What Can We Learn From Animoca Brands’ 66 Investments in 2022 H1

If you have been paying attention to fundraising news in the NFT space, you must have noticed that Animoca Brands' name pops up more often than anybody else. Even if Animoca Brands' name sounds unfamiliar, you probably have heard of its products. It owns the Sandbox, has invested in Dapper Labs (CryptoKitties and NBA Top Shot), Sky Mavis (Axie Infinity), and OpenSea, and is partnering with Yuga Labs to develop the Otherside.

The fully-diluted valuation of $SAND is currently $3.91 billion. Animoca Brands paid merely $4.875 million in 2018 to acquire Pixowl, developer and owner of the Sandbox. 800x in 4 years. Not bad at all, right?

So, what is Animoca Brands investing in this year? Who could become the next NBA Top Shot or Axie Infinity? We reviewed all 66 investments made by Animoca Brands so far this year. Here are the top 8 highlights:

Investment Thesis

Animoca Brands is very straightforward with what it believes in. Two keywords repeatedly show up, "digital property rights" and "open metaverse." Animoca Brands' investment philosophy is to provide funding to Web3 projects that they identify as open, innovative, and conducive to the emergence of the open metaverse.

Overview of Investments

Animoca Brands made 66 investments in the first half of 2022, totaling more than $185 million. The full roster is listed below.

Investment Activity

About 2/3 of the investments are into games and infrastructure. Games are the leading category with 28 deals. However, the largest deal belonged to the Media category. Israeli education video platform, TinyTap, was acquired for $38.875 million.

On average, Animoca Brands made 11 deals every month. There was a notable drop in May, when the entire crypto market was dragged down by the fall of LUNA/UST. Animoca Brands resumed in June and spent the most amount of money in that month. However, Animoca Brands only announced one deal in July, despite raising another $75 million for itself. It is possible that the June deals are delayed announcements from May and that Animoca Brands is slowing down.

Global Presence

Headquartered in Hong Kong, Animoca Brands invests across the globe with a focus in Asia, which receives about 40% of the funds. North America and Europe are second and third with similar numbers. Other regions include Australia, South America, and Middle East.

Investment Type

Animoca Brands prefers to be a lead investor during seed and series A rounds. The average fundraising size is only $5.38 million. Animoca Brands acts as the lead investor in 82% of its deals. Co-founder Yat Siu states that they are operating capital, not financial capital. Unlike mega funds such as a16z, Animoca Brands prefers to get involved at a much earlier stage.

Experienced Game Makers

Animoca Brands invested in or acquired established web2 gaming studios who now build blockchain versions of their successful titles. These developers may finally be able to deliver fun and engaging blockchain gaming experience.

Upcoming Games

Investing in infrastructure has always been favored in crypto. Joel Monegro published Fat Protocols in 2016, in which he argues that value concentrates at the shared protocol layer and only a fraction of that value is distributed along at the applications layer. Blockchain is a stack with “fat” protocols and “thin” applications.

Other industries show varying results. In online streaming, Hollywood stars (content) made bank while Netflix (infrastructure) struggled. In gaming, Apple (infrastructure) earned more than Sony, Microsoft and Nintendo (content) combined.

The key is pricing power. As we head into a multi-chain future, content will likely have stronger pricing power. $AXS and $GMT returned much better than $ETH and $SOL. Game makers are even capable of making their own infrastructure, e.g., Ronin. Therefore, it is time to shift our attention from protocols to applications like blockchain games.

Animoca Brands' investments produce a steady stream of upcoming game releases, most notably Phantom Galaxies. Maybe one of them will become the next Axie Infinity.

Decentralized Identification

One of the trending ideas in crypto right now is decentralized identification, where people have the opportunity to own their profile, including online activity history, transaction data, etc. The idea of "soulbound", or non-transferable NFT, was first brought up by Vitalik Buterin in his Jan 2022 essay of the same name. Animoca Brands has provided funding to a few attempts building in this space.

To learn more about Animoca Brands' investments in H1 2022, download the PDF report freely to check!