Not only does Josh Chapman love playing video games, he’s also a big fan of watching other people play video games.
And so do 400 million people around the world, he said. Chapman has worked for two years on a way to capitalize on video games and the competitive world of esports.
Chapman said he launched a $50 million fund, based in Denver, that’s focused on investing in video game and esports startups.
“We’ll invest in primarily technology and startups in this space, and some of our strategy will be focused on investing in video games themselves, primarily in a revenue-sharing deal with a video game,” Chapman said. Video games such as Fortnite, for example, earn revenue when players buy items to wear or use inside the game.
Chapman co-founded Konvoy Ventures two years ago with his brother Jason and their middle school friend Jackson Vaughan. Chapman said he was attracted to the industry because he saw similarities between esports — or competitive video gaming — and the rise of social media companies such as Facebook and Instagram.
“Social media had mass adoption and low monetization, and obviously that changed. Now you have some of the most valuable companies in the world,” he said. “The exact same thing is happening in esports right now, where you’ve got 400 million people that watch other people playing video games, and it’s super undermonetized. I think the same thing is about to happen again over the next five to 10 years.”
The three Konvoy co-founders, plus a fourth employee, have built a network of approximately 200 investors, including more than 20 Colorado-based angels, venture capitalists and family offices. Chapman said Konvoy is making its first investments in early-stage video game and esports startups right now, but declined to mention any by name.
Chapman, the son of a U.S. diplomat, grew up overseas in Latin America and Africa before attending Wheaton College in Illinois. He moved to New York City and worked in investment banking for BlackRock and in equity sales for Morgan Stanley. Video games always have been a hobby of his; he said he plays 15 hours a week.
“I basically have turned a personal hobby and passion into a career,” he said.
With much of the esports industry concentrated in Seattle, San Francisco and Los Angeles, Chapman said basing Konvoy in Denver was strategic, partly because there is no professional esports team in Denver.
“We’re going to build a pro esports franchise here in Colorado, where we’ll host events and tournaments, and sell out venues and stadiums,” Chapman said.
Yes, stadiums. Chapman said an esports tournament held recently at Madison Square Garden sold out in 11 minutes. And a tournament at the Staples Center in Los Angeles sold out in 17 minutes.
“These tournaments are now dwarfing traditional sports,” he said. “This industry that we’re looking at is basically the evolution of digital entertainment at the next level. This is where we’re going.”
Despite the growing popularity of esports, getting investors on board with Konvoy wasn’t easy, partly because the concept of video games being money makers remains new.
“I think we’re 18 to 24 months ahead of the market,” Chapman said.
Konvoy currently works in a shared office space in Denver, but Chapman is looking to lease his own space.