Silicon Valley venture capital firm Andreessen Horowitz, which has spent the last decade funding tech startups ranging from Airbnb to Soylent, is debuting a new $600 million fund for investing in the video game industry.

The fund (named "Games Fund One") will be split between three types of companies: game studios, companies developing player-targeted apps like Discord or Twitch, and companies creating tools and services for game developers. Discord cofounder Jason Citron, Riot Games cofounder Marc Merrill, and Blizzard entertainment cofounder Mike Morhaime are among the industry veterans participating in the fund.

This isn't Andreessen Horowitz's debut in the game industry. The investment firm's portfolio already includes companies like Riot Games, CCP, and Epic Games, and newer companies like Sandbox VR and Bonfire Studios are also benefactors of the firm's finances.

So what's driving interest in this fund? Games partner James Gwertzman, who most recently sold PlayFab to Microsoft in 2018, told us that the company's focus is on live service games. With increased player interested in games like Fortnite, League of Legends, and Minecraft, Andreessen Horowitz apparently is beginning to think of these games as something that resembles social networks, and scale like consumer technology companies.

Gwertzman advised us that developers interested in seeking money from Games Fund One should not only be thinking about live service games, but also about the world of user-generated content. There's also interest in games where "the community is encouraged to participate and help create" using that user-generated content.

As one example, he pointed to game developer Singularity 6 as being a developer that's started to build community interest in its upcoming MMORPG Palia well in advance of the game's launch.

Much of Andreessen Horowitz's announcement for Games Fund One makes mention of the metaverse, a digital futurist concept that's become part of the company visions for Epic Games, Meta, and beyond. Gwertzman admitted that there are still a lot of unknowns on the prospect, but provided key benchmarks that Andreessen Horowitz is looking for in metaverse projects. 

He described the metaverse as a place where players can have multiple experiences that come together in a seamless fashion, and that a player's identity can be maintained moving from game to game. He pitched the idea of in-depth game worlds with high levels of detail that are capable of supporting many kinds of sub-games. 

His elevator pitch was the idea of Read Dead Redemption's wild west open world being usable for multiple games. "Isn't it a shame that you can't go and play other games inside of the same vibrant world that Rockstar created?" (We should note that Red Dead Online vaguely supports this idea already, though it obviously has been a bit slow on content updates lately).

Moving between those games-within-games would involve letting players haul their personal avatars or cosmetic items with them. "You'd want to share your identity across environments, you'd want to share your avatar across these environments, and potentially some items you acquire along the way." 

Gwertzman raised the notion of decentralization as being essential to make metaverse projects truly match that vision. Decentralization of course, is the watchword for the world of cryptocurrency and blockchain technology, which has been a big focus of Andreessen Horowitz's big bets in the last year. In January the firm announced its intent to invest $4.5 billion in crypto-informed startups.

Not all of Games Fund One's investees will be cryptocurrency or blockchain focused (Gwertzman quipped that it's funding many "web2" companies, along with web3 firms), but the firm does seem to see "web3 tokens" as a vital part of live game growth. 

It's not surprising to see Andreessen Horowitz continue to bet big on crypto technologies (the firm did just release a very rosy State of Crypto report), it is notable that it's still pushing on crypto in game development while the industry is currently experience a very dramatic market crash.

We quizzed Gwertzman about this, and about the statistic produced by Game Developers Conference (disclaimer: GDC is our our sister organization) that indicated that as many of 70 percent of game developers are not interested in blockchain-based games. "There is huge interest on behalf of game developers who want to learn more about the space," he said, citing his own experiences at GDC 2022 where web3 enthusiasts in attendance rendered blockchain talks "standing room only".

Gwertzman did state that cryptocurrency's involvement in game development would need to rely on games that are focused on fun and long-term retention first, with decentralization and player ownership "on top" of those experiences. He conceded that early crypto gaming focused on "aspects that were frankly a bit more prone to speculation."

"It was more about people trying to make money and less people trying to have fun," he said. "That in some ways, gave developers a sour taste about where this space is going."

As for the crypto crash, which has even hammered "stablecoins" like Tether, Tether, and DEI Coin, Gwertzman chalked that up to normal market fluctuations. "These markets are so dynamic and so new, they're going to be going through all sorts of gyrations," he said.

A long-term thinker might look at Andreessen Horowitz's new fund as another product of the COVID-19 pandemic. With interest in video games skyrocketing during various stages of lockdown, investors of all stripes have suddenly jumped into the space, enticed by growing revenues and long-term user retention.

Andreessen Horowitz obviously isn't a new player in games, and it wouldn't be fair to call this a bandwagon fund effort. But this financial muscle being thrown into the game shows that with new money comes new expectations. Financiers will want returns on investments, and bigger returns come from big, live service games that border on social media-level growth.