Andreessen Signals Confidence in Play-to-Earn Crypto Gaming With Yield Guild Investment

American venture capital firm Andreessen Horowitz sees potential in the play-to-earn gaming business model, in which players earn cryptocurrency rewards for playing games—such as the surging Axie Infinity. That’s why the firm announced today that it has led an investment round in Yield Guild Games, a rising Filipino startup focused on play-to-earn business models.

Beyond Andreessen, the $4.6 million investment round also included participation by Kingsway Capital, Infinity Ventures Crypto, Atelier Ventures, and Gabriel Leydon, co-founder and former CEO of mobile game developer, MZ. The round, which was finalized in July, follows a previous $4 million Series A round announced in June, which was led by esports and gaming-centric VC firm, BITKRAFT Ventures.

Yield Guild Games’ largest focus to date has been Axie Infinity, the Ethereum-powered monster-battling game that has facilitated more than $1.3 billion in trading volume for in-game NFT items to date—most of it within the last couple months. The startup is one of the leading purveyors of the in-demand “Axie scholarship,” a profit-sharing model that has onboarded more users into the game and likely helped fuel its recent rise in popularity.

An NFT acts like a deed of ownership to a digital item, whether it’s an image, video file, or something else made provably scarce via blockchain networks like Ethereum. With Axie Infinity and other crypto games, interactive items like characters, weapons, and gear can be bought and sold as NFTs, and used to earn crypto rewards that have real value.

Axie Infinity players need three NFT monsters to start, but they are expensive: each sells for about $200-300 worth of ETH on the low end, thus requiring a significant upfront investment. As an alternative, Yield Guild Games and other firms loan Axie NFTs to users. Players keep the lion’s share of the SLP tokens earned in the game, which can then be exchanged for cryptocurrency, while the NFT owner and a manager take a smaller cut of the profits.

It’s a model credited with generating liveable income for players in developing countries, as explored in the recent documentary short Play-to-Earn, which Yield Guild co-funded. Earlier this month, cryptocurrency exchange FTX announced that it sponsored 137 new Axie scholars in Yield Guild’s program in countries such as the Philippines, Indonesia, and India. As of today’s funding announcement, Yield Guild has 4,700 players in its Axie program, and they have earned a collective $8.6 million worth of in-game rewards to date.

“Right now there is a largely untapped economic opportunity in emerging markets to provide jobs by building a virtual economy in the digital world,” wrote Arianna Simpson, General Partner at Andreessen Horowitz, in a post. “The way we define a ‘job’ is quickly evolving because of crypto and gaming, and we think we’re just starting to glimpse what’s possible in this realm.”

Axie Infinity surged to popularity this summer after developer Sky Mavis launched Ronin, a sidechain that minimizes the impact of Ethereum’s transaction fees and times. The game has amassed more than one million daily active users, as of this month, and has seen ample NFT trading volume of late. On top of that, Axie’s native AXS governance token has skyrocketed in value, reaching a new all-time high above $80 this week after Coinbase’s recent listing. It was worth just $0.59 at the start of 2021, according to data from CoinGecko.

On top of $9.9 million raised from three investment rounds this year—including $1.3 million in March—Yield Guild Games also raised $12.5 million in a July token sale that sold out in just 31 seconds. The firm is also exploring play-to-earn models in other games besides Axie Infinity, and has invested in NFT assets for upcoming Ethereum-based games like The Sandbox and Guild of Guardians.