If you haven’t heard of Animoca Brands over the last year or so, you haven’t been paying close attention. With a long and growing list of digital entertainment, blockchain, and gaming properties, the eight-year-old, 600-person Hong Kong-based outfit has quietly become one of the most active participants in a world that more and more stakeholders believe is the next iteration of the web.
Just today, an L.A. outfit called Fan Controlled Football League — a sports league where fans vote on real-time decisions for their team — announced $40 million in Series A funding co-led led by Animoca. And the outfit, which got its start by developing games for smartphones and tablets, has invested in more than 150 other outfits since bumping into the blockchain around 2017.
It was as serendipitous as it sounds. For Animoca founder Yat Siu, it also appears to have been love at first sight. At the time, Animoca was on its way to acquiring a company called Fuel Powered, which shared an office with a venture studio Axiom Zen, and Siu was intrigued with blockchain game that Axiom was working on called “CryptoKitties.” He learned of it from Fuel Powered’s cofounder founder, Mikhael Naayem, who was advising Axiom’s founder, Rohan Gharegozlou.
Soon after, in early 2018, Animoca struck a deal: a one-year renewable exclusive licensing and distribution agreement with Axiom Zen to publish “CryptoKitties.” It took off in such a big way that Naayem and Gharegozlou teamed up to form Dapper Labs (now known even better for its “NBA Top Shot” marketplace), and Animoca became of its earliest backers.
Animoca has been on an impressive tear since. Operating as both a publisher and, increasingly, a buyer of blockchain assets and tokens, its ballooning portfolio includes Sky Mavis, the developer of global sensation “Axie Infinity,” which closed on roughly $150 million in funding back in October at a $3 billion valuation, and the popular metaverse startup The Sandbox, a game where players can create and monetize in-game assets and that closed on $93 million in Series B funding back in November led by SoftBank. (As of last week, the smallest chunk of land users could buy in Sandbox was more than $11,000.)
Animoca also nabbed an early stake in OpenSea, the biggest marketplace for NFTs currently and valued, as of last week, at a stunning $13.3 billion.
Further underscoring that Animoca is consistently close to the action, it more recently paired with one of the breakout projects of last year, the Bored Apes Yacht Club, to create a Bored Apes-themed game this year.
Indeed, in a conversation late last week with Siu, he said Animoca’s holdings were worth around $16 billion as of late November, not long after Animoca was itself being valued at $2.2 billion in a $65 million funding round that included Sequoia Capital China.
Interestingly, Sequoia and the rest of the syndicate bought up publicly traded shares. As Siu explains it, Animoca, which previously traded on the Australian Securities Exchange, was delisted in March of 2020 because “it didn’t like the fact that we were dealing with crypto,” he says. Now it operates as unlisted public company. That means it can communicate with shareholders via its own site and mailing lists, and that its roughly 2,500 shareholders can sell their shares privately to other individuals. (You just have to know owns some.)
The stakes in OpenSea and Dapper Labs are meanwhile considered part of the company’s assets. “They would be really what you describe as balance sheet items; they basically just accrue to the value of the equity of Animoca Brands,” said Siu, who stressed that Animoca is “not a VC,” even while it can look a lot like one to outsiders.
Animoca’s success hasn’t been without speed bumps. On Monday, an Animoca subsidiary that mints sports NFTs (for nonfungible tokens), suffered a security breach that cause users to lose $18.7 million worth in tokens and for the subsidiary’s tokens’ price to tumble 92%.
This brave new world comes with its own specific downsides.
Still, Siu, who is today Animoca’s group executive chairman and managing director, is obviously very much a believer in web3 and unsurprisingly, doesn’t put much stock in recent criticisms to surface, including around the practicality of creating fully decentralized businesses.
Box CEO Aaron Levie asked recently on Twitter, for example, whether truly decentralized organizations that rely on the input of their communities will be able to truly innovate if they’re always busy trying to build consensus.
Asked about this, Siu said, “We’re not asking that users are all visionaries,” and that “people will know what is best for them when there’s something to compare against.”
We also talked about how Animoca is thinking about investments and partnerships in 2022. He said the company continues to acquire game studios in order to “move them onto the blockchain and provide essentially digital property rights to the end users.” From the investing side, he added that the outfit is also drawn to infrastructure that can help develop and grow the network effects of digital properties like NFTs.
As for what that means, it’s “lending, DeFi, fractionalization, protocols, and Layer 1 [blockchains], and Layer 2 [blockchains].”
It’s part of Animoca’s overarching belief in “cross chains” as necessary for fast-growing outfits to keep growing.
“We want to encourage companies, when they launch their gaming assets or NFTs, to launch it on, let’s say, Ethereum, But they should also consider putting it on Flow [the blockchain designed by Dapper Labs]. And they should also put it on Solana and they should also put it on HBAR. The whole idea is to encourage people to roll out their assets on as many platforms as possible, in as many protocols, as possible, because to us, this independence is really critical. We view chains very much like countries. If you are only able to launch a product in one place, in one country, then you’re limited to the culture and the potential of that particular place.”
For much more from that conversation with Siu — who grew up ethnically Chinese in Austria, landed his first job with Atari in Germany as a gangly teenager, and sold one of his first startups to a fish oil company — you can hear the whole thing here. Among other things, we discussed Facebook’s metaverse plans, Jack Dorsey’s thoughts about web3, and how the business world in Hong Kong is changing as China redraws some of the lines.