Pragma | Game Changer

Hi everyone. Welcome to Gray Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm David Thacker, a general partner at Greylock. Our guest today is Eden Chen. Eden is the CEO and co founder of Progma, which is building a backend game engine for social and multiplayer games. Greylock has been a partner to Progma since 2020 and and the company just closed its Series B a couple of months ago. There's a lot going on in the gaming industry today. We've largely moved away from traditional out of the box style games to now live services and platforms. These are virtual worlds where people convene for more than just gaming, but also live events, social networking and Commerce. Today, the 2 billion people around the globe that regularly play digital games do so not just for entertainment, but increasingly as a way to socialize with friends and make new friends. Pragma is powering that transition and setting us up for the next generation of gaming. Today we're going to talk about how the company became part of this new breed of gaming technology and what's next. Eden, welcome to Gray Matter. Thanks so much for joining us today.

Thanks for having me.

Let's start with the basics. What is Pragma?

At the highest level, we're a tool set for game developers for helping make games faster and better. Our first product is what we call a back end game engine. So games are these really, really complex products that are both entertainment properties and technology products increasingly so with movement towards live service games. So our back end game engine takes care of all of the out of game platform features, features like matchmaking, content management. So content would be things like inventory or skins or your achievements and things like that. Accounts and social features and there's actually a whole list of other features. In tech we really like to talk about these MVPs but for gaming it becomes a lot more complex because of the way that games typically scale. So in gaming an MVP can include creating a whole social network that has to scale to millions of players on day one and an entertainment property very similar to like what Pixar makes in a movie. So the barriers to entry for gaming can be extremely high. You're working on again this like super scale kind of social media property and this like beautiful entertainment property at the same time.

Yeah. Great. And can you tell us a little bit about the founding of Pragma and why you decided you wanted to work in the game industry?

Yeah, so I've actually been a lifelong gamer and basically lifelong nerd. I was one of the top 10 Warcraft players in the US and interestingly enough, when I got to college, there was really no esports industry at the time. We were called pro players at the time. But we, you know, I graduated high school, went to college and I was like, I need to figure out a way to, you know, make money and get a job eventually. I can't really just play games my whole life. And funny enough, now the esports industry is like huge. But importantly, I spent about 10 years away from the games industry, started a hedge fund, ended up starting another tech company. And then the sort of impetus for games for me was that after I had my first child about three years ago, me and a bunch of high school buddies that used to play games together, we started playing one night a week where we get on around 8:30pm after we put the kids down again, we couldn't really go out because we had kids. And that became this huge space for us to talk about fatherhood, about business, about all sorts of other topics. And that really just opened my eyes again to how much I loved just the social nature of games. I'd say, like I wasn't like I was playing every single day and trying to go pro at that point, but just the idea that I was able to play one day a week, catch up on life and just the immersive nature of games as opposed to something like social media or if you take something like Netflix, which is more of a consumptive entertainment medium, Games for me was like, oh, I'm doing something with my friends. So that was something that really, really interested me. I had this really long standing friendship with Chris. I met Chris when he was a platform lead at Riot working on League of Legends. And I knew he was one of the best backend engineers in games. I had talked to lots of folks within Riot that talked about how he was this rising star. He ended up leaving Riot and I advised him when he started his first company and he ended up selling that company to Phoenix Labs. And it was funny enough, we were both actually at a fundraiser. I bumped into him completely randomly and even though I'd advise the company, he hadn't updated me that the company had sold. So he updated me at that dinner and as soon as he updated me then I was like, I need to grab lunch with this guy because I want to co found something with him. So, you know, I think there's this personal passion of mine for games. There's this amazing co founder and Chris that I'd known for a long time. We had been Friends, you know, outside of work. And I think there's also this mission for me and Chris as well, where, you know, we really feel like games is the next frontier for where people are hanging out. And we have this strong desire to shape that industry for the good that that's things like how can we decrease toxicity, how can we encourage people to have more social connections? And so these digital worlds are not just places where people are zombies and they're not really connecting with other people. So we really feel like as this infrastructure technology that's really focused on that social part of games, we can really contribute to those things.

And you and Chris have hired this pretty amazing engineering team, many experienced veterans, veterans of the gaming industry, and you spent the last couple of years building out the beta version of the Pragma product. So can you just give us an update on what is the status today and tell us a little bit more about how you went about building the technology?

Yeah. So, I mean, we knew that building a backend engine was going to be extremely difficult. This is actually not sort of like a new idea. There have been lots of companies that have tried to build backend engines, and the predominant motion was that most of the time, people try to build products for indie studios because there's literally tens of thousands, hundreds of thousands of studios out there. And that was extremely difficult because on day one, a game needs to be able to scale to millions of players. So what would happen is you'd have thousands of studios sign up for this engine, and then the moment that a game was good and hit it is the moment that you'd have to really support a AAA game. And. And that turns out to be an extremely complex technical task. So at these, like, AAA studios, you might have 50, at least, platform engineers building out the technology for years. And then after you build out the technology, these central tech scenes are literally hundreds and hundreds of platform engineers. And so, like a startup or a new studio, trying to get that right is extremely difficult. So even as a technology provider, it's like, well, where do you even start? There's like, is it realistic that we can hire 100 engineers to build this platform tech? No. So, I mean, we had known this was gonna be complex. We knew this was gonna be a big effort. There's new advances in technology like aws, obviously, that has taken a huge burden off of us to allow us to focus a lot more on the features. And hiring an extremely senior team was, like, really, really important for us. And obviously Chris and I had worked in the technology industry for A little bit. So we had known a lot of really, really high quality platform engineers. You know, when we started talking to studios about building a backend engine, it was actually one studio that convinced us to start Pragma. They were like, hey, if you build this technology, we will just license it from you, we'll pay you for it, even though it's not built yet. Like, we need this thing so much and it's like we don't have the resources to build out our own team and this is table stakes for us. We don't need to own this back end technology. So that's when the light bulb really went off for me in terms of like, okay, well, I mean people are willing to pay us even for a product that's not been built yet. So that's really how we got started. We started with a design partner that was paying us to build out the technology and then we started signing up design partners. Over time there was a massive wait list of customers that wanted to be a part of that and we were able to sort of pick the best of the studios that we were talking to. So it's been a couple of years now. We have now an end to end platform that has features like matchmaking, lobbies, invites, game modes, account integrations, social features, content management, something that we spent really the last six months building out. That's like, how do I add a piece of inventory and then make sure that I can update that inventory over time? Even with millions of players that have that piece of inventory without there being multiple databases and dealing with migration problems, we can scale to millions of concurrent players already. And we're investing right now heavily into building out a richer set of features. So we have that sort of end to end. Now. It's about creating a more rich set of features. And we're also spending a lot of time on operability. So like, how do we allow ourselves actually to manage like many, many studios? So that's really like our ability to scale, not necessarily like a feature set. So we have about 30 engineers today and we're rapidly expanding that engineering base. And all of our customers are currently using our platform to power their game loops today.

And let's talk a little bit more about how you got those customers, you call them the design partners, your initial customers, to use Pragma as a platform. I imagine choosing a backend game engine for these studios, they're basically betting their game on your technology, right? It's pretty much an irreversible decision and you're a much better funded startup. Than you were when you started, but still an early stage startup. So how did you go about convincing these game studios that they should bet on Pragmatic?

What we really had to talk about early on was our network of platform engineers and we were able to build a team out to seven folks very, very quickly, even before we had a lot of funding. And these were seven of the most experienced platform engineers that had shipped League of legends, Fortnite, Destiny 2, some of the biggest live service games in the past. These are extremely, extremely difficult people to find and to hire because it's not like there's hundreds of and hundreds of senior platform engineers in games. There's like, you know, at each of the big studios you might have five or 10 senior engineers and there's not that many live service games in the history that have scaled to, let's say like 5 or 10 million concurrent players. So, you know, it's really, really difficult to find those people. But once we had that core team of seven, we could go to an early stage venture studio and they didn't really have a lot of alternatives. It's like if you're a venture backed studio and you're trying to build a live service game, you have like a few options. You can go out and hire five or ten like sort of Google tier engineers that are going to cost you a couple hundred thousand dollars each and you're spending literally millions of dollars a multi year build out process and then it's ongoing costs beyond that and there's not really a lot of solutions out there that are going to support the type of live service game that they're looking to build. Or you can, you know, work with someone like us, which is again, it's a huge risk because the product is still being built out live, you know, but ultimately it's like, do you take a risk with seven very, very experienced platform engineers that have done this in the past multiple times, or do you go out and try to build out your own team, spend way more money and then end up with something that maybe is not even as good as if you just like work with us in the first place. So it was a risk, but it was something that we felt like there was even a great argument for using us when we had very little at the time.

Yeah, I'm sure these studios would love to hire your team to build their backend engine.

That's exactly right. So I mean the first customer that we had, the one I was telling you about, that was like they literally tried to hire Chris as the first this was when it was literally just me and Chris. And Chris was like, I don't really want to go and work somewhere, I want to start something again. And they were like, well, what if you built it for us and then you guys built a company out of that? So they actually were the ones that almost proposed the idea of Pragma in the first place.

And let's talk a little bit more about the actual product. I think one of the interesting things about Pragma is it's not just a SaaS service in the cloud, which seems to be the, the primary enterprise model these days. You're actually giving your customers the source code so that they can modify Pragma, customize it to their needs of their studio and the game they're building. Can you tell us a little bit more about that decision?

Yeah. So one of the core insights that we had, we had talked to dozens of studios before we started Pragma and almost every studio had said, the reason why I'm not using off the shelf solutions is because these platforms are not extensible. Gaming is this very creative industry. So you might have a matchmaker, for example. The purpose of a matchmaker is to put people in the same game together, but different games have different objectives for what they want their matchmaker to do. Some people want it to be skill based, some people want it to just be time based. Let's just get people into games as fast as possible. For example, Fortnite, they're not really interested in it being a perfect match. They're trying to. Their expectation is people are trying to have fun and do it quickly, so they're trying to get people in the matches. Whereas something like CS go. It's like a lot of pro players, there's a huge pro scene. There's a lot of people that really care about it being a fair match and if it's not fair, they feel like they've been cheated. And so these people all have different objectives for a matchmaker. And the moment your platform doesn't have one feature that you need is the moment in a cloud based sort of environment where you can't make edits is the moment you have to start building out your own platform. So a lot of times what people would do is they'd have one backend and then they'd have to start spinning out their own backend and it'd be complete nightmare to manage two backends. And then like those are interfacing if one has problems and they all break down. So we had heard from people is like a back end needs to be extensible if you're going to really work with these AAA studios. So we really built a platform anticipating that studios were going to use extensions, plugins and, and custom services. Extensions are sort of like taking our general purpose matchmaker and saying like, I'm going to add a layer on top of that. We have examples for how people would write extensions. For example, a plugin would be like, you want to write your completely new service, you want to plug it into our system, take advantage of our service to service communications, our security, our scale, et cetera. And then a custom service is just like completely your own service. And so that was sort of a unique thing. In fact, like the company that I think I relate with the most in many ways is Salesforce. Because a lot of people say like, I hate Salesforce, but at the end of the day everybody uses Salesforce. And the reason why is because when you get to a certain scale as a company, you need your CRM to be extensible. Like you need to be able to do custom reporting and you need to be able to add your custom fields. And like, turns out that there's no, you know, there's been so many companies that have tried to compete with Salesforce that have created These clean software SaaS, cloud oriented products that are just very simple to use. But again, everyone, when they get to a certain scale, they have to migrate over to Salesforce. So that's what we had found with our solution too as well, is that extensibility was a core feature in terms of what needed to happen for this type of a product. And that was something that we needed to do. So there's been our initial license which was like, let's just give people source and then give people examples on how to write these different flavors of pragmatic. And then recently we've been moving into how do we actually manage pragma on behalf of our studios so that they don't have to deal with the DevOps and setting up their AWS environment and all that. And then there's lots of complexity around like how we manage a studio while giving them extensibility. And you know, I could get a lot more into that, but that's, that's like where, where really the sweet spot is of like how do we make operating pragma simple but at the same time give people extensibility and like that's a really hard thing to balance.

Yeah. And I think one of the characteristics of the best platforms is the extensibility piece. But Also just providing a great developer experience. Right. Because really the developer is your end user of Pragma. So what are you doing to equip developers at game studios to leverage Pragma most effectively?

Yeah, I mean we've learned a lot honestly over the last couple years. Even with building this out in terms of like personally we had never hired like something like a tech writer before. And this is something where we had always known tech writing or the documentation for Pragma was a first party importance kind of feature in terms of if our documentation is not good, then our product is not good because developers are interfacing with our product through our documentation. And we didn't know what we were doing when we were hiring tech writers. Do they need to be programmers? Are they super technical types of people? Who are the types of people that are tech writers? So we've actually invested a lot into tech. Tech ready. We have a whole CCX team that's five people today. So it's like we're on 30 people. So it's like almost 20% of our team is our CX team, our tech writing team. And these are all technical folks that are basically consumers or sort of the users of Pragma. Every single week we go through this end to end process where our CX team runs Pragma from scratch on a clean box so that they can really get familiar with using Pragma for the first time as if they were a new user of Pragma that was just onboarding. And then we make sure that using the existing documentation, developers have a really seamless experience basically using our documentation, our platform together. So it's something that we've invested a ton into documentation. I think it's something that's not really talked about a lot in the tech industry. I didn't know much about documentation and it's a really, really hard thing to balance because when you're platform is constantly changing, you can't invest in documentation too early, otherwise you're constantly changing your documentation. But if it's too late, then your customers can't use your product because they don't know how to use it. And so this is something that it just frankly took us a little bit of time to get right. But it's something that we always knew was extremely important and that we had to get right for it to be a good, good experience for our customers. Another thing is that we have like a product called Pragma Portal which is we bundle a front end interface or front end web. Like it's like a React Web Portal into our engine. And that web portal pulls things like metrics. It pulls all the live services directly from all of our services. And not only can you write a custom service, you can also write a custom. You can also connect that custom service with our portal product such that you're not only getting a actual feature, but you're also getting that feature monitored on a front end interface as well. So that makes things a lot easier for people that aren't just developers.

Great. And let's switch away from the technology now and talk more about the business model of Pragma. You thought about pricing and packaging and how you take this to market. What are some of the considerations you're going through and how do you intend as you come out of the beta and release the GA of this product to price the product?

Yeah, so we started off with an annual license which is like a certain dollar figure a year and that was sort of like a fixed rate. The reason why we did that was because game development cycles are fairly long. Like a normal game development cycle is anywhere from three to five years. And that's like unheard of in the tech industry. Again, we talked about how these MVPs are a little bit larger than like your whatever, your basic MVP of any type of other product and interfacing with a studio for let's say like five years and then having sort of a consumption only model didn't seem to make a lot of sense because you'd be working with this customer for years, they launch and then you'd be taking tremendous risk on that launch. Like if the game didn't do well, that might be a churned customer. The next part of it is a sort of variable rate and we've thought about a lot of different models. On the variable side, we've thought about looking at royalty. So if you look at the games industry, there's a huge history of royalty models like the app stores like Steam, Apple Play Store. You can look at Epic, Epic's product Unreal, which takes a 5% royalty. We've looked at a user metric that's tied to the variable rate so that you would look at something like CCU or MAU. And then we've also looked at read, write and storage, which is the traditional way that people in the cloud space look at, you know, pricing. That's like AWS Unity is doing that. And there's, there's several others like Playfab that have done that in the past. There's pros and cons to every single one of these I could get in a lot more detail, but essentially there's pros and cons to every single one of those models. And at this point we're working very, very closely with our customers to come up with the right model. What we've told them is we have certain principles in place. One is we work with customers very closely in the development period and so we feel like we need to monetize during the development period. Principle two is if the game is successful, we want to be successful too. So we need a variable rate attached to it. And principle three is that we have to be a great value for our studios and that we save them time, money and risk long term. And every single time we've presented that, all our studios have been fairly open to a discussion there.

Yeah, those are great principles. It really aligns you the interests of Pragma with the interests of your customers, which is terrific. Let's switch topics a little bit more now. And just when you think long term about Pragmatic, the ultimate vision of the company, what's the ultimate goal here and how do you see Pragma fitting into the overall gaming landscape?

Our like mission as a company is to support healthy and vibrant online communities which has a very, very social bend to it. The funny thing is that we so we go through what's called like a playbook every single week where we reiterate our values, our mission, our near term objectives, our like midterm objectives, et cetera. And the first thing we talk about every week is our mission support healthy and vibrant online communities. And the interesting thing is in many ways we're not even scratching the surface of that yet because those social features are not for most people, MVP for a lot of studios. Most studios use discord to go to market as their sort of social network. They don't need in game chat necessarily and voice chat and all these social features that we do want to build out eventually, but it hasn't been something that we've been prioritizing. So there's a long, long term vision for. Look, we're extremely passionate about the social space. I, I sort of started this conversation saying that what compelled me to come back to the games industry was just being able to spend time with my friends. And that means what we want to do is decrease toxicity, hate speech and racism, things like that that we see in lots and lots of games today. There's actually a great business case for that too. I know at Riot they did a study that the number one reason why players churned out of a game was because they experienced some form of hate speech or some form of toxicity. So there are really great business reasons, but they're also our own passions to make this new gaming space a positive landscape long term. We also just want to be able to create best in class tools for the games industry. We started off with the backend engine because we talked to so many studios that were like this is a core problem. The industry was facing this tremendous shift over to live services and there weren't the tools to support those studios. But we really see a huge landscape of products out there. For example, like there's a Pragma ID product that we want to launch, which is a cross game kind of cross distribution login for players. There's Pragma pay, which is very much like ability for studios to launch their own stores and to hook that up with their content management systems and be able to transact on items. There's Web3 integration and the ability for folks to pick your chain of choice and then make sure that that chain has an integration with your content management system. Which today, like, if you look at a lot of Web3 games, they don't have the complex live service components that like a League of Legends does because it's just not feasible. So there's just a slew of tools that are out there that we want to make and we just feel like gaming is just like this huge industry and it's just very, very strange to us that there's not dedicated players that are creating picks and shovels, creating these tools to make game development easier. So that's really what we want to be, this sort of advocate for developers, advocate for studios to make game development a lot more simple and hopefully we get to see a lot better and more social games that come out of that.

Terrific. And let's wrap up today. I wanted to get your thoughts on two topics that are really getting a lot of buzz in the gaming industry. The first is the Metaverse and The second is NFTs. So let's start with the Metaverse first. What's your perspective on the Metaverse? I mean there's a lot of companies trying to build metaverses. Some of your studios are probably trying to create their own metaverses. How do you see this all playing out? You know, is there going to be one uber metaverse for everything or, or what do you, what do you think?

I think that the most interesting thing to me about this concept of Metaverse is the ability to interop between various places. So like, I think the closest thing to Metaverse that we have today is the Internet. And that's like the Internet is this ability for us to interop with all these different things. I guess there's some bias obviously in the fact that we're infrastructure layer and to a big extent our view is that if we can create generalized tools and those tools become widely used and available in the games industry, there's things that we can do to benefit that interoperability. One really, really interesting company and tool out there is Shopify, obviously. And what they've done with Shop Pay is that they have thousands, I mean millions now of stores on, you know, Shopify and they're rolling out Shop Pay, which is this payment interop product where, you know, you don't have to sign up for your credit card across the hundreds of places that you shop from. You just use Shop pay and automatically your payment credentials are there and you can check out very, very quickly. I think that's like one small example of interop. But in gaming there's so many other places that you might see interop happen that lives separately from just like maybe like an E commerce store, for example in Steam. In the past Steam was like a store where you'd go there and maybe there'd be a chat function and maybe you would purchase a game there. Our version of like the next version of Steam is that Steam can live everywhere. Like with an infrastructure provider. You can chat anywhere, you can purchase anywhere. That can happen across any distribution medium, across PlayStation, Xbox, and then that can happen across games as well. So cross distribution and cross game interoperability is what we think is like at least one step towards a metaverse where you'll see increased communication on the NFT side. Yeah, I mean the interesting thing about NFTs is that, you know, digital goods have obviously been around for a long time in games. Like, obviously like most of the revenue models around games are around digital models. And the interesting thing is that the big innovation of League of Legends, which over the last 10 years has really been the most popular video game in the world, has been that they took away the ability to buy something to win a game. And so you would buy a skin that might make you look cool, but that didn't affect the actual gameplay of what you were doing. Now crypto in many ways is sort of like going back in the gaming space. It's going back to an old model which is like if you look at like Axie, for example, it's like fifteen hundred dollars to you got to pay before you even can like start competing and start, you know, owning these characters so that you can start playing with them. And there's almost this play to earn, play to play model which a lot of people in the traditional gaming space have a problem with, because the economy is more important than the game design in a lot of ways. And people don't love that. I think one of the most interesting projects is this project called Loot Project, where you buy a bundle of items and then those items are what other game developers can use to build on top of. But that's really the most interesting innovation I see in the NFT space, where the items in the economy are driving the actual game development, as opposed to the game design and development driving the actual items in the economy. Gaming for NFTs also has not really performed the way that a lot of people would. I mean, if you look at NFTs, the most obvious place that you would expect NFTs to be successful would be in games. And I think it's still going to be a huge business, but it's not something that we've seen to date. The NFTs that have been most successful have been sort of social identity. NFTs like APE and different, you know, different areas like that. And then generative art, which have really no utility. It's just something that you might throw on your Twitter profile picture. But the interesting thing about utility versus non utility is that in games you might buy like a horse. Like in some games you might breed a horse. For example, you pay for that horse and that horse has a certain yield that's attached to that purchase, which is great because you can earn income on that thing that you purchase. The problem though, with that same utility is that if that game goes away, then that asset becomes useless. There's no interoperability of that asset. That asset becomes less valuable if that actual game becomes less played. Whereas if you look at the social media profile picture, it doesn't really matter if Twitter's the biggest social medium or Facebook or whatever. You can just take that NFT and put it as your profile picture anywhere. And so those have actually been more interesting on the NFT space than in the gaming space. The innovation that crypto brings to digital goods is really, in my mind, more of a cultural shift. It's not just a technological feat, because games have tried to create marketplaces in the past. For example, Diablo had a marketplace and they shut it down because it wasn't successful. Like the ability to transact items for players, for those items to have bid and ask and market rates, those things have been tried in games and they haven't worked. But crypto has really created this huge cultural shift where players are now wanting to see market pricing, tradability and items. There's transparency and accountability that we're seeing in terms of, you know, how many items are going to be created and that creates a level of scarcity. And there's games that again are being sort of built around economies instead of the flip way where that game design is sort of the initial concept and then you build an economy to support and make sure that there's a business model there. So I think there's really, really interesting things. It's obviously like fairly, fairly early and you know, it's something that ultimately pragma, we want to be this infrastructure layer that supports how you interop between different chains and how the content integrates with various chains, et cetera. And so yeah, it's a space we're looking at, we're very, very interested in. It'll be interesting to see if the player count catches up to the amount of investments that have been made in the space. Obviously that's maybe your space and an area that you might know better. But yeah, we're definitely looking at it. It's fascinating and really interesting.

Yeah, there's a lot of people betting on the evolution of that right now. And what's interesting, I think to your point, I mean, what's most important for games is that they're fun, right?

Yeah.

And that they're social. And so when you introduce some of these concepts where you have to have acquire really expensive items to be competitive in a game, it takes away a lot of the elements of a game that make gaming a huge pass time for so many people.

That's true. And again, it hasn't been talked about much. The traditional gamer, a lot of them are fairly anti crypto. It's definitely something that I'd love to see some journalists write about that tension there because I think a lot of people view those things as synonymous. You see a lot of gaming and crypto funds and there's really like a lot of tension there right now. And you know, again, as infrastructure we're fairly agnostic and we want to support what developers want. So if developers are asking us for certain features, then we would like to build those features as long as it's ethical and you know, it's something that supports our mission.

One last question for you. Pragma is growing pretty quickly. What kind of roles are you recruiting for at the moment? You know, and what are you looking for? In candidates.

Yeah. So we had traditionally been a team of all backend platform engineers. We actually just started building out our product or we hired our first product manager, we hired our first product designer which literally started in the last few weeks. We do want to continue building out that practice. Obviously for us, we're going to continue building out our platform engineering team. This is an extremely competitive place to hire. Back end engineers are coveted everywhere, not just in gaming, but it's a place that we're going to continue aggressively hiring for. Probably want to hire another 10 platform engineers in the next three months. So if you're a platform engineer and you're of interest in games, please contact me.

Okay, terrific. Well, we'll wrap it up there. Thank you very much, Eden for coming and sharing the story of Pragma today. Really exciting stuff going on there. Congrats on all the progress and congrats on your recent fundraise. And that concludes this episode of the Gray Matter podcast. Thanks everyone for tuning in.

Thanks.