"Being consistent at something builds trust at scale.”
Josh Chapman is the Managing Partner of Konvoy Ventures, an early-stage venture fund investing exclusively in platforms and technologies in video gaming.
Konvoy has invested in over 21 companies and is now investing out of their second
fund of approximately $65M. Prior to co-founding Konvoy Ventures, Josh was an analyst at BlackRock, sales and trading at Morgan Stanley and a management consultant at Toptal.
Konvoy is very unique in its’ focus on gaming. But before getting into that would love to hear
about your background and what led you to start a venture fund in the first place?
Absolutely! I grew up moving every two years across Asia, Latin America, and Africa. While
growing up in all these different countries, there were all types of things that we could be doing for fun. One of those became gaming in the late ’ 90s, early 2000s, and we started hosting LAN parties. My parents got us a few computers and synced them up to play Age of Empires and Counter-Strike. Then we got into Halo and were holding Xbox-and-pizza parties, playing Halo, back in Halo 1, Halo 2. Gaming was always deeply social for me. Fast-forward to college: I studied business and decided to go into finance, got a job at BlackRock, then moved over to investment banking, then moved to equity sales and trading at Morgan Stanley, all in New York City. Then, I was returning back to becoming a gamer, primarily because on long days, I wanted to find some way to relax. I got myself another Xbox at the time and started gaming. I approached my co-founders, Jason and Jackson, and we decided that we always wanted to start something, and we talked about how gaming would be a great combination between our professional training and our personal passions. That’s what led to the idea back in 2016. We’re now about six years into this. We’re at, today, about one hundred and ten million dollars under management, we’re invested all across the globe, and we’re doing it right here in Denver, so it’s a lot of fun.
You’re one of the only American venture funds that are focused exclusively on gaming. Why
gaming, and why do you feel that the industry is big enough for you to invest exclusively in it?
When I first got into this, there were two billion gamers in the world. Now there are over three billion, just about six years in. So the growth rate of gamers themselves is growing. Second, I assumed that there would be so much dedicated asset management around this because a few numbers around this are that the public market cap of video game companies globally is about 2.1 trillion. That’s larger than the global market cap of cryptocurrencies, and the 2.1 trillion public market cap is not even including private companies. Today, dedicated asset management around gaming is around four to five billion. So is there an argument that you could turn, as a cohort of gaming funds, four to five billion into some fraction of a 2.1-trillion-dollar market cap?
I think there’s a strong argument that you’re going after a large, addressable, investable
market. So that’s how you back into the math of is there something here to return capital at
scale. That’s how we landed on it, and that’s why we’re full steam ahead in the space.
You’ve now raised your second fund. But raising your first fund must have been challenging
as you had no prior VC experience and wanted to invest exclusively in gaming. How did
potential LP’s react to that?
It was so hard. It was so tough raising our first fund. I think every first fund for almost every
manager is quite hard to raise, especially not having a background in venture capital. I think if you’re spinning out of Sequoia or Excel or Andreessen, it’s probably a little bit easier than what we did because you have this track record or experience at a top firm. But for us, we had a specific thesis on the space that tech platforms and infrastructure would be a better way to play this space because the multiples are higher than on content—little reference point there. Tech and platforms traded between ten to fifty times revenue. Content, like a game studio itself, trades around one to four times revenue. The return profiles and economies of scale are very different, so our thesis was interesting. Second, we were a little bit younger, which in gaming works really well. If I was launching a real estate fund, less experience might not be a great asset to raising that capital, but for us, it proved to be pretty effective. Then third, we just hustled and wrote content and got some amazing people to back us in fund one. We were thrilled and honored to have their support. Our first fund was about eleven million. Our second fund is sixty-five million, which we’re investing out of right now.
What kind of content were you doing that that helped you raise that first fund and give you
the clout you needed?
Other than referrals and networking with people, the content part of what we were doing was a weekly newsletter, which we still do to this day. You can look at our website. We have weekly newsletters going back about four plus years now. That was a huge way of, very slowly, on a weekly basis, building trust with people. Whether you realized it or not, you started to think of this newsletter as a place to read about gaming from someone who seemed pretty thoughtful about it. Now, we’re not always right. But we certainly are thinking about this on a weekly basis.
Additionally, we did some very extensive blog posts and deep dives into the industry, some of which never saw the light of day, some of which a few people read, and then a couple that got mass distributed on Twitter. We basically called out the e-sports space, and we were like, “Hey, these e-sports teams are not that valuable.” We talked about media rights, and that went pretty well. We talked about a few other things too. Blogging and newsletter consistency matters. And I think what I learned from that was that being consistent at something builds trust at scale. I think that’s something I homed in on that really has paid off and continues to this day. We’re sending out our newsletter this afternoon, and it’s going out to about two thousand investment groups worldwide. Our open rate is five times higher than the average in finance, so we’re pretty thrilled with it. It’s a strategy we’re actually doubling down into now.
One thing you’ve discussed in the newsletter is the metaverse. There’s been so much said
about Web 3.0 including Facebook changing their name to Meta; they’re big believers in it.
What is your take on the metaverse? How does this play out?
Very hotly debated right now, and certainly topical. In essence, the idea around Ready Player
One—that movie that everyone has watched by now, if not read the book—is that there will
be one metaverse that rules them all where we all hang out. It’s a farce. I firmly believe that
that’s not where we’re heading. There’s not going to be one homogeneous place where all of us hang out in the same sense that there is not one homogenous social group that dominates all of the world. For example, some people like to ski, some people like to go to a brewery, and some people like to play video games. Well, that starts to impact your social groups and who you like to hang out with. That impacts your fashion choices. That impacts the type of friends you have. That impacts a lot of things. The diversification and the breadth of human experience is something that’s actually kind of beautiful, that African cultures can thrive just as much as Latin American cultures that can thrive just as much as Japanese culture, and it goes on. So this idea that anyone could create one virtual world where everyone is happy is, I think, a total farce and not where we’re heading.
What I do think is happening is that just like we have TikTok and Snapchat and Instagram and other social platforms or social circles that people are part of, that’s also where we’re going with the metaverse in 3.0. We’re now moving to Web 3.0, which I think is just going to be a new variety of virtual-world experiences that you will pick and choose. So I might want to play in this world because it’s more fun. You might want to play in this world because you can make more money. Those are two different types of worlds with different motivations. Both are good, but some people need to make more income, whereas some people need to relax and have more fun. Both are inherently moral and good things, but they’re different worlds. They can’t necessarily always be one and the same. So where I think we’re going is that Facebook becoming Meta is them becoming, essentially, a gaming company. If you think about their logo, that Meta logo is a gaming controller as much as it is an infinity symbol and as much as it is an M. I think that the metaverse is being spearheaded by gaming because virtual worlds, virtual hangouts, and virtual currencies are fifty-year-old concepts in gaming. That is nothing new to our industry, but to everyone else, it’s very novel, and it’s a crazy idea.
As an investor, I’ve always been a firm believer that things that augment existing human behavior are amazing things to invest in. Things that change human behavior are horrible ideas to invest in. So the thought that everyone wants to be in a VR headset ten hours a day is a change in human behavior that I will not bet on. But ideas of instead of listening to calm or headspace, maybe listen to a VR meditation thing with visual therapy . . . that’s just an augmentation on what we’re already doing, and that is a very exciting, investable opportunity.
You’ve invested in close to thirty companies now, what’s been the biggest learnings?
The biggest lessons I learned is to trust your gut when it comes to founders. If it’s not the right fit, just call it. Second, don’t try to fix the company. Just try to help a company. I think that sometimes you look at so many companies that you learn a bunch of lessons and patterns, and then when you see a diamond in the rough, you want to try to fix some of their other stuff. There’s a big difference between advice and fixing, and I think we’ve shied more toward advice now than trying to fix the problem, whether it’s a cap-table problem or whether it’s a capital- raise issue or a product issue. We can’t fix it. It’s the founders that are responsible for fixing. It’s their company at the end of the day. We’re a minority investor, and so that’s the role we have to play, a minority-role impact on the company.
One of the other things I think about right now is how to think about the future of venture
capital. What does the next ten years of venture capital as a business look like versus the last
ten years? That’s occupying my headspace a lot right now. Probably over 40 percent of my time is spent really thinking of working on this. We have to be more supportive of our companies, we have to build out teams that operationally help them out, we need to be building out better content, better talent help, better partnerships, better summits, better podcasts. We need to be thinking about how to build out a full Konvoy platform that supports them better than just cash and occasional advice. I think that’s been a huge way venture capital has been done, and I think that it’s just going to be evolving incredibly quickly for the next ten years.
As the Managing Director of Konvoy, where are you spending your time and what are you
I think my time and effort are split primarily across a few things, alongside everything you do as a business owner. But the main thing is how we become the best in class. I think we build out a platform team and we build out a full support structure. I think that helps us be best in class. Two, how do we get in front of the best founders? That’s the other thing I focused on a ton. So one, how do we support the existing portfolio? Two, how do we find the best founders? That has a lot to do with newsletter writing and thought leadership and staying out in the market and having standing calls with great people in the industry, whether they’re founders, investors, or strategic partners of ours—so staying on top of things. Third, what’s the culture we’re creating at Konvoy for our internal staff? I think about this a lot because for us to pick good investments and support these investments well, it starts through an internal culture of everyone fired up to go to work. Is everyone excited to do what we’re doing? Does everyone feels supported, cared for on a holistic level? I think that the culture of the venture firm starts in the middle, then you find great companies because you have a great culture. Otherwise, you’ll find a few companies, and the culture sucks, and then it just means you got lucky. So how do you create a repeatable system? I think it’s about building a great team. We’re at seven people. We’ll probably grow to ten or twelve people this year. Next year, we’ll grow to fifteen to twenty people as a venture firm, and all here in Denver, which we’re really excited about. Also, the in-person component of venture is certainly not common right now. A lot of people are going to remote. We’re absolutely not doing that. We’re absolutely going down the path of we’re better together, we’re better in person, especially when you’re doing things that are very, see-around-corners, think-about-the-future kind of stuff, which is what venture capital is.
We’re thinking about what the world’s going to look like in five years and can this company
service that. Those are some pretty big, broad conversations. We’re just better in person on
That’s really interesting given your focus on gaming and virtual worlds. What are the things to you that you can’t replace online? What kind of things do you do as a team that you’re like, “This is so much better when we’re together.”
In no order, a couple of things. One is when you’re in person, you can pick up on body language and what the other person actually means versus what they might be typing on Slack or what they might say on a call or even on a video call. I’d say the second thing is that you get more of the spontaneous. “Hey, I had a quick thought, do you mind if I just bug you for a quick second?” And that thought could be nothing, or it could be amazing. It could be “Oh my gosh, that’s such a great idea,” then you can brainstorm. That’s really hard when you’re remote because yes, you could schedule a call, but you might miss that moment of spontaneous brilliance, which I think all humans are capable of, but it might be
random. Some of the best ideas just hit you at random moments. They don’t hit you on your
scheduled call about that topic.
Additionally, it’s more time efficient. I can talk with you for two minutes, or we could set up a
fifteen-minute call that blocks off our calendar. Humans also have a proclivity if it’s a thirty-
minute call to fill it for thirty minutes. But maybe both of you are super efficient, and you could have done that in three minutes. There are a few things like that that make us very, very excited about team culture, and that’s why we’re being pretty stringent here. I think it’s going to pay off. I think it is paying off and gives us an edge.
You’re probably excited to see some of your competitors go remote?
It’s amazing because I think we’re going to outperform them.
I’m sure you’ve gotten a lot of advice throughout this journey of launching and running
Konvoy. What would you say has been the most helpful or the best advice that you’ve
received so far?
A couple of things.
One, writing online is one of the most powerful things people can do because it allows people to understand how you think at scale without you having to do a bunch of one-hour calls. I’m shocked at how little people utilize this. You can just put your thoughts. Nobody cares if you’re necessarily wrong. They just want to understand how you think. Someone advised me to just write. I started doing that, and it paid off.
Second was start slow on the check-writing side. I’m really glad early on that we wrote small
checks, then slightly bigger checks, then slightly bigger checks. We stayed disciplined, and we grew from one-hundred-thousand-dollar checks, and now we’re writing three-million-dollar checks, but we stairstepped into that very, very progressively, and you can just watch it. We didn’t jump around too much, and I’m thankful because early on, I wasn’t as good of an investor as I am now. The same is true that three years from now, I think I’ll be better than I am today. This idea of stairstepping in was really good advice that we got, and at the time it was hard because we’re like, “No, but this opportunity is amazing. Let’s double down,” and I’m so glad we didn’t because sometimes we were just flat wrong, and so it capped our downside a little bit. I’d say the third one would be—it comes back to that thing, “trust your gut”—really trust your gut. If it’s not right, it’s not right. Walk away and just try to do that better and better over time. I’m so glad I was told that sooner. Trust your gut on the types of founders you work with, the people you hire, the partners that you agreed to a standing call with . . . whatever it is, just trust your gut. If it doesn’t feel right, it probably isn’t, and you should probably just move on. I’m trying to get better at that.
True in so many things. Has there been a book for you that has been most impactful in your
career or even your life?
Personally, my favorite book is Ender’s Game by Orson Scott Card. I love this book. Sci-fi,
strategy, the dynamics . . . it’s such a great book, and I’ve reread it multiple times. Professionally, I really enjoyed reading the book Blitzscaling by Reid Hoffman. I just found it so true that if you’re going to blitzscale and grow a company, you’ve got to move. It emphasizes action over planning, which is how Mark Zuckerberg built Facebook, and is just go, go, go. Another thing I really enjoyed is not a book, but a year ago we had the entire team every week read one of the Warren Buffett letters that he does every year. We started in the ’80s, and then we read all the way to the dot-com bubble in 2000. It was fascinating to see how he talked about people, how he talked about integrity, how he thought about business building and value creation, and to see this every-year evolution of him as an investor. It inspired us so much that we now do a quarterly letter to our entire investor base that invests in Konvoy. It’s certainly not even close to as good, but it was inspired by that, at least. As we conclude, any parting advice you would have for fellow entrepreneurs or investors?
Yes, If you’re starting a venture fund, start writing as fast as you can so people can understand how you think because any venture fund is raised on the back of the fact that I want to raise capital to invest in something that we don’t really know yet. It comes down to how you think as a GP.
For entrepreneurs right now, I think this is an amazing time to build a company. You have every resource at your disposal to build amazing companies. My advice would be get off the ground as fast as possible. Don’t wait for an investor to get you off the ground, fully understanding that some things do require capital, but some things don’t. I think it’s always surprising when people are waiting for some investor to validate their amazing idea. I’d say try to move. Entrepreneurship in general, trust your gut. It’s something I’ve started to really home in on. I think as you live more of life, some of those simple phrases get much more real versus ten years ago when I might have been like, “Oh yeah, for sure. I totally agree.” But now after living it, I’m like, “Oh, that’s gold.”
Thanks Josh for a great interview.
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