Josh Williams interview — How Forte raised $725M for a platform for blockchain gaming

Forte raised $725 million on the expectation that it will provide the building blocks for triple-A game companies to make NFT games.

The San Francisco company is creating a blockchain game platform which will enable game companies to create blockchain games that are both compliant and interoperable.

The Forte deal was announced this month not long after other NFT gaming companies have hit unicorn status (above $1 billion valuation) like Animoca Brands, Mythical Games, Dapper Labs, and Sky Mavis. All those companies are making games based on the blockchain, the secure and transparent digital ledger that enables cryptocurrencies and unique one-of-a-kind items, or nonfungible tokens (NFTs). But Forte is supplying the picks and shovels for the NFT games Gold Rush, and that could make it something like the Unity game engine of NFTs.

And that’s why big investors such as Sea, owner of Garena, which operates the huge free-to-play game Free Fire, came into the latest round. Sea Capital and Kora Management led the round, with participation from powerhouse game and media publishers including Animoca Brands,
Big Bets (Huuuge Games), Overwolf, Playstudios, Warner Music Group, zVentures (Razer), and blockchain partners Cosmos, Polygon Studios, and Solana Ventures, as well as investors including Griffin Gaming Partners, Andreessen Horowitz (a16z), and Tiger Global.

Forte makes things such as cryptocurrency wallets that blockchain games use to store a player’s tokens. Wallets have to be secure and ready to transform a currency in the form of a cryptocurrency token in a game to multiple kinds of cryptocurrencies, such as Ethereum or Bitcoin, that could in turn be changed into hard currency like U.S. dollars. Forte’s job is offloading this work from the game companies themselves and helping them make the transition to blockchain games.

One of the things that Forte will enable is what I call the “Leisure Economy,” where we all get paid to play games. This is where people like streamers and user-generated content creators can amass fans and make a living selling goods to or entertaining those fans. They can make a living from the games that they love and generate a return on the time they invest in those games through the rise in value of their  investments, such as NFT items. This economy also benefits the game companies.

Forte’s roots go back to 2019, when Kevin Chou and Josh Williams started the company. Chou grew mobile game publisher Kabam to $400 million in annual revenue and 1,000 employees before selling it in various parts for close to $1 billion to Netmarble and FoxNext Games (now owned by Scopely). He also cofounded Gen.G, the esports organization, with former Kabam chief operating officer Kent Wakeford, and he cofounder Rally, which creates blockchain-based tokens for creators and influencers so they can offer rewards to their fans. Chou’s credibility is one reason why Forte got so much momentum and why it is working with a number of game companies. Once Rally was established, Chou moved to Rally and Williams focused on running Forte. Now Forte has more than 200 employees.

There are more than 40 game developer partners, and more than 15 million players across partner games. Forte has raised more than $900 million to date. I spoke with Williams about the latest round.

Here’s an edited transcript of our interview.

GamesBeat: Congratulations. This looks like a level up from your other funding. How did that come to be?

Josh Williams: The way the round came together was great. We can’t talk about all of it publicly, but we’re lucky to work with a bunch of great publishers. We’re doing pretty deep integrations. We’re doing NFT drops and things like that, but not just that. Much more community-oriented ideas, some really thoughtful designs.

Obviously Sea and Carena are among the biggest publishers in the world. We can’t say whether or not we’re working with them on any particular projects, but I think it’s just the idea that publishers are seeing the potential for blockchain in general, what it can do to empower players. That’s a lot of how the round came together with a bunch of publishers. And some layer one partners too. We work with all of the big blockchains — Ethereum, Ripple, Cosmos, everybody.

GamesBeat: That amount of money, building the case for it–it’s so different from what everyone else has raised. Was there anything special there about how everybody came around to see that it was the right amount? I assume the valuation is pretty good too.

Williams: The way we came about it was just looking at what we think the next few years will look like in the space. We want to be able to help accelerate what developers are doing in the space. We want to work closely with developers all around the globe to figure out thoughtful designs. Not just putting a token out there that has some market value, but something that integrates well into a game design. To do that takes a big team. It takes a lot of work to be thoughtful about it. We want to help people build things. We’ll continue to do grants and funding projects. We don’t own a stake in any of the studios that we work with. Everything is purely grants to help accelerate, to help development and get stuff out there.

GamesBeat: Similar to the Epic MegaGrants program?

Williams: Yeah, yeah. It’s ecosystem development. To me, this is sort of drinking the Kool-Aid, but blockchain and tokens are giving new ways to form economic organizations and give people a stake in the things that they care about and be able to benefit from them. There’s just a lot of ecosystem development to do, too, that might not even directly relate to Forte in every case, but it’s just helping people see what’s possible with blockchain in gaming.

GamesBeat: I do wonder what’s here and now versus what’s TBD. Things like taking care of the environment better. Is that a checklist thing now, or is it still to come?

Williams: I’m glad that’s coming up now. It’s part of the reason we started off with a multi-chain setup from the beginning. The primary reason is so that players and publishers have freedom of choice. They’re not locked into one system. But one of the benefits of that is you can make tradeoffs and decisions around what blockchains you want to support with respect to their impact on the environment and the like. Also, knowing that this stuff changes a lot over time. Blockchain technology changes. You might work with one chain that’s green today, but it might change its model tomorrow. It’s an important thing for people to think about. Gamers definitely care about it. That means publishers should care about it.

GamesBeat: Clarity on regulation sounds like a TBD as well. I don’t know if you have studied this more to find where all the safe ground is.

Williams: That’s one of the biggest things we’ve focused on. We’ve talked with regulators literally weekly across a bunch of different geos and different regulatory regimes — money transmittal, securities, and elsewhere. In our last fundraise we might have talked about this a bit, how there was going to be a lot more regulatory work coming later this year. You see some of it now. Some of the big–even the most “decentralized” blockchain projects are being examined by regulators now. We spent a lot of time on this stuff.

Before forming Forte, just because we’d both been lucky in the past– [Forte cofounder] Kevin Chou and I flew to D.C. and talked to the SEC about our plan. We tried to engage with regulators from the beginning and do things right. For this to work at mass-market scale, you have to. You’re not going to avoid regulation. And there is increasing clarity even though there’s not total clarity. FATF, which is the international standards body for anti-money laundering and anti-terrorism financing and the like, they just released, a week ago, updated guidance on crypto tokens and what is and isn’t regulated and how it’s regulated. We’re lucky to be able to talk with people like those regulators before the standards come out and provide input.

The good thing is that people really like the gaming use case. A lot of crypto is speculation-oriented. The value propositions are thin. But in games people can see it. They can see how players would want to own things and trade with each other. It’s not just a speculative thing. It has a real purpose inside of the game. Regulators have been excited to see it. People don’t want to stymie this innovative technology, but they also don’t want to let markets run wild with scams and speculative stuff, potentially money laundering. They’re happy to see use cases like the ones we walk them through, where it’s real games, real players, a real purpose in allowing people to trade and have things like value exchange, cash in and cash out.

GamesBeat: I wrote about the Neon deal. You’re part of that. It feels like some of the transition to triple-A is happening.

Williams: Yeah, that seems great. We talked about it a bit. We’re seeing more and more triple-A talent leave traditional publishers and studios to focus on blockchain games. I think we’re going to see a ton of that next year. We’re going to see triple-A publishers, even the ones we’re working with today, accelerate their plans for this stuff.

GamesBeat: You have more than 200 employees. Are you going to bring that up further still?

Williams: Yeah, we have big tech teams building product and integrating with all the major blockchains. Compliance folks globally. To do this right and make it work at the scale of games takes a ton of talented people. We’ll continue growing.

GamesBeat: You had already done a round earlier in 2021. What led you to do another so soon?

Williams: We had, after our last round, a bunch of excess demand. Even just from funds and traditional investors. We thought about doing it. We didn’t want to do a round that was just a financial round. We had some of the big publishers we work with asking about aligning long term. That’s a good reason. If we’re trying to create an ecosystem, if we want to create an open platform over time, if we want any developer, any publisher to be able to participate in it, that’s a good reason to raise more funds, have more resources to go to market with, and also seed the beginnings of an open platform, an open network. We didn’t put together a fundraising process or anything. It just sort of came to us. It aligned with our vision, so we decided to do it.

Our folks who wanted to participate in this round are big proponents of what we’re doing around interoperability and compliance. They see the future of how that’s going to allow the platform, the network, the ecosystems to grow big. We’re special in the sense that we have thought about that since the beginning. We’ve been building for that since the beginning. Those are strong value props.

GamesBeat: Is there anybody else that’s adopted your kind of business model, separate from all the other different models out there?

Williams: Not yet. Not that I know of, anyway. Maybe people will get a better sense of what we’re doing and try to do similar things. But not so far, anyway.

GamesBeat: You don’t really have a direct competitor out there, then.

Williams: I don’t think so. There are people that maybe think they are, but our plan is that we’re going to fully open up our platform, and then whoever wants to can plug into it. I don’t really want to–we don’t think about competitors. If someone’s doing something well, like scaling or providing a liquidity solution or whatever it is, great. Can we just integrate, plug that in, and make it available for all these big publishers and small developers to use really simply? That’s what we’d rather do. We don’t charge fees, so it’s not like there’s a pie we have to figure out how to carve up between all these partners. If you charge fees, go for it. Talk to the publishers. We don’t stand in the way of that.

Everybody’s doing the NFT piece, but for us, that’s just an introduction. And building out those token economies and figuring out how to make them drive. That’s a specialized skill, a specialized team organization that folks developing mobile games right now are going to have to start thinking about in the future. Entire teams of economists and mathematicians, because it’s a totally different business model, a different way of forecasting. We’re super excited about that.

Just like we saw 15 years ago, and especially accelerating 10 years ago or so–we saw people starting to figure out how to think about free-to-play games, how to measure LTV and the like. You’re going to see the same thing now with blockchain games. How do you think about these economies and how to measure them and optimize them? Publishers are going to go even faster to figure this out in this phase than they did last time, because everyone saw what happened with free-to-play. They saw how much value was created. They’re aware. That’s why you see even big guys like Sea or Garena and others leaning in already.