Investment

Generation Z is increasingly where the money’s at and the metaverse is the way in

The current generation made the money.  The next generation hopes to save the planet. And Generation Z wants to hide away from it all.

For them, the metaverse is becoming a new religion. A digital world, where they can exist as avatars, taking part in virtual events, games and deals.

Zuckerberg’s family office, advised by Iconic Capital, is part of a new generation of digital investors keen to push the frontier

Family offices would do well to keep up with the trend. In the short term, the metaverse can offer up VC deals. Longer term, the future shape of family offices will depend on how well Gen Z interacts between the real and imagined universe. 

Game changer

Mark Zuckerberg of Facebook sees the metaverse as a big opportunity, potentially a 3D game changer for the internet. Around 20% of his staff is dedicated to the metaverse where he expects avatars to interact, play games and (maybe) work. 

Zuckerberg’s family office, advised by Iconic Capital, is part of a new generation of digital investors keen to push the frontier. Another investor is a family office run by hedge fund manager Steven Cohen. 

Angelo Robles, founder of the Family Office Association backs the trend: “The metaverse is a ‘real estate’ opportunity in the virtual world. We are at an early stage, but this is growing rapidly.” 

Another tech giant, Snapchat, is aiming to capitalise on the open source development of metaverse applications through its Lens Studio. 

One of its applications lets shoppers use avatars to try digital versions of clothes without leaving the house. IMVU, founded in 2004, has enjoyed a reboot from a fashion show using avatars.

Magic Leap uses 3D augmented reality to digitalise training and collaborations. Its techniques are often used by surgeons to plan their operations. Its practical applications have enabled the company to raise $2.6 billion from the likes of Google and Ali Baba since inception in 2010.

Metaverse Reit is an unlikely way into the sector. It invests in unreal estate in virtual worlds like Decentraland, Sandbox and Upland. 

The Reit’s co-founders are Jason Cassidy, ex-BlackBerry, and Michael Gord, co-founder of Global Digital Assets, prominent in the blockchain world.

Future values will rely on bids from avatars and corporate sponsors. According to NBC, however, parcels of land selling at $20 on the Decentraland site fetched $100,000 in a recent burst of digital hysteria.

Gen Z impact

The metaverse took its name from Snowcrash, a 1992 science fiction novel by Neal Stephenson partly set in a virtual world. It gained a spin from Ready Player One, whose avatars battled to win a game and save it.

The growing involvement of Gen Z in the metaverse is partly the result of computer games, a $180 billion industry, plus peripherals, growing at 10% a year. 

Lockdown gave the sector a kick and games developers have been seeking to make use of virtual reality to make their offerings more potent still. 

Gen Z, glued to their mobiles, has also developed a fascination with influencers, whose performances on social media have created extensive followings.

On TikTok you can find Khabane Lane of Senegal, whose comic skits have 81 million followers. Bella Poarch’s lip-syncing boasts 75 million. Charlie D’Amelio’s dance moves have won 119 million.

Celebrity culture has an even more powerful pull. And you can take this to another level on the metaverse, where Gen Z avatars will have a chance to interact with virtual celebrities and buy their merchandise.

Non-Fungible Token (NFT) blockchain can permit entry to a metaverse and underpin avatars unique to the user. Digital avatar collections like CryptoPunk and the Bored Ape Yacht Club are Gen Z’s collection craze in 2021, lifting NFT sales to $10.7 billion in the third quarter. Kwai Bun’s Quantum Matrix is thriving by developing made-to-measure avatars and a range of digital alternatives.

NFTs are also used to create digital tokens used as currencies for the metaverse. The trade is often facilitated by Rally, a dominant platform for the trading of digital assets. 

Celebrities like basketball star Stephen Curry and Snoop Dogg are involved in NFTs. More will follow. 

Roblox has announced a pop music festival to entertain its avatars. 

Angel investor JJ Sowers says he expects exponential growth for the metaverse because companies are desperate to tap Gen Z for business.

Influencers are already accepting generous product endorsements. Taco Bell has produced, and auctioned, collections of NFTs. Coca-Cola has distributed NFTs through the metaverse. Nike, Sotheby’s and Gucci have acted as sponsors.

As well as product placement Sowers expects goods to be tested out on the metaverse and so in the real world later. 

Different worlds

Second Life was the first self-standing virtual world created by Philip Rosedale’s Linden Lab in 2003. It enjoyed early success but went on to suffer a loss of staff and accounts.

Other metaverse developments evolved out of computer games, which can fuel interest in broader offerings. SimCity started in 1998 involved the development of virtual cities but criticism of later designs led to the end of the franchise in 2015.

Nintendo’s Pokemon series created a buzz by using augmented reality to get gamers across the world to catch its pocket monsters. The ex-Alphabet team at Niantic who created Pokemon raised $245 million in 2019  from investors, including Samsung, in its bid to create a global metaverse platform.

In more recent developments Jim Sweeney, founder of Epic Games is playing a big role in plans to build a metaverse. He sees it as an inevitable destination for his blockbuster game Fortnite whose social network is popular with Gen Z.

Ex-Amazon venture capitalist Matthew Ball has argued that games companies will lead the way, not just because of their reach but also because of their interactive software and powerful computers.

Roblox, led by Dave Baszucki is an advanced metaverse developer offering games like Jailbreak with a social network aimed at a young audience that can create maps and worlds and visit others. 

Roblox, backed by a range of institutions, took a market listing this year and boasts a market value of $45 billion. 

The Sandbox is a virtual world where players can play, build, own and monetise their own NFT games, without coding skills. They can develop their own land and explore games created by others, in a similar way to Roblox. 

Sandbox operations chief Sebastien Borget works for Animoca Brands, run by Yat Sui, which owns The Sandbox. He is also president of the Blockchain Game Alliance trade body.

Borget recently invested in Stardust which wants to help people swap dollars for NFTs. Several other digital angels were backers, along with VC heavyweight Kleiner Perkins.

Decentraland is a 3D world opened to avatars in February 2020 and overseen by the non-profit Decentraland Foundation. It was created by two Argentinians, Ari Meilich and Esteban Ordano. 

It has become a leading metaverse site, attracting Sotheby’s as sponsor to a digital reproduction of its New Bond Street headquarters to show digital art. 

Upland is a game where users can buy and trade virtual properties mapped to reality: “The geography is the same but everything else is up to you.” Cryptovoxels also involves the development and sale of virtual assets. Planned events include a film festival, night club and art exhibition.

Several of these offerings are quite similar, suggesting there could be mergers, or associations over time.  Family offices tempted to research the sector could do worse than ask their Gen Z representatives to help out. 

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