Ethan Reisel, vgames: Gaming venture capital, global ecosystems, and mobile gaming market trends

welcome to another VC wisdom pod we have Ethan Rizo with us today he's founder and Magic partner at V games we're obviously going to talk about uh VC the games ecosystem and the VC ecosystem uh in which Ethan is in he's in Israel I'm in Waka Mexico last time I spoke with his partner very interesting uh type of VCS that they're building so this is going to

be pretty fun this podcast is presented to you by ppar.com if you want to start and scale your own podcast go pod.com Ean welcome to the Pod tell me a bit more about yourself and what you're up to nowadays thanks buddy pleasure to meet you and thanks for having me a bit about myself father of four so that's probably my first title live in born and raised

in Israel currently taking this SCH from Tel Aviv been in the gaming industry for 15 years founder V games for four uh we manag almost $300 million so pretty big in our sector um invest in gaming companies all around the world so we have companies from latam Asia India and uh us Europe and Israel actually Middle East so I think almost everywhere in the world maybe besides

Australia and New Zealand but uh we'll get there as well know what else can I tell you love playing games it's uh has been what games do you play so I'm a casual player you know so I'm not uh actually most of my my team is more core players you know but uh I'll play fortnite with my kids for sure Call of Duty when I was a bit younger play a lot of casual games a lot of our portfolio games like dice dreams or animal coins or match master so I spent quite quite a few hours a day playing so my my kids love it and you know they can't we can't complain right so yeah I was a Call of Duty addict as well when I was young I was quite good after like

um I think 6,000 hours of playing I had a ratio of 2.5 2.65 so you you know like what that means uh it means that you're pretty intense mofo uh fueled by uh IC in your parent basements and playing way too much time on that game also played World of Warcraft played at least 50 hours per week was number one Hunter PVP in my server um and recently I bought a switch but I got rid of it because I didn't have quote unquote time didn't like the neurochemical influence it had on my brain more on that later but yeah I was playing rocket League which is quite amazing uh Diablo three or four I forgot what it uh what that one was then obviously Super Smash to a classic now how the heck did you

get that big in four short years at vgame that's a good question uh we raised our first fun which was 60 we were very lucky to back amazing Founders they built big companies you know we went on to fun too soon fun three and you know I guess uh you know if if you stick to backing amazing people that are going to build big companies all the rest will come so I'm a Founder as well it's I'm a v but I also have to fundraise and you know I'm an entrepreneur as much as I am an investor um you know so strong entrepreneurs I guess you know they don't uh they don't see anything else but moving forward and growing you know I think it's the same for us in vam so uh we're only

getting started so strong entrepreneurs make better VC than the VC that comes from a corporate finance background I think uh I don't know if better you know it's the world is not it's hard to compare but I think that uh one backing for strong Founders makes you a better investor and I think there's an edge when you're an in when you're a found of a fund versus

you know joining of course without derating of course a larger fund you know I think uh we go through what any founder goes in one of our companies so I think that's a all added value you know when we come to the table as board members investors whatever right in four years I'm guessing you didn't have a liquidity event yet yeah we actually did we sold our

first company around four months ago we returned most of our fund one capital and part of our fund too as well so we were very lucky we sold a company called implay labs to play Tikka I think uh six months so don't have so what's the usual life cycle in your field uh when are what's the timeline between investing in a company and getting to liquidity event

I think the word average in this in our world is probably the biggest lie because you know there aren't any averages depends how big the entrepreneurs want to build and how patient they are you know what their end goal is I'd say that especially mobile games are faster probably than any other Tech sector just for you know you or you grow or your die quicker so you

and if you grow you can grow significantly we have companies that we seated four years ago and now making hundreds of millions of dollars in annual revenue so it's less the liquidity it's where it's more when your assets materialized or there are alternatives to way to withraw Capital if you want to I believe that it's better to be patient because then you know on a 5x if

we can grow to 8X then it's better off growing to 8X if the time is reasonable right so uh that that's my My Philosophy into this the growth of the video game Market generally is it linear or is it exponential in some Fields first of all depending very much on what happens in the world right Co helped a lot you know gave crazy backgound because people were

locked down and you know the only way to socialize and I think for the first time we started actually new audiences coming from the top from the elderly not from the young genes um so you know and also Financial you know stability also helped a lot our business because you know microtransactions people can still play even if uh you know they have less Capital to go on

bid vacations and lucrative so I think we're probably the cheapest source of entertainment possible today um you know it is a very very big industry some don't know this it's like a 200 North of 200 billion consumer industry you know a lot of the tech Giants are entering this of course Microsoft acquiring Activision Etc so you know it's not growing 100% year-over-year mobile is growing more significantly

than PC and console just because more people have more devices um but you know in gaming what's important is the more technology advances the more you can play on different platforms different types of games so I think we're only in the right you know we're only on the up here we're not on the average or not on the down which I think is great for us as

investors and what segment of the market could be exponentially growing is it uh India's young population growing is it Nigeria's 30% of the population being age under 18 and what kind of games is it um like Android games or what what type of what segment of the market could be exponentially uh be growing uh at the moment yeah so I divide the question into two one is

the more people connected to internet in the world and the more devices you know cheaper devices become more advanced gives more access to uh you know people to play games so you're 100% right on Africa you know uh India you know in general like countries where you know later developed but are picking up and getting there on a business side there are two games that launched in

the past uh two years Royal match by a Turkish company and Monopoly go by sculpt in the US that Monopoly go just reach2 billion dollar in eight months and I think Royal match is not far from that maybe a bit longer time period but again probably a year and a half or two so casual has seen some breakthroughs but you know also strong titles and strong IPS

are still generating endless amount of capital so the beauty about gaming is if the content is good and the game is good people play it and it doesn't mean that they won't play other stuff you know you sometimes you will add versus you know it doesn't mean that you're going to stop playing something else um I guess people sleep less that's that's uh but almost every category

had a breakthrough and there actually are categories like Forex and stuff like that that haven't yet we haven't seen a lot of innovation recently but that's good that means that we should look for Founders that are building in these categories and hopefully even though some of them are red oceans they'll still be able to build big companies does blizzard have an investment arm um I don't know

if blizzard facility but you know active yes for sure and Microsoft now owning that yeah um a lot of the tech Giants have uh or entertainment Giants have direct Investments as well for part of them it makes a lot of sense because it's very hard to uh innovate under uh you know more Legacy umbrella and sometimes it's easier you know to back these strong teams even it's

folks who previously worked with the company and working on something new um you know that's Equity Capital versus you know PML so makes a lot of sense yeah most of the most of the Strategic investors what we call are pretty active 10 these Activision in past years RI Etc so and what's your Theses this year what's your focus you want to go from 400 million to 600

uh what's your goals I wouldn't say our goals is to grow our funds I think that's a sub of if we need more Capital to back more Founders right we don't have like targets of how much we want to we're building this business based on the cash that we need just not you know not just based on how much Capital we want to raise I'm not sure that's an interesting uh um point for us we want to make sure that we continue backing strong Founders and help our existing portfolio grow one of the things things that we do in V games I think a bit different than other funds is when our companies come to this growth mode we really double down on them versus bringing external investors in um and in gaming you can

relatively know quickly if you're on the right track or not and if that we are why to share it with others um you know that may be a Heritage or a problem when we don't do that because it's a signal you know we try to be very transparent in our in our thesis and the way that we invest um yeah continue growing our companies our business hopefully having more companies are making hundreds of millions of dollars in Revenue because that means that they have amazing games that people enjoy playing you know and and and investing money into them so uh that that's that's that's what we're here for so what's your criteria for investment in a founder and how do you spot the potential product Market fit yes so we're very early stage investors in

our thesis so most of our goes into preed and seed and then you know the later stage comes more as follow on always Founders I think there are a few value propositions that you need for a gaming founder or a gaming team one it's a pretty competitive market so people have to be pretty resilient but also be resilient with each other so we prefer to back Founders

that have a long history together I don't care they were classmates or you know have built other businesses or worked in a company together but they went through highs and lows [Music] sometimes we come in very early it's usually just the team for us that's a that's what we bet on you know we're not betting on products we're betting on people so so that's our Theses and

do you feel that historically games have needed Capital uh or they can still go bootstrap nowadays and have a Competitive Edge it really depends what you want to build there's still a lot of most of our Industries in the developers which many of them are bura you have two people in a garage making a decent amount of money and growing beautifully and it's great you know I

think that's amazing I don't know if we would drive the returns that we're expecting as VC so it's probably less interesting for us to back but the majority of games played today are indie games which I think is amazing because it's a it's a Creator world and a Creator economy um I think to build very big companies today you do need to raise Capital just because marketing

is super expensive it's not just for developing actually developing games it's probably relatively cheaper than other Tech R&D costs and stuff like that it's much more on the distribution where most of the capital goes to and it's very hard today to sponsor yourself or to surface among so much noise and so much content so yeah I think it's hard to build gaming companies today that are boot

strm if you're if you want to build the next king for example tell us about AI in video games nowadays since a a great question so I don't think it's going to replace game building but we're already seeing a lot of impact of AI on gaming I think in two prob main paths one is uh art so a lot of 2D assets that used to be designed by artists today are designed by you know tools upon mid Journey Etc like people enhancing stable diffusion and building their own Solutions and I think a lot of like the narrative part storytelling you know chat is doing a pretty good job there um and of course this those are not small things like they can reduce production costs they can BR you to Market faster the total amount

that you need to build a game can be relatively cheaper than it was six months ago or a year so the impact is significant I think we're years away from AI really building full custom games um but you know we'll get there and the more technology advances the more uh we'll see amazing products coming out of it so you know we're patient and anxious this year and

the last one did the war affected your work in what sense in like a financial sense any sense yeah I think um we have to focus much more on quality I think you know I think uh we understand that every year going by the world becomes more competitive uh in terms of fundraising in terms of building products and especially in terms of shipping them um and I

think that a lot on the quality side of what at what level of production do you launch games into the market today is super important people want to play amazing games they don't want to play average content because there's enough amazing out there and you know that's an important emphasis and you know financial markets were not in the best condition in the past two years for vce

funding um and that's of course struggling for Founders and strong Founders were not able or able to raise a very you know difficult valuations Etc but you know I think that keeps people more tight more lean and I think there's it's only for good right so I actually think that those who are resilient and stayed and floated above the you know above the water those are going

to win so uh I see uh yeah I guess every time a challenge comes in we have to just convert it into an opportunity and play with it as as it goes you you miss building found uh startups um doesn't it feel a bit alien to you to invest money full-time instead of building actual games it's a another question I and my age 43 years old so I had my crisis a bit early but uh you have to go back to the values and where you think you can be better than others right and I think that what I'm doing today I can be better than others I don't know if I am or not I'm not sure if building games would be my strongest um you know strongest pillar or value proposition and I

think being the VC raising Capital supporting Founders you know helping them you know zoom in and zoom out when they need think this is probably a sweet spot that I feel more comfortable in I think I have a competitive advantage and that's probably the reason why I have b games and not a gaming company but you know that may change in the future so still young what

does your day-to-day look like um in life and business to keep yourself happy and productive try to work out every day at 6: a.m. usually that works because I think that's a important way to start the day then you're fully energized spend time with my kids take them to school go to work commute and then you know meetings meet new Founders talk to existing a lot of time of the portfolio that's my passion I love working with our Founders you know some internal work you know go home glass of wine

and go to sleep can't complain here and there do some vacation and try to limit my business traveling because I like sleeping in the house with my children so uh that's pretty much uh may sound boring but I'm pretty satisfied with it so there you go um who are you learning from nowadays wow that's with so many people from my colleagues my team members my Founders my

children a lot you know I think uh they have such a beautiful AUD to our industry actually my oldest son I think uh I don't know if my LPS know but there are two Investments that actually I did because he signed them off so I think that's a great thing um yeah in general I think kids can teach us so much about this place about this world you see a kid how they uh turn on fortnite and start playing it's faster than I can make a cup of coffee in the morning so uh I'm Amazed by every day and how much socializing on the platforms and how they meet new people and yeah I think there's a lot for us to learn from the next Generations you know growing into uh adults so that's probably

my number one source of education so is there a way to socialize or to live one's life because as I told you I grew up on these video games too socialize there um I was quite reclusive for some time but hand out uh pretty well as an adult so as parents should there be restrictions on video games and should there be uh you should do that and uh course Corrections in kids that play video games most of their time yeah I think the best answer always is a parent and my wife and I speak about this oftenly is what the alternative is so my children are very involved in Sports you know and it's they don't spend their entire day on the screens on the other and when they're on the screen you know they're

with friends and they're communicating and they're meeting new people and they're speaking other languages so I'm not a big believer in avoiding your children to do what they're passionate about and I think you know even among communities so you I think as parents you know we have uh each has his own perspective or her perspective on life uh saying no all day is not the philosophy that

we believe in but you know I don't know if we're right or wrong ask me 20 years but I'm pretty happy with my children are very heart and giving and very fun and you know and so I can't complain and they play a lot of games so does their father so their mother less but you know she she's getting into it she doesn't have any other options so what company is catching your attention in the field and really impressing you in terms of deployment technology or just what they're on to yes I can always use our portfolio right but it's always it's like picking your baby um I actually love dream games the Turkish company that's behind raw match I think their level of production is is literally insane I've never seen such a it's

like watching the Hollywood you know Spielberg film and playing it every day just watching it every day in content there me use in the art and game design and I really I respect I respect Founders and companies are able to reach that level of execution I think it says so much about their discipline their culture and it amazes me um and there are many gaming companies I

can say the same for that um y so I'm I'm a big uh big believer and fan of our category so quite special that they're in Turkey Turkey I didn't study them why do you think they're that great at deploying amazingness that fast one turkey is one of the largest gaming Mobile gaming manufacturers in the world today also Israel is you know that's a part of why

vams is based out up here um there one I think a lot of people play games there and you know spend a lot of time on playing games which is the most important criteria for building games and building gaming companies should be playing a lot um and I think that you know it's just the level of product and details is unbelievable and you see that many companies

who were founded in turkey and and that allows them to build amazing products and so they do so where can people find out more about you Ethan V games. BC welcome to contact us we invest primarily in content and game studios so just reach out and we promise to answer very quickly so