Investing in Layer Licensing
A conversation with Rachit Moti, cofounder and CEO of Layer Licensing, on getting virtual shoes to drop across 10,000 games at once.
tl;dr:
Layer connects IP owners to those looking to license IP for interactive experiences and games.
Welcome to the Metaverse
You’ve probably heard of Fortnite, the free-to-play Battle Royale game with legions of global fans. In its first two years of operation, Fortnite made more than US$9B in revenue — with its first year (2018) representing the most annual revenue for any game in the history of the gaming industry¹.
So, how does a free-to-play game become the most profitable game in the history of games? In-game monetisation. Players are charged for Battle Passes and to buy V-bucks (in game currency), and they’re able to purchase outfits and accessories. According to a poll of Fortnite users, nearly 70% of players had made in-game purchases, each spending an average of US$85 on cosmetics in the game².
The game is also able to charge for in-game events and limited edition items. The Travis Scott Fortnite concert, which took place in April 2020, grossed the rapper approximately US$20M including merchandise sales sold in-game³… which for a nine minute concert, made his performance time worth about US$37k per second.
Investing in Layer Licensing
We believe that experiences in the metaverse are here to stay. If COVID has shown us anything, it’s that sometimes it pays to stay in. But what draws us into a virtual world, outside of the appeal of getting to stay in our PJ’s?
Although we can be whoever or whatever we want virtually, we still attach value and meaning to the brands and characters that shape our daily life. I have continued to buy the same Converse high tops since I was 13 years old. Why? They’re comfortable, and classic Americana — my slice of home away from home. With my Converse comes emotion and nostalgia. Voilà, brand loyalty at it’s finest.
For our virtual worlds to feel real, we need to incorporate real things. For better or worse, we are all emotionally connected to characters, brands and accessories. We crave authenticity, even virtually. So for us to continue to participate in virtual worlds, we need to be able to invest in the things we love. Give me my virtual sneakers, and let the good times roll.
Layer facilitates the transactions between IP owners, and games / interactive experiences to build authenticity into virtual worlds. We believe that Layer’s role as intermediary between these two players (no pun intended) is essential to creating virtual worlds which feel real.
We recently participated in Layer Licensing’s bumper Seed Round, and sat down with co-founder and CEO Rachit Moti. See below for our chat with Rachit ⬇️
Chatting with co-founder and CEO Rachit
What made you go all-in on Layer?
Last year, we saw more and more activity with non-gaming IP being brought into digital worlds. When we started doing customer discovery, we initially thought we’d want to come up with a tool for people that are already doing the deals in this space. But when we were pitching it to parties, we discovered they weren’t doing enough deals to start with. That made us think that there is space for a marketplace here. Unless you’re at the very top of the market, you’re just not doing enough to justify using a SaaS tool because you’re not transacting enough.
Of course, I have a little bit of background on the space as well. And after we raised our Pre-Seed round and participated in Startmate, it made a lot of sense to go all-in.
Why build a marketplace?
If we do it right, we accomplish two main goals through the marketplace:
1) We can democratise access to something that right now, is limited to a closed network of people shaking hands, going to lunches and leveraging existing relationships. A marketplace allows fairer access for participants on both sides. And we think it’s really important to help people that wouldn’t normally enter this space work with each other.
2) We can then leverage network effects to make IP transactions easier in the long term.
We feel that it makes sense to take the marketplace first approach.
I imagine IP negotiations are… complex. How do you build a repeatable model for both parties?
For the most part, IP negotiations involve a fairly common set of documents. For game developers that don’t have much exposure to this space, they probably don’t realise that these contracts aren’t particularly complex or different, and that it makes a lot of sense to build a standard. If we can educate and simplify the deal memos and the long form agreements for interactive licensing, then I think the complexity will continue to drop.
For the majority of the market, we believe that we can build a standardised way to bring both sides together. We are already reducing the challenges of finding who is out in the market and how much it costs, which is really simplifying the discovery or deal flow pipeline for both parties.
There’s a lot we can do as we evolve, but I think the first step is to actually start matching both sides and getting them acquainted with our marketplace.
Where do you see the future of games?
I think we’re already starting to see the way it’s moving. The reason why I was looking at games and have always been interested in games is the the rate of change that is experienced there. If you go back 15 or 20 years ago, you know, games were fringe entertainment. Traditionally, they were strategy games, first person shooters, that kind of thing. And now you’ve got huge breadth in games and play styles. They’re inherently social; people are using them as places to hang out and chat, in addition to the actual gameplay. Now, you’ve got near gender parity in who participates in these games.
Gaming has started to blur with the concept of the metaverse. We are interested in that because those digital places need to feel real. They need to include good content, with digital representations of things we already love and enjoy. I think if all of that comes together, we see an end state of interoperability of having digital identities where we can drop into one game a world and all of our stuff that comes with us, whether that’s our sneakers, weapons, money or other digital assets. I think they’re inherently just extensions of us as people if we get this right.
What’s your dream transaction to facilitate on Layer?
The thing that would be really interesting to do long-term is to have enough rails and infrastructure that we are able to act as the distribution channel for IP. Let’s say a global athletics brand drops a new hyped shoe. That shoe would be produced and distributed around the world, and it’s fine. But how do they do that with a game? At the moment, they can only do maybe one or two games at a time. How do we get the shoe to drop across 10,000 games all at once, like in the same way that it drops into stores? And how do we build the distribution channel for all the content that we need across both sides of the market so that everything is freely accessible, wherever it should be and wherever it makes sense? I think that’s the thing that’s really cool to solve for.
