Inside KRAFTON’s investment portfolio in India

KRAFTON Inc has invested close to $86 million in the Indian Media and Entertainment sector ranging from seed investment to Series D. What does it look for in startups before investing?
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KRAFTON Inc., parent of PUBG Corporation, in 2020 said it will invest $100 million in India to support local video games, esports, entertainment, and IT industries.

“When you look at the Indian market from a KRAFTON perspective, we feel a pretty large whitespace overall interactive entertainment sector, which includes video games eSports, tech platforms, platforms, extending to overall media and entertainment sectors,” Anuj Tandon , Head (India and MENA regions) of Corporate Development at KRAFTON tells YourStory.

“We see a space where not enough investments are happening in the media and entertainment industry. We saw it and decided that we should take the lead,” says Anuj.

Krafton is the creator of games such as Battlegrounds Mobile India (BGMI) and PLAYERUNKNOWN’S BATTLEGROUNDS (PUBG). BGMI was launched in May 2021 after PUBG was banned by the Indian government a year earlier. It has over 70 million downloads so far.

Anuj joined KRAFTON in 2021, prior to which, he was with Nazara Games as Head of Mobile Game Publishing and Marketing and Indian CEO for Youzu games. He also founded a gaming startup Rolocule games in 2010 which got acquired by Dream11.

KRAFTON’s investment thesis

The company has so far invested close to $86 million from its $100 million fund.

“From Krafton's perspective, 100 million was just the starting point of the thought process of our overall investment in India. For the right opportunities and areas of investment, we are absolutely ready to invest more,” says Anuj.

“We plan to keep investing in the right opportunities across our thesis and keep supporting entrepreneurs in the overall media and entertainment sector in 2022,” he further adds.

In March 2021, it made its first minority investment of $22.5 million in NODWIN Gaming. Later, it bet on the gaming live streaming platform Loco in June 2021 in a seed funding worth $9 million together with other investors.

A month later, it invested in Bengaluru-based storytelling platform Pratilipi in a Series D round of $48 million. In December 2021, it invested $6.5 million in Series A funding in audio romance and friend discovery startup, FRND.

“Our thesis is that, at a high level we are actually stage agnostic. So, we can invest in leading Series A, Series D, and even beyond. We look at the right strategic fit, we are not your typical financial investor. So in that way, we are very patient with capital, thinking from a mid to long-term perspective on growth and back founders in a long term perspective,” Anuj says.

What does KRAFTON look for in a startup?

KRAFTON’s investment ranges from investing in seed rounds to Series D rounds.

“Our investment thesis is slightly broad. Every startup has a micro thesis and broad thesis at a high level,” Anuj explains the alignment for investment.

Its investments in Loco and NODWIN are closely related to KRAFTON's business as these startups are in the live streaming and esports ecosystem. Loco platform has quite a lot of BGMI streams taking place in its platform.

Pratilipi is one of the vernacular discovery platforms. It brings readers, writers and their stories written in 12 languages; Hindi, Gujarati, Tamil, Telugu, Malayalam, Marathi, Bengali, Kannada, English, Urdu, Punjabi and Odia.

“Our thesis here is that India is going to be a massive exporter of Indian Intellectual property (IPs) globally as well as Indian and across regions in the country,” says Anuj. “Our long term belief is that IPs are going to be very important in the next five to six years in the media and entertainment sector.”

Its recent investment in a dating app FRND is different from gaming. Anuj says FRND enables social interaction, using games as well.

“It is one of the genres which is driving one of the largest consumer transactions in the digital ecosystem,” he says.

“So it is obviously an area of interest for us because for gaming, we have sufficient data to understand the networks. Social interaction is the second place, which we feel is going to be very high transaction business and is only going to increase,” adds Anuj.

Finally, the BGMI creator wants the founding team and its core capability to be forward looking, taking a bolder thought process of what they can achieve.

What does it offer a startup?

Anuj says that one of the biggest advantages is that KRAFTON’s product BGMI is one of the leading mobile games and biggest IPs in the Indian market.

“We have a lot of knowledge about how to make Indian consumers pay for digital content,” he says.

KRAFTON offers several unique consumer insights to its startups, including how to scale these digital products to a massive audience in India, how do you start making this sustainable, what are the engagement hooks, how social governance works, management of a massive social community, how do you build IPs to a large extent in the Indian market, among others.

“So these are some of the unique insights that we offer, apart from the patient capital and no exit timelines for a typical fund,” Anuj adds.

The rise of the Indian gaming market

The Indian gaming market is valued to cross $2 billion this year and set to become a $7 billion market in FY2026. It is the second-largest gaming population in the world with over 450 million gamers, set to grow to more than 700 million by FY2026, according to Report from Lumikai Fund.

“I believe this decade, the 2020s overall, is a game-changer for the startup ecosystem. We have multiple IPOs, the largest exits in any sector last year were in gaming and the two biggest M&A in the country,” says Anuj.

The Indian gaming sector has seen several large-ticket acquisitions in the past few years. In February 2021, Sweden-based free-to-play gaming studios Stillfront Group acquired Bengaluru-based Moonfrog Labs, the creator of Teen Patti Gold, Ludo Club, Rummy Gold to name a few, for over $90 million.

In July 2021, Bengaluru-based game developing startup PlaySimple was acquired by Sweden-based Modern Times Group (MTG) for $360 million — one of the largest deals among gaming startups in India.

“So, this trend is only going to continue, this is a transformational decade. This will see young companies blossoming in every sector. Media and entertainment gaming and deep tech, these are not going to be alien to those transformational changes,” adds Anuj.

India in mobile gaming has a lot of potential, but as far as revenue was concerned it did not deliver as compared to the other big consumption markets such as America, China to name a few.

However, this trend seems to be changing now.

“In 2021, we actually saw a big shift happening. People were comfortable paying for digital content in the mobile unit. This is now only going to grow, not stall or stop,” says Anuj. “I personally believe that Indian users would spend more than 100 million dollars annually in four to five years in India.”

“This number was unheard of two years back. So in my opinion, this is a big data point, which proves that this change is pretty transformational and big. It will open a large opportunity for him to start focusing on the India market for revenue operation and not just downloads,” he further explains.

“Indian gamers' propensity to pay is actually growing faster than any other country in the world,” says Justin Keeling, General Partner at Lumikai Fund during a panel discussion on Gamecon 2021 held in November. The NPU, (new paying users) first-time gamers coming into the ecosystem paying for the first time, grew by 40 percent last year and would cross 50 percent in 2021, he adds.

But the challenge overall related to video games is that even with the excitement, the game development startup ecosystem is in infancy.

“Majority are in a very early stage, but they need a lot of guidance, which we're happy to ask often to give them knowledge and share. But it's just slightly immature as a game development ecosystem,” said Anuj.

“I think it's going to improve the success of the gaming industry. More and more entrepreneurs are going to be sort of coming in building great quality content for the game ecosystem. But as of now, it's still slightly immature,” he says.

Edited by Affirunisa Kankudti