Tim Chang, Managing Director Mayfield Fund #smartmoneysv

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I interviewed Tim Chang, Managing Director Mayfield Fund @Gamesbeat 2013.  He grew up as a gamer so its a core part of who he is.  Its something he does passionately but he also believes that the future of games is to take all these game design principles & go beyond games & entertainment & actually affect & help other industries evolve from health, fitness, nutrition, financial services even enterprise software.  Things that make games fun can make the rest of life fun or at least more engaging for people.  Games are a system at heart & it is the learning from designing those systems that we can use to improve all other systems whether they’re games or not.  He said that new social distribution channels opened up that really changed the games investment area.  He invested in Playdom which Disney acquired & Ouya.  He says its fun playing games & writing checks for companies is easy but trying to grow the companies after to be successful & navigate the rapidly changing market is hard!  The upside is that games historically make money from day 1, you know what the business model is, you know how to make money, you know the metrics & you know what kind of leadership & trends to look for early on for what could make a good games company.  The downside is also historically exits meaning IPOs have not always been easy. “Wall Street doesn’t always understand content & games companies!” “There is a debate right now should venture capitalists be backing games companies? Is the right format for investment of games companies perhaps more of a dividend or profit sharing model as opposed to the classic investing for equity & hoping for a giant acquisition or IPO.”  He spoke about his perspective on the changes in the venture industry. “The good news is that entrepreneurs have more means to raise funding than ever before which democratizes entrepreneurship & allows more people to create & start companies whether through angel funding, micro angels, crowdfunding, Angellist as well as traditional vcs. Its also gotten cheaper to start most kinds of companies especially consumer companies.  In some ways that makes his job easier because they might be able to raise seed funding & prove that market demand first so then he can look at helping them grow & scale.  But there’s thousands of companies now & much more to keep track of.  In some ways its gotten harder to grow these companies or take them to the end point for a couple of factors (1) acquiring users at mass scale is still very expensive once you’re outside of early adopters & the technorati (2) once companies get traction they tend to attract huge giant fund raise rounds because of the land grab nature of the market.  So its almost in the later stages if you can’t get that war chest you may fall behind in the land grab versus competitors. (3) Wall Street has higher & higher expectations before they go IPO & what that means is that the time that you get to exit gets pushed out further & further & the requirements are higher & higher.  So you need to keep raising more & more money to be able to last that long to get to IPO.” The venture capital industry is evolving & emerging in new directions as it should.  In the old days venture capital was more of a cottage industry based on inefficient information flow, proprietary relationships, proprietary deals.  These days information relationships are very efficient, everyone has access to every deal.  So its much more about where do you specialize & where do you focus.  So we’re seeing more & more specialization of firms, by stage, region, sector, business model.  In many ways its very like the evolution of the mutual fund industry or hedge fund industry. In the future everyone will have to have a really clear playbook & a really clear focus to find their spot in the ecosystem! Evolve or Die!”