Deal focus: India e-sports early-mover makes waves

Indian e-sports and game streaming company Loco was one of Lumikai Fund’s first deals in August 2020. The VC firm had just established itself as the country’s only gaming-focused investor and helped orchestrate a spinout of Loco from its parent, Pocket Aces, via a USD 9m seed round also featuring Hashed Ventures, Hiro Capital, Axilor Ventures, 3one4 Capital, and game studio Krafton.

Lumikai, which focuses exclusively on India, launched its debut fund at this time, reaching a final close of undisclosed size last November, six months ahead of schedule and with strong support from global gaming companies. It is now about 50% deployed and Fund II plans are in the works.

This was the period when Indian gaming finally came into focus for the non-believers. Nazara became the first company in the space to complete a bumper domestic IPO. Local VC-backed studios Moonfrog and PlaySimple were acquired by global strategics, the latter for USD 360m. And the fantasy sports scene exploded with the minting of unicorns Dream 11 and Mobile Premier League.

“People were telling us that gaming companies will never raise large rounds. There will be no exits. There can be no listed companies in gaming. All of that has changed in the last 24 months,” said Salone Sehgal, a general partner at Lumikai, previously of gaming-focused London Venture Partners.

“We’ve seen over USD 1.8bn invested in the market since last year. We’ve seen it become a USD 2.2bn market and it’s growing at a 30% CAGR [compound annual growth rate]. It’s an exceptionally good time to be investing in India gaming.”

Lumikai has now doubled down on Loco with participation in an INR 3.3bn (USD 43.3m) Series A round alongside Krafton, Hashed, Hiro, and the likes of US gaming specialist Makers Fund and Korea Investment Partners, among others.

It follows a growth spurt that saw monthly active viewers increase 8x to about 5m, daily active viewers increase 15x to 500,000, and live hours viewed increase 78x, all in a single year. The average session time for users is well above the industry average at around 30 minutes.

There are now 45,000 game streamers on the platform, which supports brand-festooned e-sports tournaments with partners such as the NBA, Red Bull, Activision Blizzard, and Riot Games. About 90% of the audience is in India.

But Lumikai saw something before all this came together. Loco’s founders were also the founders of Pocket Aces, a digital entertainment business backed by Axilor and 3one4 that seeded their spinout project with a deep network of progressive brands itching to get into the game streaming space.

Loco also demonstrated uncommon strengths in catering to local-language audiences, diversifying content, and gaining the trust of streamers through the sharing of analytical data and education programs. This is a class of creator that can be difficult to manage; “Once streamers start doing well, they become like mini-celebrities,” Sehgal said.

A facility with community building was highlighted last year, when one of Krafton’s key titles, PUBG Mobile, was banned in India amid diplomatic tensions with China due to the game’s publishing partnership with Tencent Holdings. PUBG is massively popular – more than 1bn downloads – and its ejection rattled the local industry.

Krafton has since relaunched the game in the country, changing the name to Battlegrounds Mobile India and moving the publishing rights back in-house. In the meantime, Loco had to scramble to fill the hole and keep its ecosystem busy.

“They really reached out to the game streamers and provided them with a lot of support,” Sehgal said. “They did tie-ups with other game companies and provided alternative sources of games and entertainment, which kept their communities and fans engaged. That was something we realised was very special about Loco.”

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• Topics
• South Asia
• Early-stage
• Technology
• Consumer
• India
• TMT
• 3one4 Capital