Valhalla Ventures raises $66M to invest in deeptech and gaming

Valhalla Ventures has launched a $66 million venture capital fund to invest in startups in the deeptech and gaming sectors.

The firm wants to back “audacious entrepreneurs” who challenge the status quo and push the boundaries of science and engineering. It has already invested in 15 startups since early 2022.

The debut fund will focus on seed-stage companies in deeptech, such as materials science, biology, energy generation/storage, and space technology, as well as novel and underfunded gaming firms with an emphasis on social experiences, said Devan Malhotra, general partner and head of Valhalla’s gaming practice, in an interview with GamesBeat.

Valhalla Ventures is an early-stage investor that focuses on technologies and ideas years before they enter the mainstream, Malhotra said. The firm will continue to make new investments until early 2025.

“Capital is scarce right now, especially for first time funds like us, so we’re honored to be backed by some of the world’s best founders, family offices, executives, and corporations,” said Malhotra. “We want to bring venture back to its original promise, when Georges Doriot and the early investors in Silicon Valley worked hand-in-hand with the world’s boldest and zaniest entrepreneurs to solve the world’s hardest problems.”

He added, “The VC industry has lost its way. Too many funds spray and pray into ‘tier 1’ led deals while spending more time tweeting and fundraising than working with portfolio companies. We want to tack left, building a concentrated portfolio across non-traditional areas – gaming and deeptech – and working boots on the ground with the engineers, creatives, and scientists that are building a brighter future.”

Investments

In the gaming segment, Valhalla has invested in Incredible Dream, which is using board games to build the next big intellectual property, and 1v1Me, which is building a platform for gamers to compete and bet on their favorite streamers.

“Bunch welcomed Valhalla Ventures to our team during our latest round. They quickly became one of our most insightful and helpful partners, making valuable connections to strategic partners and key players in the media and entertainment industry. They carry a strong conviction and demonstrate a deep understanding of our market. Any founder would be lucky to have them in their corner,” said Selcuk Atli, founder of Bunch, which is building a mobile digital world where gamers talk, share, and play together.

On the deeptech side, it has invested in biotech firms Terran Biosciences and Avery Digital as well as Irradiant Technologies in the field of nanofabrication.

Valhalla is closely tracking the booming ecosystem of deeptech companies forming around SpaceX and has already invested in two firms founded by ex-SpaceX engineers. They include K2 Space, which is building high-powered satellite platforms for the next generation of space development, and Starpath Robotics, which aims to refuel vehicles like SpaceX’s Starship on the lunar surface.

“At Valhalla Ventures, we back relentless entrepreneurs tackling obvious problems with non-obvious solutions that challenge the bounds of science and engineering,” said Rohan Pujara, general partner, who leads Valhalla’s deeptech investments. “If you look at the biggest problems we face today, they are not solved by incrementally better software, but rather by breakthroughs in physical technology. We’re looking for businesses built around critical technology with captive markets, hinging on best-in-class engineering, execution, and scale-up.”

Origins

Malhotra, Matthew King and Rohan Pujara started the fund. It’s their first fund, but they’ve been investing together since 2020. They’re fans of games but have also taken a lot of interest in deeptech. They didn’t have a lot of experience and so they broke into the industry by making investments via special purpose vehicles. They invested $27 million via SPVs, which raise funding for each investment. Through the SPVs, it invested in eight companies across deeptech, gaming, and blockchain.

“For us, SPVs were a great way to develop a track record,” Malhotra said.

Pujara said he was drawn by his curiosity to explore new technologies and focus on the cutting edge. They formed an investment team and went out to found deals. Some of them like Terran Biosciences (mental health therapeutics) and Climax Foods (making plant-based foods) turned out well and so they were also able to raise the VC fund. They started investing from the new fund in February 2022.

Rather than deploy the money all at once, they’re taking their time with the investments, writing checks in $1 million to $2 million chunks. Gaming may be about a third of the investments, and deeptech will be the rest. Pujara and Malhotra plan to move to Los Angeles to focus on the region.

“On the deeptech side, we’re looking at things that are completely new and have never been done before,” Pujara said. “The same is true on the gaming side. Over the past couple of decades, there have been a lot of been a lot of copycats. Like Uber for this or AirBnB for whatever industry. You see the same thing within gaming. People are building the next MMO or shooter. We want to go and find out who’s building something completely new or taking an approach that everyone is ignoring.”

The team is looking for the edges and the patterns among companies that demonstrated success. That was one reason they invested in startups led by former SpaceX engineers, who had a faster approach to engineering as a rule, Pujara said.

A lot of them “are leaving SpaceX once they’ve done their time there and built up their skill set, built a good network, and they’ll take a bunch of SpaceX people with them and go start a company,” Pujara said. “We’ve seen a lot of really interesting examples of this” such as K2 Space, which is building satellites.

Trends, regions and categories

The team is looking for the edges and the patterns among companies that demonstrated success. That was one reason they invested in startups led by former SpaceX engineers, who had a faster approach to engineering as a rule, Pujara said.

A lot of them “are leaving SpaceX once they’ve done their time there and built up their skill set, built a good network, and they’ll take a bunch of SpaceX people with them and go start a company,” Pujara said. “We’ve seen a lot of really interesting examples of this” such as K2 Space, which is building satellites.

“On the deep tech side, we’re really looking for who’s solving these impossible problems,” Pujara said. “Who’s really challenging the bounds of what’s defined within science and physics and chemistry? We have a company that’s building a semiconductor platform for cell engineering.”

They’re looking at areas like new materials, biosciences, energy generation and storage.

“We really want to be generalists within deeptech. I think there’s not a lot of generalist deeptech firms out there. And we think we really want to stand out in that crowd,” Pujara said. “It’s a lot of technical risk. We want to take very little to no market risk. There are a lot of technical risks that we take on and we have to be comfortable with. And we’re building a really nice board of technical advisors and experts to help us.”

Pujara thinks cloud gaming will cause a major disruption in gaming as the capabilities close in on those of the game consoles. By contrast, he knows people hang out in virtual worlds online now but isn’t sure they’ll do the same in the metaverse. Gamers need a common thread like a Call of Duty game where they can hang out with friends and doing something with them.

On the blockchain side, Pujara thinks that people will play games to have fun, not to make money. But if the blockchain game is built by gamers for gamers, then it becomes more interesting, he said.

“The core problem for gamers is always going to be to play more fun games,” Pujara said.