Cover Photo: Kyle Johnson for Tatler Hong Kong

For Yat Siu, the man behind the launch of The Sandbox, our future is virtual and the metaverse can’t come soon enough

You’ll have heard a lot about the metaverse recently. Yat Siu is busy building it.

“The most important thing to understand about the metaverse is, for most of us, our virtual existence is already more important than our physical one,” says Siu. “If you’re detached from the online world, you’re a lesser human today: you can’t connect with people or promote yourself.”

Animoca Brands, the game producer and venture capital company of which he is executive chairman and managing director, has pivoted dramatically in recent years towards blockchain, NFTs and the metaverse, meaning a network of fully functioning 3D virtual worlds, accessed using VR, in which users can live a second life. The company is doing so armed with a valuation in the billions and a war chest that has allowed it to invest in more than 150 related companies—including one, open-world game The Sandbox, which has blown up spectacularly of late, and which is currently looking like a good bet for the first fully functioning metaverse environment.

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“We’re living in a kind of pre-metaverse. Then the question is: how do I ensure, in this digital nation, that I have rights? The problem is you don’t actually own anything; Facebook can take it away from you at any time,” Siu says. “But through this concept of Web 3.0, we can now own part of the internet. Creativity can be rewarded with equity. That’s our north star, our mission."

Metaverses might be the subject of much hype right now, but they’re not entirely new, largely because of gaming. In a so-called sandbox game like Minecraft, for example, players are involved in building the world. But the metaverses currently under development will use VR to create an entirely more immersive experience, in which users become part of a virtual world, navigating it from a first-person perspective much as they would the physical world. NFTs, aka non-fungible tokens, meanwhile, could provide the keys to unlock it. They represent proof of unique digital ownership, stored on the blockchain, the technology best known for powering cryptocurrencies; while assets can be copied, ownership can’t be forged and can be traded.

Siu was early to the NFT party, investing back in 2018 in Dapper Labs, the company behind CryptoKitties, an early blockchain game based on cat NFTs that players can collect, breed and sell. He originally started playing around with crypto mining for fun, but the mostly financial nature of blockchain applications at the time made him assume that it wasn’t something he’d be interested in professionally. CryptoKitties changed his mind. 

“I thought: wait a second—this is really good. We can store our personal culture permanently on the blockchain. With the token technology, every item is scarce. You can put experiences on this asset that are uniquely yours. You couldn’t have that in the digital world before.”

You might mainly think of NFTs as something like CryptoKitties: a novelty, or perhaps a route to a spectacular payday for a mediocre artist. But in the metaverse, they can also function as the equivalent of a receipt, certificate of ownership or title deed.

“For a gamer, it means I can own all of my game items permanently,” Siu says. “That led me to think about the metaverse and the formation of digital nations. Nations without property rights tend to be basket cases; those with them tend to do well. I thought that would also be true in virtual worlds.

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“When I saw what was happening with NFTs and blockchain, I thought it was an opportunity to redraw the internet the way we always thought it should be. The internet used to be a big, free, open space. We thought the opportunities of the open internet would always be there, before Facebook and those companies took over. We’re now able to take back control of this new version of the internet in a way we were never able to do before. With Web 3.0, I can now have the same paradigms of ownership of property that were impossible in Web 2.0.

“In 2018, I went all in, with all sorts of investments: Dapper Labs, The Sandbox, [NFT marketplace] OpenSea and so on—very small, seed stage companies that today have incredible valuations.”

Siu’s contribution to culture wasn’t supposed to take this form. He grew up in Vienna, where his Hong Kong father and Taiwanese mother had moved, driven by their love of the arts. While a lot of people who work in creative fields are initially pushed in the direction of the business world by their parents, Siu seems to have had pretty much the directly opposite experience: at the urging of his musical parents—in particular his mother, an orchestral conductor—he trained as a musician. And, in an unexpected and indirect way, it was music that kicked off his internet career. 

“In the Seventies and Eighties in Austria, there were not a lot of Asian people, and technology wasn’t exactly prevalent,” he says. “I had access to an early internet service called CompuServe, and I ended up forming relationships online. I wrote software that allowed me to do music composition faster using a keyboard. I wasn’t a very talented musician, so I had to find ways to make myself more efficient.

“That experience took me down a technological rabbit hole. People started to use the software and send me questions about it, so I started supporting them. I was 12 or 13 years old, so it was quite a validation. Back then, when people were uploading software, they would share their address; if you liked the software, you would literally send them a cheque. So, the next thing was, people started mailing me money. I didn’t even have a bank account.”

His unexpected income took his mother by surprise, he says. “She was away on tour a lot. She’d leave money for me so I could shop for groceries, and I remember her coming back and there was more cash there than she’d left for me.”

It also led to his first job, for Atari, then a video gaming market leader. “They reached out to me. I turned up at their office and they were like: who are you? I was this gangly Asian kid. But I still got the job. It didn’t matter how old I was or where I was from; if I had that skill, I could connect people. I didn’t think of it that way at the time, but looking back it was very influential: I ended up being drawn to everything digital.”

We can store our personal culture permanently on the blockchain. You couldn’t have that in the digital world before.
Yat Siu

Siu has been involved in the internet’s three-decadelong infiltration of almost every aspect of human activity and culture pretty much since the start. Working in the software industry, he first moved to first to the US and then to Hong Kong in the early 1990s, where he discovered two things: that he was entitled to permanent residency through his father; and that he couldn’t get internet access.

Those realisations led him to set up his first company, ISP Hong Kong Online, in 1993, without even coming up with a business plan first. It didn’t quite take off. “No one wanted the internet in Hong Kong at the time,” he says. “The timing was awful.”

In 1995, he moved into free web and email hosting services, which cost him money but made none at all; he ended up working at AT&T for a year to support them. When the company was acquired in 1997, though, it gave him the capital to start his next one, Outblaze, which sat at the very heart of the first dotcom era, around the turn of the millennium, providing email hosting and anti-spam services to more than 75 million people. The company’s messaging business was sold to IBM, which moved into the company’s Cyberport base. “It was early 2009,” he says. “Start-ups weren’t as cool yet in Hong Kong. The headline wasn’t ‘IBM buys Hong Kong company’ but ‘IBM moves into Cyberport’.” 

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With a non-compete on similar businesses, he started to focus on mobile games, and Animoca was spun off as a games developer in 2011 (the name was adapted from an avatar system that the company never got around to launching). Animoca Brands was itself spun off in 2014, to focus on licensing.

The company was formerly listed on the Australian Securities Exchange, but delisted in 2020 as it became more focused on crypto, a sector that still makes most stock markets extremely nervous. However, leaving the exchange doesn’t exactly seem to have done it too much harm. The company went through two gigantic funding rounds in 2021: the first, in May, valued it at US$1 billion; the second, just five months later, at US$2.2 billion. Then, in January 2022, it raised a further US$360 million, bringing its total raised to more than US$700 million, and valuing it at a whopping US$5.4 billion. Investors include a roll call of blue-chip names from both the investment and gaming worlds—Sequoia Capital, Ubisoft, Softbank, Soros Fund Management, Liberty City Ventures, Gobi Partners and Adrian Cheng’s C Ventures—and the deals, says Siu, are about more than capital.

“We don’t need the capital per se. The reason is all about strategic partnerships and relationships. We have more than 150 investments. People ask: aren’t you just enabling your competitors? We don’t think so. We don’t want to control everything; in fact, it’s better if we don’t. If we control everything, we can’t scale. If you decentralise and support entities but don’t run them, you’re creating a very powerful distributed network effect. That’s what we’re trying to do here.”

In addition to The Sandbox metaverse, Animoca Brands has developed its own blockchain and NFT products, including games such as F1 Delta Time, MotoGP Ignition and Crazy Defense Heroes; and tokens such as Revv, Sand, GMEE, Tower and LMT. Its subsidiaries include game developers such as Blowfish Studios, nWay and Pixowl; sports NFT platform Lympo; blockchain gaming platform Gamee; NFT technology company Bondly; and digital collectibles marketplace Quidd. And the extended ecosystem of other important metaverse, NFT, gaming, decentralised finance and related companies in which it has invested includes MetaMask, OpenSea, Bitski, Decentraland, Xverse and Sky Mavis. Siu says that as of December 2021, the daily trading volume of tokens issued by Animoca Brands, its subsidiaries and the companies it has invested in totalled US$3 billion.

The big beasts of the tech industry are also taking the metaverse seriously. Mark Zuckerberg is enthusiastic enough to have changed Facebook’s name to Meta; while Microsoft’s recent acquisition of gaming giant Activision Blizzard indicates just how central gaming is going to be to the whole proposition.

Of course, for a lot of people, even thinking about concepts like the metaverse and NFTs is likely to make their head ache, so there are still some sizeable hurdles to get over when it comes to mass adoption. Then there’s the notion of paying real money for what is, in the end, a few lines of code. While there are no theoretical constraints on the size of a metaverse environment, creators tend to impose one: in the case of The Sandbox, a maximum of 166,464 plots of land are available. As a result, “land”, or rather LAND, inside The Sandbox doesn’t come cheap: the smallest parcels are now changing hands for the equivalent of more than US$10,000. One user even spent US$450,000 for a plot adjacent to a mansion built by Snoop Dogg, a huge enthusiast for the project. 

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“The most valuable resource today is no longer physical: it’s data,” says Siu. “The most valuable companies are data-driven. Data makes Facebook powerful, but data is meaningless to the people who produce it, like discovering oil a thousand years ago. This resource is something we ourselves are creators of every single day: we actually create our own equity. In the digital world now, though, the value exchange never takes place. Social media creates a network effect and sells it back to you. You’re creating the data but not getting paid for it. Imagine if everyone stopped using Facebook. What’s Facebook worth? Nothing. Why do they make such disproportionate profits? They’re taking it all. They’re digital colonisers.

“When people look at the metaverse, they get confused: they think it’s all about VR and AR. They’re what give you access, but they don’t give you ownership. What makes you a true citizen of a country? You have a stake in it."

“What we’re doing at Animoca Brands isn’t just a business that’s looking to make a big profit. We believe we can do almost a new form of capitalism.”

That poses some interesting questions for the luxury industry, which has been tentatively embracing the metaverse. In Hong Kong, for example, New World boss Adrian Cheng has announced plans to create a “cultural hub” within The Sandbox, with details of precisely what that will involve still yet to be released.

“Adrian’s known for having an eye for this stuff, so his involvement is validation in multiple ways,” says Siu. “Luxury items are social identifiers. When you buy a place on The Peak, you’re not actually buying the home itself, but what it represents; you could buy the same home for a fraction of the price somewhere else and have a better quality of life. Your decision to live on The Peak is very much a social one. If you were being objective, you probably wouldn’t live there.

“When some people see something like Bored Ape [NFT collection Bored Ape Yacht Club], they say: ‘It’s just a jpeg—I don’t get it.’ But it’s the same thing as buying a Birkin bag; you don’t buy it for the materials, but for what it says about you,” Yat says. “The value you’re buying is 99 per cent virtual anyway. In the metaverse, it’s 100 per cent virtual, but it’s all the same as far as we’re concerned. We’re focused on gaming because gamers already have an understanding of virtual ownership. 

“What we define as luxury has changed over time. In the past, we’d wear our social status in public and make a statement about who we are. Where do young people spend their time? How many young people care more about Instagram likes than their physical appearance? If you’re a luxury brand, you want to identify where that next generation is going, and that’s virtual.”

Hong Kong, with its enthusiastic gaming community, ought to be fertile ground for metaverse development, he adds.

“Hong Kong might not necessarily be an innovator, but it will be a mass user. People are familiar with the value of property and are used to paying high prizes. A year ago, no one in Hong Kong knew what an NFT was; now it’s one of the most enthusiastic NFT markets in the world. Hong Kong has financial knowledge and is a fintech leader. It has an opportunity to be a leader in the construction of Web 3.0 and the metaverse.”

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