Where LA’s top consumer VCs are looking to invest

From a fundraising perspective, Los Angeles has become just the southern-most part of the Bay Area. Top-tier VCs from SF visit LA regularly, and entrepreneurs raise from investors upstate and downstate in one process. Anecdotally, as an LA resident of 4 years, there’s been a palpable uptick of entrepreneurs from the Bay Area who move down here after exiting to found their next company.

Los Angeles is a hub for a wide range of startups, but it has two major groupings: consumer-facing startups that tap into Hollywood’s marketing culture, and the deep-tech ecosystem created by the city’s role as a hub for aerospace, defense and R&D.

To track how the ecosystem for software and digital media startups here is evolving, I asked a few of the top consumer VCs based there to share some of the trends they are most excited about investing in right now:

  • Kevin Zhang, partner at Upfront Ventures
  • Mike Palank, partner at MaC Venture Capital
  • Effie Epstein, partner at Sound Ventures
  • Brett Brewer, partner at CrossCut Ventures
  • Courtney Reum, partner at M13
  • Ron Rofe, partner at Rainfall Ventures
  • Ryan Hoover, partner at The Weekend Fund
  • Dustin Rosen, partner at Wonder Ventures
  • Zach White, principal at Sinai Ventures

The key takeaway is perhaps the diversity of their responses: investors here are going deep into trends across the spectrum of consumer spending. Consumer health and transportation are mentioned, as they were in my surveys of VCs in London and in New York, but this group repeatedly predicts a new wave of interactive, social media startups (albeit with different perspectives on what it looks like).

Kevin Zhang, partner at Upfront Ventures

I’m a strong believer it’s the best time to be a game developer now. Every 10 years or so distribution shakes up, now giants like MSFT, Google, Sony, Epic, etc. are rushing in to shift gamers to subscriptions and cloud gaming, which means big exclusive content library building with lots of “non-dilutive” capital for developers. Games themselves are becoming bigger, cross-platform, cheaper to build and more accessible than ever thanks to advancement in game engine and networking tech. Related: there’s a new generation of mobile entertainment brewing at the intersection of short-form video, live, audience participation and social play; it’s marrying what’s worked with UGC and live video with in-app-purchases and retention tactics of casual games to create more accessible and bite-sized entertainment destinations.

Mike Palank, partner at MaC Venture Capital

While it used to be that great content alone made for a compelling entertainment experience, as we move into the future it will be the blending of great content and amazing tech that will truly capture and retain people’s attention. We’ve seen those funny Youtube videos of babies swiping pictures in physical magazines showcasing their expectations that everything is interactive. I think in much the same way, expectations around filmed media (movies + TV) will trend towards the interactive. We are seeing some truly interesting experimentation around interactive right now from companies like Netflix, Unrd, Eko, CtrlMovie, Playdeo, Hovercast, Aether, Within, Twitch and others.

The winners of the streaming wars understand this and I believe will supplement their content slates with interesting technology to make the viewing experience unique and participatory (Quibi has already announced some examples of this). At MaC, we are looking for those innovative companies that are re-thinking how consumers experience filmed entertainment to make it more experiential, interactive and engaging.

Effie Epstein, partner at Sound Ventures

At Sound, we believe that investors have an enormous responsibility to help shape the future we all want to see. To that end, we’ve been seeing a lot of promising innovation emerge around financial inclusion and digital healthcare. For example, Divvy Homes is a company that is making home ownership a possibility for the millions of Americans who struggle to afford a down payment, and Affirm is giving consumers a fair alternative to credit cards in an age where Americans are more in debt than ever. Meanwhile, TruePill is making it easier and more affordable for end consumers to access medication by changing the way medicine gets delivered, and Alma is making mental healthcare easier for consumers as well as for practitioners.

Kenzie Academy is scaling up a coding program for ‘the heartland’

The crowded landscape of programs teaching non-technical people to become software developers has been a proving ground for a new model of education financing: income share agreements (ISAs). With an ISA, students avoid paying tuition upfront or taking out private loans, instead paying a percentage of their income for a time after graduation after they’re earning a minimum income.

The model aligns education providers with students’ career outcomes, and one startup is staking a claim to be the leader in the space; Kenzie Academy, a year-long program with a physical campus in Indianapolis — and a student body that’s 66 percent online — announced a partnership with Community Investment Management (CIM) earlier this week that provides $100 million in debt to cover the operating costs associated with students who defer payment through ISAs.

Kenzie co-founder and CEO Chok Ooi says that core to Kenzie’s mission is the goal that its graduates “can stay in the heartland and attract more jobs so that someone coming out of the Midwest no longer has to move to Silicon Valley or New York to have a successful career in tech.” This $100 million is one of the largest commitments yet to financing ISAs and Kenzie is using it to recruit a more diverse population of students who may not be able to afford tuition or qualify for student loans otherwise.

I interviewed Ooi to understand how Kenzie differentiates itself from competitors, how it has iterated its model to improve retention and job placement and how he expects the ISA market to evolve over the next couple years. Here’s the transcript of our conversation, edited for length and clarity:

Eric Peckham: The landscape of software developer training programs is crowded. Where did you see an opportunity to do something different, and how do you position Kenzie relative to others in the market?

Chok Ooi: My co-founder came from Galvanize, so we observed firsthand the proliferation of tech and coding boot camps. These are typically short-term, three-to-five month programs and they tend to do well serving people with college degrees. I would say that they are disrupting the masters’ program space. We saw a major gap in programs that serve a much larger demographic of people who are much earlier in their development. People who never went to college, or did a little bit of college and dropped out, or just never had a professional work experience. A three-month training is insufficient to get them to a point where they could land a technical job and be successful.

We saw an opportunity to bring high-quality tech education to the American heartland that is 12 months in length. For about two-thirds of our students, this is their first post-secondary credential training.

We are giving them not just the technical skills, but elements from a traditional four-year college as well, like critical thinking, problem-solving and communication skills.

Compared to those other bootcamps or training programs, is Kenzie targeting different job outcomes for its graduates?

We did a survey of our students that asked them to name the top five tech companies they desired to work for. None of the Silicon Valley companies made the list other than Salesforce. Indianapolis is the second largest Salesforce office outside of San Francisco. The rest of the companies our students named were companies like DMI and Zylo that people in Silicon Valley don’t hear about but are doing very well in the Midwest. Their friends work there. They’re a fabric of the community. If we really want to create job opportunities for the rest of America, we cannot adopt the Silicon Valley mindset.

Kenzie Academy co-Founder and CEO Chok Ooi.

Kenzie Academy co-founder and CEO Chok Ooi.

So how do you evaluate technical aptitude and critical thinking in the admissions process? What’s that process look like, and how has it evolved over the last couple of years? What have you learned in order to make that more effective?

Prior to founding Kenzie, I started a company nine years ago called AglityIO. The model for AgilityIO was similar to companies like Andela. We were trying to solve the talent crunch in the Bay Area by recruiting and training people with the raw talent in Vietnam. Today, that company works with Google, Uber, NerdWallet, Meetup.com and 150 other tech companies. So I’ve experience in developing processes to identify raw talent in this context.

As people are doing the online assessments, we collect data points of how long it takes for them to solve the problem, what their different decision points are and things like that. Then as they get enrolled in Kenzie, we continue to collect attendance data, grades, and then placement data and use that to look at success and failure cases. We constantly refine our assessment.

Are you seeing any particular pattern or cluster in the applications you’re receiving or the candidates you’re accepting in terms of prior field of employment or aspect of their background?

A look at the top trends exciting NYC’s consumer VCs

To learn more about the next wave of consumer startup investment outside Silicon Valley, I’m speaking to leading B2C-focused investors in various hubs about the trends they’re excited about right now. 

Recently, I shared the responses from several London-based investors; today, we spoke to eight of New York’s top consumer VCs:

  • Rebecca Kaden, Partner at Union Square Ventures
  • David Tisch, Founding Partner at BoxGroup
  • Anu Duggal, Founding Partner at Female Founders Fund
  • Craig Shapiro, Partner at Collaborative Fund
  • Jeremy Levine, Partner at Bessemer
  • Beth Ferreira, Partner at Firstmark Capital
  • Graham Brown, Partner at Lerer Hippeau Ventures
  • Eric Reiner, Partner at Sinai Ventures
  • Chris Paik, Partner at Pace Capital

Consumer health and banking startups were recurring areas of interest, and there’s a sense that apps and product brands which provide a deeper sense of community are an untapped opportunity.

Rebecca Kaden, Partner at Union Square Ventures

At USV, we are focused on opportunities that broaden access by leveraging technology to increase value and decrease cost in big buckets of consumer spend. In doing so, we are looking for ways to make products and services previously available to a select segment available to many more. In particular, we have been investing in areas of consumer health where the delivery mechanism not only makes the care more convenient but also more affordable and higher quality; products and platforms in financial services that change the traditional underlying model to drive financial health for a mass customer; and opportunities that create new access to education both for kids and lifelong learners. 

Within each of these segments, I’ve been very interested in how new communities are forming inside products–users that come for a specific offering are forming allegiance and increasing engagement by interacting with other users. I think that is a trend we will only see accelerate.

David Tisch, Founding Partner at BoxGroup

People are bored on their phones, not of their phones. I am most excited to meet founders working on consumer apps that bring happiness and fun to a mass consumer audience, as I continue to believe we are in the early days of mobile and the app store is not dead.

These apps may look like a game, they may be a game, or they may be a new feed, but TikTok, Twitch, HQ, Yolo and other Snap app kit apps, Tinder and others have shown consumers want new apps, the barrier for adoption and retention is  just very high. All apps and games have a half-life, creating something with a very long one is really hard, but the demand is sitting on the phone scrolling thorough feeds, waiting for some new fun. We are excited about apps that allow people to interact with others in different ways, in new worlds, using new hardware, or new interfaces.

Anu Duggal, Founding Partner at Female Founders Fund

With the rise of the sober curious movement, we invested in Kin Euphorics, offering consumers a sexy option to an alcoholic drink, creating a social experience around a non-alcoholic beverage that doesn’t exist in the market today. With beer sales decreasing five years in a row, brands like Heineken are offering alcohol-free alternatives catering to this growing audience.

With the decline of religion, we have seen the rise of what we call the “rise of the alternate community.” Consumers are looking for ways to connect online and offline based on specific interests. Examples of this in our portfolio include The Wonder, a membership model for familyhood, Peanut, a social network for modern motherhood, and Co-Star, an astrology app.

Where VCs are looking for voice startup investments

Led by Amazon’s Alexa, smart speakers’ install base is expected to reach 200 million units worldwide by 2020. A quarter of Americans over the age of 12 own a smart speaker, and the majority of those users have more than one device in their home. Moreover, Apple could sell 50 million of its Airpods this year (generating $8 billion in sales) as Bluetooth earpieces explode in popularity.

For the market penetration of this hardware, the app ecosystem remains limited in terms of mainstream adoption. Podcast production and consumption has exploded, but they don’t take advantage of smart speakers and headphones as interactive devices. Even though there were 57,000 Alexa skills available at the end of last year, most people are using smart speakers mainly to check the weather, check the news, ask simple questions and play music.

If voice is a new operating system, where are the opportunities to build giant companies on top of it?

To get a better sense of how the smart money views this market, I asked five VCs who have spent the most time in this space to share which types of startups have captured their attention:

  • Matt Hartman, Partner at Betaworks Ventures
  • Nicole Quinn, Partner at Lightspeed Venture Partners
  • Paul Bernard, Director of the Alexa Fund at Amazon
  • Ann Miura-Ko, Partner at Floodgate
  • Jordan Cooper, Partner at Pace Capital

Here are their responses:

Matt Hartman, Partner at Betaworks Ventures

The most recent wave of audio was about constant connectivity and streaming, and we invested in Anchor, Gimlet, and other audio-first businesses that would thrive in the podcast renaissance. For the next wave of audio, we’re focused [on] three broad categories: personalization, new behaviors/new interfaces, and monetization. Personalization means both utilizing location, Apple Watch, and other data to create magical audio experiences and customized audio content, but also advances in generative content like Resemble.ai and Descript that can create custom audio. 

In terms of new behaviors/new interfaces, people are leaving their Airpods in longer, which means there may be an opportunity for “Airpod-first” product design. Finally, as audio becomes an industry, monetization will be improved and also re-thought: subscription products such as Shine and Headspace are interesting in the context that if they don’t really work as ad-supported podcasts, and they are packaged in such a way that people are willing to pay a monthly or annual subscription.

Nicole Quinn, Partner at Lightspeed Venture Partners

We are in between platforms and it’s not clear what the next platform will be. VR and AR are options, but I believe voice will be the next major platform with mass adoption. The biggest hurdle right now is discoverability which in turn leads to engagement and retention issues. This was the same for mobile before the App Store allowed us to discover new apps. We need the same for voice.

We will then see voice move from a music and list creation tool to one which quickly becomes part of popular culture around shopping, games, travel, meditation, etc. Leading audio apps such as Calm, the meditation and sleep app, are already set up to take advantage of the move to voice.

Paul Bernard, Director of the Alexa Fund at Amazon

Alexa got its start in the home, but we knew early on that bringing this experience to customers outside the home would become important. Our investments in companies like North (smart glasses), Vesper (power-efficient microphones) and Syntiant (power-efficient AI chip) were inspired by this vision, and reflect the idea that ambient computing is becoming part of daily life.

These companies are also helping create the surface area for interactive entertainment and information services, such as Drivetime’s trivia games (we are an investor there too), and social ones like TTYL, which enables friends wearing earbuds to maintain “audio-presence” with each other throughout their day while they multi-task. We also expect to see innovation in how voice can help seniors aging in place — our recent investment in Labrador Systems, which builds assistive robots, is a good example of this trend.

Lightspeed’s Jeremy Liew is on the hunt for always-on media startups

Perhaps best known for a career-making seed investment in Snapchat, Lightspeed partner Jeremy Liew is a leading investor across media and entertainment, making bets on startups like Cheddar, Giphy, HQ, SpecialGuest, Mic, Beme, Playdom, Duta and Flixster.

I spoke to him earlier this week about how he assesses the market for media startups, which led into a discussion about “always-on” forms of entertainment that add stimulation to a person’s environment, instead of commanding their full focus.

Here’s the transcript of our conversation, edited for length and clarity:

Eric Peckham: Do you have a consistent framework for evaluating potential investments?

Jeremy Liew: Our perspective is that consumer technology is now more about the consumer side than the technology side. It’s really more about pop culture than new innovations in technology. 

When we are assessing a consumer investment we ask ourselves, “does this have the potential to become part of pop culture?” One way to think about it is whether people who don’t use the product will still become familiar with what it is. Like how you can understand a reference to “Game of Thrones” even if you don’t watch it. 

Another key question is, whether there is a scalable, repeatable way for the product to reach its audience. That can be advertising, it can be word of mouth, it could be through social channels.

We also asked ourselves, “is this product going to build a new habit?” and we assess whether the entrepreneur has a unique insight into both why this is happening and why it’s happening now.

Your colleague Alex Taussig told me you have an overarching “future of TV” thesis that’s guided a number of your investments. Tell me about that thesis and how it filters opportunities in the media & entertainment space for you.

I think you can split what used to be called TV into two core use cases: “TV as entertainment” and “TV as company.”

“TV as entertainment” is most of what Netflix, Amazon, Apple, HBO, and similar companies have been focused on. It is high-production quality entertainment you have to pay attention to. Think shows like “Game of Thrones,” “Succession,” “Orange is the New Black.”

Then there’s another classic category of TV — “TV as company,” which is stuff that’s on while you’re doing something else. You’ve got the morning show on while you’re getting the kids ready for school or you’re getting ready to go to work. That’s how you get the five hours of TV viewing per day that Americans average.

TV as entertainment has to be so good that you choose to watch it over doing anything else; TV as company you just have to not choose to turn it off.

The vast amount of attention to the move to video — with subscription video on-demand (SVOD) and so forth — has been on TV as entertainment. There are hit shows that will attract people to Netflix, or to HBO Go, to Disney+. But what causes them to stay as a subscriber after they binge-watched all the way through the stuff that brought them in the first place?

That tends to be the TV as company content. If you actually look at hours watched in television, no one is tuning in to catch the latest episode of “Shark Week” — it is just what’s on. Think about the TV Guide grid: every genre, every channel will likely have a mobile native equivalent.

Some of these already exist. ESPN — it’s a channel where men watch the best competitors in the world play the sports they used to play when they were in high school and then they talk about it with their friends. Twitch is a place where men, mostly, watch the best competitors in the world play the games they used to play when they were younger and talk about it with their friends.

Israeli seed fund Remagine is financing media’s AI revolution

While large entertainment companies scramble to catch up to streaming content platforms, more fundamental upheaval is headed their way as a result of technological advances in artificial intelligence and 5G. 

Former ProSiebenSat.1 executive Kevin Baxpehler (based in Tel Aviv) and former Google Ventures partner Eze Vidra (based in London) launched Remagine Ventures earlier this year with a $35 million fund that bridges the gap between technologists at the forefront of change and the largest owners of content.

Backed by a roster of multi-billion-dollar media companies in Europe, Asia and the U.S. as its limited partners, their firm operates independently (and focuses on financial return) but aims to provide strategic value to portfolio companies and insight into the future for its LPs. Vidra referred to it as “a multi-corporate Google Ventures type of model.”

The firm’s focus on entertainment technologies has a B2B bent, with a geographic focus on Israel as its primary hub and with most of its initial portfolio selling to enterprise media companies. That makes Remagine’s ability to guide entrepreneurs through the halls of traditional media giants highly relevant; it also means it can gauge whether traditional media companies are likely to buy a startup’s product before they invest.

I spoke with Baxpehler and Vidra to learn more about their playbook and why they believe a wave of entertainment tech companies is about to come out of Israel. Here’s the transcript of our conversation (edited for length and clarity):

Eric Peckham: Are there specific investment theses within entertainment that you are hunting for startups in?

Kevin Baxpehler: Our investment thesis is based on two main drivers: new advancements in so-called AI technologies — specifically deep-learning, computer-vision and NLP — coupled with new consumer trends such as esports, visual search, and engaging with computer-generated imagery (CGI) like Lil Miquela. 

We believe that recent technological developments such as GANs (generative adversarial networks), coupled with new powerful computing power like new microprocessing chips and 5G, will change how brands, consumers, and stars/influencers will all interact. It creates tremendous opportunities to invest. 

Eze Vidra: Remagine Ventures invests independently in seed and pre-seed startups at the intersection of entertainment, tech, data and commerce. Seed investing is particularly hard for corporates to do directly (because of a combination of reasons including speed, signaling risk and the challenges of deal flow for corporates) so we specialise at that stage by sourcing real time feedback from the market. 

We are seeing industries and disciplines converge and find the intersections to be the most ripe areas of opportunity. For example, content + commerce, AI + entertainment, gaming + live stream tech giving us esports as a cultural phenomenon changing consumer behaviour.

Give me some examples of what startups at these intersection points will look like.

Vidra: The two core tenants of our thesis are 1) changing consumer behavior — for example, how esports is moving young viewers to engage with gaming — and 2) new technologies that make new forms of entertainment possible, primarily driven by AI.

Our portfolio company Syte is an image-recognition and computer-vision company that recognizes the products inside images and videos with a very high degree of accuracy. They are working with top retailers globally and Samsung selected them to power the Bixby assistant and is rolling them out globally. It’s been tried before, but the difference with Syte’s product is the level of accuracy. 

We invested in HourOne, which is a synthetic video company using generative adversarial networks to generate video without the camera. It has multiple use cases, from reducing the cost of video production to programmatic video, to text-to-speech to gaming. 

Another example is Vault, which uses deep learning to predict the success of scripted projects, whether it’s movies or TV shows down to the box office opening Rotten Tomatoes scores, the probability of there being a season two, the demographics that are most impacted, etc. So bringing a more data-driven approach to marketing films and shows.

Being vertically-focused means that we can attract relevant dealflow from both entrepreneurs and co-investors. As we evaluate startups, we look for interesting teams that are leveraging new technology (or taking an interesting consumer angle) that can scale and we focus on helping them open doors internationally. 

To what extent is your interest focused on startups selling their technology to enterprise media companies versus startups building tools for the broader landscape of small content creators?

London’s top consumer VCs share which trends they’re tracking

With 72 unicorns created since 2009 and $8.7 billion in venture funding last year, the UK is Europe’s leading startup hub.

Although it remains uncertain how Brexit will impact startups’ ease of recruiting and rapid scaling, initial pains are unlikely to displace London from its position as a global center for finance, media, retail, and technology.

As UK-based startups reach $1 billion (~£800 million) valuations at a rate of one per month, according to data from Dealroom, VC firms have raised $3.5 billion in new funds to fuel the next wave of investments.

Interested to learn where that capital could flow, I asked nine of London’s top consumer-focused VCs to find out which specific trends they’re using to identify startup investment opportunities:

  • Julia Hawkins, Partner at LocalGlobe
  • Lars Fjeldsoe-Nielsen, Partner at Balderton
  • Sonali De Rycker, Partner at Accel Partners
  • Christian Dorffer, Partner at Sweet Capital
  • Danny Rimer, Partner at Index Ventures
  • Reshma Sohoni, Managing Partner at Seedcamp
  • Niall Wass, Partner at Atomico
  • Paul Murphy, Partner at Northzone
  • Nic Brisbourne, Partner at Forward Partners

Their responses highlighted the diversify of funding interests in the ecosystem, but also show that banking, consumer health, transport, direct-to-consumer brands, and social entertainment remain hot areas.

Julia Hawkins, Partner at LocalGlobe

“I’m very focused on the healthtech sector and within consumer health, I’m particularly interested in the potential for digital therapeutics to enable people to gain control over habits and treat certain chronic conditions such as mental health. 

We’re thinking deeply about transportation, we’re already investors in Citymapper, Beryl and Voi and see the huge potential to improve how people move around cities and influence how urban centers are planned, all while reducing pollution.  

On that topic, we’re watching the climate change debate closely and I’m heartened by the fact that people everywhere are becoming wholly committed to reducing waste. Companies that can produce truly circular products for our families, homes and places of work I think will do well.

It’s an incredibly interesting time in media with titanic worlds of video, gaming and music are shifting and I believe in the transformative power of games, music and immersive experiences — TikTok and Fortnite show just how powerful these can be and I believe new platforms such as Playdeo will make consuming media and entertainment much more active experiences in the future.”

Lars Fjeldsoe-Nielsen, Partner at Balderton

“We are excited about the disruption within the European transportation sector, where we’ve seen new types of vehicles, like e-scooters from VOI, and amazing advances in autonomous mobility solutions. Time is up for car ownership in many city centers and competition is fierce for environmentally-friendly alternatives. This creates an exciting opportunity to use tech to improve public transport options and to leverage the sharing economy which Citymapper offers, as well as overhaul the car hire sector as new players like Virtuo are aiming to do.

We are also impressed by the continued innovation in the financial sector. We are long-time investors in fintech and have backed Revolut and GoCardless, amongst others. Traditional banks and financial incumbents are battling fragmented and outdated technology stacks to adapt to rapidly changing consumer demands, which creates a huge opportunity for startups.”

Sonali De Rycker, Partner at Accel Partners

“We’re excited about three key trends in consumer tech. The first is fintech, for which the UK has created a very supportive environment. A few large businesses are being built from London, like Monzo, buoyed by new rules written around retail banking and next generation financial services as well as huge, unmet customer demand.

The second is healthtech. Healthcare is a large and untapped opportunity plagued by rising costs for providers and deteriorating patient experience. We are seeing a few platform companies that are finding ways to successfully solve these problems by providing digital healthcare to consumers, like Kry out of Sweden.

Here’s where top gaming VCs are looking for startup opportunities

With cross-platform experiences like Fortnite and PUBG, in-game socializing environments, and subscription-based cloud gaming services from Playstation, Google, Amazon, and others, the gaming industry is entering a new era beyond mobile.

These days, the industry is at the center of social media and entertainment trends; gaming is expected to earn $152 billion in global revenue this year, up 9.6% year over year. 

Given my recent writing on Unity, the most-used game engine, and ongoing research into interactive media trends, I wanted to find out how top gaming-focused VCs are assessing the market right now. I asked ten of them to share which trends they are most excited about when it comes to finding investment opportunities:

  • David Gardner, Partner at London Venture Partners
  • Henric Suuronen, Partner at Play Ventures
  • Samuli Syvähuoko, Partner at Sisu Game Ventures
  • Jay Chi, Partner at Makers Fund
  • Peter Levin, Managing Director at Griffin Gaming Partners
  • Gigi Levy-Weiss, Partner at NFX
  • Ethan Kurzweil, Partner at Bessemer Venture Partners
  • Jonathan Lai, Partner at Andreessen Horowitz
  • Blake Robbins, Partner at Ludlow Ventures
  • Jon Goldman, General Partner at GC Tracker & Board Partner at Greycroft Partners

Amid the mix of predictions, there were several common threads, such as optimism about the rise of games as broader social platforms, opportunities to invest directly in new studios, and skepticism about near-term investments in augmented or virtual reality and blockchain.

Here are their responses.

David Gardner, Partner at London Venture Partners

“PC Games are back. Great place to start new IP to then migrate a success to multiple platforms. There is more innovation in business models and more open distribution on PC to facilitate audience growth without the punishment of mobile CPIs.

VR & AR remain out. We stood away from VR in the beginning and extend that to AR while the user experience for games remains a disappointment. Let’s hope those new Apple glasses do the trick!

Crypto remain a theological war zone, but honestly everything on offer has been available in the cloud world, but the real consumer benefit isn’t showing up.

We love games that are expanding audience demographics and are sensitive to less hardcore audiences.  For example, women players are estimated to account for 1 billion gamers.”

Henric Suuronen, Partner at Play Ventures

“At Play Ventures, we believe we have just entered the golden era of mobile gaming. Who would have believed 10 years ago that Nintendo and games like Fortnite and Call of Duty would all be on mobile. Mobile is not just a games platform anymore, it is THE games platform of choice for casual and core players alike. Consequently, in the next 2-3 years we will invest in 30-40 mobile games studios across the globe.”

Samuli Syvähuoko, Partner at Sisu Game Ventures

“We at Sisu Game Ventures have been investing in many sectors since 2015 including free-to-play mobile games (especially big here in Finland), VR, AR, PC, console, instant messenger, hypercasual, audio and most recently cloud-native games as well. In addition to game studios, around a third of our investments are into games related tech/infrastructure. 

We’ve so far not dipped our toes into blockchain or eSports and our appetite for doing more investments in VR and AR is nil. To me, the most interesting mega trends lie with the promise of cloud gaming when utilized to its full potential. Another term that encapsulates my excitement is games-as-a-social-hobby. Put this and the extreme accessibility of the cloud together and you’ll have a game with revolutionary potential.”

Jay Chi, Partner at Makers Fund

“We are looking closely at ‘Gaming as Media’ related content and platforms — the emergence of new interactive experience centered on ‘viewers as participants.’ Gaming as social media falls under this thesis. We are also looking for MMO and Metaverse enablers given increased demand for specialized, scalable and affordable technologies that empower lean startup teams to create and operate large-scale worlds and novel gameplays. 

We also see potential for new start-ups to emerge in hypercasual games with midcore/social meta — no one has truly cracked this genre yet.”

How Unity built the world’s most popular game engine

What do BMW, Tencent, Pokémon Go creator Niantic, movie director Jon Favreau and construction giant Skanska have in common? They’re all using the same platform to create their products.

Founded in a small Copenhagen apartment in 2004, Unity Technologies’ makes a game engine — a software platform for building video games. But the company, which was recently valued around $6 billion and could be headed toward an IPO, is becoming much more than that.

“Unity wants to be the 3D operating system of the world,” says Sylvio Drouin, VP of the Unity Labs R&D team.

Customers can design, buy, or import digital assets like forests, sound effects, and aliens and create the logic guiding how all these elements interact with players. Nearly half of the world’s games are built with Unity, which is particularly popular among mobile game developers. 

And in the fourteen years since Unity’s engine launched, the size of the global gaming market has exploded from $27 billion to $135 billion, driven by the rise of mobile gaming, which now comprises the majority of the market.

Unity is increasingly used for 3D design and simulations across other industries like film, automotive, and architecture and is now used to create 60% of all augmented and virtual reality experiences. That positions Unity — as Facebook CEO Mark Zuckerburg argued in a 2015 memo in favor of acquiring it — as a key platform for the next wave of consumer technology after mobile.

Unity’s growth is a case study of Clayton Christensen’s theory of disruptive innovation. While other game engines targeted the big AAA game makers at the top of the console and PC markets, Unity went after independent developers with a less robust product that was better suited to their needs and budget. 

As it gained popularity, the company captured growth in frontier market segments and also expanded upmarket to meet the needs of higher-performance game makers. Today, it’s making a push to become the top engine for building anything in interactive 3D.

This article is part of my ongoing research into the future of interactive media experiences. This research has included interviews with dozens of developers, executives, and investors in gaming and other industries, including interviews with over 20 Unity executives.

Founding

Unity was founded in Copenhagen by Nicholas Francis, Joachim Ante, and David Helgason. Its story began on an OpenGL forum in May 2002, where Francis posted a call for collaborators on an open source shader-compiler (graphics tool) for the niche population of Mac-based game developers like himself. It was Ante, then a high school student in Berlin, who responded. 

Ante complemented Francis’ focus on graphics and gameplay with an intuitive sense for back-end architecture. Because the game he was working on with another team wasn’t going anywhere, they collaborated on the shader part-time while each pursued their own game engine projects, but decided to combine forces upon meeting in-person. In a sprint to merge the codebases of their engines, they camped out in Helgason’s apartment for several days while he was out of town. The plan was to start a game studio grounded in robust tech infrastructure that could be licensed as well.

Helgason and Francis had worked together since high school, working on various web development ventures and even short-lived attempts at film production. Helgason dropped in and out of the University of Copenhagen while working as a freelance web developer. He provided help where he could and joined full-time after several months, selling his small stake in a web development firm to his partners. 

According to Ante, Helgason was “good with people” and more business-oriented, so he took the CEO title after the trio failed to find a more experienced person for the role. (It would be two years before Ante and Francis extended the co-founder title and a corresponding amount of equity to Helgason.)

They recruited a rotating cast to help them for free while prototyping a wide range of ideas. The diversity of ideas they pursued resulted in an engine that could handle a broad range of use cases. Commercializing the engine became a focus, as was coming up with a hit game that would show the engine off to its best advantage; for indie developers, having to reconstruct an engine with every new game idea was a pain point that, if solved, would enable more creative output. 

Supported by their savings, a €25,000 investment from Ante’s father, and Helgason’s part-time job at a café, they pressed on for three years, incorporating in the second year (2004) with the name Over The Edge Entertainment.

The game they ultimately committed to launching in spring 2005, GooBall, was “way too hard to play,” says Ante and didn’t gain much traction. Recognizing that they were better at building development tools and prototypes than commercially-viable games, they bet their company on the goal of releasing a game engine for the small Mac-based developer community. Linking the connotations of collaboration and cross-compatibility, they named the engine Unity.

As Sinai Ventures returns first fund, partner Jordan Fudge talks new LA focus

At age 27, Jordan Fudge is quietly making a splash in the VC world.

Fudge is the managing partner of Sinai Ventures, a multi-stage VC fund that manages $100 million and has more than 80 portfolio companies including Ro, Drivetime, Kapwing, and Luminary. His 2017 investment in Pinterest — a secondary shares deal from his prior firm that was rolled into Sinai when he spun out — will have returned the value of Sinai’s Fund I by itself once the lockup on shares expires next week.

Fudge and co-founder Eric Reiner, a Northwestern University classmate, hired staff in New York and San Francisco when Sinai launched in early 2018. Today, they’re centralizing the team in Los Angeles for its next fund, a bet on the rising momentum of the local startup ecosystem and their vision to be the city’s leading Series A and B firm.

Fudge and Reiner have intentionally stayed off the radar thus far, wanting to prove themselves first through a track record of investments.

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Jordan Fudge. Image via Sinai Ventures

A part-time film financier who also serves on the board of LGBT advocacy non-profit GLAAD, Fudge describes himself as an atypical VC firm founder, an edge he’s using to carve out his niche in a crowded VC landscape.

I spoke with Fudge to learn more about his strategy at Sinai and what led to him founding the firm. Here’s the transcript (edited for length and clarity):

Eric Peckham: Tell me the origin story here. How did Sinai Ventures get seeded?

Jordan Fudge: I was working for Eagle Advisors, a multi-billion dollar family office for one of the founders of SAP, focused on the tech sector across public markets, crypto, and eventually VC deals. Two years in, I pitched them on spinning out to focus on VC and they seeded Sinai with the private investments like Compass and Pinterest I had done already, plus a fresh fund to invest out of on my own. It was $100 million combined.