Notes from the Metaverse – Big PE joins the fray

Notes from the Metaverse is SRI’s look at the companies, people and trends shaping a brand-new world.

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As reported yesterday in Andrew Ross Sorkin’s Dealbook Newsletter, bulge-bracket private equity firm, Silver Lake, is leading a $150 million funding round for Genies, an Avatar technology company that provides digital tools to create and sell online characters, clothing, spaces, and social experiences.  Genies, founded in 2017, has attracted other high-profile investors recently including former Disney CEO, Bob Iger, and renowned internet investor/deal maker, Mary Meeker.  The Silver Lake investment, as reported by Dealbook values Genies at over a billion dollars, proven that unicorns are very much alive and well in the metaverse.

Even in the ongoing hype-cycle of Metaverse PR, this announcement is newsworthy on several fronts:

  • Large, established investors are staking their claims to the Metaverse.  With more than $90 billion under management, Silver Lake is one of the largest tech-focused PE firms on the planet.  In that context, $150 million isn’t a huge investment, but it does signal serious intent.  As Egon Durban, Silver Lake’s co-Chief Executive Officer, told Dealbook, “We’re just trying to invest in the very best technology companies.” That the same the firm tackled the buyout of tech behemoths like Dell and Broadcom is now setting its sites on a sub-200-person start-up, speaks volumes about Silver Lake’s view of the Metaverse market opportunity.
  • Metaverse and Web 3 business models are converging.  Genies is a prime example of how companies building the tools and technologies that will power the virtual worlds of the Metaverse are also leveraging the blockchains and non-fungible tokens of the decentralized internet or Web3.  Genies, for example, allows users to mint NFTs, which they can sell online (with a 5 percent cut of each sale going back to Genies.)  Likewise, Silver Lake has also made other Web 3 investments including a stake in Fanatics, the sports licensing and commerce juggernaut that owns NFT collectible company, Candy Digital, and blockchain development platform, Alchemy.
  • Rebels are becoming establishment. On the Genies website (albeit just below the fold) the company defiantly proclaims “Do what you want. We don’t care!” That bit of bravado notwithstanding, the company is reported to be in partnership with established media giants like Universal and Warner Music. These legacy companies know that attracting prime Millennials and Gen Z’ers to their patches of the Metaverse will require a bit of edginess, but what happens when rowdy avatars run up against corporate “standards & practices”?
  • The talent supply is about to get a lot more constrained.  Genies’ early success and Silver Lake’s deal will no doubt inspire even more investment activity in this sector. As startups and large global players (Disney, Facebook, Activision, etc.) compete for both technical and commercial talent from the same nascent talent pools, CEOs and their HR leaders will need to work harder and much more creatively to find executives who can lead and manage growth in this emerging industry. They will need to seek talent with the “horizontal” leadership competencies, analogous functional skills, and agility required to solve growth challenges in a market that’s incredibly dynamic and, in many important ways, still to be defined.

If you have insights or a hot take on the Metaverse or Web3 that you’d like share, dm me on twitter @jhussey12 or email me at jhussey@sriexecutive.com.