Market Notes

July 22, 2019

Eagle, Colorado

I had a blast this weekend! So did my 17-year old daughter. We were both legitimately excited to compete in the exact same tournament. There were no age-groups and no gender groups – all equals.

Unfortunately, I am terrible at Fortnite and didn’t win anything… I barely even scored any points. But my daughter was great. It was her first experience with competitive gaming, and it was so much fun to watch, that I almost forgot I was participating. While she didn’t walk away with any prize money, she gained a wealth of experience that could set her on a path to get all of her college paid for or give her a reason to travel the world as a professional - if she chooses that route.

Fortnite is a video game that is free to download on virtually any device with an internet connection and then play against people from all over the world. If you haven’t heard of Fortnite by now you must not have any exposure to humans under the age of say, 20 or so.

The game is so popular that according to TwitchTracker, an average of 116,256 people spent time watching other people play the game (on over the past 7 days. If you turned on ESPN over the weekend, it is possible that you saw video games being played by kids (and adults) who are making a living in the same way your favorite football player does – complete with sponsorship and endorsement deals.

Obviously, there are a ton of people out there watching video games with even more playing them. And the sponsors are taking notice. I encourage you to tune into twitch for a few minutes to get a feel for what is going on. It won’t be long before you see what is essentially a traditional advertisement or “commercial”, for a product that has absolutely nothing to do with video games.

Anyway, we played in the NSG Summer Championship hosted at Localhost Arena in Denver, where $20,000 was up for grabs over the course of the weekend. The main event was the NCS Major Tournament for CS:GO which attracted top teams from around the country including an all-female team (called Dignitas), who placed second, overall. I must admit that it was a LOT of fun to watch.

“Drove Here From Cali” won the CS:GO Major - and took home $8,000 in prize money.

I know there are many out there who view “gamers” (those who play video games) as lazy or unmotivated and apply this stereotype broadly. I fear these folks will likely not change their minds no matter what evidence is presented to them, but I can only hope that their children find ways to game anyway – or risk being left behind by the economy in which they will live and work, tomorrow.

With that said, each parent knows their child best and is the only reasonable party to set appropriate and necessary limits on screen time. There is no magic amount of time that is good or bad – it is different for each unique individual – as it is with any other passion.

Parents have had a problem with games for decades, if not centuries. I have read of parents who long ago sought to prevent their children from playing chess or working cross-word puzzles. Can you imagine being worried about your child playing too much chess, 2019? I suspect that the parents who put video games in the “always bad for kids” category today, will be looked upon similarly by history, someday.

Before you call me crazy, check out this short video showing a doctor using the Medivis Augmented Reality Product. After that, check out just the beginning of this video showing doctors using the Da Vinci surgical tool made by Intuitive Surgical.

These are doctors from today using technology that exists today.

Finally, check out this video of a mosquito carrying malaria being vaporized by a laser... Every 2 minutes a child dies from malaria and 90% of that happens in sub-Saharan Africa.

Two things that come to mind:

1.       Would any of these machines exist without video games having come first?

2.       Is it likely that a surgical machine would be operated at a higher level by someone who played video games frequently as a child than one who wasn’t allowed to play any video games as a child?

I will say that if I must be operated on using such a device I will likely opt for a great gamer as my doc -essentially the guy who is better at the “training modules” than everyone else - even if they carried a C-average through high school and college.

The world isn’t changing – it has changed.

With that said, you haven’t missed anything from an investment perspective. The esports and video game revolution is barely upon us. Esports is still one of our top 4 macro investment ideas today and has been for a couple years. There are several publicly traded companies in which to invest that provide exposure to the video game space (EA, ATVI, TTWO to name a few). There are also several additional companies that provide exposure to the infrastructure associated with gaming and esports (NVDA & AMD for example). We maintain a number of investments in public video game companies across the Elevate Strategies.

We think the big upside is in the smaller private companies that are focused on the “competitive esports” and “in-person” aspects of the gaming world, which is why we invested in NSG earlier this year through our Venture Capital/Private Equity firm, Elevate Ventures.

Next time you are in Denver, I encourage you to stop by the Localhost Arena in Lakewood and check out the scene. Pull up a chair and give computer, console, or virtual reality gaming a try. It’s always fun to try new things – and it is super fun to be able to play football with the kids without concern for a bum knee.


Shane Fleury

Chief Investment Officer


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