Investment Thesis Summary
- Dual Structural Tailwinds: Gaming as a market has matured greatly over the past 20 years, evolving into a $200B/year market globally. At the same time, blockchain technologies have now come of age and are enabling new use cases to emerge. Community Gaming benefits from the pace of progress of both of these trends, most easily seen in its initial automated tournament product.
- Agnostic to Hits: Predicting what and when a game will be popular is incredibly difficult, similar to estimating box office success (back when people went to the movies). We love that the vision for Community Gaming is independent of any one hit game, studio, or even hardware platform, and also sidesteps the temporary problem of there being subscale and lower quality cryptonative games (for now).
- Experienced and Dedicated Team: Chris’s background at ConsenSys but also as an organizer of the Esports scene in New York combines well with COO Evany’s direct competitive experience helping manage a top DOTA 2 team. More importantly, the team is passionate and convicted in the structural trends that we’ve walked through, and the role Community Gaming can and will play.
We are thrilled to announce that CoinFund is leading Community Gaming’s Seed Round. The time is right for blockchain technologies to further elevate the many aspects of gaming experiences which have already matured from a small niche to be a broadly appealing $200B+/year industry over just 2 short decades. Specifically, we are excited about Community Gaming’s hybrid team DNA spanning crypto and esports and their product roadmap for organizing and empowering all gaming communities (not just for blockchain native games). All this while side-stepping the single title risk of investing in a specific game or studio.
As a long time gamer, I feel qualified to share my views on this vertical. My interest in gaming, specifically PC gaming, predates even Satoshi’s creation of Bitcoin. What I know will be a lifelong passion started Diablo II, Blizzard’s hit action-RPG in the early 2000’s. I soon graduated to Half Life 2 and its associated family of games and even spent time in popular MMO’s like World of Warcraft and EVE Online. My experiences since then have spanned genres and hardware platforms up through today, where I still enjoy spending my spare time playing Call of Duty: Warzone to catch up with distant friends, or putting more serious effort into Escape from Tarkov, an ultra-realistic shooter, or Magic the Gathering: Arena, where I’ve been a globally ranked player on the seasonal Mythic ladder. This background underscores my extreme conviction that blockchain technology is on a collision course with gaming and that incredible opportunities for value creation are finally within reach. Community Gaming’s product squarely aligns with the clear trend of the blockchain and gaming intersection. As it is now the right time, CoinFund is now expanding its exposure to the secular theme of blockchain based Gaming in a measured but deliberate way.
The first element of the Community Gaming opportunity that we appreciate is the unique mix of gaming and crypto experience in the founding team; Chris, Evany and Hayder. Chris hails from ConsenSys, where he worked on the investments and strategy teams with a specific focus on the intersection of blockchain and gaming — all while being an angel investor and organizer for the New York-based esports and gaming business world. Evany contributed to the early success of the OG Esports organization as a co-founder and COO, which won the crowd-funded Dota 2 International event in back-to-back years and earned a combined ~$27M. Lastly, Hayder overlapped with Chris at Consensys where he was a full stack developer, marrying his blockchain programming experience with previous engineering roles at traditional web2 companies. Not all teams that we speak with can claim to have the combined mix of experience, passion and network that is effect here — and we are especially confident that the vision for what CG can become is both personally and professional compelling for all of the founders, and likely a source of inspiration that they can draw from in all market environments. We also note the growing list of partnerships, both formal and informal, with large gaming influencers as part of Community Gaming’s universe, whether as competitive talent, live casters (think sports commentators), and tournament participants. The interactions between these individuals formally and informally and on behalf of Community Gaming will only further accelerate the movement of the platform towards the more mainstream and enormous addressable market of users.
The second aspect of our thesis here is the expansive potential future of the product and platform. As part of the initial due diligence, I signed up and participated in multiple tournaments myself. I am amazed at the frontend and backend progress over just the last few months, not to mention the ever-larger prize pools, gaming content creator attention, and sponsorship partners that are starting to accumulate on the platform. The initial tournament organization technology (including not only the bracket creation, tournament progress reporting, and post-tournament prize splitting and payment) was already extremely compelling and differentiated, but we are also enthused by the future possibilities for engagement and monetization that open up once larger flywheel of audience and participation accelerates further. Specifically, we align with Chris and the team’s embracing of the multichain and multilayer future, with the recently announced Polygon partnership, but also soon to extend to others like BSC and FLOW to enhance the onboarding and payout experience in a way that feels seamless to users. Ultimately, we believe the early movers in the blockchain gaming space that create a sticky user experience will be best positioned to capture their fair share or more of the market growth that is still on the come. Community Gaming’s unique value proposition of activating and engaging with the historically underserved non-professional gamers with some desire for competition is just the start of a much larger platform opportunity.
The third major appeal for Community Gaming is the platform’s agnosticism to which games are popular, sidestepping the concentration risk of funding a studio, as well as timing risk of when cryptonative games can catch up to how fun and engaging web2 games currently are. Currently, there’s a deep chasm between what mainstream gamers demand in terms of quality, and what cryptonative startups, due to limited resources, are able to offer up. Think about the contrast in quality between any of 2020’s top-selling games like Black Ops: Cold War, or The Last of Us: Part II, versus even the most popular cryptonative game like Axie Infinity in terms of tuned gameplay and multiplayer balancing, plot and story quality, visual fidelity, backend server infrastructure, anticheat integration, art and animation assets. The gap also extends to the difference in player counts between the ~100K active marketplace participants on Axie (a leading cryptonative game) and the ~100M MAUs of a multiplayer mainstay like Activision’s CoD: Warzone, with proportional differences in the relative power of the network effects. We believe that this gap is poised to close over the coming years as cryptonative games become more fun (Skyweaver, Chain Monsters, Mirandus, Illuvium etc. all have ambitious goals) and traditional studios build upon early successes with blockchain integrations, but in the meantime, we are more bullish on agnostic, platform-based plays like Community Gaming.
As with any investment, there are risks, but we felt they were outweighed by the market opportunity. A high-priority challenge facing Chris and the team near term is the need to grow the user base quickly, but this risk was offset by the growth-to-date of the platform, accelerating pace of grassroots and content creator-driven growth, as well as the opportunity set for brand-driven sponsorships to drive high visibility tournaments to attract the next wave of users. Similarly, the odds of users routing around the Community Gaming platform and its fee cut are mitigated by the proprietary technology stack that reduces payment, bracket, and other operational friction — just like how web2 services like Uber, AirBNB, and Rover offer enough added convenience and network effects to offset the fees that they charge. Ultimately, similar to the recent breakout success and mainstream appeal of NFTs as a magnet for mainstream adoption, blockchain gaming will soon have its own taste of the limelight given the opportunity for new ownership and economic paradigms to upend an industry that shows no signs of decelerating. While Community Gaming is our first serious engagement with this exciting vertical, we look forward to future opportunities to explore teams solving other related challenges as well!