a16z’s Andrew Chen on Why the VC Missed Out on Gaming and Online Dating

Sign up for dot.LA’s daily newsletter for the latest news on Southern California’s tech, startup and venture capital scene.

When Andrew Chen first began investing in Los Angeles startups as a general partner at Andreessen Horowitz, he says there were two areas of opportunity that the Silicon Valley venture giant left unexplored: online dating and video games.

Now, both of those industries have bloomed into some of the most lucrative in Southern California’s tech scene, if not the wider tech world.

“We’d never invest in online dating, and we’d never invest in video games,” Chen said Tuesday at the Upfront Summit venture capital conference in Downtown L.A. “In the next couple years, if you’d invested in Tinder and Bumble, they would have been really good—but for a while those were considered unattractive.”

Online dating has proven a big business for West Hollywood-based Tinder’s parent company, Match Group, which also owns and operates dating apps like Hinge, OKCupid and Match.com. Match Group went public in 2015 and now boasts a market capitalization exceeding $31 billion. The gaming sector, meanwhile, has exploded since the pandemic and has now emerged as metaverse opportunity—factors that convinced Microsoft to shell out a record $69 billion for Santa Monica-based Activision Blizzard earlier this year.

Andreessen Horowitz may have missed the early boat on both industries, but now the firm is considering a broader slate of investments led by partners like Chen, who moved to L.A. recently to devote more time to discovering local startups. Chen said he’s now spending “more than half my time” vetting gaming investments, in particular. (Disclosure: Chen is an investor in dot.LA.)

Much of the venture capital sector’s previous apprehension around gaming, Chen noted, was that the industry is “hits-driven—it’s like investing in a movie.” Yet that thinking has evolved in recent years, he added.

“What we’ve seen in the last decade is if you’ve invested in Riot or Unity or Discord or any of the many tech companies [working] around games… You end up finding it’s an awesome place to invest,” according to Chen.

With the pandemic accelerated the evolution of entertainment in a more virtual direction, and investors are now working hard to keep up.

“Our goal is to invest in what might be the next major social networks,” Chen said. “Kids and young adults are spending so much time in ‘Roblox,’ ‘Minecraft,’ ‘Fortnite’—these real-time environments where they hang out with their friends. It has the possibility to be the next social experience that could create a billion-monthly-active-user product… The next Instagram or Snapchat will look more like that.”