New Trends in Web3 Game Investment: Driven by Infrastructure and Content

On January 31, two seasoned investors and entrepreneurial mentors shared a series of精彩 insights on investment and entrepreneurship in the blockchain gaming sector. Below are some selected excerpts:

Chen Yuetian stated that after leaving Innovation Works in 2020, he has been engaged in personal angel investments, participating in cryptocurrency projects and achieving returns that exceed those from equity investments. Compared to the equity world, capitalization in the crypto market is easier to achieve. This greatly impacted him, prompting him to establish Huofeng Capital in 2021 to become more deeply involved in investments in this field.

He believes that it is a pity for China, as a major game production country, to be unable to showcase personal ideals and aspirations due to the large industry cycle. However, web3 can provide game developers with the space to demonstrate their talents. This is also his motivation for being dedicated to the web3 market. However, compared to traditional investment fields, the pace of the web3 industry is very fast, and there are many new rules to learn, which is a challenge.

Kevin shared that they have been investing in the crypto space since 2017, initially focusing more on infrastructure. After 2020, DeFi and gaming had a chemical reaction, and they began to think about how blockchain can empower games and create new business models. Currently, he has several points of interest in investing in the gaming sector:

First, the gaming infrastructure needs to provide more services for ordinary users to participate and lower the barriers to entry. Second, regarding game content, it does not necessarily need to incorporate financial attributes, but rather focus on how web3 characteristics can solve problems in traditional games. Specific directions include fully on-chain games, as well as web3 attempts by traditional gaming companies.

Regarding investment strategies, Huofeng Capital focuses on the changes that technology brings to the media industry. Chen Yuetian believes that new content often originates from new media, which in turn comes from new technologies. They have identified four technological directions: cloud, XR, AI, and blockchain, and believe that these underlying technologies will have a profound impact on media iteration.

In terms of gaming, they focus on how blockchain changes the storage and computing layers of games. In 2023, there is more emphasis on investments in game development companies, while in 2024, attention will shift to infrastructure and platforms. He believes that in 2024, more excellent crypto games will emerge, capable of achieving positive cash flow through player-side revenue.

Chen Yuetian believes that the purpose of investing in games is to hope that games, as a popular product, will attract more users to join. The previous wave of GameFi was not optimistic because there were "no games and players", resulting in a mismatch between supply and demand. Ultimately, games still need to connect with players and require strong playability. Therefore, they choose teams that have previously received traditional market investments to bring the best gaming production capacity in China into the web3 industry.

Kevin stated that after the last cycle of refinement, investors' perspectives on games have changed. Currently, discussing popularization inevitably requires discussing the playability of games and how to attract user retention. Not all games are suitable to be converted into blockchain games, but PvP games can provide users with a better experience within the public and transparent framework offered by blockchain.

From a team perspective, in addition to those who understand the game, game producers, planners, and art designers, it is also necessary to have members from the encryption field to solve development challenges. This is a key focus of his investment in early-stage projects.

For web2 gaming giants to lay out web3, Chen Yuetian believes this is an industry innovation trial, but it is currently not their investment focus. This instead presents opportunities for web3 game entrepreneurs, who should seize the moment to scale up and strengthen before the giants enter the market. At the same time, it is also a window period for layoffs across major companies, which is beneficial for the establishment of teams in the web3 industry.

Kevin believes that the Bitcoin ETF is an exciting development for the industry. In the future, more crypto assets may follow the path of ETFs and become mainstream asset allocations. This will increase the industry's capital pool, enhancing profit potential for early investors, with overflow wealth continuing to flow into mainstream narratives such as infrastructure investment. Many public chains hope to develop their ecosystems through the entry of web3 games, and more funds will pay attention to the web3 gaming sector.

Regarding the impact of AI on games, Chen Yuetian believes it is mainly reflected in two types of games: first, simulation games, such as simulation management and strategy games; second, interactive games driven by ChatGPT. Web3 games often combine well with simulation games, and in the future, we may see Web3 simulation games with better virtual experiences, more gameplay options, and more imaginative worldviews.

Looking ahead to 2024, Kevin believes the market has begun to bottom out and rebound, and investors will be more actively positioning themselves in primary and secondary investments. Entrepreneurs should be more confident and focus on developing good products. Chen Yuetian stated that there will be more attention on unlocking cycles, and 2024 may present better opportunities for launching than 2025. He suggested that entrepreneurs should leverage new trends to create innovations and seek differentiated positioning.