A Brief History
Animoca Brands was originally founded in 2014 as a mobile gaming studio, but in late 2017 it made its first forays into NFTs / blockchain games and then leapt into the field in earnest in 2018 with early investments in The Sandbox, OpenSea, Axie Infinity, and Dapper Labs (of Top Shots fame). Today, the company has a portfolio of over 320+ projects that span the entire NFT and blockchain ecosystem. We cover more of Animoca Brands’ history in our Breaking Down Animoca Brands essay from February.
One of the key points to understanding Animoca Brands’ strategy is its overall vision on delivering digital property rights mainly via NFTs and gaming. To support that vision, it has focused on growing the entire ecosystem through a multitude of investments in crypto infrastructure, DeFi, marketplaces, art, virtual world platforms, guilds, esports, and many other Web3 areas. Additionally, to further its vision, Animoca Brands supports three accelerators: one focusing on NFTs, another on The Sandbox, and a third one on Gaming Guilds.
Vision
Animoca Brands feels strongly that data is a property right and NFTs are a pathway that grants uniqueness, scarcity, and most importantly ownership. This ownership paradigm is vital as it creates opportunities for new businesses and services that can be built on top. Web2 examples of this are Uber and Lyft, which wouldn’t exist if people didn’t own their cars. With digital ownership and rights, it's now possible to create entirely new opportunities based on these user-owned assets. Animoca Brands believes this will usher in a new “revolution.”
Animoca Brands also wants every game in its portfolio to plug into a blockchain and by extension connect to an open system (versus the closed system of Web2 technology). In this new Web3 world, players theoretically own their assets, and they can bring them to any place that would recognize them. The company believes that this approach will create a sustainable economy in which individual user-generated content and energy add to the open ecosystem model. This is very much The Sandbox’s approach, with most of its creator tools enabling everyone to participate and grow that virtual world ecosystem and share in the creation value, which is in stark contrast to users participating in Facebook and not receiving any value for the data they generate/create.
Another aspect of Animoca Brands’ vision of Web3 is that it also allows for valuable financial education (not taught in schools) and exposure to reach more people who would’ve otherwise been left behind. This includes many people in developing nations who do not have access to traditional banking systems but now, via the internet, have access to web-native and financially rewarding opportunities as creators.
Notable Portfolio Holdings
Just to provide a sense of all that Animoca Brands owns or has invested in, here are several examples — divided between blockchain gaming and other opportunities.
Blockchain Gaming
- Sky Mavis / Axie Infinity — led a 2019 investment round, and in 2022 participated in a $150M round led by Binance
- REVV Motorsports Racing Ecosystem, including several newly acquired studios:
- Grease Monkey Games — acquired in February 2022 (for an undisclosed amount); maker of the Torque franchise of mobile/PC racing games, with over 45M downloads across all titles
- Eden Games — acquired in April 2022 (at $16M with 96% ownership); a 24 year-old racing game studio and maker of Test Drive, Gear.Club franchise (Nintendo Switch), and F1 Racing (Mobile)
- WePlay Media — acquired in September 2022 (for an undisclosed amount); maker of the popular MotoGP™ Championship Quest mobile racing game which sports over 50M downloads and around 1.2M monthly users
- Alien Worlds — participated in a private utility token sale of $2M in March 2021
- Star Atlas — purchased $3M of Star Atlas NFTs in December 2021, plus maintains a strategic partnership
Metaverse/Infrastructure/Marketplace
- The Sandbox — acquired in 2018 for $4.875M in cash and stock
- OpenSea — invested in November 2019 as part of an early $2.1M round
- Dapper Labs — invested in November 2018 as part of the $15M Series A
- Yield Guild Games — invested in March 2021 as part of the $1.325M seed round
- Yuga Labs (including Otherside, the Bored Ape Yacht Club metaverse project) — a strategic partner and investor in the mega $450M seed round.
Strategy
With 320+ investments across blockchain games, NFTs, DeFi, and infrastructure platforms and tools, Animoca Brands is without a doubt a major player/investor in the space. All its investments revolve around its vision of digital property rights via Web3 technologies.
Animoca Brands is currently focused on:
- Raising funds to continue investing during the "crypto winter," with $500M+ raised thus far this year alone. Since its establishment in 2014, Animoca Brands has raised over $775.3M, according to Crunchbase.
- Making strategic acquisitions and investments in industries and projects that it wants to own or become a major player in, such as TinyTap with education.
- Securing partnerships with major branded IP, such as BAYC (Bored Ape Yacht Club), Cool Cats, and MotoG to encourage further mass audience reach.
- Building and advancing its various interpretations of the open metaverse with projects like The Sandbox and REVV Motorsports, and continuing development via IP collaborations and key acquisitions.
Building A War Chest
As stated in the most recent Chairman's Letter, Animoca Brands continues to invest, thinks the current market is akin to the 2000 dot-com bust, and believes now is the time to build. In the words of chairman and co-founder Yat Siu, "the current market conditions will not kill Web3, the open metaverse, NFTs, or cryptocurrencies. There will be bumps on the road, cyclical variations, and the occasional black swan event, but the map to the future is legible by anyone who takes a broader and longer view."
Despite the uncertainties of the current "crypto winter," entities such as Animoca Brands continue to amass sizable reserves to pursue their dream of digital property rights. It's true that overall VC investments in startups have declined as of late, but VCs’ appetite for crypto is still healthy and currently consolidated to established players like Animoca Brands.
This is evidenced by the raises Animoca Brands continues to do, the most recent one having occurred just this September with Singapore’s state-owned investment firm Temasek leading a $110M funding round for Animoca Brands. This follows another recent raise for the Asian market, specifically a $45M raise for Animoca Brands Japan to focus on NFT-related business opportunities. Creating a specific Animoca Brands Japan subsidiary serves several purposes: 1) it allows Animoca Brands to specialize in this market and makes it easier to conduct business at a local level, 2) it serves as a statement of its commitment to the Japanese market and the belief in the potential there, and finally, 3) given the company’s strong view that the world of Web3 will be reached through gaming, focusing on one of the strongest and most historic gaming markets is a wise strategic play.
Additionally, in July, Animoca Brands completed its second tranche of $75M, a continuation of its $358,888,888 raise at the beginning of the year, valuing the company at over $6B currently. Thus far, the total money raised for 2022 is $500M+. With this sizable bankroll to deploy, it's clear that even in the midst of a “crypto winter” Animoca Brands is amassing a sizable war chest to make strategic investments to advance its vision of digital ownership via blockchain gaming, asset interoperability, and an open framework.
How (and how well) Animoca Brands uses all these funds remains to be seen, but among its favorite moves are acquisitions into new areas where it sees great opportunity for NFT/blockchain. We'll dive more into some of these below.
Strategic Buys
An interesting acquisition is TinyTap ($40M this summer, a significant investment for Animoca Brands), which on the surface is not blockchain-game-related but does actually play into the company’s grand vision of expanding "digital property rights" to other industries.
In education, Animoca Brands feels strongly that educators have not been properly rewarded for the work and value they create. TinyTap shifts things to a new paradigm and establishes a new business segment for blockchain-based user-generated education content which allows educators for the first time to generate equity not otherwise possible. More specifically, TinyTap has over 8.2M families registered, with more than 200K interactive lessons and educational games created by publishers such as Oxford University Press, The Learning Company, and Sesame Street, in addition to more than 100K other publishers and independent contributors on the platform. Leveraging this base, Animoca Brands wants to bring these educators into Web3.
This is an interesting contrast to what's happening on The Sandbox, which is producing brand new Web3 creators from scratch. TinyTap is taking existing creators — a rather established community of educators (one of the least crypto-savvy audiences) — and assimilating them into web3 so they can better retain the value they create. It will be interesting to see how many teachers will choose to utilize the new business model, but for Animoca Brands it’s supposedly worth trying to bring that audience into the Web3 world.
On one hand, it feels like the company is losing it’s focus before it truly succeeds in its core gaming are, but on the other hand it also aligns with Animoca Brands’ (over-idealistic) goal to bring blockchain technology to everything and use established communities and brands to spur NFT/blockchain adoption.
Brands and IP
Another strategy that Animoca Brands is pursuing is leveraging established brands and partnerships, as shown most recently with a new play-to-earn Cool Cats game and tournaments. This is a collaboration between the established NFT collection Cool Cats and GAMEE (a subsidiary of Animoca Brands), utilizing its Arc8 “arcadeverse,” a virtual casual gaming space that connects players, brands, and game creators. This follows Animoca Brands’ other strategic partnership, which is with Yuga Labs, the creator of one of the most successful NFT collections, Bored Ape Yacht Club (BAYC). Both companies are working together to build out the ApeCoin-connected metaverse "Otherside," the largest NFT sale to date.
These partnerships not only give Animoca Brands exposure to the top NFT collections and brands out there, but they promote its vision that NFTs are a unique digital property that can grow in value. Cool Cats and BAYC were originally born out of the 10K NFT collections of just PFP (ProFile Picture) JPEGs. But since these are NFTs and represent ownership on the blockchain, they can be given additional increased utility not only from their own original creators but from other partnerships and even the community.
Animoca Brands also helped with the ApeCoin launch, the governance token that will power the ApeCoin DAO and have influence on the BAYC community. For Animoca Brands, these partnerships allow it to connect various parts of its portfolio in order to supercharge them. In this case, Animoca Brands’ Benji Bananas, a blockchain mobile game, features a play-to-earn component to earn ApeCoin. This frankly isn’t too exciting in and of itself, but it demonstrates how the company can leverage different parts of its portfolio to create strategic synergies. Additionally, we can bet that Animoca Brands will utilize much of its learnings from The Sandbox to help build out the "Otherside" universe.
Metaverse, Gaming, and Web3
Along with blockchain gaming, Animoca Brands believes that the broader metaverse will be a huge gateway for mass adoption to the Web3 world (is that enough buzzwords for you?). What exactly the metaverse looks like in the end is unclear, but Animoca Brands is pursuing a variety of projects to help build out its own vision for it.
Let’s dive deeper into three related projects (wholly owned by Animoca Brands) that approach things a little differently, each with its own take on the Web3 space but sharing the company’s universal goal of driving more web3 adoption via the metaverse and gaming.
The Sandbox
One of the most well-known virtual worlds today is The Sandbox, which Animoca Brands describes as “Minecraft on the blockchain.” It has a creator-driven economy where designers and artists create digital goods, investors can buy and own virtual land, and players can participate in multiple "experiences" to win and earn.
Just recently, The Sandbox launched its Alpha Season 3, which features 90+ experiences (Alpha Season 2 having 35+). Additionally, The Sandbox adopts Animoca Brands’ strategy of partnering with major IP and brands to bring more people into The Sandbox world, with recent major collabs with Gordan Ramsey's Hell Kitchen (celebrity chef), Paris Hilton (pop culture socialite), Snoop Dogg (famous hip-hop artist), Tony Hawk (skateboard legend), Playboy, Gucci, The Smurfs, and TIME to name a few.
Even though it’s a challenging market currently, The Sandbox is going full steam ahead with its Alpha Season 3 and upping the game in a number of ways. In Alpha Season 3, The Sandbox allows various top-tier NFT collectors to use their tokens as Avatars. You can play as your voxelized NFT from Bored Apes, Cool Cats, Moonbirds, or World of Women collections. This takes PFPs to a whole new level as you literally walk around in The Sandbox world as your own unique NFT avatar from your favorite collection.
Like Alpha Season 2, Alpha Season 3 is open for all to play without any purchase. If players want to earn, then picking up a NFT which rewards SAND is an option. The Alpha Season 3 NFT offers up to 500 SAND (around $420 at the time of writing) for completing the season, and this presents an arbitrage opportunity to those interested as the NFT is currently sold for $380 on OpenSea. It does seem that the crypto winter is taking a heavy toll, with only 368 owners of the 10K total Alpha Season 3 NFTs. To be fair, players can also win Alpha Season 3 NFTs by earning raffle tickets, so they could be trying their luck first before resorting to make the purchase near the end of the season. Alpha Season 2 had about 350K MAUs, which was a 10x increase over Alpha Season 1. For Alpha Season 3, the increase will be nowhere near that number, with participation expected to be similar to Alpha Season 2 or even lower, despite a 1.5M SAND reward pool for top-ranking players.
Looking at connected wallets on DappRadar, we see daily user spikes of 1.6K, the average being around 700 currently, compared to the March timeframe for Alpha Season 2 which saw around 3K daily user spikes. Granted, this is a very limited view of connected wallets (and underreported due to the true number of active users), but the overall trend cannot be mistaken. Another factor that is likely to dampen participation in Alpha Season 3 is that in order to earn assets, all accounts must now go through a KYC (Know Your Customer) process. Nevertheless, it’s a necessary evil for fighting fraud and bad actors as players with multiple accounts gaming the system has been an issue in the past.
Another difference this season is guaranteed SAND payouts if owning certain NFTs, including Avatar NFTs from featured other collections. It’s very difficult to tell if there is a measurable impact to the sales for the Avatar NFT collections. It’s highly doubtful that someone will go buy a Moonbird NFT just to be able to walk around as an owl and receive a guaranteed payout of 10-20 SAND (in dollar terms, this would barely cover ETH gas fees). More likely, it’s just an added bonus for holders but not very material.
Clearly, The Sandbox is aiming to be one of the premiere virtual world destinations and possibly the gateway for physical, real-world brands to enter into the Web3 space. Unfortunately progress has been slow and participation — especially compared to web2 counterparts — is very lackluster, which has led to plummeting asset values (which frankly were at unsustainable highs). Even so, team continues to take small steps forward. The Sandbox is smart to foster new creative experiences by encouraging participation from major brands, its game maker fund, user-generated content from the community, as well as game jams. The platform continues to experiment and grow, announcing new partnerships each month — now it just needs to translate all this action to scalable user engagement.
REVV Motorsport Racing
An alternative version of the open metaverse that Animoca Brands likes to highlight is its REVV universe of motorsport racing games. Unlike The Sandbox, which is a single virtual world ecosystem in which lots of different experiences are built, REVV pushes the interoperability of NFTs to the max with its integration of an ever-growing list of racing games into the REVV motorsport ecosystem. These include REVV Racing (on Polygon), MotoGP™ Ignition (motorcycle grand prix trading cards on Flow), and Formula E: High Voltage, the latter two being licensed brands. From the recent REVV Racing mini-deconstruct, we know that the existing REVV offerings are fairly limited, leave much to be desired, and currently have minimal (and falling) user engagement.
However, it’s clear that Animoca Brands is not backing down, having announced three major racing game studio acquisitions this year to help bolster its fledgling REVV motorsport ecosystem. It’s widely known that gaming is often a hits-driven business, and it can take two, three, or many more iterations of bad design, bad economic/token models, bad theming, or what have you before finally hitting a success. Animoca Brands continues to take shots on goal, which on one hand increases the odds of finding a success, but on the other hand makes the tokenomics (specifically a pool of tokens that are allocated across games) much harder to manage.
Animoca Brands acquired Grease Monkey in February of this year, which was quickly followed by the Eden Games acquisition in April. Both of those are established racing game studios that have built several successful racing games, with the former developing the Torque motorsport franchise (over 45M downloads), which recently received an Epic Mega Grant from Epic Games. Just this month, Animoca Brands’ shopping spree continued with its acquisition of WePlay Media, the studio behind the highly successful MotoGP™ Championship Quest mobile game with 50M+ downloads and 1M+ MAUs. This acquisition further deepens the company’s partnership with Dorna Sports (rights owner of MotoGP™) as a sponsor, NFT licensor, collectible cards provider, and now Web3 game developer.
This is not to say that everything has been sunshine and rainbows. Formula 1 was a major license that Animoca Brands inked early on for its REVV ecosystem. Unfortunately, it was unable to renew the license, thus killing its F1 Delta Time title even though NFTs for the game were already sold. But as a demonstration of the versatility and resilience of NFTs, since the purchased game assets were themselves NFTs, players still owned them even though the game was gone. In traditional gaming, once a game is gone, any items owned or bought are also gone. Since F1 Delta Time was part of the REVV family, these NFTs continue to have a life beyond the game as Animoca Brands enabled players to swap them for other items inside the REVV ecosystem. A single REVV NFT is not only usable in one game but can have utilization and value in other games of the REVV ecosystem.
Although Grease Monkey, Eden Games, and WePlay Media have long-established track records of making successful motorsport racing games on various platforms, it will still be a challenge for these studios to transition into the Web3 world. However, the future of the REVV motorsport ecosystem highly depends on these newly acquired studios and whether they can repeat their earlier successes but now with blockchain technologies. Grease Monkey is probably the furthest ahead; its Epic grant and being available on the Epic Store could prove critical for the future success of the REVV motorsport ecosystem. But even if none of these prove to be a breakaway success, Animoca Brands will still deploy its war chest and continue to invest in the REVV ecosystem. It’s very likely that Animoca Brands is not done adding to its REVV studio family.
The REVV grand vision of interoperability and digital property rights creates a whole new world in which players choose to bring their own assets to the game. In this case, a REVV gaming asset theoretically has increasing future value as the REVV ecosystem continues to grow. For this reason alone, Animoca Brands is more than likely to continue making investments and acquisitions in order to make the REVV universe successful. Its recent acquisitions of proven racing game studios definitely position REVV for several more runs around the track; hopefully the next attempts are more successful than the last.
Phantom Galaxies
Finally, one last project worth mentioning is Phantom Galaxies, which is also solely owned by Animoca Brands. What's unique about it, and in stark contrast to Axie Infinity, is that it's an AAA style game. Instead of Axie Infinity's traditional approach of “pay to play,” Phantom Galaxies offered its initial NFT assets for free; anyone that signed up for the beta received one, and later on players traded and bought others. This essentially rewards early players and adopters, creating a loyal ambassador base.
Currently, the project features the fully playable Alpha Episodes 1 through 4, and for new players joining now, it’s just a single, low-cost NFT purchase (lowest price is about $2 at the time of writing) to access all the Alpha Episodes. Phantom Galaxies is an open world mecha warrior shooter game with an official launch scheduled for Q4 2022. Its NFTs have a sizable following with over half a million owners of its Origin Collection NFTs, according to OpenSea. Any one of those NFTs grants access to all the Alpha Seasons.
Phantom Galaxies continues to progress and just recently released its Episode 4 installment, which is PC-only right now but with Mac promised soon. This follows its successful planetary NFT sale, of which the private sale generated an impressive $19.3M.
Phantom Galaxies proves that AAA-level gameplay can incorporate blockchain technologies. Its low-cost entry strategy (you only need 1 NFT to play) is an interesting model and lowers the barrier to entry to a wide audience. Outside of its planetary sale, the Phantom Galaxies Origin Collection is quite small, comprising of only 10 items, and owning any of them will provide access to the game; the lowest priced item is at about $2. However, it still needs to execute to full launch this year, and even though the Alpha Episodes are pretty impressive and fun, keeping the current model will require an endless content mill to keep players engaged. The future roadmap promises a much wider scope, and upcoming features, like guilds and multiplayer, will give the game much more depth and engagement. Of course, as with most games, it all boils down to the quality of the team’s execution.
In some ways, Phantom Galaxies is another experiment for Animoca Brands to see what works and what doesn't. Even for itself, Animoca Brands will admit it doesn't know all the answers, and that’s likely why its investment portfolio is so expansive.
What's Next?
With 320+ investments across the NFT, blockchain, and broader Web3 space, Animoca Brands is without a doubt a powerhouse player, with its current valuation said to be $6B+. The company is a strong believer in digital property rights and foresees that the gateway to mass adoption is via an open metaverse and blockchain gaming. It is so strongly committed that it will invest in many other crypto projects, seemingly anything that will help build its open Web3 metaverse vision for mass adoption.
Animoca Brands has a singular focus but has not figured it all out. Thus, its investments are vast and wide. The company has many partnerships, projects, and metaverse investments that all approach things in different ways. It continues to raise funds and amass an impressive checkbook, which will allow it to continue to make investments and acquisitions in pushing various versions of the open metaverse, as well as onboarding major brands and IP both from the physical world and the NFT collection world.
Despite its shotgun approach to investing, Animoca Brands is not shy to make major investments in ecosystems it believes in, such as REVV Motorsport and The Sandbox, which continue to be supported by ongoing partnerships and acquisitions. Frankly, it’s fair to ask how good of a job the team is at deploying capital; after all, essentially all of these big bets are well below their highs and have an incredible amount to prove. It’s too early to assess with any certainty, but we’d like to see some bigger, clear wins before stating that Animoca — despite its large size and portfolio — is good at capital allocation.
It will be very interesting to see how Animoca Brands decides to deploy all the capital it has raised. Similar to the great investors of the web2 era who invested in companies like Amazon during the dot.com crash, will Animoca be able to spot the web3 version of such future outsized winners? Watching what Animoca Brands does may provide a future glimpse of what Web3, blockchain, and an open metaverse may become. Animoca Brands is playing the long game, and it has acknowledged that its vision of an open and interconnected Web3 world is at least three years away. Until then, the team will continue to build, acquire, and partner to make its Web3 dream a reality. One thing is clear: Animoca Brands is not slowing down in this down market.
A big thanks to Lawrence Hsieh for writing this essay. If Naavik can be of help as you build or fund games, please reach out.
