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Jon Goldman is a bit biased, but he believes that gaming will become the best form of entertainment, eclipsing film and television.
Plenty of other people agree. After all, games hit $148.8 billion in revenues in 2019 and could cross $160 billion in 2020, according to market researcher Newzoo. But Goldman is in a position to make this prediction come true, as he has been involved in a lot of game startups as well as Skybound, the intellectual property owner of The Walking Dead property that Robert Kirkman created.
“We’ve seen during this difficult pandemic that the gaming industry has really grown. Young people play more than they watch television, but people in their 30s, 40s, and 50s continue to play games as well,” Goldman said. “It’s a much larger player base than some people think.”
Goldman is a board partner at venture capital fund Greycroft. He is also managing partner for Skybound. And he is the general partner at GC Tracker, a seed fund for investing in video games. He spoke about investing and gaming’s rise in a GamesBeat Summit 2020 fireside chat with Andreea Enache, the head of global business development and strategy at Blind Squirrel Entertainment.
Three top investment pros open up about what it takes to get your video game funded.
Why games are well-positioned
One of the things that concerns Goldman right now is the high rate of unemployment. The game industry is counter-cyclical, making money during slowdowns. But he’s not so sure what happens with tens of millions of people out of work.
But he notes that the industry isn’t just about the premium tier of $60 or $80 games anymore, as free-to-play in-app purchases, ad-based games, and subscriptions can lower the cost of gaming so that it is available for the masses.
“Gaming offers flexibility in payment,” he said. “It allows fans to scale their commitment to stuff they love. It’s a very vibrant industry. It’s a bigger and better industry where we are doing bigger things all the time.”
Netflix has surpassed Disney in market value, Goldman said, and that is stunning. But he notes that Netflix has a difficult model to sustain indefinitely, while gaming has a wider variety of ways to make money.
There are now ancillary sources of revenue for games, such as making money on media streams on channels such as Twitch or YouTube, Goldman said. Esports is also generating money. And it’s also possible to make money on a gaming catalog, as retro titles are appreciated by nostalgic fans. On top of that, every platform is viable. In the past, many platforms didn’t survive and it would be too late to switch.
“Today, almost every platform is viable,” Goldman said. “You can migrate the game to different platforms.”
As for Hollywood’s love-hate relationship with games, Goldman believes successful ventures start out if they begin with games. Doing deep story development with a game company and distributing widely across gamer platforms will be the most fruitful path for Hollywood companies, he said. He noted that all live filming has been shut down in Hollywood because of the pandemic, and that is an opportunity to make things in game engines that could be output as either games or animated films.
“The world has changed pretty quickly,” he said. “And entertainment and recreation are really essential to people. They’re not optional. They make people happy in their lives, and we should figure out how to do right by them.”
How to do investing
While he had a wide range of gaming roles in the past, such as running Foundation 9 Entertainment (which grew to 11 studios and 1,000 employees before getting sold in 2006), Goldman has focused his latter career on content creation, intellectual property, and investing.
He got into investing by invitation of Sony’s Yair Landau, who invited Goldman to run Jerusalem Venture Partners in Israel some years ago. He said his various relationships helped him get involved with more investment-related roles and Skybound, a little more by accident than by planning.
Goldman said he tries to be nicer talking to entrepreneurs because he knows how hard it is to run companies, do creative work, and hear “no” from investors most of the time. He has seen how Greycroft has a big picture of investments and successful CEOs, and he has seen how publishing deals from both sides. It’s hard to find people who have skills on all sides of these facets of gaming.
Pitching publishers is often very different from pitching investors. He said it is hard for traditional VCs to make game investments because they are often looking for data that can tell them something about the value of creative work. Game companies often have to burn through a lot of money before they can become successful. Goldman looks for how much progress a team makes with each round of funding.
Goldman looks at everything that crosses his desk. But he often looks for a seasoned team doing something they’ve done before, with a slight twist. Sometimes a bunch of talented developers will get together, but they have never worked together before. That represents a higher risk, as making games together often tests whether the team really works well.
He also believes it’s important for investors to deliver a quick “no” instead of leaving entrepreneurs hanging. And he believes entrepreneurs have to be honest with themselves if they get a lot of rejections. Maybe they should consider moving on, rather than trying to overcome all of the objections that investors have for a pitch.
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