Gaming is a far more complex equation to solve for investors, say experts

KPMG estimates that the number of online gamers will increase to 657 million by 2025, growing the market size to $3.7 billion. Currently, with 250 gaming companies, India is stamping its position on the global gaming map. In order to support this growth and also help develop the technologies to turn India into the world’s gaming hub, serious amount of investment is needed.

Adgully’s GAMEXX 2021 Summit & Awards saw an interesting discussion on ‘Investments and Investors for Gaming Industry in India’, which provided some deep insights from an investor’s perspective. Moderated by Askhay Chachra, Co-Founder, Head & CFO, Hashtag Poker & Mind Sports League, the panellists included:

Ankur Mittal, Co-Founder, Inflection Point Ventures

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Girish Menon, Partner & Head, Media & Entertainment, KPMG

Justin Shriram Keeling, General Partner, Lumikai

Pankaj Karna, Founder & Managing Director, Maple Capital Advisors

Sajan Raj Kurup, Founder & Creative Chairman, Creativeland Asia Network

Commencing the discussion, Akshay Chachra said, “We have been witnessing an amplification of growth in the Indian gaming sector during the pandemic in the last two years. It is also said that gaming is on a bigger track than the music and movie industry by 2023 and recently we also witnessed the first gaming company coming out with an IPO in the gaming sector, which was Nazara Technologies.”

Speaking on how the gaming sector in India measures up to other high goal sectors such as Edtech and e-commerce, Girish Menon remarked, “When you compare gaming to some other fundamental sectors, there are certain similarities for sure, but at the same time there are some core differences on how gaming as an industry and business works and, therefore, why it is a more specialised form of investing than typical digital investing models.”

Like all digital driven businesses in India over the last five years, gaming has seen a significant ramp up in terms of audience consumption as well as engagement matrix along with time spent. In a lot of ways the gaming sector in terms of user base and market potential is following a very similar trajectory like e-commerce, fintech or OTT. Therefore, when you look at the overall play around here, the excitement for most investors is really the untapped potential of the Indian market and a belief that once the users start getting more mature, monetisation will follow suit and these businesses will thus, start making a lot more sense. “Where gaming differs from a lot of these sectors is that gaming is a techno creative product, while it has got an underline text base, which drives the entire piece, but fundamentally it is also content and entertainment,” Menon further said.

“And because it is a content-driven play, you not only have to get the current content right, but also need to demonstrate the ability to come up with the content that works. Gaming is a far more complex equation to solve for investors when they look at gaming companies, but the attractiveness of the market is clearly there,” he added.

According to Pankaj Karna, “Gaming is a digital-to-digital ecosystem and is actually physical, which differentiates it from any other sector. It also has its own ability of penetration and is the entertainment sector for the consumers, which is one of the biggest differences from other sectors as they are more bound towards sustainability. The consumer looks for entertainment and that is where the gaming industry shows up. One good thing about gaming is that if you come out with greater content and shelf life than any other competitors’ content, the great games are played for a long time and helps to build more compared to the OTT content which has comparatively lesser period of lifecycle.”

Talking about the three main key factors that start-ups look for in the gaming industry, Justin Shriram Keeling said, “Gaming is a very unique business from other creative and technologies businesses. The key point here is that the gaming being the intersection of both entertainment and technology means that its constantly disrupted by technology, but these new technology cycles are not cannibalistic to the previous generations, but are basically creating new touchpoints for new audiences to play and it has been like this since the  birth of this industry 50 years ago.”

He further said, “If you look back, everyone thought that our kids would be killed by the consoles, consoles would be killed by mobile, but in reality there has been no cannibalisation. All of these maths are happily co-existing and have actually increased the overall market size to $200 billion. Historically, the technological aspect of gaming has always been constructive vis-a-vis destructive and this is what makes it an exciting sector for both investors and founders to build in.”

Ankur Mittal believed, “The thing with gaming is that it is new and growing industry in India and is penetrating really fast. We are not experts in gaming, but my education started three years back when I saw brands like Dell investing in the gaming sector, and thus I entered into this industry. Since then we have invested in different kinds of e-gaming start-ups; one of them is trying to become the CrickInfo in the gaming world. With more and more new games and businesses coming in, it is necessary to spend time with the founders to understand their GTM and how they are planning to wire their users, their strategies, vision and how they are building some structural modules within their business. At the end of the day, it’s all about users and, therefore, user retention is very important. A lot of people download, but how many of them stick around are some important things that we need to keep a track of. User matrix has kind of become parameters and the next important thing to know is whether the founders understand both the gaming and the business side of it.”

Highlighting the insights on what the investors are looking for in the gaming company (Top Line versus Users), Sajan Raj Kurup said, “When I started looking at gaming as an investment opportunity, the most important thing was to look at the purest aspect of it. As the whole cloud is around gaming right now, my interest lies in Esports. For me, the opportunity while investing in the gaming industry was to build the infrastructure. We are 20 years behind compared to many of the places in terms of infrastructure and at the same time, mobile penetration that’s happening has a lot of interesting athletes (gaming players) coming up. The huge opportunity is to build talent here. This is such an incredibly interesting opportunity to create a new sport, which will hopefully find a berth in the Olympics very soon. We have such a vast and rich culture, and for me to invest in games is to make these games more accessible to everyone who can play it and is available on mobile phones. If you can create competitive sports on mobile, this is the sector that is going to grow rapidly.”

Watch the entire panel discussion below: