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Gm!
He’s back.
The legend Akina is returning for another piece today, taking the WASD helm to discuss the state of the venture market from the perspective of a builder.
To help inform it, Akina talked with three giga-brain founders from across the ecosystem.
It’s a different type of article than what we usually publish here on WASD – But I think you’ll like it as much as I did.
However, before we get to it, I want to let you all know that WASD, ggQuest, and [WE] just launched World Sky League!
World Sky League is an onchain, Sky Strife esports league.
It will run from December 6-14, where you’ll have the chance to compete in 2v2 Sky Strife matches to win a cash prize (amount TBD but greater than $1K) and an NFT trophy designed by Bushi!
If you’re interested in participating, you can sign up via this form by December 6 @ 3:00 pm PST!
The league is team-based, so bring a friend.
However, if you want to join but don’t have a teammate, you can still sign up, and we’ll match you with someone!
I’m extremely excited for World Sky League, which (I believe) is a first of its kind as it runs entirely onchain!
You can keep tabs on it at: worldskyleague.xyz
I hope you all participate, and I wish you the best of luck if you do!
Now…here’s Akina’s piece!
Author: 0xAkina
It’s good to see you again, onchain gamers!
It’s me, your favorite nerd: 0xAkina.
As interest in onchain games and autonomous worlds has picked up among venture capital (VC) firms, I’ve found myself wondering:
What’s it like to fundraise as a team building a fully onchain game?
One of the great things about operating in such a small ecosystem (especially one where everyone is very open) is that you can easily talk to teams.
So, to help answer my question, I reached out to several prominent founders, including Tax Cuts from Primodium, Sebastien Guillemot from Paima Studios, and Stokarz from Minters.
Today, I’ll share my key takeaways from these conversations and provide insight into the state of the onchain gaming venture market from the perspective of a builder.
Without further ado, let's get straight to it!
Investor Appetite Is Growing
Until recently, it was near impossible to raise as a fully onchain gaming project.
As Stokarz puts it when describing his experience trying to do so for Minters:
'It was hard to raise in 2022 for a fully onchain gaming company. Investors didn’t see much value in them. Some of them were like: Are you guys building a casino? The idea that you can put a game on the blockchain was…hard to understand.”.
However, the tides are turning.
Investors' appetite for exposure to onchain games is now growing, with several factors driving this sentiment shift:
1. A Few Games Have Shown The Way
Onchain games like Dark Forest found product market fit while helping demonstrate that the sector can create novel experiences.
2. The Tech Has Progressed
The space has made significant strides in developing infrastructure suitable for hosting onchain games and enabling unique game mechanics.
This includes horizontal rollups, engines, zk-proofs, and more.
3. Business Models are Evolving
There is a greater emphasis on building perpetual games and “games a service” rather than products that only monetize at the point of sale (more on this later).
4. Awareness Has Grown
Investors have a greater understanding of what’s happening in the onchain gaming ecosystem, with hackathons helping contribute to this.
This has all translated into an uptick in VC activity, with teams like Proof Of Play, Curio, Argus Labs, Cartridge, and Citadel all raising multi-million dollar rounds, worth a combined $54.4M, in 2023.
Perpetual Games Are In Vogue
A key takeaway from my conversation with Tax Cuts is that investors are excited about “games as a service” and “perpetual games.”
As previously mentioned, “games-as-a-service” (GaaS) refers to video games designed for ongoing updates and content releases tailored to keep players engaged for extended periods.
This model allows developers to continuously refine their game based on player feedback, build an ongoing relationship with their players, and generate recurring revenue through subscriptions or micro-transactions.
An example of an OG perpetual game is the MMO World Of Warcraft (WOW), where players pay a monthly subscription while getting access to periodic expansions.
We’ve yet to see how (or if) this model will be implemented within onchain games.
However, due to its attributes, success in Web2, and the permanence of blockchains, the potential to implement the GaaS model within onchain gaming has helped increase enthusiasm and willingness to invest in the sector by crypto native VCs.
It’s Easier To Raise If You’re Building Infra
Another common thread among my conversations is that it’s easier for a project to raise when building infrastructure in addition to a game.
This approach not only focuses on developing engaging gaming experiences but also on creating underlying technological frameworks necessary for their seamless operation.
Sebastien shared his perspective on this trend, stating:
“My feeling for web3 games is that it's an odd spot right now. A lot of VCs see the growth of gaming but are hesitant to bet on a single game (or studio) due to the risks and see game + infra combined plays as a safer bet”.
If we put on our VC hat, it’s easy to see why many think this way.
Investing in infrastructure provides diversification, as instead of relying solely on the success (or failure) of one particular title or team alone, the risk is spread across multiple of them or even entire ecosystems.
For more context, Sebastien made a comparison along these lines on the role of onchain gaming engines that I found to be fascinating:
“Our main thesis on Paima is that onchain game engines derive value more like DEX aggregators than DEXs. That is to say, the more ecosystems you support, the more liquidity (active players) you have. [This is more] like a DEX aggregator, [rather than] a DEX where supporting more ecosystems just fractures liquidity and therefore typically isn't worth the engineering overhead.”
Takeaways and Words Of Wisdom
Overall, based on my conversations, it seems as if the venture market for onchain games is beginning to heat up slowly.
While not voracious, investor appetite is growing, particularly for projects aiming to build perpetual games and infrastructure.
This is very encouraging to see.
However, outstanding challenges remain, such as around the implementation of the GaaS model.
Furthermore, (of course) not everyone can build infrastructure in addition to a game.
To close out, I wanted to leave potential founders with some actionable advice.
One piece of it: If you’re going to raise, do so from a crypto native VC.
As Tax Cuts puts it:
“You'd be better off raising from crypto native firms who understand what building protocols are like, rather than traditional VC firms (or gaming-specific firms unless they have a [dedicated] crypto fund.”)
Thanks for reading, and see you all again soon!
Thanks again to Tax Cuts, Sebastien Guillemot, and Stokarz for their incredibly valuable input in answering my questions and helping me write this article!
Thanks for reading!
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See you all on Thursday!