Hunting Godzilla - Ben Holmes - Slush 2015

Hunting Godzilla- An Investor’s Perspective on Games -

Ben Holmes, Index Ventures

11/9/15 1Slush / Helsinki / Nov 12th 2015

Slush / Helsinki / Nov 12th 2015

• Founded 1996

• 65 People

• Offices in London, Geneva & San Francisco

• Active at Venture and Growth Stages

• Invest across tech spectrum …

• … but especially active in games and mobile games

Games Portfolio


• Partner based in London Office• Index Ventures since 2002• Most actively invest in online

marketplaces and games• IGN: indexben• [email protected]

About me What I’m playing …


Games is the best but most misunderstood sector within tech


(Mobile) Games – best sector in tech?

Capital Efficiency• Launch on Seed• Scale on Series A

Audience Potential• >1bn mobile gamers

Rollout Speed• Limited localisation• No local presence required

Margins• 50%+ margin achievable• Small teams can support big audiences

Competition• Just a bit…

Monetisation• CC on file / Click to pay• Price discrimination• Multiple business models

Testable

Engagement Potential• All 24hrs attackable• Notification channel• Multiple play patterns• 3yr+ retention possible


RealityMisconception

“…it’s doing well today but the game could be gone

tomorrow…”

Enduring 3+ yrs (and counting) franchises…



Supercell, King, Kabam and others >> multiple games in top 20 top 50 “… they have had one hit

but chances are they will never have another”



“... Investing in games companies is a total

gamble...”

A select few VCs have managed incredible hit rate in the sector


Gaming’s valuation gap

300

12365 44 75 116

Valuation / DAU $

17

30

102.95

1.9642857142857

1

7.6687116564417

2

Valuation / Rev

52nm nm 7 4

100

Valuation / EBITDA

• King & Supercell valued at massive discount to social media businesses

• Zynga’s long shadow…• Zynga was rated in line with social

media platforms• Market is now unduly wary of

games co’s

Valuations are Q3 2015 public valuations for Twitter, Facebook. 2011 IPO Valuation of Zynga and acquisition valuations for Supercell, Whatsapp and King


What next for mobile games?

Audience (MAU)

Mon

etisa

tion

(ARP

DAU)

• King $2bn revenue > 474 MAU / 133 DAU / $0.05 ARPDAU

• Supercell $2bn+ revenue / Smaller audience / higher monetisation

In the next 5 years we will see a “Godzilla” game emerge

Massive Reach > 200m+ DAUHigh Engagement > 40% + MAU/DAUMonetisation > $0.1-0.15 ARPDAU

$10bn revenue / $5bn Profit

• Successful in Asia and the West• Bridging across core and casual


OnboardingD1-7

EngagingD7-30

Loyal BaseD30+

• Pay Upfront• Level Unlocking• Decorative items• Functional Items• Social Currency

• Accelerators• Boosters• Extra Stats & Data• Tournament Entry• Etc…

CPI Features TV OtherMarketing

Acquisition

Conversion & Retention

Monetisation

• What is the pitch to Apple / Google?• What games may look similar?• What do the ads convey about the game?• What does icon & app store imagery convey

about the game?• Appstore > Download conversion• Bounce rate on download = expectation

mismatch• Is it comprehesible / familiar?• Does it look feel and sufficiently new

upfront? • Are there moments of delight?• Is there always something to achieve in a

session, day, week, month?• User vs. Content or User vs User?• How is editorial and storyline added?• What are the social structures?• What is the update cycle?• Does monetisation support retention?• Is monetisation abusive and harms retention?

Evaluating Games Concepts – Key Questions


Evaluating Games Concepts – “the Model”Metrics Economic Viability


Evaluating games teams

• Passionate about games not “tourists” entering market chasing $

• “Telepathic” connection between key people• Art, Dev, QA,

Community, Design, Analytics

• Lots of mistakes and scars

• Ideally long history of working together

Gaming DNA

• In depth understanding of latest game design principles

• Great at gathering and understandng metrics

• Make the right tech choices to enable scaling

• Fast design and QA cycles

TechnicalTalent

• Focused on creating a new experiences for consumers

• Not afraid to make creative leaps

Creative Risk Takers


Europe can win

• We are already ahead - many winners were built from Europe• King, Supercell, Mojang, Goodgame, Nordeus, Rovio,

Playfish, etc.

• Most Silicon Valley companies and entrepreneurs are “tourists” in the gaming sector

• Winning is about quality of team and product, not about who can raise most money fastest


Thank You

Please get in [email protected]

Technology

Hunting Godzilla - Ben Holmes - Slush 2015