Andreessen Horowitz has raised $600 million in a venture fund for games

Andreessen Horowitz has raised $600 million in a venture fund for games ...

Andreessen Horowitz has raised a $600 million fund to invest in games. The storied venture capital firm is already a big investor in games, but Games Fund One will be the first A16z fund focused solely on games.

Andrew Chen, Jonathan Lai, and James Gwertzman, investors at A16z, stated in a blog post that the fund is dedicated to improving the gaming industry''s future.

It''s clear to us that the gaming industry has entered a new era, and there''s no better time than today to build a fund that is focused on supporting the next generation of game developers, according to the organization.

The goal of the fund is to develop innovative apps that will play an important role in defining how we socialize, play, and work over the next century. In the past decade, games have experienced a profound transformation, from being packaged entertainment to becoming more internet services that resemble social networks and scale as consumer technology organizations.

The investors of A16z claim that today''s most successful games, such as Fortnite, League of Legends, and Minecraft, are communities that retain loyal, long-term users, and generate billions of dollars in annual revenue. Additionally, games are also driving innovation across the entire consumer ecosystem, by enforcing best-in-class channels for user engagement, retention, and monetization, such as microtransactions, battle passes, and web 3 tokens.

According to Lai, the last decade, games have fundamentally evolved from entertainment into much more today, where most popular are internet services, social networks, creator economies, virtual worlds, etc.

With this fund, A16z has invested in and believed in the gaming industry for over a decade, and we believe that the greatest will come. With new features such as web3, the metaverse, and a resurgence in VR and AR, games are becoming more popular. With this fund, we will continue to invest in all of the space we see, including in bull and bear markets, platform shifts, and future technologies.

Short term, A16z believes games infrastructure and technology will be the main foundations of the metaverse, anopportunity that is lessening the current $300 billion game industry.

What the fund will invest in

The fund will invest in the following areas:

  • Game Studios: The best games today are continually updated online services whose players form an integral part of the game through multiplayer and user-generated content. These games-as-a-service have become rich, interactive social networks, with players making in-game friendships that are just as meaningful as those made in-person.
  • Games x Consumer: The rapid growth in the number of gamers worldwide has created a thriving ecosystem of consumer apps to support them. As games become the dominant way people spend time, we believe some of the most innovative consumer companies will be built around player communities. (Social apps like Discord that help gamers build community, or platforms like Twitch where millions tune in daily to watch creators livestream video, are just a couple examples of this).
  • Infrastructure: As games evolve into virtual worlds and online services, the demand for tools and services needed to build great games is skyrocketing. Not only is this infrastructure important for games in its own right, we also believe that the coming Metaverse will be built by games companies, using games technologies. From content creation to multiplayer enablement to virtual economy management and live ops, the games industry has already solved many of the problems that need to be solved to create the Metaverse.

Why create the fund?

A16z supported companies like Zynga and Oculus in the 2010s, which expanded their experience with both game studios and game technologies. More recently, A16z has invested across the ecosystem, backed veterans from established players like Riot Games, CCP, and Epic Games, as well as from consumer tech organizations targeting gamers, like Z League and Sleeper.

A16z has tapped into advanced technologies, including web 3, instant games, and VR/AR. All of this has strengthened its belief that games require a special focus not just on dedicated investing capital, but also on operational capability that is as unique and forward-thinking as the gaming industry itself.

Several experts from across the firm, many of whom are themselves gamers, met his wife while playing League of Legends and games industry veterans from Riot Games, Twitch, EA, Tencent, and Oculus. These partners are dedicated to assisting portfolio companies and speeding their journey to success in several key areas of business development: go-to-market, marketing, talent, people practices, capital networks.

Lai discusses how the fund intends to be different.

Every member of our investment team has either worked at or established a game business or a high-growth start-up. Andrew Chen led the global rider growth teams at Uber during their high-growth years. Both Jack Soslow and Robin Guo were working at Oculus and Riot respectively. As a founder, you can be certain that the person youe talking to across the table understands what youre building.

He added, "We have a unique operating model that he was bringing to games." A key component of the A16z model is our operating platform, a 300-person cross-functional team that works with our portfolio on key topics for start-ups: go-to-market, talent, people practices, marketing, capital raising, and more. With our games fund, we intend to provide even more functions to their clients, such as managing virtual economies, performance marketing, and testing their games globally.

With Games Fund One, the firm will continue to expand its capabilities and develop deeper networks that are relevant to the games ecosystem, allowing it to assist portfolio companies with everything from building digital communities, managing their virtual economies, to licensing IP standards, and helping their development teams.

We are averaging a16z, combining games to fintech. Many game designers are now building at these intersections, according to Lai. We have invested in Carry1st and Lootrush, both in crypto and game knowledge. Many web3 gaming companies like Parsec and Overwolf love our enterprise expertise, and consumer social companies are constantly learning game-like experiences.

Jason Citron, the cofounder of Discord, Marc Merrill, the cofounder of Riot Games, Aleks Larsen, and Jeffrey Zirlin, cofounders of Sky Mavis, Kevin Lin, cofounder of Twitch, Mark Pincus, founder of Zynga, and Riccardo Zacconi, the founder of King.

A16z said it is reaffirming its commitment to the games industry. If youre building, supporting, or collaborating with the next generation of games, the company says it wants to hear from you. And its hiring on the investment team, in marketing, and partnerships.

While focusing on early stage investing in our games fund seed and Series A, Lai said, the firm has the capacity to invest at the later stages, e.g. through our growth stage investment in Roblox. Founders love the fact that we can assist them from the seed till to the IPO, with our operating platform adapting to their changing needs.

I asked Lai if he was concerned about the blockchain industry''s hype cycle and his concern about it.

Web 3 is a series of several areas that Lei said. We focus on investing in the very best founders in the games industry, although many are not. We just invested in Startplaying.games, which you covered. While there is a lot of market volatility right now, we just go back to basics which is finding and supporting the very best founders for the long term.

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