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The Need for Speed12 October 2014
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
WHO?
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– Advisor and Investor based in London for over 15 years
– Strong game sector experience, knowledge and relationships
– Advised on transactions in the game sector with a total value of over $1 billion advising many companies including:
– Shareholder in:
Who am I?Paul HeydonPartner,LVP
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
– Seed fund focused on investing in game startups in Europe
– Partners:
• David Gardner – 12th employee at
• David Lau-Kee – Founder of
• Me
– Backed by & Don Mattrick (CEO of Zynga)
– Investor in:
Who is LVP?
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WHERE IS THE GAME SECTOR HEADED?
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Market Size
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2012 2013 2014 2015 2016 2017
10
20
30
40
50
60
70
80
90
100
$70.4
18%
$75.5$81.4
$88.4$95.2
$102.9
23%27% 30%
32%34%
$12.7 $17.6$21.8 $26.3
$30.7$35.4
$Bn
SHARE
SHARE
SHARESHARE
SHARE
SHARE
MOBILEMOBILE
MOBILEMOBILE
MOBILE
MOBILE
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL GAMES MARKET MOBILE GAMES MARKET
$100 bn total addressable market for Video Games by 2017 Fastest growing area is mobile; $35bn market by 2017
Source: Newzoo
Key disruptions in the game sector»Platform – From Console/ PC to Tablets/ Smartphones
»Shift to mobile happening way faster than many expected
»Business Model – From Paid to Free»100% of the top 10 grossing apps in the US iOS Appstore are free apps»90% developed by VC backed companies
»Operations – From Products to Services»Constant need to update and analyze»Game developers need multiple types of third party services from analytics to advertising to payment
»Small is the new Big – From Big Publishers to Small Developers»Low development costs and faster development to minimum viable product for Launch enabling millions of people to make games
»Speed Matters – From Game Idea to Launch»Game development is planned in # of months vs # of years»Decision making must be fast
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
European Gems; Unicorns don’t exist
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
• Founded in May 2009 by Notch in Sweden with launch of
• Bootstrapped; never raised money
• 2013: $289m Rev & $125m Op Income
• Sept/14: Acquired by Microsoft for $2.5bn; just over 5 years since starting
• Notch is the first billionaire in game sector in Europe
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
• Founded in Aug/03 in Sweden with skill games
• 2005 – raised $43m from Apax & Index Ventures
• Pivot to casual games on Facebook H2 2011
• Launch on mobile H2 2012
• 2013: $1.9bn Rev & $825m EBITDA
• Mar/14: IPO at $7.1bn value; now $3.9bn
• Created over $1.2bn in cash/share value for remaining founders
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
• Founded in Aug/04 by founders in Copenhagen after game they developed failed
• Bootstrapped until Series A of $5.5m with Sequoia in Oct/09; I met them in early 2008 with 10 guys in a small office
• July/11 Series B of $12m• Made 4 acquisitions to date; 3 in 2014• Now: 450 employees, 18 offices, 600k+ monthly
users; the most popular game engine in the world and expanding into retention, social sharing, analytics and ad services
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
• Founded June/10 in Helsinki, Finland with team of 6 to make high quality browser games; 160+ employees now
• LVP invested in Oct/10 with Initial Capital & Jari Ovaskainen• May/11 Raised Series A of $12m with Accel Partners• June/11 Pivot to mobile• Game launches: June/12 Hay Day, Aug/12 Clash of Clans,
Mar/14 Boom Beach• Mar/13 - $130m secondary w/ Index, IVP & Atomico• Oct/13 – 51% sale to Softbank/ Gungho for $3bn; 3 years
since LVP invested• 2013 - $892m revenue, $464m EBITDA• One of the fastest growing companies ever; Accel said
faster than Facebook
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SO WHAT DOES THIS ALL MEAN FOR A GAME STARTUP?
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Success in the game sector is defined by:
- number of DAU’s;- revenue size; or
- exit price sizeNOT:
- how much funding you raise
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MASSIVE SUCCESS IS POSSIBLE; EVEN WITH FOCUSSING ON A VERY SMALL NUMBER OF GAMES WITH SMALL NUMBER OF EMPLOYEES
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FOCUS MATTERS; SAY CHEERS TO ALL THE THINGS
YOU SAY NO TO
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SPEED MATTERS TO INVESTORS; IDEALLY WANT BIGGEST RETURN
IN FASTEST POSSIBLE TIME
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CAPITAL EFFICIENCY MATTERS TO INVESTORS;
GAME STARTUPS DO NOT NEED TENS OF MILLIONS TO REACH
SUCCESS
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MAKE GAMES WITH MASSIVE POTENTIAL; THE GAME YOU REALLY
WANT TO MAKE MAY BE VERY DIFFERENT FROM WHAT THE
MARKET WANTS
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
If You Get Strong Traction
• Then investors will call
• You will have luxury of:
– Raising money
– Selling some shares
– All of the Above
– Doing nothing & focussing on your success
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
But
• Dont focus just on your success
– Keep updating your game
• Start developing more games
• Ultimately you need a diversified portfolio
• Success breeds copies
• One game’s strong revenue will not last forever; maybe a long time but not forever
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
WHY INVEST IN THE GAME SECTOR?
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Largest Europe Liquidity Events in Game Sector
Total Value Creation: $18 bn in Europe since 2000; $13.2bn in past 12 months
Source: Capital IQ, Company Filings, Brokers & Press
Note: Including secondary deals
Exit/ IPO Deal Value (USD$ millions)
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
TT GamesBigpoint Playfish
BigpointSN SystemsBizarre Creations EidosMental ImagesCodemastersCriterion
RarePlayJam Funcom
AstrumDigital Bros
Gameloft Mindscape Weka Entertainment Scoreloop
Supercell
Supercell
King
Mojang
NaturalMotion
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Jan/00 Jan/01 Jan/02 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15
WHAT WE LIKE TO SEE IN COMPANIES TO INVEST IN
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+ +
INTELLIGENCE INSIGHT PASSION
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© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
LOW LATENCY IDEAS
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FAST ITERATION
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CURIOSITY
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PORTFOLIO APPROACH
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WE LIKE TO UNDERSTAND WHY PEOPLE LIKE IT
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GOOD CHEMISTRY
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WHY WE DO THIS?
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WHY WE DO THIS
• Frustrated with bad inertia at big companies
• Early investors at Playfish, Unity, NaturalMotion
• Funding for “games” was hard
• Love Europe
• Love Entrepreneurs (that listen)
• Love the industry
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
WHAT YOU SHOULD DO
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© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
“Video games foster the mindset that allows creativity to grow.”― Nolan Bushnell
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
Paul Heydon
London Venture Partners
Email: paul@londonvp.com
Web: www.londonvp.com
Twitter: @pheydon
38© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved
Disclaimer
• This presentation was prepared by London Venture Partners exclusively for the benefit and internal use of Recipient(s) in order to provide some thoughts onfundraising in the game sector. This presentation is incomplete without reference to, and should be viewed solely in conjunction with oral briefing provided byLondon Venture Partners. The presentation is proprietary to London Venture Partners and may not be used for any other purpose without the prior written consentof London Venture Partners.
• The information in this presentation reflects prevailing conditions and our views as of this date, which are accordingly subject to change. In preparing thispresentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all the information available from publicsources or which was otherwise reviewed by us.
© 2014 London Venture Partners LLP Confidential and Proprietary, all rights reserved