A lot of innovation comes from looking at an established company or industry through a new prism.
Andreessen Horowitz is “a media company that monetises through venture capital,” according to its former partner, Benedict Evans, in his weekly blog rather than an asset manager that does some blogs and podcasts.
It would certainly make sense to do more investing if the core aspect of a media company’s value comes from finding out information and sharing with a selected group how they can use these insights for their advantage.
Local news told people where to shop and what their politicians and business and social leaders were up to. Cable, sports and entertainment companies kept people occupied as they worked less hard over the past century and had more free time while giving them cultural talking points.
Keeping the userbase and adding network effects can deliver opportunities for value creation.
This is how US-based games platform Roblox raised $520m in new funding at a $29.5bn valuation last week and said it would hold a direct listing to join a stock exchange. As data provider Pitchbook in its weekly newsletter noted: “Roblox was founded in 2004 as a self-contained platform for game developers and gamers. Most of its titles are aimed at younger users, employing a blocky animation style reminiscent of Lego or Minecraft.
“Over the next decade, it raised a few million in venture funding, but there were few, if any, signs that the company was a budding colossus.
“That began to change in 2017, when the San Mateo, Calif.-based company brought in $25m at a $500m valuation, according to PitchBook data. And the company’s growth curve started to go vertical last year, when the pandemic caused millions of socially distancing children to turn to Roblox as a new platform for fun and social interaction.
“Roblox had 31.1 million daily active users as of the end of Q3 [third quarter to end-September] 2020, up nearly 82% from the same period in 2019. Users spent 22.2 billion hours on its platform during the first nine months of last year, up 122% year-over-year. Revenue is up 68%.”
What will be interesting post-flotation is if Roblox takes a leaf out of other gaming groups and uses the cash to create an ecosystem.
China-based gaming leader Tencent spends almost all its about-$10bn in free cashflow on corporate venturing deals to find the next winners and broader technology to service its established userbase of more than a billion people.
Over the past few decades media companies’ traditional business models have been undermined by high cost bases and dislocation of advertising to Google, Facebook and Amazon.
Building a curated set of users through the provision of data and information, however, will always be useful and by understanding their needs more widely you can offer more to them in differing ways.
Corporate venturing applies the mechanism to find these value-added opportunities as well profitable return on investment. Expect to see more of this happening in future.
