The Exchanges

Q She is awesome, but I'd love to get the ball rolling today. By discussing a bit about you and how you made the move for an operational role as COO at Square Enix, To now a managing director at Crosscut Ventures. So how did you make the transition into VC?

A I think it's a little unconventional. I failed to the role of being a VC. And what I mean by that is I had a great role at Square Enix. Square Enix is a publicly traded company that's based in Japan. It does video games, and it's a large publisher. We do, I still say we sometimes, so forgive me on that, but we did Final Fantasy, Tomb Raider, Space Invaders way back in the day, and it was an amazing company. I got to work with some of the greatest creative people on the planet with Final Fantasy, with Kingdom Hearts, Batman, and I loved it, but I always thought there was something a little bit more that I could do, and I started meeting people like Mitch Lasky at Benchmark and saw some of the work that he did going from an operational role at EA and Jamdat to Benchmark. It got I think the juice is flowing in my brain and thinking maybe I could do something like that too. Um, and so I thought about angel investing and I started to look at potential investments in and around the video game space. And I saw Oculus Rift come up and Oculus, as we know, had a two billion dollar exit to Facebook a few years ago. Well, I tried to get in on the angel round of investment in Oculus right after their Kickstarter. I thought, well, I'm the COO of Square Enix, this two billion dollar company. Surely I can get in. And I talked to the lawyers and talked to some of the people doing the deal. They…

AI assessment note: “I started meeting people like Mitch Lasky at Benchmark and saw some of the work”

Q You're taking the piss out of me. Okay. There, I'm with it. Okay. All right. We're going to scrap this. This is where podcast editing is brilliant. Okay. So let's do this again. Very serious face. Watching the singing. Oh, fuck. Uh, what's the single, what's the single biggest challenge to e-sports?

A I think the single biggest challenge is how will the publishers act in this ecosystem? I don't think that Riot Games and Valve are And Activision Blizzard were really conscious that esports was something that was growing so big over the last five to 10 years. I'm not sure if they consciously created League of Legends to become an esport. It's just something that the community took hold of and ran with, and now it's this amazing massive market and this amazing community that is in some ways controlling them as much as those publishers are controlling the community, and the professional teams are somewhere sitting in between. As the content driver for, for that community. I think one of the biggest threats and one of the biggest challenges is how all of those actors work together. How do the publishers work with the teams and how do they work with the distribution? Um, the Foxes and the ESPNs and the Turners and the Twitches. That's still a challenge that hasn't been fully formed and, and there isn't something that, that exists like it does now for traditional sports.

AI assessment note: “I think the single biggest challenge is how will the publishers act in this ecosystem?”

Q on the thesis that venture investments have to be billion-dollar outcomes. Is invest, and I'm asking here, is investing in an esports team a potential billion-dollar outcome, do you think? I mean, I know Dota, the biggest kind of mothership of competitions. I think, Matt, Mazio's told me before, it's a twenty-five million dollar reward if you win. So, is that really a billion dollar outcome, do you think, potentially?

A I think the prize pool isn't in and of itself a billion dollar outcome, but I think owning and operating and growing an esports team and a franchise and a platform could potentially be a multi-hundred million dollar or even a potential billion dollar outcome over time. And what I mean by that is maybe it helps to take a sports analogy or If you look at what happened in the NBA back in the early 19 eighties, you saw teams like the Los Angeles Clippers get bought for eleven million dollars by Donald Sterling. It just recently sold in the last two years for two billion dollars to Steve Ballmer. And I think where we are with esports is really the early eighties, um, when the Lakers sold for somewhere around fifteen million dollars plus a plot of land, uh, that's where we are. That's where we are, and now they're, they're multi-billion dollar franchises. Except for with esports, I think it's accelerating much faster than traditional sports because the infrastructure is there now. You know, you have distribution like Twitch, you have YouTube, you have Facebook Live, you also have the distribution of traditional cable broadcasts, you have ESPN and Fox and Turner all getting into esports distribution and broadcast and live streaming. That exists. Plus, you have large brands that want to get into that. Plus, I think you really are seeing an inefficiency in the market right now where you…

AI assessment note: “growing an esports team and a franchise and a platform could potentially be a multi-hundred million dollar or even a potential billion dollar outcome”

Q She is awesome, but I'd love to get the ball rolling today. By discussing a bit about you and how you made the move for an operational role as COO at Square Enix, To now a managing director at Crosscut Ventures. So how did you make the transition into VC?

A I think it's a little unconventional. I failed to the role of being a VC. And what I mean by that is I had a great role at Square Enix. Square Enix is a publicly traded company that's based in Japan. It does video games, and it's a large publisher. We do, I still say we sometimes, so forgive me on that, but we did Final Fantasy, Tomb Raider, Space Invaders way back in the day, and it was an amazing company. I got to work with some of the greatest creative people on the planet with Final Fantasy, with Kingdom Hearts, Batman, and I loved it, but I always thought there was something a little bit more that I could do, and I started meeting people like Mitch Lasky at Benchmark and saw some of the work that he did going from an operational role at EA and Jamdat to Benchmark. It got I think the juice is flowing in my brain and thinking maybe I could do something like that too. Um, and so I thought about angel investing and I started to look at potential investments in and around the video game space. And I saw Oculus Rift come up and Oculus, as we know, had a two billion dollar exit to Facebook a few years ago. Well, I tried to get in on the angel round of investment in Oculus right after their Kickstarter. I thought, well, I'm the COO of Square Enix, this two billion dollar company. Surely I can get in. And I talked to the lawyers and talked to some of the people doing the deal. They…

AI assessment note: “I started meeting people like Mitch Lasky at Benchmark and saw some of the work”

Q on the thesis that venture investments have to be billion-dollar outcomes. Is invest, and I'm asking here, is investing in an esports team a potential billion-dollar outcome, do you think? I mean, I know Dota, the biggest kind of mothership of competitions. I think, Matt, Mazio's told me before, it's a twenty-five million dollar reward if you win. So, is that really a billion dollar outcome, do you think, potentially?

A I think the prize pool isn't in and of itself a billion dollar outcome, but I think owning and operating and growing an esports team and a franchise and a platform could potentially be a multi-hundred million dollar or even a potential billion dollar outcome over time. And what I mean by that is maybe it helps to take a sports analogy or If you look at what happened in the NBA back in the early 19 eighties, you saw teams like the Los Angeles Clippers get bought for eleven million dollars by Donald Sterling. It just recently sold in the last two years for two billion dollars to Steve Ballmer. And I think where we are with esports is really the early eighties, um, when the Lakers sold for somewhere around fifteen million dollars plus a plot of land, uh, that's where we are. That's where we are, and now they're, they're multi-billion dollar franchises. Except for with esports, I think it's accelerating much faster than traditional sports because the infrastructure is there now. You know, you have distribution like Twitch, you have YouTube, you have Facebook Live, you also have the distribution of traditional cable broadcasts, you have ESPN and Fox and Turner all getting into esports distribution and broadcast and live streaming. That exists. Plus, you have large brands that want to get into that. Plus, I think you really are seeing an inefficiency in the market right now where you…

AI assessment note: “could potentially be a multi-hundred million dollar or even a potential billion dollar outcome over time”

Q I, I'm intrigued with, in terms of that integration of esports and traditional sports, and how you perceive the future of esports versus traditional sports. Are they kind of, are they mutually exclusive? Is that a zero-sum game? What, what's your thesis towards this?

A Well, I'm going to say something a little controversial, and that's that I think they're Are some traditional sports that are dying out, that are sitting on a demographic time bomb. If you look at, for instance, baseball. Baseball, the average fan of baseball is about 54 years old and male, and aging every year. The average demographic increases every year, and that, that, that fan next year will be 55, and it's decreasing on a viewership basis three to four percent per year. But you're seeing things like eSports increasing 20 to 30% per year in viewership and engagement, and you have this amazing demographic of 14 to 24 to 34 year olds who are just starting to change viewing habits in a pretty fundamental way. They're not watching the content, they're not watching sports on TV, they're watching it through streaming platforms like Twitch or through YouTube, Facebook Live even, and they're watching it on mobile devices, they're watching it on their computers, they're not watching it on their TV. They're, they're cord nevers. They're not just cord cutters. They just have never watched TV. And I think that that demographic is going to supplant some traditional sports. And I think some are going to survive. I think, for instance, basketball and soccer are two very healthy international sports that are going to do very well. But I think you're going to see that. And if you interview…

AI assessment note: “I think that that demographic is going to supplant some traditional sports.”

Q I, I'm intrigued with, in terms of that integration of esports and traditional sports, and how you perceive the future of esports versus traditional sports. Are they kind of, are they mutually exclusive? Is that a zero-sum game? What, what's your thesis towards this?

A Well, I'm going to say something a little controversial, and that's that I think they're Are some traditional sports that are dying out, that are sitting on a demographic time bomb. If you look at, for instance, baseball. Baseball, the average fan of baseball is about 54 years old and male, and aging every year. The average demographic increases every year, and that, that, that fan next year will be 55, and it's decreasing on a viewership basis three to four percent per year. But you're seeing things like eSports increasing 20 to 30% per year in viewership and engagement, and you have this amazing demographic of 14 to 24 to 34 year olds who are just starting to change viewing habits in a pretty fundamental way. They're not watching the content, they're not watching sports on TV, they're watching it through streaming platforms like Twitch or through YouTube, Facebook Live even, and they're watching it on mobile devices, they're watching it on their computers, they're not watching it on their TV. They're, they're cord nevers. They're not just cord cutters. They just have never watched TV. And I think that that demographic is going to supplant some traditional sports. And I think some are going to survive. I think, for instance, basketball and soccer are two very healthy international sports that are going to do very well. But I think you're going to see that. And if you interview…

AI assessment note: “that demographic is going to supplant some traditional sports”

Q almost the backwardness of it in terms of it not being a completely fair market in terms of using relationships to get into deals. But do you think that method of deal flow relationship building will continue to exist in the future? Essentially, what do you think the future of VC then entails? Because as you said, it is an undisrupted market. Do you think VC itself will be disrupted?

A I think it will. We're starting to see that happen with Y Combinator. There was a great article I just read Profiling Sam Altman in the New Yorker, and I respect what Y Combinator has done, and I'm a big fan of what they've done over the last three to four years that I've been tracking them and been participating in YC. Just by creating a different system that's, that's essentially flipped supply and demand for VCs is doing something that's inherently disruptive, but it's also doing something that I think needs to happen. And it's not to say that relationships and networks still don't matter, and they always, I think, will matter to some extent. But I think that flip, putting, putting the power more in the hands of the people who create the value, the entrepreneurs and the founders is, is not a bad thing.

AI assessment note: “I think it will. We're starting to see that happen with Y Combinator.”

Q of the Rings. Well, we'll have to make up for it. I know, I'm sorry, you'll probably want to end the call now. I've never seen it either. We can't talk to anyone. But yeah, we've got one more question left, and then you're done with me. So just, just hold out for one more question, and that is, what's your most recent investment, and why did you say yes?

A We had three that closed just in the last three months. We actually have a small investment. Crosscut has a small investment in Immortals, the esports franchise. Also, Arsenic TV, which is a next-generation media platform. It's, uh, one of the most popular Snapchat channels. Super interesting team, um, with a really strong, um, woman co-founder named Amanda McAuliffe and Billy Hawkins. Uh, love that team. Then we also have an unannounced VR platform. And streaming investment. Let's just say if Facebook and Twitch had a beautiful love child, it would be this company. And I, I, I promised the founder that I wouldn't, uh, publicly out him and announce it yet. Please, please look out for that one. I'm super excited about that. We, we did that with some of our favorite, uh, co-investors and first round capital, uh, Chris Freilich and, um, a few other friends in the VR space.

AI assessment note: “We had three that closed just in the last three months.”

Q before we dive into the quickfire, and it's an interesting one in terms of platinum Platform shifts and how it affects e-sports in terms of how do you think VR and AR will affect the e-gaming industry? Do you think there'll be a mass transformation as it's so much more immersive and kind of realistic? Or do you think actually they won't be as transformative as potentially some people think?

A I think long-term, I think VR and AR will be in e-sports. I'm long-term bullish on VR. Like I said, the reason why, one of the reasons why I got into PC was because of VR and that failed investment into Oculus. And so I'm very much a VR fanboy. I just think that the intersection of VR and e-sports is still maybe say three to four years off. And what I mean by that is I don't think the hardware and the software and the latency has really caught up with where e-sports is right now, just on a PC basis. There are certain things that have to happen technologically that don't exist now so that people can watch, um, e-sports in VR and they won't get sick. That's a big issue. Once those things are solved, I do think that that's going to be the future of watching esports.

AI assessment note: “the intersection of VR and e-sports is still maybe say three to four years off.”

Q there. I do want to go back to your story with, uh, Lucky and Oculus, because you mentioned that obviously it was VCs that pushed you out, and it taught you the importance of a network. So having been on both sides and seen that importance, I'm intrigued to hear how important you feel network and relationship building is within VC. Is this a market of kind of bullish predators?

A I think that's a great question. I don't I think it's a market of bullish predators because I think those bullish predators get forced out of the system. I think you can be a short-term predator, but to be a good VC, I think you have to be an excellent long-term actor. You have to be somebody who's in it for the long term and looks at it as a long game. Those relationships that you build along the way and that those relationships that you had in your prior experience as an operator or in finance or law, those are relationships that I think you will always have and that you have to take with you and you have to develop. If you don't have a strong network and a strong relationship with other VCs and entrepreneurs and founders, you shouldn't be a VC, I don't think. I don't think you can be an effective VC, let's say that.

AI assessment note: “I don't think it's a market of bullish predators because I think those bullish predators get forced”

Q almost the backwardness of it in terms of it not being a completely fair market in terms of using relationships to get into deals. But do you think that method of deal flow relationship building will continue to exist in the future? Essentially, what do you think the future of VC then entails? Because as you said, it is an undisrupted market. Do you think VC itself will be disrupted?

A I think it will. We're starting to see that happen with Y Combinator. There was a great article I just read Profiling Sam Altman in the New Yorker, and I respect what Y Combinator has done, and I'm a big fan of what they've done over the last three to four years that I've been tracking them and been participating in YC. Just by creating a different system that's, that's essentially flipped supply and demand for VCs is doing something that's inherently disruptive, but it's also doing something that I think needs to happen. And it's not to say that relationships and networks still don't matter, and they always, I think, will matter to some extent. But I think that flip, putting, putting the power more in the hands of the people who create the value, the entrepreneurs and the founders is, is not a bad thing.

AI assessment note: “I think it will. We're starting to see that happen with Y Combinator.”

Q before we dive into the quickfire, and it's an interesting one in terms of platinum Platform shifts and how it affects e-sports in terms of how do you think VR and AR will affect the e-gaming industry? Do you think there'll be a mass transformation as it's so much more immersive and kind of realistic? Or do you think actually they won't be as transformative as potentially some people think?

A I think long-term, I think VR and AR will be in e-sports. I'm long-term bullish on VR. Like I said, the reason why, one of the reasons why I got into PC was because of VR and that failed investment into Oculus. And so I'm very much a VR fanboy. I just think that the intersection of VR and e-sports is still maybe say three to four years off. And what I mean by that is I don't think the hardware and the software and the latency has really caught up with where e-sports is right now, just on a PC basis. There are certain things that have to happen technologically that don't exist now so that people can watch, um, e-sports in VR and they won't get sick. That's a big issue. Once those things are solved, I do think that that's going to be the future of watching esports.

AI assessment note: “I think long-term, I think VR and AR will be in e-sports.”

Q there. I do want to go back to your story with, uh, Lucky and Oculus, because you mentioned that obviously it was VCs that pushed you out, and it taught you the importance of a network. So having been on both sides and seen that importance, I'm intrigued to hear how important you feel network and relationship building is within VC. Is this a market of kind of bullish predators?

A I think that's a great question. I don't I think it's a market of bullish predators because I think those bullish predators get forced out of the system. I think you can be a short-term predator, but to be a good VC, I think you have to be an excellent long-term actor. You have to be somebody who's in it for the long term and looks at it as a long game. Those relationships that you build along the way and that those relationships that you had in your prior experience as an operator or in finance or law, those are relationships that I think you will always have and that you have to take with you and you have to develop. If you don't have a strong network and a strong relationship with other VCs and entrepreneurs and founders, you shouldn't be a VC, I don't think. I don't think you can be an effective VC, let's say that.

AI assessment note: “I don't think it's a market of bullish predators because I think those bullish predators get forced out”

Q One thing that's always challenging, though, with the network is, is how to do it in a natural and organic way without me wanting to meet you for a coffee to lend to my deal flow. So how do you approach that kind of natural, organic relationship building?

A I think a way of doing it authentically is you meet people you care about and that you genuinely want to meet, and it organically leads to doing deals and working with people who you, you want to do things with. And I think it's hard to explain until you actually see it, but I think the people who, who aren't genuine in this industry get marginalized pretty quickly. I think the people who aren't authentic and the people who aren't good actors are I think they get pushed out. And that's just, that's just a thesis that I have. I'm a fairly new VC. I'm only three and a half years into it. But for me, I see VC as being one of those last industries, one of those last categories that's inefficient still. And what I mean by that is it's not like the public markets where the highest bidder is always going to win. I think VCs through relationships, through various networks, through various expertise, they can win deals and By being a nicer person, by being a more genuine person, by being a good friend, by being authentic, and by co-investing with other great VCs, and by developing a relationship with those founders and entrepreneurs. And I think you develop a relationship over time that allows you to get into those deals through those non-financial influence. That's what's exciting to me.

AI assessment note: “you meet people you care about and that you genuinely want to meet”

Q And then SpaceX, bright future or too much capital required from the markets?

A I'm a huge SpaceX fanboy. If I can somehow get a few billion dollar exits, I'm going into space exploration and, uh, and, and, and, and funding, and funding aerospace. This is something that, that I've cared about since, I don't know, junior high, high school. I, I'm a voracious science fiction reader. I think that SpaceX has an incredibly bright future. I think the ambitions of Elon Musk and what he's doing and thinking big is something that that's inspiring for a lot of VCs, um, especially VCs that are at the seed level and investing in, you know, the new ad tech platform or this mobile game or in something that that seems small in comparison to making humans a multi-planetary species. That's something that's inspiring to me.

AI assessment note: “I think that SpaceX has an incredibly bright future.”

Q One thing that's always challenging, though, with the network is, is how to do it in a natural and organic way without me wanting to meet you for a coffee to lend to my deal flow. So how do you approach that kind of natural, organic relationship building?

A I think a way of doing it authentically is you meet people you care about and that you genuinely want to meet, and it organically leads to doing deals and working with people who you, you want to do things with. And I think it's hard to explain until you actually see it, but I think the people who, who aren't genuine in this industry get marginalized pretty quickly. I think the people who aren't authentic and the people who aren't good actors are I think they get pushed out. And that's just, that's just a thesis that I have. I'm a fairly new VC. I'm only three and a half years into it. But for me, I see VC as being one of those last industries, one of those last categories that's inefficient still. And what I mean by that is it's not like the public markets where the highest bidder is always going to win. I think VCs through relationships, through various networks, through various expertise, they can win deals and By being a nicer person, by being a more genuine person, by being a good friend, by being authentic, and by co-investing with other great VCs, and by developing a relationship with those founders and entrepreneurs. And I think you develop a relationship over time that allows you to get into those deals through those non-financial influence. That's what's exciting to me.

AI assessment note: “you meet people you care about and that you genuinely want to meet”