How did the struggling game company Animoca Brands make a comeback with NFTs?

Author: Kyle, Hive Tech

The wave of NFTs and the metaverse has led to the emergence of a large number of new businesses, including the well-known blockchain game Axie Infinity and the NFT project Bored Ape Yacht Club.

Among the many emerging projects, one somewhat outdated company stands out. Animoca Brands, established in 2014, initially focused on mobile game development and publishing. It was once listed on the Australian Stock Exchange but later faced delisting. As the mobile gaming boom declined, the company struggled financially for a long time, even attempting to expand into the e-book business as a backup.

It is this very company that has rewritten its fate through NFTs and has become one of the hottest giants in the NFT field today. Its blockchain games include The Sandbox, Crazy Kings, and others. Previously, it was also an early investor in NFT star projects such as Axie Infinity developer Sky Mavis, Decentraland, and Dapper Labs (NBA Top Shot).

In the past year, Animoca Brands has completed multiple rounds of massive financing, ranging from tens of millions to hundreds of millions of dollars, with its valuation growing from $1 billion to $5 billion.

This legendary turnaround story is not a coincidence. What sets Animoca Brands apart is its early emphasis on IP-licensed games when developing mobile games, creating brand-licensed mobile games such as Garfield, Doraemon, and Ultraman. During its transition to NFTs, it continued to acquire IP rights in sports, including Formula 1, Major League Baseball, and the Bundesliga, through partnerships and acquisitions, and developed blockchain games like F1 Delta Time. Recently, its subsidiary collaborated with the International Olympic Committee to launch a Beijing Winter Olympics-themed blockchain game and issued Olympic series NFTs like Bing Dwen Dwen.

It can be said that the dedication to popular IPs and the accumulation of IP resources have allowed Animoca Brands to quickly seize opportunities in the NFT wave and achieve a transformative turnaround. It is also giving back through investments and creations, promoting the advancement of NFTs and the metaverse.

Animoca Brands Secures Massive Investments

If we were to list the unicorns that have emerged from the NFT and metaverse wave, Animoca Brands would certainly be on that list. This company, headquartered in Hong Kong, initially started as a relatively unknown traditional mobile game developer. It went public on the Australian Securities Exchange through a reverse takeover but was ultimately delisted due to internal governance and trading violations.

As the mobile gaming boom began to decline, Animoca Brands went through a difficult period, and the emergence of NFTs and the metaverse changed its fate.

Animoca Brands' relationship with NFTs began in 2018. That year, the original blockchain game Cryptokitties became a sensation, and Animoca Brands, in its transition period, saw the potential of this market. It obtained authorization from the Cryptokitties development team to exclusively publish Cryptokitties in China and receive a share of the profits.

Although this collaboration did not yield significant profits, Animoca Brands recognized the vast space for NFTs. Yat Siu, co-founder and executive chairman of Animoca Brands, stated that the company formulated a strategy at that time, believing that digital ownership would fundamentally change the industry through expanded financial inclusivity, and this important change would begin with the adoption of NFTs in games.

Since then, Animoca Brands has fully entered the NFT field. In August 2018, Animoca Brands acquired the sandbox mobile game The Sandbox developed by Pixowl and built it on the blockchain. Through this virtual sandbox world, Animoca Brands entered its NFT world.

Two years later, NFTs became one of the hottest topics in the blockchain community, with numerous NFTs being traded at sky-high prices. Subsequently, blockchain games that featured NFTs as a key underlying element began to flourish, and The Sandbox, which had an early layout and a large user base, successfully exploded in popularity, becoming one of the hottest blockchain games.

The Sandbox Game Poster

In November last year, Zheng Zhigang, CEO of New World Development Company Limited in Hong Kong, announced plans to build virtual land in The Sandbox. In February this year, luxury brand Gucci announced that it had purchased virtual land in The Sandbox. Additionally, several sports brands, including Adidas, have also entered this virtual world.

Acquiring The Sandbox is one of Animoca Brands' most successful investments in the NFT field. The reason it is considered one of the most successful is that Animoca Brands is no longer just a game developer but has also brought many classic investment cases as an investor.

In 2018, Animoca Brands invested in the metaverse project Decentraland and the NFT development company Dapper Labs (which created the well-known product NBA Top Shot). In 2019, it completed a $1.465 million investment in Axie Infinity developer Sky Mavis. Furthermore, Animoca Brands has acquired NFT marketplace QUIDD, sports NFT ecosystem Lympo, independent game developer Blowfish Studios, NFT solution provider Bondly, and other NFT-related companies.

With smooth sailing in the NFT field, Animoca Brands has attracted a lot of capital interest, and its valuation has soared.

In May last year, Animoca Brands completed a financing round of $88.88 million at a valuation of $1 billion, with investors including Kingsway Capital, RIT Capital Partners, and AppWorks Fund; five months later, the company completed another $65 million financing round, with investors including Liberty City Ventures, Ubisoft Entertainment, Sequoia China, and cryptocurrency newcomer Sun Yuchen. At this point, its valuation had risen to $2.2 billion.

In January this year, Animoca Brands secured another $358.8 million in financing, led by Liberty City Ventures, with participation from 10T Holdings, Gemini Frontier Fund, ParaFi Capital, Provident, Sequoia China, and Winklevoss Capital, bringing its post-investment valuation to $5 billion.

According to insiders, after this round of investment, several investment institutions, including private equity giant KKR, expressed strong interest in Animoca Brands, hoping to increase the financing amount from nearly $359 million to $500 million. Animoca Brands executives informed existing investors that they plan to conduct a new round of financing as soon as this year, at which point Animoca's valuation is expected to reach $10 billion.

Seizing IP Licensing, Animoca Brands Turns Around with NFTs

Turnaround stories are always the most captivating, and Animoca Brands' leap from a delisted traditional game company to a unicorn in the NFT and metaverse fields describes a legendary journey. However, success is never accidental. The reason Animoca Brands could seize the NFT wave and complete its layout ahead of time is closely related to its genetic makeup.

Let's turn back to 2014, when Animoca Brands was just established. At that time, mobile devices such as smartphones and tablets were entering a golden era of development, and the demand for mobile games reached unprecedented heights. At its inception, Animoca Brands focused on mobile game development and publishing. During the mobile gaming boom, the company's early development was relatively smooth, and it went public on the Australian Securities Exchange in 2015 through a reverse takeover. At that time, the company had over 170 games with cumulative downloads exceeding 160 million.

Animoca Brands has a special principle in mobile game creation, which is to place great importance on IP-licensed games, especially those with global popularity. For example, the company obtained authorization from Paws for Garfield and all supporting characters from Jim Davis' comic series. The Garfield series mobile games were developed by Animoca Brands and quickly surpassed 30 million downloads after launch. The company has also developed licensed mobile games for brands such as Doraemon, Ben 10, Astro Boy, and Ultraman.

Animoca Brands has created multiple IP-licensed mobile games

Focusing on globally popular IPs for game creation has allowed Animoca Brands to stand out in the mobile gaming field. By concentrating on producing licensed games from television or comics, the company has accumulated rich experience in IP collaboration, laying the foundation for its subsequent layout in the NFT gaming track.

In contrast to its current success, Animoca Brands experienced a passive development phase from 2015 to 2018. Due to increasing competition in mobile gaming, the costs of obtaining IP licenses and developing games led to prolonged financial losses, and by the fourth quarter of 2017, its quarterly operating cash flow remained negative. The company's stock price also fell by over 95% at one point.

At this time, transformation became a necessary step. Therefore, in 2018, Animoca Brands acquired the well-known game IP The Sandbox, entering the NFT world and marking a turning point in its fate.

In 2020, the Australian Securities Exchange removed Animoca Brands from its listing due to internal governance issues, participation in cryptocurrency activities, and trading violations. However, after being delisted, Animoca Brands soared to new heights through NFTs.

During its focus on the NFT field, Animoca Brands maintained its emphasis on IP, acquiring IP rights in sports, including Formula 1, Major League Baseball, and the Bundesliga, through partnerships and acquisitions, and developed blockchain games like F1 Delta Time.

In 2021, Animoca Brands increased its investment efforts, investing in well-known projects such as Yield Guild Games, Bloktopia, GuildFi, ConsenSys, and DeHorizon, and collaborated with Binance Smart Chain (BSC) to launch a $200 million investment plan to accelerate and incubate early-stage cryptocurrency game startups.

Notably, the recently launched Beijing Winter Olympics-themed blockchain game Olympic Games Jam: Beijing 2022 was also developed by Animoca Brands' subsidiary nWay. Inheriting the company's focus on IP, this game is officially authorized by the International Olympic Committee and has released multiple Olympic-themed NFTs, including the Beijing Winter Olympics mascot Bing Dwen Dwen NFT, which has been well received in the market.

It can be said that the dedication to popular IPs and the accumulation of IP resources have allowed Animoca Brands to quickly seize opportunities in the NFT wave and achieve a transformative turnaround.

Despite having invested in nearly 200 NFT-related projects, Animoca Brands has not forgotten its "old business." From its product plans, Animoca Brands still holds several NFT games that have been or will be launched, including Crazy Kings and Crazy Defense Heroes. Additionally, its AAA blockchain TPS game Phantom Galaxies is highly anticipated, as Animoca Brands attempts to bring high-quality games to the blockchain, leveraging its years of experience in a market where most blockchain games lack playability and quality.

Since its establishment in 2014, Animoca Brands has gone through eight long years filled with twists and turns and difficulties. During its business downturn, this game company even attempted to expand into e-books and other businesses. Looking back, the wave of NFTs has rewritten its fate, and it is now giving back through investments and creations, promoting the advancement of NFTs and the metaverse.