Weekly News Digest #22

Public Investment Fund acquires 5.01% stake in Nintendo

Saudi Arabia-based Public Investment Fund (PIF) has acquired 5.01% stake in Nintendo (TSE:7974) for an undisclosed sum. Considering the current market capitalization of Nintendo, the estimated deal value can be somewhere around $2.7B.

Saudi Arabia Public Investment Fund is a $500B fund established to drive the transformation of Saudi Arabia’s economy with a focus on the tech segment. Over the last two years, it has made several investments and acquisitions into gaming:

— In Apr’22, PIF increased its stake in Japan-based PC&console games developer SNK Corporation to 96.18% stake. The total consideration is almost $400m for 62.88% of all shares;
— In Mar’22, it purchased undisclosed stakes in Japan-based multiplatform games developer Capcom (TYO: 9697), and Japan-based multiplatform games developer Nexon (TYO: 3659) for a combined consideration of around $1.2B;
— In Jan’22, PIF purchased ESL Gaming ($1.05B) and FaceIt ($450m), via its subsidiary company Savvy Gaming Group for a combined amount of $1.5B in an all-cash transaction. The two acquired companies were announced to be merging to create a global platform for competitive gaming, named ESL Facelt Group;
— In Q4’20, PIF acquired stakes in three major gaming companies for a total consideration of over $3.3B. The stakes were bought in:
> Activision Blizzard (NASDAQ: ATVI) — 15 million shares (3.5% stake) for around $1.4B;
> Electronic Arts (NASDAQ: EA) — 7.42 million shares (2.6% stake) for around $1B;
> Take-Two Interactive Software (NASDAQ: TTWO) — 3.97 million shares (3.5% stake) for around $825.5m.

As a result of this investment activity, PIF took the 4th place in our Global Gaming Deals Activity Report Q1’22 Top-15 Strategics Rating. With 5 disclosed investments for a total of $2.7B, the fund is right behind Microsoft, Take-Two, and Sony — the three companies, which all have announced the most outstanding gaming M&As of the year (and one of all time, in case of Microsoft). There is, of course, an obvious local market potential: according to Newzoo, in 2021, the Saudi games market generated $946m via consumer spending, with mobile games accounting for around 55% of the sum — over 21 million mobile gamers spent $520m. But PIF not only goes local, it also keeps a keen eye on the gaming industry as a whole, continuously making investments in the global gaming companies, both to diversify the region’s economy, and also gather more information, connections, and expertise from public gaming companies, which can then be used for the development of the local gaming ecosystem, and the fund’s subsidiary Savvy Gaming Group. Thus, the gaming industry becomes more attractive for both institutional and public investors, and we are likely to see more of them joining the market soon.

a16z launched $600m VC gaming fund

US-based venture capital firm Andreessen Horowitz has raised a $600m fund — Games Fund One. Among the fund backers are founders and co-founders of such companies as Roblox, Discord, Riot Games, Blizzard, Sky Mavis, Twitch, Zynga, and King. Games Fund One becomes the third industry-specific division under a16z, after a16z Bio Fund and a16z crypto.

Since its foundation in 2009, a16z has invested in various tech startups, and eventually became one of the most active investors in the gaming industry. Some of the notable investments made by the fund include Zynga (2011), Oculus VR (2013), Roblox (2020), and several play-to-earn gaming companies, including Dapper Labs (2020-2021), Forte (2021), and Sky Mavis (2021).

From now on, a16z will play a much more significant role in the market, since Games Fund One will focus solely on investments in gaming — game studios, gaming infrastructure, and gaming consumer apps. Moreover, this is the largest sum ever raised by a gaming VC fund over a single round. As mentioned on the latest Deconstructor of Fun podcast with Jonathan Lai (General Partner at a16z), the fund plans to hire more people and is likely to make more follow-up investments than before. This may change a16z image among game developers. Taking into account the fact that a16z almost always leads the deals, game developers potentially get to work with the fund that will stay with them for longer than a single round.

In the Q1’22 Report, the fund took up second place in the Top-15 VC Funds ranking.

Skybound Entertainment has raised an undisclosed amount of funding

Skybound Entertainment has closed a new round of funding, led by Knollwood Advisory, with participation from Boost VC and Hiro Capital. Though the amount of funding remained undisclosed, the investment is highlighted as ‘significant’, according to the press release.

Skybound Entertainment was founded in 2010 by the creator of The Walking Dead franchise Robert Kirkman to work with creators on comics, TV, film, tabletop and video games, books, digital content, events, etc. Skybound Entertainment joined the gaming industry in 2014, when it formed the mobile gaming division Howyaknow, which has published several The Walking Dead mobile titles since then. In 2018, the company significantly expanded its gaming operations, opening Skybound Games to develop games based on its IPs and work with indie games as a publisher.

Soon after the announcement of Skybound Games, the newly formed division started working on the final two episodes of The Walking Dead game by Telltale Games, after the latter went bankrupt. After that, the company published several remastered games from Baldur’s Gate, Neverwinter Nights, and Icewind Date series. Currently, Skybound Games is working on the third-person survival horror game for PC&consoles The Callisto Protocol, which is to be released this year.

In Jan’20, Skybound Entertainment closed a funding round led by South Korea-based mobile and online games developer and publisher  Com2Us. Along with the investment, the companies agreed to partner on another The Walking Dead game for mobile.

Apart from the TWD franchise, Skybound Entertainment owns many more IPs, including Invincible, Outcast, Impact Winter, and others. Most of them have not expanded into gaming yet, but have already proved that their narrative works in other media like comics. Though we didn’t see any particular commitment to investing the funding into the game development, potentially, some of the proceeds may support the creation of more IP-based games for both PC&console and mobile markets.

We want to thank Hiro Capital and The Games Fund for supporting this digest.

MERGERS & ACQUISITIONS

UPDATE: US-based play and entertainment company Hasbro (NASDAQ: HAS) has completed the acquisition of D&D Beyond, a digital toolset and game companion for the Dungeons & Dragons game, with almost 10 million registered users, from US-based fan platform Fandom. The total cost of the deal is $146.3m, paid fully in cash. The acquisition will let Hasbro increase its presence in tabletop entertainment, as well as grab experienced staff for the Wizards of the Coast project.

Canada-based games publisher and developer Behaviour Interactive has purchased US-based PC&console games developer Midwinter Entertainment — the creators of F2P shooter ​​Scavengers. Financial terms of the deal are not disclosed. However, as a result of the acquisition, the console version of Scavengers was canceled. Behavior Interactive, most known for its title Dead by Daylight, plans to use the resources of Midwinter for the development of a new project (not yet announced).

Poland-based games publisher, developer and distributor CI Games has made a tender offer to acquire the remaining shares of Poland-based publisher United Label. The company already owns 78.5% of the outfit, best known for Tails of Iron, and Röki. The new offer price is $4.07 per share, which values the publisher at $5.19m. The deal is not yet finalized, but CI Games plans to use its resources for further growth and development of United Label.

US-based gaming coaching platform Metafy has acquired Denmark-based coaching platform (and its competitor) GamerzClass. The deal was made, following the recent $25m Series A round by Metafy. Financial terms of the deal are not disclosed. This acquisition aims to boost the growth of the company and expand its platform across more games.

US-based esports company Generation Esports has acquired US-based military focused esports league Military Gaming League (MGL). Financial terms of the deal are not disclosed. As a result of the acquisition, Generation Esports will continue to operate esports tournaments for the league, whose user base consists of active service members and veterans of the US military.

Scotland-based cloud-based, live service platform that provides a complete end-to-end economic infrastructure for web3 Metanomic has acquired UK-based Artificial Intelligence company, focused on Bayesian Inference Intoolab A.I. Financial terms of the deal are not disclosed. As a result of the acquisition, Metanomic aims to expand and improve data analysis and A.I across video games and Web3. As a part of the deal, the existing solution will be rebranded to Thunderstruck and extend the capabilities of the Metanomic Engine.

Singapore-based video game development company Virtuos has acquired Vietnam-based art production company Glass Egg Digital Media. Financial terms of the deal are not disclosed. As a part of the deal, Glass Egg will be rebranded as ‘Glass Egg – a Virtuos Studio’, but will continue to operate independently. Virtuos added 400 staff members with an experience of working under AAA titles like Call of Duty: Modern Warfare, Marvel’s Spider-Man, and Demon Souls.

Spain-based advertising company Tappx acquires Spain-based mobile games developer From The Bench Games — most known for its fantasy sport titles from the Fantasy Manager series. Financial terms of the deal are not disclosed. This is the first gaming deal of Tappx, which aims to diversify its business and to enter the mobile games market.

VENTURE FINANCING

Hong-Kong based blockchain company Animoca Brands, and its subsidiary Australia-based blockchain games developer Blowfish Studios has raised $19.3m in a Private Sale round of planets from the upcoming Web3 game Phantom Galaxies. The game is currently in alpha stage and has 125k active users, and over 500k owners of the NFTs granting access to the game.

US-based blockchain games developer N3twork Studios has raised $46m in Series A round. The round was led by Griffin Gaming Partners, with participation from Kleiner Perkins, Galaxy Interactive, and others. The funding will be used towards further development of two upcoming titles — Legendary: Heroes Unchained, and Triumph.

Turkey-based hypercasual mobile game developer Hyperlab has raised an undisclosed amount in Seed funding. ACT Capital has participated in this round, while the exact amount of investment was not announced. The company’s valuation has reached $7.5m after this round. The funding will be used toward expanding the company and adding more staff.

US-based web3 gaming company Metatheory (founded by Twitch co-founder Kevin Lin) has raised $24m in Series A funding. The round was led by Andreessen Horowitz (a16z), with participation from Pantera Capital, FTX Ventures, and others. The funding will be used for upcoming non-fungible tokens, comics and a play-to-earn game DuskBreakers, slated for late 2022.

US-based Web3 gaming monetisation platform Joystick has raised $8m in Seed funding. The list of participants was not disclosed. The platform aims to create an environment where owning gaming assets and other tokens is accessible and beneficial to anyone in the world. The funding will be used towards further company’s growth.

US-based blockchain games developer Azra Games has raised $15m in Seed funding. The round was led by Andreessen Horowitz, with participation from NFX, Coinbase Ventures, Play Ventures, and others. The funding will be used for the development of the company’s first game — sci-fi/fantasy collectibles and mass combat RPG Project Arcanas.

UK-based VR company Virtex has raised $3.2m in Seed funding. Global Founders Capital, All Iron Ventures, and Graph Ventures have participated in this round. The company specializes in the creation of virtual stadiums, with a focus towards Esports. The funding will be used towards company growth and adding more staff.