Finding the Right Investors: Advice from our Digital Play Portfolio
The global gaming market has exploded in recent years, triggering a dramatic increase in funding. We asked the Founders of the most recent additions to our digital play portfolio for their reflections and advice in working with investors.
The global gaming market has exploded in recent years, with revenue doubling in the last decade, increasing from $80 billion in 2010 to over $160 billion in 2020. This has triggered a dramatic increase in funding, with venture-backed gaming companies having raised nearly $5.9 billion between January and August this year, which surpassed the total raised by in 2020 and 2019. In light of this, we asked the Founders of the most recent additions to our digital play portfolio for their reflections and advice in working with investors. Hear from Scott Reismanis, Founder & CEO of mod.io, and Benjamin Devienne, Co-Founder & CEO of Piepacker.
What unique opportunities and hurdles do gaming companies face when it comes to fundraising?
Scott: The gaming industry is hit-driven. The key is to develop and present a point of difference as a target for funds, built around a business and processes which are repeatable and demonstrate sustained success. At mod.io, we’ve focused on game UGC because we see a future where mods are how players connect with the games they love. We believe it’s a scalable model that’ll feed into the community and content strategies increasingly being used by studios for monetization and engagement.
Benjamin: In the video game industry, there are a combination of challenges businesses will face when they get started, many of which can seem hard to dissociate and tackle at first. From fierce competition to high expectations from users, it is undoubtedly becoming harder and harder to stand out with a unique idea which bears the potential to become an instant sell for investors. At Piepacker, our obsession in the first year was to create a bullet-proof pilot and, in parallel, assemble a credible team of talents to gain noticeable velocity quickly and drive the team’s energy.
What advice would you give a gaming company that is currently looking for investors?
Scott: Never start the fundraising process cold, you should be building your networks, investor relationships, and pitch, well in advance. Find your early champion and go in confident to all negotiations knowing you have got a strong option to pursue, and others will need to beat it to catch your attention.
Benjamin: Make sure you find a partner that you believe will be able to help your business to reach its fullest potential. This was the driving force behind our partnership with LEGO Ventures.
Developing a video game platform, like Piepacker, is an exhilarating journey that comes with many important and tough decisions, from choosing key games and features to building out a solid business model. We met many potential investors before LEGO Ventures and what ultimately swayed our decision was the team’s understanding of our product and their natural affinity with our mission: building the most accessible social gaming platform online.
How do you think about explaining the metaverse opportunity in the context of your fundraising?
Scott: My advice is to always be genuine; you must believe in what you are pitching. Don’t latch onto current trends and throw around buzzwords if it doesn’t align with your vision because you’ll attract the wrong kinds of investors for you. We love the idea of enabling mini-metaverses, by giving game studios all the tools they need to run a collaborative ecosystem of their own. We don’t necessarily buy into the notion that there has to be “one metaverse to rule them all”. Everyone has different tastes and being able to choose which mini-metaverses you participate in seems like an awesome thing to us.
We believe in this story because no matter how the metaverse takes shape, UGC will be a core building block which provides personality, authenticity, and scale. Encouraging creativity and allowing freedom of expression through UGC is something all metaverse experiences should be striving to do. We’ve barely scratched the surface of what we believe UGC will become. Helping studios confidently take that step and work in unison with their playing community to innovate, is a challenge we’re excited to take on.
Any final pieces of advice on fundraising or reflections on choosing the right investment partner?
Scott: Perception really matters. If you’re a gaming company it may not make sense to add a fintech specialist VC with no prior gaming experience to your cap table. Align yourself with investors you respect and can build a strong long-term relationship with. Focus on those in the industry who have earned respect and are trusted to make smart decisions. It will help a lot in future rounds.
Benjamin: Trust is vital, and plays a major role when selecting which investors you feel should work with your team. Some of our early investors naturally renewed their trust during our Series A and that’s a key argument for our team: long-term stability helps long-term decision making – a luxury in this ever-changing ecosystem!
At LEGO Ventures, we’re thrilled to be working with the talented teams that are driving the future of creativity and digital play forward. Explore more of our blog to learn about our investment in Piepacker, and our investment in mod.io.