Have you heard of the Metaverse? How to profit from it?
“Have you heard of the Metaverse? Everyone talks about it. It’s the next big thing. What is the Metaverse, exactly? With 20 years in gaming, you must know!”
About two years ago, at the start of COVID, I knew that tech companies would continue to do well no matter the challenges. My investments in gaming, e-commerce, artificial intelligence, and crypto — will continue to flourish. Two of my invested companies became unicorns last year alone (Chiliz & Asia Innovations), and more will follow.
I also realized that the world would shift online even faster. We accelerated living and working in a more immersive and participatory digital world.
That meant companies operating with a digital-first mindset would outperform traditional ones. And with compound gains on all fronts — from prediction to production, those who learned to think like digital-first companies will ultimately wipe out the competition.
My latest book, “Atomic Scaling”, shares the business operating system of the digital natives to help companies and leaders to think at scale, the way high-performing teams in the gaming & tech world function and succeed.
I did not anticipate that one man would name that revolution: Metaverse!
Mark Zuckerberg started saying Metaverse a lot. Metaverse? Metaverse!! Metaverse is the buzzword of the moment, yet the Metaverse doesn’t really exist. But when Facebook-turned-Meta announced its new focus on building the Metaverse, a new race officially started.
Something happened. From that moment, my phone starts ringing. My inbox got filled with inquiries about the Metaverse, and entrepreneurs pitching for investments began to add the word Metaverse to their decks.
Even the Communist Party, in its official newspaper People’s Daily in China, where I have been living for over a decade, said last November that “everyone needs to stay rational in understanding the current metaverse mania.”
So, What is the Metaverse?
While still a somewhat nebulous concept, the Metaverse is, broadly speaking, viewed by many as the next phase of the internet, the Web 3.0. During his company’s recent conference, Zuck called the metaverse “the next chapter for the Internet.”
Online experiences will combine to form something of an immersive virtual experience. Like all the best buzzwords, “metaverse” tries to link many exciting things together. In this case, virtual reality, augmented reality, gaming, NFT, cryptocurrencies, smart contracts, and other digital social experiences are combined into 3D virtual worlds.
The tech insiders have been dreaming for three decades of Metaverse since sci-fi author Neal Stephenson coined the phrase. Entrepreneurs like Philip Rosedale created 20 years ago virtual world like Second Life. Others like Eric Ries — famously known for his book “Lean Startup,” inspiring a generation of startup entrepreneurs — were actually before being an author, co-founder, and CTO of the 3D avatar messenger, IMVU.
Yet, the Metaverse is one of these things, like longevity (discloser: I am an investor in Novos) or hydrogen (discloser: I am an investor in Hopium). The idea sticks and is bound to happen.
A dozen years ago, as an entrepreneur involved in gaming and social networks, I pitched Asian and Silicon Valley investors my Web 3.0 vision as a participatory platform — an opportunity to re-shape the world, re-balance power and redistribute wealth.
Web 1.0 was about information and search. Web 2.0 was about People and connectivity. Web 3.0 will be about Participation and synchronicity. From information to connection to Participation, the idea was too early for its time.
So we ended up building instead the largest 3D shooter on Facebook, UberStrike — and contributed for a while to almost half of the Unity plugin installs.
The time has come. Why Web3 matters now — and why no matter who you are, where you are, and what you do, Metaverse is one of these MegaTrends that will most likely impact you and generations to come.
As an internet & gaming entrepreneur, I tend to see a binary world. I see Metaverse built on two strands:
On the Front-end, think of Metaverse as an immersive world in which we can participate, be it for playing, shopping, working, or changing society.
Think of gaming, online games, augmented reality and virtual reality, virtual world — and the future of work or commerce. Think of Ernest Cline’s 2011 novel “Ready Player One” as an imaginative reference point for what the Metaverse could look like.
On the Back-end, think of an infrastructure that allows money (think of Bitcoin but also Terra LUNA — a decentralized financial infrastructure and blockchain protocol; +9,984% in last 12 months — LUNA) and people to move freely, with smart contracts (ETH), decentralized and interoperable universes. Think of decentralized banking, Identity Management (we coined back in the day the idea of ID3: real name identity; a nickname-based ID, yet related to your offline ID; anonymously), and economics.
Snowcrash was an inspiration on the sci-fi side. Yet, I got the most impacted by authors like US sociologist Ray Oldenburg who coined the term the “Third Place” in his 1989 book “The Great Good Place.” The first place is your home; the second place is your work. The third place is where you hang out, relax and socialize. Or, back then, MIT professor — Henry Jenkins’s research on participatory culture forged my opinion of what the future could hold and what Metaverse/Web 3.0 would be.
Beyond Zuck’s interest in building the Metaverse, with Oculus on the front-end, Facebook ID, and Novi on the back-end, who else is interested in making the Metaverse?
Unity, the 3D engine my company was using to build games 12 years ago (we were among the first users in both China and South Korea), is investing in building “digital twins” — digital copies of the real world. For example, on the industrial side, companies like Mercedes or Tesla are building a digital twin of their car factories, allowing them to monitor and optimize a manufacturing component, asset, system, or process in real-time.
The graphics company Nvidia is building its “Omniverse,” which it describes as a platform for connecting 3D virtual worlds. Jensen Huang, Nvidia co-founder, and CEO has found a purpose in using its artificial intelligence and simulation technology made possible by its graphics chips and deep learning neural network algorithms. His company is gathering all of the experts it needs to simulate climate science, so the world’s biggest supercomputers will be able to model climate change and predict how the Earth will change over decades. And Huang will use this to warn us all about the planet’s fate. On top of that, he will build us the Metaverse for free — as reported by Dean Takahashi at VentureBeat.
Roblox CEO David Baszucki coyly notes that “some people refer to what we’re building as the Metaverse.” Microsoft’s Minecraft gets less hype than Roblox these days, but it enables similar activities through modding. So do lower-profile services like The Sandbox (+3,800% in last 12 months — SAND)— founded by French fellows entrepreneurs Arthur Madrid and Sébastien Borget, invested by Hong Kong-based Animoca founded by Yat Siu and Softbank— which incorporates a complex cryptocurrency-based economy as well.
Tim Sweeney, the founder, and CEO of Epic Games (which makes Fortnite and the 3D engine, Unreal — and is partially owned by Tencent), has long spoken about his metaverse aspirations.
Tim, in his interview with Joseph Kim (Discloser: I am an investor in Lila Games, Joseph’s company), talked about the “economic sphere” behind the Metaverse and how to build an “efficient economy.”
Following last year’s explosive rise of Ethereum-based monster-battling game Axie Infinity (+11,927% in last 12 months — AXS) and play-to-earn gaming guilds like YGG in the Philippines, every major gaming publisher is exploring blockchain.
We also see the emergence of Web 3.0/Metaverse theme fund. Cryptocurrency exchange FTX — founded by Sam Bankman-Fried — is excited about Web3 gaming and consumer and social Web3 applications. After launching with Solana Ventures last November a $100 million Web3 gaming co-investment fund, Binance and Coinbase competitor — FTX decided to funnel a chunk of its growing war chest into a new venture capital arm. FTX Ventures is a $2 billion VC fund led by Amy Wu, previously General Partner at Lightspeed Venture Partners.
Other Funds with a focus on Web 3.0/Metaverse include Galaxy $3.4 billion Funds; Andreessen Horowitz (a16z) $2.2 billion funds (with notable investments like Opensea — now valued at 13.3 billion and Uniswap); Binance $1 billion Growth Fund; Reddit co-founder Alexis Ohanian, Seven Seven Six venture firm + Solana Ventures $100 million funds; Crypto.com $200 million funds; Solana-Forte-Griffin Griffin Gaming Partners $150 million Web 3.0 gaming fund; Dedicated gaming fund with great strategists & operators like Shanti Bergel & Andrew Sheppard at Transcend Fund; Berlin-based Bitkraft $75 million Token Fund co-founded by one of the most prominent investors in games and esports startups — Jens Hilgers; and more to be announced soon. As my finance professor used to say, “Ludovic, follow the money!”
One could argue that we are already in the Metaverse; call it v1.0.
Humans have already surrendered a portion of their existence and autonomy to the digital world. We depend on our digital extensions to interface with the world. That includes algorithms that govern our lives the same way the laws of nature do, communication, social interaction, and survival skills.
What could v2.0 look like? A true metaverse should be a persistent destination where users can experience a parallel “reality.” It would need to be highly interoperable between existing significant platforms, as self-sufficient as possible, and with clear ground rules and protections that could not be broken. Essentially, it would be an autonomous zone for users to explore and create. No individuals or organizations should have leverage over the operations or the people.
A true metaverse must always exist simultaneously with the real world. It must not disappear, rearrange, or reload when no one looks. Everything should be as it was when a user returns. One user should be able to pick up where another left off. Elements in the Metaverse should be transferable and interoperable with most other platforms and the digital world. By all accounts, the Metaverse should feel equivalent to any other “third place.”
As Alan Kay, former chief scientist at Atari and Turing Award winner, the highest honor in computer science, said, “The best way to predict the future is to invent it.” The Metaverse is still in its infancy and yet to be built for the most part. It got people like me excited about such digital platforms when it included some of the following ten attributes that frame the Metaverse:
Attribute #1: The Metaverse is Decentralized
Attribute #2: The Metaverse is Immersive
Attribute #3: The Metaverse is Inclusive
Attribute #4: The Metaverse is Accessible
Attribute #5: The Metaverse has ID3 management
Attribute #6: The Metaverse is Synchronous
Attribute #7: The Metaverse is Persistent
Attribute #8: The Metaverse is Participatory
Attribute #9: The Metaverse is Interoperable
Attribute #10: The Metaverse is Self-Sufficient
If the Metaverse is not self-sufficient, then the entities that control it also hold power over everything that happens inside it. The world will become an entity that exists to please and serve its owners, not its users. Let the Metaverse be here to “Serve the People.” Game On, Let’s Play!
