Tencent's Games Strategy

Thread/ I often get asked to explain how Tencent has such a great track record in games. Their portfolio includes hits like Riot Games, Epic, Discord, Supercell, etc. Here are a few lessons I learned in 4 yrs @TencentGlobal investing & publishing some of the top games of our time

1/ Product is king – the first thing we looked for is product innovation, something that enables a game to break out and become #1-2 in a genre. This could be a new mechanic like @dots Squares, a new system like @PUBG Battle Royale mode, or new tech enabling the above

1a/ While obvious in hindsight, ‘innovation’ is hard to identify in development unless you’re really familiar with the problems of the category. That’s why almost everyone in Tencent senior mgmt is a core gamer with thousands of hours under their belt. Eat your own dog food

2/ Look for teams focused on a core customer community – this focus enables them to build the best possible product for a group of early adopters & evangelists. @Riotgames started as a team of ‘core gamers’ focused on building for a fellow core audience of DOTA players

2a/ With app stores getting crowded (@Steam released ~8k games last year, the iOS store has ~1M games) – having a core group of early adopters who love your game and evangelize broadly will help build an initial audience organically; expand from there to less-core users

2b/ As the gaming TAM expands, it’s been tempting to build games for 'everyone' – but these games don’t stand out and most fail - by building for everyone they end up not being the best for anyone, and in a world where time is a scarce commodity they just don’t get played

3/ Pick the right battleground – market & timing can trump the efforts of even the best teams. Due to the network effects in multiplayer games, it usually doesn’t pay to go after genres that are dominated by 800-lb (ex @FortniteGame /Battle Royale; @LeagueOfLegends /MOBA)

3a/ However, 1st-mover advantage doesn't guarantee success: post-launch execution & live ops matter. League & Fortnite both won against games (HoN, PUBG) that released earlier. Mobile has even more examples of fast-followers (ex @CandyCrushSaga) taking down slower first movers

3b/ Platform shifts may be one exception where speed trumps execution: in the early days of social & mobile games, the first scaled games on a platform were often the ones that won due to network effects & platforms favoring publishers w/ the largest audiences (ex Jamdat, @zynga)

4/ Leave great teams alone. After the hard work of finding & investing in a great team working on an innovative product in a blue ocean market, leave them alone. While you can add value in recruiting, bus dev, marketing, etc - don’t micro-manage product development

4a/ And for all the publishers/investors out there touting 'product value-add' – yes there are cases where a great publisher was able to course-correct a bad product, but those are far out-numbered by cases where they did more harm than good. In most cases, trust the chef

5/ Finally, don’t be cheap – neither games nor venture is a value investing business. Only a handful of great teams with innovative ideas come around each decade and they create the vast majority of value. Don’t nickel and dime founders – give them what they deserve!

Wrap 1/ I’ve been blessed to work with really amazing people at @TencentGames. In addition to the values above, they’ve also built a strong culture of teamwork and collaboration, which led to the right decisions more often than not

Wrap 2/ I came to @a16z because they share many of the same great values & culture. It’s been amazing building our games practice with @andrewchen @illscience @pmarca @davidgeorge83 @arampell @conniechan @jeff_jordan @DCoolican @aleximm @btcarroccio @anneleeskates. More to come!

Wrap 3/ Finally, these takeaways aren’t necessarily specific to games, most are applicable across all consumer products – focus on innovating for a core user community, give teams space to focus on product, keep iterating post-launch, etc. Would love to hear your thoughts and Qs!