Weekly News Digest #26

Source: Anzu

Anzu Raises $48m in Series B Funding Round

Israel-based in-game ads solution company Anzu has raised $48m in a Series B funding round led by Emmis Corporation. The new investors of the round include PayPal Ventures, Evolution, Simon Equity Partners, and Bandai Namco Entertainment 021 Fund. As for returning investors, there are Sony Innovation Fund, NBCUniversal, WPP, BITKRAFT, Samsung Next, Harris Blitzer Sports & Entertainment (HBSE) Ventures, Axel Springer and Marquee Ventures.

The deal will include the conversion of SAFE notes, and become a 10x exit for some of the early investors of Anzu, who the company has not disclosed. Since its foundation in 2017, Anzu had closed three other rounds of funding:
— In Mar’22, Anzu raised $20m in a funding round led by NBCUniversal and HTC (TW: 2498);
— In Feb’21, the company received a $9m investment in a round led by BITKRAFT and Sony Innovation Fund;
— In Aug’19, the company secured a $6.5m round led by BITKRAFT.

Anzu specializes in providing solutions for non-intrusive ads within video games. It connects advertisers and game developers, to integrate ads into the in-game environment. The new funding will allow the company to build out its global leadership team, grow its US footprint by establishing new teams in the country, and to maintain its independence.

In-game advertisement blended into the gaming environment is still kind of novel, and the market has yet to see its true leaders. Over the last 3,5 years, we saw a moderate interest in the niche from the investors: Admix closing a $25m Series B round, Bidstack securing an $11m investment, and Frameplay raising $8m in a Series A round — these are some of the most notable examples.

As for Anzu, since the platform has raised a total of $83m over the course of the last four years, the company has good chances to become the leader of the niche. The market is still relatively small, but is expected to grow fast. How big is the market though? According to MRFR, the in-game advertising market is projected to grow from $8.2B in 2023 to $20.7B in 2032.

One assumption may be that new startups like Anzu will become a more common thing when and if the metaverse trend becomes not just a marketing gimmick, but a fully-operational product. The in-game advertising might be one of the possible formats of monetization for the various metaverse projects, balancing between gaming and social experiences. We already saw Fortnite collaborating with Nike, McDonald’s, and Samsung among other brands, and the game is often labeled as one of the first proto-metaverses. Apart from that, there are examples like Roblox, Rocket League, FIFA, NBA 2K, and even Halo. In this sense, online games look especially tempting for advertisers, since they have clearer audience metrics, while gamers are easier to ‘read’ for developers, due to longer relationships, IAPs and live-ops data.

Moreover, now that there are over 3.2 billion people playing video games across all the possible platforms, the in-game environment becomes a part of daily life for almost 40% of the planet, and the number only goes up. This means that pretty much every brand has potential gamers among its audience, and it is only a matter of time for the businesses to find new ways of reaching them.

Looking at Anzu’s business from investors’ perspective, we see an already established business model, which is now becoming significantly more used than before, while the growth of the in-game ads market is accelerated by the ongoing growth of the gaming industry as a whole. The new generations these days feel much more comfortable in the virtual worlds, and there are plenty of ways to communicate with them inside this comfort zone. Will the intrinsic in-game advertisement become one of the major Revenue sources for game developers, and will it be able to be as efficient as ads inside movies and TV? Only time will tell.

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

MERGERS & ACQUISITIONS

Saudi Arabian Public Investment Fund (PIF) has acquired 1.01% of shares in Japan-based gaming company Nexon (TYO: 3659), increasing its total stake in the company to 10.33%. The first PIF’s investment in Nexon was announced back in Mar’22. To read about the aggressive deal activity of the Public Investment Fund, as well as the strategy behind it, please read one of our previous analyses.

US-based mobile game publisher Scopely has acquired UK-based mobile games developer Tag Games. The company is primarily known for such games like Angry Birds Action, Pocket Mortys, and CSR2. With this acquisition, Scopely gets a team of 60 employees. The companies have been collaborating on a list of titles since 2021, when Scopely invested $50m in Tag Games and two other studios.

VENTURE FINANCING

US-based Web3 gaming platform Mythical Games has raised $37m in the first part of its Series C funding round, bringing its valuation to over $1B. The funding round was led by Scytale Digital with participation from Animoca Brands, MoonPay, and others. The company plans to use the funds to pursue new revenue-generating initiatives and launch a new marketplace, while also aiming to achieve profitability by the end of the year.

UK-based mobile games developer Scriptic, formerly known as ElectricNoir, has raised $5.7m in a Seed funding round to expand its generative AI business operations, expand Scriptic’s content pipeline, and onboard a community of external writers to the company’s AI-led creator service. BITKRAFT led the funding round, with participation from Tower 26 and the Amazon Alexa Fund. This is the second time in a year that Scriptic has raised money, bringing the company’s total Seed round to $8.2m. The studio’s main products are Scriptic: Crime Stories and Scriptic: Interactive Dramas, an interactive gaming media. BITKRAFT was advised on the deal by Taylor Wessing LLP.

Canada-based gaming software company Swarmio Media (CNSX: SWRM) has received approximately $4.4m in funding from Invest Nova Scotia and Atlantic Canada Opportunities Agency, as well as a $1.3m grant from National Research Council’s IRAP program, which are all government organizations. Now Swarmio is filing for creditor protection after experiencing liquidity issues. The company’s shares have plummeted from initial 56 cents per share as of 2021 to 0.5 cents per share, while market capitalization of $55m dropped to around $0.55m. Swarmio is known for developing a number of solutions for seamless gaming experience and building global gaming communities.

UK-based Web3 game developer Pixion Games has raised $5.5m in a funding round, backed by Blizzard Fund, Shima Capital, Eldridge, Merit Circle, ReadyPlayerDAO and several other investors. The funding will be utilized for further elaboration of the studio’s flagship mobile-first game, Fableborne — NFT play-to-own isometric action RPG.

Slovakia-based SuperScale has raised $5.4m in a Series A funding round led by Venture to Future Fund, with participation from Across Private Investments and Zero One Hundred. SuperScale operates a SaaS platform for mobile game developers and publishers, focusing on optimizing commercial effectiveness. The studio is working with such companies as Electronic Arts (NASDAQ:EA), Lego, and Big Fish Games. The sum will be used for the company’s global expansion.

India-based metaverse gaming platform AvatarLife has raised $1.5m in a Seed funding round led by Info Edge Ventures, a subsidiary of Info Edge India. The company develops play-to-earn skill-based games for the virtual world, also allowing its users to create and operate games on its platform. The funds will be used for global expansion and further development of the platform, including 3D mobile products for the Indian market.