*by Kevin Baxpehler
At Remagine Ventures we like to say that “we invest in technologies that change how people spend their time and money”. Advancements in technology and changing cultural behaviour are big drivers of this trend and Covid-19 was like pouring gasoline on fire.
As we are spending more of our resources online, we believe that a “new Internet” is being created – with the consumer at its centre – on top of a strong tech infrastructure: 5g/6g, cloud, edge computing, new powerful GPUs, spatial computing, decentralisation etc.
I believe that Toya, our latest investment announced this week, and companies like it, are building the application layer of this new internet.
The “new internet” aka “Metaverse”
Part of this “new Internet” is still being created and is comprised of several virtual worlds where people play, hang-out, listen to music or go to concerts, shop, role-play and share all kinds of other experiences.
The leaders here are mainly gaming-related companies such as Epic, Roblox, MantiCore Games, Unity, Animal Crossing or even newer entrants such as the earn-to-play phenomenon, Axie Infinity. Traditional brands, namely eCommerce/luxury fashion and CPG brands are trying to figure out how to get in the action. Gucci, for example, has a store on Roblox and Nintendo’s Animal Crossing hosted live fashion shows inside the game.
These new social, virtual experiences, are often referred to as the “Metaverse” and is quickly becoming the trendiest buzzword of the year. Don’t believe me? In the last month alone we saw Mark Zuckerberg (Facebook), Satya Nadella (Microsoft), James Mitchell (Tencent), Dave Baszukcki (Roblox) and of course Tim Sweeney (Epic/Fortnite) officially brand/re-band their multi-billion dollar market cap companies as “Metaverse” companies.
Our recently announced investment into Toya (part of the company’s $4M seed round) follows our continued vision and efforts to invest in the next Internet. Toya is more than a gaming studio investment, it represents much more.
Enter Toya
Toya is a female-led studio partnering with the biggest platforms in the gaming industry to develop and promote games that reflect equal opportunities, diverse characters, and more dynamic storylines across the gender spectrum.
Toya focuses on creating female-centric experiences on Roblox, servicing a large and growing user demographic – close to half of Roblox users are female. The Tel Aviv based studio was founded in 2017 by Anat Shperling, and has released a number of games including the first official Miraculous Ladybug Roblox Game, which generated over 200 million visits since launch, as well as proprietary games like My Farm. Toya creates diverse and inclusive content for the Metaverse generation.
My 12 year old daughter, who kindly agreed to help with due diligence, is a big fan of Toya’s games because the games allow her to role-play, interact with friends, be social and express herself by creating her own story through digital items. She and more than 40 million other daily active users are meeting on Roblox to share experiences, not physically, but in a digital setting experience.
Take a look at the usage graph for Toya’s Miraculous™ Ladybug & Cat Noir game
We got to spend a lot of time with Anat before we invested. We knew that she, Guy Zaidenband and their team can execute and build hit games. We also loved Toya’s mission of building games that target a diverse group of people! But what stood out in the process was Anat’s creative ideas about how games should be played on Roblox. This confidence allowed her to say “no” to a brand if it is not a fit with the company’s values and strategy.
It takes a LOT of courage to say no to potential revenue, especially in the very early stages of a startup. Avoiding saying no is a mistake I made as an entrepreneur and one I have seen many other founders make frequently. Saying “no” can be equally important as saying “yes” to a potential partner or client.
Opportunities & Challenges for Roblox
While the economics for studios are still challenging on Roblox itself – the engagement is incredible and we believe that money will follow attention. Brands are extremely eager to get involved with Roblox and we expect around $1 Billion in sponsored experiences this year alone.
Between the first quarters of 2018 and 2021, Roblox’s DAUs (daily active users) more than quadrupled from 10.3 million to 42.1 million. The total hours of user engagement sky rocketed from 2.1 billion to 9.7 billion and its average bookings per DAU rose from $11.62 to $15.48. Revenue in Q2 2021 was up 127% to $454.1m.
Challenges, besides developer economics, remain. Currently half of Roblox’s user base is younger than 13 years old and most of the audience is US-based. Roblox is aware of these challenges and is experimenting with different ways to support creators on its platform, e.g. through premium payments that are based on engagement KPIs, actively targeting and growing older demographic (over 13 yrs old) as well aggressive international expansion plans.
On a macro level, we also believe that the 30% App Store tax which currently charged by Apple and Google on mobile devices will significantly decrease in the future – driven by competitive and regulatory pressures, as evidenced by South Korea’s recent ruling).
Toya – more than a studio
The way we valued Toya is not only by the future value of potential cash flows. Toya represents a new type of digital ,branded, social experiences that are already creating brand equity. Thinking ahead 5-10 yearsm we believe that Toya will be one of the leading IP owners of the virtual world.
And with regards to Roblox, I believe it has a good chance of becoming the new “Facebook” of the Metaverse. We’re excited to back Toya on this journey!
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