Game Investment Experts Discuss Industry Trends: The Essence of Games is King, Opportunities and Challenges Coexist

On January 31, two industry leaders had an in-depth dialogue about investment and entrepreneurship in the blockchain gaming sector, sharing valuable investment experiences, entrepreneurial advice, and industry trend analysis. Below are some selected highlights from the conversation:

Host: Could you share your original intention for joining the Web3 industry, as well as the challenges and opportunities you encountered during the creation of your investment institution?

A guest: I started personal angel investing in cryptocurrency projects in 2020 and achieved returns that exceeded those of equity investments. Compared to the equity world, capitalization in the crypto market is easier to achieve, which deeply moved me. In 2021, I established a dedicated investment institution to participate more deeply in this field. We invested in a series of projects, including an NFT series that received a good response in the Asian celebrity NFT market, as well as a Move-to-Earn project that provided a great demonstration for Web2 practitioners entering Web3.

Establishing an investment institution is to create broader connections with the entire market. The cryptocurrency capital market is very active and innovative. I prefer using the term "crypto games" rather than "GameFi"; the focus should be on the games themselves. As a major game-producing country, China has many outstanding game developers, and Web3 provides them with a new space to showcase their talents. This is also one of my motivations for entering this market.

Compared to traditional investment fields, the pace of the Web3 industry is very fast, which is a challenge for me. There are many new rules to learn in Web3, which is very different from equity investment.

Host: Could you please introduce your investment direction and strategy in the blockchain gaming sector?

Another guest: We started investing in crypto in 2017, initially focusing on infrastructure. After 2020, the combination of DeFi and gaming produced a wonderful chemical reaction, and we began to consider whether blockchain could bring new business models and user experiences to gaming.

Currently, I have several points of concern regarding my investment in the gaming sector:

First is the gaming infrastructure. The game needs to lower the user threshold, and the infrastructure should serve ordinary users' participation more, involving wallets, distribution platforms, public chains, and other aspects.

Secondly, there is the game content. Blockchain games do not necessarily have to incorporate financial attributes. MMO games themselves are already a small society and economy, and combining them with blockchain will make this economic system even more open. We hope to use the characteristics of blockchain to solve some issues in traditional games, such as user asset security and personal data control.

In terms of game content, we mainly focus on two directions: first, fully on-chain games, which is a great idea, but currently lacks breakthrough products. Second, the participation of traditional gaming giants; although their products incorporate blockchain concepts, the actual blockchain content involved is still very limited. This is a necessary stage in the development of blockchain games, and as awareness increases, they will have more in-depth attempts.

We also maintain an open mindset, believing that more unexpected new trends will emerge. We hope to gather innovative entrepreneurs through the entrepreneurial camp to create more forward-looking products and ideas from different dimensions.

Host: Currently, some venture capitalists may be more inclined to invest in blockchain game infrastructure rather than applications. What is your view on this issue? Additionally, it seems that blockchain games are difficult to detach from their financial attributes. What is your opinion on the concept of GameFi?

A guest: We need to clarify the purpose of introducing blockchain. For investors in the primary market with a wide range of interests, if they are not particularly passionate about gaming, they may pay more attention to infrastructure. The entire industry generally has a high valuation for infrastructure, whereas specific landed projects often have lower valuations. This is also why investors are not very keen on the gaming sector. Secondary market traders also tend to prefer infrastructure projects because they have strong explosive potential and fast speeds.

I invest in games hoping that it can serve as a traffic-driving product to attract more users. The previous wave of GameFi was not well received mainly because "there were neither good games nor real gamers in GameFi." Our game is not fun enough, and the players are not true gaming enthusiasts, resulting in a mismatch between supply and demand.

Games ultimately need to connect with players, regardless of whether they pay attention to Web3. This requires games to have sufficient playability and to be designed by real game development teams. Therefore, last year we chose teams that had previously received investments from the traditional market, bringing the best gaming production capabilities in China into the Web3 industry. I believe the focus of "GameFi" should be on "Game" rather than "Fi."

Host: As an investor, what qualities do you pay more attention to when evaluating new blockchain gaming projects? In which areas do entrepreneurs need to put in more effort to gain more favor?

Another guest: After experiencing the last cycle, investors' perspectives on games have changed. Currently, we are more focused on the playability of games and user retention. Not all games are suitable for transitioning to blockchain games; we need to leverage the characteristics of blockchain to realize value. For example, content interaction games may not be very suitable, while PvP games may provide users with a better experience under the open and transparent framework provided by blockchain.

From the team's perspective, several roles are indispensable: people who understand games, game producers, planners, art designers, etc. In the crypto field, the interactions based on smart contracts make game development more challenging, so professionals in the crypto field are also needed to address these difficulties. The formation of the team is something I will focus on when investing in early-stage projects.

A certain guest: Crypto games also need to be well integrated with blockchain technology. In addition to the playability, themes, audience, promotional conversion, and payment point design that traditional game investments focus on, I will pay more attention to the specific applications of blockchain technology in games, the most fundamental being the use of tokens and NFTs. We are not afraid if the team hasn't thought it through completely, as long as they are willing to discuss, the design ideas can be gradually improved.

But I care more about the quality of the team. I will ask them some "meta questions" about the gaming industry, such as "What fun games have you played recently, and why do you think they are fun?" and "Why do you think the game you designed is fun?" Through their answers, I can understand their knowledge and experience of games.

Host: More and more domestic gaming giants are starting to explore Web3 game projects. What are your thoughts on this? Will it bring new vitality to the blockchain gaming track? How should entrepreneurs seize this opportunity?

A certain guest: For large Web2 gaming companies, venturing into Web3 is actually an attempt to innovate within the industry. Every year, these companies experiment with a plethora of dispersed new technologies, and only when they achieve certain results will their priority be elevated. Although we insiders know that Web3 has reached a new height and may even change the fundamentals of the industry, those outside our circle do not understand this, and many good innovative ideas remain merely ideas.

Currently, some gaming giants do have investments in Web3, but it is not yet a focus of their investment landscape. For these large groups, the changes and returns in the crypto industry are relatively insignificant, so their level of emphasis is not very high. However, for Web3 game entrepreneurs, the opportunity has arrived. We should seize the layout and strengthen ourselves before the big companies truly enter the market. Right now, many major companies are laying off employees, and a large number of Web2 talents are leaving, which creates opportunities for the Web3 industry to build teams.

Host: The approval of the Bitcoin spot ETF is a milestone for the industry. What impact will this have on the Web3 gaming sector?

Another guest: The approval of the Bitcoin ETF is indeed exhilarating for the industry. Currently, Bitcoin has become the second-largest ETF asset, which means that there may be more crypto assets on the ETF path in the future, becoming mainstream asset allocation. As institutional allocation increases, the industry's capital pool will grow larger, and the influx of new funds will drive the overall market capitalization growth, creating greater profit margins for early investors.

The overflowing wealth is likely to flow into mainstream narratives in the industry, such as infrastructure investment. Teams working on infrastructure need a large number of quality users or developers. During our accelerator program, many public chains hoped to develop their ecosystems through the entry of Web3 games. In this context, more capital will pay attention to the Web3 gaming track.

Of course, Web3 games pose a huge challenge for both Web2 game developers and Web3 native developers. If a team that can effectively combine both emerges, it is likely to gain market recognition.

Host: With AI technology on the rise, how do you think it will affect the future development of Web3 game products? Will it disrupt traditional game development methods?

A guest: AI not only affects Web3 games, but it also impacts the entire gaming industry, primarily by enhancing and optimizing the virtual experience for players. There are two main categories of AI games:

1. Simulation games, such as simulation management and strategy games. These types of games require a large amount of computation, involving complex generation processes such as character logic generation, self-reflection, character scale, map size, and scene changes.

2. Games powered by ChatGPT that generate new game interactions through AI communication, such as "Yandere Catgirl" on Bilibili and "Suck Up!" on Twitch.

Web3 games are often well combined with simulation games, especially simulation management and strategy games (SLG). These types of games have servers that accommodate a large number of players, and the interactions between players determine the gaming experience, leading to many trading behaviors, which provide a space for cryptographic technology. As AI continues to optimize the simulation game experience, it is possible that in the future, there will be Web3 simulation games with better virtual experiences, more gameplay options, and more imaginative worldviews.

In addition, from the perspective of the entire Web3 industry, AI can also be combined with computing power, such as AI computing power mining.

Host: Do you have any new investment plans or game development plans for 2024? Will you be trying other new sectors? Will 2024 be a good time to invest in the blockchain gaming sector?

Another guest: Investment needs to balance long-term and cyclical aspects. Focusing on cycles can yield twice the result with half the effort, which tests the sensitivity of entrepreneurial teams and investors to the industry. The industry was in a downward channel from 2022 to 2023, with the primary and secondary market cap inversion. For investment institutions, increasing secondary investments during this phase may be more cost-effective than direct primary investments. The market has now started to rebound from the bottom, and the worst period is over, prompting investors to be more actively involved in primary and secondary investments.

For entrepreneurs, experiencing a wave of bear markets will lead to a more rational and cautious attitude towards investors. Entrepreneurs should be more confident, focus on creating good products, and move forward bravely.

A certain guest: Our investment methodology in the primary market has been iterating. Recently, we will pay more attention to the unlock cycle, because the bull and bear cycle in the Web3 industry changes quickly, and the unlock cycle is important for investors. In terms of investment timing, 2024 may be better than 2025.

Generally speaking, whether it is investment or entrepreneurship, it is about "doing new things rather than old ones." This is especially true for small entrepreneurial teams, which need to work hard on innovation in 2024 by integrating new market trends. This year, a batch of new entrepreneurs will definitely transition from Web2 to Web3. For native entrepreneurs, finding their unique advantages and integrating new technologies into their products will make their product positioning more differentiated and competitive.

Host: Thank you very much to both guests for your wonderful sharing! Our startup accelerator is dedicated to cultivating and supporting outstanding entrepreneurs in the future Web3 gaming industry, empowering more high-quality Web3 gaming projects, and assisting global Web3 game entrepreneurs in responding to the future growth market for blockchain games. The accelerator has now opened for student enrollment, and we have invited several well-known industry mentors to provide comprehensive guidance. Projects entering the program will receive various resource supports, including scholarships, investment support, public chain grants, audit discounts, cloud credits, and customized wallet services. We welcome interested startup teams to actively enroll and gain more support and advice for project development. Thank you all for participating, and see you next time!