“We believe that Gaming is Hot and there needs to be some more evolution in the animation IP space before that space heats up too”
After quite a few years, the scene is beginning to really heat up in Indian Animation & Gaming. In addition to the outsourcing model where India is making its mark in CG and VFX, the mild emergence of the domestic market as well as some massive investments that look to tap into the potential huge demand for digitally created content (including Games / Animation) have fired up the space.
And the good news for Animation / Gaming Entrepreneurs is that Venture Capital is in the ring too!
In a follow up to NASSCOM Animation & Gaming 2007 which had a session on Financing, AnimationXpress.com Managing Editor Anand Gurnani met up Clearstone Venture Advisors Director Rahul Khanna to get his perspective on the Animation & Gaming space.
What is your take on the Indian Animation & Gaming space?
India has one of the youngest demographics in the world and Animation and Games is an interesting space, especially gaming. Today gaming is also about socializing and a gaming caf?© is a place where the youth hang out. Itâ€?s about lifestyle. The share of wallet spent on gaming will be categorized as lifestyle spends.
One can observe a lot of encouraging trends and opportunities. The launching of casual gaming portals such as zapak.com, the opportunity to have game centric niche channels on DTH, if you observe the DTH services, they will need to differentiate themselves in terms of content and there is an opportunity for content creators in that.
The affluence of the middle class, the consumerism and the voracious demand for entertainment and social interaction propels large opportunities in content, devices and the backbone infrastructure to fully network the activities they will be used for.
What about Animation?
Personally I am a strong believer of local content that can connect with the consumer and there is immense opportunity if tapped correctly. I believe that with the last mile reaching the consumer in many ways such as Fibre, Cable, DTH and even Vsat, there is an opportunity to meet the obvious demand and hunger for local animated content.
However, from what I gather, the IP and product creators in the animation space in India are facing some initial hiccups in terms of finding the revenues, as broadcast alone is not able to bring in enough returns. There have to be strategic tie ups and associations with books, toys, comics, games etc. and animation based character centric products have to be in the market, the emergence of organized retail has to be tapped into.
Theatrical Features is the keyword in the Indian animation IP space today?
The Film business is a hits and misses business and we wouldn’t be particularly interested in investing in individual projects.
What about investing in a slate of animated films?
A slate is just a slate and that means, if out of four films if one is a big success and another an average grosser and two failures, the risk will be mitigated and there might be some box office overflows as profit. But we are more interested in businesses where my Five Million US$ which would be a 30% buy-in into a company can become at least Twenty Five Million in a span of say 4-5 years. We are interested in value creation rather than just table profits.
Animated features have perpetual revenues….
Yes but a VC generally exits in 5-7 years and it would be difficult to factor in all future and perpetual revenues during the exit. We want to be involved where returns need to be quicker and more substantial within a period of 5 years time.
Any Indian Animation & Gaming projects that you have invested in?
Not yet, but we are actively looking at a few gaming related projects including Game Caf?© chains.
We also believe that if any animation player could create and aggregate a huge library of local content, then there is an obvious space for a TV channel focused on local animated content, either on the DTH platform or Satellite.
Another space we see tremendous scope in is Online Education as well as edutainment. The mobile space too is burgeoning with opportunities and we have made investments in that space…
What’s the Mobile investment about?
Well that’s not a content company. It is an engineering company that creates mobile phones customized for specific Indian demographics. The company works with Operators and can bundle and match features to create a customized solution.
“We believe that if any animation player could create and aggregate a huge library of local content, then there is an obvious space for a TV channel focused on local animated content, either on the DTH platform or Satellite”
Which are the (now) Big brands and businesses that Clearstone has invested into in the US?
There’s many including Overture which invented performance-based targeted online advertising models that now underpin the economics of the Web. Then there is PayPal which took the worry out of online payments between strangers, contributing to the boom in online shopping and eBay itself. There are other companies like United Online, Cars Direct etc. All these companies changed old practices, and all were built to do so with guidance from Clearstone Venture Partners.
What’s Your message to entrepreneurs and businesses from the Indian animation and gaming space who are looking to work with you?
We believe that a great many factors are now favoring the growth rate in India and that India is here to stay as a economic Super Power. As a Venture Capital firm we are looking to work with businesses that are very focused and have a clear defined consumer TG and have the solutions or products in place to cater to demand.
Along with the investment we also bring a lot of strategic value to the table and help make connections with large clients or vendors possible. We do a lot of guidance and our entire team of experts helps build the business, but when we invest with anyone, there have to be clear, focused business models, there has to be capability to create and deliver, there has to be experience and expertise in the team and lastly innovation and entrepreneurship has to drive the whole thing.
We believe that Gaming is Hot and there needs to be some more evolution in the animation IP space before that space heats up too.