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Blockchain group Animoca to form metaverse fund

Written by Nikkei Asia Published on   3 mins read

Co-founder says up to USD 2 billion vehicle focuses on mid- to late-stage startups.

Hong Kong-based blockchain gaming group Animoca Brands plans to launch a fund of up to USD 2 billion to invest in metaverse businesses, according to company co-founder and Executive Chairman Yat Siu.

Animoca is known for the Sandbox metaverse game that allows users to buy plots of digital land and decorate them using non-fungible tokens (NFT)—a type of digital asset traded on the blockchain. Animoca’s investors include Singapore state fund Temasek, GGV Capital of the U.S., and South Korea’s Mirae Asset Management, and has a valuation of over USD 5 billion as of its latest fundraising.

In an interview with Nikkei Asia in Tokyo, Siu said the company now plans to launch a fund called Animoca Capital, with its first investment expected next year.

“We are thinking about a fund [that is now] forming,” the chairman said. The fund’s target is USD 1 billion to 2 billion, though Siu said it has not raised money yet. Siu and his fund manager partner will oversee the account.

The metaverse refers to a virtual reality space in which users can interact and trade goods similar to the real world. More businesses are entering the metaverse to tap growing opportunities.

The “focus will be everything on digital property rights,” Siu said, referring to “NFT metaverse” and “open metaverse” businesses. He added that there will be no geographical restrictions for investment targets.

Founded in 2014, Animoca has been seen as a trailblazer of Web3—a decentralized internet landscape that uses blockchain technology. The company has made about 380 investments in Web3 businesses, such as secondary NFT market platform OpenSea and Dapper Labs.

However, Siu said the primary purpose of these investments was to “develop the ecosystem” of Web3 and create an active market rather than pursuing returns.

Now that the industry is more mature, Siu feels the need for a separate investment vehicle to pursue capital efficiency. “The fund will be focused on equity optimization,” he said. “As a fund, you optimize for return. So it’s different.”

Siu said the fund would create more opportunities for investors to access Web3 companies. Some Animoca investors had sought exposure to its portfolio companies but now want more direct investments, he said. “They want direct exposure to mid- to late-stage companies, and this is the role of a fund.”

He said the planned fund would be “a good entry point” for Web3 businesses. “For a lot of traditional investors, investing in growth [stage] to a late stage is safer. It’s very different from investing in a seed startup, which has much higher risk.”

Despite rising global interest rate hikes and turmoil in the cryptocurrency sector—including the collapse of FTX, one of its biggest names—Animoca has attracted investors. It announced a USD 358 million fundraising in January and one for USD 110 million in September.

“Obviously, it’s more challenging than before,” he said of the fundraising environment. “[But] on the other hand, I think it’s not as competitive as before. … In a bear market, what often happens is concentration goes to market leaders.”

With regard to recent crypto industry failures, Siu said Animoca will contribute $10 million to the Web3 Industry Recovery Initiative led by Binance “to support the ecosystem.” He said his company might increase its contribution depending on the situation.

Siu said the crypto industry would recover and noted that the sector’s underlying utility was not weakening. “More people are joining crypto every day, especially in gaming,” he said, adding that those people are different from speculative crypto investors.

Meanwhile, the planned investment fund will be one of the vehicles for Animoca to advance long-term goals. “The long-term goal for us, and frankly for myself, is creating a way where we all have digital property rights,” he said. “I’m hoping that this will also drive a scenario where digital property will be recognized like physical property in the legal system.”

Animoca was initially listed on the Australian Securities Exchange in 2015 but was delisted in 2020, with the exchange citing failure to comply with rules.

Asked about a future stock exchange relisting plan, Siu said, “We definitely will be listing, but not very soon, not in this market.” He said he would consider “all options” as to where to list.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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