Why Transcend Funds Believe Gaming Investment Opportunities Are Growing

Transcend Fund debuted as a gaming-focused venture capital fund in 2020 and turned out to be one of the top performers among funds launched that year, according to Pitchbook.

Based in San Francisco, the fund doubles down on gaming, benefiting from and the rise of gaming in popular culture. Game platform growth and their monetization opportunities. Transcend has already closed his second fund, with 100% of Transcend I’s LP signed to Transcend II.

And recent reports from McKinsey, Goldman Sachs, Morgan Stanley, and Citibank highlight the key role gaming plays in the multitrillion-dollar potential of the Metaverse.

Transcend Fund I scored in the top quartile of all vintage venture funds in 2020, according to both Pitchbook and Cambridge Associates. And the debut fund’s return on investment exceeded the top 5% benchmark in Q1 2022. This is reassuring considering it’s a scary time for VCs.

In August, Brett Krause was appointed managing director at a venture focused on digital entertainment. He was the former Chief Investment Officer of his FunPlus. Krause was also the former president of JPMorgan Chase China and managing director of early-stage venture his capital firm, PurpleSky Capital. Krause is based in Zug, Switzerland.

“Our fund’s performance has been exemplary,” said Shanti Berger, managing director and founder of the fund. “It has worked very well. We are in the top 5% of funds launched in 2020. We are very happy.”

Krause invests in streaming platforms with Funplus, with a focus on strategic investments such as building studios and licensing intellectual property.

“I’m more interested in being involved in this kind of business,” Krause said. “I like to help, monitor and support portfolio companies. The advantage of this fund is that all partners have experience in game company management and game development.”

Last year, Andrew Shepherd, former president of Kabam Studios, joined Transcend Fund as Managing Director. Sheppard has over 20 years of experience with game companies such as Electronic Arts, Gamespot, Gree and Rakuten Games.

This means that all Transcend fund leaders have experience operating game companies. A 30-year veteran of the gaming industry, Bergel launched the fund in 2020 with a focus on working with seasoned entrepreneurs to cross the boundaries between video games and digital media.

Noting that some analysts estimate the video game industry will generate more than $500 billion by 2028, a recent report from McKinsey and Goldman Sachs puts It points out the important role of the game.

According to Pitchbook data, Transcend’s first fund is already in the top quartile of returns for 2020 as a whole.
Vintage Venture Fund. In two years, Transcend has built an industry-leading portfolio of nearly 30 companies, including one unicorn and the creator of some of the world’s most anticipated titles.
space.

Transcend has also hired Finance Director Andrew Crankshaw, who spent 12 years as Finance Director at Atomico, one of Europe’s largest venture capital funds. A senior associate, his Sikander Chahal has a background in competitive gaming, finance, M&A and game development advisory. Lirui Ding, a former esports expert and consultant who worked in Activision Blizzard’s strategy and corporate development department. and Naheda Noori, a mobile app services expert who used to work at Miniclip.

“The last two years have been great,” said Shepard. “It is very satisfying to see the company’s efforts focused on founders, team building and fund management really pay off. Our second fund is just getting started, and as investors who have been building gaming companies for decades, we are very excited about the next chapter.”

The fund is funded by Thatgamecompany, Possibility Space, Polygon, Singularity 6, Laguna Games,
Gardens, Roboto, Venly, IndiGG, Big Run, C2X, Nifty Games, Treehouse Games, Stress Level Zero,
Maestro, Fun Country, Arcadia, Triscope, Bunch, Heroic Story, Kings of Games, Spatial, Goss, Ruckus,
Some unannounced new ventures. Thatgamecompany, led by Journey co-creator Jenova Chen, recently raised $160 million.

Weak macroeconomic outlook

Cambridge Associates says new VC firms consistently rank among the top 10 asset classes.

Of course, the global recession, cryptocurrency winter, NFT price crash, stock market crash, war in Ukraine, and the onset of high inflation slowed the funding environment.

“It was hot then, not so hot now. That’s obvious. What do you mean?” Berger said. “A full pullback would create a bigger cycle. There are financial cycles, hardware cycles and things that affect the actual opportunity space in which games are played. There are many growth drivers that are on long upward trajectories. .”

Games are becoming mainstream entertainment, and more investors are turning to the gaming sector, he said.

“Games and economies sometimes work on the same vector, but not always,” said Bergel. “The overall core of our business is very strong. We are excited to invest in games and digital entertainment today. and technology.”

The end result, he said, is that Berger’s enthusiasm for the game has not waned.

Krause agreed that the long-term growth trajectory is all still intact.

“Anything that is headwinds for the global economy over the next 18 months will have dire consequences for new startups,” Krause said. “We can’t be complacent about the status quo. It could be a long time coming, but there’s a golden opportunity in the next 18 months that you can’t afford to miss.”

new opportunities

Regarding the sector, Bergel said esports is interesting as a cultural trend that can help move the game forward.

“Esports has definitely been a phenomenon,” he said. “But when we look at it today, some of the opportunities that might have been attractive five years ago, such as investing in esports teams, are only accessible with a time machine. It’s a tough business to get into at that level. is.”

Bergel says his team is even more excited about developing cross-platform franchises, as is happening with Singularity 6, the Los Angeles startup born out of Riot Games.

Bergel is also optimistic about VR companies like Stress Level Zero, makers of the recently debuted Bonelab game.

“If we can find the next League of Legends or the next Valorant, that’s the most interesting thing in the esports space,” Krause said. No. If you’re a good player, you can make interesting money, but its lifespan is pretty short.The only thing that makes interesting money is a long-term franchise.”

Competition for Talent and Regional Dominance

Just a few months ago, there was a massive war for talent in the gaming industry.

At a macro level, companies are now tending to cut headcount instead of chasing the many game developers they are short of, Bergel said. Certain types of engineers are still valuable, and the metaverse category will continue to be hot in the talent war. But it will coincide with major layoffs, he said.

When it comes to hot regions like Turkey and Finland, Berger said there is a strong reputation for good local talent.

A few years ago, Shepard traveled the globe setting up Kabam studios in the hottest regions of game development.

It’s no longer just about outsourcing or finding lower-cost areas, Bergel said. Places such as India, Southeast Asia and Latin America have become real talent bases and real markets in themselves, Bergel said. Mobile is strong in Finland. Social his casino games are popular in Israel. and so on.

“The regional differences in the industry are very interesting,” says Bergel.

Klaus said Southeast Asia is definitely interesting. Places like Vietnam, Indonesia, and Malaysia are all seriously competing against each other to jump into the hottest game development trends first.

“There is certainly a lot of innovation going on in the region and we have to learn how to prioritize,” says Krause.

Metaverse and blockchain

We also asked Bergel about investing in the metaverse and blockchain. Here’s what he said in the email:

Transcend is known as an audience-first fund. The audience is the only true compass in all entertainment. Our approach is rooted in first-hand experience reading Compass over decades in the gaming industry and building for those audiences. Our experience with billions of revenues defining franchises and entertainment companies demonstrates our first-principles approach to early-stage investments in general, including the sectors you mentioned.

The metaverse has recently become a powerful narrative that blends existing industry dynamics such as social gameplay and UGC with long-term visions such as interoperability. However, our investment themes are driven by what our audience cares about and what they spend their time doing. Transcend works with entrepreneurs who aim to create something unique and significant for a passionate global audience. So while we welcome big visions and ambitions, we always keep an eye on how it works against the larger backdrop of audience growth and change. The driving force is community, and the democratization of participation brought about by innovations in interaction models. The Metaverse is just one possible destination, but along the way we expect it to grow in the number of gaming communities in our portfolio and become a significant platform in its own right.

Blockchain is an interesting tool that can be used to explore new use cases in the hands of talented artisans. Independently verifiable ownership opens up the possibility of potentially disruptive economic and interaction models. But we’re just getting started, and investments in this area have been directed toward the infrastructure needed to create an experience that’s smooth and enjoyable enough to build an audience large enough to deliver on its promise. .

– Shanti Berger