FunCubator — What we’re looking for

Mikhail Kalashnikov

Published in

FunCubator

5 min readFeb 26, 2019

FunCubator is a seed-stage VC fund focused on digital entertainment. We mostly invest in Europe but work worldwide.

Every VC fund works differently.

Some are omnivorous number-crunchers, others have laser-tight focus. Some prefer to follow the herd, others invest only in the companies snubbed by other VCs. Every fund has a unique approach to stages, checks and portfolio diversification.

FunCubator is a thesis-oriented fund. We have rules that help us to make decisions. Even if it hard sometimes to miss great companies not fitting our thesis, we compensate it by the in-depth understanding of our areas. We receive hundreds, not thousands of incoming applications, and have more time for each one. Sometimes we even know in advance what we’re looking for (Fred Wilson wrote a great post about it) and search for such companies proactively.

Here is our current thesis.

We’re looking for scalable companies that change their area of the entertainment industry by providing emotions of the next level of quality.

What does it even mean?

We’re not limited by technologies and markets

A strategy isn’t just a bunch of buzzwords. We work on the pre-seed and seed stages, and if everyone speaks about something, it’s too late for us to have a chance there.

VR/AR, eSports, AI in audio/video/gaming — that’s our current focus, but not a strategy. Tech trends change, the strategy remains the same.

We’re searching for the applications of known patterns in the new mediums. If VR by any means becomes globally accepted, what known models will be successful? Ad networks, analytics, messaging, what else? Fibrum (our portfolio company, as in the following examples) solves the problem of fragmentation of the market. They offer a common platform with selected quality experiences (Desirium) for every type of headset, so developers can concentrate on creating the best content.

We’re hunting for the new approaches to the big, old, lucrative entertainment markets. When TV becomes the internet, it means that your screen is watching you too. The picture is no longer immutable. Everyone can see different things. What does it allow to do?

We’re fascinated by the behavior changes. Competition won’t kill the tech giants. But they can become irrelevant in the changing world. We observe how the early adopters and geeks spend their free time. In five years that could become common for all of us. If big media and social platforms are respected no longer by the trendsetters, what new possibilities arise from it?

We’re looking for things that scale

Scaling means having a way to lower costs when you grow. You need to create a technology that allows you to repeat former successes.

Mubert’s AI algorithms generate an endless stream of background electronic music. They buy loops, mix and transform them, and Mubert receives all the rights for the resulting streams. Their current library is already enough to produce a unique stream of music for every atom in the universe. The music sounds great too — I’m listening to it while writing this post.

Technology is not always a piece of software. If you can open dozens of franchises while not losing in quality, automate your sales or reliably produce blockbusters, that works too. That’s why video game companies can go public: the market believes they can repeat their successes.

Swedish producer Max Martin has written or co-written 22 Billboard number-one hits in three decades. The same guy has authored ” …Baby One More Time”, “I Want It That Way”, “It’s My Life”, ”I Kissed A Girl”, “Can’t Feel My Face” and dozens more of pop hits that you know.

His technology seems to work better than blockchain.

We use a broad meaning of “entertainment”

We see entertainment as everything that helps people to fill their free time. Sometimes even work time too.

Almost always it’s the matter of emotions. For a long time, economists ignored the human willingness to receive strong and diverse feelings. It wasn’t even mentioned as a core human drive in classic business book Driven. But the people still watch funny videos instead of doing crucial work, and prefer playing video games to actually getting a job.

Entertainment doesn’t consist only of games, pics, and videos. The borders between useful and entertaining are becoming blurred. Unnecessary education can be really fun (ever had a Wikipedia reading binge?) And even the workplace is becoming more like a playground than a battlefield.

Our portfolio company Hello Baby builds apps for the parents and soon-to-be parents. They provide a lot of useful and educational content. But foremost they’re about emotions: the anticipation, the joy, the moments to remember. That’s why people love their apps and are ready to pay for them.

We look for the emotions of the next level quality

Cheap doesn’t sell in the entertainment market. Nobody wants to listen to bad music, play a boring game or watch a bland movie even for free.

There is only one way to success: being more amusing, more emotional, more convenient. We believe that the quality of emotions is an ultimate metric that precedes revenue and audience growth.

But it’s impossible to do the same as competitors, only better. Next level of quality requires new technologies or business models.

Radio stations used to generate revenue from audio ads — one of the most hated types of advertising. Streaming services offer less intrusive kinds of monetization but lack human touch that made people turn on their FM the same time every week. Can we combine the better parts of both worlds? Gimme Radio is doing exactly that: you listen to the music handpicked by the respected DJs and musicians and can support your favorite bands directly.

Winstrike Arena is the gaming center where you can meet esports stars: they’re often playing right there, using the same PCs as you. Winstrike Team is not another virtual esports team: you can visit their home arena when you want. By combining two business units Winstrike gives gamers the feelings they can’t get anywhere else.

In B2B this approach works too. Viqeo helps media sites to use video illustrations for their articles, seamlessly and mobile-friendly. By improving the UX they manage to increase both publisher’s revenue and time spent on the page. Maybe they’re the first ad tech company in the world that makes the web a better place.

What’s next?

Go save the world if that’s your passion. But after the world is saved, people want to live their life with pleasure and delight. That’s the mission of the companies we invest in.