Patron Fund Raises $90 Million - Former Riot Games Team

The Rise of Play-to-Earn Gaming and a New Venture Firm

Recent coverage in the tech press has increasingly focused on the blockchain-based, play-to-earn trend. This model allows players of crypto-powered games to potentially earn income by acquiring in-game assets or tokens, which can then be exchanged for conventional currency.

Axie Infinity and the Growing Ecosystem

Currently, much of the discussion centers around a Vietnamese company, “Axie Infinity.” Its popularity has spurred the creation of a Philippines-based startup dedicated to providing loans to new players seeking to participate in the “Axie Infinity” ecosystem. Notably, both the game developer and the lending company have received backing from Andreessen Horowitz.

Patron: A New Venture Firm Focused on Web 3

The co-founders of a new early-stage venture firm, Patron, believe this trend is more than a fleeting fad. They posit that games like “Axie” will serve as the primary entry point for consumers into the emerging decentralized “Web 3” era.

Founders' Backgrounds

Brian Cho, one of Patron’s founders, previously spent seven years at Riot Games, culminating in the role of global head of business and corporate development. He also has a two-year tenure at Andreessen Horowitz, starting in 2012. His co-founder, Jason Yeh, dedicated the last four years to establishing his own investment firm in Berlin, Germany. Prior to that, he worked for eight years at Riot Games, including a position as its head of EU Esports.

Investor Base

Patron’s investor network includes partners from Andreessen Horowitz, Fred Wilson of Union Square Ventures, Garry Tan of Initialized Capital, and Hans Tung of GGV Capital. The firm has also outlined its future plans.

Insights from Patron’s Founders

TC: Your paths first crossed at Riot Games. When did the idea for starting your own venture firm take shape?

BC: We initially connected as colleagues at Riot Games and developed a strong rapport through co-investing in various ventures over the past decade. While Patron has been a conceptual project for years, the current market conditions presented the ideal opportunity to establish the firm we envisioned.

TC: You’ve secured substantial capital commitments from numerous prominent VCs. Which investor provided the initial funding?

BC: Our strategy was to attract individuals who were deeply invested in the success of our portfolio companies, particularly as they approached their Series A funding rounds. We underestimated the significant impact our early individual LPs would have on our fundraising efforts and our ability to secure highly competitive seed deals. We successfully raised the entire $90 million within four months.

Many of these LPs are individuals with whom we’ve maintained close relationships for nearly a decade, either as colleagues or co-investors. Therefore, it was logical to approach them first. Our initial investments came from former supervisors and mentors, such as Chris [Dixon] and Marc [Andreessen] at a16z, Rick [Heitzmann] and Amish [Jani] at FirstMark [where Yeh previously worked], and the founders of Riot Games. The average individual check size exceeded $400,000, with many investors contributing substantial personal funds.

Institutional Investment and Riot Games

TC: Are institutional investors involved? Is Riot Games a backer?

JY: Horsley Bridge Partners and Invesco represent our most significant institutional investments in the fund. Riot Games did not invest, as we prioritized individuals and institutions over strategic partners for this initial fund.

The Play-to-Earn Landscape

TC: The “play to earn” model has gained significant traction, largely due to “Axie Infinity.” How long have you been monitoring this trend, and which other startups are noteworthy?

BC: I briefly left Riot Games four years ago to launch a company in the NFT gaming space following the initial surge of Cryptokitties. Unfortunately, the timing wasn’t right, as consumer and investor interest was limited, particularly after the market downturn in 2018. However, the emergence of products like “Axie Infinity” and “NBA Top Shot” has been a key indicator, demonstrating the ability to onboard users unfamiliar with cryptocurrency.

Furthermore, projects like BAYC and Punks have increased mainstream awareness. The 2.3 million-strong waitlist for the Coinbase NFT marketplace and the influx of applications from AAA and Web 2 game developers transitioning to this space are all positive signals.

Investment Status and Strategy

TC: How many investments have you made to date?

JY: We have completed four investments in the space, which remain unannounced but align directly with our investment thesis.

TC: Will you be allocating capital to both tokens and equity? How are you approaching these different investment methods, and what are your LPs’ expectations?

JY: Yes, and our first investment is a pure token deal. We assess each opportunity individually, believing that a thoughtful implementation is crucial for the type of product or startup the founder intends to build. We have informed our LPs that Web 3 and tokens will be a significant component of the fund, given the increasing convergence of gaming and Web 3, which is a key reason for their investment in Patron.

Location and Future Outlook

TC: Does being based in Los Angeles offer any advantages, considering your investment focus?

JY: Los Angeles presents a unique convergence of arts, creativity, gaming, entertainment, and cryptocurrency. However, we operate as a virtual-native firm. While we will maintain a presence in both LA and Silicon Valley, our investment scope will be international, with approximately half of our deals originating outside the U.S.

I recently returned to LA after spending a decade in Berlin, and both Brian and I gained experience working on opportunities in East and Southeast Asia during our time at Riot. We believe that global consumer businesses can be built from any of these locations.

Check Sizes and Deal Sourcing

TC: Regarding investment amounts, what is the minimum investment you’ll consider, and what is the upper limit?

JY: We are adopting a high-conviction, concentrated portfolio approach, prioritizing quality over quantity and aiming to lead or co-lead seed-stage opportunities. This means we will [invest anywhere] from $1 to $4 million per deal, seeking significant early ownership as a lead investor.

TC: Where are you actively searching for promising projects?

JY: Our LPs have been invaluable sources of deal flow and have helped us win competitive deals. Twitter and Discord will naturally be platforms for connecting with founders. We also anticipate that non-traditional sources, such as Web 3 native communities like DAOs and angel syndicates – of which we are members – will become vital sources of future deal flow.

Pictured above: a scene from “Axie Infinity”