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VCs see opportunities for gaming infrastructure startups and incumbents

As the infrastructure for developing games becomes more advanced, studios have turned to buying best-in-class technology from others instead of building everything from scratch (often with inferior quality).

This shift underpinned Unity’s rise as the most popular game engine. The current focus on games as ever-evolving social hubs that can remain popular for a decade requires investment in “live ops” to keep updating the game with new features and experiences, only adding to a game studio’s responsibilities.

There are big movements in gaming right now to make games cross-platform (not just restricted to mobile or PC or one console), incorporate new types of chat (in-game or outside of it) and to automatically remove bullies and bots among other things. Optimizing games’ virtual economies is only getting more complex as trade of virtual goods becomes increasingly popular.

All this means more opportunity for startups (and large incumbents) that provide new tools and platforms to game developers and gamers. To gauge which opportunities are prime for entrepreneurs, I asked four leading early-stage investors who focus on the gaming sector to share their analysis:

  • Sam Englebardt, Galaxy Interactive
  • Gigi Levy Weiss, NFX
  • Amit Kumar, Accel
  • Anton Backman, Play Ventures

Sam Englebardt, Galaxy Interactive

Which areas within gaming infrastructure seem firmly dominated by large incumbents, versus open for new startups to rise up?

I’m always rooting for the startup, but some of the really big and expensive infrastructure challenges seem unlikely to be solved by a startup, especially where the incumbents have a lead in time, money and the personnel they’re throwing at the problem. I’m thinking here, for example, about something like cloud computing, storage solutions, etc.

Despite pandemic, gaming is well-positioned to withstand recession

Efforts to slow the spread of COVID-19 have led to a global economic downturn, but the gaming industry is booming.

With hundreds of millions of people sequestered in their homes, game usage has spiked. And while the economic repercussions will persist after people cease physical distancing, gaming is positioned to fare well during a recession.

Video game usage increased 75% during peak hours

Video game usage during peak hours increased 75% in the first week many Americans began staying home, according to Verizon data. Game distribution platform Steam set a record for peak concurrent users (more than 20 million) on March 16 without any notable new releases driving demand. Gaming chat platform Discord saw its servers go down briefly last week even after the company increased capacity by more than 20% to handle surging usage.

According to Siamc Kamalie, manager of hedge fund Skycatcher, “average time spent per user on mobile games grew 41% during Chinese New Year in 2020 versus 2019, and was up 18% versus the week prior to Chinese New Year in 2020.” (Chinese New Year is when widespread stay-at-home orders began in China.)

All of the gaming industry professionals I’ve spoken to over the last week noted increased popularity of their games, though most were wary of sharing their strong performance publicly, given the unfortunate circumstances.

People don’t just turn to games for entertainment; especially when in-person interactions are restricted and most of the most popular games are multiplayer in one form or another — games also serve as social hangout spots.

Thomas Kurian on his first year as Google Cloud CEO

“Yes.”

That was Google Cloud CEO Thomas Kurian’s simple answer when I asked if he thought he’d achieved what he set out to do in his first year.

A year ago, he took the helm of Google’s cloud operations — which includes G Suite — and set about giving the organization a sharpened focus by expanding on a strategy his predecessor Diane Greene first set during her tenure.

It’s no secret that Kurian, with his background at Oracle, immediately put the entire Google Cloud operation on a course to focus on enterprise customers, with an emphasis on a number of key verticals.

So it’s no surprise, then, that the first highlight Kurian cited is that Google Cloud expanded its feature lineup with important capabilities that were previously missing. “When we look at what we’ve done this last year, first is maturing our products,” he said. “We’ve opened up many markets for our products because we’ve matured the core capabilities in the product. We’ve added things like compliance requirements. We’ve added support for many enterprise things like SAP and VMware and Oracle and a number of enterprise solutions.” Thanks to this, he stressed, analyst firms like Gartner and Forrester now rank Google Cloud “neck-and-neck with the other two players that everybody compares us to.”

If Google Cloud’s previous record made anything clear, though, it’s that technical know-how and great features aren’t enough. One of the first actions Kurian took was to expand the company’s sales team to resemble an organization that looked a bit more like that of a traditional enterprise company. “We were able to specialize our sales teams by industry — added talent into the sales organization and scaled up the sales force very, very significantly — and I think you’re starting to see those results. Not only did we increase the number of people, but our productivity improved as well as the sales organization, so all of that was good.”

He also cited Google’s partner business as a reason for its overall growth. Partner influence revenue increased by about 200% in 2019, and its partners brought in 13 times more new customers in 2019 when compared to the previous year.