Investment Thesis
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Investment Thesis

Vision

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Round Labs is currently developing an app for users to engage in competitive arcade and financial games on top of blockchain networks

  • Our long-term vision is to build an aggregator of digital assets, gamified applications, and consumer experiences
  • We believe that mobile gaming is the perfect trojan horse to get regular folks to earn and use digital assets

Insight

  • The way we see it, the worlds of gaming, social networks, and fintech are colliding and colluding
  • This has created a once in a lifetime opportunity to build the next consumer platform: an aggregator of digital assets and gamified consumer experiences
  • As we spend more of our time consuming digital products and immersed in digital worlds, whether it is on OTT platforms, on social networking apps, or playing games, our behaviours in the digital world are mimicking those in real-life and our spending patterns are catching up
  • Moreover, you must have noticed that everything is gamified today
    • Shopping feels like a game of finding the best deals and the best credit card rewards
    • Travel seems like a game with a goal of visiting the most number of exotic locations
    • Watching sports is more about building the right fantasy team
    • Posting on social media is a game of likes and shares
    • Posting updates on LinkedIn and thought provoking tweets is nothing but a status and signaling game
  • Ironically, actual gaming is now a proxy for the real world. It is a place where users keep their mics switched on and hang out with friends, discuss politics, indulge in social gossip, and do their daily charcha. Interesting, isn’t it?
  • The team at Round Labs is leveraging public blockchain primitives to bring together the worlds of gaming, social networks, and digital assets under a common paradigm

Problem

Gaming: Great Mainstream User Adoption; But Poor Monetization

  • Existing business models of selling in-game consumables and highly priced digital collectibles do not work for 3 billion mainstream users
  • Freemium models devolve into pay-to-win schemes and lead to a frustrating user experience
  • The only alternative for game developers is to introduce in-game ads which unfortunately ruin the user experience and do not monetize very well
  • Poor monetization has deterred established gaming companies from truly embracing the mobile platform in emerging markets, and has led to a dearth of console-quality mobile content tailored to users’ unique and highly-localized preferences
  • Even though console and PC-based eSports are widespread, there are few trusted apps for mobile gamers to test their skills against other gamers while wagering cash

Digital Assets: Great Monetization; But No Mainstream Adoption

  • The consensus view is that digital assets can provide better financial inclusion
  • Emerging markets users are expected to be utilitarian beings who use the internet to find jobs, improve their financial habits, and self-educate
  • However, research reveals that emerging markets' internet users use it exactly like first-world folks: for flirting, gaming, and entertainment
  • Most blockchain apps today are targeting niche use cases that appeal only to the most sophisticated users who are motivated enough to overcome the steep technological learning curve and the UX friction of managing their own private keys
  • Blockchain apps that aim to ‘bank the unbanked’ need to accept users’ preferences for spending time within TikTok, Whatsapp, and playing video games. Admittedly, this may not be the best use of one's time, but we are all human and may have sub-optimal desires
  • For blockchains to reach mass adoption, we need to build around behaviours that users are already engaging in

Solution

Product

We have built a platform consisting of:

  1. A user-friendly and secure digital asset wallet
  2. An on-ramp to add cash (INR, USD, etc.) from your bank account or card to your digital asset wallet
  3. A non-custodial digital asset exchange
  4. An arcade of 8 casual mobile games
  5. A gaming tournaments engine built on top of the Ethereum and Flow blockchains
  6. An SDK for third-party developers so that they can seamlessly host tournaments for their games on our platform without having to create their own non-custodial wallets, player matching engine, token supply models, or Ethereum scaling solutions

Solving the monetization problem in mobile gaming

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  • Our uniqueness lies in converting a digital consumable (a gaming subscription or an in-game purchase) into a digital investment (entering and winning an arcade tournament or a financial game)
  • A mainstream user can engage in peer-to-peer battles and leaderboard-style multiplayer tournaments across our arcade of casual and financial games
  • Competitive gaming not only increases the revenue potential for an average user by 5-10x, but also increases engagement by adding a financial incentive for achieving new ranks on the leaderboards
    • Competition adds excitement and experiencing 'winning moments' everyday gives the users a sense of escapism from their mundane lifestyles
    • Having an arcade of games ensures that the users are spoilt for choice and can switch seamlessly between the different gaming experiences
    • Our product has a strong social element wherein users can catch up with existing friends and can meet new people while playing their favourite games
    • Adding the element of competition leads to 6-7 bite-sized game sessions per day wherein the average length of a game session is 5-6 minutes; thereby enabling engagement even when users are on-the-go

Solving the adoption problem in digital assets

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  • The most significant opportunity in crypto today is being able to own the relationship with the users
  • A sensible place to build killer blockchain apps right now is games, due to the fact that there is already a very large captive audience eager to experiment with new things, and since games add 3 novel elements to the digital asset ecosystem
    • Habitual usage through game mechanics;
    • Exchange as a secondary function of the product experience;
    • A massive entry point for new users
  • We view gaming as a trojan horse wherein users will initially come for the entertainment and the speculative payouts, but will learn how to manage their private keys, engage in on-chain transactions, and invest in digital assets, all without realizing that they are using open financial protocols on public blockchains

Product Features

Competitive Gaming

  1. Users can play the games in our arcade against other human users with cash and win awards that they can redeem for INR (or USD), or for digital assets based on their preference
  2. Users will also earn in-game rewards in the form of ERC-721 tokens (cricket player cards, fungible gaming currency, cars, guns, etc.), and these rewards will be stored in the user’s digital asset wallet
  3. Users can utilize the tokenized in-game rewards earned in one particular game on any other game within our arcade, thereby increasing in-app engagement
  4. Users will not even notice that the app is running on a blockchain since we have abstracted away confusing concepts such as gas and transaction confirmations

Digital Asset Wallet

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  1. We have built a frictionless onboarding experience using a 2-of-4 multi-signature and non-custodial wallet
  2. The user's private key is split up into 4 shards which are then encrypted and stored on Round’s servers, the phone’s secure element, the user’s linked google drive, and a QR code sent to an alternate email address respectively
  3. Our wallet can hold digital assets across several blockchains including Bitcoin, Ethereum, Ripple, Algorand, etc.
  4. Our wallet can hold ERC-20 tokens and ERC-721 tokens issued on the Ethereum blockchain

Investing in Digital Assets

  1. Users can add INR (or USD) to their wallet by using UPI, a bank transfer, or by using a credit or debit card, and can trade Bitcoin, Ethereum, Ripple, and several other Layer-1 blockchain assets
  2. Users can search, browse, and trade >2000 digital assets seamlessly from their mobile device
  3. Users will receive intelligent price alerts on their holdings so that they never miss a beat

Security of Digital Assets

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  1. Users can be assured of the safety of their funds as only they can access their assets, not even us
  2. Users will have peace of mind with daily transfer limits, locking, biometrics and more
  3. Users can recover their wallet in case of SIM card hijacking, lost/stolen phones, forgotten passwords, and hacking of Round’s servers
  4. Wallet recovery will not require any seed phrases or paper backups and is designed to be dummy-proof and user friendly

Cashing Out

  1. Users do not need to hold digital assets to use our app if they don't want to. They can choose to transact only in cash (i.e. INR or USD)
  2. Users can withdraw their game winnings and trading profits to their bank accounts at any time
  3. Users can freely swap their digital assets for any of the 2000+ digital assets available on our platform, or they can convert the digital assets to cash (i.e. INR or USD)
  4. Users can spend the cash and digital assets in their Round wallet at leading retailers such as Amazon, Uber, Nike, Flipkart, PayTM, PVR, etc. by generating QR code-based payment vouchers
  5. We also plan to offer a debit card which will be backed by the cash and digital assets in the user's Round wallet. Users will be able to earn 3-10% cash back in Bitcoin or Ethereum if they pay using our debit card, or spend using our app

Product Demos

App Videos

Enjoy our cool and frictionless non-custodial wallet onboarding & key recovery as well as our digital asset marketplace and contests engine in the following videos!

Creating Your Account

Logging In With Account Recovery

Resetting Your Password

Contests Engine

Game Videos

Please watch these videos in HD resolution (720p or 1080p) as YouTube may default to lower resolutions, and don’t forget to turn up the volume!

Koncept Racing

Western Shooter

London Run

Cricket Clashes

Jumping Ball

Paint Smash

Market

Market Size

  • Gaming is a $160bn industry out of which $63bn comes from mobile gaming
  • The industry is growing at 9.3% annually with almost half of the revenues coming from Asia
  • The market cap of digital assets is at $900bn already and is growing at 30-35% annually
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Audience

Initial Customers: 250m digital natives in India

  • 18-45 year old male or female who lives in an urban or semi-urban area
  • Uses an Android smartphone as his primary computing device
  • Uses a mobile wallet to buy physical and digital goods and services
  • Consumes 10-15 GB of 4G data per month; spends 30-40 mins/day playing games and 50-60 mins/day on video streaming apps

Subsequent Target Markets

  • US
  • Brazil, Russia, Indonesia, Vietnam, Mexico, and Nigeria i.e. emerging markets that present an overlap of opportunities in both digital assets and gaming

Business Model

Revenue Model

Fees For Hosting Mobile Gaming Tournaments

  • Rake: 15-20% of GMV
  • Estimated Average Gross Margin: $3-5/month/user

Digital Assets' Commissions

  • Fiat on/off ramp and digital asset exchange transaction fees: 2-3%
  • Affiliate fees from third-party apps: 10-15%
  • Estimated Average Lifetime Trading Volume: $1,000-$1,500/user

Potential Revenue Streams

  • Advertising and media rights from the games
  • Fees from enabling the discovery and issuance of new digital assets

GTM Strategy

First Prong: Inorganic Targeted Growth

Performance Marketing

  • Successful ad campaigns across Google, Facebook, Youtube, and third-party app stores (e.g., Xiaomi) for aggressive outreach

Engaging Youtube, Instagram, and ShareChat influencers

  • The millennial population is hooked onto social media, and influencer marketing has proven to be an efficient marketing tool with direct access to our target audience
  • Collaborate with relevant gaming and media influencers and leverage their communities and channels to create excitement and engagement

Physical Marketing

  • Send physical cricket player cards and game posters to early backers
  • On-campus marketing and organizing gaming tournaments at college festivals

Second Prong: Getting the viral loop going

  • Offer compelling referral incentives and unlocking network effects
  • Digital asset airdrops via easy-to-share WhatsApp and FB Messenger integrations
  • Pitch for authored stories to showcase thought-leadership in the space

Competitive Landscape

Competitive Gaming

  • Skillz: IPO at $3.25bn valuation
  • MPL (India): Raised $131m; Current Valuation: $400m
  • Unikrn: Raised $40m; Current Valuation: $150m
  • WinZo (India): Raised $23m; Current Valuation: $125m

Digital Assets (Global)

  • Argent: Raised $14m; Current Valuation: $45m
  • Dharma: Raised $11m; Current Valuation: $50m
  • a16z peers: Raised $1-5m; Valuation $10-25m

Digital Assets (India)

  • CoinDCX: Raised $20m
  • WazirX: Acquired by Binance
  • Matic Network: Raised $5m; Current Valuation: $50m
  • Nuo Network and Nuo Exchange: Raised >$3m
  • DeFi Dollar, Marlin Protocol, Covalent, Biconomy and Vauld: Early Stage India-based startups; Raised $1-3m; Valuation: $7-15m

Competitive Advantages

4 C's = Content + Competition + Commerce + Community

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USP

Building on top of public blockchains

  • Progressive decentralization and smart contract integration will help bring transparency to payout models in competitive gaming for both users and third-party game developers
  • We are using stablecoins for payments, smart contracts for determining and paying out rewards, and on-chain notarization to ensure that the tournament results are provably fair
  • We plan to expand our arcade from 8 to 30 games without spending a lot of time or money by enabling third-party game developers to add their games to our platform by integrating with the Round SDK
  • The idea that the Round wallet can directly interface with a variety of different financial apps and seamlessly hop around between them without sign-up, instead of having to through multiple steps to log in to a closed garden, is mind bending
  • One can use a prediction market like Polymarket to bet some dollars on the US election, withdraw the winnings to buy some options, or go long Bitcoin with leveraged perpetual swaps, all without filling in a single password or completing a captcha
  • This model allows every service to fixate on their one specific thing. Polymarket does prediction markets. Hegic does options. dYdX does leveraged perpetual swaps. And they each focus on perfecting their one thing
  • A new app store is being built on Ethereum by its >100,000 developers using the money for the internet. The Round wallet will be your passport to traverse this world just like the iPhone has been your gateway to the App Store over the past decade
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How this maps to our long-term vision

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  • As the number of digital assets, experiences, and applications trends towards infinity, and we race to explore the vast design space, digital asset exchanges will end up looking more like search engines for assets and applications
  • Between game tokens, digital collectibles, and liquid IP (i.e. NFTs) as well as cryptocurrencies and financial assets, we see a great opportunity in building an aggregator that surfaces markets based on the user’s address history, and takes affiliate fees as a market maker
  • It is no longer enough to create a wallet that solely makes it easier to hold and transact with digital assets, but rather we need to make contracts and blockchains easier to write to
  • By crafting an interface on top of existing tokenized protocols, we will have the chance to receive delegates from our users, and to use them directly in governance proposals to increase our own revenue
  • We are convinced that curators, living beneath aggregators, will become the most prominent brands as they fight for user attention

Progress

Achievements and Awards

Andreessen Horowitz

  • We are amongst the 25 teams out of 2000+ applicants selected by Andreessen Horowitz for their Crypto Startup School
  • Received $125k in grants from AWS and Google Cloud
  • Received grants (in the form of liquid tokens) from a16z's various blockchain ecosystem partners

Dapper Labs

  • We have been selected by Dapper Labs for their Flow Blockchain Alpha Accelerator
  • Flow has already raised $90m from public and private investors and shares our vision for introducing new business models to gaming via digital assets and blockchain-based consensus
  • Received a grant of Flow tokens and are supported by Dapper Labs' CEO Roham Gharegozlu to raise institutional seed round in the future

Near-Term Roadmap

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Team

Founders

  • Spent 6 years on Wall Street trading complex financial products and in tech M&A
  • Built 2 mobile games with >1m downloads, 150k paying users
  • Math & CS @Stanford, MBA @UChicago, a16z Crypto Fellow, On Deck Fellow
  • Operations ninja with experience managing 20+ member teams across DTC & CPG
  • Led business development for 2 early-stage startups
  • Studied Business @Duke Fuqua and Accounting @University of Mumbai

Core Team

  • Vishal Vasudeva: Tech Lead and growth specialist with deep expertise in skill-based gaming and consumer social apps; IIM-graduate
  • Tamas Bako: Worked on some of the biggest titles in the industry for blue chips including Sony Computer Interactive, Activision Blizzard, Electronic Arts, and Milestone Games
  • Akash Kumar: IIT-Bombay grad and experienced blockchain engineer having won prizes at MIT Bitcoin Hackathon, ETHIndia 2.0, MakerDAO bounty, amongst others
  • Sarang Parikh: Worked as a Blockchain Researcher at ConsenSys; Won prizes at MIT, ConsenSys, Aztec Grants, amongst others
  • Lakshay Kukreja: Front-end engineer with experience designing and developing applications for stock investing, consumer banking, fantasy sports, and competitive gaming

Key Angels

  • Len Buzyna, CTO of a successfully exited startup and crypto OG
  • Dean Soteropoulous, Head of Blockchain R&D at Credit Suisse in New York
  • Sandeep Nailwal, Founder and COO of Matic Network
  • Ravindra Kumar, Founder and CEO of Frontier, Founding CTO of InstaDapp
  • Siddhartha Jain, Founder and CEO of DeFi Dollar
  • Ram Shivakumar, Professor of Strategy and Business at The University of Chicago Booth School of Business
  • V. Sreepathy, Head of US Corporate Development for the Hinduja group
  • Prem Tadipatri, Head of Financial Innovation at Credit Suisse in New York

Financials and Projections

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Affiliate Revenue

Sources of affiliate revenue include interest income from lending, borrowing and staking digital assets, leveraged trading, options trading, prediction markets, trading of digital art and limited edition goods, and no-loss lotteries, amongst other use cases

Funding Requirements and Utilization

Funding Details

  • Raised $250k in the first tranche of our angel round at the end of 2019
  • Currently raising $1.3m (+ $200k greenshoe) in the second tranche of our angel round
    • Committed Capital: $1.25m
    • Capital Remaining: $50k (+ $200k greenshoe)

Funds Required

  • We are looking for 12-18 months of runway to work on product development, customer acquisition, and strategic partnerships
  • Use of funds
    • 30%: Salaries for developers and product team members
    • 40%: Marketing initiatives and advertising campaigns
    • 30%: Buffer for unforeseen contingencies and business challenges

Exit Opportunity

Exit Options

Initial Public Offering

The home run case

Acquisition

  • Building scalable consumer software on blockchains is extremely hard and our technological infrastructure should be very valuable for an established incumbent with distribution
  • Round Labs may very well be a good candidate for an acquisition by a fintech or media company

Buyback

  • We expect to have high gross margins with 0 marginal cost of servicing the incremental user since the assets and services we provide are 100% digital
  • Given that the business is expected to generate positive cash flows, the company could buyback the shares of the investors participating in the angel round

Token Sale

  • Once we have launched our product, we may issue a token to the stakeholders within our ecosystem in order to bootstrap our network
  • The investors participating in the angel round will have the right to convert a part or all of their investments into tokens
  • The tokens will likely have a 2-3 year vesting schedule and will be listed on top digital asset exchanges; thereby offering a path to liquidity for the investors

Considerations for launching our own token

  • Crypto enables token-based network bootstrapping wherein a project can finance subsidization of network utility building actions, user growth, and engagement with an asset tied to network value
  • While some participants may sell these rewards, those that hold are essentially converted into “network shareholders” that are long-term aligned, and have the potential to support the project as power users, influencers, and/or value-add investors
  • We are currently witnessing the runaway success of liquidity mining programs in the DeFi space. Token-based network bootstrapping can be applied to any application that benefits from network effects - from multiplayer games, to financial games, to social networks

Risk Mitigation

Considerations For Competitive Gaming

  • We will only include games that are games of skill and not games of chance. A game of skill is one in which winning is dependent on the skill level of the user vs. his opponent, the user's level of practice and training, the user's form on the day of the tournament, etc. A game of chance is one in which the outcome is dependent on a probabilistic event (for e.g., roulette, poker, dice, etc.)
  • Games of skill are legal and acceptable in 180+ countries
  • Games of chance and betting are not allowed in some countries including India. We will stay very far away from such games of chance

App Store Policy

  • Google Play Store does not allow cash contests
    • Most apps like Dream11 and MPL market their apps through direct APK install links, 3rd party app stores (Xiaomi, etc.), and referral links via influencers. We will do the same
    • In addition, we will launch an independent digital assets app that can be published on the Google Play Store. This app will include the games arcade but without cash contests. We will then incentivize the users to download the pro gaming app (with cash contests)
  • Apple App Store allows apps with cash contests
    • We won't need to pay Apple a 15-20% commission on sales as long as we do not use Apple Pay and instead ask the user to add cash to his digital asset wallet directly via a payment gateway, or by entering his credit or debit card details

Regulatory Concerns For Digital Assets

  • The Supreme Court via its directive in May 2020 deemed digital assets to be legal
  • We are further circumventing any issues by never taking custody of the digital assets. Unlike normal crypto exchanges, we are a non-custodial digital asset exchange wherein the users custody their own assets by controlling the private keys to their wallets
  • Furthermore, we will be KYC-ing every customer on our app
    • We will do light KYC for users who are only playing competitive games with cash contests (ID check and bank account verification)
    • We will do full KYC for users who buy or sell digital assets on our platform. This includes an ID check, bank account verification, a liveness check, in-person video verification, a review of the user's political affiliations and prior investment experience
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