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"We
believe that Gaming is Hot and there needs to be some more
evolution in the animation IP space before that space heats
up too"
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After
quite a few years, the scene is beginning to really heat up in Indian
Animation & Gaming. In addition to the outsourcing model where
India is making its mark in CG and VFX, the mild emergence of the
domestic market as well as some massive investments that look to
tap into the potential huge demand for digitally created content
(including Games / Animation) have fired up the space.
And the good news for Animation / Gaming Entrepreneurs is that Venture
Capital is in the ring too!
In
a follow up to NASSCOM Animation & Gaming 2007 which had a session
on Financing, AnimationXpress.com
Managing Editor Anand Gurnani
met up Clearstone
Venture Advisors Director Rahul Khanna
to get his perspective on the Animation & Gaming space.
Excerpts
What
is your take on the Indian Animation & Gaming space?
India has one of the youngest demographics in the world and Animation
and Games is an interesting space, especially gaming. Today gaming
is also about socializing and a gaming café is a place where
the youth hang out. It's about lifestyle. The share of wallet spent
on gaming will be categorized as lifestyle spends.
One
can observe a lot of encouraging trends and opportunities. The launching
of casual gaming portals such as zapak.com, the opportunity to have
game centric niche channels on DTH, if you observe the DTH services,
they will need to differentiate themselves in terms of content and
there is an opportunity for content creators in that.
The
affluence of the middle class, the consumerism and the voracious
demand for entertainment and social interaction propels large opportunities
in content, devices and the backbone infrastructure to fully network
the activities they will be used for.
What
about Animation?
Personally I am a strong believer of local content that can connect
with the consumer and there is immense opportunity if tapped correctly.
I believe that with the last mile reaching the consumer in many
ways such as Fibre, Cable, DTH and even Vsat, there is an opportunity
to meet the obvious demand and hunger for local animated content.
However,
from what I gather, the IP and product creators in the animation
space in India are facing some initial hiccups in terms of finding
the revenues, as broadcast alone is not able to bring in enough
returns. There have to be strategic tie ups and associations with
books, toys, comics, games etc. and animation based character centric
products have to be in the market, the emergence of organized retail
has to be tapped into.
Theatrical
Features is the keyword in the Indian animation IP space today?
The Film business is a hits and misses business and we wouldn't
be particularly interested in investing in individual projects.
What
about investing in a slate of animated films?
A slate is just a slate and that means, if out of four films if
one is a big success and another an average grosser and two failures,
the risk will be mitigated and there might be some box office overflows
as profit. But we are more interested in businesses where my Five
Million US$ which would be a 30% buy-in into a company can become
at least Twenty Five Million in a span of say 4-5 years. We are
interested in value creation rather than just table profits.
Animated
features have perpetual revenues....
Yes
but a VC generally exits in 5-7 years and it would be difficult
to factor in all future and perpetual revenues during the exit.
We want to be involved where returns need to be quicker and more
substantial within a period of 5 years time.
Any
Indian Animation & Gaming projects that you have invested in?
Not yet, but we are actively looking at a few gaming related projects
including Game Café chains.
We
also believe that if any animation player could create and aggregate
a huge library of local content, then there is an obvious space
for a TV channel focused on local animated content, either on the
DTH platform or Satellite.
Another
space we see tremendous scope in is Online Education as well as
edutainment. The mobile space too is burgeoning with opportunities
and we have made investments in that space...
What's
the Mobile investment about?
Well that's not a content company. It is an engineering company
that creates mobile phones customized for specific Indian demographics.
The company works with Operators and can bundle and match features
to create a customized solution.
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"We
believe that if any animation player could create and aggregate
a huge library of local content, then there is an obvious
space for a TV channel focused on local animated content,
either on the DTH platform or Satellite"
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Which
are the (now) Big brands and businesses that Clearstone has invested
into in the US?
There's many including Overture which invented performance-based
targeted online advertising models that now underpin the economics
of the Web. Then there is PayPal which took the worry out of online
payments between strangers, contributing to the boom in online shopping
and eBay itself. There are other companies like United Online, Cars
Direct etc. All these companies changed old practices, and all were
built to do so with guidance from Clearstone Venture Partners.
What's
Your message to entrepreneurs and businesses from the Indian animation
and gaming space who are looking to work with you?
We
believe that a great many factors are now favoring the growth rate
in India and that India is here to stay as a economic Super Power.
As a Venture Capital firm we are looking to work with businesses
that are very focused and have a clear defined consumer TG and have
the solutions or products in place to cater to demand.
Along
with the investment we also bring a lot of strategic value to the
table and help make connections with large clients or vendors possible.
We do a lot of guidance and our entire team of experts helps build
the business, but when we invest with anyone, there have to be clear,
focused business models, there has to be capability to create and
deliver, there has to be experience and expertise in the team and
lastly innovation and entrepreneurship has to drive the whole thing.
We
believe that Gaming is Hot and there needs to be some more evolution
in the animation IP space before that space heats up too.
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