Animoca Brands raises $358.8M at $5B valuation for NFT games and open metaverse

Animoca Brands has raised a new round of funding — the fourth time since May — and this time the company has scooped up $358.8888 million at a $5 billion premoney valuation. It’s another endorsement for blockhain gaming and the company’s attempt to spawn an open metaverse.

Liberty City Ventures led the round, with other investors including 10T Holdings, C Ventures, Delta Fund, Gemini Frontier Fund, Gobi Partners Greater Bay Area, Kingsway, L2 Capital, Mirae Asset, Pacific Century Group, ParaFi Capital, Provident, Senator Investment Group, Sequoia China, Smile Group, Stable Asset Management, Soros Fund Management, Wildcat Capital Management, Winklevoss Capital, and others.

The new capital will be used to continue funding strategic acquisitions and investments, product  development, and licenses for popular intellectual properties.

Animoca Brands is working to build the open metaverse by bringing digital property rights to online users through the use of blockchain and NFTs; these technologies enable the true digital ownership of users’ virtual assets and data, and make possible various decentralized finance (DeFi) and GameFi opportunities (including play-to-earn), asset interoperability, and an open framework that can lead to greater equitability for all participants.

Above: Yat Siu is chairman of Animoca Brands.

Image Credit: Animoca Brands

“We are pleased to see continued and growing support from influential and strategic investors for Animoca Brands’ mission to deliver true digital property rights and build the open metaverse,” said Yat Siu, chairman of Animoca Brands, in a statement. “We have set ourselves the ambitious goals of building an open Web3 and facilitating an open metaverse that expands financial inclusion. In 2021 we saw tremendous growth in this space and Animoca Brands has been one of the forefront leaders in the development of this industry. We believe we are still at the initial stages of a new Internet revolution, and there are tremendous opportunities ahead of us in 2022 and beyond.”

The global video game market generated an estimated $180.3 billion in 2021, according to market researcher Newzoo. Meanwhile, market researcher Emergen Research estimated that the metaverse market size is expected to grow to around $829 billion by 2028.

During the course of 2021, Animoca Brands raised $216.28 million to power its vision of digital property rights and the open metaverse, while its subsidiary The Sandbox completed a capital raise of $93
million in November.

Above: Animoca Brands acquired The Sandbox developer Pixowl for $4.875 million.

Image Credit: Animoca Brands

Animoca Brands and subsidiaries offer a broad portfolio of game products, both centralized and decentralized, branded and original, with coverage across most primary platforms including mobile devices, game consoles, PC, web, and blockchain. Products include games ranging from hypercasual to hardcore, as well as collectibles, utility tokens, esports titles, and more.

Some of the company’s major blockchain game projects include The Sandbox and its associated utility token SAND, the upcoming Phantom Galaxies triple-A blockchain third-person shooter, the REVV token ecosystem (REVV Racing, F1 Delta Time, MotoGPfIgnition, and Formula E: High Voltage), the Arc8 platform and its Gamee utility token.

In addition to its product development and publishing businesses, Animoca Brands is an active investor in more than 150 of the world’s most meaningful NFT and metaverse-related companies, including OpenSea, Dapper Labs, Yield Guild Games, Star Atlas, Axie Infinity, Thetan Arena, and many others.

“The trailblazing Animoca Brands is demonstrating to the world the game-changing characteristics of Web3 and the open metaverse,” said Murtaza Akbar, managing partner at Liberty City Ventures, in a statement. “Animoca Brands is championing a more decentralized, open, fairer, and more inclusive future where everyone can truly own their digital goods and benefit from them accordingly. We are extremely proud to be working with Yat and his world-class team to build the future of asset ownership and  management.”

The funding comes off other big blockchain gaming financing, including Forte’s raise of $725 million. Concept Art House raised $25 million and Galaxy Interactive raised a $325 million fund to invest in blockchain games. Bitkraft raised a $75 million token fund. Sky Mavis raised $152 million, Dapper Labs raised $250 million, Mythical raised $75 million, and biggest of all Sorare raised $680 million.

Above: Animoca Brands’ NFT game F1 Delta Time.

Image Credit: Animoca Brands

According to BGA member BlockchainGamer.biz, an estimated $4 billion has been invested in blockchain gaming in the year 2021. The top five companies that raised the most money were Forte ($900 million), Sorare ($783 million), Dapper Labs ($607 million), Mythical Games ($270 million), and Animoca Brands ($221 million).

Above: Animoca Brands wants to be the leader in blockchain gaming.

Image Credit: Animoca Brands

Animoca Brands was one of the earliest companies to adopt a blockchain gaming strategy in 2018, starting with a belief that NFTs would be adopted in games. Now that prediction has come true, though blockchain games still face significant hurdles in mainstream adoption, ease of use, environment impact concerns (some true, some outdated), and fears of scams. Lots of hardcore gamers say they hate NFTs.

In the meantime, brands such as Ubisoft, South Korea’s Com2Us, Square Enix, Zynga, and others have come out in support of NFTs in games.

I asked some questions via email of Siu. Here’s the answers:

GamesBeat: What is the reason for raising more money so soon after the last round?

Siu: Raising money is not only about the funding itself but also about establishing partnerships and alliances. At valuations like ours, in order to make investor involvement meaningful the round sizes get larger. New investors such as Soros Fund, Winklevoss Capital, Gemini Frontier Fund, Pacific Century, Stable, Wildcat, Mirae, Senator, and ParaFI all offer incredible value to Animoca Brands as we reach for new heights.

GamesBeat: Does this enable more acquisitions, or more investments by Animoca into new blockchain game companies?

Siu: Both. This enables us to continue and accelerate our M&A strategy and our vigorous investment
into the open metaverse ecosystem.

GamesBeat: How many employees are there now at Animoca?
Siu: We have around 600 employees at Animoca Brands and our subsidiaries.

GamesBeat: Do you have any concern about some of the resistance we’ve seen from hardcore gamers toward NFTs in in games?

Siu: No, because the strong negative reaction we’ve seen is not indicative of all gamers. There are an estimated 3.2 billion people who play games, and even if NFTs appeal only to 10% to begin with,  that’s still 320 million people.

One of the major reasons that many hardcore traditional gamers are currently resistant to NFTs is the past behavior of many game companies, who have squeezed as much value as possible from their most passionate user bases. Expensive game titles, rapacious in-app purchases, costly skins, pay-to-win offerings, and the like – often all at once.

It’s therefore no surprise gamers are wary of NFTs, because they think that it’s just another exploitation strategy. In the wrong hands that could be the case, of course, but what gamers don’t yet fully grasp is that NFTs also represent a potential paradigm shift that is very much to THEIR advantage: the transition from a feudalistic operator-owned system to one where individual users finally enjoy digital property rights.

Consider how we approached this issue in our games REVV Racing and Phantom Galaxies: the several thousand NFTs we dropped were completely free. More than 90% of users who joined our games became first-time NFT holders whose first experience was to earn something simply by participating, and which was worth real money. The Phantom Galaxies NFTs (the Halberd-001) are trading for around $17 to $20 and the REVV Racing level 1 cars are trading at around $10. Those game items were introduced free of charge (we didn’t sell anything) which means that many gamers were able – for the very first time – to experience the benefits of true digital ownership.

GamesBeat: Did that resistance affect the funding round at all?
Siu: Not in the least. The investors we brought on board have a good understanding of the situation.

GamesBeat: How do we get around some of that and convince them this is worth it?
Siu: Education is obviously critical: gamers, who are accustomed to being milked for money, must be
made to understand that NFTs are not automatically a scam. Some NFTs are indeed a scam, of course, but that applies to literally anything. Ultimately, NFTs are simply a way to give gamers ownership and control of game assets that previously were the sole property of game companies.

Just as important, every game company needs to create a good model for gamer engagement that is less exploitative and more, well, engaging. For decades, game companies have been riding on the passion and dedication of gamers, extracting value from them aggressively in order to maximize profits. Now, gamers are being offered a different approach.

Most gamers are not ready to pay thousands of dollars just to play a game without immediate utility and earning potential. That’s why in our games like Phantom Galaxies and REVV Racing we give away NFTs as rewards for activity and engagement. The free NFTs that players receive allow them to play the game, and in addition to that I think that many gamers find the quality of true ownership to be a positive change from traditional gaming: even if they don’t sell their NFTs, it still feels good to know that they can.

It boils down to giving gamers transient versus lasting value. You can play games for temporary enjoyment, which is what games are for. But now, in addition to that, you can also enjoy the more tangible benefits of property rights.

It is encouraging to view responses of actual gamers who try some of our blockchain games.

GamesBeat: Do you see equal weight for the strategy in terms of nft games and the metaverse? Or is one more important to invest in?

Siu: NFT games and the open metaverse tend to be closely interrelated and are, in some cases, the same thing. We have defined the open metaverse as an interconnected series of open worlds where users enjoy ownership and agency over their digital assets, where property rights and composability provide the foundations for a potentially infinite number of creations.