Kyber Knight’s $120M fund will invest in tech startups and games

Kyber Knight Capital launched a $120 million venture capital fund earlier this summer, and the firm said that games are part of its investment focus in addition to tech startups.

The firm said it will focus on pre-seed and seed investments in early stage technology start-ups. Kyber Knight associate Ary Vaidya said in an interview with GamesBeat that the company will invest in game studios, given the background of founders and managing directors Sunny Dhillon and Linus Liang.

I spoke often with Dhillon in the years during the rise of social mobile games when he was at the previous fund, Signia Venture Partners with game entrepreneur Rick Thompson. It’s nice to know that yet another tech venture fund is willing to invest in game companies.

“We would definitely be interested in pure game studios, beyond the fact that Sunny and Linus come from kind of the gaming world themselves,” Vaidya said. “I think that as much as it’s compelling to build to start a B2B SaaS company selling software to game studios, it’s better to invest in a game studio making a whole new game in a new category and like really defining this next generation of the gaming industry.”

Kyber Knight Capital offers a hands-on approach with founders and provides them with inside access to its exclusive network of luminary investors, including: Alphabet chairman John Hennessy; Bain Consulting global head Manny Maceda; former Dreamworks Animation president Chris DeFaria; former president and CEO of eBay and HP Meg Whitman; former MGM Chairman and CEO Gary Barber; previous Warner Bros. chairman and CEO Kevin Tsujihara; and former Disney CEO Michael Eisner.

Additional backers include founders of some of Silicon Valley’s most transformational companies, such as Joe Gebbia of Airbnb, Michael Mente of Revolve, PayPal’s David Sacks, and Zynga’s Mark Pincus. Senior financial industry titans from KKR, Oaktree, Apollo, Goldman Sachs, and New Enterprise Associates are also part of the Kyber Knight cap table.

Kyber Knight is also supported by institutional investors including consulting behemoth McKinsey, the Smithsonian Museum Endowment and a major California pension fund, among others. Such investors add further breadth and depth to the firm’s network. Vaidya focuses on AI investments.

The firm has already invested in 16 soon-to-launch companies at the pre-seed or seed stage and had markups from Sand Hill Road top tier funds leading follow-on financing rounds. Investments range from robotics and automation in traditional manufacturing and construction to sales enablement, e-commerce and AI technology. Kyber Knight plans to invest in approximately 40 to 50 companies with its debut fund.

Vaidya is a Stanford grad who also studied at Oxford, looking at the philosophy of artificial intelligence. He looked at how it would affect civilization on a societal level. He also spent time at Cantor Fitzgerald to help integrate emerging technologies across business lines. He joined Kyber Knight to lead the AI and commerce focus at the firm.

“One thing I’m particularly excited about is that tech barriers to entry are dropping for startups,” Vaidya said. “As the distance between English language and code converges to zero, the technical resources, expertise and capital that were previously required to build great startups has drastically decreased. And I think that we will have this renaissance of entrepreneurship.”

He said he’s seeing it with companies that he’s speaking to on a day to day basis. There are so many AI companies in the works that it’s just like starting an internet company in the early 2000s.

“Fundamentally, there’s no such thing as an AI company. There are companies that are using AI to solve a problem, using AI as a set of tools,” Vaidya said. “It’s such an exciting time for entrepreneurship. I truly believe that AI is a democratizing force across most industries, especially for creativity. So I think in films, in games, we’ll see studios and production companies that previously didn’t have the technical resources or capital to make these high budget films, but are able to leverage a lot of these AI tools to build compelling content.”

Within games, Vaidya said he is fascinated by the concept of AI non-player characters and how they can become more intelligent beings that you interact with as a player.

“The incumbent big game studios don’t really want to take the risk of building the first AI game. And so I think there’s opportunity for startups to take advantage of this white space and build the next delightful consumer experience in gaming,” Vaidya said.

Vaidya said the cost of large language models will likely decrease in the same way we’ve seen computer vision costs fall lower and lower, and AI itself could help bring down the cost of computing and that in turn will make AI more practical.

Beyond AI, the company will also invest in fintech and ecommerce and other technologies across the board.

Vaidya said, “As I mentioned, the concept of AI is similar to how we refer to internet companies. It’s better to look at it from a way of how companies are using AI to solve a problem in an existing market. So I think it’s super interesting. Just on the infrastructure and application layer side. There’s a lot of buzz around the infrastructure layer of AI. Nvidia and Arm are perfect examples, right? The picks and shovels stocks, essentially. think investors more wary on the application layer. Just because there’s a higher degree of risk and it’s still unclear how much of it’s going to be commoditized or captured by incumbents.”

He said that blockchain startups were more like a solution looking for a problem, while AI could be applied quickly to create an order of magnitude increase in productivity or efficiency in a company.

Vaidya said that while the metaverse aren’t as fashionable now, he believes there are interesting fundamental technologies being built now that are like “the guard rails for the metaverse” and he thinks that the Apple Vision Pro will draw further attention to the metaverse category.

Kyber Knight will likely focus a lot on U.S. investments, where the founders are. Vaidya said the fund’s goal is to leverage its network of limited partners and advisers who can help break down doors for founders.

Before starting Kyber Knight Capital, Liang spent a decade at Signia Ventures, where he continues as a partner. His entrepreneurial pursuits include cofounding Embrace, the company behind the world’s most affordable infant incubator. He joined Zynga’s founding team, following the acquisition of his startup, where he served as the tenth employee.

He also served as a program manager at Microsoft, database researcher at IBM, and a member of the investment team at Andreessen Horowitz.

Dhillon was an early stage investor for the past 10 years, having led investments in Cruise (acq. by General Motors), Phoenix Labs (acq. by SEA Garena), Manscaped ($1bn+ unicorn), and Tenor (acq. by Google). He was also responsible for incubating Skale Networks ($SKL).

He founded one of the App Store’s first mobile apps (named Barstool) and was the first employee at a venture-backed spin off of Warner Bros-owned New Line Cinema, working directly for the Lord of the Rings producers on new PC and mobile gaming products. He was previously an associate for JB Pritzker’s family office, worked in corporate strategy for Warner Bros in Los Angeles, and was a tech investment banker at Rothschild in London.