5 ms·

There's nothing wrong in theory with a VC making a large investment into a company which has a long R&D road ahead of it with effectively zero revenue before th

by zaroth 7y ago

There's nothing wrong in theory with a VC making a large investment into a company which has a long R&D road ahead of it with effectively zero revenue before they launch a revolutionary product. It's amazing if moonshot companies with all-star teams can raise a lot of money on good terms so they can get to work on solving hard problems which have great long-term fundamentals. A gaming engine just really doesn't seem to fit that mold. And for most problems you really can split up the roadmap to be able to launch earlier, make more incremental progress toward your overarching goal, reduce the size of the initial raise, and ensure you are iterating and learning along the way through actual customer contact, not working away in a dark room disconnected from the market realities.

chii 7y ago
> A gaming engine just really doesn't seem to fit that mold. if it had been unity or unreal engine, would you have changed your opinion?
- gbear605 7y ago
  As far as I can tell, throwing 500m at either Unity nor the Unreal Engine wouldn’t be a good allocation of money either, although better than staying in Softbank’s hands.
- foobarian 7y ago
  Are those profitable to the tune of 500M? Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
- zaroth 7y ago
  It never ceases to amaze me the depth of the world economy, and how seemingly small niches can add up to billion dollar markets. But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively. It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.
  - k__ 7y ago
    It's that fact that led to FB and Google. IBM didn't see MS coming, MS didn't see Google coming, Google didn't see FB coming, etc. The beauty of this is that things look done and then someone see a new niche and it turns out it wasn't a niche, but something millions of people wanted.
    - ses1984 7y ago
      What's "that fact"?
      - k__ 7y ago
        "how seemingly small niches can add up to billion dollar markets"
  - reitzensteinm 7y ago
    I wouldn't go as far as to say the Improbable deal made sense, but your analysis here is pretty shallow. SpatialOS isn't really something that can be built as a series of libraries a la carte and individually proven. It's an opinionated and tightly integrated approach to solving a very difficult problem, and the entire point is the turnkey platform. Either it's ready to build notable games on, or it's not. Further, Improbable wants developers to pull the trigger on spending millions or even tens of millions developing titles for the platform. Investing this much in a platform that fails is an existential crisis for a games company. There's no way your half built SpatialOS game can run anywhere else. Therefore, confidence is key, and raising an eye watering amount of money is basically table stakes to be taken seriously. Whether it's worth solving a problem that can't be broken down in viable independent chunks is another matter (I have no interest in that personally). I'm not saying I'd invest at that valuation either. But it's certainly not as straight forward as you seem to be claiming.
    - deleted 7y ago
      [deleted]
  - xiphias2 7y ago
- munchbunny 7y ago
  I don’t think so, because game engines shouldn’t need $500 million to prove themselves. If you could make the case that the software was irreducibly complex, then maybe. More generally, just because Unity and Epic are worth more now, doesn’t mean it would have been a good idea to pour money in back then. Hindsight isn’t an actionable heuristic.
  - dmix 7y ago
    SpatialOS isn't building a 'game engine' though, it's something that plugs into Unity/Epic, with a service whose revenue model extends beyond the initial game development to support services for the whole lifespan of the game.
    - munchbunny 7y ago
      I was responding directly to the parent question: "if it had been unity or unreal engine, would you have changed your opinion?" Your point may be true. I don't think it's a $500 million point to prove, but I also haven't looked at SpatialOS enough to take that stand.
- thrower123 7y ago
  That's such a crowded market though, with CryEngine, Godot, Lumberyard, and yet more competing for attention.
- CydeWeys 7y ago
  Those are bad examples because they didn't need huge unprofitable upfront investments. Unreal engine, for example, was a side benefit of creating a game that was itself profitable, and then they realized they could make additional money from licensing the engine, and did so. It simply doesn't take massive upfront independent investment to develop game engines, and the market is already crowded with all sorts of good options some of which are even developed on a volunteer basis (like Minecraft which originally used the open source LWJGL).
  - jayparth 7y ago
    This comment doesn't really make sense to me. To me, (paraphrasing heavily), the comment two tiers above you is trying to say, "The upside is not high enough as typical moonshot companies to raise as much as they did. Plus, they could have probably broken the problem down further." The guy above you responds: "But these game engines had very high upside." And you respond: "But those game engines didn't need high upfront investment. And none really do, you can make them cheaply." That wasn't the point of the guy above. His point is, "There may be enough upside to building a really good game engine." The hypothesis of this company is by spending a lot of money building a really good game engine, they can get upside like Unreal. Whether or not that hypothesis makes sense is entirely a different discussion than: "Is there enough upside to justify this hypothesis", the question at hand.
    - celticmusic 7y ago
      That's not what the poster you're responding to said. Ruby on Rails was extracted from the creation of a website, basecamp. Once they were done creating it they realized they could extract a new framework out of it and did so. This has multiple benefits. 1. profitable from the get go 2. design geared towards solving actual problems What the person above you is saying is that the Unreal Engine was created in the same manner, whereas SpatialOS was not. And because of that, the risk was much lower.
      - jayparth 7y ago
        I agree with you, but why was the person above me commenting on risk? While it is true that those things happened with Unreal Engine, it was sideways from the discussion that was occurring, but presented as a refutation. Risk has nothing to do with the comment two tier above me. I'm just pointing that out.
coob 7y ago
The gaming engine is their current bread and butter but they're betting their future on lots of general simulation contracts, particularly in the defence sector.
- lonelappde 7y ago
  In other words, it's a big money play to scam the government for Military-Industrial Complex pork, bankrolled by foreign investors because it's the 21st Century and nothing has to make sense anymore.
  - anm89 7y ago
    This is pretty absurd when framed this way. As a long time critic of military spending, at least I would call it. A plus that most of that spending is receipts to some other US business no matter how regressive those transfers may be. But once it can be arbitraged by international capital, and leeching of foreign governments who can't control their own spending becomes a business we have hit full insanity.
  - perl4ever 7y ago
    Years ago, I saw an article in some legal industry magazine about how a new thing for UK venture capital to invest in was American lawsuits.
9erdelta 7y ago
> A gaming engine just really doesn't seem to fit that mold Even more to your point, Improbable doesn't make a full game engine...they make SpatialOS. "SpatialOS is a cloud platform that provides hosting, online services, tools and a multiserver networking stack for developing and operating your multiplayer game, using any engine." Also several projects using SpatialOS have folded recently https://www.eurogamer.net/articles/2019-08-12-another-spatialos-games-been-canned-making-it-the-third-this-year https://www.eurogamer.net/articles/2019-08-12-another-spatia...
high_derivative 7y ago
What makes this a softbank-crazy investment is: - the founders were just out of undergrad - zero background/credibility in either distributed systems or gaming or simulation So I will guess there was no well-defined R&D roadmap ahead at all. Where should it have come from?

by zaroth 7y ago

chii 7y ago

> A gaming engine just really doesn't seem to fit that mold. if it had been unity or unreal engine, would you have changed your opinion?

gbear605 7y ago
As far as I can tell, throwing 500m at either Unity nor the Unreal Engine wouldn’t be a good allocation of money either, although better than staying in Softbank’s hands.
foobarian 7y ago
Are those profitable to the tune of 500M? Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
zaroth 7y ago
It never ceases to amaze me the depth of the world economy, and how seemingly small niches can add up to billion dollar markets. But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively. It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.
- k__ 7y ago
  It's that fact that led to FB and Google. IBM didn't see MS coming, MS didn't see Google coming, Google didn't see FB coming, etc. The beauty of this is that things look done and then someone see a new niche and it turns out it wasn't a niche, but something millions of people wanted.
  - ses1984 7y ago
    What's "that fact"?
    - k__ 7y ago
      "how seemingly small niches can add up to billion dollar markets"
- reitzensteinm 7y ago
  I wouldn't go as far as to say the Improbable deal made sense, but your analysis here is pretty shallow. SpatialOS isn't really something that can be built as a series of libraries a la carte and individually proven. It's an opinionated and tightly integrated approach to solving a very difficult problem, and the entire point is the turnkey platform. Either it's ready to build notable games on, or it's not. Further, Improbable wants developers to pull the trigger on spending millions or even tens of millions developing titles for the platform. Investing this much in a platform that fails is an existential crisis for a games company. There's no way your half built SpatialOS game can run anywhere else. Therefore, confidence is key, and raising an eye watering amount of money is basically table stakes to be taken seriously. Whether it's worth solving a problem that can't be broken down in viable independent chunks is another matter (I have no interest in that personally). I'm not saying I'd invest at that valuation either. But it's certainly not as straight forward as you seem to be claiming.
  - deleted 7y ago
    [deleted]
- xiphias2 7y ago
munchbunny 7y ago
I don’t think so, because game engines shouldn’t need $500 million to prove themselves. If you could make the case that the software was irreducibly complex, then maybe. More generally, just because Unity and Epic are worth more now, doesn’t mean it would have been a good idea to pour money in back then. Hindsight isn’t an actionable heuristic.
- dmix 7y ago
  SpatialOS isn't building a 'game engine' though, it's something that plugs into Unity/Epic, with a service whose revenue model extends beyond the initial game development to support services for the whole lifespan of the game.
  - munchbunny 7y ago
    I was responding directly to the parent question: "if it had been unity or unreal engine, would you have changed your opinion?" Your point may be true. I don't think it's a $500 million point to prove, but I also haven't looked at SpatialOS enough to take that stand.
thrower123 7y ago
That's such a crowded market though, with CryEngine, Godot, Lumberyard, and yet more competing for attention.
CydeWeys 7y ago
Those are bad examples because they didn't need huge unprofitable upfront investments. Unreal engine, for example, was a side benefit of creating a game that was itself profitable, and then they realized they could make additional money from licensing the engine, and did so. It simply doesn't take massive upfront independent investment to develop game engines, and the market is already crowded with all sorts of good options some of which are even developed on a volunteer basis (like Minecraft which originally used the open source LWJGL).
- jayparth 7y ago
  This comment doesn't really make sense to me. To me, (paraphrasing heavily), the comment two tiers above you is trying to say, "The upside is not high enough as typical moonshot companies to raise as much as they did. Plus, they could have probably broken the problem down further." The guy above you responds: "But these game engines had very high upside." And you respond: "But those game engines didn't need high upfront investment. And none really do, you can make them cheaply." That wasn't the point of the guy above. His point is, "There may be enough upside to building a really good game engine." The hypothesis of this company is by spending a lot of money building a really good game engine, they can get upside like Unreal. Whether or not that hypothesis makes sense is entirely a different discussion than: "Is there enough upside to justify this hypothesis", the question at hand.
  - celticmusic 7y ago
    That's not what the poster you're responding to said. Ruby on Rails was extracted from the creation of a website, basecamp. Once they were done creating it they realized they could extract a new framework out of it and did so. This has multiple benefits. 1. profitable from the get go 2. design geared towards solving actual problems What the person above you is saying is that the Unreal Engine was created in the same manner, whereas SpatialOS was not. And because of that, the risk was much lower.
    - jayparth 7y ago
      I agree with you, but why was the person above me commenting on risk? While it is true that those things happened with Unreal Engine, it was sideways from the discussion that was occurring, but presented as a refutation. Risk has nothing to do with the comment two tier above me. I'm just pointing that out.

coob 7y ago

The gaming engine is their current bread and butter but they're betting their future on lots of general simulation contracts, particularly in the defence sector.

lonelappde 7y ago
In other words, it's a big money play to scam the government for Military-Industrial Complex pork, bankrolled by foreign investors because it's the 21st Century and nothing has to make sense anymore.
- anm89 7y ago
  This is pretty absurd when framed this way. As a long time critic of military spending, at least I would call it. A plus that most of that spending is receipts to some other US business no matter how regressive those transfers may be. But once it can be arbitraged by international capital, and leeching of foreign governments who can't control their own spending becomes a business we have hit full insanity.
- perl4ever 7y ago
  Years ago, I saw an article in some legal industry magazine about how a new thing for UK venture capital to invest in was American lawsuits.

9erdelta 7y ago

> A gaming engine just really doesn't seem to fit that mold Even more to your point, Improbable doesn't make a full game engine...they make SpatialOS. "SpatialOS is a cloud platform that provides hosting, online services, tools and a multiserver networking stack for developing and operating your multiplayer game, using any engine." Also several projects using SpatialOS have folded recently https://www.eurogamer.net/articles/2019-08-12-another-spatialos-games-been-canned-making-it-the-third-this-year https://www.eurogamer.net/articles/2019-08-12-another-spatia...

high_derivative 7y ago

What makes this a softbank-crazy investment is: - the founders were just out of undergrad - zero background/credibility in either distributed systems or gaming or simulation So I will guess there was no well-defined R&D roadmap ahead at all. Where should it have come from?