Dialogue with Animoca Brands Founder: When Blockchain Becomes Infrastructure, Blockchain Games Will Refresh Public Perception

This article was published in Planet Daily in August this year.

The wave of the metaverse has completely ignited the enthusiasm for blockchain games, led by The Sandbox, but few people know that its parent company is Animoca Brands. Two months after the publication of this article, top venture capital firms such as Sequoia China and Dragonfly invested, completing a $65 million financing at a valuation of $2.2 billion. Subsequently, Animoca Brands took frequent actions, leading and participating in various metaverse, NFT, and gaming guild projects crazily from September to November. It is time to revisit the views of Animoca Brands founder Yat Siu on the industry.

The boom of NFT (Non-Fungible Token) cannot be separated from the push of capital. Animoca Brands is a leader in the digital entertainment field, specializing in blockchain, gamification, and artificial intelligence technologies to develop and publish a wide range of products, including the REVV token and SAND token, which are typical representatives.

According to incomplete statistics, Animoca Brands has made over 70 investments in the past three years, becoming the largest investor in the blockchain gaming sector. Among them, the recent wealth effect and top traffic generator Axie Infinity is built on the Ethereum blockchain, inspired by Pokémon, where anyone can earn token rewards through skilled gameplay and contributions to the ecosystem. The largest backer behind it is Animoca Brands. Additionally, Animoca Brands has invested in well-known blockchain games such as The Sandbox, leading NFT trading platform OpenSea, and NBA Top Shot development team Dapper Labs. In January this year, Animoca Brands ranked fifth in BlockchainGamer.biz's list of the top 50 blockchain companies of 2020.

With the continuous emergence of NFT games, Animoca Brands, which frequently makes moves in the crypto world, has also attracted mainstream investment institutions. In early July, Animoca Brands completed a financing of up to $138.88 million, with Blue Pool Capital prominently listed among the investors. It is understood that Blue Pool Capital manages a significant portion of Jack Ma's wealth and most of Joe Tsai's $8 billion fortune. This investment in Animoca Brands marks their first foray into the blockchain industry.

Animoca Brands founder and chairman Yat Siu has an impressive resume and achievements over his 20-plus years in internet technology entrepreneurship. After settling in Hong Kong in 1995, he founded Asia's first free web and electronic service provider. In 1998, he founded Outblaze, which combined game development and internet services, and after winning multiple awards, it was acquired by IBM in 2009. After that, Yat Siu focused more on investing in cutting-edge new tracks.

Against the backdrop of the rising NFT gaming sector, which has become a recent hotspot in the crypto world, Odaily Planet Daily had the privilege of interviewing Yat Siu, asking him to share his investment philosophy in this new track and the recent significant actions of Animoca Brands. Below are the highlights of the interview, enjoy~

1. A 28-Year Journey from Entrepreneurship to Investment in Technology

Q1: First, a side question. It is said that you studied music arts and are a trained classical musician. What prompted you to come to Hong Kong and engage in entrepreneurship and investment in the IT industry?

Yat Siu: I was born in Vienna, Austria, to musician parents, and choosing a music major was following their wishes, but my talent wasn't in that area. I had a strong interest in coding and programming during my teenage years, so I was better at using computer software to create music, a habit I still maintain today. Before I turned 18, I briefly started a business in the U.S., but the company was eventually acquired. Around the age of 18, I returned to Hong Kong because my father is from Hong Kong. Around 1993, feeling uncomfortable with the lack of email services in Hong Kong, I founded an internet technology company—Hong Kong Online—thus starting my entrepreneurial journey. At that time, locals viewed this project much like how people view blockchain technology today. As for investment, long-termism is my core investment philosophy, and I particularly value a project's growth potential and future value.

Q2: We reviewed your resume and found that 2009 was a watershed year in your entrepreneurial and investment career. Before that, your main focus was on the traditional IT technology sector, such as Outblaze, which was eventually sold to IBM. After that, you shifted your focus to entertainment, education, and crypto assets, becoming more diversified, such as with Animoca Brands and Dalton Learning Labs. What factors prompted you to make these changes? Looking back now, do you think it was the best choice?

Yat Siu: In 1998, I founded an internet service company, Outblaze, which, by today's standards, primarily dealt with cloud computing, but at that time, the concept of cloud computing didn't exist, so it seemed a bit ahead of its time. However, our team's philosophy was that if technology could make the world better, we would take action. If someone could maximize our expertise, we would generously give them the opportunity. So later, we sold this business to IBM, which happened to need a cloud computing email system at that time. Sometimes I wonder if we had continued, would we have become a giant like Google, given our deep accumulation in technology?

After completing the deal with IBM in 2009, I became very interested in the emerging mobile internet, and the advent of the iPhone excited me. So, I began researching apps, focusing on games. The most popular one was Pretty Pet Salon, launched in 2011, which surpassed 50 million downloads at that time. This number seems trivial now, but it was significant in 2011 when the mobile internet was still in its infancy. This also laid the groundwork for our later focus on blockchain + gaming.

For many entrepreneurs, satisfaction depends on wealth. But I value meaning more, so in the future, I want to do more impactful things, which will enrich my sense of fulfillment in my entrepreneurial journey, rather than just making money.

Q3: Which project do you consider the most successful among those you have invested in? Please briefly introduce its background and reasons.

Yat Siu: This question is hard to answer, like asking me which child I like the most. I will mention two that are particularly special: Axie Infinity and The Sandbox. The former had a development team entirely composed of Vietnamese, making it difficult to secure international financing. The latter's team is based in Argentina, far from the Silicon Valley startup teams that the public is familiar with, but the subsequent events surprised everyone. Both games have attracted countless fans with their exquisite creative designs.

Additionally, you might be curious why we were able to discover these two relatively unknown blockchain games among many projects. It’s worth mentioning that in 2018, our circle was small and narrow, with only about 200 people, and we had already gained some fame in the industry, making it easy for others to reach out to us. Moreover, the pandemic had not yet broken out, making cross-border communication very convenient. In 2019, we held the first Blockchain Gamer Connects in Hong Kong, which received a good international response.

Besides these two games, we have also invested in dozens of blockchain games and incubated the REVV Motorsport racing game ecosystem, which combines super IPs. This ecosystem currently includes licensed IPs such as F1® Delta Time, MotoGP™ Ignition, and the upcoming Formula E: High Voltage, as well as an original REVV racing game, REVV Racing.

2. The Value of NFT Blockchain Games is Not Just About Making Money

Q4: Animoca Brands began investing in blockchain and blockchain game projects at the end of 2018 and the beginning of 2019, when blockchain and blockchain games were not yet in the spotlight. What characteristics of blockchain and blockchain games attracted you to invest in this industry earlier than others?

Yat Siu: The reason we are optimistic about this track is that it truly realizes decentralization. As we all know, in centralized gaming platforms, players' rights cannot be guaranteed. A platform that holds absolute power can irresponsibly infringe on players' privacy and asset ownership. However, in the decentralized blockchain world, all processes are executed by smart contracts, completely independent of the platform's will. Moreover, I believe that when blockchain technology becomes infrastructure in the future, the popularity of blockchain games will continuously refresh public perception.

In investing, I believe that seizing opportunities is very important, but timing is difficult to judge, especially for things that have infinite potential in the future but have not fully demonstrated their value at present. Therefore, it is essential to enter the market early; otherwise, the costs will be higher if you come late.

NFTs and blockchain games both represent the future, but it is still uncertain when they will truly explode or become the infrastructure of internet society. However, we hope to find partners to promote this process together, which is why we have been tirelessly investing in quality projects. Additionally, we are self-funded, allowing us to adhere to long-termism without being constrained by short-term return requirements.

Q5: Animoca Brands has made over 70 investments in the past three years, becoming the largest investor in the blockchain gaming sector. What factors do you consider when investing in blockchain game projects? Furthermore, does Animoca Brands have deeper layouts and considerations for frequent investments in the blockchain gaming sector?

Yat Siu: In the early stages, we valued the team the most. If the early team lacked profitability, we would look at future potential, with three criteria: business logic, delivery capability, and whether they believe that freedom and openness are the future. The third point is marked by whether they can allow users' data assets to be tokenized as NFTs. We have encountered teams that claim to be open but actually want to control user data and assets, and we definitely do not invest in those.

Another important factor is the team's history and why they joined this industry. Axie Infinity's team is based in Vietnam, which deeply understands Southeast Asian users and markets, so we favored them from the start.

For these invested projects, in addition to financial support, we also provide comprehensive services, including over 300 well-known IP resources, brand PR, mechanism design, and technical support, among other project incubation services. This is thanks to my 20 years of entrepreneurial investment experience in the internet circle, which can be transformed into support for these young entrepreneurs.

Q6: Will the recent hot Play to Earn model accelerate the bursting of the NFT gaming bubble? If one day players can no longer earn, will they still stay to play?

Yat Siu: My team and I believe that blockchain games are the future, but I do not rule out the situation you mentioned. Users can transfer or upgrade weapon assets while playing, but they may not necessarily make money.

In my view, the value that NFT games can bring to the industry and users has many layers, of which "play and earn" is just a label. Play can also mean own and trade, not necessarily earn. Value has many layers, not just making money. P2E is just a label; it may be a good way to quickly attract players, but if game design only focuses on this point without other advantages, or cannot balance with other advantages, it will quickly fall into silence.

Q7: What obvious pain points do you think exist in the emerging blockchain gaming industry? What are the solutions? What efforts will Animoca Brands make in this regard?

Yat Siu: It is very difficult to form an accurate understanding of this new thing, so our education costs for the market are too high, which is the most obvious pain point. Specifically, players first need to use a wallet to store their digital assets, but they find it hard to understand this, and once money is involved, it easily becomes a sensitive issue. Of course, this involves another problem: the usage threshold of digital wallets is high, and the user experience is poor. It’s like ordinary people wanting to deposit money in a bank but facing cumbersome account opening procedures. Additionally, new users find it difficult to form an objective and comprehensive understanding of NFTs and digital assets, with some users treating blockchain games as tools for making money, which is also one-sided.

Currently, we will strengthen interaction with users and increase investment in market education. In addition, to optimize user experience to the greatest extent, the games on REVV Motorsport will be deployed on Polygon this week, reducing costs and increasing speed. With this dual effect, the games we develop and launch may have a positive significance for educating the market.

(Odaily Planet Daily adds: The REVV Motorsport platform, which has obtained IP licenses from the two major super events F1 and MotoGP, offers gameplay that provides game content in the form of NFTs, including cars, drivers, and equipment, allowing users to experience the joy of "ownership."

To this end, REVV Motorsport has issued an in-game utility token, REVV, which has been fully audited by CertiK. Its uses include but are not limited to:

1. Purchasing in-game items (various NFTs);
2. Paying for entry tickets to participate in races: as entry fees for grand prix and time trials;
3. Game rewards: participating players will receive corresponding rewards based on their performance in the races;
4. Staking: during special events, players can stake REVV to directly receive REVV rewards or NFTs.

Readers interested in gameplay and incentives are welcome to click: "NFTizing F1 Racing Games, Attracting Players Not Just for Realistic Experiences…")

3. In the Future, All Assets in Games Will Belong to Players

Q8: Does Animoca Brands have any new projects recently? Can you introduce the launch schedule and reward activities for REVV Racing?

Yat Siu: The ongoing Tokyo Olympics is very popular, and we have already laid the groundwork for next year's Beijing Winter Olympics. Previously, Animoca Brands' subsidiary nWay announced the development of officially licensed NFT badges for the Olympics, as well as a cross-platform multiplayer racing video game themed around the Olympics. This game will be released before the 2022 Beijing Winter Olympics.

Additionally, the beta launch event for Animoca Brands' blockchain game REVV Racing will offer prizes worth $150,000 to 1,000 winners, with the event running from August 11 to 17, 2021. We have already given away NFT cars to players in several events, allowing them to earn money because they own these assets. For specific reward rules, please refer to the announcement.

In the future, we will also launch more fun and rewarding activities, and everyone is welcome to participate. There will also be many airdrop activities, not just targeting top players. The NFTs you grab from the airdrops can be traded in the market.

Q9: What is the progress of another game, Formula E: High Voltage? Will NFTs be launched?

Yat Siu: Our electric formula racing blockchain game Formula E will also be announced soon. It belongs to the REVV Motorsport ecosystem alongside F1® Delta Time and MotoGP Ignition, and uses REVV as the in-game utility token. In this game, players can take on the role of a team manager, and whether they can lead the team to victory will depend on the strategies players adopt. At the same time, this game will further align with traditional gaming experiences, enhancing the fun and intensity of the game, and we welcome everyone's attention and participation.

Additionally, the NFT sales for this game will officially launch in the coming months, and everyone can follow our official website and social media accounts to stay updated on the latest developments.

Q10: This year, Animoca Brands has completed two rounds of large financing, totaling nearly $140 million, with investors including Blue Pool Capital. What qualities of Animoca Brands do you think attracted these institutions' attention and investment? In terms of capital and operational routes, which traditional game publishers do you benchmark against?

Yat Siu: To be precise, we raised $138,888,888, as we hope this number has symbolic significance for the company culturally. First, we are in the most imaginative track and have long made extensive layouts. Second, several blockchain games we invest in or develop are top-tier in the industry, such as Axie Infinity. Finally, our profitability is also good. Even during the peak of the pandemic last year, our unaudited revenue for the first four months reached $7.34 million. Based on these factors, Blue Pool Capital made a significant investment in us.

Every large game development company has aspects we can learn from; they understand user preferences and tastes better and know the operational path of games. However, they may not be prepared to embrace the big trend of NFT games. In the future, I believe that all assets in games will belong to players; this is a consensus and direction. Of course, this needs to be achieved through blockchain and NFTs, and we will work towards this goal, giving players more choices.