The New Era of Due Diligence in Web3 Gaming
As we dive deep into the crypto winter, investments in Web3 gaming have transformed into a meticulous process requiring a higher level of scrutiny. Robby Yung, the CEO of Animoca Brands and co-founder of The Sandbox, highlighted new standards for investment evaluations during his talk at the European Blockchain Convention in Barcelona.
Raising the Bar on Investment Standards
“Now that we’re in a sort of crypto winter and an economic downturn, from the investor perspective, we can afford to be quite choosy because, obviously, capital is scarce,” shared Yung. This shift reveals that investors are not just throwing darts at a board anymore; they want precise data and a robust business plan before investing. The necessity for a passionate team with specific skills is essential, alongside a robust product idea that has a clear market fit.
The Demand for Tangible Progress
Gone are the days when a good pitch was enough to secure funding. Nowadays, Yung insists on having a tangible alpha build and some user testing in place. “It’s very difficult to raise just on the basis of the business plan in this market,” he emphasized. Investors are less likely to take the plunge unless they see actual progress rather than just potential; in short, the era of empty promises is over.
A Flight to Quality
Despite the stringent requirements, Yung acknowledged that capital continues to flow into the industry, particularly in the second half of 2023. Yet, he pointed out a clear trend: “There has been a flight to quality.” Investors are gravitating toward projects that not only show promise but also prove their mettle in the current economic landscape.
The Challenges of User Acquisition
User acquisition remains a significant hurdle for many Web3 games, primarily due to the sticky situation of distributing games on mainstream platforms. Yung noted that traditional gaming services like mobile app stores, Steam, or console platforms have historically been resistant to games equipped with Web3 infrastructure. This resistance stems from fears of disrupting their established business models by giving up their share of the pie.
“I think that the idea of putting Web3 infrastructure in would bypass their business models,” Yung remarked, capturing the uncertainty surrounding this issue.
Until traditional platforms engage with Web3 and start considering it as an opportunity rather than an obstacle, the integration remains a complicated challenge.
