Weekly News Digest #48

Web3 games publisher Fenix Games raises $150m 

UAE-headquartered Web3 games publisher Fenix Games has closed a $150m investment from Phoenix Group and Cypher Capital.

Fenix Games announced its establishment on the day of receiving the investment. The studio is co-founded by three former C-level executives of Mythical Games: Chris Ko (CEO), Matt Nutt (COO), and Rudy Koch (CBO). Founded in 2018, US-based Mythical Games is best known for its Blankos Block Party blockchain-powered game, which became the first everWeb3 game released on Epic Games Store.

In his interview for GamesBeat, CEO and co-founder of the company Chris Ko revealed their plans not only to publish and operate Web3 games, but also to make investments and acquisitions. For this, Fenix Games has ‘a few hundred million’, which will also be used to acquire some of the existing Web2 games.

Overall, the company’s global aim is broader than just building a strong publishing division for the Web3 gaming industry. We might say that the long-term goal of such M&A activity is to build a large ecosystem of studios like that of Embracer, or Stillfront. This, in turn, might help the company to become one of the key pioneers, creating infrastructure for the future Web3 gaming industry.

However, we cannot but highlight the current state of the blockchain gaming market here. Since Q2’22, we have observed a decline in blockchain-related investment activity. Both VC and Strategic Investors are becoming more careful with their investments, which resulted in a continuous decrease in both the total sum and the deal count. The recent collapse of FTX, which was not only a large cryptocurrency exchange, but also one of the most active investors in the Web3 gaming space (see p. 23 of our latest Report). We might fairly assume that the FTX story will make investors even more cautious now, which will result in the further decline of a recently flourishing and record-breaking market.

Source: Global Gaming Deals Activity Report Q1-Q3 2022 by InvestGame

However, there is still lots of capital ready to be deployed in Web3 gaming studios, including Andreessen Horowitz’s $4.5B Crypto Fund Four, the largest crypto fund today, which is bigger than the total sum invested in blockchain gaming in 2021. As for Strategic Investors, we already saw Animoca making 51 investments in blockchain gaming studios in Q1-Q3’22, and with ‘a few hundred million’ of dry powder Fenix Games may also get into the same league someday. So, even though the market might clearly lose some Web2 and non-core investors, there will still be some capital present to make this crypto winter a little bit warmer.

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

 MERGERS & ACQUISITIONS

Israel-based mobile games developer and publisher Playtika (NASDAQ: PLTK) has purchased a minority stake in Turkey-based mobile games developer Ace Games for $25m. Ace Games is known for its casual farming title Fiona’s Farm. The deal will allow Playtika to increase its portfolio, while Ace Games will get access to Playtika’s resources for further growth.

China-based game giant NetEase (NASDAQ: NTES; HKEX: 9999) has purchased a minority stake in Poland-based games developer Rebel Wolves, co-founded by former CD Projekt RED executive Konrad Tomaszkiewicz. The financial terms of the deal were not disclosed. The funds will be used for the development and publishing of a unannounced narrative-focused dark fantasy RPG.

VENTURE FINANCING

US-based user-owned gaming identity startup Carv has raised $4m in funding, reaching a $40m valuation. The round was led by Vertex, an early-stage focused VC firm under the Temasek fund. Carv provides data services to game operators that can be applied for cross-platform data transmission on other established ecosystems like Steam or Uplay. The funds will be used to further develop its main product — an engine that aggregates gamer data from both Web2 and Web3 services.

Brazil-based mobile games developer Aoca Game Lab has received a $2m investment from Google Play’s Indie Games Fund. The studio is known as a creator of the Árida franchise — a survival and adventure series that happens in the Brazilian backlands. The funds will go towards further franchise development, including release of Árida: Definitive Edition.

US-based Web3 game company Midnight emerged from stealth mode and revealed a $7.5m Seed funding. The round was led by Shima Capital, with participation from Forte, Snackclub, and others. The funds will go towards creating a free-to-play ‘eternal’ game, targeting a wide range of audiences with and without crypto experience.

Estonia-based mobile games developer Plummy Games has received a $6m investment from the UK and Cyprus-based mobile gaming company X-FLOW. The funds will be used to add more staff and to develop new titles in the Match 3 genre.

US and Japan-based Web3 and VR games developer Thirdverse has raised $15m in funding. The round was led by MZ Web3, with participation from 8DAO, B Dash Ventures, and others. The funds will go towards expanding the team and developing VR and Web3 games.

US-based PC games developer City State Entertainment has raised $15m in funding. The list of investors was not disclosed. The funds will be used to expand the team and to further develop its gaming engine, already used for creating Final Stand Ragnarok, and Camelot Unchained.