Welcome to Escape Velocity by Outlook Business — a podcast series that dives deep into transformative trends, disruptive ideas, and the future of fast-growing industries. In this episode, we sit down with Salone Sehgal, Founder and Managing Partner of Lumikai Fund, India’s first gaming and interactive media-focused venture capital fund.
Joining Deepsekhar Choudhury, Associate Editor at Outlook Business, Salone offers a compelling look into the rapidly evolving gaming ecosystem in India.
With razor-sharp insight and a passion for storytelling, Salone unpacks why India must move beyond borrowed narratives and instead create games that reflect its own rich culture and diversity. She champions the idea of “Make for India & Make from India”, urging Indian creators to embrace their roots and craft gaming experiences that resonate globally, yet stay authentically Indian.
From cultural representation to the industry's $12 billion growth potential, this conversation is a masterclass in understanding the power and promise of Indian gaming. Whether you're an investor, entrepreneur, gamer, or simply curious about the next frontier in digital entertainment, this episode is not to be missed.
Joining Deepsekhar Choudhury, Associate Editor at Outlook Business, Salone offers a compelling look into the rapidly evolving gaming ecosystem in India.
With razor-sharp insight and a passion for storytelling, Salone unpacks why India must move beyond borrowed narratives and instead create games that reflect its own rich culture and diversity. She champions the idea of “Make for India & Make from India”, urging Indian creators to embrace their roots and craft gaming experiences that resonate globally, yet stay authentically Indian.
From cultural representation to the industry's $12 billion growth potential, this conversation is a masterclass in understanding the power and promise of Indian gaming. Whether you're an investor, entrepreneur, gamer, or simply curious about the next frontier in digital entertainment, this episode is not to be missed.
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GamingTranscript
00:00What does it take to really shape creative industries and what does it really take to
00:04shape creative ambitions of founders? Globally, gaming is very mainstream. Global gaming is about
00:09a 250-300 billion dollar market. It's bigger than box office, bigger than Hollywood, it's bigger than
00:14sports media rights, it's bigger than television media, it's bigger than OTT, bigger than music
00:18and that has happened across the world. Whether it's Korea, whether it's Japan, whether it's China,
00:24US, India could not have been immune to that trend, right? So it was only a matter of time
00:29where the Indian industry would catch up. Five years back, the average revenue per paying user
00:34in India for gaming was $2. In 2018-2019, today it's $22. The fastest growing slice of monetization
00:41is actually in-app purchases. Yes, to a large extent with AI, weak content will get commoditized.
00:47Yeah, you know, it's said that if you want to see what innovation will look like in five years,
00:52see what's happening in the gaming industry today.
01:07Hello and welcome to the Escape Velocity podcast by Outlook Business,
01:11where we talk to the movers, shakers, thinkers and doers of the tech and startup ecosystem.
01:17Today we have with us Saloni Saigal, founder and general partner of Lumikai,
01:21a gaming and interactive media venture capital firm based out of Gurgaon. Welcome Saloni to
01:26the Escape Velocity podcast. You had a dream career in London. You were an investment banker
01:32there, a founder, and then a VC. And I think around 2019, you decided to come back to India
01:38and start Lumikai. So it would be great to understand a bit about your journey. What
01:43prompted you to come back? What was the situation then? I get asked this question often. And
01:49actually, there was a very big personal compulsion alongside the professional need.
01:57I think professionally, I've been in interactive media and gaming now for about two decades.
02:03And I've seen the industry from all sides of the table. I've been a VC, I've been an entrepreneur,
02:08but I've also been in investment banking and private equity. And, you know, there was always
02:12this deep seated desire to see and build and learn to kind of, you know, what does it take to really
02:23shape creative industries? And what does it really take to shape, let's say, creative ambitions of
02:28founders? And I spent a lot of time in Europe doing that, right? I think, you know, if you
02:33were to look at it statistically, I shouldn't even be here. Because I started my career in
02:38investment banking and private equity was a completely male dominated environment.
02:42Then I became an entrepreneur, also in the interactive media and gaming industry.
02:46Again, I saw nobody like me building in that industry. And, you know, I used to play games
02:53as a kid. And so I always used to think if I wanted to see a brown female Indian protagonist
02:57in a game, I'd probably have to build it myself. Later on, I realized I'd probably have to fund
03:02it myself as well. So I ended up joining a venture fund. But no, all jokes aside, I think,
03:08you know, there was this perfect inflection point that came together for a move to India,
03:14you know, back in 2019, when I was at a UK based venture fund. And that was the world's
03:18first interactive media and gaming VC fund. There was a lot of deal flow that started to
03:24come from India. And in India, that point of time had gone through what I call the geofocation of
03:28the internet. Smartphones had become very cheap, internet was dirt cheap. And of course, you know,
03:3350% of India's smartphone population is under 25. And that further meant that there were just a lot
03:40of companies which started building in gaming and interactive media back in 2019. So it felt like it
03:46was the right time to come back to India to build a sector focused strategy, simply because, you
03:53know, I had been in the industry for so long, I'd seen the inflection points in markets like China,
03:58markets like Turkey, markets like Israel, had a very large global strategic network as well.
04:04And there was a curiosity about the India market. So, you know, being first to the market is always
04:11hard. A lot about the market was unknown globally. There were a lot of questions about us, you know,
04:18whether there would be enough depth in the market for founders, whether this market would actually
04:22provide enough liquidity, whether the sector in itself is VC backable. And, you know, I'd say that
04:29was a big leap of faith that was taken. And, you know, the word Lumikai is actually a combination
04:36of two words, it's the Latin word for light, and the Japanese word for tribe. So the intention was
04:41to illuminate a path for the next generation of founders. But also even for us, we were laying
04:47the road, and to be a lighthouse fund in this sector. And there was a lot of, I guess, audacity,
04:55a lot of, I guess, risk taking there, to some extent luck, as well. And luck, I think I'd
05:02kind of say, you know, we launched a debut fund in the middle of a pandemic. So I can't say we
05:07were very lucky. But at the same time, gaming adoption, interactive media adoption really went
05:12through the roof in India. And, you know, since then, it's been five years, we are looking at
05:19targeting about investing $100 million in the India market. We've backed about 17 companies,
05:25we've seen north of 2500 companies in the ecosystem, we have near 100% market coverage.
05:33So in some sense, as a fund, we have been tested and battle tested. We've seen a pandemic,
05:39we've seen a private market crash, we've seen a fundraising winter, we've seen, we're now seeing
05:43war. So for a young fund, it's been a tumultuous journey. But I guess, you know, that's that's what
05:51a founder's journey is like. So we're very much like the founders, we back as a fund. But that's
05:56kind of the story in a nutshell. So when you started LumiKai, India did not have a lot of
06:01sector specific VC fund. That's right. Most of the funds, you know, at that time, Sequoia, Lightspeed,
06:08Axel, they invested, you know, across sectors. So would be great to understand what was
06:15your pitch like to LPs? It must have been difficult. You know, how do you convince them?
06:20And then there was also the pandemic around. Yes, of course. So how did you go about it?
06:24Yeah, it was very hard. You know, and I think what was the template in a nutshell was essentially,
06:33if you see any market, any venture market, when it reaches a level of maturity, right,
06:39there is the first evolution is there will be horizontal funds, right? Because there is not
06:43enough depth or breadth in the, there is enough breadth, but there's not enough depth in the
06:48market. And hence it yields a lot of horizontal funds. Now, if you look at the first wave of the
06:52internet in India, a lot of things needed to be built in terms of digital infrastructure. First,
06:56you had to get, you know, ecommerce, you had to get travel, you had to get FinTech, and get all
07:02of that layers built before, you know, one can start thinking of, let's say, actual vertical
07:07strategies. And if you've seen that in, let's say, the US market, or even in the China market,
07:12where countries have been through one or two cycles of venture funds, it has often led that
07:18the next level of venture investing is often sector specialist, and sector specialization,
07:25which is required, right. And I think we got the timing of the sector specialization in a way which
07:31coincided with just user adoption. Had I launched Lumikai in 2015, it would have probably been too
07:38early because the digital infrastructure did not exist, right, data was still expensive,
07:43smartphones weren't powerful enough. And also, of course, you know, monetization was a question
07:49mark. I think a lot of that got solved in 2020. Monetization also got solved, right, with the
07:55advent of UPI. So, a lot of things have to come in place for a strategy to work. And in that sense,
08:02you know, 2020 was a confluence in a perfect storm of at least the macro factors coming into place.
08:09But of course, as a first time fund manager in a market which is untested, in a industry which is
08:16unproven, and with founders who have been underserved, you know, for us, we literally
08:22had to create everything from scratch, which meant educating global investors about the market,
08:28which also meant mapping the market, which is why we do our own proprietary research report. It's
08:33been something that we've been doing for the last four years, simply because there was nobody
08:37mapping the market prior to us. Nobody had actually put down the numbers to how big the
08:42market opportunity is, what is the market size, what is the revenue for this market.
08:47We did that effort. It's six months of our effort. But, you know, we do it because we not only wanted
08:53to educate our investors, but we also wanted to educate the ecosystem about what about the
08:57opportunity that we were seeing. Further, we also wanted to, you know, provide comfort to founders
09:02that if you are going to take this off the beaten path route of building in a creative industry,
09:10like interactive media, like gaming, like entertainment, which has so far been underserved,
09:15and there has been little capital and little conviction, which has gone into it,
09:19then we're here for you. And so, all of that effort needed to be put in. Raising capital was,
09:26of course, a big challenge because, you know, we were raising in 2020, there were no roadshows
09:30possible. All our capital was raised on Zoom with me doing Zoom calls after Zoom calls
09:36with investors. And, you know, we raised the first one in the middle of a pandemic.
09:41We're raising the second fund in the middle of a fundraising winter. We're just about closing
09:44our second fund. You know, it's wartime at the moment. So, I like to joke that the next time we
09:49launch a fund, you should definitely short the market because we're probably never going to
09:53get our market timing right. But, you know, in the long run, you know, I think the industry has
09:59been kind. We've been able to back some really spectacular companies, companies which are now
10:06showing real strengths of becoming category leaders. I think what's more interesting is
10:10that, you know, we come in super early. We're seed, pre-seed investors and more than 80% of
10:16our early stage bets are revenue generating. So, they think monetization first. And that is
10:22actually tells us that the strategy works because now, you know, whether it's ad-based monetization,
10:28whether it's in-app purchases, whether it's virtual gifting and tipping, whether it's
10:31subscriptions, all of those monetization possibilities are existing in the market.
10:36So, you know, the myths that was that India is just a Dow farm, Indians will never pay,
10:42all of that has now, you know, been settled in terms of the traction that we see within the
10:47portfolio. You said that, you know, when you were raising the first fund, you know,
10:51talking to global investors, because we have seen that in India, whenever you start a micro VC or
10:58the first fund when you raise it, it is generally backed by the family offices, HNIs. So, in your
11:05case, was it different? You know, could you kind of get global LPs to buy this story at the outset?
11:11How was it like? Actually, that's, that our case was actually exactly that. 100% of our capital,
11:18at least in the first fund was global. And in the second fund, due to all the efforts that,
11:23you know, we put into the industry in terms of evangelizing the industry, working with
11:29policymakers, publishing our research report, our research report gets, you know, quoted by
11:33the government, by the think tanks, by the Ministry of Information and Broadcasting,
11:38it's been used by the World Economic Forum. And that has helped to also educate the domestic
11:43industry as a result of which we have some leading family offices now in the fund.
11:47But actually, 80% of our capital came from global financial, global strategic institutions,
11:53as well as financial capital. But that's largely because of, you know, I have been in the sector
11:58for nearly two decades. So, a lot of the investors have obviously, I have known…
12:04You are betting on your resume.
12:06Yes, for a very long period of time, simply because, you know, this is all I knew,
12:11this is all I understood. And these were investors in previous fund or investors who'd worked with
12:17me or seen me during my entrepreneurial ventures. And, or, you know, corporates that I'd work with
12:24or advised during my investment banking private equity days, as a result of which it allowed that
12:28kind of global network for me to reach out to that global network to say, hey, I'm doing this. And,
12:34you know, we're going to launch this strategy for India. And, you know, they were kind enough
12:38to support on this journey.
12:41You've recently said at a public forum that in India, the gaming industry has now
12:47topped the movie industry.
12:49That's right.
12:49And now you just said that catchphrase that, you know, India is just a Dow farm. Now it's
12:55no more true.
12:56Yes.
12:56So, how can you kind of weave these two together and double click a bit?
13:01Yeah.
13:01And what has happened?
13:03Sure. You know, globally, gaming is very mainstream, right? Global gaming is about
13:10a 250-300 billion dollar market. It's bigger than box office. It's bigger than Hollywood. It's
13:16bigger than sports media rights. It's bigger than television media. It's bigger than OTT,
13:20bigger than music. And that has happened across the world. Whether it's Korea, whether it's Japan,
13:27whether it's China, it's US. India could not have been immune to that trend, right? So,
13:34it was only a matter of time where the Indian industry would catch up.
13:39And if you were to just look at, you know, how we shape the media entertainment pie,
13:44how does it break up, right, in India? It's about a 25 billion dollar bucket. Half of it is
13:50linear media. You know, it's television, it's box office, it's print, it's out of home media.
13:55The other half, which is about 12 billion or so, is gaming, it's animation VFX, it's digital media
14:02that includes streaming, video streaming, audio streaming, social entertainment streaming,
14:06and esports. That's growing at a 16% year on year. It's expected to be a 30 billion dollar market
14:12in the next five years. Gaming out of that is a 3.8 billion dollar market.
14:17It's three times as big as Bollywood. And it's actually also exceeded cricket revenues
14:23this year. So, that global trend is actually happening in India as well, right? And largely
14:30predicated by very four key factors. You know, you've got an 800 million smartphone user base.
14:36An average Indian consumes about 31 gigabytes of data a month. 50% of India's population is
14:42under 25. Five years back, they were not in the workforce. Today, they are. And lastly is UPI,
14:47right? Where microtransactions have become possible. So, what credit cards and debit
14:53cards could not do for monetization, UPI has done it, right? Because the average first time gamer
15:02spends about 29 rupees for their first purchase, right? So, it's as little as that. And this is
15:07because we do extensive research. We work with knowledge partners like Google, like Deloitte.
15:12And we do a lot of data analysis. And this is what we actually discovered. So, if your first
15:19time transaction is that low and you have a UPI mechanism, which is very seamless, it's very
15:24frictionless. And monetization in entertainment is always impulse led. It's not intent led, right?
15:31That has unlocked as a result of which that entire willingness to pay has now started to show up.
15:37In actual numbers. So, 29 rupees is the first transaction?
15:41Yes. And what is the average that people spend in a year or maybe a month?
15:46I mean, that's data that we know that about five years back, the average revenue per paying user
15:51in India for gaming was $2. In 2018-2019, today it's $22. So, it has grown, you know, if you can
15:59say, more than 10x, right, in the last just three, four years. So, these trends are very,
16:06very real. And it is not a urban phenomena, or it is not only not a male phenomena only.
16:14You know, we were at waves last week, where we launched our consumer research report,
16:20and it's called from swipes to stories. It's on our website if somebody wants to download it.
16:24But what was most interesting was that 66% of gamers come from non-metro cities,
16:30from tier two, tier three cities. So, this is a pan-India phenomenon.
16:33It's from Patna to Pune, from Guwahati to Gurgaon, right? Like we surveyed nearly 3,000
16:38smartphone users, and 45% of gamers are actually women. And we're seeing that age demographic,
16:47it's not young boys playing this or doing this. It's 18 to 30. If nearly 40% of the user base is
16:5518 to 30, about 28% is more than 30 years old. So, this is an older user base with disposable
17:02income who is actively choosing their phone as their primary mode of entertainment.
17:06But what does gaming include? Because there is something like esports. Is esports,
17:12does it fall under gaming or is it different? Can you, you know, explain a bit about the
17:16different buckets that- Yeah, sure. So, as a fund, we look at what
17:20we call interactive media, right? Interactive media for us, and we invest across five key
17:25pillars. We invest in gaming, we invest in content, which is essentially gaming companies
17:31building games. Studios.
17:32Studios, right? It could be games, studios building games for the global markets. It
17:36also could be studios building games for India. We back platforms. So, which is essentially,
17:42you know, discrete audiences coming together for certain experiences. It could be game streaming,
17:48it could be audio entertainment, it could be social entertainment.
17:52Those are platform plays where it brings audiences together. We also invest in tools tech
17:59infrastructure, which is the underlying infrastructure layer for powering these
18:03experiences. We also invest in companies which are using applied game mechanics,
18:08which could be, let's say, AI tutors and companions in a gamified way to improve education.
18:15We've recently backed a spiritual tech company, which is building AI avatars for gurus and for
18:22astrologers. And so that you have an AI companion who is a guru and they're actually translating
18:27Vedic text into LLMs and creating their wrappers around it to be able to provide that to their
18:35users. So, this is essentially wherever it is interactive, immersive, and personalized,
18:42that constitutes interactive media for us. Because, you know, we have a generation that
18:48we call internally the swipe before type generation, right? This is a generation which has
18:54learned everything on their mobile phone, right? And they have been exposed to everything from
19:00social media, to video, to audio, to gaming, all at the same time. So, that is the generation for
19:07which experiences have to be built in the future. And that falls within the mandate of what we call
19:12interactive media. The division that you defined at the outset, $25 billion of which half is
19:20linear media and the other half is interactive. So, your kind of time is that entire two,
19:26twelve and a half. And it's not just the three and a half billion dollars of gaming.
19:30Exactly. That's right. That's right.
19:32Got it. Got it. And so, understand this three and a half billion dollars of gaming,
19:38is it mostly fantasy? Because, I mean, like you said that everybody is doing like a transaction,
19:4429 rupees is the first transaction. We see instances whenever IPL starts around that time,
19:51that UPI goes down. Because so many people are doing transactions. So, can you kind of
19:58shine a light on that? Yeah. So, you know, out of the
20:03twelve and a half billion dollars, about two billion is real money gaming. But I think the
20:07most interesting aspect of that is that the fastest growing slice of monetization is actually in-app
20:16purchases. In-app purchases or microtransactions are actually growing at 46% year on year. And,
20:22you know, over the course of the next four years, we expect that to be a nearly $4 billion market
20:27in itself. I think what's more interesting was that real money gaming, if you look at
20:33the evolution of any market, especially if you make a comparison to China, it was the first
20:38experience that the user had with making digital payments for, let's say, pure play entertainment,
20:45right. It trained an entire generation to make digital transactions. When we undertook
20:53our research last year, we discovered that 66% of gamers who pay in real money gaming apps are
21:00actually also now paying for mid-core games. So, there's a very high degree of overlap.
21:0661% of gamers who are paying for fantasy games are also starting playing for
21:10mid-core games or casual games. What are mid-core games and casual games?
21:13Like a Battlegrounds Mobile India or a Clash of Clans, right. So, they are actually starting to
21:18make that transition and journey into paying in other ways like in-app purchases. So, yes,
21:25real money gaming is a revenue pillar, but it is not the foundation, right. And that is the way to
21:31think about it. It is the evolution of the player, if you were to say, where they started with real
21:39money gaming. But clearly, we can see, you know, casual game revenue in India, for example, last
21:45year exceeded download revenue. It's the first time that it's happened, right. We see mid-core
21:50games like Battlegrounds Mobile India, like a Clash of Clans, like EA FC Mobile, their revenues
21:55have grown 50% year-on-year over the last year. So, we're seeing that kind of transition happen
22:00already where gamers are saying, hey, I'd like to experience other kind of entertainment as well on
22:07my mobile phone. We also now see the rise of subscription revenue. We see the rise of virtual
22:13gifting and tipping. Like we have a company called EloElo, which has, you know, just recently raised
22:18its pre-series B. It's now on a $23 million run rate, nearly 100 million users on their platform
22:25and they monetize via in-app purchases and virtual gifting and tipping completely.
22:29Now, this was behavior, which was really unthinkable a couple of years back, but now
22:35it is available. And if we were to see, let's say platforms, other platforms,
22:40even if it's audio platforms, we're seeing that kind of monetization happen in India.
22:44So, real money gaming is like when you do a transaction, bet on something, create a team,
22:50right? That's fantasy.
22:51That's fantasy. Yes.
22:52And then there is the subscription model, which is maybe you'll play for a month.
22:58Yeah, there is free-to-play games, which are monetized, but it's free-to-play,
23:02but there are certain items that you can buy within the gameplay,
23:06which may or may not give you gameplay benefit. It could just be a vanity item,
23:10which makes your avatar look better. So, which is a skin, or it could be an item,
23:14which gives you gameplay benefit. Like it helps you, you know, skip a level,
23:18for example, or it helps in progression. That's a free-to-play game.
23:23Then of course, there are subscriptions also. It could be a battle pass, for example.
23:28And then there are models of virtual gifting or tipping, which are typically used in
23:31social streaming platforms. So, there are now very novel business models that are available.
23:38So, I'll break it down and make it a little simple, right? Like, for example, if you think
23:42of a D2C company or an e-commerce company, right, a user comes to the platform and if they make a
23:48purchase, that is a user where the CAC of the user or the customer acquisition cost has actually
23:56resulted in some return for the company, right? But if they come, browse the platform and they
24:02leave, there is no way for that company to really monetize that user, right?
24:06In the case of an entertainment or a gaming platform, that's no longer the case. Like,
24:11if a consumer lands on, let's say, a game, you can monetize that user via eyeballs through ads,
24:16you can do in-app purchases, you can do subscription revenue,
24:20or if it's an entertainment platform, you can also do virtual gifting and tipping,
24:24where the user chooses to provide a tip or a gift to the creator who's on that platform.
24:29So, there are multiple avenues in an entertainment platform to be able to monetize a user,
24:34which doesn't exist in, let's say, just a regular consumer.
24:37And what are the different kind of, is there a bracketing of this revenue? How much is,
24:43what percentage of the rural revenues are subscription revenues? What percentage is ad?
24:49Yeah, so, you know, I'd say a majority of the revenue is right now out of this $12.5 billion
24:55bucket is ads revenue, because digital media is being monetized a lot via ads.
25:00So, it could be your social, your streaming, your OTT platforms, etc.
25:06But of course, there is subscription revenue, which is rising as well.
25:09And in-app purchase revenue is now emerging in gaming right now, right?
25:14So, that is, that pie of it is also starting to increase.
25:18So, out of the $12.5 billion, $1.6 billion is just in-app purchases on gaming alone,
25:25right? And that's expected to grow to $4.4 billion in the next four years.
25:29So, that in itself is a very powerful indicator of growth because it's growing
25:34at a compounded annual growth rate of 40% year on year.
25:37And that is more like a, also, it's like how we imagine Web3 to be, right?
25:43Web3 is different in that sense.
25:45Web3 is quite different from this because this is, you know,
25:48it's peer-to-peer or peer-to-merchant, right?
25:51Web3 is different in terms because there is, you know, currency,
25:54different kind of a currency involved.
25:57You know, you have different tokens, etc.
25:59So, Web3 is a little bit, and it also uses blockchain,
26:01which is very different and also a lot more friction.
26:04Got it, got it.
26:05So, this $4 billion in the next four years, this $4 billion bucket of in-app purchases.
26:11So, what are the games where these kind of things happen?
26:13So, is it like those games like Clash of Clans?
26:16Yes, that's right.
26:18Which we don't make in India, mostly, right?
26:20So, I don't understand that.
26:21You know, are we doing that in India?
26:25Is it starting to happen?
26:26That's exactly what, as a fund, we exist for.
26:29And that's exactly what we want to back in India.
26:33You know, we currently import content in a way.
26:37So, you know, I would make the analogy,
26:39if you think about it, in the 1990s, right, we had Doordarshan.
26:44So, we used to only watch state television, right?
26:46Then satellite happened.
26:48A lot of American television got beamed into our homes.
26:50So, a lot of us grew up watching Beverly Hills and
26:53Bold and the Beautiful and Santa Barbara, right?
26:55But it took about six, seven years for the domestic production houses to come up, right?
27:01The SL, the Balajis, the Zs, right?
27:03And that's when we started getting a lot more massy television,
27:07which was mass market, like Humpanch and etc.
27:09And all those kind of shows came out, right?
27:11We're currently in that transition, right?
27:13Like where we, if you were to think about it, gaming, interactive entertainment, etc.
27:17It's just about a four-year-old industry, right, in its institutional journey.
27:21It's still very nascent.
27:23It is taking time for the domestic production houses to come up and studios to come up.
27:29But we've backed quite a few of these companies who are building for the India market,
27:33but also building from India for the global market as well.
27:37And they're leveraging, you know, whether it's Indian storytelling or whether it's
27:40building, let's say, a cricket game for India.
27:42They're leveraging uniquely Indian stories to be able to translate them into entertainment
27:48experiences, right, which is built for India from India.
27:52So, it does take some time.
27:54And so far, you know, I guess developers, entrepreneurs have been, you know, cash-strapped.
28:01There's not been a lot of conviction or not of expertise in evaluating founders.
28:08Founders have not had access to best-in-class knowledge.
28:11And all of that in the last four or five years has changed.
28:15We, when we invest, we often also co-invest with our global LP base.
28:22Our investor base are some of the world's largest global media companies,
28:26gaming companies from Japan, from South Korea, from US, Europe.
28:30So, they bring a lot of best-in-class experience and knowledge and talent.
28:35We also work a lot and collaborate a lot with global funds.
28:38There are now 100-plus global interactive media funds with very experienced operators,
28:44industry veterans who work very closely with us, who often act as downstream capital for
28:49the companies that we back as well.
28:52And that is largely part of, you know, what we bring to the founders.
28:57It's more than capital.
28:59You talked about Raja Kodori.
29:00Raja Kodori is actually part of the Lumikai Leader Circle, which is our advisory panel.
29:08All of them, we not only have Raja Kodori, we've got John Vlosipoulos, who's the CEO of Napster.
29:12He used to be previously vice president at Roblox.
29:15We have Amarnath Tombre, who used to be the CEO of the Match Group Americas.
29:20We have John Bellamy, who's the CEO of, currently CEO of Jagex.
29:24These are global industry experts who we bring and provide access to our founders.
29:29And, you know, our founders can access them and spend, you know, every month talking to
29:33some of these industry experts to really understand what it takes to build best-in-class
29:36interactive experiences.
29:38So, you know, that is what we do to be able to really unlock founders in the ecosystem.
29:44I also want to understand from you, because it's said that the gaming industry historically
29:49has feeded a lot into the deep tech industry.
29:54Yeah.
29:55And now that, you know, there's a lot of sentiment in India about deep tech.
30:00So, how does it connect?
30:02How does gaming connect with deep tech?
30:04If you can explain that a bit.
30:05And also, given the context of, let's say, NVIDIA, which started out as a gaming company.
30:10Yeah, you know, it's said that if you want to see what innovation will look like in five
30:14years, see what's happening in the gaming industry today.
30:17And if you were to really think about it, gaming is ubiquitous.
30:21It is everywhere.
30:23And let's, you know, whether it's not just deep tech, but any successful consumer-facing
30:28experience is actually a game mechanic in disguise, right?
30:31Your chat came from the old school 4chan.
30:34Your digital, your likes and badges came, that are now in Facebook, actually came from
30:39games, right?
30:40Your emojis and sticker packs were very popular in gaming in the 80s and the 90s.
30:46That feeling of collaboration, connectivity, that emotional resonance that you want to
30:51have your consumer experience with your product, actually the best companies in the world that
30:56have solved it have been gaming companies, right?
30:58And that's not a surprise because some of the world's largest consumer companies are
31:04led by people who are active gamers, whether it's Mark Zuckerberg, whether it's Reid Hoffman,
31:08whether it's Elon Musk, they're self-proclaimed gamers, right?
31:11But also, you know, going back to your point on deep tech, there is a very deep connection
31:16between, you know, at least technology which has been used to propel in a way, for example,
31:23Nvidia is a great example.
31:24It started off, you know, doing very complex 3D computations for games, and now it's become
31:28the backbone infrastructure for AI, right?
31:30And that's what it was developing for about two decades.
31:33If you were to look at game engines, Unity powers Hong Kong airport.
31:37They do simulations of passenger traffic.
31:39Unreal is being used in real estate development projects, right?
31:45If you were to see AR, VR is now being used for virtual try-ons in fashion.
31:51If you were to think about movie making, Avatar, The Way of the Water, was actually shot completely
31:56in a green room with actors wearing body suits and cameras for facial recognition.
32:01But, you know, and this beautiful world was constructed out of a game engine, right?
32:06So, if you were to think about the use cases of just gaming, game tech, and applied game
32:12mechanics, in a way, this is a far larger industry than just the $250 billion market
32:18that we actually talk about, because it has, its reach is so, so present in our lives.
32:24So, is there an appreciation in India of this, that how important gaming is?
32:30I'd say, if you asked me that question five years back, I would have said no,
32:34but I just came back from waves, right?
32:36And there is a very deep appreciation now at the highest level.
32:40I was at the inauguration where Prime Minister Modi actually singled out the fact that
32:46original storytelling, animation, VFX, gaming are actually national priorities, right?
32:52There has been the announcement and the establishment of the
32:54Indian Institute of Creative Technologies on the same lines as that of the IITs,
32:58and this is now being partnered with some of the world's largest institutions like NVIDIA,
33:03Adobe, Microsoft, Meta, Google, are coming together for the creation of this institute,
33:09which is going to focus a lot on creative technologies.
33:11And I think now there is a lot more policy focus on realizing that this is a massive
33:16sunrise sector, and it is also a way of exporting culture, right?
33:21It is a way of narrative infrastructure, it's the next vector of cultural export, in a way,
33:28which I think now there is a lot of policy focus on.
33:31And I think a lot of that has come after 4-5 years of evangelizing the market,
33:36and speaking to policy makers, speaking to the government,
33:39and just showcasing what India has to offer.
33:42This is a very interesting term you use, narrative infrastructure,
33:46and along with that cultural export.
33:48So, can you kind of double click a little bit on this?
33:51Are there examples how it has been done by different countries?
33:55Of course, you know, look at Korea where we have K-pop, right?
34:00That's that soft power, right?
34:02With Japan, it's anime.
34:05So, and of course, in every culture which has its own nuance, own language, own heritage,
34:12the way they have exported their culture and just made it commonplace,
34:17even let's say with China with the Black Myth Mukong or Genshin Impact,
34:21or even now this new concept of micro-dramas, which are these, you know, 60-minute episodes,
34:26but shot in one-minute clips, which have really taken the US by storm.
34:31You know, that's a way of exporting culture, right?
34:34And that kind of cultural export, that kind of narrative infrastructure,
34:38I mean, India has so many stories to tell.
34:41That has yet to happen, at least on the interactive entertainment side.
34:45We've seen the movie industry do that very well, right?
34:48Like we've seen the translation of, let's say, Bollywood movies,
34:51and our Indian film stars being recognized globally.
34:54Of course, we have seen, you know, S.S. Rajamouli with his films like Bahubali and RRR
35:01translate that to Japan.
35:03And, you know, when we spoke with Rajamouli sir last year, he was at our annual event,
35:09you know, he talked a lot about how he took authentic stories,
35:14and just the idea was to just build an authentic Indian story.
35:18And authentic stories told well, he said, would just translate globally.
35:22He said, we didn't adapt it for an audience.
35:25We didn't adapt it for a global palette at all.
35:28It was just very inherent Indian storytelling.
35:30But because the world had seen nothing like it, it was so fresh.
35:33And it really appealed.
35:35Like how many more Viking movies or dragons and, you know,
35:39can we, spy thrillers can we watch, you know,
35:42we have to be able to take our culture and export it.
35:46And I think there's a lot of now policy focus on that.
35:48Do you think that, you know, we have these great epics in India?
35:51Yes.
35:52And they, when we read it, and when we listen to the stories, they sound very grand.
35:57Yes.
35:58And in a way that Rajamouli has been able to capture a lot of it.
36:02Do you think that can also be a great staging for a lot of maybe gaming studios and games?
36:07Absolutely.
36:07Are you seeing that happen?
36:08Absolutely.
36:09So we've actually backed a company called Studio Sira.
36:12Their first game was called Kurukshetra Ascension.
36:14It's a card backer game, which is built around the deep lore of the Mahabharata.
36:20And about all the epic characters.
36:23And that has translated well with the global markets.
36:26You know, they've now hit a million downloads globally.
36:29Their average revenue per paying user is about $6.
36:32And they're seeing a lot of resonance with players from every everybody from
36:37Germany to Spain to Cambodia and Philippines.
36:40Right.
36:41So yes, absolutely.
36:42We can see that.
36:43And we also see that being transcendent.
36:45Like we see games transcending boundaries, right?
36:48A Black Myth Wukong blew up globally, right?
36:51A Genshin Impact blew up globally, right?
36:53So that does kind of translate as long as it's a good game, right?
36:59The rapper mythology needs to come with a really enjoyable experience and narrative, right?
37:09And I think that's where the challenge often arises,
37:12where people aren't being able to abstract the mechanics from the narrative, right?
37:17And I think that is the big challenge for gaming studios.
37:20But our stories are in abundance.
37:22There are plenty of stories to be told.
37:24Can you double click a bit on this?
37:26Abstract the mechanics from the narrative.
37:29So what does it mean?
37:30And is it about tech talent?
37:32It's a lot about...
37:34It's a couple of things, right?
37:36While we see a lot of visions and a lot of excitement,
37:40I think there are a couple of things that founders often overlook, right?
37:44The first is just really paying a lot of attention to the math, right?
37:49What are LTVs look like?
37:51What does retention look like?
37:52What does player cost look like?
37:56That's one.
37:57The second is to really understand the craft of designing a game.
38:00That's often understated or overlooked.
38:03The third is player...
38:05Getting player feedback, right?
38:07What does the player actually want?
38:08What are they looking for?
38:10How to kind of adapt your narrative towards the player.
38:13And lastly is to not look at Western templates, right?
38:16And try and retrofit them.
38:19I think that is important, right?
38:20You have to build something which is uniquely Indian,
38:23but you have to have it at high quality.
38:25And again, I'll go back to S.S. Rajamouli,
38:28because that was his example that he gave us,
38:31is that I just wanted to build the most extravagant,
38:33epic experience at the best quality,
38:36but in a very Indian way.
38:38And that's what I did, right?
38:40And of course, he was very persistent
38:42and very passionate about his project
38:44and the way he builds it.
38:45And it reflects in his movies
38:46and the way he drives his team and his actors.
38:51That kind of passion,
38:52that kind of marrying art, craft and science
38:56is what is needed to be able to abstract that,
39:00I guess, narrative into the mechanics.
39:05But do we have enough designers,
39:08product managers, engineers in gaming in India,
39:12in the top level,
39:12who can create those kinds of immersive games,
39:16very successful immersive games
39:17like other countries have done?
39:19It's, I'd say, happening now.
39:22And there are two ways of looking at it.
39:25The first is, in India,
39:27over the course of the last decade,
39:28there have been a lot of gaming companies,
39:31media companies, right,
39:32which have been set up, right?
39:33Whether it's been Zynga,
39:34whether it's been Ubisoft,
39:35whether it's been Electronic Arts,
39:37Glu Mobile.
39:38This is talent,
39:39which has been trained best in class
39:42at global P&Ls.
39:43They have taken companies from small sizes
39:47and P&Ls have managed anywhere
39:49between 50 to $100 million P&Ls.
39:51That's one crop of entrepreneurs that we're seeing.
39:54There's a second crop of entrepreneurs
39:56who've actually taken games from seed to exit,
39:59whether it's companies like Play Simple
40:01or Moon Frog, et cetera.
40:03These are companies, or ShareChat.
40:05These are companies, or Pocket FM, right?
40:07These are founders who are coming out
40:08from these kind of businesses saying,
40:10hey, now we want to build.
40:12And we have now been trained from seed to scale
40:15and we kind of know how to build.
40:17And then there is a third kind of a founder
40:19who is very young, very bold,
40:21and who's using a lot of AI, right?
40:24And they don't have any kind of technical baggage.
40:26They're very first principle thinkers
40:28and they're very oriented towards understanding,
40:32because they natively understand these experiences
40:35because they've grown up playing those experiences
40:37or consuming those experiences.
40:39And that's a third kind of founder that we back.
40:41So I'd say between these three kind of founder prototypes
40:45or personas, there is enough talent
40:48that is available in the ecosystem.
40:50But of course, they require,
40:52because it's a global industry, right?
40:56And India is not a walled garden like China, right?
41:00We consume American content as well.
41:02We consume Korean games as well.
41:05And they have about two, three decades
41:07of product experience and product thinking ahead of us.
41:10So Indian founders actually have to play catch up
41:12and they're on a treadmill, right?
41:13Against those experiences.
41:14So it does take time,
41:16but I think that kind of is emerging now more and more.
41:20You said this thing that Indian founders,
41:23a lot of times they don't understand the math,
41:25LTV retention.
41:27So let's say there's a founder somewhere planning
41:30to start a gaming startup.
41:32You know, what is the basic math
41:33or what are the basic four or five principles
41:36of this business arithmetic
41:38that you should kind of keep in mind?
41:39Yeah, I think the first one is that, you know,
41:41you have to understand that games are not Dow sports.
41:45They are LTV engines, right?
41:47Like you have to understand monetization very well.
41:50Can you explain a bit because the Dow and LTV.
41:54So it's not just about getting users, right?
41:56You have to learn how to engage that user.
41:58You have to learn how to retain that user.
42:00You have to learn how to monetize that user.
42:02And then you have to also learn
42:04how to distribute your product to the user.
42:07It is now no longer about,
42:09hey, I'll build this great product
42:11and people will flock to it.
42:12That's not the case anymore
42:13because your biggest competition
42:17in this industry is boredom, right?
42:19Anything and everything competes with you.
42:21Reading a book competes with you.
42:23Watching Netflix competes with you.
42:25It's the attention economy.
42:27Nor is it an inherent problem that you're solving, right?
42:31A lot of venture capitalists
42:32apply this problem solution framework.
42:34Are you a vitamin?
42:35Are you a painkiller?
42:36In entertainment, there are no painkillers.
42:39It's all time pass, right?
42:40So if you were to really have to build in this space,
42:44you have to understand the maths of this space.
42:46How do you design a beautiful product?
42:49Then how do you engage a consumer?
42:52How do you retain?
42:53How do you build the right retention hooks?
42:54How do you distribute it, right?
42:56All of these things have to be thought through
42:59and that is where I mean by knowing your math as a founder.
43:05In order to do that,
43:06you need to pick one kind of genre
43:09or one kind of product type
43:12and then just learn very deeply from it.
43:16So if you are, let's say,
43:18building a racing game,
43:23don't say that you're going to build a shooter game the next day
43:25because it doesn't, you know,
43:26the expertise required is very different.
43:29You're building an audio platform one day
43:33but you want to also do, you know,
43:35some creator tools on the side at the other, right?
43:37Like it just takes a very different kind of DNA
43:41to be able to do a lot
43:42or you have unlimited capital, right?
43:44So then that sometimes solves things
43:47but not always.
43:49In gaming, are the successful founders
43:51mostly those who have maybe had 5-10 years of industry experience
43:56and then come in to kind of build their own thing
43:59or because we don't, I don't know,
44:01it seems intuitively that we don't see a lot of this dorm room successes.
44:06It can be.
44:08I'd say yes, you require expertise.
44:11I think more importantly is, you know,
44:13you need to know what excellence looks like
44:15to be able to build great gaming products
44:18and great, at least, you know, interactive media products.
44:22But yes, I'd say there is a crop of founders
44:25who are very tenacious, very persistent,
44:28who, you know, just through trial and error
44:31and being very, very frugal
44:32and who have, you know, great curiosity,
44:35have this really intuitive ability to listen to their consumer
44:38and actually embody that in their product.
44:41That also does well and we've seen that, right?
44:43Like for example, we have a company in our portfolio called DevTouch.
44:46It's these, you know, they're two guys.
44:47They've never been trained in game design
44:49and they now have India's number two most popular cricket game
44:55called Kings of Cricket.
44:56They have nearly 200,000 daily active users on their platform.
44:59They've built a game which is published in India
45:02with a best-in-class ad stack and user acquisition platform, right?
45:06So that they learned completely through trial and error
45:10and on the job, just being very frugal.
45:12It's a very small team of just nine people
45:14and they're just constantly learning
45:16and they're learning machines
45:18and they're just very, very deeply passionate and persistent, right?
45:20So yes, we see that also.
45:23So I think it's a combination of both.
45:26So what should a founder starting out, you know, in this sector
45:31aim to build at this point?
45:34Which are the best areas or kind of segments to build in?
45:37I'd say definitely start looking at the India market.
45:41I think a lot of people look at the global market
45:45and, you know, try and build a lot of clones of what already exists.
45:49But I'd say, you know, tell Indian stories and build genre expertise.
45:56Be brutally focused on your retention and engagement and monetization.
46:01Build for India, from India.
46:05You know, as long as you build world-class experiences,
46:08no matter what the cultural palette is, it will do well.
46:11Especially in interactive media and entertainment
46:13because this translates and it transcends boundaries, right?
46:17And we see that. We see that in film.
46:18We see that in television.
46:20Why would we not see it in interactive media and entertainment?
46:24I think this is a big kind of maybe a disadvantage that, you know, in media
46:30that you have to compete with global players.
46:33So it's not good enough to be the best in India.
46:36And everybody, Netflix, if you are Bollywood, Netflix is also competing.
46:40Yes, yes, absolutely.
46:41That's right. But that's what makes this industry very exciting.
46:44And it makes it, you know, possible for because there's so much value.
46:51It's so hard.
46:52That means that there is so much value to be captured, right?
46:54And if you think about the evolution of media, right,
46:57we've gone from the television screen being a family screen
47:01to your personalized mobile screen.
47:03I mean, the next 10 years of media is going to look very different
47:06from the last 10 years, right?
47:08So if you're a founder starting out today,
47:11I will tell you that, you know, there are lots of stories to be told.
47:15The world is ready to play.
47:16But what stories are you going to tell?
47:18Right? That's what you have to figure out.
47:21And because in the waves, there was this focus on narratives.
47:24Yes.
47:25Don't understand because games, like you said,
47:28okay, a lot of people play games now, even elderly people,
47:32or older kind of cohorts of people.
47:35But generally, it's the children who play a lot of games, right?
47:40So how important do you think is that India develops its own games
47:45so that the storytelling, the narrative setting
47:48and that narrative infrastructure is Indian
47:51so that we can retain the kind of strength of telling the stories our way
47:58or what we want children to learn?
48:02So I think, you know, I think everybody plays games, right?
48:06If you were to look around you, you know,
48:08whether you're in an airport, just in a terminal, right?
48:11Like, if you were to look around you,
48:13you'd see people do two things on their phones.
48:15You will see them either playing games
48:16or you're seeing them watch video content, right?
48:18So it's not just about children, right?
48:21I like to think about it like, you know, everybody watches movies.
48:24We don't say you're a movie-er, right?
48:27Everybody plays games.
48:28I don't know why we need the label of it being a gamer.
48:30I think one has to think of it from that sense, right?
48:33Yes, there are stories that will appeal and experiences
48:35that will appeal to children.
48:36But there are stories and experiences that will appeal to male audiences,
48:39to female audiences, to older audiences.
48:42Like, there are older audiences who play Solitaire and Ludo, right?
48:46Even they're gamers.
48:47Even they're gamers.
48:48It's not like you have to have a headset.
48:50Yeah, yeah, yeah, you don't.
48:51You don't need to.
48:51And anyway, 99% of India's audience plays games on their mobile phones, right?
48:57So it's this complete, you know, mismatch of, you know,
49:01who identifies as a gamer, right?
49:02Like, you'll typically see women playing games
49:05but if you ask them,
49:06कि आप गेम्स खेलते हो, तो दे लगे,
49:07कि नहीं हम गेम्स नहीं खेलते,
49:08बड़ उनके फोन पर Candy Crush,
49:09they'll be at level 97, right?
49:12There's a lot of that.
49:13और कि आप लुडो खेलते हो.
49:14So there is a lot of that kind of experience which are very untapped.
49:21So what kind of stories you want to tell is completely,
49:23it's a complete white space for founders, right?
49:25How do you build those?
49:26And if you think about it, you know,
49:28if we think about your entertainment choices,
49:30sometimes you want to watch a spy thriller,
49:31but sometimes you want to watch a comedy,
49:33sometimes you want to watch a drama,
49:35sometimes you want to watch a family soap, right?
49:37Your palette in entertainment is so wide and so diverse, right?
49:42You don't say that I am only an action movie person, right?
49:47You consume all sorts of entertainment
49:50and that is the important lens to keep in mind.
49:52Now the biggest thing is AI.
49:54Yes.
49:55So how will AI impact the gaming sector?
49:58Because like studios, you would have seen a few weeks back
50:01what happened with Ghibli.
50:03Yes, that's right.
50:04Yeah.
50:04So I think there is this concern that
50:08when you create or invest in innovation in media,
50:11but it gets commoditized by AI.
50:14So what is the thinking within the gaming sector about this?
50:17So a lot of us, companies are using AI,
50:20but it's an accelerant, I would say.
50:23A lot of our companies are using AI in let's say production
50:25or to help essentially unlock creative work.
50:30So using it for marketing and user acquisition
50:33and quality assurance in bug testing, etc, right?
50:37And yes, to a large extent with AI,
50:40weak content will get commoditized, right?
50:43So when the cost of content creation
50:45or the friction towards creating content will reduce,
50:49the quality of content will also go down, right?
50:51But that's where really great content can set itself aside, right?
50:57That's where creativity and originality really has to stand out.
51:00Now, I like to think about it the way that when you have food,
51:04AI can make the food,
51:05but you will still crave your grandmother's recipe, right?
51:08You will still want that particular kind of touch, right?
51:11No matter how well AI may cook it, right?
51:16So that is the lens in which you have to think about
51:19making consumer experiences, right?
51:20It is about providing that extra.
51:23Because if AI can do it,
51:24then 20 other people can also create it.
51:27What is that extra experience or that accelerant
51:30that you can use to unlock creativity and originality?
51:33That's where the winning, that's where the winner lies.
51:36Within animation, I think a lot of animation
51:40for the global markets is being done out of India.
51:42Yes, that's right.
51:44Are you seeing any impact there on jobs,
51:46on animation jobs, design jobs?
51:48Well, I mean, we saw Technicolor shut down in India,
51:52but I don't believe it was for AI reasons.
51:55But yes, nearly 60% of animation work globally happens out of India.
52:01But that happens to a lot of fragmented shops
52:05and a lot of small outfits.
52:07But there is an opportunity to use AI
52:10to augment the animation pipeline,
52:14to make it cheaper, to make it less manual,
52:16to make it less cumbersome.
52:18And that's very interesting for us to see,
52:20is that how can, again, AI act as almost an accelerant
52:24to translate a creator's vision into these beautiful experiences,
52:28but do it at a less cost and a less time?
52:30Like if it took, let's say,
52:33it takes $70 million to make a certain movie,
52:35can you do it in $10 million?
52:37That would be a game changer.
52:40Would a SS Rajamouli who takes him three years to make a film,
52:44can it be done in one year?
52:46Right?
52:47Can you accelerate a visionary filmmaker like him?
52:50And I think those are kind of interesting questions for us
52:53that we'd like to get answered.
52:55So, one last thing.
52:57So, AI, how do you think, net-net,
52:59what will be the impact on the Indian gaming industry?
53:01Will it, you know, there was this one trajectory
53:04that it has been growing.
53:05Now, will it accelerate
53:06or will it be something that will be negative net
53:10and we have to overcome it?
53:11I think, you know, we have to definitely
53:16use it to our advantage.
53:18I think, you know, otherwise the delta
53:21between global companies using AI
53:25and Indian companies not using AI will start to expand
53:28and will start to show, right?
53:30You will be slower, you will be less efficient.
53:33You will, it will be more expensive.
53:35So, yes, Indian companies have to now build expertise in AI.
53:39There is no question about it.
53:41I think AI sovereignty will become a very big thing
53:45going forward where, you know,
53:47now the government is putting efforts into Sarvam.
53:50Of course, we've seen that with DeepSeek,
53:52you know, the US has open AI.
53:54We see, you know, Europe also now starting to set up
53:57guardrails around AI regulation.
54:00So, yes, I'd say Indian companies have to now
54:03start embracing AI in a way which is smart,
54:05which is efficient, which can keep them at pace
54:07with global companies, absolutely.
54:10And I think from a government standpoint,
54:12there is definitely focus on AI upskilling as well.
54:16And a lot of it is just, you know,
54:18there are no AI experts because the industry is so new.
54:21A lot of it is just self-teaching and learning, right?
54:25All of us have to upskill, you know, in a way.
54:27So, on that note, that all of us have to upskill
54:30in the age of AI and so will the gaming sector.
54:35Thank you so much, Saloni, for your time.
54:38It was great to chat with you.
54:40And hope we can again sit down another day
54:44and take the conversation forward.
54:45Absolutely. No, thank you so much for having me
54:47and thank you for all the great questions.