The New Gaming Industry

Now that we have a macro view of the gaming industry and insights on how game developers are evolving, I want to focus on the rest of the gaming ecosystem. This is a whole new industry that is driven by esports. The bigger categories I break down by function, feature and use case. The smaller categories I just try to highlight trends or unique startup activities. Below is a chart of all of these categories outside of game developers.

GAMES LEAGUES

This category focuses on platforms or services that create competition among players in any format. This category breaks apart in many ways, I included esports teams, fantasy leagues, online and offline gamer tournaments and organizations hosting competitions. These startups will lead the future of esports and how they are monetized.

Function

This section focuses on how competitions are facilitated. The majority of leagues offer a combination of in-person or digital competitions. Competitions can range from one-on-one to massive tournaments. Many allow players to compete for free, cash or prizes. Leagues make sure they are a trusted third party to oversee fun but fair competitions. Examples of how startups in this category facilitate competitions:

1 – For Gamers

  • Quarterback lets you play for you favorite influencers. Influencers creates clubs their viewers can join. An influencer’s club can compete with other influencer’s clubs.
  • Unikrn offers a wagering service that allows viewers to bet on eSports matches. They also have in-game competitions that are based on events or actions completed within the game play.
  • Challengeme helps players setup a custom game in seconds and challenge influencers.
  • Majority of fantasy leagues like HalaPlayDream11DraftKingsFanduelWinview and more, allow players to place bets daily on a variety of sports and winning criteria.
  • FaceIT and Mogul create buy-in online tournaments daily.

2 – For Organizers

  • FaceIT and Skillz provides game developers with the necessary tools to integrate matchmaking, tournaments, and leagues into their titles. Players can compete for free, cash or prizes within the game they are playing.
  • Smash.gg helps college clubs, national eSports organizations, or brands supporting gamers create and manage tournaments or leagues.
  • PlayVS helps high schools establish esports teams and encourage students to compete.

Feature

This sections focuses on additional perks leagues offer to drive fan engagement and more competitions. This section requires a lot of service and community building. Here are examples:

  • Events: Majority of leagues are event based. They host competitions, tournaments, meetups or bootcamps. N3rd St Gamers holds bootcamps, meetups, tournaments and more. They also created an US eastern conference for professional esports players. Startups like Moguk host online tournaments daily.
  • Arenas: Many leagues are building their own arenas to host their own tournaments and offer it as a gaming center for locals. Most leagues try to partner with local gaming centers to host competitions. N3rd St Gamers built arena in Chicago, D.C. and Philadelphia. Winstrike has an arena and lounge in Moscow with over 115 computers. Super League Games actually partnered with Top Golf to host tournaments within their facilities. ESforce opened a massive arena, called Yota Arena, in Moscow with 1000+ seat capacity, lounges and more.
  • Prizes: Most leagues offer a combination of cash or other prizes that is supported by sponsors or by players/viewers entry fee. To increase engagement, leagues are also offering raffle prizes to viewers and players. Quarterback awards raffles to top gamers where they can win skins and ingame items. Challengeme offers weekly raffles for prizes. Majority of fantasy leagues offer promotions that will refund players if they lose their bets.
  • Player Assistance: Leagues want to make sure players can compete fairly, have all the tools necessary to win and to stay engaged on their platform. Players Lounge gamers are matched with opponents with similar skill and offered a large variety of games. Skillzoffers player loyalty programs. Challengeme helps players track their progression on a variety of training maps and see how they improve over time. Here is where you see categories like management and analytics blend with leagues.
  • Anti-cheating: This is one of the most important features of leagues. Cheating especially for cash prizes can be a big problem. FaceIT bans on average 1500 players a month from their competitions because of cheating. Many leagues offer anti-cheating solutions, and if they don’t, it will become a big problem in the future.

Use Case

This section focuses the type of consumers leagues are trying to target. All leagues are focused on creating competition among the gamer community. How they monetize this varies. Here are a few examples of who leagues are targeting:

  • Teams: It seems a handful of leagues use their platform to develop or recruit top esports players. N3rd St GamersWinstrike and ESforce each have their own esports teams. Some even promote their team’s streams on their platforms. Smash.gg doesn’t have a team but helps players search for free agents.
  • DevelopersFaceIT and Skillz are focused on selling league platforms that can integrate within developer’s games. They help facilitate betting and cash prize competitions within the developer’s titles. Winstrike and ESforce built marketing agencies and video production studios that cater towards developers, brands and event organizers.
  • Brands: Almost all leagues are pushing to get brands to sponsor their tournaments or give away non-cash prizes to their users.
  • Influencers: To build exposure, leagues want influencers to be engaged or compete on their platform. Skillz pays influencers to host their tournaments on their channel.
  • OrganizersSmash.gg providing event management software to anyone hosting a tournament or competition.

What’s Important?

This is an exciting but extremely tough industry to compete because it’s still very early. The secret sauce is creating a community that keeps gamers and viewers coming back. To monetize, leagues are focused on sponsorship/advertising, volume of buy-in games or ‘whales’ betting. The leagues focused on buy-in online game play seems to be finding success. As an example, Skillz hit a $400M revenue run rate by allowing developers to create in-game betting tournaments. In-person tournaments look to be hard to scale, Super League Gaming reported only ~$201k in sales and ~$13M loss in 2017The biggest winners are developers franchising or offering media rights to their popular titles. Teams are also driving massive revenue to their group. Team SoloMid’s estimated revenue was $25M in 2018. Fantasy leagues for esports will merge with streaming platforms in a variety of unique ways. The future of leagues will continue to be focused on sustainable, community-oriented competitions around popular developer titles. You will also start to see an increase in casual mobile game competitions and tournaments.

Top Gaming League Startups To Watch For:

N3rd Street GamersPlayVSFighting EsportsWinstrikePlayers LoungeQuarterbackSkillzUnikrnSmash.ggBattlefyFaceITChallengeme EsportsHalaPlayDraftKingsDream11Boom FantasyGamedayWinView Games100 ThievesCloud9Team SoloMidand Fnatic

GAME ANALYTICS

This category focuses on startups building analytic tools for gamers, publishers and developers.

Function:

This section will focus on the unique ways startups acquire and analyze data.

1 – Game Play Improvement

Majority of the analytics tools are focused on helping players improve their performance on popular gaming titles. Most analytical tools use developers APIs to pull game play data. Here are other methods used to analyze game play:

  • Startups like Blitz and Visor created computer vision analytic tools. You can stream your game to their platforms and they will provide live analytics and recommendations.
  • GOSU.ai extracts mouse movements from replays of the game to provide feedback and detect cheaters. They’ve also created a bot that provides recommendations for game play.
  • DOJO Madness provides desktop and mobile apps for gaming analytics.

2 – Industry Analytics

There are a couple startups tracking macro-gaming data. Their purpose is to help game studios, publishers and esports teams to track the reach and engagement of their activities. One examples is Repable, who tracks social and broadcast statistics to provide insight on game titles, streamers, teams, and tournaments.

Feature:

This sections focuses on features and breadth of analytics offered.

1 – Game Play Improvement

Most analytic tools offer pre match, live and post match analytics to help players make the optimal decisions to win a game. This can be a grey area as there has been push back regarding cheating. Some tools actually offers ways to catch cheaters during game play. Examples analytics include:

  • Visor uses an intuitive combination of overlays, visual alerts, and audio cues to surface actionable information at exactly the right time so players can improve dynamically
  • GOSU lets players train against simulators. They also have position, looting, dropping, weapons, aiming recommendations. They provide anti-cheating solutions and an AI to determine who’s best for your team.
  • L2P releases meta data on latest matches and champions. They also provide raw statistics of game play and help identify a players weak spots. They even go as far as hosting their own tournament.
  • DOJO tracks information about an opponent’s tendencies and they provide recommended tools to win matches. They also allow you to track your friends analytics.
  • Mobalytics provides a breadth of statistics but also publishes infographics on games strategies to help players prepare.

2 – Industry Analytics

Most tools are either to help identity ways to improve game play, build your gamer profile or to understand the reach of a developer’s game across the ecosystem. Examples include:

  • Gyroscope provides analytics on cohorts, triggers for in-game actions, event data, A/B testing and more. The purpose is to help game developers improve game engagement.
  • GameAnalytics tracks studio games performance to help developers improve their games engagement.
  • 5Rocks, before they were acquired, provided a detailed analysis of users for different types of games. The intent is to support development and marketing of new games.

Use Case

This section focuses on target consumer for analytic tools.

  • Games: Majority of gaming analytic tools are catering to esports gamers. Whatever games that happen to be the most popular at the moment. Examples Visor focuses on Overwatch; GOSU focuses on Dota 2, CS:GO and PUBG; L2P focuses on Dota 2 and LOL; DOJO focuses on Overwatch, CS:GO, LOL and Dota 2.
  • Player Skill: Most analytic tools seem to support players at all skill levels. Others cater to professional teams.
  • Demographic: Most of these tools are focused on the largest esports countries. Languages I’ve seen supported so far are English, Spanish, Chinese, Russian and some other languages within Asia.
  • Developer: There are a handful of startups that I’ve mentioned above that cater to game developers and advertisers to help optimize reach and engagement.

Why this is important?

As the esports industry grows, analytics are extremely important for professional players to improve and developers to build more compelling games. As more cash prizes for esports competitions rise, managing cheating players and rigged games will become a priority for this industry outside of game improvement. In addition, gaming analytics are features developers, marketplaces, management, leagues and teams are all trying to offer to differentiate themselves. You should see new gaming analytics tools popup from many angles but you will also see tools in this category partner with many other categories. Eventually you should see gaming analytics tools evolve to offer their own leagues, teams, management tools and more.

Top Gaming Analytics Startups To Watch For:

VisorL2P LimitedGOSU Data LabDOJO MadnessGyroscope SoftwareMobalytics and HEROZ

GAME PLATFORMS

This sections focuses on game infrastructure for performance, speed, distribution, or payments. More companies can be found in the game developers category.

1 – Distribution

These are startups that believe existing networks or the end devices are not tuned for optimal gaming performance. Each are focused on improving different parts of the ecosystem. Here are a few examples:

  • CDNs & VPNs: Startups like WtfastNetwork NextHast or Gaikai are focused on improving the latency of online games by optimizing and stabilizing connections of game servers. This can be through VPNs or improving content network connections.
  • StreamingRainwayLiquidsky and Parsec are building game streaming platforms that lets users play their favorite games on different devices anywhere. OnLive attempted this but burned through cash and shut down. AppOnboard takes a different approach where they allow you to demo games before downloading them.
  • Servers: These tools help developers offer games without having to worry about the backend. Improbable and Gameye are helping developers build server capacity that dynamically scales based on the current player load and historical patterns.

2 – Development

Majority of gaming engines/tools are created by developers. This section focuses on tools that help developers build more immersive games faster and lighter. Examples include:

  • Design: These are any design tools used to create games. DreamCraft helps developers create games without coding or drawing. Quixel and Absentia are building 3D graphic editors, animation and modeling toolkits.
  • Stack: These are products that try to encompass development, optimization and distribution. Game Closure technology platform provides game studios with tools to author, distribute, optimize, and operate messenger games.

3 – Payments

These are startups building payment gateways, tokens or cryptocurrency for games. This is a hot category for blockchain startups. This category mainly competes with payment gateways outside the gaming ecosystem. Developers also seem to build their own payments tools within their own games. Startups here have to really differentiate themselves to compete. Here are a few examples:

  • Revlo, before it was acquired, helped broadcasters build custom currency into their Twitch channels, so they could reward loyal fans.
  • Betable enables any developer to legally offer real-money play in their games and apps on any platform or device.
  • Mo9 is creating a play first then pay platform. This is a unique form of lending.
  • Ryu Blockchain TechnologiesPlaygameEOT ProtocolGamedexAlphaslotCOCOS BlockchainFuel Games and Enjin are all helping developers integrate blockchain or cryptocurrency as a payment tool for developers.

Top Gaming Platforms Startups To Watch For:

BetableMo9Network NextDreamCraftImprobableThe Future GroupQuixelParsecWTFastLiquidSky SoftwareABSENTIA and Game Closure

GAMES SOCIAL

This section focuses on tools that help gamers communicate with each other.

Function:

This sections focuses the methods used by players to communicate. The goal for most startups are to offer simple communication tools that don’t interfere with your game play across platforms. This section competes with traditional CPaaS and video solutions. These tools are the core of building a community and developers, marketplaces and leagues are all trying to incorporate these tools in their platforms to boost engagement.

  • Messenger/Voice: Voice and chat are default features most social gaming tools provide. DiscordEvasystKaiheikeji Digital and more are all building chat/voice interfaces for gamers and developers.
  • VideoBunch and Evasyst provide tools that allow players to broadcast, stream or play with their friends over video chat.
  • VRTeleporter and a handful of developers are creating VR worlds that allow gamers to watch streamers play, chat with one another and play games together.
  • FeedLaoyuegou is creating a social media feed people can gossip about the gaming industry. Palringo creates groups of communities similar to that of subreddits. This section merges with gaming content section.
  • Offline: These are startups focused on creating meetups and competitions in person. We see developers create in-person events but you’ll find leagues are using this strategy the most.

Feature:

This section highlights added features that help social platforms build a community and encourage usage of their communication tools. Here are a few examples:

  • Integration: Social platforms are partnering with as many developers as possible to include chat within their games. Discord and Bunch are both trying to expand their presence across developers so gamers can use their social tools in-game.
  • Platform: These social tools try to be available across gaming platforms. Discord works on desktop and mobile, where as Bunch focuses only on mobile.
  • Marketplace: Social tools are also building marketplaces for their audience. Discordprovides gaming subscription and a marketplace. Zengaming also developed a marketplace for trading skins and game products.
  • Identity: Social tools are giving users the ability to create their own unique profiles. Evasyst allow users to create profile pages that share their favorite games, players origin and play style. Popbase allows you to create a virtual persona.
  • Content: Many tools try to add content to their platform to keep it more engaging. Examples Kaiheikeji Digital provides education to help gamers train. Gamewith offers news and reviews of games.

Use Case:

This section focuses on what type of audience social tools are built for. This is how social tools differentiate themselves among traditional CPaaS solutions.

  • Casual: These are tools built for casual gamers. Majority of social tools focus on this demographic. Evasyst goes a step further by helping gamers hop into friends’ live games, and discover new parties, groups, and people to play with.
  • Professional: These are networks built for the purpose of meeting and building esports teams. This is very similar with leagues and games management section. Kaiheikeji Digital is a social network where novice gamers can meet pro gamers. Zengaming is a professional network for esports players.

Top Gaming Social Startups To Watch For:

DiscordEvasystBunchKaiheikeji Digital and Zengaming

GAMING STREAMING

This category focuses on tools that help gamers or developers broadcast their gameplay. This section blends with social. This is the preferred content of gamers.

Function:

This section focuses on how streaming tools differ by their method of broadcasting. There are a handful of open source broadcasting solutions available, most notably OBS. Most broadcasting solutions focus on the simplicity of streaming and avoiding interfering with gameplay. Here are examples:

  • Genvid provides an SDK that enables developers to create and deliver broadcasts to live streaming audiences.
  • Mobcrush helps you stream to all other platforms like Twitch or Youtube.
  • Medal provides mobile and desktop broadcasting solutions, plus they offer free cloud storage.
  • Shou and Chushou are only focused on mobile broadcasting solutions.

Feature:

This section focuses on features that help streaming platforms become more engaging. The goal for all streaming platforms is to become the go-to gamer community. Almost all streaming platforms offer live streaming and social tools within the gaming social category. Features include:

  • Influencers: To build communities, streaming tools are trying to attract influencers. Chushou allows users to purchase gifts for influencers or live streamers. Mobcrush will help influencers receive sponsorship opportunities. Boom.tv allows you to make predictions about games and help influencers monetize their audience.
  • Player Control: To encourage more engagement, streaming tools are allowing viewers to control what they want to see and/or control the game play itself. Genvid allows viewers to display player/game information, take control of camera views and gameplay elements while watching an esports match. Znipe.tv provides exclusive player perspectives, multi-POV with maps and the ability to track other matches played at the same time. Twitch offers crowd control, which allows the audience to help or hinder a streamers game play.
  • Advertising: Streaming platforms are incorporating advertising into their platforms. Genvid enables embedding of targeted ads and marketing elements. Mobcrush helps streamers get sponsored and they add ads into streams that can be triggered at anytime.
  • Leagues: Some streaming platforms allow viewers to bet on players and for players to compete in tournaments. You’ll see more of this in leagues. Boom.tv allows viewers to bet on players and win prizes.
  • Streamer Tools: These tools helps streamers improve the viewing experience for their audience. This category includes tools I mentioned above in player control. Other examples, Plays.tv allow streamers to bookmark key events and must review spots within a game. Medal helps streamers record with a hotkey. Boom.tv provides instant replay.
  • Content: The larger streaming platforms are creating voice over and exclusive content within their platform. Twitch is creating a music library. Medal offers post-game clips and a social feed. Mixer produces their own shows that review game plays, similar to traditional sport networks. Znipe provides access to exclusive matches and digital passes to tournaments.

Use Case:

This category focuses on users streaming platforms are targeting. Streaming platforms are starting to expand into non-gaming content to attract a new user base or keep gamers on their platform longer. Examples include:

Top Gaming Streaming Startups To Watch For:

ChushouGenvid TechnologyBoom.tvPlays.tvMobcrush and Longzhu TV.

GAME EDUCATION

This section covers services that help teach players how to become better gamers. There are a small number of startups in this category. Most education content is provided by streamers on social networks. Here are some highlights:

  • Education platforms are mainly service oriented.
  • Some have pro-gamers share advice, similar to MasterClass format.
  • There are some platforms that offer P2P training advice.
  • Mostly education platforms focus on a select few games – LOL, Fortnite, HearthStone, CS:GO.

Top Gaming Education Startups To Watch For:

Gamer Sensei

GAME FUNDRAISING

This section covers services that help game developers raise capital to create their games. This category is important for indie game developers. The common trend among fundraising platforms is keeping the contributors engaged and a part of the development process. All fundraising platforms have a heavy vetting process before developers can list their project. Some highlights of this category:

  • Fig created a Kickstarter style of fundraising for indie developers. If a developer does not meet its fundraising goal, the developer does not get any capital. Fig also develops their own games.
  • Brightlocker has the same functionality as Kickstarter but contributors buy tokens to fund games. If fundraising target is not met, developers still get to keep contributions. Brightlocker shows the game development status and the contributors get to participate in the creation of the game.
  • Matcherino is focused on crowdfunding for esports tournaments and teams. They build at platform to help organizers manage donations or contributions to a prize pool.

Top Gaming Fundraising Startups To Watch For:

Matcherino and Fig

GAME MANAGEMENT

This section focuses on platforms that manages esports teams or tournaments. These tools make sure teams operate in sync, manage their professional presence and they can source the best players. These tools are important for upcoming esports players and existing teams. These management tools are merging with leagues. Examples of management tools:

  • DreamTeam helps teams source for new players. Free agents are verified and filtered by skill level. They also help players manage sponsorships, media rights, prize money, salaries and transfers. They also offer game play analytics and the ability to practice on their own game servers.
  • ReadyUp helps teams manage their roster, events, messaging, availability and fan pages. They allow players to showcase achievements, statistics and videos of their game play.
  • Guilded provides teams with forums, calendars, matchmaking and document sharing tools. They also help facilitate scrims.
  • Repable offers a streamer management platform to helps brands and sponsors track engagement.

Top Gaming Management Startups To Watch For:

DreamTeamGuilde and Repable

GAME MARKETING

This section focuses on developer/brand marketing, advertising or tools to drive fan engagement. This seems to be a tough area for advertisers as a handful of startups notably closed, including IGA, Double Fusion and MZ’s Cognant. Nonetheless, advertising and sponsorships drive the majority of revenue outside of game sales. Fan engagement, marketing and advertising solutions are also becoming features of leagues. You should will see more collaboration or competition from leagues. Examples of startups within this marketing category:

Advertising: This category competes with traditional DSP, SSP and advertising platforms. Some ad networks mentioned above have closed because they had too many publishers and didn’t focus on making publishers happy. If you look at many of the app store complaints of mobile games, most report too many ads are disrupting their game play. Here are some gaming advertising startups:

  • Adverty focuses on placing ads inside games to make it very immersive and non intrusive. In addition, they provide powerful analytics to help advertisers understand the success of their ad placements.
  • Ad2games is a gaming focused ad agency that helps with audience engagement, website branding, TV and native advertising and fraud detection.
  • Loots is focused on building video ads during streaming.
  • Yodo1 is creating an ad platform for games in China. In addition, they also help developers launch games within China.

Marketing: This category is focused on player analytics, fan engagement and sponsor management. This category will blend with game management category. Here are some examples of marketing platforms:

  • FanAI is creating an esports event management platform. They help brands with audience analytics. They also help teams target the right sponsors.
  • Ader is focused on connecting gaming influencers with brands. They help with live streaming, youtube, tournaments, chat sentiment analytics, content creation and more.
  • Playnomics, before they were acquired, helped marketers and developers predict player value and behavior, and immediately act on those insights with customized messaging.
  • Monetizer helps developers offer rewards to players based on behavioral incentives.
  • Indiboost is more of a PR firm but they help create press for indie developers. They also help match advertisers and developers with influencers.

Top Gaming Marketing Startups To Watch For:

FanAI and Yodo1

GAME MARKETPLACE

This section focuses on marketplaces selling gaming related items. Marketplaces and publishers are very similar. They try to differentiate by the products sold on their marketplace or how they build a community around their marketplace. Examples of some unique startups within this category:

  • Overwolf created a marketplace to sell games, tools, skins, mods and more. Majority of their items are for free. It seems they are monetizing by displaying ads within their products sold. To build a community around their marketplace, they’re sponsoring Fortnite challenges and teaching gamers how to build apps.
  • Robotcache helps gamers resell digital games. They’ve build their marketplace on a blockchain. To build a community, they allow players to mine coins.
  • Green Man Gaming offers traditional PC, VR and Playstation games for sale. They build community through blogs, forums and a newsroom.
  • Gameflip is a P2P marketplace where players can actually sell their gaming skills. In addition they sell games, collectibles, accessories, consoles, movies and more.
  • Jump Gaming is offering subscription service for indie games.
  • Blacknut is a subscription gaming service that lets you play their games on any device – computer, android or TV.
  • Humble allows gamers to pay what they want when purchasing games.
  • DMarket and Stardust is a blockchain-based marketplace for turning virtual items into real assets that can be traded between players.

Top Gaming Marketplace Startups To Watch For:

Overwolf

GAME TOOLS

This category is focused on tools gamers or streamers can use to improve their performance or have more fun when playing. Some examples include:

  • Athenascope provides computer vision tool that recaps highlights of your gameplay.
  • Minkonet creates 3D replay solutions.
  • Mixed Dimensions provides 3D printed game animations.
  • Pwnwin creates extensions that allows viewers to vote whether in-game events occur or not.
  • Facemoji creates avatars for live game streaming and video chat.

Top Gaming Tools Startups To Watch For:

Athenascope and Facemoji

GAME BLOCKCHAIN

Blockchain startups could have been included in other categories but I put them in a separate category just to highlight them. Blockchain startups still face the same challenges all other categories face when building gamer communities and relationships with developers. I won’t get into the details how they differentiate other than highlight the industries they are targeting.

Top Gaming Blockchain Startups To Watch For:

Mythical GamesDapper LabsAlphaslotEOTGamedexHash WorldFuel GamesUnblockablechiliZDMarketDecentralandFunFair Technologies and TOK.tv

Note: I did not include hardware or content within this article. If you have questions about these categories please contact me.

Conclusion

The new gaming industry is exciting to watch. It is still in its infancy. There are a couple established players but I think there is a lot of room to see new big players. Expect to see more competitions, communities, teams and leagues.

Thanks for reading my report on the gaming industry. I created these articles for personal development and to help our fund make better investment decisions. The purpose for sharing them was to encourage investors to invest more capital into the gaming industry and help gaming founders think of new ways they can differentiate their platform. I hope it helps. Apologies if there are a few grammar mistakes. Any questions, message me.

The Evolution Of Game Developers

The last article, I gave a macro view of the gaming ecosystem. Now, I wanted to spend time on each game category to define what they are, how they innovate by function, feature or use case, and finally what are the top startups startups in each category. This article will solely focus on game developers. This category dominates the gaming industry. They make up almost 60% of the entire gaming ecosystems funding ($7.1B) and number of startups built (447).

GAME DEVELOPERS

The game developer category focuses on studios and publishers that are looking to create, acquire and distribute new games. This is one of the most unique categories of the entire startup ecosystem because of its success and failure rate. Over the 447 game developers I’ve reviewed, ~23% have exited and ~10% have closed.

It is truly an art to build a game with the right level of strategy, skill and style – which only the best game developers know how to do. For this article, I won’t touch on game play but I do want to highlight the patterns I see in tools used to create games, features added to drive engagement and target demographics of game developers.

Basics Trends Game Most Developers Follow

  • Mobile is becoming the most important platform to publish games.
  • Majority of game developers are creating free-to-play games.
  • Monetization of each game comes from advertisements or in-game purchases such as skins, boosters or premium products.
  • It also seems standard to build games across all platforms (consoles, mobile, TV and VR).
  • Creating a competitive multiplayer ecosystem or offering prizes are a must to drive engagement.
  • It seems more and more developers are trying to build communities around their game through any means possible – chat, in-person meetups, leagues and more.
  • All developers must cater to influencers to attract viewers and gamers.
  • Building your own unique IP or using an existing valuable IP is key to building a successful game.

Function

How game developers differentiate by the tools they use to build games or the platforms the games are built for.

1 – New Platforms Used To Play Games

Game developers are finding new platforms for game play. This looks like an opportunity for game developers to grow where others have not yet. Examples include:

  • Audio: Developers like Drivetime or Sensible Object are allowing users to play audio trivia games from Alexa or while driving a car.
  • Smart WatchesEverywear Games and Pocket Gems are creating games for both android and apple smart watches.
  • Chat ApplicationsKnock Knock has been building games in Facebook messenger. Neptune has been working with Kakao. Tencent’s Mini Program has sparked a number of games over WeChat. Mojiworks is building games for both Messenger and WeChat. This looks like an an exciting category for short casual game play – an area telecoms or CPaaS solutions should pay attention to.
  • Progressive Web Applications: These are applications that load like regular websites but offer more functionality. GAMEE cofounder, Bozena Rezab mentioned, “Progressive Web Apps getting stronger push both by Google and Microsoft. Even Apple announced their first support for PWAs.” GAMEE created both a native app and PWA to allow gamers to play with friends on GAMEE or within a chat app. This section is heavily tied to chat applications section above.
  • Internet of Things: It seems more often traditional board games or toys are merging with video games. Workinman Interactive is making interactive toys for brands like Disney, Nickelodeon, Atari and Fisher-Price. Mighty Bear Games created a heart rate monitor that controls game difficulty. Sensible Object created a unique hardware game where Jenga meets pokemon.
  • TelevisionNazara has also forged an alliance with Amazon to provide localized Indian gaming experience on Fire TV. It seems TV’s are becoming an important platform for more publishers outside mobile and PC. Will this hinder console growth?
  • VR/ARNianticLeaftail LabsSnatchNext GamesPlaceholder and Shifu are all primarily using mobile phones to create AR experiences that are social, interactive and collaborative. VR is also a platform of choice for developers to expand their existing IP. Resolution Games, as an example, brought Angry Birds to VR. Others are taking a step further to enhance the gaming experiences within AR/VR. Subdream is building their own hardware that can be used in VR games. Meleap has gone as far as creating their own arena for AR gameplay.
  • Theme ParksImmersive Game Labs and Survios built an indoor video game theme park where people can play their games. VR/AR indoor theme parks have been a trend for awhile, but the economics of managing them are a bit shaky.

Why is this important?

New platforms are able to reach new or existing gamers in a different way. Publishing games on these new platforms first can define a new category of gaming. As an example, Mech Mocha claims 96% of mobile first gamers have no history of PC/Console games. New platforms can also hurt existing platforms. Tencent mentioned in their annual report that their PC gaming revenue is impacted and will continually decline because of the mobile gaming shift.

2 – Developers Creating Their Own Game Engine

The engine used to build games are becoming equally important as the game itself for many developers. This seems to be developers growth strategy to evolve into a publisher.

  • Game Engines To Publisher: Companies like Epic Games Unreal Engine or NianticReal World Platform are examples of developers building successful games and sharing their platform with other developers. Developers like The Ready Games will publish games built using their developer platform, the key benefit is users don’t have to know any code to build games. Workinman Interactive offers a IoT hardware simulators.
  • Internal Game Engine: Developers like Super Evil Megacorp and Mojiworks created their own game engine to power their mobile and chat games with no intention to license it. This route seems to give studios more freedom over their games performance and how quickly games can be developed. Dapper Labs takes a slightly different approach by allowing developers to use their code to create games within their gaming ecosystem. The purpose is to create more mini-games around Dapper Labs branded games. FRVR’stechnology stack helps them serve quality games in less than a second on almost any mobile phone.
  • Gaming Tools: Many developers are also licensing tools they use to improve the performance, distribution or engagement of their own games. Teatime Games offers broadcasting and video chat within games. Reload Games offers in-game music studio and tools to accelerate game downloads. Midas Touch creates 2D animation software.

Why this is important?

The future of gaming infrastructure and tools will most likely come from game developers. The future of game development is focused on how fast, cheap and immersive a developer can build a new game. This is a stepping stone to becoming a major publisher for developers.

3 – Quantity of Games Built

A handful of studios and publishers seem to be aggressively setting production or acquisition targets for new games. Maybe this stems from the search for the right IP that will that will create a big payoff for the studio. Some publishers like Games2win encourage zero dependency on a single title. HypixelMighty Bear or Flowplay try to build multiple mini-games within an existing successful game. MZ Studios sets a goal to release a game every 6 months. The Ready Games tries to release a game every 48 hours. Examples of approximate quantities of games under developers or publishers:

Developers seem to be doing this so they don’t put all the eggs in one basket. Below is a graph on Games2win portfolio strategy. They launch multiple games so they aren’t reliant on one IP.

Why this is important?

It’s tough to build quality games quickly, Phoenix Labs mentioned that it takes almost 200 people to produce their new PC free-to-play cooperative hunting game. If done right, games can bring in hundreds of thousands, if not millions per day. Developers and publishers seem to be constantly looking for their next big win. As gaming engines evolve to make it easier to produce games, you should see this ecosystem flooded with more and more content.

Redemption Games mentioned, “The mobile games business has become one of the most competitive industries the world has ever seen. There are hundreds of thousands of games in the app store and to be able to rise to the top requires a unique combination of skill and effort, from how the game is designed to how its marketed and operated as a live service. There are no silver bullets and no shortcuts.”

4 – Studios Collaborating

Developing a game is an art, and artists constantly collaborate. There are a handful of developers collaborating for skill, IP or regional distribution. Obviously many collaborate with publishers to receive help for production and distribution. Other developers like Hutchprefer to self-publish. Nonetheless, merger of media, content and game IP will constantly generate exciting new gameplay. Examples of collaboration:

  • Halfbrick Studios worked with Mech Mocha to localize and relaunch their games in India.
  • Workinman collaborated with Addicting Games to create an intense combat game to reflect the spirit of the series, Man at Arms.
  • Digit Game Studio collaborated with Scopely to build Hollywood IP, Star Trek Fleet Command.

Features

This section focuses on how developers differentiate through their IP or the features they to their games to increase fan engagement.

1 – Merger of Media, Brands, Icons with Games

Many developers are building games around existing popular brands to drive instant attraction. Other developers try to build games around movie or tv show content to further build upon their game’s IP. Some developers are producing rich media content within their games to create a better gaming experience. Here are examples of how games are merging with media:

  • Media Icons To Games: Almost any popular media icon from television, movies or actors, has been or will be built into a game. Examples include Niantic using Harry Potter; Jam City using Family Guy and Marvel; Second Dinner also using Marvel; Scopely using Walking Dead and Wheel of Fortune; nWay with Power Rangers; MZ Games using Final Fantasy; Moonfrog Labs using India’s highest grossing film and most famous actors; Funtactix creates games based on blockbuster films. Neptune is partnering with messaging platform Kakao and using their characters to build games. HQ Trivia takes a different approach by inviting celebrities like The Rock, Robert De Niro, Gordon Ramsay, Neil Patrick Harris, and Alicia Silverstone to drop into their game. A really unique example of building games off of popular media is Hypixel. They started by producing their own funny youtube videos. This Youtube channel garnered enough attention and following to help them build their own Minecraft mini-games based off their youtube videos.
  • Games To Media: To further build off of the existing IP of a game, developers are creating media around their game. It can be as simple, like Kixeye creating videos and blogs on how to beat their games. Or it can go as far as Niantic, who is creating a tv show around their game Ingress. Telltale releases interactive episodic content on a monthly schedule about their games. Youxigu participated in the investment in the production of two cinema films and action type movies. Moshi Monster went as for a creating books, magazines, toys, trading cards, music albums, a movie and a dog mat.
  • Brands To Games: Developers are also partnering with iconic brands to build games. As an example, Playstudios partnered with casinos in Vegas to offer rewards. The Ready Games works with top brands to build custom game experiences. Animoca Brands built games for Mattel. 704Games created six games all about NASCAR.
  • Games To Games: It’s common to see developers revamping existing popular board/arcade games. Mech Mocha built a game about a popular local Indian board game called Ludo. Subdream built a VR game based on the popular 1980’s arcade game Galaga. Jackpocket helps you play state lottery games on your phone. Scopely built games for Yahtzee. SuperSolid is building off of Sims. The list goes on.

Why this is important?

Building a successful game IP is very difficult. To keep a previously successful brand alive is even more challenging. Any popular content will inevitably be eaten up quickly by developers. Those who have found successful gaming IP will create media around it to keep players around. I think we’ll see more media and games colliding in the future, especially as it gets easier to make and distribute games and media.

2 – Game Ownership

Giving players ownership of the game seems to be a building trend among developers. Selling in-game items have been the standard for monetization for most free to play games. However, developers are opening up their game to allow the players to create, sell and trade items, maps and more. Examples of this trend:

  • Dapper Labs opened up their code to allow developers to build games off their game IP.
  • Epic Games and Funcom gives out mods so gamers can create their own worlds within popular games.
  • Mythical Games will focus its next game on user generated content where players and influencers can trade the digital assets they created.
  • Klang Games allows players to create and manage multiple characters. The characters live on even when the player is logged off.
  • Pocket Gems allows users to create their own storyline within the game to share with other players.
  • IMVU created their own fashion blog for in-game styles created by players. Their avatars can be named top model and recognized on the game banner.

Why this is important?

Digital assets are becoming extremely valuable for engagement but also the new means of monetizing games. The future of gaming will allow players to build their own games, profiles, skins, storyline and more. The future of game development will probably come from players.

3 – Events, Tournaments & Competition

Another rising trend of developers and publishers to increase engagement is by hosting competitions for their games. This can be done in-game or by hosting an event. This helps developers drive engagement and new monetization strategies. Some examples include:

  • Niantic creates events and local meetups for their AR gamers. Some of these meetups are a core part of gameplay. In addition, they hold contests for developers.
  • In Tencent’s annual report, they mentioned they are able to increase user engagement through esports tournaments and live streaming events.
  • Nazara Technologies secured multi-year exclusive licensing rights for the ESL to organise and operate ESL competitions in India.
  • Funplus and Millennial Esports host esports tournament and leagues. Millennial Esportsactually has their own gaming arena in Las Vegas.
  • Games like The Ready Games and HQ Trivia host competitions for prizes in-game daily.

Why this is important?

Esports is a movement that has been growing fast. Developing collaborative and competitive games seems to becoming a requirement. Participating in the esports industry is a must for developers.

4 – Social

Big or small, all games have added a social component to them. This can be anything from chat, live video or VR worlds. Adding live social components to games are becoming a must for all developers. Examples include:

  • Mech Mocha is focused on building social components to their games. Their DAU spend on average 25 minutes per day on their in-game voice chat.
  • Teatime Games provides live video for their face to face racing battle games.
  • Funplus mobile app enables users to stream their game play and interact with their audience.
  • Flowplay created a virtual world that allows players to interact and play games together.

Why this is important?

Social interactions seem to drive engagement but are also becoming a new means to distribute games.

Bozena Rezab, CEO of GAMEE mentioned, “AppStore and Google Play are still the most dominant way how to get mobile game to players, however, several trends showing signals of change. First, change in distribution of content is getting more decentralized, starting from social connection. The rise of chat apps is creating the biggest reach networks on the planet, with higher time spent than social media combined, becoming hub for sharing and distributing content . WeChat with mini programs, Messenger, Viber, Telegram bots and the huge amount of sharing actions that people do in conversations with friends or groups. All chat apps are moving towards supporting groups and communities, noticing their power is way beyond 1:1 conversations.”

Use Case

This section focuses on the type of audiences game developers are focused on and how their company evolves.

1 – Demographic Target

There are a handful of game developers catering to specific demographics that are worth noting. Examples of common demographics below:

  • GeographicMech Mocha feels there is a gap in location specific games. They are focused on winning small regions within India. Games2Win also claims to focus on creating localized content.
  • GenderSingularity 6’s upcoming game hopes women will be a major portion of their audience. Nix Hydra is focused on creating women oriented games. Gram Gamesactually created a movement called Project 22% that caters to women.
  • CompetitiveGamelynx is creating team-based competitive games on mobile, so esports can become more accessible and global.
  • ProfessionalLevel Ex creates video games for doctors that capture the challenges of practicing medicine. Radd3 virtual reality training system helps football players mentally prepare for upcoming games by visualizing plays. It also allows football players to practice without the risk of injury.

Why this is important?

Catering to a specific demographic could open up new growth opportunities for developers. As an example, Nazara Technologies mentioned, “In either case, with a 500 Mn players’ market, India has the potential to build its own League Of Legends.”

2 – Empowering Influencers

Influencers are a major component of game developers marketing strategy. Phoenix Labspointed out, “the reality is most of the folks who play Dauntless come in from somebody on Twitch who happens to play, or a YouTuber, or the vast majority of folks are coming in because their friends play and they want to play with their other friends.” How game developers interact with influencers are crucial to driving traffic to their new developments. Examples of innovative methods publishers use to cater to influencers:

  • Funcom pre-made bundles exclusive for influencers to help them create better content for their audience.
  • Epic Games Support-A-Creator program enables creators to earn money from Fortnite and other games in the Epic games store.
  • Seriously found success by developing a series of campaigns with YouTube influencers around charity initiatives and timed them to coincide with game updates.
  • Proletariat builds full live stream integrations and tools that allow viewers to interact with their favorite broadcasters within their games.
  • GAMEE supports their top gamers by labeling them Gaming Stars and allowing them to challenge their followers.

Why this is important?

Influencers will, if not already, become the dominate outlet for the launch of new games. To keep influencers happy, game developers need to help them offer better content to their viewers. We should see more collaborations and unique ways game developers will collaborate with influencers.

3 – Evolution Of Game Startups

Game developers are constantly searching for ways to expand on their existing IP. Many shift from building games catered to players to offering their platform and expertise to new game developers.

  • Acquiring Portfolio Growth: Many successful game developers start acquiring or investing other studios for growth, namely Jam CityScopely and Tencent.
  • Developer To Publisher: Many developers use their game engines they’ve created or reach to build their publishing portfolio. As an example, Epic Games leverages their gaming engine as a means to grow as a publisher. Paradox Interactive is also creating a digital distribution platform. Rumble Games offers tools for developers to publish and operate in game service.
  • Developer To Service ProviderWorkinman Interactive creates design, IoT toys, art, exhibits and more services for brands looking to develop games. ZGames offers game design document development, art creation, prototyping and audience research to app store release and post-release analytics-powered tuning and server support. Virtuos also offers extended gaming services and training for gaming artists.
  • Developer To ProductsMind Candy build a successful IP that expanded into books, pet products, apps for pets, feeding mats, trading cards, magazines, toys, music albums and a movie.

Why this is important?

Creating legendary games are nearly impossible. Therefore, developers always have to be looking for new ways to evolve, grow and monetize or they will inevitably fail. Ideally, developers should continue to launch new games, but they should also have a plan B.

Top Game Developers To Watch For

Hypixel StudioImmersive GamesNianticJam CitySecond Dinners StudiosMech MochaMythical GamesEverywear GamesBigBox VREmbark StudiosDrivetimeDapper LabsSubdream StudioJackpocketEpic GamesPhoenix LabsLeaftail LabsGAMEESingularity 61939 Games704GamesNeptune, Knock KnockScopelyJumpshipFRVRKlang GamesMighty Bear GamesMightierSensible ObjectRedemption GamesGamelynxTeatime GamesKIXEYEDigit Game StudioLevel ExVolleyHQTriviaTrailmixCaret GamesnWayManitcore GamesMind CandySnatchMojiworks3rd Eye StudiosSupersolidThe Ready GamesPLAYSTUDIOSSuper Evil Mega CorpPortalariumPocket GemsSeasunNext GamesArmada InteractiveHutchPlaySimple GamesBonfire StudiosMino GamesSeriouslyMinistry of GamesMachine ZoneSupreme GamesBeyond GamesMoonfrog LabsTelltale GamesProletariatDerby GamesKingnetPlaydotscloudcadeFlaregamesOctroNix HydraThatgamecompanyFunplusCoconeTabtaleChukong TechnologiesYouxiguGrand CruFlowPlayGames2WinArkadiumPeak GamesReloaded GamesMindSnacksRed Robot LabsDang LeSNSplus and a few more.

Conclusion

Game development is an extremely difficult industry. Creating a popular game is only half the challenge. Staying relevant by building out your IP, creating communities and expanding your game platform will help developers last longer. The future of gaming engines will be built by developers. The next best publisher will be a new successful game developer. It will be exciting to see how developers create new immersive games on a variety of platforms; how they will connect with the esports industry; and how they merge with traditional media. Next article I will break down the rest of the industry.

The Future Of Gaming

In this series of articles, I wanted to break down the gaming/esports ecosystem. The industry seems a bit taboo for most investors. However, the growth of this industry is something that can’t be ignored.

What: I categorized 759 gaming/esports startups into 15 categories. I then broke each one apart by how they innovate by function, feature or use case to understand how each category is evolving.

Purpose: To build a better understanding of the gaming/esports industry to encourage investment and continuous innovation.

Why It is Important: Before I dive into how game categories differ, I want to give you a macro view of the industry. This way it’s easier to understand which components of the industry are important.

The gaming and esports industry are on a rapid rise. The viewership of competitions and developers DAU continuously show outstanding numbers. Game developers like Supercellare worth more than Evernote, Eventbrite, and BuzzFeed combined (The Hustle). League of Legends 2017 World Championship had over 70M viewers. For reference, the NBA finals only had 25M viewers. (DreamTeam). This industry is the next evolution of sports and many investors should be paying attention.

Market Trends

How much money is flowing in the gaming industry? Newzoo graphs below showcase its incredible size and growth. Mobile is the dominate platform for the gaming industry. The future is mobile.

A better view of this growth is in Newzoo’s chart of growth by platform since 2012. The industry has more than doubled through mobile games.

Esports is also a prominent component of the gaming ecosystem that is rising quickly. DreamTeam’s white paper does a fantastic job comparing esports to traditional sports. What’s exciting is the mass viewership within the esports ecosystem and how this will be monetized in the future. Below is a graph comparing the esports market size to the entire gaming market.

Viewership for esports championships are no joke. League of legends competitions are outpacing traditional sports by far. Does this mean we will soon see massive stadiums built across the country to cater to these new esports competitions?

The graph below shows what could be a big opportunity for esports compared to traditional sports. We can expect these numbers will catch up to traditional sports.

Fundraising Trends

With such big market size and opportunity ahead, how is capital being invested to fuel this growth? At the moment, majority of funding flows to game developers and publishers. Those who can create the right IP hit the jackpot. As an example, Supercell‘s success with Clash of Clans makes them worth more than Evernote, Eventbrite, and BuzzFeed combined. Streaming being the primary means of consuming gaming content and gaming leagues will continue to rise as viewership and esports rises.

The graph below also highlights the exits and closures per category. Developers and publishers are a unique category as ~23% of startups exit and 10% close. Where there are more exits, there will be more funding.

The graph below highlights the average value per startup in each category. This graph would signal that investors value game streaming category much higher than any other category. However, there are a few outlier streaming startups in China that have raised massive funding rounds. If they were removed, the average value of the streaming category would come down to ~$24M. Game platforms average funding is high as well, but this is due to massive gaming engines like Unity or Improbable that push up this average. If you removed these companies, the average funding would drop down to ~$6M per startup for this category. The same result would happen if you removed Discord from the social category, the average would drop to ~$6M.

Next, I wanted to focus on where game publishers/developers and top venture investors are investing. The developer that stands out the most is Tencent. They are aggressively investing in new developers globally. The strategic angle must be to acquire partnerships with valuable IP to redistribute in China. Surprisingly, you don’t see developers aggressive in other parts of the ecosystem. You’ll notice top venture investors are heavily focused on developers, which is not a surprise based on funding and exit trends above. The second category most investors gravitate towards are game platforms. Note, disregard blockchain category, I did not count developers or investors within this category. Stay tuned for a blockchain industry breakdown.  

Conclusion

Mobile is the future of gaming. It is the most important platform for developers to launch their portfolio. In addition, investors seem to be heavily focused on finding the next popular gaming IP. You can see funding for developers far outpace every other category. Nonetheless, the rise of esports is building a whole new ecosystem. The race to become the top platform or community of choice for gamers is on. For now, it feels like we are still at the very early stages of esports and exciting growth is coming. I will post an article soon on how each category breaks down.

Notes: Investors interested in the database I’ve created, message me and I’d be happy to share.

AI Startups You Should Know – Part 1

In this article, I want to showcase some disruptive AI startups by application. My first article outlined the overall fundraising trends across the global AI landscape. My second article took a closer look at how conglomerates invest/acquire AI startups. Now, I hope to shine light on actual use cases of AI and what startups you should be paying attention to.

I mentioned before that I reviewed 1,600+ startups globally. After looking through each company, I was able to split most startups into two main categories (Horizontal and Vertical), of which was split into 22 subcategories to better define their application.

In this article, I only want to focus on the Horizontal AI startup category. This is made up of 9 subcategories, which are Analytics, Assistant, Data, Infrastructure, NLP, Robotics, Security, Tool and Vision (The definition of each subcategory is outlined in my previous article). I’ll do my best of giving a general overview of the subcategory and then I will mention a few startups that are excelling in this subcategory.

 

Analytics: (AI built solely to analyze general data and provide insight)

The Analytics AI subcategory is challenging because it’s hard to distinguish startups that are building a glorified business intelligence tool and an analytics application that has a form of machine intelligence. Most startups claim they can provide “transformative” information based on existing big data, but the trends that I’m seeing are Analytic AI startups are building tools that can automatically identify patterns in big data sets. This is different from most BI tools that require users to understand what they’re looking for or ask questions to probe for patterns. These tools simply figure out all possible combinations and suggests patterns/factors you may not have noticed.

Most of these Analytic AI startups cater to enterprises trying to optimise operations, understand customer behaviour, manage vendors/finances, etc. Outside of enterprises, this subcategory uses AI for a number of analytical purposes. Examples include natural disaster damage estimates, predicting maintenance of machinery, discover patterns/information across social networks, optimise mobile networks, identify opportunities in financial markets, identify economic or political changes, predicting price changes in consumer products or airfare, analyse scientific or legal literature, helping realtors figure out when someone is moving, predicting success of books or movie scripts before release and much more.

Startups in this subcategory you should watch include: Ayasdi*, ThoughtSpot, Tamr, INCORTA, Banjo, FLYR* and Interana*.

In total are about 20 out of 100+ AI startups in this subcategory that I’m watching closely.

 

Assistant: (Tools that are built to be forms of chat bots)

The Assistant subcategory is comprised of mostly startups that create chat bots. Assistant AI startups can take many form factors but their ultimate goal is to help you complete a task through a simply question/answer system.

Applications of chat bots are vast but each chat bot is only capable of handling a single use case without human intervention. Applications include setting up meetings, querying information from science/financial/legal databases, managing customer service questions, travel/flight/hotel assistant, personal on-demand assistant, virtual sales teams, banking requests, buying gifts and more.

It’s notable that Tech Giants were very active in this category between 2013-2015, but interest dropped off afterwards.

Startups in this subcategory you should watch include: Eloquent Labs, Octane AI, Hyper Anna, X.ai, Mezi (Recently Acquired), Magic*, Recast.ai (Recently Acquired), Action.ai and Sensay*.

In total are about 10 out of 60+ AI startups in this subcategory that I’m watching closely.

 

Data: (Startups that acquire, analyze and sell private data sets)

The Data subcategory is very similar to that of the Analytic subcategory. The only difference is that these startups hold proprietary data. Many of these startups offer services to help you cross reference their data with yours, others provide data for educational purposes, while most simply sell their data/analysis to give companies an edge over their competitors.

Startups in this subcategory you should watch include: Near*, Qloo*, Node*, Premise*, and Descartes Labs.

There are 5 AI startups out of 15 that I’m watching in this subcategory.

 

Infrastructure: (Startups building the physical or software infrastructure to empower AI tools)

The Infrastructure subcategory is comprised of mostly hardware AI startups. These companies are focused on building servers, chips or any hardware system that can process information faster, handle more complex calculations and/or can operate more efficiently. There is a blend of quantum computing in this subcategory. Almost all of these startups are focused on solving the infrastructure challenges required for AI tools to perform optimally.

Startups in this subcategory you should watch include: Graphcore, Kneron, Cambircon Technologies, Rigetti Computing*, Thinkforce, LeapMind, Bigstream* and Wave Computing*.

There are 10 AI startups out of 30 that I’m watching in this subcategory.

 

NLP: (AI startups focused on understanding speech, voice or text)

The NLP subcategory is made up of startups building tools that pick up on human voice/text, understand the meaning behind what is said/written, and sometimes take action upon that information. What differentiates most NLP’s is how they compare your voice/text to a particular data set. Applications of NLP include translation, interacting with electronic devices, querying a knowledge base of an organisation, analysing or optimising meetings/sales/customer service and more.

Startups in this subcategory you should watch include: MindMeld (Acquired), Unbabel, SoundAI, AISense, Insight Engines*, Entefy*, Snips*, Agolo* and Semantic Machines*.

There are 11 AI startups out of 60+ that I’m watching in this subcategory.

 

Robotics: (AI built for robots to perform any types of tasks, movements, etc)

The Robotics subcategory is broken in to two parts. First, there are startups focused on the ‘brains’ of a robot. Their goal is to train robots to perform various tasks on their own. This is done training the robot to teach itself or users guiding the robot to perform a specific task. Second, there are startups building robots solely for a specific task.

Robots are built to be companions, some for healthcare monitoring, managing warehouses or retail stores, security guards, inspection, delivery, restaurant catering, education and more.

Startups in this subcategory you should watch include: Vicarious*, Intuition Robotics*, CloudMinds*, Embodied*, ROBART GmbH and Embodied Intelligence.

There are 14 AI startups out of 45+ that I’m watching in this subcategory.

 

Security: (Tools built to protect companies from security threats)

Security is a challenging subject when reviewing startups because it is very arbitrary how startups measure success. Most Security AI startups claim they are better a spotting abnormalities. How security startups take action upon their findings are different. Some simply notify companies of patterns that aren’t normal, others provide action for specific cases and others try to solve the problem.

Examples of applications in this industry include identifying malware in emails/computers/networks, monitoring phones/IoT/Vehicles/enterprises, various forms of authentication, identifying fraud in various financial services, monitoring your online presence or your online community and more.

Startups in this subcategory you should watch include: Emailage, Versive, UnifyID*, Callsign*, Simility, NS8 Inc, Blue Hexagon, ZingBox and Socure

There are 25 AI startups out of 60+ that I’m watching in this subcategory.

 

Tool: (Startups building AI algorithms)

The Tool AI subcategory focused on building tools to optimise, deploy and manage machine learning models. Tool AI is mostly built for developers but there are many startups trying to help non-programmers deploy machine learning models. Many of these startups offer different analytical services based on the common trends they find among their clients. These services are very similar to that of Analytics AI subcategory. Many of these startups offer a consulting services to deploy their tools.

This subcategory is popular among investors from all industries. In addition, there a handful of startups that have multiple investors from the same industry.

Startups in this subcategory you should watch include: Kensho*, Bonsai*, H2O.ai*, CognitiveScale*, DataRobot*, Element AI* and Neura*.

There are 30+ AI startups out of 95+ that I’m watching in this subcategory.

 

Vision: (Startups building image recognition tools)

Vision AI startups are applying forms of image recognition to various applications. Examples include indexing content of videos, visual search engines, analytics of earth imagery, security and monitoring of offices or cities, identifying people or understanding their emotions, capturing key moments of an event, building eyes for autonomous vehicles/drones/objects, home designing, analysing safety in construction sites, building logos and much more.

As you may recall from my previous article, this was the most heavily invested category by large corporations. Tech Giants, Top VCs and Commerce were the most active in this subcategory.

Startups in this subcategory you should watch include: Mighty AI*, PointGrab Ltd.*, Vidrovr, Clarifai*, PrecisionHawk*, Skycatch*, Shield AI*, Vion Technology and SenseTime

There are 40+ AI startups out of 130+ that I’m watching in this subcategory.

 

Conclusion:

I hope this review gives you more clarity about what is actually happening in the AI ecosystem. My goal was to share different examples of AI in order to make the subject more familiar. Ultimately, I hope this serves to inspire new founders, help corporations discover new applications of AI and help investors find new opportunities. I will publish an article soon on the Vertical AI category.

* Is for investors to know which AI startups from this list will be fundraising again in the near future, are currently fundraising for their next round or they could announce the closure of a new round very soon.

How Corporate Giants Invest In AI

Last week I published an article on the overall trends in the AI industry. After reviewing 1600+ AI startups globally, I was able to group most startups into 22 different subcategories, reveal fundraising trends, identify countries leading the AI race and more.

Taking it one step further, I wanted to share how the largest corporations by industry invest in AI startups. Watching corporate venture capital fund’s activity is a key indicator in spotting industry disruption. Corporate funds typically have very rigorous investment criteria and chase after investments that either add new revenue streams, boost operational efficiencies or attempt to partner with future competition.

I analysed over 200 of the most active CVC funds as well as the most influential corporations across 11 industries. My goal was to find which AI subcategories receive the most funding by industry, what corporations lead in AI investment per industry, what are the most popular AI startups in each industry and what AI startups are making the most impact across all industries.

The 11 industries I researched are as follows:

  • Tech Giants (Top 15 largest or most influential technology corporations)
  • Finance (Largest most active banks or financial institutions globally)
  • Telecoms (Largest telecoms by continent)
  • Electronic Manufacturers (The largest semi-conductor, chip and electronic device manufacturers)
  • Media (Largest media, advertising or entertainment corporations)
  • Industrial (Largest industrial manufacturing corporations that includes construction, appliances, metals, aerospace, chemicals, etc)
  • Commerce (Worlds largest eCommerce and retail stores)
  • Insurance (Largest life, health, automobile or reinsurance providers)
  • Consulting (The largest strategy, tech and accounting consulting firms)
  • Automotive (The largest automotive or parts manufacturers)
  • Healthcare (The largest hospitals, biochemical or pharmaceutical corporations)

I also took TechCrunch’s 2017 top 10 VC list and used it as a reference point to compare against corporations. VC’s typically have a much longer term vision than corporations and should indicate what AI startups will have more of an impact in 5 to 10 years.

Please note, all of this information is what I was able to find publicly. I’m sure there are many undisclosed investments made by these corporations. However, I think this subset of information will give you a general idea of the common trends among industries.

 

AI Investment Analytics By Industry

There was over 400 investments/acquisitions made by large corporations in AI startups. The Top VC’s and Tech Giants outpace all other industries with the most investments in AI startups. However, it’s surprising to find Finance, Telecom and Media industries are leading outside of the tech industry. Surprisingly, the Healthcare industry invested in the least amount of AI startups.

Most industry giants are investing in more US AI startups than INT startups. This means corporations abroad are pushing more capital to the US and less US investors are moving capital outside of the US. In reference to my previous article, given that there are significantly more AI startups built in the US, this is probably why we have this disparity. It is surprising however, to see the Top VCs actually invest less abroad than most tech giants.

In my previous article I split all AI startups into two categories. First by Horizontal, which are startups building AI tools, think of this as the hammer or measuring tape. Second by Vertical, which are startups creating a service using a form of AI, think of this as the plumber or construction worker. The majority of all industry leaders are investing in slightly more Horizontal AI categories than the Vertical AI categories. This is probably driven by corporations desire to find tools that improve existing products and services as opposed to trying to create a whole new product offering.

AI startups that fundraise from corporations are raising significantly more capital than the global benchmark of $10-11M. Startups receiving capital from corporations signals to the industry that there are potential synergies, therefore future growth expectations are much higher and price goes up. International AI startups raise a significant amount more capital than US AI startups. This can be a result of a tremendous amount of capital abroad with a very little supply of AI startups which inevitably drives up prices.

If you were to break apart the average fundraise by location in to categories it will paint a slightly different picture. It seems US corporate investors either find more opportunities/impactful AI startups in the Vertical category or less supply of them in comparison to the Horizontal category. For the international community it is opposite that of the US.

There doesn’t seem to be any outliers by country that pushed the average capital raise, which is something we saw in the previous article. The countries that receive the most investment from each industry and Top VCs are the United Kingdom, China, Israel, Canada, Japan and Singapore. These countries lead because they have very active corporations investing in their community and they also lead with the most amount of startups/funding outside the US.

 

AI Subcategory Investment Analytics By Industry

The graph above showcases how corporations from each industry are investing across the 9 Horizontal AI subcategories. In my previous article, most capital flowed into Vision, Tool and Analytics subcategories, this follows the corporate industry trends as well. To help you parse through the graph above, I broke down the top subcategories per industry:

  • Tech Giants: Vision, Tool and Analytics
  • Top VCs: Vision, Analytics and Security/Assistants
  • Finance: Tool, Security and Vision
  • Telecom: Vision, Analytics, Security and Assistants
  • Electronic: Tool, Security and Infrastructure
  • Media: Vision, Analytics and Data
  • Industrial: Vision and Tool/Analytics/Infrastructure/Robotics
  • Commerce: Vision and Infrastructure
  • Insurance: Tool and Analytics
  • Consulting: Security
  • Automotive: Robotics
  • Healthcare: Vision

This graph represents how corporations across all industries have invested in the 13 Vertical AI subcategories. In my previous article, Automotive, Healthcare and Fintech subcategories received the most funding. The graph above showcases how Fintech, Enterprise, CRM and Marketing are the most popular subcategories among all industries and Top VCs. This means corporations are focused on investing in operational efficiencies and customer acquisition. However, if you were to remove Top VCs, the most popular subcategory is Automotive, followed by Marketing, CRM, Fintech, Enterprise and IoT. In addition, Top VCs invest significantly more in Healthcare than they do in the Automotive subcategory. The top subcategories per industry are as follows:

  • Tech Giants: CRM, Marketing and IoT
  • Top VCs: Enterprise, Healthcare and Fintech
  • Finance: Fintech
  • Telecom: Enterprise and Automotive
  • Electronic: Automotive
  • Media: Marketing
  • Industrial: IoT
  • Commerce: Commerce
  • Insurance: Fintech
  • Consulting: CRM
  • Automotive: Automotive
  • Healthcare: Enterprise and Healthcare

 

Top AI Investors And Startups By Industry

To recap some of the information above, I wanted to share who are the most active AI investors in each industry, the most popular AI startups in some industries, and the most popular AI startups overall. The top investors and startups are below:

  • Tech Giants: Most active investors are Intel, Google and Salesforce. The most popular AI startups are MindMeld, CognitiveScale and Unbabel.
  • Top VCs: Most active investors are NEA, A16Z and Khosla/Accel. The most popular AI startups are Kensho and Timeful.
  • Finance: Most active investors are Bloomberg, Mastercard and Goldman/Fidelity/Citi. The most popular AI startups are Kensho, Moneytree and H2O.ai/Appzen/Versive.
  • Telecom: Most active investors are Softbank, NTT and Singtel. The most popular AI startups are Precision Hawk and MindMeld.
  • Electronic: Most active investors are Dell and Nvidia.
  • Media: Most active investors are R/GA, Comcast and KBS. The most popular AI startups are Vidrovr and Indicative.
  • Industrial: Most active investors are GE, ABB and Bosch. The most popular AI startup is Maana.
  • Commerce: Most active investor is Alibaba. The most popular AI startup is SalesPredict.
  • Insurance: Most active investor is New York Life.
  • Consulting: Most active investor is Bain.
  • Automotive: Most active investors are Ford and Toyota.
  • Healthcare: There weren’t any investors that stood out as the most active.

The startups with funding from the most amount of industries are CYNGN, Lemonade, Graphcore, Vicarious, ABEJA, Tamr and MindMeld.

The startups with the most corporate investors are Kensho, CYNGN, MindMeld, Moneytree, Maana, Lemonade, H2O.ai and Bonsai.

 

Conclusion

I hope this gives you a better overview of the AI startup ecosystem. As a reminder, this only showcases public information corporations are willing to share about their investments in AI. However, I think it is a good indicator where AI is growing, where it is not, and where it could be in the future.

I will continue to post a few more articles on the state of the AI industry. This will include top startups by subcategory. Stay tuned!

Kyle

Who Is Leading The AI Race?

Artificial Intelligence is becoming an extremely important function of the next evolution of technology. Therefore, I looked at every AI startup at the end of 2017. This was a collection of 1600+ startups globally. My goal was to understand the applications of AI/ML in every industry, the current fundraising environment and what countries are leading in AI development.

My summarised findings are below. You will see what countries are leading in the AI development and fundraising. In addition, I broke apart all 1600+ startups into 22 subcategories by function and application. This will help you understand where AI leads in development, funding and exits for each industry and application.

This report will give entrepreneurs, investors and companies a sense of where opportunities in AI exist and a benchmark for valuations.

For reference, I only looked at startups that have raised Angel-Series C funding. I combed through every company and applied my best judgement to keep startups if they actual apply a form of AI.

 

Countries Leading AI Development

The United States generated almost 1.5x the amount of startups than all other countries outside the US combined (International). It’s intriguing to see the United Kingdom as the leader of AI development outside the US, with Canada and Israel not too far behind.

Countries leading by total investment into AI startups paints a different picture. United States generated almost 2x the amount of investment than the entire international community received. However, China, Hong Kong and Japan have pushed a significant amount of investment into a smaller number of companies.

For both the US and all International companies, the average funding for AI startups hovers around $10M-$11M. However you’ll find that Hong Kong, China and Japan startup’s average raise is much higher. This could imply these startups are overvalued or AI startups in these markets are performing very well. Without these outliers, the average funding for International AI startups is closer to $5M.

It’s interesting to note the US as 3x as many more exits than the International community. Runner up is actually Israel, United Kingdom, Canada and China.

 

AI Startup Subcategories

After looking at over 1600 companies, I was able to come up with 2 main categories for AI startups, that further breaks into 22 subcategories. The two main categories are Horizontal AI and Vertical AI.

The Horizontal AI category are startups that are building AI tools, platforms or infrastructure that can be used across almost all industries. Think of this category as the hammer, wood or measuring tape of AI. This category breaks into 9 subcategories outlined below:

  • Analytics: AI built for analysing and pulling insights from large data sets
  • Assistant: Tools that are built to be forms of chat bots
  • Data: Startups that acquire, analyse and sell private data sets
  • Infrastructure: Startups building the physical or software infrastructure to empower AI tools
  • NLP: AI startups focused on understanding speech, voice or text (natural language processing)
  • Robotics: AI built for robots to perform any types of tasks, movements, etc
  • Security: Tools built to protect companies from security threats
  • Tool: Startups building general AI algorithms
  • Vision: Startups building image recognition tools

The Vertical AI category is applying AI tools to a particular industry to provide a service. Think of these as the plumber, construction worker or appraiser – they are simply using tools from Horizontal AI to provide unique services. This category is broken into 13 subcategories outlined below:

  • Agriculture: Startups building AI services to improve farming
  • Automotive: Startups building navigation, self-driving, maintenance, or any applications for vehicles
  • Commerce: AI companies built for different forms of commerce
  • Consumer: AI startups built for consumer lifestyle
  • CRM: AI startups focused on sales or managing customer questions
  • Education: AI startups focused on bettering education for students, teachers or schools
  • Enterprise: AI startups solely focused on improving operations in corporations, including accessing/sharing information, automating menial tasks, etc
  • Fintech: AI tools built for banking, investment, wealth management or efficient/safer ways to transact with one another
  • Gaming: Tools build for better gaming experiences, content or distribution
  • Healthcare: Any forms of managing, monitoring or servicing healthcare
  • IoT: Tools that collect, analyse or manage IoT device information
  • Marketing: Different forms of advertising or marketing activities
  • Recruiting: Tools built to source, analyse and track potential hires and or existing employees

 

Horizontal And Vertical Subcategory Break Down

Both the US and International community have built more Vertical AI startups than Horizontal AI startups.

However, the International community actually raises more funding for the Horizontal AI category than their Vertical AI category.

 

Horizontal AI Subcategory Statistics

In Horizontal AI, most US startups are created in the Analytics, Vision, Tool and Security subcategories. The International community differs slightly being that Vision, Analytics, Tool and NLP subcategories lead.

In the Horizontal AI Category, more funding is pushed into Tool, Analytics, Robotics and Vision subcategories for US startups. Whereas International startups it is Vision, Robotics, Infrastructure and Tool subcategories. This can be slightly skewed by the China, Hong Kong and Japan funding environments.

In the Horizontal AI category, you’ll notice most subcategories are at or above the average funding rate for all AI startups. You’ll also notice the Infrastructure subcategory gets a substantial amount of funding outside the US. This anomaly is from the China, Hong Kong and Japan funding environment.

It’s notable that the Analytics subcategory leads in the number of exits compared to all other subcategories in US and International.

Outside the US, the UK, Israel, China, Canada, and France are leading the development of Horizontal AI startup subcategory.

 

Vertical AI Subcategory Statistics

In the Vertical AI Category, most US startups are created in the Marketing, CRM, Enterprise and Healthcare subcategories. Whereas in International it is Fintech, Enterprise, Healthcare and Marketing subcategories.

In the Vertical AI category, more funding is pushed into Automotive, Healthcare, Fintech and Marketing subcategories. Whereas in International it is Healthcare, Fintech, Marketing and CRM subcategories.

In the Vertical AI category, you’ll notice US startups in Automotive and Agriculture receive a substantial amount of funding compared to the industry average. Outside the US you’ll find most subcategories raise below the average funding rate for AI startups.

Most exits in Vertical AI are within Marketing, CRM or Enterprise subcategories. However, it is surprising that the Consumer subcategory is one of the top exit subcategories both in US and International.

Outside the US, the UK, Canada, Israel, Germany and India are leading the development of Vertical AI startup subcategory.

 

Conclusion

There are many inferences you can pull from this data. I hope this helps puts the AI industry into perspective for many investors, entrepreneurs and corporations. It’s clear the United States outpaces all other countries in AI development and funding. Nonetheless, capital is flowing into this industry quickly and there are many opportunities to fill in each subcategory globally.

Of the 1600 AI startups, I believe about 360 will have big impact on their subcategory. Please connect or follow me as I will break down what companies to watch for in each subcategory in the future.