Deal focus: VR gaming comes of age

Japan’s Incubate Fund has always been big on videogames. In the firm’s early days, mobile games represented the bulk of its returns. Incubate Fund has racked up seven exits in the space, including Tokyo-listed category leader Gumi. Logically, it started dabbling in virtual reality (VR) games when the segment showed signs of heating up around 2015-2016, but no investments were made. It was too early.

According to Masahiko Honma, co-founder of Incubate Fund, the time has now come. “The prices of devices are going down and at the same time, the quality is going up. This environment is ready for investors like us, but there is one thing missing – hit titles that can use these capabilities,” he says. “This market is definitely a lot more open than even one year ago.”

Incubate Fund is leveraging its experience by joining Jafco and US specialist investors Sisu Ventures and Presence Capital in an $8.5 million Series A round for Thirdverse. The company was co-founded by Masaru Ohnogi, a former VR lead for Gumi and a 10-year acquaintance of Honma.

Ohnogi has spent the last five years building up his global VR network by traveling to 20 countries, helping set up a VR-dedicated fund for Gumi and establishing the firm’s specialist incubators in Japan, Korea, and Finland. Thirdverse was spun out of this program.

The company is best known for helping develop “Swords of Gargantua,” an online VR multiplayer combat game and is set to release its first fully in-house creation, a similar game called “Frostpoint,” later this year. First priorities are to build out the sales, design and engineering teams.

Again, timing is of the essence. COVID-19 has done wonders for home entertainment, and Thirdverse has reported a 200% increase in users since March. The investment also coincides with Oculus, one of the industry’s main goggle makers, launching a $300 headset that is usable without connecting to a separate PC. Headset prices have historically ranged around $800.

Oculus has begun to stock its products in brick-and-mortar retailers, an important marketing and public awareness coup for hardware, especially in Japan. The US and Europe are also core target markets.

Longer term plans include the creation of a virtual “multiverse” that will be more tourism than gaming. The idea is to create a free-access VR world, where revenues could be generated by charging users to augment their avatars. There will be no plot, no monsters to shoot – just an alternate reality for everyday escapists. The technology is said to be 5-10 years away.

“For a lot of people, happiness depends on where they were born. Some people want to be born a different gender or don’t like their appearance, or they want to be rich, but they can’t achieve that in their environment. They may have stress,” says Ohnogi. “In VR, they can have their life the way they want it. We can create those environments. You can be whatever you want and have a different ID in each world with true friends that have common interests.”

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• Topics
• North Asia
• Consumer
• Technology
• Early-stage
• Media
• Japan
• JAFCO
• Incubate Fund
• gaming
• TMT