The next Amazon and Coinbase will probably emerge from a game

I think a lot about ecosystems. Mostly as a mental hack to get around those odd cognitive blockers which humans have when conceptualizing really big things. Especially that category of really big things which everyone agrees will probably be pretty big anyway but which could be really big. The best examples are entirely obvious: Google, Microsoft, Amazon-you get the idea.

Dean Takahashi just wrote a great status piece about the emerging metaverse ecosystem(s). He describes what’s happening as a content Big Bang and I feel the universe analogy is spot-on: there is a whole new internet of content being created e.g. Roblox, Fortnite etc. Core is the latest interesting example of a worlds generator (built on Epic’s Unreal engine). Jon Radoff’s (excellent) market map of the metaverse is another way to visualise what’s going on. Game engines (and more specifically their content) are truly eating the world. This metaversification trend is clearly going to be a big thing but I think maybe also a really big thing.

I’m particularly interested by the services which emerge from within the ecosystem of really big things. If you think about how AWS and AMS stemmed from Amazon (albeit as first-party solutions), you can begin to grasp the opportunities embedded in the scale and (theoretical) interoperability of these games/content universes. Discord and Twitch are the best known gaming examples but they’re ultimately artifacts from a much earlier environment (when games were worlds rather than universes).

Somewhere around the world, a handful of centacorns whose business models are symbiotic with today’s game universes are being born. But this cohort will go far beyond just games functionality, in <10yrs I fully expect one of the pervasive consumer internet services (ecom/search/food delivery/wallet/etc) to have bootstrapped its growth from these connected games universes.

Is it still an opportunity if the pricing is nuts?

This post originally started as an exercise to structure my thoughts on current private tech company valuations. Between Deliveroo’s brutal IPO experience on the London market and Clubhouse’s hold-my-beer financing rounds, do valuations even have a purpose?

Take, for example, some of the recent investing activity around kids financial services:

  • Greenlight, Current and Step (US-based) are each raising multi-hundred million dollar rounds at $1-$2b valuations.
  • Vybe just raised a seed round to launch a challenger bank for teens in France
  • A few months ago GoHenry (UK) raised $40m

On the surface it looks like ‘fintech startup y raises quadrillion dollars at 25x revenue multiple’. However amidst the favourable financing fervour lurk the occasional truly large market opportunities. Kids (<13), young teens (<16) and kidtech are one of those spaces:

  • Under-16s are now ~40% of all new internet users every year
  • Kids and young teens are now major consumers of games and videos
  • Digital privacy laws designed for these audiences (COPPA, GDPR-K, AADC) mean that existing adult solutions can’t easily be scaled down
  • Major technology platforms have materially ignore the audience (too difficult, limited ROI)

The idea that ten years from now virtually all minors will a) have a digital wallet (probably parentally controlled) and b) receive only digital allowance seems entirely plausible. It may even be legally mandated. Roblox won’t be the only company built on kids’ digital suffrage.

Giant opportunities remain, even in times of madness (but make sure you hold preference shares). Final final words to the perennially wise Jason Lemkin:

(I’m not an investor in any of the companies mentioned)