Andreessen Horowitz is one of Silicon Valley’s biggest venture capital firms, investing in both early-stage startups and established growth companies. Its investments run the gamut of software industries, and lately, it has also been investing in games.
Started in 2009 by Netscape founder Marc Andreessen and entrepreneur Ben Horowitz, Andreessen Horowitz has backed companies such as Skype, Airbnb, Lytro, GitHub, Ripple, Oculus VR, BuzzFeed, and CryptoKitties. The firm, also known as a16z, has more than $12 billion in assets under management across multiple funds.
It has also begun making more investments in game companies and threw its weight behind the user-generated gaming world of Roblox, which raised $150 million in February in a deal led by Andreessen Horowitz. This interest is a validation of gaming’s mainstream growth, as the number of gamers in the world reaches billions and industry revenues top $160 billion.
Andrew Chen, a partner at Andreessen Horowitz, has a lot to do with the firm’s interest in games and consumer products. Along with games specialist Jonathan Lai, Chen and the partners at a16z have put money into such game startups as Singularity6, Forte, SandboxVR, Mainframe, Improbable, Elodie Games, and CodeCombat. Chen writes regularly about gaming and consumer trends, and he balances his enthusiasm for games with interests in the wider tech arena.
I spoke with Chen about these trends and why he thinks gaming could be the source of some of the biggest venture returns in the future. We also talked about social unrest and how the company can help through its existing cultural leadership investment fund and its new Talent x Opportunity Fund.
Here’s an edited transcript of our interview.
GamesBeat: Tell me about your background. Why did you decide to join Andreessen Horowitz?
Andrew Chen: I’ll give a super-quick summary. I grew up in Seattle. I worked in startups and ended up in the Bay Area, where I was starting my own company, which was seed-funded by Marc and Ben back when they were angel investors. During that time I was doing a lot of blogging about the intersection of product design and social products, how you grow products from zero. I’ve been writing for a long time, which has been fun. I soft landed the startup at Uber, so I was running a bunch of the growth games at Uber, primarily on the rider side of the product. All the tens of millions of new users that have popped into Uber all the last few years go through experiences that I worked on, which is cool.
Then I joined Andreessen Horowitz a bit over two years ago. It’s been cool. Part of the reason why we’re talking is because I’ve had a lifelong passion for games, going all the way back to playing BBS door games, early online multiplayer games. Then the NES, and then playing a lot of the early massively multiplayer games. I started to see a convergence of a lot of things I was interested in, all at one go. I got super excited about that. I’ve been investing in games, probably spending half my time there. The core of it is investing in game studios. We have a bunch of studio investments. I’ve also been interested in tech companies related to games. You can imagine that as the next set of companies like Sleeper, which we just announced, with chat and communication around games. Whatever will become the next Discord. We’re in Caffeine, a Twitch competitor. We’re very excited about all those adjacent things.
Frankly, we’re just seeing a lot of life in game design ideas and features entering mainstream products, which is exciting. Everything from avatars to looking at virtual points and currencies and microtransactions. I spend half my time there, and then I spend the other half of it working on my background in marketplaces and Uber, thinking about the next set of marketplace companies and ways for people to make money online. Those are companies like Substack.
GamesBeat: Did you come in with an investment thesis? And if so, have you stuck to it?
Chen: I was lucky to be very interested in what’s the next general of social networks early on. I always thought that there would be more beyond–obviously you have TikTok and Twitch and products like that, which are successful and continue to grow. But then also thinking about what’s next. Part of what we’ve talked about on this, and how it intersects with games, is that one of the easiest ways to pick out the next set of social products–what are young people using?
You quickly see that if you’re a kid, one of the first things you do is spend all your time playing with your friends in Roblox. You use it like a social network. You hang out with your friends there and talk with them. You build a persistent identity. You might play Roblox and Minecraft and Fortnite and some of these other games for years before you’re allowed to have a “social network” account. Even though that’s really your social network. I’ve become interested in that, the idea that these multiplayer game experiences are the next social networks. That’s been a key part of my thesis.
Another thesis that’s been interesting to me, and that has stuck all the way through, has been the fact that there’s ways to—when I grew up, my mom would say, “You can be a doctor or an engineer. Pick one or the other.” It’s amazing to me now that being a YouTuber or being a game streamer is an actual profession you can take on. The other big area that intersects with games, that you’ve also followed very closely, is the idea that as a content creator, an influencer, there are a lot of new ways to be able to create work in the economy.
If you build a platform that enables that, that’s one of the big areas we’ve gotten excited about recently. There’s a whole sector of marketplaces that allow gamers to find other gamers, like pro gamers or companions, to play games with them. This is a model that’s worked well in China. There are a couple companies floating around, like Legion Farm and EPal and others that are all very interesting. That’s one model. Obviously there’s the streaming model. A bunch of people are making great livings for themselves by building tutorials and reviews, doing that for strategy gamers and some of the superstar games on YouTube, creating a living that way. That’s an interesting trend, and one I’ve followed very closely.
GamesBeat: Given the firm’s history with the likes of Oculus and Roblox, how much do you feel like this desire to a get to a metaverse is guiding you in some of these investments? Eventually, this universe of virtual worlds that are all connected is where we’re going to wind up.
Chen: It’s an interesting question. I don’t think it’s come up very much in our investment criteria. The parts where we share a lot of interest with what people have articulated as the metaverse is, number one, when you think of a metaverse you think of the idea that there’s other people. Intrinsically, it’s a social product. There are other people you’re interacting with, as opposed to the next triple-A first-person narrative-driven thing. We’re not in the business of funding those. I don’t think the metaverse will come out of those.
The other part of the metaverse that’s compelling is that you would be willing, maybe, to put in a lot of different types of content there. You might imagine part of the metaverse would have very science-fiction stuff, or very fantasy-oriented stuff. We like the idea of user-generated content or moddable platforms as part of our investment thesis, because it lets users participate in creating their own worlds. That’s very interesting.
Another big part of it is just the concept of a persistent identity you care about. Part of the metaverse idea is that you might spend as much time there as in real life. That’s an interesting thing. People are already gaming, obviously, for many hours a week. That’s almost already available. That’s shared.