Feature #1
Feature sponsored by $GDEV
The growing popularity of platform enablers like Roblox, Fortnite, and Discord, coupled with advancements in the tech sector (AI), is gathering significant attention from investors. Recent rounds led by gaming-focused VCs in such startups as k-ID, Suno AI, Luma, or Kaedim suggest a potential shift in VC focus from gaming content creators and publishers to technology-driven and platform-oriented startups (Platform & Tech) operating in the video game sector.
This shift raises an intriguing hypothesis: are VCs increasingly investing in Platform & Tech startups rather than traditional game development studios today, or is this just a publicity-driven distortion? We’ve been tracking industry deals for over four years and can contribute to this discussion.
For a quick overview, refer to our PDF featuring the essential data points from this article:
GDEV x InvestGame – Feature #1.
For a comprehensive analysis, let’s delve into the detailed investigation below!
Following The VC Money Thread
To confirm or refute our hypothesis, we analyzed all VC-led deals in the video game industry with disclosed deal values between $250k and $500m, excluding any blockchain-, esports- and cash/skill-based deals. We also excluded Corporate VC/Strategic-led deals to gain more precise insights into VC strategies. Note: our database does not include investments outside the video game industry.
First, we analyzed the total capital deployed by investors in both Early and Late-stage rounds across the video game sector. Although we observed periodic spikes in Platform & Tech investments (e.g. accounting for 50% of total value in H1’24), it is too early to speak about any sustainable trend indicating the long-term preferred interest in tech-driven startups vs. content creators.
While analyzing total capital deployment offers valuable insights, relying exclusively on this metric can be misleading, as large late-stage rounds tend to disproportionately impact the overall figures. A more nuanced perspective can be gained by examining the number of deals and by looking at Early0stage (Seed and Series A rounds). Our findings indicate that investments in game developers and publishers have actually strengthened their share over time (from 55% in H1’20 to ~70% in H1’24).
When looking at Early-stage deals, we’ve expanded the classification of content creators.
The data reveals no consistent increase in capital deployment into Platform & Tech startups. In fact, the average investment per period has decreased over the past few years. This trend is also reflected in the number of investment rounds. Although there was a noticeable increase in Platform & Tech deals in 2022, the number has since stabilized, showing no significant growth in dealmaking activity today. One interesting finding is the growth of the PC & Console segment over Mobile gaming, aligning with recent industry shifts (read our Q1’24 report).
To enhance the accuracy and reliability of our conclusions, we focused our analysis on the top 30 most active gaming VC funds. These funds, known for their substantial capital, resilience, and industry expertise, are instrumental in shaping the fundraising landscape of the video game market. Over the past twelve months, these leading VC funds have increasingly directed capital towards Platform & Tech startups, which now account for half of all capital deployed. This marks a notable growth of over 36% compared to the previous period (H2’22-H1’23). Despite this shift, gaming studios continue to command the majority of investment value and lead in the number of funding rounds.
Content remains the “King” drawing more investment than tech startups
Our analysis does not show any sustainable shift in VCs interest towards Platform & Tech startups over game development and publishing studios: :
- Gaming content continues to dominate VC-led rounds, maintaining a 50%+ share despite the notable growth in Platform & Tech capital raised in H1’24.
- Although there were occasional surges in Platform & Tech investments, the data does not indicate a long-term sustainable trend favoring such startups over gaming content.
- Focusing on Seed and Series A rounds, we observed a similar trend, with content creators continuing to lead, particularly with PC & Console studios outpacing Mobile startups in securing funding.
- In contrast, the Top-30 gaming-focused VC funds have recently shown a notable increase in capital allocation towards Platform & Tech startups compared to content creators. An intriguing development that we will monitor closely in the coming quarters.
Platform & Tech startups continue to play a critical role in the industry, exhibiting strong investment activity even amid broader macroeconomic challenges.The recent surge in eye-catching headlines and stories about technological innovations may give the impression that tech startups are dominating the landscape. However, for the time being, gaming content continues to hold the throne. We will keep monitoring VC investment patterns closely to update our subscribers should the situation change.