Veteran gaming investor Jon Goldman has raised a $50 million venture capital fund called Tower 26 to invest in extended reality startups.

The firm will invest in virtual reality games and related areas such as the metaverse, the metaverse, the universe of virtual worlds that are all interconnected, as in novels like snow crash Y ready player one.

The fund is named after the Tower 26 lifeguard tower in Venice, California. Goldman went there frequently during the pandemic to make calls and work while the tower was down. It’s where he had to think a bit. (Goldman will moderate a panel on VR gaming at our GamesBeat Summit 2022 event on April 26-28.)

“I was able to make calls there all day, and it was a nice part of the experience,” he said.

Goldman remains CEO (actually Formagio Grande) at Skybound, the creator of The Walking Dead franchise and other entertainment. He is also a member of the Greycroft board of directors and runs the GC Tracker Fund, his previous fund which is now in its final stages. That position gives him visibility across multiple industries, but he uses the smaller funds to focus on passions like virtual reality.

Before investing, Goldman was the founder, chairman and CEO of Foundation 9 Entertainment, the world’s largest independent video game developer at the time with 11 studios and 1,000 employees. He sold the company in 2006. Foundation 9 studios have created hundreds of video games based on top-tier global brands like Star Wars, Matrix, The Simpsons and The Lord of the Rings.

“I have a lot of different things going on that can help me be an effective venture partner or portfolio company partner. I’m still active in entertainment and I’m still active in video games,” he said.

He watches the performance of VR titles on Skybound and has many connections with their CEOs and their teams.

“It turns out that when you help people early in their careers, it turns out to be good for you, too,” he said. “Supporting entrepreneurs for more or less 20 years has been like a reward.”

The GC Tracker Fund was a $15 million fund for early investments in VR and AR games. He noted that about 30% of the fund remains viable despite many VR companies going out of business during the disappointment that followed the bumpy launch of VR headsets in 2016.

Goldman found some companies that grew in valuation such as Wave XR, Sliver TV and Applied VR. Goldman stopped investing in VR and stopped after a while because the VR headset installed base wasn’t there yet. While not a standout success with unicorns in the portfolio, the fund validated the investment approach of focusing on gon themes like virtual reality, Goldman said. And he allowed her to raise a second fund.

The new fund will focus on some larger investments, focusing on initial and follow-on investments. And with more than 10 million VR headsets sold to date, Goldman believes VR is reaching a critical mass of consumers.

“We’re going to focus on VR gaming and the metaverse, but mostly VR gaming,” he said. “Now there are more experienced entrepreneurs and game creators entering the field, whereas in 2015 there were a lot of rookies who had maybe never finished a game. We’re getting real game makers to do stuff now.”

VR game makers are still struggling in terms of selling enough games to keep going. But they are doing better in terms of game sales.

“I see royalty reports and I know the growth is real,” he said.

Goldman also reviews traditional games for investment, noting that it invested in Flavourworks, an interactive film studio run by Jack Attridge.

As for what it’s looking for, Goldman said: “The main thing I’m looking for are entrepreneurs who have closed games before, and ideally, at least critically acclaimed games, if not commercially successful. Someone who has delivered a game with a good Metacritic rating and shows they know how to talk to the fans.”

He added: “You can always figure out how to make money. But you can’t always figure out how to do something good. And I would say that in my last portfolio, for better or worse, newbies were having trouble closing games. If you haven’t been in the production fire and really made the hard decisions about whether or not it’s ready to ship, it doesn’t necessarily occur to you the first time you walk out the door.”

That means Goldman is looking for strong technical leaders on a founding team, as well as a good CEO. Good CEOs realize they have to be good leaders and deal with a lot of detail when hiring great people, launching publishing deals, setting up payroll and finances, briefing investors, and recruiting people.

“On top of that, you have to make a great game that’s a great experience,” he said.

Goldman believes that Meta will expand its installed base for Meta Quest 2 and follow up with better, lighter headsets. He thinks Sony will do very well with its PlayStation VR headset, and new entrants like Pico and Apple could also cause a stir in the market. Even if Apple’s device doesn’t sell extremely high numbers, it will propel the industry forward, Goldman said.

Goldman said that it thinks blockchain games will be interesting, but it will not be its focus. He is targeting investments all over the world.

As for the rise of gaming, with so many funds focused on gaming, Goldman feels good about focusing on VR.

“If you have to have risky style returns, I think it’s a really tough market,” he said. “I want to focus on a place where I think I can be successful.”

He warned that some companies may feel good about getting a $30 million valuation, but may find they can’t raise any more money after that because their milestones were too ambitious and they couldn’t hit them.

“The current structure of corporate and gaming funding is getting to a point where it’s a very competitive environment for entrepreneurs and big teams,” he said. “And what that means, ironically, is that you can’t make a mistake as an entrepreneur. I’m looking to compete in a slightly more forgiving environment so that companies have the opportunity to make some mistakes and still be successful.”