Original title: "What crypto winter? This investor is on a buying spree》

Original source: Zheping Huang & Sarah Zheng, Financial Review

Original compilation: Biscuit, chain catcher

Original compilation: Biscuit, chain catcher

Animoca, Asia's largest blockchain venture capital institution, is building a huge financial, gaming and social media group, with a total of more than 340 companies. The company's goal, Siu said, is to give people ownership over their virtual properties and break up the Meta Platforms and Microsoft empires. Siu described it as a "digital dictatorship".

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Animoca's Yat Siu says now is the time to deploy more funds. Image via Bloomberg

Siu came into the industry from the cryptocurrency crash of 2018, when he turned his small video game studio into a crypto investment firm. The startup bought a stake in the developer of CryptoKitties, a Pokémon-like game featuring virtual cats that can be traded for cryptocurrency. Just four years later, Animoca has become one of the most influential investors in the crypto industry, backed by Sequoia Capital and George Soros.

“If people were saying it was a crypto winter, then 2018 was the crypto ice age,” Siu said, “now is the time to deploy more capital, not less.”

If successful, Siu could become another crypto kingpin. The absence of Animoca, whose investment business is similar to that of venture capital firm Andreessen Horowitz (a16z) or Sam Bankman-Fried-led FTX.US , is seen as an Asian crypto startup with legitimacy, and its absence is a worrying sign. Now that Animoca is one of the few organizations that preserves its investment muscle, Siu’s money is more of a formidable weapon — but if the crypto downturn doesn’t unfold like it did in 2018, this strategy of ramping up investment could backfire .

“Animoca can be invested at any stage, at any time,” said Brian Lu, founding partner of Infinity Ventures Crypto, which counts Animoca as one of its backers. "People said, 'They're everywhere, so if Animoca isn't investing in you, maybe there's something wrong with you?'"

Siu's entrepreneurial career began in the 1990s when he started several software companies, one of which even required him to use a personal credit card to maintain it. The startup, Outblaze, sold its cloud messaging business to International Business Machines during the global recession in 2009, allowing Siu to co-found Animoca in 2011 and explore his passion for video games. The studio has helped create hundreds of mobile games, but unfortunately has not been consistently profitable. During the company's darkest days, Siu fired half of its staff and sold equity at a discount to raise capital.

CryptoKitties provides a new lifeline for Animoca. Animoca's knowledge of the Chinese gaming market helped it secure the distribution rights for CryptoKitties in the region. At its peak in late 2017, some CryptoKitties traded for more than $100,000. When the market cooled the following year, Animoca bought a stake in game developer Dapper Labs, and it turned out to be a successful investment. (Dapper is now worth $7 billion.)

But the format of these games has yet to prove sustainable. In CryptoKitties, over time, the most valuable crypto kitties are concentrated in the hands of a few players, and those unwilling to spend money on the popular breed want the game to decay and stop playing. Animoca offered some discount marketing tactics as the game's popularity waned, but ultimately the market wasn't ready, Siu said. The company has largely abandoned the game.

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more aggressive

"Animoca wants to be the most successful startup. I don't think it's bad, but it doesn't make people who have been backed in the past feel good," said CryptoKitties founder Benny Giang, who left to build another blockchain venture . “That’s what Yat is still doing today, doing a lot of deals with various crypto projects. It’s just that it’s more intense now.”

Axie Infinity is showing signs of a similar boom-bust cycle. The game's economy has become so overheated that wealthy gamers have created a game of online exploitation where they acquire lucrative crypto assets and rent them out to people in developing countries to spend their days working for Digital currencies do the hard work. The cryptocurrency crash has hit Axie Infinity hard; its daily users have dropped to 250,000 from a peak of 2 million late last year.

Even the notion of ownership in the game is questionable. In March, Animoca shut down its three-year-old racing game F1 Delta Time after failing to renew its brand license with Formula 1 organizers. Players who spent hundreds of dollars on drivers and car parts for the game were suddenly rewarded with worthless crypto tokens. In compensation for Animoca giving up assets for other racing games, an Animoca-backed studio called 99Starz plans to make a racing game without a Formula 1 license that will support NFT versions of older games, Siu said. This, he said, shows the enduring value of blockchain-based assets.

There has long been a debate about whether these are games or instruments of financial speculation. During a private pitch with the company's investment team, the maker of the NFT game was asked to skip slides in the presentation about the game's mechanics and instead focus on its token economy, the host said, speaking on condition of anonymity. study.

In another example, a representative of Animoca demanded free tokens from crypto projects in exchange for endorsements and business advice. Ibrahim El-Mouelhy, a spokesman for Animoca, said the company does not comment on individual startups and that "our long-term word-of-mouth needs to be judged against a historical perspective."

His ideal world, as Siu describes it, is based on some kind of moral free market. "As an organization, we do believe in the incentives of capitalism," he said, "not that everything has to be distributed equally, but that whatever you end up making has to be more net benefit to other people in the community .”

For Siu, a normal workday can last until 3 a.m., with two-thirds of his waking hours spent on Zoom calls. Over the past few months, the father-of-three has shuttled between Hong Kong, Japan, San Francisco and Zurich, meeting regulators and industry heavyweights while speaking out on the road to digital property rights. "I get energy from the work I do, so I don't get tired," he said.

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billionaire club

The crypto investment business has brought great returns to Animoca. Animoca recorded nearly $300 million in NFT and cryptocurrency sales last year, up from $5 million in total revenue in 2017, when it was just a game developer. In July, investors valued the company at $6 billion.

However, obtaining this funding is not easy. Negotiations continued for several months, Siu said. Bloomberg News reported that some potential backers, including buyout giant KKR, were put off by the debacle of TerraUSD, a so-called stablecoin that turned out to be nothing at all. Siu declined to comment on specific circumstances. "Everything in the crypto market ends up being a little scary," he said.

Even after the July financing deal, some Animoca shareholders bought shares at discounts of 30% to 50% to the company's current valuation, people familiar with the matter said. Spokesman El-Mouelhy said such secondary transactions were small and did not represent the company's prospects.

Animoca's current focus is to move everything it touches onto the blockchain. That includes an educational content platform called TinyTap, which it acquired this summer for $40 million. Meanwhile, Animoca subsidiary NWay is developing a game based on the famous NFT art collectible Bored Ape Yacht Club. Animoca holds a stake in Bored Ape's development company, Yuga Labs, and holds a large number of ApeCoin tokens, which have voting rights on how Bored Ape will develop in the future.

Siu owns 7 percent of Animoca and is guiding the business toward its next valuation target of $10 billion and $20 billion, according to the minutes of its December shareholder meeting. If he succeeds, investors have agreed to nearly double their ownership in Siu, which would catapult him into the billionaire club.

Animoca wants to go public, maybe in the next two to three years. That will depend on market acceptance of its core business of selling NFTs and cryptocurrencies and taking a cut of secondary transactions, Siu said. The viability of this approach will depend on the extent of encryption recovery, or whether recovery will ever occur.

In the crypto industry, the company will be hard to ignore. “Companies like Animoca that raised money before the crash will have a lot of power in shaping the future direction of this technology,” said Matthew Kanterman, director of research at Ball Metaverse Research Partners. “They can decide who lives and who dies.”

Siu sees it differently. “I don’t think we want to be a kingmaker,” he said, “I don’t believe we can change the crypto market purely with money.”