Zynga Failures Sober Up Venture Capitalists

[Karloff]

Zynga Failures Sober Up Venture Capitalists

Post-Zynga, the game investment market has become less interested in frothy valuations.

Zynga's recent financial debacle [http://www.escapistmagazine.com/news/view/120328-Zynga-Suffers-52-7-Million-Net-Loss-in-Third-Quarter-2012] has at least done this much good: according to luminaries from the likes of Blumberg Capital, GameStop Digital Ventures, Scale Venture Partners and Sing Tel Innov8, the venture capitalists who thought nothing of dumping millions into the market have suddenly sobered up.

The group was speaking at a YetiZen [http://yetizen.com/] conference and, when asked whether Zynga's stock collapse had brought down valuations for all game company start-ups, the group's unanimous conclusion was yes. Moreover the Zynga disaster had also killed off at least some of the industry's tendency to "frothy" valuations; claims made with little to back them up, in other words.

"There were a lot of these big party rounds," said Chris Gottschalk of Blumberg, "where people weren't even meeting the entrepreneur and putting money behind it." Those days are done, according to the panel; now it's a much more sober market. "I think that was a unique time and a unique environment," said Gottschalk. "We definitely won't be seeing that become as much of a strategy as it was."

The tendency for game companies to froth was, in some ways, understandable, claimed Chris Petrovic of GameStop. "Once an idea gains momentum," Petrovic said, "it's hard to get these companies that are in the process of being acquired away from that line of thinking."

"Ultimately, for yourself and your investors," Petrovic added, "you want to sell at the highest possible bid."

Source: Venture Beat [http://venturebeat.com/2012/12/03/investors-weigh-in-on-falling-game-startup-valuations/]


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[AzrealMaximillion]

Oh Zynga. And now they're trying to sue EA. tsk tsk

 

[Formica Archonis]

Zynga Failures Sober Up Venture Capitalists

Wait until they hear about "the cloud". That'll fix 'em right up.

 

[Pipotchi]

Zynga Failures Sober Up Venture Capitalists

Wait until they hear about "the cloud". That'll fix 'em right up.

I have a large bag with a dollar sign on it for you if you use more terms like that my good man. If you can somehow include some terms I don't understand and also how you'll crack the Chinese market all my venture capital is yours!

 

[RJ 17]

I think one of the bigger lessons here is to never invest in a company whose big ideas equate to rip-offs of other companies' big ideas.

Captcha: Gravy Train
HA! That one has already run off the tracks.

 

[Eggsnham]

So... does this mean that I won't be getting as many notifications about Farmville on Facebook?

 

[jon_sf]

I think one of the bigger lessons here is to never invest in a company whose big ideas equate to rip-offs of other companies' big ideas.

To be fair, a lot of what Apple does is to take ideas developed by other people and implement them with a high level of polish. They seem to be doing alright, with a market cap of half a trillion dollars. (I say this as someone who owns many Apple products, and am generally a fan of what they create.)

Another example is Angry Birds. That's basically Crush the Castle with cuter art. Crush the Castle is Tank Wars + a physics engine. A lot of "big ideas" are actually iterations of existing ideas.

 

[RJ 17]

I think one of the bigger lessons here is to never invest in a company whose big ideas equate to rip-offs of other companies' big ideas.

To be fair, a lot of what Apple does is to take ideas developed by other people and implement them with a high level of polish. They seem to be doing alright, with a market cap of half a trillion dollars. (I say this as someone who owns many Apple products, and am generally a fan of what they create.)

Another example is Angry Birds. That's basically Crush the Castle with cuter art. Crush the Castle is Tank Wars + a physics engine. A lot of "big ideas" are actually iterations of existing ideas.

Yeah, but by all accounts, Zynga games are straight-up bastardizations of other developer's games, not borrowing an idea and renovating it with some higher quality and polish.

Now, for full disclosure I should say that I (proudly) do not have a facebook or twitter account, I don't think I've ever played a game created by Zynga. But judging from the news stories, in the worst of cases Zynga 100% copy-pasted games and just slapped new textures on them.

It's one thing to take someone's design for a watch, add in a 2-way radio, and say "This is our new watch." It's a completely different story when you take someone's design for a watch, change the hands from red to blue, and say "This is our new watch." Bit of a lame, watered down example, I know, but that's the point.