Former Nazara CEO’s Web3 gaming startup Kratos Studio picks up Rs 160 crore in seed funding

The seed round values the startup at Rs 1,200 crore.

Founded by former Nazara Technologies chief executive Manish Agarwal and Ishank Gupta, Kratos Studios has also completed the acquisition of gaming venture IndiGG from Yield Guild Games (YGG) through a token swap, an equity swap equivalent for decentralised autonomous organisations (DAOs).

Agarwal told ET that IndiGG will utilise the funds to build a product platform, support gaming teams, build communities and a global brand through IPs and Web3 e-sports competitions.

“These are the four areas where we will use the funds,” he said. “But more importantly, we want to create operational cash flows faster so that this fund is there for a rainy day and not to burn.”

Agarwal said though the company can expand the community by 100x, if the platform’s capacity utilisation is only 5%, then there will be a churn in the community.

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“Percentage capacity utilisation is very important in a two-sided marketplace,” he added.IndiGG said in a statement that Agarwal and Gupta will continue to work closely with Yield YGG’s co-founder Gabby Dizon and Polygon’s co-founder Sandeep Nailwal, who has invested in YGG, towards building the largest gaming DAO in the world.

Subrata Mitra, partner at Accel, said: “Blockchain can fundamentally transform gaming and accelerate growth in emerging markets. We believe that this team is the best suited to unlock this value for Gamers.”

On the challenges that the ecosystem could face over the next six to seven years, Agarwal said the availability of good quality games was key to the success of the model.

“It is very important for us to have a number of good quality games with deep progression systems,” he said.

He added that the entity had 106 games in its portfolio, of which 40-44 are in alpha-beta stage, with the rest of them being in development. “Of the 40-44 games, 15 are live on our platform,” he said.

He also alluded to a steady supply of games being important to build the platform.

“Earlier, games were being designed for a closed ecosystem but now assets are being made interoperable, the ecosystem is opening. And to design an open ecosystem, it takes a lot of time. The existing Web2 gaming market is $140 billion in size, and it won’t get disrupted overnight. It will take 12-24 months for new and good games to get released,” he added.

The statutory policies around virtual digital assets are another factor.

“We’ll need to understand the framework, and how it is to be enabled. The third thing is that there is a lot of friction in a user trying to get on board Web3 games. Lastly, the understanding of unit economics – who will bear the various fees – is also a barrier. These are all barriers that one needs to solve for the disruption to happen and countries like India to become gaming powerhouses,” Agarwal said.