First Round Capital - While everyone built for gaming, Braze stayed broad and built for a market that didn't exist (yet)
Between 2012 and 2015, many SaaS businesses in the mobile sector focused on the gaming industry due to its quick profitability. However, the company in question chose to develop a product applicable across various industries, believing this approach would fundamentally change lifestyles and the economy. They avoided the gaming industry's unsustainable practices, such as exploiting users for in-app purchases. This strategic decision allowed them to be well-positioned when the market expanded beyond gaming. As a result, they built a diversified capability, while others struggled to pivot away from gaming. Today, their largest vertical accounts for only about 21-22% of their revenue, demonstrating their broad market reach. They adopted a long-term vision, investing in a future market they believed would grow significantly larger than gaming. This approach deviated from the Lean Startup methodology, which advocates for a narrow focus initially. Their foresight allowed them to develop a comprehensive product with 35 out of 50 necessary functionalities by the time the market caught up, enabling rapid growth and differentiation.
Key Points:
- Focus on diversified product development across multiple verticals, not just gaming.
- Avoided unsustainable gaming practices, anticipating broader market needs.
- Positioned well for market expansion beyond gaming, leading to diversified revenue streams.
- Adopted a long-term vision, investing in future market growth.
- Developed comprehensive product functionalities, enabling rapid growth and differentiation.
Details:
1. 🎮 Early Focus on Gaming Industry
- Between 2012 and 2015, 85-90% of SaaS businesses in mobile concentrated on the gaming industry, reflecting its status as the quickest route to profitability at the time.
- The gaming industry was seen as a lucrative market due to its rapid user growth and high engagement rates, which translated into significant monetization opportunities.
- During this period, successful companies often leveraged in-app purchases and microtransactions, tapping into a market that consistently showed a willingness to spend.
- Examples of successful gaming apps that drove profitability include "Clash of Clans" and "Candy Crush Saga," which dominated the charts and generated substantial revenue through innovative monetization strategies.
2. 🌍 Vision Beyond Gaming
- The company aims to broaden its impact beyond gaming, targeting sectors like education, healthcare, and finance.
- Founders believe the product will revolutionize daily life and economic systems, motivating continued perseverance through challenges.
- Specific applications include using the product for educational simulations, healthcare training, and financial modeling, demonstrating its versatility.
- The strategic vision includes partnerships with industry leaders in these sectors to leverage the product's capabilities effectively.
3. 🛠️ Building a Diversified Product
- The gaming industry has faced criticism for unsustainable business models centered around exploiting 'whales' (high-spending users) and promoting excessive in-app purchases by children, which raises ethical concerns.
- A strategic pivot has been made to avoid these exploitative practices, emphasizing the development of more sustainable and ethical business models in gaming, prioritizing long-term player satisfaction over short-term revenue gains.
4. 🚀 Strategic Positioning for Growth
- Our largest single vertical accounts for only 21-22% of our Vue, highlighting our diversified capability, which reduces dependency on a single market and enhances stability.
- The decision to invest in a non-gaming vertical is based on a strategic outlook that it will grow to be substantially larger than gaming in the future, aligning our investments with anticipated market trends and future growth opportunities.
- We focus on strategic diversification to not only capture current market opportunities but also to position ourselves for future growth, leveraging industry insights and market analysis.
- This approach allows for risk mitigation across various sectors while capitalizing on emerging trends, ensuring long-term sustainable growth.
5. 🔮 Preparing for Future Market Needs
- The company strategically deviated from the traditional Lean Startup methodology by choosing not to focus on a super narrow product for one use case.
- They anticipated future market and technology trends, leading to the development of a broader product with extensive functionality.
- Despite initial market misalignment, this forward-thinking approach allowed them to build 35 out of the 50 required functionalities before the market caught up with their vision.
- Once the market aligned with their expectations, they experienced rapid growth due to significant product differentiation.