Planning $100 Mn Investment In Gaming – Parth Das, Angel Investor

Started his career as a consultant for big financial institutions like Bank of America and Credit Suisse, Parth Das used to help firms set their operations in the Asia Debt Market. Das later got involved in helping startups find a foothold in the tech industry, which was at the crossroads of his interests and formal education in tech and business.

Das, who is an angel investor for a decade now, recently started The Collective Ace Group to focus on the service sector in gaming. The company, which already has a 100$ million at disposal to invest, speaks a strong reputation in the financial market and intends to provide a structure of a multinational holding to the service companies. 

In conversation with BW Businessworld, Das shares more about The Collective Ace, its expansion and investment plans in gaming companies, and the Indian gaming landscape.

Excerpts:

Q. Please tell us about your association with Deca Games and your inspiration to start The Collective Ace.

I spent the last four and a half years with Deca Games, a company headquartered in Berlin with a focus on acquiring gaming assets and then working on breathing new life into these games. During this time, I observed that mostly the development studios are the companies that are getting the biggest amount of attention and are benefiting from the consolidation that is happening in the gaming ecosystem. 

However, all the companies that are providing game life cycle services like engineering, QA, art, localisation, and analytics – that are the true backbone of the gaming ecosystem, are hardly benefiting from this. These are the unsung heroes behind the scenes and with The Collective Ace Group, I want to put the spotlight on these companies. The aim is to make sure that they also get their piece of the pie on the consolidation scene along with all the advantages associated with it. 

Q. What kind of market positioning is The Collective Ace Group looking for? And what are your expansion plans?

The main role of The Collective Ace Group is providing a structure of a multinational holding to the service companies. It translates into several benefits at the financial level. To set up this structure, we already have a 100$ million at our disposal and plan to add more. This speaks strongly of our reputation in the financial market.

With regards to the gaming market, we will be building on the reputation of the service companies that join us.  Putting these two elements together would allow us to create a commendable positioning as a group. 

In terms of our growth strategy, we intend to do it in phases. Phase 1 would be focused on service companies from Central & Eastern Europe, Middle East, and the Indian subcontinent. However, in the next phases, we would also be targeting expansion in North America, Western Europe, and the southern hemisphere.

Q. You have recently been planning a lot of investments around gaming. Tell us about how you are executing the acquisitions.

We are putting a lot of effort into identifying the right partners in the gaming service sector. By that, I mean that we are looking for companies of a certain size that have been already established on the market and proven to be running their business successfully and profitably. Once a service company is interested in joining us, we would be starting the due diligence process. 

It is an intense time of approximately 6-8 weeks during which we would be looking closely into their business track record, financials, team structure, and growth plans. It is an indispensable step for us to make sure that the company is a strong fit and we can succeed together. 

What is equally or even more important is the mindset of the companies’ founders. We want them to join our Collective and stay on board, making sure that they keep on successfully operating their ventures. They need to understand that it is not an exit but rather a next step in the direction of making something bigger together. All the Founders would be enjoying independence in running their companies, growing together as a group, and benefiting from it. 

Q. How did venture money begin pouring into the gaming ecosystem especially in India? And how does the future look like for esports or other gaming formats from an investor’s perspective?

The first set of VC investments in gaming startups in India started in 2014. Between then and 2020 about $350 million were invested. However, only in the past eight months, we have seen over $500 million investment pouring into India. Projections for the coming 12 to 18 months are even more staggering and talk about doubling the capital inflow meaning it would reach over $1 billion. 

Big names on the global scene like Tencent and Alibaba have already invested in gaming, fuelling interest from VC firms such as Sequoia, Kalaari, Blume, Matrix, to name a few. We can also not forget that the Indian gaming sector is a beneficiary of the pandemic. People under lockdown had more time and disposable income than they spent on mobile games.

Regarding esports, it is still a niche segment, but it has been enjoying engagement increase fuelled by the pandemic and investment. To name just a few examples - Loco, GamerJi, or MPL (Mobile Premier League) that secured $95 million in the last financing round. India’s large young population together with increasing ownership of smartphones and affordable data plans create great conditions for further development of E-sports. 

Another area worth keeping in mind is Real Money Games (RMG) like rummy or poker expected to grow at a high pace in the coming months. 

Q. Do you think sudden rise can also lead to stagnancy in the industry in the coming times in terms of numbers? Do you think there would be ample opportunities for the start-ups planning to debut in gaming or do we see a market saturation?

Gaming as a subset of the technology industry is far from stagnation/saturation. There is constant innovation happening in the tech industry where every month there is something new in terms of AR, VR, blockchain, streaming, etc. There would be no stagnation in terms of possibilities, opportunities, and business models given this trajectory. However, there could certainly be a stagnation in terms of talent that can use these opportunities to flourish.

We have seen a strong development of the infrastructure and inflow of support being directed mostly to the Tier 1 cities in India. On the one hand, it drives an increase in the number of players, but on the other hand, it provides companies with an adept workforce that has gotten the necessary exposure to thrive with the opportunities. However, after a while, the talent pool in these cities will start drying out as the rate of migration of the workforce to these cities will not be able to keep up with the increasing demand. Employees will circulate between the companies being offered better conditions but their overall numbers won’t grow at the necessary pace, which can lead to a stagnation of available talent. 

To avoid such a scenario, the Tier 2 and Tier 3 cities would need to be exposed to upgraded technology - both on the players' and industry experts’ level. India has a very strong past when it comes to service companies. We boomed during the IT revolution and became one of the biggest trusted partners for developed markets. This allowed us to get exposure to newer technologies and thus develop the talent and skills for them. These factors create the right environment for innovation and once they are in place, VCs will be there to invest. This is where currently the biggest challenge lies wherein someone needs to break this vicious cycle. And this is exactly where I am seeing Collective Ace playing a significant role.

Q. India’s gaming industry is growing and attracting investors too. How much do you agree it would be a good decision to invest in gaming, especially in times when there is apprehension in the market? Also, will the gaming industry become an investor’s dream in the times to come?

Gaming was one of the industries that provided gains during Covid times. Most of the stocks increased over the lookback window of 1.5 years and although some companies are slightly overvalued, the majority within the sector still has growth potential. However, to make sound investment decisions, we need to break this down into investment profiles.

For Investors, both institutions and individuals, making private investments:  The market is very conducive as profitable businesses can have successful exits with IPOs or Groups providing sizable returns for the private investors.

Investors investing in the public markets can be further divided into active investors, passive investors, and speculators.   

For active investors, who keep abreast of their portfolio performance frequently, the younger companies, in terms of time since IPO, can provide significant upside potential which can be comparable to the trajectory of any tech unicorn.

For passive investors, who look for slightly lower risk-return profiles, the big and renowned names in the gaming space are reliable options.

For speculators, who are looking for specific conditions for a super-fast return, following closely the M&A scene would open up opportunities. 

Overall, yes it would be a good decision to invest in gaming given the current market conditions but like any sound investment, one would need to do a thorough analysis into the investment options to rule out the losers as an investment-friendly market dynamics also produces a high number of cash drains.