Glimpsing the future through the lens of days past
Dear shareholders and friends of Animoca Brands,
To call the first half of 2022 tumultuous may be an understatement: Russia’s invasion of Ukraine and its severe effects on the global economy, the continued impact of the COVID-19 pandemic, slowing economic growth, the boom in meme stocks, ballooning inflation, routs across stock markets, drops in tech stocks, a crypto crash, and more. The world is experiencing strong global macroeconomic headwinds and the media are sounding the alarm about another dotcom crash and a tech meltdown.
Animoca Brands is deeply involved in the tech sector and particularly Web3: we have a portfolio of over 340 investments and several subsidiaries and projects in the Web3 space, including The Sandbox (one of the Time100 most influential companies), GAMEE, REVV Motorsport, TOWER, LYMPO, PRIMATE and many others. This considerable spread of companies and projects allows us to have a reasonably good view of the state of our industry and that’s why, despite current market concerns, we remain undeterred and positive about the future.
Our sanguine view is supported by the recent financial results we have just issued (see our official announcement). For the four-month period ending on 30 April 2022 (the following are all non-IFRS measures), we recorded bookings and other income of US$573 million, liquid cash and digital assets of U$352 million, and US$659 million of other digital asset holdings. Our portfolio investment and digital asset reserves combined were valued at approximately US$5.7 billion.
In addition to having acquired six companies so far this year, Animoca Brands has continued to develop significant partnerships, most recently with Yuga Labs, OneFootball, Planet Hollywood, Cube Entertainment, and Untamed Planet.
Our triple-A game Phantom Galaxies successfully launched its planet virtual real estate offering, raising over US$19 million in its first private sale and launching its first public sale. The “Otherdeed” NFT sale for virtual land in Otherside (the metaverse for Bored Ape Yacht Club, in which we are a key partner) was the largest NFT mint event ever.
We started actively building and investing in this space during the “crypto winter” in 2018, and that is when — as a small company with a small market cap — we developed some of our most impactful opportunities and helped to kickstart the movement for the open metaverse. Today we are in a significantly stronger position than we were in 2018 and we intend to continue to support, grow, and invest in the development of the open metaverse.
Our investment philosophy over the last few years has been to provide funding to Web3 projects that we identify as open, innovative, and conducive to the emergence of the open metaverse. We remain committed to supporting that ecosystem. Some of our portfolio companies will require support during the current cycle of hardship, and we will seek to assist those in need.
We are encouraged at the level of activity that persists among the companies and projects that are building the open metaverse. While the value of many crypto tokens has dropped in recent times, the important long-term indicator that everyone should keep their eyes on is the strong growth of the Web3 market.
Key talent and resources are moving to Web3, taking advantage of and helping to build exciting new opportunities. Just in the first quarter of this year, investment in blockchain gaming topped US$2.5 billion.
Although nearly everyone who goes online today does so in centralized and controlled Web2 structures, the shift to Web3 is already underway. This is evident in blockchain gaming, which has emerged as a main driver of broader blockchain adoption globally. Despite this, the burgeoning Web3 gaming world represents only a small fraction of the 3.2 billion people who play games, or of the 5 billion people who are online.
Like many other technologists, we firmly believe that Web3 represents the natural evolution of the Internet, of a future where digital property rights and the resulting economic freedom will empower billions of online users in an interconnected series of open worlds and platforms.
Yes, billions of users: Web3 still has several billion people waiting to be brought aboard the platforms of the future. That’s a market with powerful growth opportunities, which is why we are so bullish about Web3: we’ve been here before, multiple times.
You see, despite its sensational (and sensationalized) growth, Web3 today is still in its early days, somewhat analogous to the rise of the Internet 25 years ago or smartphone adoption nearly 15 years ago.
The devastating Dot-com crash of 2000 didn’t kill the burgeoning Internet. The horrific 2008 financial crisis didn’t halt the explosive growth of the Internet, smartphones, or mobile gaming. The frigid crypto winter of 2018 didn’t extinguish the crypto flame.
All of those events seemed brutally terminal at their time, but if you could travel back to 2000, 2008, and 2018, you would have no difficulty in picking the winning side that seemed — back then — to be inexorably doomed.
Similarly, the current market conditions will not kill Web3, the open metaverse, NFTs, or cryptocurrencies. There will be bumps on the road, cyclical variations, and the occasional black swan event, but the map to the future is legible by anyone who takes a broader and longer view.
I would like to express my deepest thanks for the support that Animoca Brands has received from shareholders, partners, and users, and I am especially grateful to our growing family of companies and employees, who all share a compelling vision of a tomorrow that is open and decentralized. Thanks to your help, the future of play and work draws closer every day.
Co-Founder and Executive Chairman