However, as other development clusters spring up and mature - Helsinki, Berlin, Stockholm, London - so the money men follow.
And that's what's happening in Hamburg, which is where iVentureCapital is based.
Founded by four serial entrepreneurs who made their money in the internet boom, it's particularly focused on games companies and distribution outfits - both online and mobile.
We spoke to co-founder and senior partner Michael Reul to find out more about the company's plans.
Pocket Gamer: Can you explain about the background of iVentureCapital and what advantages you have over other investments companies?
Michael Reul: The founders of iVC are entrepreneurs by heart and invest only their own money - that's the foundation for the entire investment approach and offer following benefits:
- As we are focused on the mobile and online games industry, we execute strategic and entrepreneurial oriented investments.
- Hands on support of the portfolio companies with the extensive experience of 15 years of successful internet business, especially in marketing, traffic generation and monetisation.
- Frequent meetings with interesting and successful entrepreneurs form our other portfolio companies benefit everybody as valuable information will be exchanged in an exclusive circle.
- That is what we call 'iPoTs' workshops (iVentureCaptial Portfolio Team) where synergies and experience will be exchanged.
Why do you think the mobile and online gaming space is a good investment opportunity?
The mobile and online games industry has started to grow up and is influenced by strong dynamic changes.
New genres and business models have opened up a huge market across all kinds of audiences, all age groups and genders. The increasing distribution of smartphones enables everyone to play anywhere and any time.
Combining this potential with the experience in marketing and monetisation of the general internet business, as well as creative game developers, allows us to develop excellent targeted strategies in cooperation with our partners.
Some people think the bubble of very large investments in companies such as Funzio and OMGPOP has popped as Facebook and Zynga's share prices have dropped. Do you think this is good in terms of companies being open to more rationale investments and valuations?
The games industry is influenced by strong dynamic changes and there is no end to learn from successes and less successful strategies.
Algorithms can't make valuations; it is more an entrepreneurial approach to estimate potentials.
One of your investments is TrafficCaptain. Why did you invest in it and why do you think it will provide a better service compared to other traffic monetisation and optimisation services?
We have large experiences and a successful track record of building up online and mobile affiliate networks. The performance network TrafficCaptain focuses only on online and mobile games.
The experts in performance marketing and games give personal support and know how to optimise any campaign - as opposed to automatic service platforms. We have broad games content and game-related publishers in Europe and North America, and have better offers due to our specialisation.
Additionally, TrafficCaptain is the exclusive performance network of browser games such as Knastvoegel.de and Bumrise.com, as well as the German games portal Games.de
You've also invested in developer MobileBits. What attracted you to that company as developers are often seen as high risk?
We were impressed by the management and development team, which that has an excellent track record of building very attractive games.
Furthermore they built their own development engine for true cross-platform games on any device (PC, mobile phone and tablet as well as consoles) - the Delta Engine.
SoulCraft which has been released as open beta on Android and iOS by BigPoint, takes full advantage of Delta Engine. Other game developers in our portfolio might benefit by using this engine as well.
Typically, what size of company are you looking to invest in and up to how much cash?
We don't have hard rules of the size of the company. The ideal time for us to invest is when a team has developed a game, which is in beta testing - shortly before being released.
Typically we invest from 50,000 up to a low 7-digit amount.
What other areas of the market are you looking to invest in?
We are also interested in game portals and platforms with a high reach of gamers or game advertising networks.
Our latest investment into games.de was a perfect fit for our portfolio and all portfolio companies benefit from this.
Places like the Bay Area and London are well known for VC companies. What's it like to operate in Hamburg?
Hamburg is a well-known hub for game companies with excellent and creative game development talents. The initiative gamecity:Hamburg supports the networking and exchange amongst game developers and publishers and draws new game companies to Hamburg.
We only receive positive feedback from our contacts in the Bay Area - both in terms of investment opportunities as well as VCs who are interested in co-investments.
You call your investment strategy 'Smart Money'. What do you mean by that?
As previously mentioned: we partner with our portfolio companies and help them in areas where they don't have strong experiences to make their business as successful as possible.
There are game development companies, which love to be creative and to concentrate on the development of a game. Some game developers want more, some want less help in various areas, such as:
- Support in entrepreneurial and business strategy topics
- Market launch and marketing (SEO, SEM, traffic generation, PR)
- Internationalisation
- Establishment of analysis of KPIs
- Monetisation and optimisation
- Access to the performance network TrafficCaptain as well as the portal Games.de and their expertise for optimising campaigns for low cost
- Infrastructure, such as office space (in our office), accounting, server administration
- Billing expertise and access to our alternative payment service platform for multiple countries at low costs
- Quality Assurance, A/B landing page testing
- Experience in establishing user support
- Highly skilled server administration team with know how with cloud computing, high availability system with high volume transactions, Kanban, CDN etc,
- Access to the development expertise (PHP, Java, C, C++, Zend, jquery, jboss, Java Script) of our development team
- Synergies and experience exchange with other companies in our portfolio through frequent workshops (iPoTs meetings).
Thanks to Michael for his time.
