The Wolf Of All Streets - Gaming Industry Veterans Explain How They Will Invest $150M In Web3 Gaming | Rudy Koch & Chris Ko

Episode Date: March 26, 2023

Gaming is one of the hottest areas of web3. I am lucky enough to share this conversation with Fenix Games co-founders: Rudy Koch and Chris Ko, gaming industry veterans, who have recently raised $150 million to invest in future unicorns. In this episode, we’ve covered the problems of web3 gaming: regulation, content, and the problems that Rudy and Chris face every day: how to pick the best teams and make the right investment decisions. If you want to learn more about gaming - do not miss this episode! https://www.linkedin.com/in/chriskocubs/ https://twitter.com/rudykoch https://www.fenixgames.com/ ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Web3 #gaming  Timestamps: 0:00 Intro 1:22 Is Web3 gaming dead? 3:40 Fenix games 8:08 Quality of web3 games 10:30 The way into gaming 18:20 Regulation barriers 22:00 Content problem 27:15 $150 million for web3 gaming 34:45 Picking the right startups 39:20 Licensed sports games in web3 43:00 What it takes to create a successful web3 game 47:00 The timing is right 50:20 New partnerships The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Is Web3 gaming dead? Because if you listen to the mainstream media, that's probably the narrative that you would hear simply because prices are down and cryptocurrencies have suffered. But it couldn't be farther from the truth. As we continue to hear, bear markets are the best time for building. And Rudy Koch and Chris Coe from Phoenix Games are doing just that, having just raised $150 million to invest in Web3 gaming. We talked about where that money's going, what's being built, what the timeline is, and when we can start to see AAA games coming out of Web3. In the depths here of the bear market,

we've seen a bit of the shine come off of Web3, I think, right? We've also had sort of a returned focus to Bitcoin in the crypto space. But every single time I talk to anyone who's actually running a project, raising money, they say bear markets are great for building. And actually, the best things are being built right now, quietly. Would you guys agree with that sentiment? Clearly you don't think that Web3 gaming is dead yet, right? Oh, wait, maybe I should stop what I'm doing. No, I totally 100% agree with that sentiment. I think for us, because we've been in gaming for 15, 20 years, we've seen this pattern happen. You saw this with early mobile free-to-play.

You remember way back then, there was all this controversy over the horse skin that was sold in one of the console games, which was just a vanity item. I think it was sold for 12 bucks and people freaked out. And now suddenly the dominant model is skins again. So I think we've seen this pattern. This is the early phase. And I 100% agree with your comments, Sky. This is the best time to be building. And so we've been heads down for the last couple of months just building our product. Rudy, what do you think? I mean, is this sort of a quiet time for gaming?

Are people going to be really shocked with what happens next? And does any of this actually relate to the bear market itself? I mean, this seems like it sort of exists outside of the bear market regardless. And people are probably just conflating the price action with the actual market itself. Yeah. I mean, having been in the Web3 space for almost five years now, for me, I see this as a really needed level set for the space, right? I mean, leading up to it with the bull run that we had, the last bull run that we had, I mean, everything was being, you know,

masked by token hype, token value. That's what value is, right? Like that is what value to the consumer is. That's what value to the investor is. And, you know, we saw some pretty fun, phenomenal collapses from Terra Luna and, you know, others that showed that it isn't just about token hype. And so I think this is a very needed level set for the industry. It really focuses us,

the startups, back on building value, real long-term value, and not just chasing token hype. You guys are building effectively a portfolio company, right? I mean, is that an accurate assessment? So you, I think, are taking a different approach to what's being built, which to my understanding is gathering all the talented developers in games and putting them together in a package for investment. But you can correct me if I'm wrong. Okay. Yeah. I think it's a little bit nuanced. I think you're right from an external perspective in that sense, but I always go back to the prior cycles of gaming because things repeat itself quite often. And so you always had like in console, Sony, Microsoft, Nintendo, these are platforms and

they've often built first party studios in-house to build games, to demonstrate their unique selling points. And same thing, what we've seen is happening again. In a way, we're putting together a portfolio of games that we want to bring to market as a publisher to demonstrate what we think is the next wave, and Rudy touched on it, of games that will become a Web3. They happen to have commonalities of developers that have been doing this for 15, 20 years. They have core competencies in a respective genre where they've demonstrated excellence. And so we're helping them come to market because for them, all the Web3 stuff is new to them. And not anyone's a super expert on it,

but Rudy's been in for five years. We've learned a few things, we've seen things, and we can help accelerate the variants for them from A through Z, maybe A through F. And publishers always existed in gaming throughout history. We're just following that same pattern, but taking the things that are wonderful about Web3 and applying it into publishing as a model and helping those developers come to market with our take on it, which is a little bit different than how most people are thinking about it. So we have to construct a portfolio to help bring it because there are structural issues, because I mentioned consoles and Apple and Google they all provided essentially liquidity liquidity for players liquidity for content to come and be in a safe respected way where there's payments and privacy and

refunds and things like that we didn't have that necessarily in web3 it's early days and so we're helping to broker and bring people together to strike to create that player liquidity and so I think the way we're approaching is we need to bring games over that have already existing player liquidities. Communities in Web3 have built amazing communities with liquidity that we can start to bring them together. And that's essentially what a publisher is doing, is matchmaking these people. So is there an element of bringing the existing big games,

the Call of Duties and the Fortnites and such, into Web3? Or is this more about incubating these Web3 companies and allowing them to succeed in that Web2 model? I think there's three pieces. If I wave my magic wand and say, here's our portfolio 12 months from now, there are three types of games in our portfolio. There are games that are existing mobile free-to-play or PC free-to-play. I think it's going to take a lot longer for the big established console games like a Call of Duty or the brands or FIFA or

Madden, that's going to take time, there's a lot of other structural reasons why and it's not a criticism on the EA's and Call of Duty's I think they have a lot to protect. But I think there's a lot of mobile free to play games with 500,000 to a million DAU with a range of cohorts that are three years old, two years old, one year. These are important because if you think back at how mobile free-to-play accelerated, it was all based on insights. People took insights, they optimized, improved. So our view is there's a portfolio of

games that can solve the player liquidity by bringing existing games over because they have liquidity in players. Then as we figure out ways to bring it to Web3 where it makes sense, we take those insights and then go into our next layer of portfolio games, which is games that are being built by really good developers that are building for Web3 that are six months away, 12 months away. We can then give insights to them, what we learn, which then helps accelerate their optimization process. And then finally, the third one is we have ways to work with other people with sources of capital, work with chains, to then invest into brand new projects for games for Web3 with developers, like I mentioned before, that are coming now from the traditional side. Now looking to come to Web3 because there is no growth right now because in the traditional mobile free-to-play with IDFA and Apple's AT&T policies, it has effectively shut down the user acquisition funnel for them.

And so now you're seeing for the first time mobile games decline double digits in its history. And so now these developers are thinking, gosh, we've got to find new growth vectors and Web3 is an opportunity for them. So then we'll help them come over. So again, it's a serialization of de-risking each one's by taking liquidity that exists today, learning from that, and then moving up the stack. Rudy, are we seeing games in Web3 yet that are comparable in quality to the games that we saw in Web2? For me, the early iterations, the axes and such, it was cool that people could make money, but nobody really wanted to play those games, in my opinion. You didn't want to sit there and play it all day like some of these other ones. So to me, one of the big barriers was just having cool enough and fun enough games

to really spark this sort of revolution. Is that happening? Yeah. So I was actually going to comment on that because, you know, I think there's been a lot of experimentation. I've seen a lot of experimentation in the last five years and of teams pushing and pulling on these concepts. And every now and then a team like Axie sort of explodes into the public eye with some really out there concepts that made us all think, oh, wow, what if, right? But, you know, I think also the other thing that had happened over the last five years is that primarily outside of, let's say, Axie and some of the others, all the investment money and all the startups really focused on infrastructure, right? We went from when I started in this space, three blockchains, and now there's like 20

blockchains, right? So there's been a lot of work done to set a foundation, but what's happening, what's got to happen now and what we're sort of seeing and what we want to be a part of is this pivot in the Web3 industry from focusing on infrastructure to focusing on great content right and that means doing the things that chris mentioned to be able to de-risk the space for the great teams to come in the great teams are looking at the space 100 they are but they're starting from ground zero they're going okay well what's a public chain and what's a permission chain and what's an ERC 721 and why is it called that? Right. Like what? So, you know, they're coming in going, well, how do we get solve these these risks that we've never dealt with before?

So the good news is the industry is looking right. They're trying to figure it out. What they need is teams like Phoenix Games to come in and help de-risk because we've had some time to sort of get to get the lay of the land for them and so i think in to answer your question directly 18 to 24 months we'll start seeing some of these games hit the market and they'll there's definitely a new wave of higher quality games on the way that's relatively soon so i would you know i think that uh that's a more accelerated timeline than probably most people would expect in context of what's been happening over the past few years. So obviously, you mentioned that you've been in gaming for 10, 15 years, I believe. It's a lot longer than blockchain

and Web3 gaming has existed. So how did you guys get into gaming in the first place? And I guess, what lessons did you learn in the previous iteration that's allowed you to leverage that experience now to help Web3 companies? I'll go first. So yeah, I mean, I started my career at Disney in the gaming industry, working on a game called Club Penguin. I just loved the video game industry. That's why I got into it.

I just found a path in and I haven't left. So, you know, Club Penguin was an early pioneer out West in the free to play world. And so it was really neat to be on the ground floor for that whole movement. But I also, you know, like to say that Club Penguin was maybe the first metaverse. I, you know, a lot of people who buy NFTs today seem to be Club Penguin fans or played Club Penguin when they were young. So I think there's definitely a correlation there. But from Club Penguin, I went to work on Call of Duty. I went to Activision for six years.

And then from there, I went to World of Warcraft at Blizzard for a couple of years. And I think this career sort of led me directly to you know where what blockchain can do for the games industry because you know for this idea of digital item sales as chris put it isn't new to the gaming industry right in world of warcraft we had enormous gray markets you know these are things that players were engaging in types of commerce that we didn't enable in the game they They were going outside the game ecosystem and trading items with each other. And I remember in the late 90s playing a game called Astron's Call, and I would go on eBay and sell the items and I would come back to the game

and stand by a tree and wait for the buyer to come along, right? So this is a concept that we've had for a long time. And so in 2018, when I started looking at blockchain, there was sort of a clear connection of wow, a blockchain could really supercharge these kind of behaviors and pull this type of commerce into the game where everybody benefits, right? It's not this sort of fringe outside, out of the ecosystem kind of thing that was, you know, players were getting defrauded, you know, it was against the terms of service um but with blockchain now we can sort of bring it into the fold so I left Blizzard 2018 I founded a web3 company called mythical games I spent about four and a half years um working on that project dealing with all the growth in infrastructure the protocols the chains the complexities with regulations.

I mean, regulations was a minefield. As a game developer, I've never had to deal with so much regulations. And then, of course, the design, you know, knowledge gap was quite something, right? Going from designing closed economies for games to now these open economies, right? So that whole experience over the last four years led me to a new point of view, which is why I ended up teaming up with my friend Chris and a couple of others to launch Phoenix Games. Chris, have at it.

Sure, sure. Very similar to Rudy. I actually started my career in investment management of all places and with a portfolio manager managing emerging market funds and then i was an equity research analyst covering a totally non-related sector which was really boring which was common quentin but i was a gamer and so i i started to find my way wiggle over to a fringe new sector called video gaming and there's only three companies to cover micros i mean ea activision, and THQ. I kind of call it

three and a half because THQ quickly left. And so I eventually picked up coverage of EA and that's where I met the management team and expressed my interest. And so they brought me over to come over and I had no viable game skill whatsoever that's useful to anything related to making games. I couldn't draw, I couldn't program, I couldn't write music, I couldn't write dialogue, and I couldn't design games. But I went over and incorporated that type of function, and I found my way navigating through the entire org, ultimately to the studio side. And that was really instrumental because I got to see the entire ecosystem of how a game comes to market, how it's built, and then how it gets on the shelf back then in the early days.

I'm dating myself where it used to be on the shelves of Walmart, Best Buy. But that was instrumental because that basically exposed me to the entire ecosystem and the economics of gaming, which has come full circle now to Web3, why I think it's a very interesting thing. And I think, Scott, you brought up the question, what things have we learned in the past that are going to be you know instrumental for web3 and i i'm a huge believer in the past of the prologue things repeat itself and we're seeing it happen so um but eventually i moved into um more and more studio sites so i took on roles at um caban which is an early free-to-play pioneer

and really learned a ton of stuff around there saw structural impacts like when it was on facebook facebook i don't know if people remember, introduced Facebook credits, which was attacked. And immediately to see how people pivoted because it completely disrupted the model of you spend a dollar to acquire a user, and then you have an LTV and you recoup it now with 20% suddenly hitting you, that changes the economics and what do you do to change that? And then I eventually went back to EA and I ran a bunch of studios for them. So I was running a lot of the sports franchises for EA Sports Mobile, your Maddens, your MBAs, your FIFA. I also did the same thing for the racing teams like Need for Speed Mobile,

Real Racing Mobile. And then I left that because I got the bug for crypto and joined Mythical and now with Rudy. But I think to your question, Scott, I think Rudy touched on it and it's really important. I think the emerging gameplay, game designers are making a game in a closed ecosystem, but some of the best games that we see as reference points didn't come out as intended. They were emerging gameplay because of these closed ecosystems. And Rudy gave a great example where people met by the tree to trade things because they wanted something more from the game. The community, once they latch on, are really rabid and they'll find ways to construct new experiences of play. So some of the best games were born out of mods, like CSI Go or CSGO. And then you have

Fortnite as an example. A lot of these games weren't successful when they first launched, as intended. It's only when something happened structurally or the community took hold of it and turned it into something that they wanted. And so the real power that Rudy mentioned about Web3 is if you can open it up and give the community access to how they want to play and share the economic wealth and invite them in to create the construct of the game, suddenly you have, I think, the emerging gameplay unleashed. And that's where we see the true potential. And I actually fundamentally believe deep down, the economics will be much greater for everyone who participates. You have to fundamentally believe that.

And I always go back to what I learned in mobile free-to-play games that we've managed that are in 10 years of live services. If you look at the LTV curve, right? The first two years, most of that game design is the game team. But after two years, three years, if a game that lasts for 10 years, from year seven on, 70% to 80% of the LTV comes from the community from years three to 10. So the most value comes from the community-led ideas. And so we fundamentally believe if you unleash that and empower them, that's where you see a lot of value creation. And everyone's going to win in that state. I heard you date yourself. I'm 46 years old.

So, you know, I had the first Atari. I literally started from the very beginning and ColecoVision and television, et cetera. I think the best day of my life was when my neighbor got a Nintendo. All of a sudden I became his best friend because I loved Duck Hunt and Hogan's Alley so much. So I'm assuming that we're probably on around the same age there. I was Commodore PET. A little bit older. I had a Commodore 64, Print Shop, RBI Baseball. Oh, man. I think it was awesome.

But I wanted to go back, Rudy, to you. You sort of hinted at the fact that you had never dealt with regulation before. And that was a huge barrier and understanding. And I think that's coming to the forefront a lot more prominently now, certainly with crypto assets as to whether they're securities or not, and how that will be handled. But is there concern that in-game assets like these NFTs are going to be deemed that way and that that could be a major obstacle for what these companies are building? Yes, I think that's definitely the challenge, especially for games, because we're an entertainment product at the end of the day,

right? We're not financial services, right? So we are trying to deliver entertainment to fans and we're innovating with this new technology to deliver new experiences and new ways of engaging with the audience. However, in some regions, building a Web3 startup in the US, I had front row seats to all the regulatory turmoil. But the regulations seem to be taking a crypto first approach, right? We're looking at it through the lens of crypto and everything seems to fall under there. It doesn't matter what the end use case is for the user. Right. And so, you know, for us, we've been doing things like paying out rewards and things like that forever.

Right. You know, you as mechanics where you can put stuff in you know your car in a garage or your character you know somewhere and they're earning some kind of uh in-game currency but because it's a closed economy it's been fine there's been no issues but now if you have a tokenized economy where you can actually trade what you have for real world value you know suddenly the potential is is that they become um you know, that that's, that's called staking or that's a security and you can't do that. Well, wait a minute. We've been doing this mechanic for, you know, 30 years in games. You're telling us we can't

suddenly not do that. And so I think it's just, you know, crypto's the, the bigger, shinier challenge for the regulators. And so that's what they're focusing on. And we're kind of getting punched around because of it. So I think over time, we'll be able to shift that. But interestingly enough, I mean, Phoenix Games, we found it out in the UAE. I'm actually in Dubai right now. And, you know, we did that very deliberately because there are some regions around the world who are starting to see this hesitation from regulators as an opportunity to become leaders on the global stage. And they're taking a much more collaborative approach. We're out here.

We're talking to regulators. We're educating them. We believe in regulations, but we need to work together with the experts to be able to define regulations that make sense for each sector. So, you know, when it came time to do a new venture, you know, it became clear that in order to continue to really innovate, we have to be smart about where we based our headquarters. And over time, that won't be an issue. You know, hopefully, you know, we'll get to a point where regulations across the globe have been figured out.

But, you know, it feels like we're still quite far in some regions from getting there. Yeah, regulatory arbitrage is a huge issue, I think, in crypto. Just go where you're treated best. But that's not that great for the American gamer who just wants to participate, right? I totally understand it from a corporate perspective. Just go be headquartered offshore and operate in a place like Dubai, where they obviously are far ahead of the curve in the way that they're viewing these assets. But what does that mean for me as a guy sitting in America who wants to play one of these games and potentially you know make money on my nfts yeah I mean from my perspective um you know we've had a challenge of which you already

mentioned is that we haven't had great content right so um we we and so it's kind of like a chicken and egg situation the traditional game teams have been looking at the space and going, well, there's a lot of regulatory risk, right? Like, why would we want to put our livelihoods on the line when we're already making money making Web2 games? Let's let things settle down a bit, right? So it's a chicken and egg. You kind of need the great content to come in, though,

to show people what the real use cases can be and these aren't financial tools right like axie Infinity you know you could argue was more of a sort of gamify right than it was uh you know a game right and so it was a financial tool with some gaming mechanics right so we need to start bringing content that shows that this is just an evolution of entertainment and games. And by being in a region that wants to be collaborative and wants to sort of inspire innovation, it gives us a chance to put that content out, right? And show players around the world and regulators around the world what we actually are trying to do and it's not do a pump and dump it's not doing a ponzi scheme it's

not you know like we're just trying to provide entertainment that's what we've always tried to do right and so like rudy's rudy's point about you know i think how long it will take i actually think if you break that 18 months you know so forth down into what really drives that it's actually, I think a lot of us working with the entire ecosystem, including the regulators to Rudy's point to show what we mean. We haven't seen the supercells clash of clan for web three yet. And I think once you see that, you're going to suddenly see a mass, a mass, you know, acceleration of games coming and you'll see the acceleration happening. But in order to get that clash of clans, I think the difference with Web3 is everyone's been swimming and going for the same thing, but doing it individually.

And so what you'll see, I think the next six months, a theme is people working together from the ecosystem chains, working with wallets, publishers working with chains and wallets, us pushing with regulators to say, hey, here's what we mean. Here's what our use case is. Here's what we're trying to do from a game perspective. You tell us what's the box and we'll work with you on that. And so that's going to take, I think, the bulk of that 18 months. And so that's why we've been actively working with universities.

We're working with regulators to say, hey, if we had a game mechanic that we've always done for 30 years, and you're saying this is a securities, help us figure out a way to solve from a game perspective, from a player perspective, what would make it okay for you. And so that just takes time. And so I think that's going to be the bulk of the time is getting parties all to work together towards this common goal. And I think you're starting to see that happen. You know, Immutable and Polygon just announced a collaboration. I think you'll see more of that over the next couple of weeks. And I think that's a really positive indicator that we're really seeing the whole collective community of Web3 trying to solve it. And I expect you'll

see more of these happening. And that's a positive sign for everyone. Okay. So let's take the worst case scenario. Regulators come down hard. They say that all of this is securities. You need to be licensed to mint these NFTs. And then there's crazy taxable transactions. Does Web3 still improve the gaming experience, even if there isn't that monetary incentive for the players? Yeah, I mean, I think that this is something we inevitably have to solve, right? Like, and we have to solve it in a way where game developers don't have to go get banking licenses in order to operate, right?

We have to solve this because, you know, this concept of even gamers making money is not new, right? We've had Twitch streaming for over a decade. We've had YouTube content creation, which is what we're doing here right now today right like this is this is you know fans of games going and making content and making money they're not working on the game they're not part of it but they're making money they're part of the value chain and it's really an important pivot in the industry because you know for for many adults it was like whoa where did the streaming come from? But the reality is, is that the new generation of gamers are spending so much time in the digital space

that they really put a lot of value in the experiences that they engage with, right? They want to be part of those ecosystems in much more meaningful ways. And so blockchain allows us to take it another step further, right? Not only can you make content and be a streamer, you know, that can be a career for you if you want. But now we're giving you tools to be able to participate in the value chain and the, you know, to be able to participate in the value that you as a player bring to the game. You spend hours of your time building, creating, you know, and showing off stuff that only helps us as developers because you're promoting our game, right? Why not be part of that value chain? And so that's what blockchain provides. And so, yeah, there's a worst case scenario. We're here to make it happen though. There's no turning back now. Because the next question was,

the world's melting down. Banks are collapsing. Everything seems to be going to zero, right? Not my narrative. I'm just kidding. But you guys still managed to raise 150 million bucks. So it seems like in the hardest time to raise capital, you guys were able to do a massive raise. Where does that money go? And I guess that's a signal that people really believe in this still. Yeah. I mean, what I will say is that there's a huge appetite out in the UAE to take a leadership position in the gaming industry. They see this as a window of opportunity to do a land grab, right? It's not just regulators that are hesitating. It's also the big game companies are hesitating, right?

So this poses an opportunity. The UAE is coming out and saying, hey, we've got capital. We're interested in this space. office poses an opportunity the uae is coming out and saying hey we've got capital we're interested in this space we don't have the expertise how can we support um you know how can we support uh you know great talented teams and experts to come into the region and take advantage of the opportunity while everyone else is sort of you know pausing a little bit right and so i really think they have a big shot at it and we're excited to be a part of that. I'd say that, you know, while the number was big,

it still is a bear market. You know, our funding partners are being very cautious and very risk averse. We're being cautious. You know, we're not just going out there, you know, and throwing money around. We're going to build sensibly. We're going to start small. You know, and throwing money around, we're going to build sensibly, we're going to start small, you know, our first year budget is going to be very small,

and we're going to, you know, watch how the, the space evolves, you know, at some point, the bear market is going to, you know, we're going to be through the bear market. And that's when, you know, people will feel more comfortable pouring capital into the space. Until then, we've got to manage risk for our partners out in the UAE and for Phoenix Games as well. It feels like you should just move to Singapore and buy a yacht called MuchWow. That seems like that would be the way to spend that money, but maybe that's the old model. So is it largely deploying the capital to invest in all of these different projects and then just to facilitate their growth? I mean, is this something where you deploy all the capital now or is it basically a savings account that you can use as opportunity arises and as the

market improves? Oh yeah. I mean, this isn't a lump sum that somebody just dumped in our bank account. Not. I said not. I know. I know. I know. I know. I'd be like, wait, Singapore? All right. Again, everyone's feeling the bear market. As ambitious as everybody is out here they're still cautious you know so we we've started with a sort of a small amount of that total that we're going to be starting to take build like you said now's a good time to build silently right let's just start testing out let's let's not do 20 projects today right because we don't know the formula yet right let's try two three four projects this year let's keep our head count low right like we don't know the formula yet. Right. Let's try two, three, four projects this year.

Let's keep our head count low. Right. Like we don't know if we're even at the bottom of the bear market. Right. You know, I've seen so many teams, even successful sort of manage their cash flow properly, you know, we're going to see some of them disappear in this bear market. And that's the last thing we want to do. So, you know, for again, managing risk for our partners and for ourselves, we're going to look at sort of, okay, given our hypothesis on the space and what we want to achieve, what would we say are sort of like the two to four projects we can pick this year, really go deep on and try and prove out our formula. Hopefully by next year, what we'll see is

we'll see the bear market recovering. We'll have a lot of data under our belts and the appetite for investment hopefully will increase and we can then start to really push. Yeah, from the outside looking in, I think you touched on one of the biggest problems or at least perceptions, which is that you can be an exceptional developer. You can be great at releasing a coin or building a blockchain, but that doesn't mean you know how to manage a company,

right? Or manage a treasury. It blows my mind how few projects I've talked to that are blowing up even had a CFO. Yeah, right. I mean, it's ridiculous. I mean, the valuations have been hyperinflated, right? You've seen billion-dollar companies with no revenue out there raising and raising, right? Like, what is going on? This is what I was saying back previously was the bear market is a bit of a level set. It's like, come on, right? Like, not everybody can be building a metaverse, right? Like, let's get realistic here, right? And,

you know, I think the bear market is super valuable, right? Because especially to a team like us that's building, we want everybody coming in with realistic expectations, you know, not teams coming in and thinking they can YOLO a token out the door and then move to Singapore and buy a yacht, right? Yeah. I mean, we already touched on, again, you know, our approach because we come from traditional gaming. We don't know all the answers, right, to then rapidly scale your operations. And so we're trying to find the insights. And what I mean by that, let's say we have a game project, one of these three, and say two of them are in the same category. What we've always known is if you have a game team that works on similar projects, they can handle multiple of the same projects.

However, we don't know that. No one's proven that out. And so that's why we're hiring one team to put together to work on one project and see how they scale. If they can scale, we'll give them another one. If they break, we have to hire. And so we're trying also from an operations of building a company, what is that leverage we have as we build out our operations, our optics, if you will. And then once we have those insights and pattern recognition, we'll start to pull down on the capital to then continue to invest and build. And so we're taking a very methodical, and that's a benefit and a luxury, in my opinion,

of the bear market, because you're afforded a longer runway to take your time to think through it because no one's pushing you. The market's not running away from you. Given that we're building a portfolio of games over time, we are inviting investors, LPs out there who are interested in games because there's a huge appetite for games in Web three period, everybody keeps telling me it's the killer app. Okay, cool. So but you know, so many LPS and investors we talked to, they don't really have the deep insights and operational expertise that we do in terms of picking teams picking games, right.

And so you know, we've we've recently started opening up and saying, Okay, well, we're going in on these great teams that we really believe in, we're going to be supporting these teams, help de risking the space for them helping them go to market, you know, and, and some of these teams, just like everybody else are looking for capital valuations are reasonable right now, which is great time to invest. You know, we've got a team like us who's able to vet these teams ahead of time, de-risk the investment. So we've just started

out in the UAE, but we're going to expand our efforts into the US and Europe to say, anybody interested in games, come talk to us. We're going to build what we're calling an ecosystem fund to allow external LPs to participate. Give me an idea of just how big this market is. How many pitches, companies are you seeing hit your desk in a month, six months, a year? Listen, I'm like just a guy with a podcast who trades and I get sent decks, you know, like 10, 20 a month. It feels like still even after the craziness

of the bull market. So I have to imagine you're seeing quite a lot of potential deal flow here. I got three during the time we've been recording this. So, you know, it's rapid fire right now. It's rapid fire. And it's, you know, I can understand from an investor's point of view, it's just noise. How do you know which one to pick? And again, like I said, they're all seem to be building the metaverse. They're all trying to take down Steam. It's like, whoa, these are pretty lofty goals you have here, right?

And many of the teams have never built a game before. That's a real challenge. So how do you sift through this noise? How do you pick the right teams? And this is sort of where we see ourselves bringing the value to the space, right? Our expertise, you know, we're not necessarily, I mean, there's a few here and there that come through that we're like, oh, that's interesting. We should talk to that team more. But in many cases, the teams that we're working with are teams that we're pulling from our network who we know have been delivering for

10 years, right? Games industry, it's a hard industry to be in you really have to be passionate about games to to want to try and make money in this industry so you know we start to as you know after being in the space 15 years years you start to learn who are the folks who can actually execute and who aren't so yeah it's like I'd say of 10 that come through, one is one that maybe will vet because it hits some of the criteria that Rudy talked about, which is kind of coincidentally ironic because that's essentially the hit rate for gaming right now is 10%. And I think for Web3, it's probably less than 5% because no one's figured out the model. No one knows the pattern yet. And so you're right, Scott. We see a lot, but maybe less than 10%. We actually kind of kick the tires and go knows the pattern yet. And so you're right, Scott, we see a lot, but maybe

less than 10%. We actually kind of kick the tires and go through the next step. Yeah. Well, I would imagine that the barriers to entry to create a Web3 game that is effectively like a scam pump and dump or Ponzi scheme are much less than the tens of millions or hundreds of millions it would take to do that with the old model. That's the, I would say, probably the up and downside of this new technology and it being so decentralized and, I guess, democratized. But it's interesting. How do you even outright dismiss the 9 out of 10? I mean, do you even have the bandwidth to read these? Or is there some secret sauce where you look at a pitch and you're like, just no way way and only 10% of them even pique your interest? Because like you said, they're all the same from what I've seen. I mean, a slight deviation perhaps or innovation, but

it's a metaverse with NFTs and... Right. I mean, right or wrong. And ours is certainly one approach of many ways to be successful as a publisher. I mean, publishing is not like a secret sauce thing. It's been done for years by multiple people. But I think our angle is we have a very clear distinction of what type of games and what type of semantics and what type of game loops that we'll look for. So that easily eliminates many. But there are some that we just know from history, just from whether it's the art style, if they're going for steampunk, that is not a very big opportunity. So you eliminate those because that's probably on the fringe of less than 10% of the audience cares about steampunk and you can't scale those games with user acquisition.

It's really hard to do. So I think things like that, you can immediately eliminate. The bigger ones are obviously the harder ones are like high fantasy, like the world of Warcraft themes where it's high fantasy, huge opportunity, a lot of dollars, but we know from history, not a lot of people you're going after versus say a sports game or a racing game or something that's attached to a brand. That's where you have huge and massive amount of natural organic insults. It just makes intuitive sense because you don't have to explain who Tom Brady is or Gail Sayers. People know the lore and the fiction about that player. Whereas how do you tell the

difference between a blue sword and a yellow sword? You have to explain that to people. That's not saying it's impossible, but that takes effort and that's attribution risk, essentially. And so I think we could quickly eliminate those. Like, yeah, it doesn't mean we won't look at an RPG game that's high fantasy, but we're quickly to say, if it's not from a team that's been doing it for N number of years, likely they're not going to make it. But if it's a team that comes from Blizzard, okay, we'll listen because clearly they know what they're talking about and they have a secret sauce. So I think there's things like that you can draw from your operating experiences from the last 15 years that quickly let you vet. But we also have a very defined focus and strategy

to eliminate probably eight of those quickly. Let me ask the next obvious question. Will we see licensed sports games in Web3? Madden, FIFA, NHL, NBA 2K. Is it even still NBA? It's probably NBA 7K by now. I'm updating myself probably there. But are we going to see those easy barrier to entry games coming into Web3 with open economies? Or is it always going to be sort of these native fantasy types and RPGs that you described? It seems like EA wouldn't want to give up the license for Madden, right? Well, I think you are already seeing licensed IP come in. There's been plenty of products that have been attacking it, but I think the licensing is a very nuanced, tricky area. And I'm certainly not an expert, but the licensing rights all give you different certain things. Like they've now kind of split them down to very nuanced things.

Like you may have a NFL PA, an NFL license for a certain type of game style. You know, it could be simulation or there could be Web3 rights. So it really depends about what rights. But I think to answer your question more directly, Scott, yes, you will see a lot of sports and licensed IP come to WebPre. It's a natural fit for it. How it gets executed is a whole other ballgame, right? I think you're seeing a lot of really interesting companies taking clever approaches, whether it's in soccer with Sorare or Dapper with the NBA Top Shots and some of the other stuff they're going into. But I think ultimately you're going to see it come down to three distinct areas in the space.

You have rights for the physical area, you know, whether it's, okay, I have a Gale Sarah jersey that's going to be authenticated and verified on the chain. One aspect, you have NFTs, which we've certainly seen the first in the last full month executions and inspirations around that. And then you'll see eventually the game part. What's interesting to us is how do you attach those three distinct pieces, physical collectability, the world of whether it's a sports card or an NFT, and then the game side, utility. The funny thing is you think from a player motivation, the collectability extends through all three areas. And I think

that's the vector where the unlock will be. If you play off what people really care about, like you and I were talking about earlier, Scott, you talked about your father and your relatives being diehard Brooklyn Dodgers fans from way back in the day. That immediately triggers memories for a lot of people who follow the move from Brooklyn to LA and then what happens there, right? And then Tiger Woods and the collectability, or I was at the game that LeBron James passed Will Chamberlain or who was it? No, no, it was Kareem.

Kareem Abdul-Jabbar. Yeah, Kareem Abdul-Jabbar. All those things are memories. And I think that's the power of Web3 to actually put that and verify that you are there. You're a huge fan. And so I think that's the aspect you'll start to see. That's the real opportunity. But yes, you will see people do and hit on it.

It's going to take 12 months to 18 months for people to hit on it. And then you'll eventually see it codified. And so I think in our view, what's really exciting is to see the leagues really experiment. The NBA has been very aggressive. I think UFC has been amazing experimenting with great things. They're going to hit on it. It's the combination of a developer, a league, putting together the power. And this is going back to the theme. If they can push together, put aside the economics to show the fan, the consumer, what the opportunity is, they will come. And we believe that. And so

we're on the cusp of it. Yeah. I mean, I think what Dapper has done is incredible. To me, that's more sports cards than gaming, right? I think it's the bridge, of course. And even, you know, so rare is awesome, but that's fantasy football. It's not a game that you're physically playing. Although I love that as well. So I'm just waiting to see the bridge where I can be Lamar Jackson, assuming he makes it onto an NFL football team, you know, and, and play the actual game as a sports figure. But I do, I agree with you. I think we'll get there. I'm curious, Rudy, I want to ask you, we talk about these fantasy games and the RPGs. We saw sort of this first wave in the last two years of, I think, games with extremely high ambition, really quality trailers, Star Atlas,

Alluvium, right? Do you think that we can see winners still coming from that early wave or were they just too early? You know, it's tough. I think for those who were around when Kickstarter first came about, there's probably some similar parallel patterns we can pull together between what happened there and what's

happening now you know there's been you know i think it's great that teams have come and said hey we need better quality games we we need to you know make it more about entertainment and all that but if you haven't made a game before not to say that these teams haven't but you know we've certainly seen our fair share of teams that haven't made a game before. They don't know how long the piece of string is. They're going, okay, we want to build a space game and we want to do this, we want to do that, without really understanding how much that takes. And we had exactly that with Kickstarter. If you guys remember, Star Citizen was one of the early games to get backed by Kickstarter. It became famous because of Kickstarter. I think they got like $200 million

backing or something like that. Free money, essentially, right? And if you play that game today, I mean, it is a trip. It's like, you know, being on on drugs there's so many problems with that game it's insane right so you know i think there's a little bit of a you know people seeing this sort of wide open field and going wow let's go big and i admire that because it's helping push i've been inspired by many of those projects right going wow look that look the ambition. Look what could be possible. Imagine if we had tokenomics in a big high fidelity game. How cool would that be, right? But yes, you know, I think what it's going to take is, you know, more experienced teams,

which again, like I've said, are looking at the space. It's going to take them to come in and, you know, do what they do best, which is delivering great games. I would say though, and this is also tying back to your question about how do we vet teams, right? Every now and then there is a Web3 team that comes flying out of nowhere that completely surprises us. I'll give a small shout out to Genopets, which is one of those teams that really surprise us with how forward thinking they are about how Web3 fits into games, right?

And there's a few of these out there that are really paving the way and inspiring the industry. So, you know, for all the failures as to be expected in a brand new innovative space, you know, there are some really inspiring successes as well, which is helping. Yeah, I mean, they always liken the crypto, not specific to gaming, but to the dot-com bubble of the late nineties, as if it's a bad thing. And I always sort of make the point that each of those failed things, okay, maybe not pets.com or net taxi, but the rest of them, they, you know, advanced the ball, they kick the can forward so that we could have Facebook, Google, Amazon, et cetera. When everybody floods into one space at one time 99 of them are going to fail but to me that means that we're going to see some of the biggest companies in

the world come out of this wave yeah totally agree yeah and so it's very very exciting to see what will be built and we've always had to to what we were. And we've always had to, to what we were just discussing, we've always had companies that were just too early with great ideas. Webvan going back, right? Yeah. I mean, listen, there, you know, there were companies that tried to be Uber in their early two thousands, but we didn't have smartphones to call the, to call the car. It was a brilliant idea. Just the tech, the technology hadn't caught up. So I guess that's actually a corollary here.

We just have now probably gotten to the point where the technology has caught up, which means we're going to see it sort of built over the next 24, 48 months, next few years. That's right. Or regulation hasn't caught up. Right. And that's no surprise. But I would say if we had tried to do sort of Phoenix Games

maybe a year or two ago, it just wouldn't have clicked because there was still so much infrastructure to be built. There was nowhere to take these games, you know, so, you know, now is the time to be pivoting into, you know, bringing in great content

and the industry's ready for it because of all the pioneers that have come in and laid down the tracks. Do you think that potentially we could have a situation here where the big boys sort of win, right? The big companies come in, they dominate the space, they know how to build these games. But then the tail end of that is that those guys go and they build native Web3 things and sort of that trickle down effect. Web3 doesn't really win first, but eventually those are the projects that do succeed years down the road. You say we'll start to see it in 18 to 24 months, but I would imagine that the ones

that are going to win immediately are going to be people who've built games before and are well-funded, right? I think, yes, that's our hypothesis. People who are experienced. Because if you take a 100% pie, like what is the attribution of the risk coming from? I think a lot of this is coming to build a good game with sustainable economies and core loops. And then the trick would be, how do you integrate that into a real world economy? And that's the aspect. And so I think the marriage will be, if you take a really good development team that has history building games, and you take an early web three team that has kind of got the battle scars

and you merge them together, I think that hybrid will actually be the one that uncovers the unlock. So you can't, it's not mutually exclusive. Like to Rudy's point, I cannot explain how much I've learned so much from seeing a lot of those Web3 early pioneers. What went wrong to decide what we pivot to, it's those teams. It's kind of like the cliche. You can never get rid of all bugs. It's how you respond to it.

And there's Web3 teams that quickly pivoted and optimized and got in there. So I think it's going to be the marriage of those two. And we're actually starting to see teams come together. And those are the ones we're super excited to see because I think they're the ones that are going to be the next super sales that become the dominant ones. And to your other question, Scott, I don't think you see the EAs and the big traditional guys coming in necessarily, not because they don't care about it, but you think about all the things they have to prioritize. It's a priority, but it's not the number one. I mean, they have billions of dollars of business. They have to figure out a way to protect and grow.

It's important, but they've always done a wait and see. And that's a win of opportunity for these two hybrid teams to come together and win. And that's what we're super excited for. Makes perfect sense. So not EA themselves, but people who worked at EA for 10 years, guys like you. Literally, you guys are probably the exact playbook. People who have done it, have the experience, get it, and then make the jump across with help from people who have been in that audience already. Listen, we're coming up against time, but is there anything, A, I may have missed, anything you guys are excited about?

B, any specific games you guys are looking at that you're allowed to shout out and tell us about that we should be looking for? Well, what we can say is this week is GDC. I know this podcast comes out after GDC, but this week right now, there's a lot going on in the space. We've seen some big announcements. We've got some announcements coming up in the next few days. Two here we're really excited about.

Part of our philosophy is working together with the Web3 community. It's really important to us because the space is still so small. We all have to band together and grow the pie so we can all be successful. And so before we even bring games in, we are forming some great partnerships with some teams that are gonna help build a foundation for these games to come in the door.

And so some of the teams that we're really bullish on is Horizon with their sequence technology really excited about what they're doing um they're something a partner we're going to be announcing and we're really excited about that partnership um we're really bullish on yield guild games YGG and the you know the pioneers in the guild space uh we're really bullish on what Magic Eden's been doing and their focus on gaming, really exciting. Who else? Game7, really bullish on them. They've been here to stimulate and help innovation in the gaming sector for Web3.

And so we're excited to be locking arms with them to support great game content coming into the space. And then we're looking at some protocols. Polygon is one that's on our radar that we're really bullish about. So yeah, this is a foundation laying year for us. And we're getting together with the best of the best in the community. And we're gonna team up, work together,

all pushing the same direction. And I think that's the big thing that I can't stress hard enough. I think this is gonna dictate whether the industry moves forward faster or slower. And I think you're starting to see people work together just for the interest of the industry, put inside their own personal interests to work together. And that's always been a key mantra of Web3 is a community working together, open and community-based. And so I think we're going to see a lot of that back to roots and push it forward. And that's what I think we're really excited to look forward to.

I'm glad you guys are doing it. It keeps me excited. And I love dispelling the everything's dead because price is down myth. And you guys have helped to do that exceptionally well. I'm glad. I'm glad we could. We're excited about what's to come for sure. Awesome.

Thank you, Rudy. Thank you, Chris. Thank you, Scott. Thanks for having us.