Weekly News Digest #13

Hi all,

Before we dive into the roundup of last week’s deals, we have an announcement about our new feature that you might find helpful. Following the announcement, we’ll proceed with our regular segments: in-depth analysis and highlights of critical transactions. Enjoy!

Your Gateway to Gaming Investments: List of Industry-Focused Funds

First, we are excited to share an important update from InvestGame: launching a carefully curated list highlighting over 60 gaming-focused funds globally. This resource offers detailed funds insights into the following:

– Investment Deal Types: Outlining preferred stages of investment, from Early-stage rounds to Late-stage equity;

– Investor Type: For now, most of the investors are VC funds, but we will add generalist VCs, PEs, and Strategics in the future;

– Gaming Verticals: Exploring the breadth of their interests, not limited to game development but also encompassing web3, esports, and broader ecosystem innovations;

– Investment Regions: Detailing the geographic focus of investments.

– Headquarters Country and Region: Identifying the central office locations of investors;

Over the past three years, our commitment has been to bridge the gap between investors and gaming studios, promoting a culture of transparency and shared success. Recognizing our industry’s current challenges, we are more determined than ever to contribute positively to its growth and resilience. This new initiative is a step towards that goal, aiming to facilitate meaningful partnerships that drive forward the future of gaming.

But this is just the beginning. We plan to enhance this list with additional data continuously and include generalist investors operating outside the gaming industry but making significant contributions to this sector. This expansion will feature key strategic investors enriched with updated information, including assets under management, investment round sizes, and recent deals. We aim to create a comprehensive and indispensable guide for navigating the gaming investment landscape.

You can explore this new feature and download the list here: https://investgame.net/investors/ 

Note: If you want to add your fund to our list or see it featured, please let us know through the submission form on the site or directly via this link.

Thank you for your continued support as we embark on this exciting journey together!

Take-Two Acquires Gearbox Entertainment from Embracer Group

Sweden-based gaming holding Embracer Group (STO: EMBRAC B) has sold US-based games developer Gearbox Entertainment to US-based gaming holding Take-Two Interactive Software (NASDAQ: TTWO) for $460m, paid fully in newly issued Take-Two shares. Embracer plans to sell the shares upon closing the acquisition, which will happen no later than Jun’24.

Founded in 1999, Gearbox Entertainment is primarily known for its multiplatform FPS franchises Borderlands and Brothers in Arms. The company has also worked on titles such as Half-Life, Duke Nukem, Homeworld, and others. Notably, the Borderlands franchise is published by Australia-based 2K Games, a subsidiary of Take-Two.

In Feb’21, Gearbox formed Embracer’s seventh operating group after Embracer acquired it for up to $1.3B with $363m upfront and the rest set in potential earn-out payments over the following six years. By then, Gearbox had over 550 team members, which increased to more than 1500 employees by Q1 ’24.

Transaction Key Details

The total consideration of $460m is paid 100% in Take-Two newly issued shares, although Embracer expects $300-330m net cash proceeds following purchase price adjustments and other costs. The deal will allow Embracer to decrease its cash earnouts from $582.2m to $434.3m and reduce its share earnout obligations from 30 million B shares to 12 million B shares.

Divested companies include Gearbox Software, Gearbox Montréal, Gearbox Studio Quebec, Borderlands, and Tiny Tina’s Wonderlands franchises, and such titles as Homeworld, Risk of Rain, Brothers in Arms, and Duke Nukem.

The retained include are:

— Gearbox Publishing San Francisco (to be renamed before closing, formerly named Perfect World Entertainment), including the publishing rights to the Remnant franchise, the upcoming Hyper Light Breaker, and other unannounced games,

—  Cryptic Studios, including MMO titles Neverwinter Online and Star Trek Online, Lost Boys Interactive, and Captured Dimensions.

The retained studios will be integrated into other Embracer’s operating groups.

The deal is another step in Embracer’s restructuring, described in our previous digests. The total value of divested assets is shown in the table below. 

Source: Embracer Group

For Gearbox, the transaction is the continuation of a long-term partnership rather than the beginning of a new relationship. Take-Two has a nearly 20-year history of working with Gearbox, so the transition is likely to be smoother and faster than it could be with any other acquirer, especially considering that Randy Pitchford, Gearbox’s founder, and CEO, will stay in the studio along with his management team. 

As for Embracer, some sources report Lars Wingefors, CEO of Embracer Group, announced the end of the restructuring program, meaning there will likely be no further divestments or acquisitions in the foreseeable future.

For Gearbox, the transaction is the continuation of a long-term partnership rather than the beginning of a new relationship. Take-Two has a nearly 20-year history of working with Gearbox, so the transition is likely to be smoother and faster than it could be with any other acquirer, especially considering that Randy Pitchford, Gearbox’s founder, and CEO, will stay in the studio along with his management team. 

As for Embracer, some sources report Lars Wingefors, CEO of Embracer Group, announced the end of the restructuring program, meaning there will likely be no further divestments or acquisitions in the foreseeable future.

We want to thank MGVC and Xsolla for supporting this digest.

MERGERS & ACQUISITIONS

Sweden-based games holding Thunderful Group (STO:THUNDR) has entered into an agreement to sell German-based games publisher Headup Games to Microcuts Holding for $0.54m (€0.5m). The deal includes Headup’s 80-title back catalog and five games in development, initially acquired by Thunderful in 2021 for ~$11.8m (€11m). Thunderful is set to receive a revenue share on a future title, pending shareholder approval, IP contract rewrites, and the transfer of Studio Fizbin.

VENTURE FINANCING

Canada-based web3 games developer Parallel Studios has raised $35m from Distributed Global, The Operating Group, VanEck, Solana Ventures, Base Ecosystem Fund, and Amber Group, with participation from other investors. The funds will support the expansion of Parallel card games across new platforms. The latest fundraising round came just a month after the launch of Parallel’s open beta. After launching in 2021, the company has raised $50m at a valuation of $500m.

US-based PC & console web3 games developer Gunzilla Games has raised $20m in a funding round led by CoinFund and Blizzard Fund. This funding will support its cyberpunk battle royale game, Off the Grid, which is set for release on PC, PlayStation, and Xbox.

Spain-based web3 gaming platform Elixir Games has raised $14m in Seed funding from Square Enix (TSE: 9684), the Solana Foundation, Shima Capital, and others. The funds will support the development of a global gaming ecosystem, the launch of the $ELIX token, and a Launchpad & Incubation Program set for 2024. This is the second deal related to web3 this month for Square Enix. Previous funding round related to US-based games store Hyperplay.

Australia-based web3 games developer Illuvium Labs has secured $12m in Series A funding, co-led by King River Capital, Arrington Capital, Animoca Brands (ASX: AB1), and The Spartan Group, with participation from Arca, Polygon Ventures, 32-Bit Ventures, Yield Guild Games, and others. The funding supports the launch of the Illuvium gaming universe, including titles like Illuvium Arena and Illuvium Overworld, built on compatible assets in the Ethereum ecosystem and set for release in Q2 ’24.

US-based games-rewarding platform Benjamin has raised $5.5m in a Seed funding round led by Play Ventures and F4 Fund, with participation from other investors. The investment will fund user acquisition and boost the development of the Benjamin platform, with gaming identified as a critical area for expansion. The app, launched in Oct’23, boasts over 250,000 installs and monthly revenue growth of over 40%.

Switzerland-based PC games developer 7 Digital Labs has raised $4m in Seed funding led by the Avalanche Foundation, Merit Circle, Citizen Capital, and others. The funding will boost the development of its own web3 shooter, Bloodloop.

US-based web3 gaming super app developer Gam3s.gg has raised $2m from Merit Circle, WWVentures, Cogitent Ventures, P2 Ventures, Cypher Capital, Acheron, Basics Capital, OIG Capital, BreederDAO, Hercules Ventures and others. The funding will be used to scale the super app and launch the upcoming $G3 token. The super app has 300,000 registered gamers and a library of over 350 games.

US-based PC games developer Popularium has raised $2m in a Seed funding round from Palm Drive Capital, The Data Economics Company, A16Z Scout Fund, Reverb Ventures, Pareto, Exit Capital, The Society of Entertainment, Bustle Digital Group, and others. The funding will support the public alpha launch of the debut title, Chaos Agents, a mix of battle royale and auto-battlers, in the summer of 2024.

Turkey-based mobile games developer Midas Games has raised $1m from Ludus Ventures. The funds will fuel Midas’s development of skill-based competitive games, the company’s debut project. The company aims to have a global market impact by the second half of 2024.

Canada-based games developer Shifty Eye Games has raised $0.58m from various investors. The funds will support the development of a stealth-adventure game based on a famous movie franchise. Shifty Eye Games has already raised $6m and is planning another funding round.

Jordan-based mobile games publisher Tamatem Games has raised an undisclosed sum from the Abu Dhabi Investment Office (ADIO) and is set to relocate its HQ to UAE, aiming to fuel growth and enhance UAE’s gaming ecosystem. The studio plans to create a “center of excellence” in Abu Dhabi, recruit over 40 staff, and develop local talent through university internships and training. The collaboration underscores UAE’s ambition to become a regional games hub, with Tamatem focusing on culturally relevant games for the Arabic-speaking community.

FUNDRAISING

Cyprus-based investment company Mika Games, led by Wargaming co-founder Nick Katselapov and supported by Flint Capital, has commenced with $10m towards its $50m goal for investing in mobile game studios at the soft launch stage. Targeting a portfolio to facilitate scale towards IPO, Mika has already funded mobile games developers Guli Games and Hot Siberians, aiming for monthly revenues exceeding $1m. The focus is on free-to-play, mobile-first titles with long-term potential.

Sweden-based Jonas Gundersen, former COO of Ninjas in Pyjamas, has launched Continuum X Group, a new fund specializing in investments, strategic advisory, and management within the esports and gaming sectors. Gundersen is an esports veteran with more than 15 years in the industry.