In this episode, Moritz Baier-Lentz – Partner and the Head of Gaming at Lightspeed Venture Partners (LSVP) – joins Naavik co-founder Aaron Bush to discuss:

  • His move to LSVP and the team’s revamped ambitions to invest across the games industry.
  • Lessons learned as a VC, including how he’s grown as an investor.
  • The current state of the venture market and his advice to founders on how to navigate tougher times.
  • Insights on investing in web3, AI, game studios, and more!

Joining Lightspeed Venture Partners: [00:04:50]

[Aaron]: Why did you join Lightspeed Venture Partners and why now?

[Moritz]: It was completely serendipitous. I was not actively looking for anything new, especially since I love what we were doing at Bitkraft. This actually happened during vacation in Greece, where I met for the second time Nicole Quinn, who co-heads the consumer practice at Lightspeed. She told me that they've been looking for someone to up their game initiative and that is when the exploration and the process started, which took about two-three months and ultimately for me, as much as as I love what we all accomplished at Bitkraft, was just a bit too good and too exciting to turn down. Lightspeed is a firm that manages over 18 billion dollars in assets under management, made 500 plus Investments, many notable ones and I feel excited to start that new journey.

Gaming Categories Lightspeed will Invest in [00:09:20]

[Aaron]: What gaming categories will Lightspeed invest in? Are you trying to narrow into certain zones?

[Moritz]: This is also something I’ve spent some time on over the last two months crunching a bunch of data to see where, historically, we’ve been in the Venture returns. I think for a lot of people the natural answer would be on the platform and tech side, pointing to IPOs of Roblox or Unity, but it's quite remarkable how many VC backed - but also non-vc backed - companies got there. For us, game studios are going to be a focus area, primarily in the early stage side. And then, what we call gaming platforms - e.g. Discord or Roblox. And third, game technologies, anything that helps with the creation of interactive media experiences, from engines and modding to novel 3D creation and approaches to AI or procedural generation we’d look at.

Learnings from Bitkraft that will set the Foundation to Lightspeed [00:14:30]

[Aaron]: What did you learn at Bitkraft that you want to take over to Lightspeed? Anything new that you want to pioneer now that you’re at a new place?

[Moritz]: Authentic expertise, rolling up your own sleeves, setting the right culture - all of this I learned at Bitkraft, which’s always part of the core thesis of how to build a VC that is actually one that naturally attracts the best talent. I’d lean more on all these things.

How to Land into Top Percentile Returns [00:20:30]

[Aaron]: How do you think about doing what it takes to land in that top percentile return?

[Moritz]: Let’s take the example of game studios because I think that’s a good one. You want to make sure you’re backing teams that do have a genuine chance at creating something extraordinary. It needs to be more than one hit game, you’re looking for talent that ideally has had previous commercial success at a big publisher that was responsible for creating a commercial franchise like Call of Duty, LoL, Valorant, in a leading position. In some cases founders that had previous entrepreneurial successes and exits, so, in the absence of a firm recipe the best precursor you have an informed shot are those previous experiences. It's a lot more important to have the right team than the idea from the get-go, you certainly want to make sure it's a team that wants to swing big, where the ambition is to build the next Blizzard, the next Riot, in addition to just making a first great game.

Outline for the Venture Market in 2023 [00:26:20]

[Aaron]: I’m curious what your outlook is for the venture market in 2023, specifically compared to the past years. What are your expectations for this year?

[Moritz]: Deals very likely, at least compared to the 2021 peak, I’d be surprised if 2023 excited 2021 or 2022 levels either. The way it typically works is that the early stage valuations follow the public valuations, and we’ve seen Epic Games, Discord and other companies taking hits on their valuations - so I would expect early stage valuations going down something in the domain of 30 to 50 percent.

Interesting Things to Look at Web3 [00:32:30]

[Aaron]: When you look at web3, what are you focused on right now?

[Moritz]: I think it's very easy in g general to have hindsight on things, it’s a lot harder when you’re in the moment of a potential major shift, which web3 certainly has the capacity to be that driving force and it still has, it’s a lot trickier to be cautious and not lean in as an investors - because of obvious you don’t want to miss out. It’s incredibly hard to get this stuff right, at Bitkraft we had different perspectives on how much we should lean into this space, how important we thoughts this would be for the future of gaming, how much we should give for a bar of talent, how much we should lower the bar for an acceptable dilution along the way. Essentially if you look at blockchain as a value driver, I think that can be a fallacy - it can be a tool for value creation in community, marketing, but I think you can’t get around the core principles of good game design. I look at web3 game studios as I’ve always looked at it, simply game studios, and whether they want to use web3 that’s all fine, but we can discuss this on page 7 of the pitch, you don’t need the word web3 on the cover.

Time Spectrum of AI in Games Right Now [00:38:15]

[Aaron]: Where are we right now in AI and how real is AI in games right now?

[Moritz]: AI is a topic that has been fascinating me for a while, and its a bit scary to think about, when you look at chat GPT it feels so real, I kind of wonder with the emergence of GPT4 now and other innovations that are coming out over the next years - which’s just what we see as a consumer, you don’t even know what’s going under the hood. You can easily spend all your time exploring that as an investor, it’ll have implications for many sectors, including gaming. It's very easy to see, for example, how producing concept art is now a matter of minutes versus hours or days, assets for mobile games, or even isometric visuals. It’s very likely for me to say that 2023 will be a year for me where I’ll have one or two new investments in that space.