5 questions with Gus Tai

Last month, Hidden City Games Inc. announced that it raised $15 million in its first institutional funding from Trinity Ventures and Rustic Canyon Ventures. Even for investors who are growing accustomed to seeing casual gaming companies take hold (see story, page 1), Hidden CIty is not a typical VC portfolio company. The Seattle-based startup makes collectible trading card games. CEO Peter Adkison previously founded Wizards of the Coast, which created the Pokemon trading cards, and which Hasbro bought for $500 million several years ago. PE Week Managing Editor Alastair Goldfisher put down his Game Boy long enough to pick up the phone and call Trinity General Partner Gus Tai and ask what all the fuss was about with Hidden City.

Q: What got you excited about the company to invest in it?

A: I’m excited at how the company incorporates the consumer with the Internet. Hidden City is perhaps best known for licensing Bella Sara, the horse-themed trading cards that girls buy and trade and then go online to link to a safe website to learn more about the character on the card. So for us, Hidden City Games represents an emerging set of companies that focuses on integrating online services with offline products as a way to monetize customers.

Q: You say an emerging trend, so what are some other examples of companies doing this?A: Other startups that have done this would include Webkinz, a stuffed animal pet that comes alive in an online world. In fact, I would argue that the best example of offline entertainment integrating with the Internet is Apple with its iPod and iTunes. The joint delivery of a physical product with an Internet service creates a very powerful consumer proposition. Doing just one or the other isn’t as strong of a proposition.

Q: When you chose to invest in the company, did it help that you knew of the CEO and his track record with trading cards?

A: Yes, without a doubt. Adkison is a legend in the card business. But it’s not just the entrepreneur behind the company. The company’s business plan is working. There’s evidence of that. Plus, with broadband technology penetrating more than half of the U.S. households, it’s only natural to see the potential of this company, which integrates collectible cards with the Internet.

You asked why I’m excited. I’m excited about the company’s core retail business and I am excited about their direction towards enriching this experience for consumers on the Web.

Q: A lot of talk lately about bubbles, with so many Web 2.0 companies getting started. What’s your take on it all?

A: No, it’s a lot different now than in the late 1990s. Entrepreneurs and investors are more cautious now. And they are smarter. And there’s not the same volume of liquidity as there was several years ago. So we feel great, no worries.

Q: Speaking of liquidity, you had a good year with News Corp. paying $250 million for portfolio company Photobucket. So what’s your secret?

A: No secret. You just have to do what you are competent at. The median size of the companies I have funded while at Trinity is three people. So I specialize in company formation. I’m personally not going to go setup a fund in India and China. I have a different skill set. And so far I’m able to find the right innovative entrepreneurs for the right companies.