Venture Firm Rolls Out its Investing Strategy for the 'Metaverse' that May Soon Eclipse the Internet
Sep 29 2020
Gaming is eating the world.
So says a new report issued Tuesday by L.A.-based investment firm MaC Venture Capital.
The report mentions the recent explosion of gaming companies – including Epic Games' $1.78 billion raise that valued it at $17.3 billion, Unity's $1.3 billion IPO that valued the Epic competitor at $13.7 billion and Roblox's $150 million fundraise that valued the kid's gaming "sandbox" at $4 billion — and that was before the pandemic boosted Roblox's user base.
But most of the analysis is devoted to the techniques and tools that gaming has popularized over the years, and that are fast proliferating into areas as diverse as retail, film production, medicine and national defense.
<p>MaC, an early stage firm formed from a merger of Cross Culture Ventures and M Ventures, invests in tech companies it believes will benefit from shifting cultural trends and behaviors. </p><p>Underlying much of the firm's optimism around the gaming industry is its maturity, general partner Michael Palank told dot.LA. Multiple generations have now grown up with gaming, from early Nintendo consoles to mobile games and newly immersive platforms like Fortnite. That familiarity has pushed the mechanics of video gaming – taking action, leveling up, expanding your in-game persona – far beyond a traditional leisure activity, he said.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ0ODEzMi9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTY0NTM3NzU4NH0.smnfODhQF1R6u7DG6hFObQUgeYtTXCCo5PZ0FDXEVLE/image.png?width=980" id="106ff" class="rm-shortcode" data-rm-shortcode-id="e8e682434867792bdc797b5bf1a7ee8d" data-rm-shortcode-name="rebelmouse-image" />
<small class="image-media media-caption" placeholder="Add Photo Caption...">A graph from MaC Venture Capital's report highlights gaming's growth in 2020.</small><small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Image from MaC Venture Capital</small></p><p>In addition to merging into other sectors, those tropes are starting to inform how people operate in new spaces, including what industry observers have termed the "metaverse." MaC sees this space as a virtual world "where we will not just play games but socialize with friends, shop, learn, earn a living, perform, transform, travel and escape.<br/></p><p>"Many believe that the metaverse will not only be the next great computing platform — one that rivals the internet itself — but also a virtual world where billions of people come to transact trillions of dollars," the report says. </p><p>The ubiquity of gaming has created a stronger desire among consumers to be able to participate in their content. </p><p>And, especially among young people, the way one's digital self is presented to the world is closing in on its real-world analog. </p><p>"Your inventory of items, the character you play with, the skins you have, the avatars you choose – these things are becoming as important as wearing a Starter jacket was when I was in high school," Palank said.</p><p>MaC is currently raising capital for its next fund; Palank said he expects about 25% of it will be deployed to gaming.</p><p>The report, entitled "<a href="https://macventurecapital.com/in-the-news/stcgaming/" rel="noopener noreferrer" target="_blank">The State of Technology & Culture: Gaming Takeover</a>," touches on gaming's darker side as well, including its issues with misogyny and a lack of diversity among developers and characters. This, despite the fact that people of color have a proportionately higher engagement with gaming, as the report details. </p><p>"There is a lot of work to be done to ensure that this new gaming-influenced world is the kind of world in which we want to live," the report states.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<a href="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzU3MTIzMy9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxODg2OTMxOX0.uVtWcp3syyDKzC5fSNSW_6iNjGLSaAuTLnr0WPu85Q0/img.jpg?width=980" target="_blank"><img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzU3MTIzMy9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxODg2OTMxOX0.uVtWcp3syyDKzC5fSNSW_6iNjGLSaAuTLnr0WPu85Q0/img.jpg?width=980" id="4320d" class="rm-shortcode" data-rm-shortcode-id="8bab1ab029d743755463ebdf5e99fe26" data-rm-shortcode-name="rebelmouse-image" /></a>
<small class="image-media media-caption" placeholder="Add Photo Caption...">PlayVS employs has key relationships with educational institutions as well as partnerships with major game publishers including Riot and Epic.</small>
<small class="image-media media-photo-credit" placeholder="Add Photo Credit...">
Image from PlayVS
</small>
</p><p>As for what MaC will actually do to avoid a world of underrepresentation and gaming addiction, among other potential problems, the firm's partners ascribe to a philosophy of "investing in the future that we want to see," Palank said.<br/></p><p>For example, Cross Culture Ventures was an early investor in PlayVS, <a href="https://dot.la/playvs-high-school-esports-2647048099.html" target="_self">a company that enables high schools and colleges to run esports programs</a> and participate in leagues and tournaments. Palank pointed to the priority that PlayVS places on increasing access to gaming as one reason the firm found it appealing. The company was founded by Delane Parnell, who is Black.</p><p>"If it were a team that didn't care or know about diversity challenges in gaming and had no passion about rectifying those issues, I think PlayVS would have been a less attractive investment," Palank said.</p><p>The report also highlights L.A.-based <a href="https://glowup.games" rel="noopener noreferrer" target="_blank">Glow Up Games</a> and <a href="https://dot.la/run-by-ex-jam-city-executive-robin-games-raises-7-million-to-build-lifestyle-games-2645528288.html" target="_self">Robin Games</a> as companies poised to bring more diversity to the industry. </p><p>Los Angeles is likely to play a big role in the firm's investment strategy. Palank said he expects at least half of the fund's future bets will be L.A.-based. </p><p>MaC's L.A.-based investments in gaming also include Artie, which is <a href="https://dot.la/artie-2647773915.html" target="_self">seeking to change how mobile games are distributed</a>; FazeClan, whose <a href="https://dot.la/faze-clan-2646120733.html" target="_self">culture-shaping initiatives</a> include retail, esports and content production; and Within, whose <a href="https://wonderscope.com" rel="noopener noreferrer" target="_blank">Wonderscope app</a> is designed to give kids AR-enabled interactive story experiences.</p>
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- As school gets back in session, the pandemic has limited the number of available extracurricular activities
- PlayVS, which helps schools compete in esports leagues, expects participation this year to double or triple, due at least in part to COVID
- Not all schools view esports the same way, and many are still considering the pros and cons
Under normal circumstances, going back to school is not just the start of a new academic year, but the renewal of extracurricular activities, whether on the debate stage or under the Friday night lights. This year, however, the pandemic has made gridiron glory and other activities nearly impossible. Could that lead to a banner year for high school esports?
<p>
Santa Monica-based PlayVS (pronounced "play versus"), which provides the technological and organizational infrastructure for high school esports leagues, thinks so.
</p><p>
"We're expecting 2-3 times the number of students that competed last year," said Clint Kennedy, PlayVS' director of education. "I think COVID is a chief driver."
</p><h2>A COVID Boost
</h2><p>
Kennedy said 90% of U.S. high schools with a football program already use PlayVS or are on the waiting list. The company has an exclusive partnership with the National Federation of State High School Associations (NFHS), the main governing body of American high school sports. The relationship effectively turns esports via PlayVS into a fully fledged varsity sport at participating schools.
</p><p>
Founded in early 2018, PlayVS employs 46 people and has raised $96 million. In addition to having relationships with key educational institutions, it also has partnerships with major game publishers such as Riot and Epic Games.
</p><p>
Competing schools pay $63 per participating student. To accommodate increased demand the company will be rolling out a tiered pricing model this school year, including free scrimmage-only play on one end and a premium level at the other that allows schools to sign up more students.
</p><p>
"Schools are saying 'our teams are growing,'" said Kennedy, "so we've added this other layer to accommodate that growth."
</p><p>
Allen Whitten, principal at Sunny Hills High School, which has won two straight California Interscholastic Federation (CIF) esports state championships, said esports is "the one thing we haven't had to cancel, because they can do it from home." His school's esports coaches, Myra Deister and Sonya Joyce, expect student participation this year to double.
</p><p>
A spokesperson from L.A. Unified School District (LAUSD) said, "we expect interest in this extracurricular activity to expand during the pandemic."
</p><p>
Kennedy added that when COVID arrived this past spring, PlayVS "saw an uptick in our overall registrants" and that he has since seen increased interest from school administrators.
</p><p>
"Esports is in a unique spot to provide opportunities in a pandemic world," he said.
</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzU3MTIzMy9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxODg2OTMxOX0.uVtWcp3syyDKzC5fSNSW_6iNjGLSaAuTLnr0WPu85Q0/image.jpg?width=980" id="33ebc" class="rm-shortcode" data-rm-shortcode-id="4ed91e4e7922ead806a6d11c7ed9e6da" data-rm-shortcode-name="rebelmouse-image">
<small class="image-media media-caption" placeholder="Add Photo Caption...">PlayVS employs has key relationships with educational institutions as well as partnerships with major game publishers including Riot and Epic.</small><small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Image from PlayVS</small>
</p><h2>Parents Hit Pause </h2><p>
But it's not so clear cut, said CIF director of corporate sponsorships Chris Fahey. "We had mixed reactions" this past spring, he said. "Some schools had interest in continuing with esports to give kids an outlet. Other schools were like, 'We understand it can be played remotely, but the whole reason we got into this is it brings kids together'."
</p><p>
"It's all over the board. It depends on the school," Fahey added.
</p><p>
At Sunny Hills, Principal Whitten noted that among his school's community, the impression of esports has "gone from something that will rot your brains to lots of positive things – teamwork, communication, high-level problem solving. Parents are very supportive – and now (their kids are) competing and winning and being offered scholarships to go to college."
</p><p>
He also pointed to the growth of the gaming industry – particularly in Southern California – as something his school is trying to help students prepare to enter. In addition to its esports teams, Sunny Hills offers an optional two-year gaming and coding curriculum. Whitten said he thinks his school's gaming program has helped it sustain the number of students at the school, even though it's in a district with declining enrollment.
</p><p>
Some parents and faculty members in Compton's school district have expressed concern that esports won't appeal to female gamers, said Mikle McBride, who directs Compton USD's technical and occupational program, which includes esports. At Sunny Hills, Whitten said esports attracts "boys and girls from all over the world" and many "different cultures.".
</p><p>
Another potential downside, said McBride, are concerns that students will commit too much time to gaming. His program takes steps to mitigate that, however, and he thinks the presence of esports in schools "will explode."
</p><p>
PlayVS' Kennedy noted that 42% of all students on PlayVS had never previously played a high school sport, so, he said, it's "engaging a whole group of students that haven't been engaged."
</p><p>
Many schools feel that esports encourages greater student-school engagement, said CIF director Fahey. Only about 800,000 of the approximately 1.8 million high school students in California are student-athletes, he added.
</p><p>
PlayVS focuses on team-based, strategy-oriented games like League of Legends and Rocket League, Kennedy said. He and Fahey both said research suggests structured gaming can help improve students' grades, behavior and attendance.
</p><p>
With PlayVS signups opening this week and carrying on through the beginning of October, Kennedy said the company is ready for whatever schools ultimately choose to do.
</p><p>
Even if his prediction proves optimistic, the future looks bright for esports in schools. Interest is growing at the college level. Fahey said the NCAA "has looked at it and said 'we're not there yet'," while Kennedy noted that PlayVS has already begun working with athletic conferences to support their forays into esports.
</p><p>
Marlon Nichols, whose L.A.-based MaC Venture Capital has invested in PlayVS, sees that trend advancing. "We're moving into more and more of a virtual world," he said, "so colleges are going to want to add this to their repertoire of what they offer students."
</p>
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Two companies betting on the Los Angeles eSports market aren't throwing in on glitzy, state of the art stadiums or sinking big bucks into the pros: They're banking on the average Joe.
The video game industry has been red hot, surpassing $120 billion last year. Many in the marketplace think the next area for growth is in the amateurs; a vast pool of recreational players who can, if provided the infrastructure, make hay for investors as competitive players.
<p>Southland stalwarts like Blizzard Entertainment and Riot Games both have investments in the unpaid ranks, building programs around blockbuster offerings like Overwatch and League of Legends.</p><p>But companies without game development programs have found a way in.</p><p>Santa Monica-based Super League wants to anchor its tournaments and one-off events with geography, drawing crowds to local sites set up for tournaments at the local Buffalo Wild Wings, or maybe even a Dave & Busters. The company already has, launching the program four years ago.</p><p>In the age of wireless internet, any place with a strong connection is a potential tournament site. </p><p>Matt Edelman, Super League's chief commercial officer, wants to convert the millions who watch competitive gameplay on Twitch or YouTube gaming channel into Super League community members. </p><p>Think recreational league sports at the local YMCA or community center. </p><p>"Super League is not in the pro eSports business. We have really focused on the fact that every viewer, every player is a participant. And that's not the way it is in traditional sports," Edelman said. "Every single person who goes to a League of Legends event also plays the game. How do I get to play in person? That's where Super League comes in."</p><p>The cost structure includes games for as little as $5 or leagues that cost about $80.</p>
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<p>Newzoo, a games and eSports analytics firm with offices in San Francisco estimates there are more than 2.5 billion gamers world wide.<br/></p><p>Gaming has long offered the advantage of remote competition, allowing communities to grow nationally and even overseas. But Edelman wants to capitalize on the lure of local community, and the chance for digital friends to share a laugh and a high five in person.</p><p>The company also streams these events on services like Twitch, offering packages that beam the most captivating gameplay moments to a user's computer screen or television. It's like NFL Red Zone for gamers.</p><p>Super League is playing with the on-location model, holding 275 events in the U.S., Canada and Mexico. The company announced last month that it had partnered with Chinese-based Wanda Media to bring its model to more than 700 locations in the Middle Kingdom. Super League has not invested in brick and mortar locations, but has amassed a hoard of users, and sponsors who advertise through signage or commercials on gaming highlight videos.</p><p>The pro ranks are also sinking more focus into physical locations. Blizzard's Overwatch League will require teams, like the Los Angeles Gladiators, to play more games in their chosen city.</p><p>Nerd Street Gamers wants in on the Los Angeles market, too. It finished a round of funding last October, bolstering it with $12 million to help it bring its gaming centers, branded Localhost, nationwide. Fellow Philadelphia company and discount retailer Five Below provided the capital, following a long line of investors including Comcast, SeventySix Capital, Elevate Capital, and angel investor George Miller. The deal is a bet on the value of amateur eSports. </p><p>CEO and founder John Fazio said the appeal is largely because of its high school district, which is ranked the largest in the country. </p><p>"Those schools are full of kids who would love to take advantage of these kinds of opportunities," he said.</p><p>Fazio's company plans to build a massive gaming center where players can compete, and friends can watch. The facility, located in Hawthorne, is a planned 26,000 square-feet or, as the company reports, the size of five-and-a-half NBA regulation basketball courts. Loaded with 375 gaming PCs, it would have capacity for 120 teams and has planned its opening for summer 2020. It's the gamer equivalent of a basketball court or a soccer field. The company announced the arrival Feb 12 of a Southland addition to its previously established foothold in Huntington Beach located at 1524 Transistor Lane.</p><p>"I think the growth has accelerated. Right now is what's kind of crazy is we've seen growth with really just investment at the professional level," Fazio said. "We're taking hundreds of thousands — if not millions — of students and turning them into esports fans, if not future professionals."</p><p>He noted that developers have closely controlled the leagues they've created for college eSports teams, of which there are more than 250 nationwide. The casual gamer with competitive aspirations, he said, is where his company can find opportunity.</p><p>Both companies have their eye on the high-school market, too, but Santa Monica-based PlayVs has focussed their efforts on cornering that market. The company has been raking in investments, including $50 million in funding announced last September, designed to spread its platform to all 50 states.</p><p>Sari Kitelyn, director of eSports and project development at Full Sail University, a for-profit college with a focus on eSports, is keeping her eye on the unpaid ranks.</p><p> But the market remains in flux. Super League is still growing, recording year-over-year growth in of 350,000 or 129% during the third quarter. Nerd Street Gamers doesn't release financials because it is privately held, but received seed funding from Major League Baseball slugger Ryan Howard and is backed by Comcast.</p><p> Whatever the growth potential, Super League and Nerd Street Gamers have already made the commitment, investing in the amateurs in hopes of making big league dollars.</p><p> "I think this is the biggest area of market opportunity," Kitelyn said. <br/></p>From Your Site Articles
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