Mining The Metaverse: Finding the Gold Rush Profit-Leader Equivalents
With billions of capital flooding into startups, the current gaming ecosystem market map is overwhelmingly convoluted.
Having trouble identifying the urgent and the resilient from the fads and nice-to-haves? Feeling lost and without a framework to assess brand new tech? Find an analogy to the past to structure the information in your mind and models.
I previously wrote on the parallel between the Metaverse and the Gold Rush: a generation of entrepreneurs aiming to capitalize on the opening of new territory (virtual, not physical, but equal in having sincere value).
For metaverse platform enablers, literalize the picks and shovels of the Gold Rush and ask, which companies profited the most in the move west in the US? Then find their counterparts.
The classic aphorism of picks and shovels suppliers — I took as literally as possible.
1. Levi Strauss & Co.
History: Durable, comfortable denim for miners to withstand harsh conditions and have ease of access to the tools and processes specific to their workflows.
Parallel Spaces in the Metaverse: ‘gamer apparel’? No, too fragmented. Instead, the lesson here is of Levi’s product design ingenuity. Levi reimagined what Pants could be. Similarly, gaming accessory companies that deeply understand metaverse power users’ needs and rethink everyday tech accessories (mouses, keyboards, standing desks, ergonomic chairs) for this segment.
Investment Pick within this Space: Dygma
- Sourced through: Reddit (Kickstarter after seeing a cult following on Reddit ergonomic gaming subthreads)
- Gold Rush Parallel: Like Levi, the company sat in with gamers (workers) observing how they used the belt, pockets and materials, and designed an optimized product for this segment; Dygma knows exactly what accessories are legitimately useful in a gamer’s toolkit, leading to their differentiated vertical-stand design
- Key Competitors: Logitech and Razer. Razer valued at $3.2b in a CVC Capital Take-Private in 2021; Since has faced difficulty straying too far in vertical acquisitions into new service areas; there may be room for a pure-play accessory company re-focused on the consumer
- Risk: Common complaint is bluetooth latency, real gamers prefer plugged-in mouse for fastest reaction time, and Dygma is largely wireless
2. Wells Fargo
History: Wells Fargo provided banking and express services to miners and people in the growing western territories. They transported gold from the west back to the east coast, offering secure financial and delivery services.
Parallel Spaces in the Metaverse:
- Cyber protection for digital assets (a major problem in early gaming economy models where ‘raids’ and ‘looting’ frustrated players causing churn, as per Gamer Economies podcast)
- ‘Commercial banks’ of the metaverse that could facilitate loans of the game’s digital currency to cash-strapped players, collateralized against digital assets like metaverse real estate assets, sweat equity-won game trophies, virtual REITs, etc.
Investment Pick: Waffle, MIT accelerator startup
3. Studebaker
History: manufactured wagons to transport people, goods, and mining equipment across the vast distances to the gold fields.
Parallel Spaces in the Metaverse: The ‘vehicles’ packaging and carrying loads of data ensuring low latency gameplay for players to travel through their worlds without too many bumps in the road
Investment Pick: TBD
4. Pacific Cable Communications
History: several in-mine cable companies took off at this time allowing workers to communicate through the rock tunnels underground, and share information across outposts
Metaverse parallel: gamer communication platforms + underlying technology like smartcells to allow wifi connectivity in rural areas
Investment Pick (Incumbent Advantage too strong for a startup to challenge; instead, opt for a public equity investment in Samsung):
- Largest owner of 5g smartcell technology patents (18.5%)
- Monopoly (94%) on 5G smartphone market in the US
- Strong global positioning across multiple metaverse infrastructure needs including system services, 5g infrastructure, mobile, and chip supply
- September 4, 2023: won a contract to supply High-Bandwidth Memory 3 (HBM3) chips to Nvidia → stock rose 6%
5. Gold Hill Daily News Newspaper Advertising
History: Newspaper advertisements where entrepreneurs at the time such as Henry J. Heinz and Dr. W.K. Kellogg hawked their food and supplies (i.e. in Nevada) fetched high prices
Metaverse parallel: in-game advertising technology
Investment Pick: 4D Sight
- Initial PoC with Amazon Games currently will give them necessary traffic to stress-test and debug seamless digital out-of-home virtual billboarding and virtual arena placement
