports and they get sponsors to engage with the audience. that's the Like an IPL. Sort of to dump it down. Yeah, yeah we are. But but then BCCI controls IPL. Okay. in esports the value chain is the The problem with this is the publishers... like if I'm running BGMI.
Speaker: and I am the publisher of BGMI. The power of... holding a tournament on on this game. is with me. So I control who can come into it. It's not a very...
Speaker: open ecosystem that I can host a tournament for. um anyone. There are calendars for it. You have to pick slots, pick permissions. so so When you are building a business,
Speaker: on someone else's asset. your margin profile. you are your sort of growth opportunities. oh are going to be sort of Captured.
Speaker: what nodwin has done is not they're not just a simply events business for this they have multiple IPs. in live engagement it's a youth entertainment company so to say right it has you know comic con as an ip they have and it's seven weekender as an ip apart from that they have gaming ips etc So that's a very diversified.
Speaker: business. That's why. I feel that is a business which is different than say a typical Simple. eSports League organisations. Having said that...
Speaker: yeah ESL, which Jens... the founding gp of bitcraft was the founder of sold to Southeast for a billion dollars, right? So it's it's not like there was no value to it.
Speaker: but i just feel it's ah from a venture returns perspective. right now in this market. It's just a very hard. um as a class to go after.
Speaker: Okay, okay. I want to give you some names of... ah gaming companies and ask you if you would have invested in them or not. um yeah Have you heard of super gaming? It's... ah game studio building. that Indian mythology which you spoke about. Would you have invested in them? I'm sure the deal would have come across your table.
Speaker: I have not invested it in them. So that is an answer. with I'm curious on why. Because you just said there is an opportunity for Indian mythology and they're doing Indian mythology.
Speaker: I mean... First of all, credit to Robbie, he is one of the most resilient. Founders I have met. And he's from the city. As I am.
Speaker: and go We started off. are So I was a founder as well of Gaming Studio, right? Back in 2010, we started off. at the same time So told him for quite some time. um I think there are there are different aspects.
Speaker: while evaluating. uh a gaming studio i would Not like to go in details of... But that's what I want to learn from you, right? like The insider stuff is what I want to learn, not... stuff which is like publicly available. Yeah, but but but it's it's tough for me to say why we did not invest in it. I think they can be... valuation issues.
Speaker: There can be... um you know, slight problems ah so So let me put it very generally. taking super gaming out of the equation, right? just from a gaming studio what I look for is.
Speaker: That's number one. Have you got any monetization? early. Signals. that you are able to monetize your users. you are able to retain and engage those users.
Speaker: ah you are able to build a differentiating mode. for your studio not for the first game but for the next game and the next game oh you are able to show this and able to sort of improve on these aspects look i'm giving you a very dumbed down version of or squat water drill. takes and then of course the valuation what is my target ownership as a fund that I want to take and what is the money I'm willing to put.
Speaker: Where should that money go? of There are so many aspects of it that you know a deal can fall through. for any of these not sort of matching that. That's all.
Speaker: I would say. uh, Super gaming is amazing. startup I did not do it for... either one of these reasons. Good night. yeah yeah that works that works it's not a testament for the fact that robbie is and not building at amazing companies, building at amazing companies.
Speaker: Have you heard of Felicity? Which is like a... publisher, and maybe that deal would have also come across your table. And you probably did not invest.
Speaker: so They are also doing the India to Globe. Like they want to do global mobile gaming, so why not? Amen. again like i said there can be multiple reasons i'll give you three at a high level which can be Uh, one can be valuation one can be uh you know, the capital requirement and one can be... um what has been proven so far that gives me confidence that Well... this is a great asset to buy.
Speaker: So, proven means that you would have wanted a hit. Not really. Help me. I mean, as an early stage investor, you are able to sort of You don't...
Speaker: If I... if they've already gotten hit. they'll probably be become too expensive for me to invest have an early stage investor right I have to invest to my growth fund. Uh, probably, if that is the case.
Speaker: So we do still invest out of a growth fund. So it's not like we just do early. We do have a growth fund as well. ah But... From that perspective, ah one of these criterias it might have sort of not fit it into our our our perspective.
Speaker: Oh. And there can be but many other reasons like, you know, macro. Competing deals being cheaper. but um I just want to zoom in on what has been proven. what Is there a checklist in that?
Speaker: what has been so proven means it depends right so if you're asking me for say and this again and Yeah, generic, generic, without taking names. So if a person, is a startup comes to me and say, hey, Anuj, I want $100 million valuation.
Speaker: Oh. for for a startup. And ah I've got... $10 million of revenue. I am running a beta negative right now. And I want $100 million dollar valuation.
Speaker: And these are the games I've made and it's making $10 million. dollars Now I will go. First of all, you're not making profit. Gaming it. in its self. effectively has to be a profit -making.
Speaker: Business. in mobile gaming specifically. If you're not making a profit, That means you're investing in growth. which I understand completely and that is sort of helping you sort of get the impressive.
Speaker: curve on the revenue. But how long will it last? How long will your UA financing last? So I have to understand and study the cohort. of that. users? What are they getting? Where are they getting those users from? How long are these people engaged? What is the D30 retention, retention, D90 retention? And what are the equations of LTV -CAC.
Speaker: And where are they lying? And then I can say, hey, you know what? I don't think you're worth a hundred million. I like you guys. Maybe I can do... at a 50 million. That's the multiple that people are. working with at a global level.
Speaker: maybe you get a premium x advantage of being very you in a unique market like india and you're operating in a unique sub -genre so maybe i can give you 16 But 100 million is too high come down a little. and that's how negotiations typically sort of work out And I'm using very, very large numbers um at this. just for reference sake.
Speaker: Oh. This is for a mature company. If it's an early stage company, you apply the same logic. But you compress it to 10 million. Say it's 1 million revenues proven. It's asking for 10 million valuation. You compress all of that and you study this. But there you take... putting more weightage for for uh or on the founding team
Speaker: yeah Then if it's not proven up to 10 million, then you can bet on numbers. And of course, team is important. But when you're investing in a smaller stage or very early stage, more weightage is given to the founding team. Like what is the investment? What is the pedigree they have? Have they done this before? Will they use my capital to... learn about these things. first.
Speaker: And then and then that might need they might need another round much faster. They need more capitalization. so There are different risk parameters and evaluation. Epicling Meoli stage the founding team. is very very critical.
Speaker: how would they see why and why are they motivated to build a gaming studio What have they lot? Adé. going to learn during this phase or are they going to Figure shit out. by themselves because they have more experience so there's It's just...
Speaker: Like I said, there's no simplified way of doing it. Got it. Okay. No, no, that's good. ah Do you... Yeah. So in your mind, you have like some benchmarks for, you said you would look at CAC to LTV ratio, you would look at day 30 retention, day 60. So you, in your mind, have benchmarks on all of these, like a good...
Speaker: game will have this kind of retention. A plea. Like I said, every genre of game have different standard benchmarks. And then... competitive mapping.
Speaker: of what we are seeing in other markets. For example, ah I'm not just focused on India. now If I look at Turkey, Turkey... these numbers are amazingly high.
Speaker: ah and much better somehow they figured out Uh, there's something in the waters in istanbul that they figured out mobile gary Uh, Very, very bad. especially hybrid casual that specific genre. What is hybrid casual? What's an example?
Speaker: Uh... Say a match 3 game. which also has a room building feature. For example, Um, um something like Oh.
Speaker: You know, you haven't matched 3K Candy Crush. sa but you also have to you add a genre to it. you you make a room better so it's a female audience targeted game so that's hybrid it's a mixture of two genres or three genres.
Speaker: it will casual game I'll talk back. Go. crazy order. engagement and monetization. loop So to say that sort of... hybrid casual is very, very...
Speaker: uh well known. ah because they've had success like peak games etc and alumni coming out of those companies. They just have that knowledge to how to scale these games and build. Really, really. good experiences that very, very high retention.
Speaker: In India, we've had that ah we are still building We do have some expertise. but it's not the talent density that we see in Turkey is much higher than talent density we see in Bangalore.
Speaker: Right? So so it's it's it's it's sort of... Still, would you want to invest in Turkey versus taking a bet in Bangalore? is is a question that comes as because we ah as a global firm can invest in either of the markets where we find the best valuation.
Speaker: So that also stops us from you know giving a... premium on valuations. um when you think about. Ah. Yeah. So, broadly speaking like an India investment.
Speaker: would fall under one of two buckets. Either they it's a team in India building a global product, because India by itself is... got monetization challenges or it's a team building for India.
Speaker: ah Now, we've covered like India for Global where you've mentioned that there is a lack of talent and it would be rare to... Find the good. investment in India compared to, say, Turkey, where you find much better and talent much better, proof of talent through metrics, etc.
Speaker: yeah What about consumption for India opportunities? What are those? like for For example, would you have invested in astrology platforms? Yes. I think ah if you think about India, I think consumer AI apps are um and and interactive media apps.
Speaker: have monetized much better than Gibbs. Oh. That is Indian startups building for Indian audiences. Something like a cuckoo. ah microdra or odd friend which is which is dating slash gaming ah these are the apps which i invested back in 21 22. they are doing um extremely, extremely well.
Speaker: ah from what I understand. Uh, Both of these are in double digit million dollars and one is in triple digit million dollars in terms of annual revenue. Getting on fingers. right, so we have seen monetization of Indian users done really, really well by consumer AI apps.
Speaker: Not. specifically gaming. apps built out of gaming entrepreneurs. Why do you call this consumer AI? Neither Kuku nor Friend is really... consumer AI. like These are more like Social content.
Speaker: I mean I'll just classify from how I view my world view internally. I would say these are more interactive media hacks or gamified apps. yeah So. I mean, consumer AI is just one market we...
Speaker: we classify it only. a lot of these things uh so you're right and saying that hey for the other guys but For me, it is interactive media apps. So interactive media is the opportunity in India, which is built for Indian audience. What's the matter?
Speaker: And this is just one genre. I think there are multiple, like Astrology, like you said, I think is I'm very bullish on Astrology. I'm bullish on you live streaming as a function. I'm bullish on on local language support apps who waitit for 2, tier 3 Bharat users. ah So, there are... multiple ways of of sort of ah solving Oh. for indian users which unfortunately gaming entrepreneurs have not been able to do
Speaker: in India for Indians. But interactive media ah you know, whether it's micro drama, whether it's other genres, have been able to do much. Better run faster. Um,
Speaker: I'm wondering why. Uh... I feel like... duh Quality of talent would be similar in both these. you know be it ah I think it's...
Speaker: Giving it your heart. The Cuckoo FM founders quality. versus the found the quality of gaming founders would be equal? Is it just that... The market in India is ready to pay for one and not the other. No, not really. I think ah people in India are paying for BGMI.
Speaker: In billions of dollars, they're paying for free fire. so then then maybe the moat is localization because gaming can be global it's hard to No? I think it's ah it's just a lack of ecosystem development, to be very honest with you. It it it is what it is. We don't have I would say the quality of interactive media founders in India is way higher.
Speaker: than gaming studios building games for gaming audience in India. If you compare these two, Make this up. It's not even a comparison. And the reason for that is...
Speaker: it be I mean... ah Gaming is hard. building games is a hard business it's not just the founders etc it's just a hard business Out. I'll give you an example. ah In 2020, there were TikTok banned. There was...
Speaker: a lot of bans that happen. Right. within six months. they were at least and Tiktok clones.
Speaker: I businesses started again. Yeah. Right? So many. and some of them created very high enterprise valuations. Before Instagram Reels came and took over the market. There was startup activity and they were created within six months.
Speaker: There was also games that were bad. How many gaming companies came out of it? Bye. for that opportunity. Let's... It's... it's probably You know, 4G, one game came.
Speaker: that wanted to replace a shooting game.
Speaker: Because it's hard. It took takes three to... two to three years to build. a game and then it has to be tested if it's fun or not. Then it has to scale and Then it has to, it's just harder. and And we don't have that sort of fast follow.
Speaker: creation. I'm not saying I'm not optimistic about this. ah It did this. activity happening underground you know there's a lot of studios being built which is very good but from a venture returns perspective i need to have at least 100 studios to select two to three which will be sort of the top tier that I would put.
Speaker: Mike Apterlill. Amen. Interesting. So in a way, building a game is like drug discovery. It is a lot of moving parts, extremely complex, not as easy as...
Speaker: building an interactive media app. I'm not saying interactive media is easy. It has its own challenge. Don't misquote me. It has its own challenge. Yeah. But... But the domain expertise that is needed.
Speaker: uh for uh Like you rightly said, it's like pharma. like if you Oh. if you don't have a cancer research ecosystem. So... ah You know, I also want to ask you about the real money gaming.
Speaker: Absolutely. which in a way was really the Only. and gaming. successful outcome even in terms of venture returns in India.
Speaker: ah Did you come across real money giving apps? Did you invest in any? I mean, today, of course, we know that there was the ban because of which. a lot of these companies are really struggling But pre -ban.
Speaker: ah Would you have invested in any? need Did you come across these deals? What was your take on it? Yeah, I think... um fundamentally, when I started at my investing. in 2021.
Speaker: Oh. at Grafton. oh We never... Invested in RMG. And can you describe what is RMG for my listeners who may not know? So... Real Money Gaming. which was defined as Somebody who could do cash in.
Speaker: and cash out And in the middle... there was a gap. Not that game. whether it is skill, chance. or whatever you want to define it.
Speaker: not going to confuse you audience it was basically my motivation was to put money in and I could get one out. Cash in and cash out wherever that was happening in a game the motivation of the user was OK to have fun, but there was a motive to also make money out of it.
Speaker: And that... as we know in the wisdom of the regulators has been banned through Proka. What is broker? Proga is the law. Proportion regulation of online gaming authority. that is passed by the government. which banned all of this. but One question on the gaming mechanics itself. Are you playing against the house or are you playing against other players? Like like who loses money when you win money?
Speaker: Well, different games had different setups. ah For example, if I'm playing a card game, then I'm playing against three other people and I win. and the platform takes a take Uh, Take care.
Speaker: Right? Uh, It's... ah in a in a more unregulated way it is against the house. Uh, Unfortunately, this market was not regulated in India.
Speaker: It was completely banned. Uh, where you have these regulations a regulated market somewhere like See? UK, etc., then... do you have rules that you cannot scam users and user protection is there. Where you don't make them play against the house while claiming it to be. Like you can have a bot.
Speaker: which is an immediate user. But they will always win and you will always make money. So, And so there's a lot of consumer protection. It's all banned now. So we can talk about these things.
Speaker: But. Having said that, I never invested. uh Uh... as crafton or at betcraft in real money gaming Uh, Call me a little old school. I just felt that ah As a market RMG.
Speaker: First of all, the founders in the market. are some of the best I've seen. Oh. in India, right? they were probably in terms of building teams, capability, products.
Speaker: They were very good. It's just that the sector for me was too grey. as an investor to invest. Oh. Um, and no. sign ah hindsight 20 vision is 20 20 you can say that you you were right but it was always an market. which from my experience, because I worked for a Chinese company.
Speaker: And I know how that market operates and how regulated it is. and other Asian markets like Korean and otherlthough east asian yeah other Asian markets. Real Money Gaming was not allowed in these models.
Speaker: or super highly regulated like you would not make venture returns. in in in a business like that. right, it was shady. Um, ah in these markets.
Speaker: so I... always had a sense that you know somewhere somewhere down the line the regulators might look at it um and in not a favorable way so from my investment perspective or whether it was craft and deciding like Should we invest?
Speaker: they always felt like they took the side of like of caution rather than or risk. Ah, okay. Now... I want to talk about micro dramas.
Speaker: You know, microdrama, China is pretty much like the the pioneer in microdramas. how do microdramas monetize what is the india opportunity there can you talk a bit on that Sure, I think... so 2 -2 two things which which are very, very interesting right I think ah The entire...
Speaker: TikTok and realification of our consumption of source of video Uh, which sort of post -COVID has been the mainstream.
Speaker: Give both. to sort of this entire microdrama concept. Right, and that's how it sort of started off like hey why don't i watch content.
Speaker: based on on on on short engagement times and shorter episodes. We had a... my sort of consumer habit of not investing.
Speaker: Um, yeah I mean, just for example, if you if you're scrolling Netflix today. ah You end up watching the previews. more than deciding what to invest your next 45 to 60 minutes.
Speaker: in it right and for the the user attention gap for watching long -form content is shrinking. And that's where the consumer psychology of because the ticktockfication or the realification of of the of the habit has become so much that you want to get instant gratification.
Speaker: That's how really the concept of microdrama really started in China and became huge. I think the... two ways of monetization there it is So one one question about the form itself. So a microgram is like a vertical.
Speaker: series. Yes. ah And you keep swiping up for. after every one or two minute video. So it's a... It's like a 30 -minute story split into two minutes. chunks which you keep swiping up.
Speaker: it's it's that and much more i mean there is a nuanced take i mean how you shoot them how you create a script for something like this how you sort of create in some cases interactivity on character relation on top of it it's different than a long form you have...
Speaker: character build up times in long form content you have uh different aspects to it whereas in short form ah It has to be punchy, hooky from the first episode that allows you to scroll to the next episode. And the first few content, like the first six, seven.
Speaker: uh minutes have to be really really oh Dramatic. all needs to suit the audience that they're looking for and then Then it sort of builds up.
Speaker: oh so there are different nuanced takes on how do you sort of build for this but But my my thing is like, if you think about it a tool They're too large. uh monetization factors one is people are trying to enact purchases okay that's where they're upselling content they're upselling uh certain aspects of it like a game and the other way subscription which is more prevalent in india is the leader there. Uh, where where you're seeing a you know you subscribe
Speaker: I know. quarterly on on on an annual basis or even weekly basis. to watch more content. and unlock content what these platforms have become the large platforms have become is more of a Like you said, vertical OTT, they have different genres of content.
Speaker: Uh, in them. and the people who are creating more content. and keeping the content core library refreshed and active. are winning the game at this point.
Speaker: That. do they Uh... License content or do they create content? A lot of these people are creating what? concentration has become so easy. Uh, uh... and with AI sort of helping in you know,
Speaker: reducing the pipeline. and they're making it more efficient. It's only going to become me. easier. So... You see this as ah as like a...
Speaker: ah streaming market like the similar size opportunity like the way let's say Jio, Hotstar and Netflix and all of these apps the kind of revenue that they do collectively do you see microgrammers reaching a similar revenue stage in India?
Speaker: I think Quotity is like Geo Artstat has a lot of live sports etc which is a different content. category in itself i mean but if you think about from a drama perspective i think the potential of our microdrama is much higher and larger.
Speaker: in the long term. then then the traditional OTT and just from a NAMA perspective and genres and that. uh i feel so i and that's i might be wrong but i feel the you're going to have a billion ah smartphone users connected to the internet in the next five to six years and and the vertical scrolling format is so habitual is now becoming so sort of in the consumer psychology the default way
Speaker: I'll... I think you will have separate audiences. but like what casual gains did to expand the market for AAA games, Microdrama will do the same for Love, from Godhead.
Speaker: So you you feel like for... the Gen Z there. From the wallet, the spend on OTT. Will not. be as high as they're spent on micro -journals.
Speaker: Like from a consumer. spending perspective. I think from a consumer spending perspective, I think there will be different audience for different uh Well... Oh. purpose but like i said i think the best analogy is think of microdrama is
Speaker: a candy crush compared to a call of duty which is the long -form quadrant. Oh, that's cool. so think of this as a gaming analogy, I feel they are going to bet. Candy Crush.
Speaker: type of developers are going to get better bigger and be able to monetize much. because they are more nimble more Adjusting. than the traditional OTT platforms. And here from idea to go live.
Speaker: For a series. It is much shorter because you can... It's much shorter and AI is aiding development, et cetera. So I think that's the best way to put it. Okay, fascinating. ah So here also you feel the publisher is the bet to take or are there also studio opportunities here in microdrama?
Speaker: I don't think there's a master studio opportunity to sort of pack in this space. It's it's the content creator, like someone like Cuckoo or Bob. guys like that who are able to build scale and distribution for this as sd from a venture returns perspective of course ah there's ah entrepreneurial opportunities and building studios Absolutely. so
Speaker: very good time to be building studios from an entrepreneur perspective if you want to make good sustainable business Good fall. are venture returns. thesis I can the matter as to go after this.
Speaker: Oh. you know, tools or or or platforms that are able to Me. the such scale I want to understand a bit more on your... decision making frameworks. um Peace.
Speaker: You know, do you give more value to founders or more value to the... ah structural ah like like say what is the structure of the monetization what is the traction what is the business opportunity what is the overall market look like like like those factors or Great set of founders. They will figure out a way to make money.
Speaker: So, we are not a gender -greasy firm. Let me start off with that. or generic VC form. means that they can invest in fintech space.
Speaker: Gaming is just one section. Content is just one section. Interactive media is just one section of that thesis. so They have. very broad -based.
Speaker: investment appetite and they can invest anywhere. Uh, These are the large top tier firms in India, etc. We are a very thesis driven investor. That means we need to have.
Speaker: enough confidence in a space where we have Oh. enough markers from an operational knowledge perspective enough thought process how the market and then small industry segment will change over a period of next to five to six years.
Speaker: and enough expertise to make that underwriting from a thesis perspective. I think that is number one. So for us, it has to fit our thesis. otherwise there's no differentiator between me and a say, any other generic arrest.
Speaker: So our our discipline has to be on the thesis first. I think at an early stage, It's the founders which have. much much more weightage. than the traction.
Speaker: Oh. in in obviously mid -stage and late stage it is the traction which has keeps having a lot of traction. but So it's thesis, founders. traction in the early stages thesis ah founders and traction, but in different weightages.
Speaker: it in the growth stage. You know... Like. Even within ah The thesis, how do you know? Who's a great founder and who's not a great founder? How do you really...
Speaker: tell that apart like like if there are multiple opportunities within your thesis, then what's the next step? I think... go How do you de -risk? and identification of anger capabilities.
Speaker: it's a It's water. It's becoming more science than art, but it is was an art. But... than sites. ah I think... What? what we have seen In terms of ah founder capabilities, which are sort of extraordinary is,
Speaker: Chip on the shoulder. someone who has built something experience and and expertise in that domain field which is reference which is Proven. and is coming to build, ah they are seeing a large opportunity.
Speaker: oh and then building something there. with the chip on the shoulder that means they have something to prove Oh. Either it is flawed. proving that genre works, proving that gaming world's proving, that micro -drama world's proving.
Speaker: proving something and have the ambition to build something very large. Of course, you get it wrong also sometimes. it's a Business of... of you know, trying to de -risk as much as you can, but you can.
Speaker: get founders who and it's a journey right it's you can be motivated above the first two years and then not be motivated in the third, fourth year. I think ah So that's the number one thing that you probably look for. is Also, you look for the team, not just the founder. What's the co -founding deal?
Speaker: Uh, are the three people, are the two people. Is there a single farmer? There's a lot of risk with the single farmer. and And you. typically do not want to just invest in a single founder.
Speaker: from that perspective from a venture returns perspective i'm not saying they're bad companies are bad or startups if you have a single founder that's perfectly orけど. back if you And people do back.
Speaker: when they have very high conviction. But you know... you Typically, you need to have complementary skill sets on the founding team. and within the founders. oh Wow. ah Is that happening? What's the division of responsibility? How long have they known each other? Can they work out in a stressful situation? Have they handled a stressful situation? on you because like I said, it's a journey.
Speaker: So, Will they stick together? Will they not? Because one of the ... major issues that happen is when you have a three people founding team or You have four or five and then a couple of them break out.
Speaker: There's a lot of... stuff to manage. So... That is also the theme. that's How do they match up? What is their... or alpha compared to the others.
Speaker: So those are the... high level stuff that we look for. from the clips. The... Why does experience matter? you know a lot of Founders figure out stuff.
Speaker: And especially this... Yeah. I mean, you know they're not necessarily very standard playbooks. uh within ah gaming interactive media space.
Speaker: Yeah, I think that's a good question. Why can't a new guide? create the next big game. ah And in a way, both Friend and Cuckoo FM founders did not have experience, right?
Speaker: Not in this space, but they had experience in, you know, um before what they tried, what they did. Um, Ciao. Like. The Cuckoo Founders.
Speaker: already sold one company. So they had that. cycle experience. So. so you sort of not just judge from the domain expertise you also judge from what they've done previously.
Speaker: All right. So... There are aspects to it.
Speaker: i I would value experience. And. of course you can have young founders which have not done anything i'm one of the most brilliant guys MIT, Howard, blah blah blah but they would have to win expertise. of something.
Speaker: So what are your red flags when people are pitching to you? Things which like turn you off? Most recently it is, seeing all those clod. Baked bitches. With the that cream kind of a color. Claude has that preference for that that color scheme. and yeah You can figure it out. in the first glance and then it feel that if they cannot put an effort in a shortill building a grey deck again i might be
Speaker: Old facet. Yeah, I'm giving boomer energy right now. but but But I mean, to be honest with you. I cannot imagine building a presentation by hand anymore. It is like... I might be giving a boo on energy right now, but... It just shows.
Speaker: a little bit of casual attitude, so to say. oh It's not necessarily a red flag. It's an orange flag for me. It just... It just doesn't make you that excited and about the deck as you thought you would be.
Speaker: I think number one point. in emerging markets. is The... Red flag is the data. if massaging the data.
Speaker: If you're... Um, Sort of. Telling your revenue, your GMA is your revenue. or or there are some very creative ways of of of you of sort of showing user acquisition revenues,
Speaker: Bye. user acquisition and and creator payouts as as part of your top line and stuff like that. you know People try to be very creative. in in these aspects.
Speaker: Yeah. then you have lost the trust. even if you are an amazing, amazing founder. We have to realize venture returns are not a money or two year. or it's not a decision, it's a journey.
Speaker: of six, seven, eight, nine, ten years, right? and And if in that journey, your your initial sort of conversation is starting with the distrust. I mean...
Speaker: Even if it might be, you might regret it as an anti -portfolio company. but then the trust is lost. Have you... funded a founder who was bad at pitching.
Speaker: like, you know, maybe naive, no experience, whatever, made a bet. like like a cringe pitch to use Gen Z language, but you still... Invested. I mean I would not Put it as dramatic as bad.
Speaker: But Joss? But yes. I've... Bitched. I've... pitched in fact. They are not probably the best. Pitching ah guys like they're not good storytellers but they've managed to build amazing team Very recently I did one.
Speaker: investment where I helped them also that guys you're not pitching well I'm going to... Like... you guys are Not focusing on this your first time founder so it's natural for you to sort of be there but the gravitas of your content and your knowledge of the subject matter expertise is top notch.
Speaker: And that makes me excited. So I think I have definitely done that what what is it that you were still able to see in them like the passion for what they're building or what like The passion. the ability for them to attract the core founding team.
Speaker: Oh. that is super important if there are so many people who are willing to leave their high profile job and Walk. or this idea with you. without even getting funded.
Speaker: That is all. very, very big. Green flag. and It's just the experience and the content of the pitch or what they're building. So if their experience and what they're building matches.
Speaker: You understand, okay, how you present it can be shit. But. These two are matching. so Okay, okay, okay. What's your advice to founders? Who was?
Speaker: you know, No prior experience looking to start something today. what are opportunities how should they think about building how soon should they go and try to raise i kept for First first ah answer to this is I don't think every business is venture investable. Let's just be.
Speaker: very very clear you You. You. venture investment and getting your venture capital is so very a different call that you need to take as a business. you are taking someone's capital you have an obligation to return that capital That's a different journey. It's a different...
Speaker: Oh. might sound ah you know, sexy. Uh, But it is a tough journey. Oh. I think if you're starting a business, it's the best type to be building right now. So so much of productivity has been solved by AI, whether in gaming, whether in consumer AI.
Speaker: Uh, Best time to be starting is now. um entrepreneurs and opportunities are there. Not necessarily venture fundable. But they're not dead.
Speaker: Uh, And it's absolutely okay to be building businesses. Wow. which are not actually profitable. a 10 crore business turning out two crores with a five to seven people team is an amazing business to be part of and growing that slowly.
Speaker: and to be sort of thinking of i want 100 million dollar valuation where you have to turn a different game. So it's... it's it's I would say find your ah sort of spot in that and what you want to before you start uh,
Speaker: and why you need money is also very important too. How do you before you start know that I need to build this business? for venture investing or I should not be even thinking about venture investing given this is my business.
Speaker: Yeah, I think I did the same mistake. when i was starting out like should Why should you need capital? It's only you need venture growth capital for scaling, right? Uh, for scaling something. whether it is proving out your pmf whether it is not well you know proving out your scale capital etc right all these stage investors typically the pre -seed guys will fund you even without seen anything.
Speaker: So those are the people who can take capital and save PMF. is sort of achievable not achievable you can you build a team not build a team i mean capital is the issue if you are an experienced operator you have enough capital to
Speaker: work with AI and a few like -minded people. I don't think you need... even pre -seed capital too. prove something that you are onto something and we'll give you the signal that hey maybe i'm on to something that can be pretty massive and now i need to sort of go to venture capital investors.
Speaker: I think if you know when you know. Mm -hmm. Awesome. Thank you so much for your time, Anuj. It's been a pleasure. Absolute reaction. And... It's been a pleasure, myself.
