Why the $830M gaming fund Bitkraft is bullish on Asia

With $830 million in assets under management, Bitkraft Ventures has built a name for backing early- to mid-stage web3 games and other immersive technologies. After eight years of investing mostly in the West, the firm is extending its footprint to Asia to capture the continent’s savvy mobile gamers and fledgling web3 gaming space.

Bitkraft, which has a portfolio of over 100 startups, announced today that it is expanding to Asia by bringing on two new members: Jin Oh, formerly president of Riot Games and CEO of Garena, will take the helm as partner; Jonathan Huang, former associate director at Temasek, will serve as principal.

Currently, Bitkraft invests 15% outside of the Western market, with the majority in Asia. Over time, the firm aims to develop a dedicated strategy for the continent with the goal of increasing investments in Asia to 20-25%.

Despite being a small team of two in the region, the fact that Bitkraft has boots on the ground in Asia gives it a big advantage over many other Western gaming funds, Huang, who’s based in Singapore, told TechCrunch in an interview.

The team also benefits from the investors’ complementary experiences in the gaming industry. Oh “really knows the space very well as an operator… He’s very well connected and knows the ins and outs of building a game and a platform and all the adjacencies with gaming,” said Huang.

“My background is very investor focused,” added the investor, who has been a lifelong gamer himself. “I came through two years of banking and did investments for the last six years… Having that operator-plus-investor combo is something that’s very, very powerful that we don’t see in many of the funds.”

Oh and Huang will hunt down conventional gaming projects in Asia but will also allocate a big chunk of their time to high-potential blockchain games. The firm’s typical check size for seed investments in traditional equity is from $2-10 million; the checks are slightly smaller for web3 projects, ranging from $1 million to $5 million.

The investors are going after a sector that is still very much a niche. Despite the billions of dollars poured into web3 gaming, the genre is mostly attracting crypto-native users for now.

Investments for blockchain games reached $7.6 billion in 2022, more than double the sum from a year ago, according to analytics firm DappRadar; on average, though, just over one million unique active wallets were connected to game dApps (decentralized apps) daily last year (crypto wallets are channels for gamers to access and trade their in-game assets).

The gaming industry overall, in comparison, is approaching three billion users by 2023, research firm Newzoo forecasted.

Huang is nonetheless optimistic about blockchain-powered games, arguing that for the last few decades, breakthroughs in hardware have ushered in new innovation cycles — from arcade, console and PC to mobile games. The next innovation might not come from hardware but blockchain, which is in essence a database, he said.

“If you use the existing mental model of hardware driving innovation, then this doesn’t work. So at one point, I was thinking to myself… maybe we don’t need hardware to drive new models of consumption… The crux of it is: Is this the new platform that is going to drive the next wave of innovation?”

Given Bitkraft’s focus on web3, it makes total sense for the firm to set up in Asia where consumer appetite for blockchain games is huge. The play-to-earn hit Axie Infinity, for example, was made in Vietnam and accrued a loyal user base in Asian countries like the Philippines.

While hardcore, purist gamers might dismiss Axie as a piece of mindless work with little creative value, Huang pointed out that it is “basically a card game” with a niche audience. “If you are someone that enjoys Hearthstone, or Legends of Runeterra, or any of those strategic card games, then you’ll like it,” he said.

Most important, he reckoned that Asia is fundamentally different from the West in that its internet users are much more “open-minded.”

“They are a lot more embracing [towards] new monetization models, new ways of playing games. This is where gacha games originated from, something that the West was very much against. We [Asians] are very good at monetizing our players, and people are okay with pay-to-win, to an extent,” the investor said.

“I think that open-mindedness basically lends the Eastern market to be a bit more receptive of web3 gaming. In essence, there isn’t an immediate backlash, and people don’t feel like they’re just getting monetized by the publishers, which seems to be the narrative that’s playing out in the West.”

Corrected Huang’s information on April 21, 2023.