The Lumikai Latest: Issue #1
Updated: May 24, 2021
Lumikai thesis and philosophy
What we look for, and why we foresee a golden age of Indian gaming.
India’s gaming and interactive media sector is on an unprecedented growth trajectory. Multiple opportunities have arisen driven by increasing founder and player sophistication, community, demand, and diversity. Beyond this, we’re also seeing an unique convergence as gaming becomes more like (and replaces) traditional digital media, while digital media increasingly uses ‘systems of play’ to become more like gaming.
Lumikai General Partners, Justin Shriram Keeling and Salone Sehgal, share their insights on Lumikai’s focus at the heart of this interactive media convergence, and what we look for in founders building for the future.
Q1: What does being India’s first interactive media and gaming focused fund mean?
Lumikai is a combination of the Latin word for ‘light’ and Japanese word for ‘tribe’.
Our vision is to find and fund game-changing early stage founders to help them achieve outlier success in India’s “ripe for disruption” gaming and interactive sector.
Interactive media means the confluence of technology, culture and new media i.e. anything designed with interactive and innovative touchpoints, in comparison to static, linear experiences.
India has witnessed a paradigm shift in digital entertainment. It is the very first time that millions of Indians have become first-time smartphone users. We also see an increasing level of “digital decolonisation” underway with young Indians reclaiming their digital identities and demanding India-first games and products, clearly decoupling from the West.
At Lumikai, we call these users “digital convergence natives”, users who are intrinsically social and keen to explore interactive experiences. Consumers in this attention economy are using games, social networks, short-form videos, audio, video chat, and in-app payments and seeing them converge on their mobile screens simultaneously.
This demographic and behavioural shift has created a massive whitespace. To cater to this new digital sociology and unexplored economy, we needed a sector focused fund to back this next-generation of ecosystem builders.
There’s never been a better time to invest in gaming in India. We believe that gaming and more specifically — systems of play, will form the cornerstone of a new golden age of entertainment, a transformational shift in how we interact, share, learn, compete, and create over the next 20 years.
Global gaming markets have traced a unique trajectory. Every cycle in our industry has created new touch points that has broadened the accessibility of digital play, rather than cannibalising the last. Arcades, console gaming, PC gaming, mobile premium, mobile free to play, MOBAs, games as a service, cloud gaming, location based gaming, to XR and MILEs. Each cycle has created new opportunities for innovation in product, interface, and business models, with new market leaders emerging at each inflection point.
In India, the rise of a sophisticated consumer class, frictionless digital payments, and affordable smartphones have all created context for the golden age of gaming. Traditional barriers to entry have been lowered or removed altogether, with a democratisation of creator tools and a massive scale mobile-native user base with its own unique sociology.
If you’re a founder, there’s never been a better time to start a gaming company. Today there are 2.5B gamers in the world. We believe the next billion are in India.
We have an unprecedented depth and diversity of ambitious domestic talent, a rich tapestry of unexplored cultural touch points, and an increasingly sophisticated, young population hungry for mobile entertainment that resonates.
Our mission is to focus deeply on this fast growing interactive sector, the beating heart of future digital innovation, and catalyse the next generation of Indian founders who are looking towards the future.
Q2: Why now?
The Indian gaming market is an inflection point. India has the highest data usage per smartphone (12GB / month) in the world. India has 450 million smartphone users with 67% of India’s millennials being active gamers. Gaming and digital media entertainment have become the ultimate beneficiaries of dirt cheap data and behavioural change accelerated by the pandemic. In 2020, Indians consumed 7.3 Bn gaming apps, beating more mature markets like the US.
However, less than 13% of apps out of India’s top 50 grossing apps are of Indian origin. This is a huge unexplored white space and opportunity for Indian developers to tap into. It then becomes even more significant to have access to financing that can help entrepreneurs create truly delightful, fun experiences for Indian audiences, capture the zeitgeist of the market and scale locally and globally.
With a consortium of the world’s iconic gaming, entertainment companies and financial investors backing Lumikai, we seek to catalyse founders by providing them access to capital, expertise and global strategic networks.
Everyone’s aware of how Jio led the democratization of India’s internet economy with cheap data.
Every mature gaming and entertainment market has at some point had a “Cambrian explosion” moment ; Japan from 1985–1990, China from 2005–2010, the Nordics from 2010–2015. I’ve been fortunate to have built companies at the frontier of some of these markets.
Five years ago there were between 25 game developers in India. Today there are over 600. Gaming is one of its fastest-growing categories with a projected CAGR of 40% till 2022 (10x of India’s 2019 GDP!). We see ambitious, new founders coming to us every week. Many Gen Z founders have grown up playing the best mobile games in the world and have an intuitive understanding of category leading gameplay. They understand that domestic gamers are hungry for higher quality.
The true opportunity is now — in the nuance, execution and timing. It’s not just a function of the size of user demand, but also supply and quality of founders. It’s about truly understanding what makes Indian digital sociology unique, and founders building daring, first to market products that satisfy those demands or in some cases also about building IP that has global potential.
Q3: What is Lumikai’s investment thesis?
We back early stage interactive (more on that shortly) founders either based in India, or with a significant presence in India. Our direct cheque sizes vary from as little as $200K to $1.5M, with co-investment as needed from our LPs.
Our investments are focused on interactive media, including content, tools, enabling technologies, infrastructure i.e. the entire ecosystem around gaming and interactive media.
We like to ask — what happens if we apply universal principles of play to education, to short form video, to meme culture, to payments, shopping, or productivity? What are the next-generation, learn-forward, participatory versions of these platforms in India?
Lumikai’s interactive focus is at the heart of this convergence.
It is a function of gaming increasingly overlapping with “traditional” digital and social media. Examples range from mobile gaming studios, social gaming / mobile esports platform, influencer platforms, creator toolsets, gaming tech and tools, analytics platforms, along with digital media startups leveraging the power of interactive.
Today the world’s most popular games are destinations for users to socialise, share, and create in effect. They are the logical next generation evolution of social networks. This is especially relevant for Indian “digital convergence natives”.
Our investment focus reflects the opportunity directed towards Indian users for whom the traditional delineation between gaming and other forms of digital entertainment has been blurred from the start.
Q6: What qualities do you look for in founders in the GEM space?
We generally like to find out:
Have founders captured a white space in which they can succeed globally or domestically?
What makes them uniquely positioned to build this company (experience / skillset / a way of thinking etc)?
Are they able to attract talent and tell a story which is absolutely essential for company building and fundraising?
Are they passionate and committed to stay devoted for the next 10 years, persist, iterate, adapt and make it happen?
Are they firmly pliable? It’s an oxymoron but it’s the ability to really listen and assimilate, while at the same time having an inner conviction and compass to see something others don’t.
Alongside the above, we evaluate founders who closely align to the values of Lumikai:
Clarity — founders who are laser focused on the opportunity, avoid feature creep, and ruthlessly prioritise goals.
Passion — entrepreneurs who the know “why” as well as the “what” of their business, deep conviction with long-term goal setting that helps put short term bumps in context.
Integrity — honesty, transparency and authenticity are absolutely key for us to build trust as long term partners.
Collaboration, adaptability and curiosity — This sector moves at light speed. Founders who are are curious enough to constantly learn and evolve, know when to ask for help and be open to feedback are likely to see long term success.
Q4: When should founders reach out to you?
At the very beginning. If you are tackling an innovative white space, with a founder or team that has clarity, focus and is thoughtful, then come talk to us.
As former company builders if we partner with you, we’re happy to get hands-on and jam on your idea, help validate the product/market fit, advise on the competitive landscape, and assist with key hires. It’s better to get these key fundamentals right first and that can only happen if you come to us early.
We wanted to build a fund we wanted as founders. Even though we evaluate hundreds of pitches we always attempt to give feedback if we spend time with you, even if we don’t invest. We know how frustrating the founder’s journey can be and if we can help, we always try.
Q5: What value does Lumikai bring for the founders?
JUSTIN & SALONE
Traditionally a VC will offer capital, and some degree of knowledge, and strategic connections. As a sector focused fund with a team that’s lived the founder journey multiple times, we aim to take this to the next level.
Gaming and interactive companies are wildly diverse and there’s no ‘one-size fits-all’ support process. Capital is only one of the many constraints an early stage gaming start-up faces.
This is also a complex industry and requires specialist capital.
Some of the main areas we think can benefit our founders is typically:
Helping think through product/market fit
Identifying key talent and resources to build a sustainable foundation for your business.
Product feedback and jamming on future roadmap, priorities, fixes for retention, FTUE, player economy etc.
Fundraising, strategic connections, access to publishers, partners and global co-investors.
More importantly, we speak your language. We listen closely to understand your vision, challenges and opportunities, and then leverage our resources to provide tailored support.
Starting a company is an act of creation, requiring conviction, focus and some very long days (and nights!). Even with great co-founders, it is often a lonely path.
We’ve been there, and we get it. We want to be in your corner all the way.
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