Co-Founder of Framework Ventures: Take Web3 out of Marketing Web3 Games

The crypto bear market may have cooled public interest in blockchain and cryptocurrency, but venture capital firms like Framework Ventures continue to pour billions into the industry.

“There are three paths,” Framework Ventures co-founder Vance Spencer told me Decrypt at Chainlink SmartCon. “It’s traditional DeFi, we’re still investing in it. It’s the regulated DeFi [products], which is only emerging. And then there are regions like Brazil, India and Southeast Asia – they just need the infrastructure to come online, so we’re investing in that as well.”

One area that Framework Ventures has focused on is blockchain gaming. The firm earmarked $200 million for the blockchain gaming industry in April through its FVIII fund.

“People are excited [blockchain] games because they all launch Q1 [2023]” Spencer said, adding that with so many games coming out at the same time, the industry is going to find out quickly if it’s good at game development.

“Gaming and DeFi are two things that we’re doing very tactically, because big markets are immediately available and we have use cases that exist now,” Spencer said.

But that is easier said than done. The marketing of blockchain or Web3 games has outpaced the design ability, and many in the gaming community see it as nothing more than a cash grab at the players’ expense.

“The first iteration games were [like] Axie Infinity,” Spencer said. “This was hyper-funded, potentially financial napalm,” he said, noting what he called “violent ups and downs” of the market. But Spencer says he’s optimistic about the next six to the 12 months that more traditional game studios build games on the chain.

“They probably don’t want their own native token,” he said. “Maybe they put NFTs on the chain, or have monetization, and have the virtual currency as tokens,” but will be more grounded in reality.

As Spencer explained, one problem that slows down the adoption of blockchain or Web3 games is that they are known as blockchain Web3 games. This brand carries years of baggage, including a negative environmental impact.

“I think [not referencing blockchain or Web3] will be the recipe for success for the first iteration of games,” Spencer said. “We’re bringing in people who play traditional games, and you don’t want to flood them with too much blockchain.”

Spencer went on to say that developers who use the blockchain to create better user and gaming experiences such as virtual reality, augmented reality and GPS-based games are the ones who will succeed.

“A lot of people look at the 1,000 DeFi protocols that didn’t succeed and get a little discouraged, but I choose to look at the 50 that worked,” Spencer said. “You have to throw 1,000 startups at the wall for 50 to work.”

While regulation and the risk of driving blockchain innovation overseas is a concern, Spencer said he is optimistic that it will ultimately create better investment opportunities.

“I feel [it] provides an opportunity; you’re going to have DeFi in its current form, but it will be more overseas,” he said. “The [projects] in the United States must fall under some regulatory jurisdiction.”

DeFi under regulatory oversight, Spencer explains, will be positive for the industry and will open it up to investors, the traditional banking system and access to more capital.

“There are going to be some growing pains,” he says. “But the industry always has to change and evolve and can’t just be the same. So we’re pretty positive about that. It’s going to be a headache, but that’s okay.”