- Griffin Gaming Partners announced the creation of the world’s largest gaming fund, garnering $750 million for its game-focused venture capital fund.
- Peter Levin, Phil Sanderson, and Nick Tuosto (a Griffin adviser and managing director at Liontree) founded the fund to invest in gaming and related industries such as esports, gaming infrastructure, tools, social gaming platforms, streaming, and the cloud.
- Griffin Gaming Partners now manages more than $1 billion in assets for gaming investments through its two funds.
Griffin Gaming Partners announced that it had raised the largest gaming fund in history, raising $750 million for its game-focused venture capital fund. The fund’s founders, Peter Levin, Phil Sanderson, and Nick Tuosto (a Griffin adviser and managing director at Liontree), focus on gaming and associated areas such as esports, gaming infrastructure, tools, social gaming platforms, streaming, and the cloud. Griffin Gaming Partners now manages over $1 billion in-game investments through its two funds.
The fund’s size reveals a great deal about the condition of games and game finance (which we will discuss at GamesBeat Summit 2022). According to market researcher Newzoo, gaming has surpassed music as the world’s most effective form of entertainment, with $180.3 billion in revenue expected in 2021. This figure exceeded Newzoo’s previous forecast of $175.8 billion, owing to growth in mobile gaming and continued strength in the core console business for the Nintendo Switch, Sony PlayStation 5, and Xbox Series X/S.
When asked what the $750 million fundraising round meant, This suggests that now is a perfect moment to be a founder. When he considers the history of gaming, he realizes that it has a reputation among investors as a very hit-driven industry with a difficult time making money. The majority of people who invest in this category do so for a portion of their time. They are not all in on the joke. They keep a close eye on this area. It requires knowledge, relationships, and a laser-like focus, he added.
According to Drake Star Partners, 2021 was a record year for video game agreements, with $85 billion in value over 1,159 announced or finalized transactions. That was nearly thrice the amount in 2020. It resulted from gaming’s unprecedented boom during the epidemic, as individuals used games to pass the time during lockdowns. These practices persisted when lockdowns were lifted and reintroduced, and gaming firms profited.
Levin stated in an interview with GamesBeat that Phil Sanderson is the longest-running active venture capitalist investing in games, having sponsored in Discord first. Nick Tuosto is undoubtedly the industry’s top banker. He has access to a wealth of private data and a keen understanding of what buyers and strategic investors are searching for. He has spent his whole career at the nexus of gaming and journalism. He noted that these realms of gaming, television, sport, social media, creative economies, and brands are now merging.
Drake Star Partners now anticipates more than $150 billion in deals in 2022, owing to the more than $85 billion in sales already announced in January, including Microsoft’s acquisition of Activision Blizzard for $68.7 billion, Take-acquisition Two’s of Zynga for $12.7 billion, and Sony’s acquisition of Bungie for $3.6 billion. Acquisition prices for game companies continue to rise.
Levin admitted that new sources of funding are flooding into gaming. At times, this results in artificially inflated values, which they are not interested in, he explained. They are at ease with adhering to their models, and logical entrepreneurs gravitate toward that strategy. According to Newzoo, the gaming market has surpassed movies, music, and books combined. It is the fastest-growing consumer trend globally, with a projected 248 percent raise over the next decade.
According to Newzoo, the global gaming business is expected to reach a remarkable $256 billion in yearly consumer expenditure by 2025. According to DFC Intelligence, one-third of the world’s population, or 3.1 billion gamers, spend about an hour a day playing games.
Tuosto stated that it is not just a big market in aggregate but also a market with several subcategories, each with its characteristics and each team addressing things differently. It’s pretty challenging to transform this into the type of pattern recognition and muscle memory that investors build for other asset classes. The addressable market for gaming is around two-thirds the size of the addressable market for commercial software. The absence of professional investors in this market is a glaring error, and that is our premise.
Tuosto noted that they have competition in this category from other fundraisers. This implies that there will be a lot more innovation, he explained. It’s terrific that more individuals are playing games daily and for more extended periods. That opportunity generates more significant income. It is only natural that additional cash should be available to serve that audience.
Levin stated that the epidemic had altered people’s perceptions of games. Its trajectory is rapidly overtaking film, television, literature, and music. And parents are becoming aware that their children are becoming engaged in gaming and are developing the habit. They’re coming to terms with the fact that this is, in fact, a thing, Levin explained. According to App Annie, consumers would spend an average of 5 billion hours and $1.7 billion a week on mobile games in the first half of 2021.
According to Phil Sanderson, managing director of Griffin Gaming Partners, the barriers between gaming, media, sport, and social connectedness have become increasingly blurred. They gain a bird’s eye view of the industry and what it will take to succeed in the following interactive entertainment phase across platforms, genres, and demographics by reviewing over 1,300 qualified investment opportunities per year.
By investing in both early- and late-stage gaming firms, the new fund will help drive these acquisitions. Griffin invests in content, software infrastructure, social networks, and Web3 firms focused on gaming. The company’s first fund began in 2019 and was announced in November 2020 with a capital commitment of $235 million. Griffin Gaming Partners was the top-performing fund in 2019 with an internal rate of return of 81 percent, according to statistics released by Pitchbook.
Griffin asserts that its track record and competitive advantage are based on pattern identification gleaned from historical knowledge, proprietary research, and hands-on experience growing portfolio companies.
According to Tuosto, they can get their hands on a thing and determine whether it’s enjoyable. That is the aspect of the work that does not always transfer into numerical values. However, he believes it is a unique mix to analyze thousands of data points used to assess a company’s performance and make sense of the data and comparisons across the gaming industry. They examine dozens of offers in a given category, if not more. They constantly provide a consumer perspective.
Each year, the Griffin team analyses massive data and evaluates over 1,300 qualifying investment options to inform perspectives on growth, retention, and monetization. Using its unique skills and emphasis on gaming, the company aids portfolio firms with hiring and business development.
Levin stated that they are all in it for the culture; they play games, are passionate about them, care deeply about the business, and ultimately invest in the ecosystem. This results in creating jobs and opportunities for people to create jobs, Levin explained. Additionally, scalability is critical. However, they are intensely focused on early-stage investments by design.
Griffin Gaming Partners was founded in Santa Monica, California, by general partner Peter Levin, co-founder of Nerdist Industries and former Lionsgate president of interactive ventures, games, and digital strategy; Phil Sanderson, a venture capitalist with two decades of experience in play investing; and Nick Tuosto, managing director of investment banking firm LionTree. Liontree is the fund’s strategic partner.
Their primary concept is to study as much as possible about a category they are enthusiastic about, to be active and understand where buyers’ minds are, what they find appealing, where they want to purchase, and to invest in patterns that indicate where the puck is headed. Tuosto described this as a distinctive aspect of their strategy.
Levin was instrumental in bringing Jonathan Nolan and Lisa Joy from Westworld to work on a video series for Amazon based on the Fallout video games and bringing Candy Crush Saga to CBS for a program. He also assisted with integrating John Wick and Reservoir Dogs into Fortnite and Pay Day. He believes we’ll see even more triumphs in the future, such as the Sonic the Hedgehog film and the Netflix adaptation of The Witcher novels.
Sanderson, who runs 100-mile races regularly and just finished a 240-mile race, formerly worked at IDG Ventures and has invested in games for 23 years, with deals including Funzio, Next Games, Telltale, and Plain Vanilla Games. Levin explained that the organization leverages its extensive network to assist game developers with employment, commercial growth, and corporate development.
Toronto is one of the most active investments and acquisition advisers in the gaming industry, having advised on seven 2020 transactions, including Take-Two Interactive’s $12.7 billion acquisition of Zynga, Electronic Arts’ $1.3 billion acquisition of Playdemic, Scopely’s acquisition of FoxNext Games, AppLovin’s acquisition of Machine Zone, and Phoenix Labs’ sale to Garena. He was also involved in the (partial) sale of N3twork to Forte and the public offers (through SPACS) of Nexters, Playstudios, and Skillz.
The initial fund generated several significant returns, including the IPOs of Skillz and AppLovin. Among its investments was N3twork, which sold a segment to another Griffin portfolio company, Forte. Additionally, Tactile, Wave, Subspace, Scopely, Discord, Overwolf, Winzo, Spyke, and Funzy were invested. Additionally, it invested in Theorycraft, Incredible Dream, Players’ Lounge, Latitude, ggwp, and Super social as seed investors.
Additionally, the second fund has made investments in gaming firms such as Winzo, OMG, Hadi, Forte, Neon, Million Victories, STG, Palm, and DeHorizon. All of these activities will focus on our GamesBeat Summit 2022 event, which will take place on April 26–28. Griffin aided in Forte’s $725 million funding, a blockchain gaming infrastructure startup.
Griffin Gaming Partners’ philanthropy
In interviews, Levin and Tuosto stated that the team comprises gamers who have decades of aggregate expertise in the gaming business, including investment, consulting, and running.
Levin stated that the fund’s core consists of gaming. Collectibles and arcade equipment abound at the company’s headquarters. In front of Levin’s life-sized Mario facsimile, Shigeru Miyamoto, the game’s designer, posed for a photo. While Levin claims to be an Animal Crossing enthusiast, Tuosto is a Pokemon Go devotee.
While playing Call of Duty: Multiplayer and Call of Duty: Warzone, the Griffin team met Pierre Planche, who eventually became a partner. With Levin and Planche, I’ve had the opportunity to play Warzone, and Planche is an esports-level player. My friends Anthony Palma and James Wing (as well as Timmie Graves) and I have played Warzone on a more regular basis, and they have taken me to victory or relative success several times. At the recent DICE Summit, we had our first face-to-face meeting.
CEO Josh Williams of Forte stated that Griffin had supported Forte’s shared vision for the future of gaming by being a valued partner. As a result, they have secured breakthrough business alliances and necessary leadership appointments. They put in as much effort on behalf of their portfolio firm as any other investors. Griffin fund advisor Felicia Day is an actor, producer, and author.
“We are always on the lookout for fascinating gaming properties and creators,” Griffin said in a statement. Griffin’s investments are helping to elevate independent voices, stimulate innovation, and support out-of-the-box thinking as gaming and other media become increasingly intertwined.
The most popular or least popular gaming trends
When it comes to infrastructure and content, Levin says we’re witnessing tremendous dynamic shifts in the sector. Nonfungible tokens (NFTs) and a metaverse development roadmap are becoming increasingly commonplace on the web 3.
He said that the company is investing in that area with the same prudence that it has used throughout its long business history. To avoid a “spray and pray” strategy, the fund is only investing in one or two companies at a time. In its place, it seeks to identify the best individuals, groups, and initiatives.
“They have to take a real hard look” when they see “incredible people coming together, with a wonderful roadmap, with a product and an opportunity in the market,” Levin added. They don’t adhere to a strict policy of allocating a specific percentage of the budget to particular subgenres.
He explained that the company had avoided VR in the past because it didn’t consider it ready for primetime. However, he claimed that “everyone” will benefit if virtual reality “turns a corner.” Because of the opposition from diehard gamers, he cautioned against investing in NFTs.
Levin stated that several of NFT’s investing decisions appeared opportunistic and predatory. “That raises more than a few questions in our minds.” They will flee as fast as possible if they perceive any gaming mechanic or product to be opportunistic or exploitative. They want to make sure they’re doing a decent job in the sector to which they’ve dedicated their lives. They can’t help but be giddy about it. However, when it comes to making investments, they want to take their time.
In contrast, Forte, an infrastructure firm specializing in ensuring regulatory compliance for blockchain game firms, is a strong supporter. Levin noted that the underlying parts are being put in place. Companies like Forte will allow developers to thrive on top of a platform capable of scaling.
Also, Tuosto feels that blockchain and the web three are popular, as demonstrated by Forte’s investment and expansion. For him, free-to-play games aren’t the only way to make money from gaming.
Free-to-play games opened the door to three billion gamers, he added. He thinks a similar thing may happen in terms of new game prospects. It’s not going to start up by itself. It’s more likely that we’ll choose a more complicated route. New teams with innovative ideas will spring up, free of the constraints imposed by the innovator’s dilemma.
There is no first pitch in the first inning of a nine-inning game regarding Levin’s metaverse. They’re about to go out on the field. There can be no better approach to empower players than reducing economic friction and doing it in a safe and legal way. Right. The puck is visible. They don’t want anyone getting too far ahead of themselves to be safe. It will need the installation of guardrails.
According to Levin, the time is right to invest in Latin America, India, Southeast Asia, Africa, and the Middle East. He claimed that Turkey has a plethora of talent and that Northern Europe remains a breeding ground. Levin stated that he had gone to Finland more than 50 times in his lifetime.
He described the growth in the whole market as “astonishing.” As a result, it’s more important than ever to remain disciplined and grounded in your approach.
Predicting the year 2022
Regarding the remainder of 2022, Tuosto stated, “It’s difficult to compete with $85 billion in transactions in six weeks.” That pace will be challenging to maintain. However, I anticipate that the number of scaled transactions will stay at an all-time high. It’s been a great start to the year, but the level of discussion has never been higher throughout the globe, which is exactly what this category should be.
Gaming should be a strategic emphasis for media organizations, technology companies, incumbents, and foreign enterprises. Everyone should be considering their strategy about the metaverse and gaming since it is a fundamental component of the human leisure experience. This is a mass-market phenomenon that will not decrease. It’s on an exponential curve, so sitting on the sidelines makes no sense.