In the first quarter of 2020, the total overall spending on video games in the US reached a record of $10.86B (a 9 percent increase compared to the same quarter last year). With the COVID-19 keeping more people at home seeking entertainment options, video game spending isn’t slowing down and recent trends in gaming have reinforced the untapped potential that exists in the virtual economies in these games that offer items like skins, accessories, features, real and estate that players pay REAL money for. DMarket is the blockchain-based game marketplace that provides transparency and the virtual economy technology for in-game space. DMarket’s platform technology has already enabled gamers to co-create video game content securely and generate profit while continuing to play and have fun in games such as Dota 2 and Team Fortress 3. Game developers are able to seamlessly build their own in-game stores. The in-game market has the potential to reach up to $300B in the next few years according to DMarket.
LA TechWatch caught up with CEO and Founder Vlad Panchenko to learn more about the company’s DMarket’s unique features, the untapped potential of the virtual economy, and recent funding round, which brings the company’s total funding to $25.6M across two rounds.
Who were your investors and how much did you raise?
$6.6M Series A led by Almaz Capital, with support from Xsolla and Fulgur Ventures.
Tell us about the product or service Dmarket offers.
DMarket is an in-game item trading platform and a monetization technology for game developers, content creators, brands, and players. DMarket technology is an engine to power platforms and digital worlds, creating a virtual economy.
We are providing tools and mechanics for building digital in-game stores, launching peer-to-peer items trading, and implementing user-generated content as well as content created in collaboration with brands, celebrities, and influencers. We also take care of all the paperwork, legal requirements, and provide payments for millions of users worldwide.
Essentially, DMarket creates an ecosystem where game developers, players, influencers, and brands are able to co-create video game content securely and generate profit while continuing to play and have fun in different gaming multiverses.
This now offers the ability for billions of people, not only in the gaming space but in connected industries, like fashion, design, trading, music, movies, etc. to be part of the gaming ecosystem.
What inspired the start of DMarket?
DMarket was born out of the deepest passion for the gaming industry and community, and the sincere desire to create a future in the virtual reality where everyone is happy doing what they really love.
I have always wanted more for gaming. I believe in the virtual economy and what it can mean for “in real life.” This includes game developers, content creators, brands, and players. What we built at DMarket.com is only the tip of the iceberg. It’s actually powered by DMarket.tech, which is a technology we use for the gaming industry and beyond – brands/gaming, movies + gaming, fashion + gaming, etc
We are building an ecosystem where everyone connected can make money through the platforms and video games powered by DMarket technology.
How is it different?
We have years of experience in trading in-game assets and we know exactly which mechanics will be most applicable in the future.
We are leveraging multiple technologies under the hood. DMarket was built using both distributed ledger technology and A.I. The distributed ledger tech is focused on transparent and secure transactions and our A.I. hones in on using deep analysis, predictions for pricing, demand, and availability. This is a new approach for making gaming more available to industries around the world.
The B2C platform is our proof of sustainability of the technology – and it’s worked tremendously. We built the bookstore on the path to making our own version of Amazon for digital assets.
What market you are targeting and how big is it?
There are a number of different markets featuring in-game assets that we are targeting, official and non-official. Officially, based on surveys, it’s collectively around $20-25B Unofficially, the in-game purchases market reached up to $90B in 2019. The potential for the next few years is $300B at least. I would give it even $450B in the next 5-7 years.
What’s your business model?
We have two ways that DMarket makes money: B2C and B2B. It’s a revenue share and SaaS. Our B2B audience includes game developers, brands and influencers. With them, it consists of a revenue share model, or revenue share combined with a commission.
For the B2C portion of our business, it’s a commission-based model. We make 5 percent on every deal.
We are proud to pay out millions to gamers every month. They are doing what they love and making money (for some it’s their entire livelihood) with our platform.
How has the business impacted by COVID-19?
The gaming industry was among a small number that continued growing during enforced isolation. In the first quarter of 2020 we had up to 60% of users increase in some markets. I wouldn’t complain: COVID-19 has helped us to grow our business.
What was the funding process like?
It was my first venture fundraising, and it wasn’t easy – especially due to the coronavirus crisis. But we successfully managed it, and I’m glad we had this experience.
What are the biggest challenges that you faced while raising capital?
We had a few venture funds with documents signed and fully ready to invest in DMarket Technology. But due to COVID and the difficult economic environment, beginning in February, many venture capitalists were trying to support their existing portfolio rather than invest in new startups.
What factors about your business led your investors to write the check?
Our lead investor Almaz has known DMarket for almost three years, regularly keeping in touch, observing our ups and downs, visiting our offices a few times. They strongly believe in the rise of gaming economies and the desire to personalize the digital persona and express individuality in virtual worlds, and the future of blockchain technology.
Our lead investor Almaz has known DMarket for almost three years, regularly keeping in touch, observing our ups and downs, visiting our offices a few times. They strongly believe in the rise of gaming economies and the desire to personalize the digital persona and express individuality in virtual worlds, and the future of blockchain technology.
What are the milestones you plan to achieve in the next six months?
In short, we are planning on finding a market fit, signing more games, bringing DMarket Technology to the next level, and to hire more people.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
The beauty of LA is in the diversity of extremely talented and successful people, from sports and entertainment celebrities to film and game streamers. Most of them are eager to invest your creativity, and this is the most precious LA experience, a real ‘diamond in the city’s crown.
Where do you see the company going now over the near term?
In the next year or two, I see DMarket as an industry leader and a trendsetter of its niche.
What is your favorite restaurant in LA?
There are two that I really like – Kazu Nori and Gjusta.
You are seconds away from signing up for the hottest list in Los Angeles Tech! Join the millions and keep up with the stories shaping entrepreneurship. Sign up today