The commitment of gaming and technology companies from Japan, Finland, the US and South Korea to a new India-based venture capital firm, Lumikai, is a reflection of the size of market potential but also shows up some wider trends.
In India there are more than 300 million gamers but with the development of platform engines, such as Unity and Unreal from Epic Games, and reliable, cheap telecoms through Jio Platforms, the nascent local ecosystem could take off.
The existing gaming companies, such as China-based Tencent and Japan-based Nintendo and Sony, have already reaped some of the benefits through an internationalisation strategy but that there was no mention of China as LPs for Lumikai is possibly reflective of the geopolitical tensions being raised between China and India.
Investment bank Goldman Sachs has estimated Tencent’s stakes of US-based portfolio companies were worth $26bn, according to a report seen by WSJ.
Tencent has invested in US gaming companies, such as Epic Games, publisher of Fortnite, and Activision Blizzard, and also has a portfolio of other investments, including stakes in Spotify Technology and Snap, that have listed.
The difference between private and public companies is increasingly blurred when using corporate venturing as a tool to drive value.
Alphabet, US-listed conglomerate behind the Google search engine, has agreed to invest $450m for a 6.6% stake in ADT, the New York-listed home alarm company. Google acquired the Nest smart alarm system and working with ADT gives access to its 20,000 technicians to compete with Honeywell.
As blogger (Link) Benedict Evans said: “This still feels like a very long game (or just option value) – there’s still almost no tangible benefit to Google today from any smart home stuff (I wrote the same about Alexa 18 months ago).”
But just as Japan-listed conglomerate SoftBank shook up and scaled up the venture capital industry through raising nearly $100bn for its Vision Fund, so it is now trying to combine the insights from its private investment unit with a public-focused asset management operation.
Last week, Masayoshi Son, founder of SoftBank, said the asset management company would have about $555m in capital and has already started investing in stocks, such as Apple, Amazon and Facebook.
Son will personally own 33% of the asset management firm and said: “We are promoting the information revolution, like the conductor of an orchestra. This is the purpose of our company.”
The move to join up private and public investing gives an edge to active managers, such as UK-based Baillie Gifford, in the wake of fee pressure and rising assets for passive or index trackers, such as BlackRock and Vanguard. It also reinforces the chances their investment analysts will understand the power of the corporate venturing strategies of the stocks they track, which should improve market efficiency.
