Blockchain group Animoca to form metaverse fund

Hong Kong-based blockchain gaming group Animoca Brands plans to launch a fund of up to US$2 billion to invest in metaverse businesses, according to the company’s co-founder and executive chairman Yat Siu.

Animoca is known for its 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 sovereign wealth fund Temasek, GGV Capital of the US and South Korea’s Mirae Asset Management, and has a valuation of over US$5 billion at its most recent fundraising.

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

“We are thinking of a fund [that is now] formation, said the chairman. The fund’s goal is US$1 billion to US$2 billion, although Siu said it has not raised any money yet. Siu and his fund manager partner will oversee the account.

The metaverse refers to a virtual reality space where users can interact and trade goods similar to the real world. More companies are entering the metaverse to take advantage of growth opportunities.

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

Founded in 2014, Animoca has been seen as a trailblazer for Web3 – a decentralized internet landscape using blockchain technology. The company has made around 380 investments in Web3 companies, such as secondary NFT market platform OpenSea and Dapper Labs.

However, Siu said the main 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 achieve capital efficiency. “The fund will be focused on equity optimization,” he said. “As a fund, you optimize for returns. 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 the portfolio companies but now want more direct investment, 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 companies. “For many traditional investors, investing in growth [stage] to a late stage is safer. It is very different from investing in a startup, which has a 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 $358 million fundraising in January and another for $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 is not as competitive as before. … In a bear market, it often happens that the concentration goes to market leaders.”

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

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

In the meantime, 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 to create a way where we all have digital property rights,” he said. “I hope that this will also drive a scenario where digital property will be recognized as physical property in the legal system.”

Animoca was initially listed on the Australian Securities Exchange in 2015, but was delisted in 2020, citing non-compliance.

Asked about a future IPO plan, Siu said: “We will definitely list, 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 collaboration with Nikkei.