EGD News #195 — Joakim on 20Angel
Note! EGD News is now on Substack. Elitegamedevelopers.com still has everything, but the newsletter has moved here. Now, to this week’s piece.
When I got into angel investing in 2019, my favorite podcast was 20 Minute VC, a podcast where the host would interview VCs and ask them questions. The show was very insightful and has dramatically impacted my development as an investor.
In 2023, I’m proud to be featured on 20VC’s sister show, the 20Angel podcast. I had a great time doing this recording, where we went into detail on my founder background, angel investing, running a syndicate, and then transitioning to becoming a VC with F4 Fund.
Here are my favorite bits and ones that didn’t make it to the show, as we only had 60 minutes of recording time.
Favorite bits
One of the best was when we delved into what is more critical to building a gaming business to product market fit. Is it data or founder motivation, or founder insight?
“The insight is the thing; I’m a huge fan of that. Creativity and innovation are key, but what does that mean? In most cases, many game mechanics are recycled from one game to another, but the best game developers… They can have a new game in them. They have a concept for a new game in mind and can articulate well why it will work in the market. That’s what I get really excited about. I try to poke holes into their concept. If the concept stays intact, I will write the check.”
“In the past, venture success in gaming has mostly come from capital-efficient teams who develop and test quickly, with an understanding of CAC to LTV. At the early stage, the investor needs a certain kind of pattern recognition to spot founders who have insight into games that need to be built. Investing in early-stage gaming is much harder as an outsider since you won’t have KPIs for a while.”
Then, we went on to talk about how I work with the portfolio companies daily and weekly.
Finally, I really liked that we covered the biggest lessons I’ve learned in my investing journey to date.
Ones that didn’t make it
We did cover Jason Calacanis’ book, Angel, as a catalyst for me to get into angel investing. But some other material also placed me on my angel path.
If we had had time, I would have spent time talking about Naval Ravikant’s “How to get rich (without getting lucky)” podcast series and Tweetstorm on X.
My favorite bits from Naval’s piece that I still think about today:
“Seek wealth, not money or status. Wealth is having assets that you earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.”
“You’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom.”
“Learn to sell. Learn to build. If you can do both, you will be unstoppable.”
“When you’re finally wealthy, you’ll realize that it wasn’t what you were seeking in the first place. But that’s for another day.”
Thoughts on portfolio construction
There is much to learn from moving from angel to syndicate lead and now to VC. When allocating checks, the big question is concentration or diversification. During 2020 and 2021, diversification was significant as everyone seemed to be raising new rounds. However, the benefits of a portfolio of 20 or more companies, you have problems doing trade-offs. You will own less of your winners. And since new rounds aren’t a given, more of your companies will run out of cash now than in 2020 and 2021.
Portfolio construction is a great topic to figure out when you are moving from angel to VC, as you want to start optimizing your returns. A concentrated portfolio makes sense, with reserves to double down on your winners.
The most significant difference between VC and angel syndicate
After having been a VC for the best part of 2023, I can start to reflect on the differences between VC and the angel syndicate. In both roles, I’m investing other people’s money. But there are significant differences.
Founders usually want to have some level of secrecy when they are raising. With a VC, they can rest assured that their idea won’t start going around, whereas, with an angel syndicate of 200 people, it’s tough to share something secret and hope that it doesn’t lead to other developers in a competitive space, picking up some juicy insight.
As a VC, I haven’t had to deal with the fact that the decks I’m seeing would need to be shared with my LPs. It’s a different situation if an LP from F4 Fund would like to angel invest on the side. Then, I would proceed to ask the founder if they’d want to share their deck with this person who might be helpful as an angel.
Final words
Here are the links to the episode on different services.
And here's the content that I mentioned in the episode.
My book, The Long Term Game: How to Build a Video Games Company, is on Amazon with 4.5 stars and 39 ratings. Get your copy today.
Articles worth reading
+ Hedgehogs, foxes, and VCs — "Market shocks are by their nature temporary, and so are eventually solved by the market if they are large enough and exist long enough. A market shock opens a window of opportunity that can be a powerful “why now”, but it’s important to remember that these windows are fleeting. Being too late or too early to them is just as bad as not having them at all."
+ The Next Era of Modding — "UGC expands the gaming market and steals market share, the largest IPs and games are also becoming bigger, more engaging, and will also steal market share. The middle will get increasingly squeezed and harder to win in, but if those middle-market participants have more opportunities to also sell into the audiences of large games, it could create new revenue opportunities."
+ Revenue Per Gamer — "The industry has now found itself in a conundrum: the gamer has been trained to expect too much for free. This simple fact is the result of 10+ years of the gaming industry growing and evolving to where it is today. Much of this growth has been fantastic for gamers, industry participants, and the world at large. Yet the “revenue per gamer” metric is now anemic, flat-lined, and concerning."
Quote that I’ve been thinking about
"There is no greater journey than the one that you must take to discover all of the mysteries that lie within you." — Michelle Sandlin
Thanks for reading this newsletter. I wish you all a great weekend!
Joakim
Great to see you on Substack. Really great platform. If you can turn on the audio element that helps as these newsletters are great to walk the dog to. I give them even more focus out in the snow and ice than home in the warm.