Today we are thrilled to announce our latest investment – in VR gaming studio Fast Travel Games. This investment is the first for Industrifonden in the gaming space, and also the first in VR.
The gaming industry from a VC perspective
Sweden has historically been the birthplace for quite a few massively successful gaming companies – Mojang, Paradox, King and DICE. If we look at returns generated from the gaming market segment, venture capital is under represented in the gaming segment. That may however not be so surprising – the gaming industry, at least historically, is set up similarly to the publishing, music and film industry – where major gaming companies own a catalogue of IP and have gaming studios (sometimes outside, sometimes their own) producing the games.
In this regard, gaming companies have taken on the role that venture capitalists usually have with companies – which is to enable companies by accepting risk in their investment (and generating returns). And for a good reason – it doesn’t make sense for the content producer to also specialize in pressing DVDs, work closely with distributors, plan the marketing campaigns etc.
We have noticed that in recent years this has started to change. While the major gaming companies are still dominant, and hugely successful, smaller gaming studios are less dependent on the old ways. The market has shifted to empowering the content producers. There is now digital distribution through online stores, who take a cut closer to that of the Google and Apple app stores. Marketing has changed too – the growing dominance of YouTube has made gaming marketing different, and allows gaming companies to market their games directly to potential a billion people audience through one single medium.
Virtual reality moving to mass market and shifting from hardware to software
VR popularized the Head Mounted Displays in 2012, and was bought by Facebook only two years after. Today almost all the dominant Internet players have their VR/AR/MR play – Microsoft, Facebook, Google, Sony, Apple etc. There are further developments on the horizon – Magic Leap being the most anticipated. The growth is massive. Last year the hi-quality HMDs surpassed one million, this year the estimates range from 4-11 million devices (Christmas market being important), expected to grow by at least 100% YoY until 2020.
So far most investments has been into supporting hardware development – which makes sense – you need hardware to run software. With the market growing rapidly and a date for a mass market approaching (let’s say 100 million devices) investments will shift from hardware to software. We expect to see exciting software companies in AR/VR/MR in the upcoming years.
To summarize: with VR we see two things – the mass market approaching, and the shift moving from hardware focus to software focus over the next years. We know that timing the market is important, and we expect the dominant future software players in the VR market to be founded right about now – taking into account that it takes a while to build a successful enduring business.
So, when we met the founders of Fast Travel Games we became very excited. Not only do they fit perfectly well into what we see is happening in the market, but more importantly they are a fantastic team founded by industry veterans from Rovio, EA and DICE. They impressed us with their focus, frugality and passion for the company they’re building and in the speed they were moving, in a market that growing rapidly and changing to their favour. We’re happy to welcome them to the Industrifonden family!
John Sjölander, Industrifonden investment lead for Fast Travel Games