11 November 2022

Glimpsing the future through the lens of days past: Part 2

Dear shareholders, friends and colleagues of Animoca Brands,

 

Only 5 months ago I wrote about the tumultuous effects of Russia’s war, ballooning inflation, and a crypto crash that we now know was caused by a number of irresponsible actors. And here we are again.

 

Our exposure to FTX is limited to a non-material trading balance and we continue to invest and support the ecosystem, most recently with Cool Cats, VCORE, Viker and a number of yet to be announced investments. Animoca Brands remains financially strong with a cash balance of approximately US$214 million, digital assets of US$940 million with a further US$3 billion of off-balance sheet digital reserves and a portfolio of some 380 companies representing the best Web3 and blockchain companies in the world (OpenSea, Dapper Labs, Sky Mavis, The Sandbox, and Upland to name a few) that represent significant additional value to the groups balance sheet (as of 1 November 2022)*.

 

It is fair to say that many of us, myself included, are very upset by the events of the last several days. I am not particularly upset at the drop in token prices; in fact recent developments would suggest more resilience in the market as compared to five months ago and we view them simply as moments in history especially when you consider what our industry looked like 5 years ago.

 

No, I am upset that the important work on making the web decentralized, free from central power structures that continue to abuse their disproportionate power, is once again being overshadowed by a very few irresponsible actors. Very few.

 

These actors do not represent our industry nor do they represent our vision to make the world a better place where value is distributed fairly and where we are able to generate and own our digital equity. What our industry suffered in the past week is certainly damaging but not as financially severe as what happened some five months ago. It was, however, an attack on our reputation as an industry and on the goodwill that we are building toward.

 

We should be talking about protecting creator royalties, we should be talking about how teachers can make fair pay for their contribution to society or the success of the recent The Sandbox Alpha Season with record participation and engagement. We should be talking about how all of us, and especially the more than 380 companies in our investment portfolio with their amazing products and services, are using Web3 to try to make the world a better place. All of you who continue to build through this slightly colder winter are the unsung heroes of this industry. They may not talk about your work, or about how creators, gamers and teachers changed their lives for the better thanks to NFTs, or about many other cool and noteworthy things that are happening right now. It may be discouraging that our industry has suffered another reputational setback, but the work you do is appreciated and important not just today, but even more so for tomorrow.

 

Things may be a bit tougher now, you may feel discouraged, and the temperature may remain low for a while longer, but the work we are all engaged in is contributing to the foundations that will change the future of our digital existence. 

 

Certain crises such as the current one and various others far greater, including Enron and Lehman Brothers, occur because a number of powerful elite players strive for zero-sum outcomes often through fraud, causing cycles of damage to any industry that they touch. 

 

This is what Web3 can and will change and we must also continue to educate the world about why it matters. Each life you impact for the better, through Web3, NFTs and/or the open metaverse is a victory to be celebrated. We don’t play to beat each other, we play to become better for ourselves and to help one another in the collaborative spirit of Web3, as we share in the network effect that we are building together.

Animoca Brands_Sharing the Network Effect.jpg

“History never repeats itself, but it does often rhyme.” - Mark Twain

 

Everything I wrote back in June still applies today: Glimpsing the future through the lens of days past

 

The devastating Dot-com crash of 2000 didn’t kill the burgeoning Internet. The horrific 2008 financial crisis didn’t halt the explosive growth of the Internet, smartphones, or mobile gaming. The frigid crypto winter of 2018 didn’t extinguish the crypto flame.

 

All of those events seemed brutally terminal at their time, but if you could travel back to 2000, 2008, and 2018, you would have no difficulty in picking the winning side that seemed — back then — to be inexorably doomed 

 

Similarly, the current market conditions will not kill Web3, the open metaverse, NFTs, or cryptocurrencies. There will be bumps on the road, cyclical variations, and the occasional black swan event, but the map to the future is legible by anyone who takes a broader and longer view.

 

We firmly believe that Web3 represents the natural evolution of the Internet, of a future where digital property rights and the resulting economic freedom will empower billions of online users in an interconnected series of open worlds and platforms. 

 

The incredible new talent, companies, and brands that continue to enter the space to build, despite the temperature, are all evidence of the important long-term indicator that everyone should keep their eyes on which is the strong growth of the Web3 market including Web3 games.

 

We recognize that there will be some difficulties and as an organization we are preparing to support our group companies through this period. 

 

I would like to, once again, express my deepest thanks for the support that Animoca Brands has received from shareholders, partners, and I am especially grateful to our growing family of companies, employees and the entire Web3 community, who all share a compelling vision of a tomorrow that is open, more fair, decentralized and one where we get to truly own our digital property.


 

With gratitude,

 

Yat Siu

Co-Founder and Executive Chairman

Animoca Brands


 

*Unaudited financial numbers.