How a VC avoids the “hyper-financialization” of gambling
- Gaming venture capital firm Hiro Capital just launched a $340 million fund to capture companies based on the metaverse.
- Co-founder Luke Alvarez showcases the company’s unique, user-friendly approach to investing in the metaverse.
- He explains the expansion of gamified fitness companies in Europe and shares 3 rising stars.
European game venture capital firm Hiro Capital launched its second fund this week.
Hiro Capital looks perfectly poised to capture the “metaverse moment” currently unfolding in society with a powerful investment team of gaming industry veterans and a metaverse-based strategy that dates back to 2018.
“It seemed in 2018 when we launched Hiro Capital 1 that another big change was coming,” said Luke Alvarez, managing partner and co-founder of Hiro Capital. “A massive new computing platform that was going to emerge over the next decade or two, which was this thing called the metaverse.”
The team even named the company after Hiro Protagonist, from the sci-fi book “Snow Crash“, which is a founding text of the cyber punk movement, and in which the main character jumps between Los Angeles and a virtual world known as the Metaverse.
The metaverse moment
The Metaverse is still in its infancy, a vision that hopes to parallel the real world through computer generation and the technologies that drive its immersive capabilities.
But four years after the original fund was launched, it is now attracting a lot more attention.
Mark Zuckerberg brought the concept to mainstream attention when he announced he would change Facebook’s name to Meta as part of a larger metaverse vision for the tech company. Brands and investors have since thrown away large sums of money and resources trying to create a presence in the digital world.
It has also recently become associated with cryptocurrencies, as blockchain companies race to develop the Web 3.0 vision, a decentralized and more immersive version of the internet where individual users have more control over their assets.
Hiro’s second fund will channel some investment into Web 3.0-based and crypto-oriented games, but it’s likely to only be a small proportion of the total investment, as there’s more to the metaverse to focus on decentralization.
“Part of that is because there are 3 billion gamers around the world today, generating over $100 million in gaming revenue,” Alvarez said. “The Web 3.0 part of this is still very, very small. There are only a few tens of millions of people with Metamask wallets.”
Betting on the founders
Hiro Capital’s founding team is made up of all entrepreneurs. Alvarez founded Inspired Entertainmenta NASDAQ-listed games technology company.
Sir Ian Livingstone founded Games Workshop and was recently knighted by Her Majesty Queen Elizabeth II for his services to the gaming industry. Cherry Freeman, on the other hand, has spent her career as a serial entrepreneur and has over 10 years of experience in angel investing.
They are looking for entrepreneurs who have “a magical combination of imagination, creativity, vision and ambition”. At the same time, there must be pragmatism and tenacity, Alvarez said.
“You’re looking for that belief that they’re going to be able to scale and pivot and deal with problems and be creative in growing the business,” Alvarez said.
Investing in entrepreneurs in the crypto gambling space can be difficult.
Many know a lot about decentralized technology and finance, but very little about gaming, Alvarez said.
“You have to support the creator and you’re looking for a great gameplay loop,” Alvarez said. “So if it’s someone with smart blockchain innovation, but no idea of the gameplay loop, we’ll probably pass.
“If it’s someone with a really strong game loop, who needs help with blockchain technology and economy design, we could support them because we can help with that kind of stuff. “
Gamers vs Crypto
The management team at indie game publisher Team17 planned to release a series of collectible NFTs for the popular game Worms. the the decision received significant backlash from employees and players, resulting in a quick turnaround and the outing was cancelled.
Alvarez says some of the benefits have been overstated, but there are still strong potential benefits for gamers with Web 3.0, even if it’s all in its infancy.
“I think everything has to be proven,” Alvarez said. “What we don’t like is the mix of basic player experience with hyper-financialization.”
“This crossover is probably a pretty narrow segment,” Alvarez said. “And most gamers just want to play a game and have fun with their friends while doing it and enjoy the core gameplay loop. So the core of what we’re looking for is always gameplay, gameplay, gameplay… And if the trust and decentralization of the blockchain can make it a better experience for the player then great.”
Hiro Capital is not only at the forefront of metaverse investing, but also of gamified fitness, a trend that originated in Europe.
Most people associate gamified fitness with a company like Peloton, but that’s a misconception, Alvarez said.
A good gamified fitness experience and a good platform comes down to four factors, Alvarez said.
1) The platform captures body data of an individual during fitness activities.
2) Machine learning can be applied to data.
3) An interactive gamification element is implemented.
4) There is a feedback loop that will help optimize an individual’s performance and technique.
With Peloton, individuals are consuming content one way, Alvarez said.
“There’s no circular feedback,” Alvarez said. “What excites us is multiplayer gamification.“
He shares three successful investments in this area:
1) Fit XR
FitXR is a London-based subscription service which gives access to fitness classes on virtual reality headsets.
“It’s established itself as one of the best VR fitness experiences in the world now and is moving really, really fast,” Alvarez said.
Zwift brings massive multiplayer online gaming to cycling. It is an app-based service that allows individuals to train and compete with each other in a virtual world.
NURVV is a wearable smart insole which provides detailed feedback on an individual’s running form in real time.
“It will tell you in real time through your hearing aid or through your watch to shorten your stride or, or come more to the center of the foot or more on the balance between left and right,” Alvarez said.