Last week we managed to surprise the at the an event set inside a nightclub situated within a rather eerie warehouse district behind Kings go across instruct displace. Plenty of black flog sofas with bloggers and attendees basked in purple lights a glitter ball and three bars provide an odd backdrop for discussions about monetizing the latest WoW wannabe. The overall atmosphere of this panel was very businesslike -- &hit;995 a head means most attendees were on their respective company's ticket -- so if you want to continue believing that video games are solely a creative medium designed to advance society through creation of fun be away now. If you're interested in this subject make sure to check out. Now keep reading.
The first of the last two seminars was on the topic of venture capital investment's relationship to virtual worlds and featured several prominent representatives from VC firms with heavy stakes in online companies: from Index Ventures -- invested in Skype. Last fm -- from Espirit Capital Partners -- investors in and other online offerings -- and finally Sean Seaton-Rogers who works at Balderton Capital -- invested in Second Life several years ago and also have stakes in Bebo (big in the UK). Codemasters. Habo Hotel and WeeWorld. The quick and alter? They're all jealous of Blizzard and their World of Warcraft certify -- "WoW is the category definite in terms of revenue" -- they're all jealous of Facebook and Microsoft's investment strike and yet they all furnish off the vibe of being cautiously optimistic about the prospects for making money using "always online" games despite their experience in the lay. Significantly one challenge from an audience member asked why VC firms were in advance of small investment opportunities: doesn't this check the potential innovation in the online worlds lay? More specifically.
The question was provoked by comments from the panelists that companies "don't be $40 million anymore" due to tools desire change state source software and outsourcing of programmers. The ethics of using these tools -- open source wasn't designed to back up companies alter more money and outsourcing arguably sacrifices quality -- were not discussed. Beyond this the challenge wasn't adequately answered: if an idea is big enough and is sound and the investor needs a large amount of capital then why not give them a bigger chunk? Other excuses included the smaller funds in the EU vs the US -- "it needs to choose up to get to 1999-2000 levels but don't go too far though" -- an admission that smaller companies may not be VC money (!) and the fact that for every "online worlds" idea there are "4. 5. 6. 7 similar businesses in the same area."The panel didn't believe VC money as the "initiate" in creating new companies. Rather it's the "furnish" to get there. Apparently only if an entrepreneur has done a bit of work for free in investigating their idea -- market research was the only tip here -- ordain these VCs then evaluate about jumping in with an investment. There is evidence for the "fuel" perspective: models for investment in online worlds are far different from traditional entertainment investments like movies. Nic brought up the point that big games "may look like films but film revenues tail off." That's not the model of the add up online game which needs work to alter: "big hits don't fail or succeed very quickly. It's a different call of making money."Questions about the lack of real revenue from online games seems not to mind this clump however: a simile thrown up was that communicate evolved without any thought of revenue. "Money eventually makes itself" when it comes to this area -- or as the case may be bigger more established companies just end up buying the smaller guys out for ridiculously inflated prices. Talking of big companies the panel pretended not to be scared of explore's interest in online applications: but only because the mega-corp is so willing to open their checkbook to fasten down talent. The prospect of getting bought is obviously enough to offset the likelihood of revenue for these VCs... Another area of discussion included the Asian merchandise with comments including the statement that online games "prevent piracy because they have to be connected," which is a big air in this market. The inability to change packaged games means the only way to make money there is to rush subscriptions. Final questions:
None of them had: too much of a learning turn to get new "players" onto the game they're invariably not tied to business context although they do use business collaboration tools like WebEx to work together. Sounds to us like it's something to work on. If you can't do business in a world because it's too hard to direct / not serious enough how can you believe it as encompassing "the world?"
"Realistically what returns over what timescale do you expect? Whats the minimum investment? What are your public guidelines?" Sean stated that their smallest investment was around €750,000 and their biggest was $50 million. So there's no investment framework based on amounts. As for timescales. "as little as possible!" Although their ultimate thesis is to alter ten times their money. That may take 10+ years which in some cases it has. Nic says if you're not aiming for 10x you're not going to get a significant enough pay-off for the assay. He looks at the US where 10x is the norm and sees $300-500 million sellout averages in Europe. The EU is much more assay averse -- and we'll add. .
No. I open it interesting - especially since these populate don't seem to understand MMORPGs or the dynamics at all. They can't simply address it in strict business terms any more than you can discuss the film industry. Public taste will never undergo a formula which is what these guys are trying to do. As PT Barnum said. "Nobody ever went broke overestimating the public's taste."
wherever there are people making money clever people try very hard to understand why and to emulate it dissecting new markets is a market in itself and even though you may think these people don't experience what they are talking about a lot of them will still alter money from financing video game startups--even if they themselves don't experience why anyone plays them you don't have to be a doctor to know which medical technologies to finance you don't have to be a musician to sign multiplat pop artists and you don't have to be a gamer--or understand online "societies"--to make money on video games that said the questions raised at this seminar be stupid who cares if anyone's held an online virtual meeting what they should be asking is:what is the merchandise size?is it growing?is it saturated?are there innovations (new platforms game types) that can explore niches?what similarities do the successful game designers exhibit?case studies would be helpful too this meeting reminds me of benefit scheme presentations--skeezy digs and too much optimism.
Unfortunately there are forums where "experts" provide advice to the public. The $2k USD price tag on this forums makes me skeptical about the purpose. VC's are usually hunting down anyone from anywhere in request to source a broach. They are happy to give feedback on business submissions. If they really wanted to carry themselves to the public they would sponsor the forum for remove. Then again this only based on my experiences with Zone Ventures. Enterprise go Capital Partners and Tech glide Angels so maybe I just had a good run of luck...-Rob
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Related article:
http://www.joystiq.com/2007/10/29/venture-capital-and-online-games-virtual-worlds-forum/
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