As I’ve been consulting with Soccerverse since 2018 and have also been the blockchain gaming venture specialist at Hiro Capital since 2021, the news that Hiro Capital has invested in Soccerverse — our first web3 games investment no less! — probably isn’t a surprise.
But it is to me.
Certainly it was a surprise to me that it was our first deal and we didn’t invest in any blockchain games during the boomtimes of 2022.
We looked at a lot of projects and got close a couple of times but for various reasons — both internal and external — they didn’t come off.
Of course, when it comes to Soccerverse, it wasn’t that the deal was a surprise. It’s been in the works for months. Instead, it’s the process — and what I’ve learned through it and all the other companies we’ve spoken to — that’s been eye-opening.
Noob view
Given I’ve spent years covering the activity of VCs in the game industry, my assumption was the whole thing was conceptually fairly simple.
Investors have money to invest and startups have visions that require investment. The two groups come to an agreement: the startup gets the money it needs and the investors get a share of the eventual profits. Everyone’s happy.
Even the knowledge that most investments don’t eventually work out seemed logical to explain away. Investors give money to lots of startups and enough of them make money that the fact the majority fail doesn’t matter.
The unwritten assumption here is that the best investors give money to the best startups, which means they get the best rewards. It’s all about the quality of the companies involved, which is why the likes of a16z, Sequoia, Tiger, Coatue and Accel get all the attention.
But this was the point when my growing understanding of the actuality saw the wheels falling off my lazy mental model. What you have to understand about investing is it’s not a beauty contest among smart people, it’s a results business — pure and simple — and the results are measured years later in cold, hard ROI.
Spun this way, the “best” deals do not arise from the meeting of minds of the “best” investors and the “best” startups — at least as outsiders view it.
No, the best deals are those in which the investor and the startup come to agreement about the exciting potential of the vision and how to fulfil it, while also agreeing on the resources — capital and expertise — required.
Only if all these things are aligned, and stay aligned as the startup manages to grow to either IPO or be acquired (or various assets sold) at a decent multiple to its valuation can the deal be deemed to be a success.
Positioned in this manner, the bar for success is considerably higher than it first appears for not only do the startup and its investors to have survive and thrive together through years of often tough business, the valuation they agreed upon — probably updated through various investment rounds — has to have been as well matched at the start (and during) as at the end of the process.
Indeed, from what I’ve learned so far, the real art of an early VC deal is negotiating the initial valuation: at this point almost everything else is secondary.
The reason it’s so important is because it’s an existential situation for both parties.
The startup wants as high a valuation as possible because it makes the founders feel psychologically rich (on paper) and because it means the investors will own a relatively smaller share of the company for their investment.
Conversely, the investors want a smaller valuation because this is what maximizes ROI across their entire portfolio, and if they fail at this, they fail entirely.
More VCs fail because not because they invested in the wrong companies but because they invested at the wrong valuation.
And yet on that basis, if the two parties can successfully negotiate these competing forces, it should provide a solid and mutually agreeable foundation for the hard work that’s about to begin.
And that’s the road on which Soccerverse and Hiro Capital have now commenced. Good luck to us all!
This Substack is sponsored by Hiro Capital: investing in the future of games, including now blockchain games (officially)
Funding Finland news
Finnish developer (#1) Empires Not Vampires has announced a $1 million seed round for its Avalanche-based game Paradise Tycoon. Investors included arch-degens such as Shima Capital, Zee Prime, Fomocraft and FireX.
Currently available in open alpha without blockchain assets for browser and Android via Google Play, it’s expected that Paradise Tycoon will be released towards the end of 2023. In the meantime, a free mint of in-game assets will take place in early March.
Finnish developer (#2) Tower Pop has announced a $2.1 million seed round, which was led by Play Ventures with participation from Agnitio Capital and arch-angel Santiago R. Santos. It’s currently operating mobile/browser multiplayer TD game Omega Royale, in which players will be able mint on-chain assets through gameplay.
Interestingly, co-founding cousins Fredrik and Niklas Wahrman previously sold their TicBits studio to Animoca Brands in 2016, and henced worked extensively on Animoca’s own TD blockchain game Crazy Defense Heroes.
Another NFT Mint Vs Floor Price Disconnect news
While free NFT mints are going great guns, the market’s appetite for paid mints is still patchy. One ongoing example is Guild of Guardians, which is attempting to sell 16,000 characters themed for eight esport teams — Fnatic, Cloud9, NIP, Team Liquid etc — at $99 a pop.
The current count is 9,538 sold (60%) but I think a lot of those weren’t sold to retail, either reserved for the esports teams and/or crypto guilds. I say this because when I first looked at the sale on day 1, the availability count was already below 8,000.
An obvious structural issue with the mint is its relatively high price and a relatively large supply. But — more significantly — people who have bought these esports characters are already selling them on marketplaces with a floor price of $50.
Given the probability of getting one of the rarer versions is 13%, the $99 sale price for a random character is now much too high.
My back-of-the-envelope calculator suggests the floor price for revealed character would need to be nearer to $80 for it to start to make any financial sense, and this would also require a lot more market liquidity than is currently the case.
Another example of why you shouldn’t reveal NFTs while your mint is ongoing!
DigiDaigaku Dragons mint news
I didn’t stay up for the Super Bowl, so I didn’t have a view on the adverts, including the impact of Limit Break’s DigiDaigaku Dragons giveaway.
But looking at the trading data, it appears to be off to a good start. The floor price of the unrevealed NFTs — which are being airdropped to wallets — is currently 0.3 ETH ($350), with $1.8 million-worth of trading volume, making it the top collection over the past 24 hours.
However, only half of the 10,000 supply has thus far been distributed, with 5,000 still in the process of being released so I’d imagine the floor price may drop.
More generally, though, it’s not clear to me that the $6.5 million advert has had much impact in terms of boosting the DigiDaigaku brand. The floor for the Genesis NFTs has dropped below 8 ETH, while Super Villains are down to under 1 ETH for the first time — 0.7 ETH at time of writing.
And although this is mainly due to the crypto hit from the SEC’s recent activity, it also means it’s currently uneconomic to buy the NFTs required to mint a Super Villain or a Villain NFT.
On the upside, Gabe Leydon’s Twitter now has 1 million followers compared to around 300,000 for the DigiDaigaku account: Twitter engagement has always been the core focus of DigiDaigaku’s social marketing. Of course, not everyone agrees this has been a positive move.
Still, next up, we’ll have the Dragons reveal — which will also involved an airdrop Dragon Essence NFT to existing Genesis, Hero and Villain holders — and hopefully some more details about how this increasing library of assets is going to be used in a game.
More Migration To ImmutableX news
Singapore-based developer XP Foundry has revealed it will be migrating the on-chain assets for its F2P PC/mobile battle royale game Rooniverse from Solana to ImmutableX. Currently, there are 4,442 Origin NFTs live on Solana, with a floor price of around $100 (5 SOL).
The game is expected to enter open alpha test within week and has planned full launch for Q4 2023.
Splinterlands’ Sorta-Soulbound news
Splinterlands has launched a set of 43 Chaos Legion cards that are being made available via loot boxes but which will be soulbound, that is locked to the accounts that own them, and not available for trading.
This move is an experiment to encourage players to have a more long-term focus on their assets. However, once this season of loot boxes is sold out, the cards can become unbounded through the process of players staking DEC tokens into the cards.
This means it will be possible to burn such unbound cards releasing their underlying DEC, providing an inherent floor price.
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