Mar 2024 | Athera's Odyssey: Fun, Frugality, and Foresight
From how to make award winning toys to the values from three decades of investing, dive into this month's Odyssey.
In this month’s edition of Athera’s Odyssey, we explore
Portfolio Perspectives: We talk to Dinesh Advani, co-founder of PlayShifu to understand what it takes to reimagine playtime in the 21st century.
Athera’s Almanac: Parag Dohl shares what three decades of investing experience have taught him.
Ecosystem Stories: Tanay Tayal shares his insights from starting and running the gaming studio behind the likes of Teen Patti Gold and Ludo Club.
Pathways: Three research papers that have defined the modern day tech landscape.
Portfolio Perspectives: PlayShifu
In less than a decade, PlayShifu has become a global leader in educational toys, with a presence in over 35 countries and more than 1 million toys sold. The company's innovative phygital (physical + digital) toys have earned them recognition, including the Toy of the Year award and a spot on Wired Magazine's Best STEM Toys for Kids list.
As parents look to make playtime more productive for kids, the educational toy market has steadily increased over the few years spurned by the pandemic.
With an impressive 80% retention rate and an average playtime of 35 minutes per session, PlayShifu's products have proven to be both engaging and effective in promoting learning through play.
For March's edition of Portfolio Perspectives, we caught up with Dinesh Advani, co-founder of PlayShifu, to learn more about the creative process behind their groundbreaking toys and the impact they have.
The following is a lightly edited version of our conversation with Dinesh.
The Journey of a PlayShifu Toy
Athera: Can you walk us through the journey of a game within PlayShifu, from idea to inception, game design, and storytelling?
Dinesh: We are a toy company revolutionizing playtime for kids so we started by observing how kids are surrounded by technology and how they learn through play during their formative years. This led us to the realization that transforming playtime is key to transforming learning.
Our multifunctional team, consisting of technology, content, toy design, game design, and UI/UX experts, works together to create our products. We begin with a physical toy that kids can relate to and bring into the 21st century.
Once we have the physical form factor, we create games and interactions around it, adding a layer of gamified content. Our apps feature top-notch animations, learning elements, and entertainment value to ensure kids remain engaged for weeks and months.
Take our interactive globe, for example. We took the five-century-old concept of a globe and made it come alive using augmented reality technology. The globe symbolizes travel so we designed content and experiences for kids to explore the world through the globe. The kid can explore cultures, food, monuments, museums, and wildlife through the static interface of the humble globe.
In all our products the physical component can be bought from a retail store or an online store, and the digital component is downloaded on iOS, and Android tablets, or phones. When you combine the two, that is where the magic happens.
Enriching and Engaging Content
Athera: How do you ensure the content is enriching and engaging for kids?
Dinesh: Our creative team is the driving force behind the engaging content. We create multiple games around various themes that kids have an affinity towards, such as space, monsters, dinosaurs, and animals. This allows us to appeal to kids across ages and interests.
We also ensure that the learning component is adaptive, so kids are challenged at the right level. The quality of our animations rivals that of Disney, and the gameplay is rich and immersive. Our team creates captivating stories and weaves the entire gameplay around them, making learning fun and engaging for kids.
To create the perfect experience, we use game mechanics, adaptive learning tools, and top-notch content quality. We also have a feedback loop in place, where we test prototypes with a community of kids in Bangalore and the US to gather valuable insights before finalizing the product.
The Impact on Kids and Families
Athera: How do you work with kids to inspire new products or storylines?
Dinesh: Feedback from kids is an integral part of our development process.
We have kids from the intended age group play with our products and also involve older age groups to get specific and constructive feedback. This feedback keeps us motivated and helps us understand the impact we're making.
In Bangalore and the US, we have a community of about 200 kids to whom the first prototypes, both digital and physical, are sent. We get intense feedback from them and their parents. We use this feedback to ensure that all the obvious issues and fundamental pieces are taken care of before things are pushed into production.
We've seen the difference our products have made in Anganwadis (government-funded pre-primary setups in India) that lack access to technology and infrastructure.
The engagement our products generate is remarkable – kids continue playing with them even after months, which is rare for toys. Some of our toys are even being used by younger siblings after 2-3 years.
Kids also inspire us to create new storylines and products.
During a play session, a kid asked if they could become a doctor, which sparked the idea for us to create a doctor kit. This kit became a finalist for the Toy of the Year award, which is like the Oscars in the toy industry.
The Future of Educational Play
Athera: What are you excited about in terms of the future of content and gamification at PlayShifu?
Dinesh: As we've grown from one product to over 20, we've gained a deep understanding of kids' milestones and the buying process. This knowledge allows us to venture into new categories, including pure entertainment and products that bring families together to play.
One exciting project we're working on is a digital pet that grows and learns with the child over weeks, developing its own personality. We're also exploring multiple areas that cut across categories, deliver entertainment, and offer soft learning value. These new products will be launching in the next 6-12 months, and we can't wait to see how kids and families respond to them.
End.
One of the reasons we backed PlayShifu is their bold mission to reimagine playtime and create lasting learning experiences for kids. Through their innovative phygital toys, PlayShifu is bridging the gap between the physical and digital worlds, making learning fun and engaging.
As they continue to grow and evolve, we remain committed to helping the team push the boundaries of what's possible in the world of educational play.
Athera’s Almanac: Parag Dohl
As I reflect on my three-decade-long career in the venture capital industry, I can't help but marvel at the incredible journey I've had. When I first joined ICICI Venture in 1993, fresh out of my MBA, I had no idea that I would fall in love with this industry and make it my life's work. Little did I know that my accidental entry into the world of VC would lead me to witness and participate in the extraordinary growth of India's startup ecosystem.
Early Days: Witnessing the Impact of Liberalization
In the early days, the country was a different place. India had just begun to liberalize its economy in 1991, but the true impact of these measures didn't hit me until I started working at ICICI Venture.
I vividly remember interacting with portfolio companies like Armaan Electric, which made keyboards in India, and Transmatic Systems, which had developed specialised printers for banks. These companies were once hailed as pioneers, thriving in an era of import substitution. However, as liberalization took hold, they struggled to compete with global players.
At ICICI Venture we had an 80:20 split between non-tech and tech investing, so while tech-related investments were few and far between, one of the learnings from the non-tech investments could be summarised as
“There is many a slip between the (macro) cup and (micro) lip (in India)”.
A prime example of this was our investment in an IVF clinic in the early 90s. While there was a clear need for such services, we underestimated the importance of affordability and accessibility in the Indian context. It was a valuable lesson that “x% of India’s couples are infertile, hence a large market” kind of hypothesis does not necessarily work in a context-heavy market like India.
A corollary is that timing is key, even if your hunch is right it might be a decade or two off. A good look at the consumption patterns of Indian consumers is essential before “concept arbitrage” (cloning a US/China/Western idea) is employed.
Intel and GE: Lessons from Corporate Venture Capital
After my time at ICICI Venture, I moved on to roles at two other corporate venture capital firms - General Electric (GE Capital) and Intel Capital. My experiences at these firms provided valuable lessons and insights into how they operate compared to traditional venture firms
I joined GE in 2000. While GE Capital is more corporate than Silicon Valley in its DNA, what surprised me about GE was the appetite for risk and streamlined decision-making, especially for a behemoth of its size.
It was at GE that I truly understood the importance of having functions like finance and HR deeply involved through structured reviews.
After a brief stint at Genpact, my next stop was Intel Capital, where I got a closer look at how a Silicon Valley-based corporate VC operates. As a manufacturing company at heart, Intel had a culture. Intel’s strong cash flow was used to make equity investments in the ecosystem to fuel its core business growth. I also saw the flip side - dual objectives (ecosystem growth and financial returns) blurred the mission.
I still recall the then-CEO, Paul Otellini (Paul was on Google’s Board then), likening Google to Intel’s crazy growth 20 years prior.
He predicted that Google would also become a stable/moderate-growth company (and it has!). A stark reminder of the breakneck pace of change and the constant threat of competition - even the mightiest must constantly adapt to stay ahead.
Looking back, my time at GE and Intel was an insightful exposure to the inner workings of corporate VCs, the art of navigating complex organisations, and the importance of adapting to diverse business cultures.
Athera and Beyond
After a chance encounter with Samir Kumar, I joined Athera in 2008 as a Principal. We were known as Inventus India then - an India-focused investing arm of Inventus Capital, co-founded by Kanwal Rekhi, Samir, and John Dougery.
A lot can happen over 15 years but in the interest of time, I’d like to share three learnings from my time here.
The CAC equation has changed considerably
One of our defining investments was redBus in 2009. It was a pivotal moment that crystallized the potential of the internet in India. Within months of our investment, we witnessed a dramatic shift from call centre bookings to online (straight-through) transactions.
This signal led us to back FundsIndia, betting that consumers would soon graduate from e-commerce to more complex online services like investments and insurance. The two-sided network model of aggregating producers and consumers became a guiding principle for many of our subsequent investments.
However, the landscape of consumer internet investing is rapidly evolving, presenting new challenges. The dominance of Google and Facebook in digital advertising has led to skyrocketing customer acquisition costs (CAC). The low-hanging fruit in two-sided network models has mostly been plucked.
Striking the right balance between CAC and high gross margins proves elusive for many and will remain a challenge for years to come as AI alters the CAC equation yet again.
The importance of practising what we preach
Of the values we hold dear, one is frugality. It is something that I have grown up with and it is something that we also try and practice at Athera. One of the things that doesn’t sit well with me is VCs asking founders to cut costs while sitting in swanky offices.
Frugality is a mindset that’s hard to learn if it’s not a value that has been taught early on and we see it as one of the defining characteristics of the founders we choose to back.
A prime example is Yashish Dahiya, co-founder of PolicyBazaar. Even after raising significant amounts of money from 2014 to 2017, Yashish & Alok (his co-founder) chose to open 5-6 smaller, modest offices close to a metro station to make it easier for employees to commute.
The Startup world needs its own Sidney Poitier
Finally, if there is anything I’ve learned from my lived experience, reading, and general observation, it is the outstanding impact of true pioneers. Someone I frequently remember in this regard is Sidney Poitier, the first black man to receive an Oscar for Best Actor.
Sidney's groundbreaking Oscar win inspired a generation of black actors to pursue excellence, I believe that today's Indian entrepreneurs need their trailblazer – a visionary leader who can inspire and guide them to reach new heights.
While we had the likes of Narayana Murthy to look up to, the current generation of entrepreneurs is still waiting for their shining example.
I hope that someday soon, we will celebrate the emergence of a pioneer who will light the way for aspiring entrepreneurs across India, just as Sidney Poitier did for black actors. Until then, let us continue to work tirelessly, support one another, and never lose sight of the need to build and create impactful institutions.
Ecosystem Stories & Discoveries with Moonfrog Labs’ Tanay Tayal
Founded in 2013, Bangalore-based Moonfrog Labs studio has launched blockbuster mobile games like Teen Patti Gold and Ludo Club, each clocking over 100 million downloads. Moonfrog's success caught the eye of global players, culminating in a $100 million+ acquisition by Sweden's Stillfront Group in 2021.
Tanay Tayal, an INSEAD MBA graduate with a knack for marrying creativity with business acumen, was at the helm of this rise. Tanay's journey from software engineer to pioneering the "games as a service" model in India offers a playbook for the country's burgeoning gaming ecosystem.
In this edition of Athera Odyssey, we sit down with Tanay to retrace Moonfrog's origin story, dissect the evolving landscape of Indian gaming, and gather insights for the next generation of founders and developers.
The Genesis of Moonfrog Labs
Athera: Tanay, you started your career as a software engineer and then took up various business and sales roles before moving to Zynga. What made you shift to gaming?
Tanay: Gaming is an exciting space because it marries many of my core interests and skills. I like being creative and gaming was the perfect place to put that to use along with my software engineering and business background.
Before Zynga, I had experience in product and sales roles. The opportunity to work in gaming came about because Zynga had launched Farmville, and it was growing fast, so they wanted someone to help set up the India office.
When they reached out to me I found that it's an amazing combination of all three of my skills across business, product and analytics, and creativity. Plus I love playing games and understanding user psychology and behaviour.
I helped build the product organization and run some games out of the India office, growing that from 10 people to about 250 people. That's when I decided to start my own company [Moonfrog Labs] with some of my colleagues who worked with me at Zynga.
Athera: What market opportunity did you identify when founding Moonfrog?
Tanay: In 2013, mobile gaming was at an inflection point. Smartphones were rapidly proliferating across India and we believed this would open up a market on par with the scale China had witnessed. While incumbents like Zynga were still focused on Facebook and browser-based games, we saw a huge untapped opportunity in mobile-first, made-in-India titles. That conviction formed the bedrock of our pitch and strategy.
Decoding the Gaming Landscape
Athera: In the initial phase, what are some surprising things you learned about building and running a mobile-first gaming studio?
Tanay: Have you seen the movie Moneyball? Games were created and published with a similar sort of approach used in the movie, which is built on statistics and data analytics of genre, cohort, and other factors. So back in the early 2000s, the gaming industry was run like a movie business - you crunch the numbers, build it once, launch it, and then it's played on a console.
What changed was with online connectivity and server-connected games, games became more like GaaS or "games as a service". You could change statistics and difficulty in the background. You could tune the game depending on the data and add new content on the fly.
Games became more of a service business, like television series. Based on what was working, you could adapt and change the game on the fly. That's what we call "live ops" in gaming.
So at one end, you need a really strong game. Then you need a strong team to run operations on a day-to-day basis with maybe two releases a week. You have to constantly look at data and make decisions, fine-tuning things like the game economy.
A lot of these games have complex economies akin to managing the GDP of a small country. There's inflation, sources, and sinks of currency to keep in control. People perceive virtual currencies to have real value so they work towards certain goals.
The games can be of many different genres appealing to different player types and psychologies. Building and running these required a strong data and analytics platform, which we spent the first 6 months building out. That enabled us to launch our second game much faster, in just 6 weeks.
Athera: On that note, how do you see the Indian gaming landscape now? Are studios targeting new genres or trying to double down on what Moonfrog set as a precedent?
Tanay: Gaming is so wide and you can slice and dice categories and genres in many ways. The industry has come a long way in the last 10 years in India. The Indian gaming industry has matured by leaps and bounds over the last decade. When we started, the ecosystem was nascent with only a handful of studios. Today, it's a vibrant melting pot of developers, investors, and gaming titans making inroads into India.
One crucial distinction is the delineation between real money gaming (RMG) and casual gaming. RMG encompasses platforms like Dream11 and Mobile Premier League that have gained immense popularity but operate in a distinct regulatory realm.
Moonfrog and several of our contemporaries, on the other hand, built purely entertainment-led casual games spanning myriad themes and genres. From social casino games to puzzle and strategy titles, the diversity is staggering.
Each genre has a different way to monetize - some are ad-driven, and some have in-app purchases which could be power-ups (like Candy Crush), longer playtime, or purely cosmetic (like Pub G). Different games have different motives and a good team needs to figure out what works for the genre and capitalize on that.
Advice for Aspiring Gaming Entrepreneurs
Athera: What guidance would you offer founders looking to make their mark in Indian gaming?
Tanay: My first piece of advice is to gain ground-level experience in the genre you're passionate about. Aspiring to build the next big shooter game? Go work with the likes of Leela Games or Mayhem Studios to understand the technical and creative nuances. Fancy creating a narrative-driven title? Apprentice with a studio specializing in story-rich games.
Secondly, recognize that a successful gaming venture demands both passion and technical prowess. It's akin to being an F1 enthusiast - knowing the ins and outs of the sport is great but to compete, you need the skills of a top-tier driver, mechanic and engineer rolled into one. Assemble a team that complements your strengths.
Lastly, treat user acquisition as a science from day one. Home in on the right marketing channels, forge strong partnerships, and relentlessly optimize your campaigns based on hard data. The gaming landscape is increasingly crowded and having a well-oiled UA machine can make all the difference.
Building a Successful Gaming Studio
Athera: Looking back, what were some of the standout factors that contributed to Moonfrog's success?
Tanay: One of our biggest strengths was the founding team's chemistry and complementary skill sets. Having worked together at Zynga for years, we had a shared history and deep understanding of each other's domains - from engineering and art to product and analytics. That foundation of trust and collaboration was instrumental in our early days.
Secondly, we were extremely disciplined in our approach to game development and monetization. We invested six months in building a robust data backend to power our LiveOps for our very first game. This allowed us to rapidly prototype and iterate on new titles, going from concept to launch in a matter of weeks.
Moreover, we were prudent in our monetization strategy, balancing in-app purchases with a strong focus on delivering engaging, polished gameplay. That user-centric ethos, combined with our data-driven approach, enabled us to achieve profitability within just a few years - a rarity in the world of consumer tech.
The Road Ahead
Athera: As we wrap up, what are your top hopes and predictions for the Indian gaming ecosystem over the next five years?
Tanay: I'm incredibly bullish on the potential of gaming studios coming out of India. We're already seeing a groundswell of talent, with seasoned developers from top-tier studios striking out on their own.
When we started, it was hard to find game designers or people with product experience in games. We had to grow them in-house or hire from abroad. But now there are many more people with 10-15 years of experience in the industry, whether in India or internationally.
On the regulatory front, I believe the distinction between real money gaming and skill-based casual games will become increasingly clear, fostering a more stable and innovation-friendly environment.
Lastly, I expect to see a surge in investments and M&A activity as global players wake up to the untapped potential of the Indian market. With marquee exits like Moonfrog, Nextwave and PlaySimple already under our belt, the stage is set for an explosive phase of growth and value creation.
All in all, I couldn't be more excited to see what the next generation of Indian gaming startups will achieve.
Pathways: The Value of Research Papers
This month under Pathways, let’s dive into reading of a different kind - research papers! To keep it interesting, we recommend three (out of very many) landmark research papers that precipitated watershed moments in tech. We’ll keep our narration short, and link the original papers. If short of time, run it through GPT-4 or Claude-3, and ask whatever you feel like to get summarised answers.
Start with “The anatomy of a large-scale hypertextual web search engine”
Published in 1998, the paper was authored by Stanford University PhD candidates Sergey Brin and Lawrence Page. This covers, you guessed it - the official origin of Google!
Explore the original whitepaper on “Bitcoin: A Peer-to-Peer Electronic Cash System”
Published in October 2008 by the elusive Satoshi Nakamoto, the paper lays the groundwork for a paradigm change in how the execution of global payments can be envisioned, in a decentralized manner through a trustless system. Bitcoin’s fortunes may have been uneven over the last few years, but perhaps the story is yet to play out entirely.
Finally, end with the revolutionary 2017 paper Attention is all you need
Vaswani et al. introduce the Transformer architecture - based solely on attention mechanisms - doing away with recurrence and convolutions. In a nutshell, this ushered in the age of generative AI and is perhaps a mandatory starting point for anyone looking to familiarize themselves with the field. That said, this one might need quite a bit of additional googling.