At the start of the year, SolChicks was flying high. The crypto-powered, play-to-earn game — which stars a cast of 10,000 cartoon chicks in an array of costumes — was one of the hottest prospects to have been built on the Solana blockchain. Through a sale of its chicks tokens in November 2021, the game’s Hong Kong-based developer Catheon Gaming raised $55 million. And all for a game that, even now, remains in beta-testing.
Since January, the price of the chicks token has fallen from around $0.16 to less than $0.004, according to CoinGecko data — a decline that mirrors the performance of the wider crypto market. The price of bitcoin, over the same period, has more than halved, while Solana’s token SOL has plummeted from over $170 to just $30. NFT trading volumes are also down sharply from their peak last year.
In more ways than one, the bear market has taken a toll on Catheon. The startup’s headcount shrank rapidly over the summer thanks to a combination of layoffs and executive departures, according to people familiar with the matter. William Wu, Catheon’s CEO, confirmed that the number of full-time employees at the firm fell from 80 people to around 40.
“We are now in a bear market and practically all revenue generating avenues have collapsed,” he said in an emailed statement. “Given the above, Catheon Gaming took prudent and proactive measures in August to right-size the headcount and prepare for a potentially long bear market, similar to what has taken place at many other tech companies both in crypto and elsewhere.”
Several top executives are among those who have left the company, including Mark Aubrey, who joined the outfit in July from gaming giant Activision Blizzard, where he was a vice president and managing director in the Asia Pacific region. Aubrey, who did not respond to requests for comment, spent just two months in the role of co-CEO alongside Wu.
Catheon offers a striking example of the various knock-on effects that a so-called crypto winter — a popular phrase for a period of suppressed token prices — can have.
Many startups in the web3 sector hold a substantial part of the funds they have raised in tokens. Catheon was no different. Before the trouble sparked by the collapse of the Terra ecosystem — an implosion that evaporated some $40 billion in value overnight — Catheon's treasury held a diversified pool of cryptocurrencies, including bitcoin, ether, BNB, SOL and various stablecoins, according to Wu. A small amount of those stablecoins were parked in Anchor Protocol, the lending and borrowing platform built on Terra, according to people familiar with the matter.
“The downturn in market prices for the cryptocurrency assets has reduced the value of the treasury but the company still has a significant amount of treasury and runway remaining,” Wu said.
Catheon had hoped, earlier this year, to land at least $100 million through an equity-based fundraising effort, for which it had hired the investment bank Lazard. A pitch deck for that round, obtained by The Block, highlights the success of fellow play-to-earn game Axie Infinity, and outlined the opportunity for similar games built on Solana.
Several sources told The Block that Catheon had, at one stage, drawn considerable interest from blue-chip venture capital backers. Ultimately, though, the fundraise failed.
“With the deterioration in market conditions, we realized that a full equity raise process at a $100m+ size would likely to drag out and be at a significantly lower valuation,” said Wu, who also claimed that the company has more than 10 years of financial runway. “Subject to market conditions, we may consider running an equity raise process in 2023,” he added.
P2E store pivot
In the shorter-term, Wu and his remaining team have been focused on launching a new token, named catheon, with a wider range of use cases than chicks, which is of little practical use until the SolChicks game is fully up and running.
The new token launch is part of a pivot away from focusing on a single game in favor of nurturing a portfolio of crypto-based titles. The plan is for the catheon token, which is due to launch Oct. 24, to facilitate transactions across a stable of games.
“The data shows though that the most value is created not by single individual game titles, but rather, by building the deepest and widest gaming ecosystems,” Wu said, pointing to Gala Games, Wemix and ImmutableX as examples of startups taking the same platform approach.
For the catheon token, Catheon plans to allow eligible chicks holders to swap their tokens for catheon on a 1:1 basis. Wu said he hopes this will benefit chicks holders “by significantly increasing their utility beyond the single game title token they purchased.” He added that there has been no pre-sale or private sale of catheon.
The work on SolChicks continues, too. Last week, the company launched a “closed beta” version of SolChicks, giving exclusive access to a small group of players.
Wu, despite the considerable setbacks his company has faced this year, sees a bright future for Catheon. As recently as July 25, it ranked eighth in a report produced by KPMG and HSBC highlighting the “leading 100 emerging giants” in Asia Pacific.
“The recent transition from chicks to catheon was met with very positive feedback from our community and token holders and we are very optimistic about the future and continuing to be at the forefront of this industry,” Wu said.
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