NASSCOM Animation & Gaming India 2007: Session Wise Coverage
For all those budding Animation / Gaming entrepreneurs with dreams in their eyes and business plans in their hands, the good news is that VCs are getting interested in the Animation /Gaming space.
This was evident from the sterling line up of panelists that participated in the session on “Financing Content” at The NASSCOM Animation & Gaming India 2007 summit.
The session was chaired by Waygate Capital MD Rajesh Jog. Panelists included Nexus India Capital MD Sandeep Singhal, Canaan Partners Executive Director Alok Mittal, Clearstone Venture Advisors Director Rahul Khanna and IDG Ventures India MD Manik Arora.
However it has to be kept in mind, that every emerging industry attracts the attention of investors and venture capital. And attracting attention of investors is one thing, while winning their confidence and getting them to actually invest is another.So for the VCs, what was attractive about the Animation/Gaming vertical?
In a very enriching session (pun intended), the panelists expressed their excitement about the gaming space in India. They also shared their conviction in Animation as well as Gaming IP and the understanding that the services model was necessary to balance business models and make them more feasible. Also that in the case of gradeA clients, services as a standalone business model was attractive too.
Citing the entry of players like Zapak.com as well as UTVs involvement with Indiagames and Ignition, Clearstoneâ€?s Rahul Khanna remarked, “We are here at the conference because we are excited about the gaming space, the emergence of new players with a lot of heavy investments and consumer facing brands as well as mainstream media companies getting into gaming makes this exciting. DTH is also creating opportunities for gaming”
“Another aspect is the enabling infrastructure, in context of gaming, the connectivity aspect (online, mobile) , payment infrastructure, finally as we look towards speciality retail formats such as online gaming cafes and so on… things are starting to fall in place” he added.
Hinting at adver-gaming, Khanna who has earlier been in the advertising business stated that, “Digital Media and Advertising are getting closer to each other and it will be interesting to see revenue models emerge from that”
Nexus India Capital MD Sandeep Singhal shared, “We are an early stage fund for IP related business in India and are looking to work with entrepreneurs from the animation and gaming space. I along with Rajesh (Jog) invested early on in Contests2Win and Chaitime.com, I still am an investor in Mobile2Win as well as another animation studio which I have not named”
“I am a strong believer in Animation IP, provided the venture has been thought through and there is a good amount of research and a well rounded experienced team” he added.
Session Chair Rajesh Jog who has invested into this space for more than eight years now shared, “We are looking at both Animation as well as Gaming IP. There is a clear need for local content in India, additionally even if you look at the global arena, there is opportunity for Indian style to emerge and have its own market demand globally”
IDG India Venturesâ€? Manik Arora shared, “We are clear believers that gaming is taking off in India. We created a company in Vietnam, called vena games, where the ecosystem was just what it is India today, in terms of gaming cafes and LAN parties in basements etc.. The challenge is that its a hits business and you donâ€?t know which is the hit, and how does one minimize risk”
Talking about the outsourcing model, Arora added “EA was very careful about outsourcing, but now they are doing it with some companies in India and I think we will see a lot more happening on that front. Working with companies like EA probably does ensure a secure order book”
Canaan Partners ED Alok Mittal stated that, “We are looking for businesses that deal with consumer facing brands and bring in the best products to the market. Not necessarily IP creation, we are looking at the outsourcing business, the outsourcing of game art, technology inside of gaming etc. In fact we have invested in a company that creates in game VOIP technology and its doing really well”
The panelists also pointed out a few gaps that were characteristic to new startups in this sector, these needed to be addressed in order to witness some real investment from VCs in this sector.
What were the Gaps?
“Unlike most of the ventures from the other verticals that we are used to dealing with, there are hardly any well rounded teams in animation/gaming in terms of marketing and other departments. Teams need to comprise of experienced expertise in each department, be it business development, be it Marketing, be it Operations, HR, Management, creative and so on” remarked Rajesh Jog
Canaan Partners Alok Mittal
Alok Mittal quipped “Even in case of the most brilliant IP, one has to remember that IP does not generate revenue automatically. There has to be global marketing experience in your team. You need to have experienced professionals who are in the business of monetizing IP, to be directly involved in marketing and building business around your property”
“Also many a times we notice that there is an absence of a risk mitigation measures in the business model, there has to be a balanced business model which has short term as well as long term goals and revenues from services need to come in to help sustain long term IP goals” shared Manik Arora.
“A lot of research has to be done while creating business models” he added.
An area of concern for the panelists when it came to the outsourcing studios was in terms of HR and talent retention
Manik Arora pointed out that “Talent and retaining it is a crucial part of this business and , has that aspect of the company been thought through? Today when i see animation service companies, I donâ€?t see too much emphasis on that”
“Even creativity is a process, and process management skills are very important, if we step away from the actual content, management depth and ability is extremely important” added Jog.
“One may have arguments that 300 creative people may be difficult to manage but there is an example in the advertising industry which has shown that creative people can be managed over long periods of time. Why canâ€?t the same happen in other creative fields?” he further added.
Another remarkable thing about the panel discussion was their evident enthusiasm about the IP creation business both for animation and gaming.
“Indianisation and desi content is key, you have to be steeped into the youth culture, the better you get into the skin of the local audience the better. At the end of the day content is something that has to hit you in your stomach and in your heart” shared Clearstoneâ€?s Rahul Khanna.
The thing about gaming IP which was attractive to the panel was the fact that there could be many product driven businesses which would be consumer connect brands.
What attracted the VCs to the Animation IP business was the inherent demand for local content in the Indian market as well as the 360* revenue opportunity in animated IP created for global audiences.
On being asked by Session Chair Rajesh Jog on how could IP be funded by venture money?
Nexus Indiaâ€?s Singhal said that the either an IP driven company could be funded or the funding could be project specific funding just like in the west. He however pointed out that, “The Western modelsâ€? quite mature, funding individual is still early days in India”
“Most VCs today are still educating themselves on what it is to fund IP companies in India and what are the issues for entrepreneurs, given the nature of the hits business and how difficult it is. Risk Mitigation is an issue, outsourced business supporting through side cash flow is probably a way out” shared Arora.
Alok Mittal pointed out that “The teams will have to be more well rounded, there has to be global marketing experience, the IP is not going to generate revenue on its own”
Laying emphasis on the story telling talent within the IP company, Nexus Indiaâ€?s Sandeep Singhal opined, “Pixar was evaluated at Seven Billion US $, it ultimately is about story telling you can have the best talent, you can be an outsourcer but true value creation comes in story telling. Look at Balaji Telefilms”
“The point is the IP Company has to ask itself, what is it that the studio is doing that is truly unique, what is it in your content that will truly grip the audience” he added.
“Market connect is one of the core areas to strengthen the gap” shared Mittal.
Agreeing with Mittal, Khanna added, “Both for Animation as well as Gaming related IP an products, the focus needs to move from distribution to consumer marketing and positioning, engaging consumers is mostly around pricing and positioning. Pick people from media, from telecom, so that these professionals can build products and services that relate to our daily life”
Singhal asked, “How many people out there in Animation and Gaming are doing research into what the consumer wants. You need to have a goal that you are shooting for, In the absence of that goal, it might be really difficult to manage creativity”
In an interesting discussion that took place between Siddhartha Jain of Adlabs and Ashish Kulkarni of Anirghts from the audience on one end and the panel of VCs on the other, it also emerged that having a slate of films as opposed to a single film in the plan, helped in de-risking the business model, making it more attractive.
The catch was sometimes, VCs might back a couple of projects that they thought were safe from a bouquet of five and one would then have to wait for getting all the projects got funded before the production of the slate of films got into process…
Another aspect to this pointed out by the panelists was that most VCs were interested in returns which were more in value terms and not just the Balance Sheet returns.
The need for understanding Movie Business Market Realities was also bought forth in the conversation.
As the Panel Session came to an end, besides the long queues of delegates waiting to network with the panelists, one could see that silently a lot of the VCs and Capital professionals have been researching the Animation /Gaming space for a while now and that there is some amount of real confidence building up towards this sector.
And this once, the long distance between the cup and the lip seemed shorter!