Gumi Cryptos Capital has raised its second fund, and it’s going to invest its $110 million in capital into early-stage blockchain startups.
The original Gumi Cryptos Capital fund started in 2018 grew its value from $21 million to $516 million in asset value, or a 24.6 times return on capital employed (ROCE). That puts the first fund’s performance in the top 1% of all venture capita funds, according to AngelList. In addition, companies in the gCC Fund I portfolio have themselves raised more than $1 billion since January 2020 to fuel growth.
That strong performance helped the partners — Hironao Kunimitsu, Rui Zhang, and Miko Matsumura — secure more money in their newest round, said managing partner Matsumura, in an interview with GamesBeat. The founders have all started companies and exited them via acquisitions or initial public offerings.
“One of the absolute keys for our approach is that we’re hands-on, experience-providing early-stage funds,” Matsumura said. “We think of ourselves as unicorn builders. We’ve all founded companies and exited companies. The fit is really finding people that we can identify with as entrepreneurs and provide assistance to them.”
The first fund invested in around 36 companies. The second fund, dubbed gCC Fund II based, will target early-stage startups in infrastructure, developer tools, gaming, DeFi (decentralized finance), the metaverse, DAOs (decentralized autonomous organizations), guilds, and web 3 applications. Fund II will target exceptional developers, projects, DAOs, guilds, apps, games, and protocols at any layer at the earliest stage and is chain-agnostic.
Matsumura said the second fund expects to invest between $500,000 to $5 million per investment through both initial and follow-on investments.
The first fund’s top performers were OpenSea, the blockchain asset marketplace, and Yield Guild Gaming, one of the pioneers of play-to-earn gaming. It also invested in unicorns including Celsius Network, Qredo, Agoric, Astar, 1inch, and VEGA protocol. While some blockchain games are running into problems, Kunimitsu feels like there are a lot of quality projects coming down the road that will prove you that fun and blockchain are not oxymorons.
“It used to be about play for fun, and now the games have moved to play-to-earn,” Kunimitsu said in an interview. “The problem has been that play-to-earn games aren’t fun. I think the next generation of web 3 games is coming and they will also be fun. That is the kind of project we are looking for.”
Gumi Cryptos Capital led the strategic seed round into OpenSea, as well as the seed-stage investment into YGG. The fund likes to make investments in the intersection of games and crypto, Matsumura said.
“Think of us as blockchain’s experienced, high-conviction, high trust, hands-on value adding, long time preference, unicorn to megacorn, builder-focused all-in venture society,” said Zhang.
Matsumura said that he knows many hardcore gamers and game developers have been resistant to blockchain games out of concerns for environmental waste, Ponzi schemes, money laundering, and other scams. But he believes that gamers who embrace experimentation and innovation are likely to be more receptive, as are game makers and players in Asia, as well as crypto enthusiasts. For now, it’s important for blockchain makers to target the right audience and build their communities via social tools like Discord.
“We live in the experimental age,” Matsumura said.
He said that existing institutions and infrastructure such as big tech are demonstrably failing us, and that the way forward will require experimentation. That means experiments in tokens, web 3, DAOs, guilds, avatars, and non-fungible tokens (NFTs). He said the metaverse will be a collection of these experimental realities.
“I think about it as the appetite for experimentation,” Matsumura said. “Everybody wants to try new things. People are absolutely confident that the existing systems are not going to get us where we want to go.”
Matsumura said he believes we’ll see more “capital formation” going forward, even though there was about $3 billion in funds invested in blockchain games in 2021. He also thinks we’ll see some amazing blockchain games ship in 2022.
Kunimitsu and Zhang noted that players around the world in places like Southeast Asia, South Africa, or South America are embracing blockchain games and play-to-earn. Kunimitsu said that Western gamers resisted free-to-play games early on but eventually accepted them in mobile and other types of games.
“I think that NFTs will eventually find an audience,” he said.
Matsumura said that we are likely to see a combination of NFT and free-to-play business models in the same game.
“I’m just waiting for us to stop saying ‘blockchain games’ since people don’t say things like TCP/IP games,” Matsumura said.
Kunimitsu chuckled when he said that.
Matsumura added, “I think from now on, after three or four years of blockchain experimentation, I think we need to be focused more on the usability of it, or why people would want to use it and for what purpose.”
Zhang said that fund will look ahead and try to find exceptional founders in advanced subsectors that have the potential to be sector leaders and disrupt global industries.
Portfolio leadership teams will also have access to Gumi Crypto Capital’s global network of portfolio company founders, legal and financial advisors, token economy designers, token liquidity and market-making partners, and a global investor base. The fund had its headquarters in both San Francisco and Tokyo.
Kunimitsu said that the fund has access to both Silicon Valley’s startup culture and capital markets as well as access to the Japanese market.
Matsumura said the firm has already made investments from its second fund.
“We like projects that have a utility and make use of this technology, rather than just chase the hype,” Zhang said. “We like the problem solving and solid technologies and good teams with experience.”
There will be a lot of competition, with so many funds forming like Katie Haun’s $1.5 billion crypto fund. But Kunimitsu said his firm has worked with those other funds well and it has figured out when to go in early and invest ahead of those other investors as a lead seed investor.
“We have an appetite and preference for taking the lead position,” Matsumura said.
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