Gaming Industry Report Q2 2023

Jul, 2023 Gaming Industry ReportQ2 20231

Gaming: at a glance•2023 market size: $201b (+9% YoY)•Public markets: leading public gaming ETFs up 10-30% YTD•Venture funding in Q2‘23: $472m across 85 rounds (funding is -38% QoQ)Total gamers in 2022 by region:1,746(55%)Asia-Pacific488(15%)Middle East & Africa430(13%)Europe315(10%)Latin America219(7%)North America3,198mSource: CB Insights, Newzoo, Sony, Microsoft, Nintendo, public reporting, Drake StarKey Trends•Apple announces the Vision Pro•Embracer Group restructuring•MSFT <> ATVI regulation update: almost there•A new era for UGC: what’s next•Generative AI and its applications within gaming2

Gaming on track to reach $201b in 2023$20$22$23$26$28$32$42$55$60$64$68$71$77$85$93$107$122$138$152$166$180$184$201$219$238$260$28320032001200520092007201120132015201720192021202320252027+8.94%ProjectedActual$ in billionsSource: IFPI, Newzoo, Arstechnica, MPAA, Mordor Intelligence3

Gaming funding: private markets overview41: Includes transactions such as Private Equity, Growth Equity, Corporate Minorities, PIPEs, and others. This excludes M&A; 2: 2022 data includes ~$4.5b in PIPE activity, primarily from large investments into Playtika, Embracer, Nexon, and NCSoft; Note 1: VC includes Pre-Seed through Series I VC; Note 2: Historical data across reports is subject to change, as source adds new deals as they become public; Source: CB Insights$ in millions$305$541$411$591$761$472$306$103$331$280$516$615$139Q1-20Q2-20$1,987Q3-20$1,041Q4-20$1,919Q1-21$1,794$1,470Q2-21$1,475$2,247Q3-21$1,715$3,196Q4-21$1,816$2,308Q1-22$5,462$1,407Q2-22$1,023Q3-22Q1-19Q4-19Q1-23$1,158$611$1,037$1,060$821$1,096$2,725$1,557$2,534$3,264$3,722$4,911$4,123$6,870$1,867$1,188$900Q2-23$629$529$934$729$685$738$597$543$844$71Q3-19Q2-19Q4-22Other Transactions1VC2019: $3,8662020: $6,1992021: $14,43120222: $14,0482023: $1,443Note: this excludes M&A including Savvy Games Group’s $4.9b acquisition of Scopely

Gaming VC funding: down $290m (38%) QoQ, primarily driven by a 60% drop in growth funding$228$108$164$225$571$341$301$197$180$227$86$631$11$150$100$145Q1-20Q4-19Q2-20$0$358$433$305Q3-20$440$363$238Q4-20$825$664$430Q1-21$0$360$438$1,033Q2-21$900$0$468Q3-21Q3-19$2,189$862Q4-21$0$1,278$1,030Q1-22$0$776Q2-22$0$229$452Q3-22$0$472Q4-22$0Q2-19$329$432Q1-23$0Q2-23$530$306$934$729$541$411$738$1,041$1,919$1,470$2,247$3,196$2,308$1,407$1,023$591$761$472$0$525$119$131Q1-19$879LateGrowthEarly$ in millions5Note 1: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Note 2: Historical data across reports is subject to change, as source adds new deals as they become public; Note 3: CCP in Q1-23 ($40m) is classified as a Series B (unattributed publicly); Source: CB Insights2019: $2,4982020: $2,7302021: $8,8322022: $5,3292023: $1,232

Gaming VC deals: down 22% QoQ76517670716888871041071071752011381089910377162116212722161109Q2-1929Q3-19Q1-1910Q4-19810Q1-2017Q2-20011Q3-202Q4-202Q1-210Q2-213Q3-21Q4-210Q1-2200011Q3-2205Q4-2206Q1-2384608781827699105127123131203223154119104109Q2-2385801Q2-22LateGrowthEarly6Note 1: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Note 2: Historical data across reports is subject to change, as source adds new deals as they become public; Note 3: CCP in Q1-23 ($40m) is classified as a Series B (unattributed publicly); Source: CB Insights# of deals2019: 3122020: 3622021: 5842022: 6002023: 194

Gaming in the public markets: top gaming ETFs up 10-30% YTDStock performance of Gaming ETFs: ESPO & GAMR, % change from January 2019-2 0%0%20%40%60%80%100%12 0%140%160%20202021201920222023ESPOGAMRSource: Public reporting as of July 5, 2023; Note: ESPO seeks to track the MVIS Global Video Gaming and eSports Index (MVESPOTR), GAMR seeks to track EEFund Video Game Tech Index7YTD change (6/30):•ESPO: 30.1%•GAMR: 9.7%•S&P 500: 15.9%

Public gaming companies hold $45b in cash and equivalents; a healthy M&A environmentGaming companiesTech companies with Gaming divisionsCompanyCash & equivalents2 (USD)$9.2b$8.8b$6.1b$2.4b$2.0b$1.9b$1.9bOthers1$12.3bTotal$44.7bCompanyCash & equivalents2 (USD)$49.3b$26.6$25.9b$24.7b$21.1b$11.6b$10.3b$6.7bTotal$176.2b1: Ubisoft, Unity, Konami, Square Enix, Applovin, Sega, Roblox, TTWO, Playtika, Krafton, Embracer, NCSoft; 2: Does not include short-term investments; Source: Latest public reporting (as of July 5, 2023)8

Q2 2023: Largest gaming tech & platform VC dealsGaming Tech & Platform investments – Q2 2023Source: CB Insights9StageSeedSeries CSeries BSeries ASeries ASeries ASeedSeedSeedSeries BRaise, $m$50.0 $37.0 $28.0 $22.7 $12.0 $10.2 $10.0 $10.0 $9.5 $48.0 RegionAsiaNorth AmericaAsiaAsiaNorth AmericaNorth AmericaAsiaNorth AmericaEuropeAsiaCompany nameEverdomeMythical GamesNodwin GamingMadngineHyperPlayTriumph LabsCheeleeGame Cloud NetworkMetaGravityAnzuComments:•Half of the top 10 Tech & Platform deals were into companies in Asia•Only 1 of the top 10 Tech & Platform deals was done in Europe•The top 10 Tech & Platform funding totaled $237.4m this quarter (2x greater than the top 10 content investments this quarter)•The largest platform investment this quarter, Everdome, received 150% more funding than the largest Content investment

Q2 2023: Largest game content VC dealsGame Content investments – Q2 202310Source: CB InsightsComments:•9 out of the top 10 Content deals were from North America or Europe•There was no growth or late-stage content deal (Series B+) done in Q2 2023•Only 3 of the top 10 studios funded this month are publicly building blockchain games – Goals, Argus Labs, and Pixion Games•6 out of the top 10 Content investments done were Seed stage dealsStageSeries ASeries ASeedSeedSeedSeries ASeries ASeedSeedSeedRaise, $m$20.0 $12.3 $10.0 $10.0 $8.6 $8.5 $6.5 $5.5 $5.3 $19.1 RegionEuropeNorth AmericaNorth AmericaNorth AmericaAsiaNorth AmericaEuropeEuropeEuropeEuropeCompany nameGoalsGardens InteractiveThingsArgus LabsRich AlienBigBrainMillion VictoriesPixion GamesGrand-AtticDrest

Regional Breakdown11

Gaming deals globally: at a glanceNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsGaming venture funding in Q2 2023, $m$138$98$98$83$43$0$0$0$0$0$1$0$0$0$0$0$141$102$7$1$0$7AsiaNorth America (NA)EuropeAustraliaSouth AmericaAfrica$4$221Number of gaming venture deals in Q2 20233519202323000000038210210AsiaNorth America (NA)EuropeAustraliaSouth AmericaAfrica1002312LateEarlyGrowth

Asia: most active region in Q2, driven by growth fundingDateDeal sizeNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsLargest gaming venture deals in Q2 2023Gaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1$29Q1$71$45$62$73$241$219$531$375$440$774$892$528$276$144$362Q2$221$83Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q128Q13229232437345950507410066473942Q238182019: $2282020: $5952021: $2,1202022: $1,840132023: $583$48.0m Jun-23$28.0m May-23LateEarlyGrowth$50.0m Apr-23$22.7m May-23$10.0m Jun-232019: 107 2020: 1182021: 2332022: 2522023: 80$8.6m May-23CompanyAnzuNodwin GamingEverdomeMadngineCheeleeRich Alien

NA: Early-stage funding down ~60% QoQ14LateEarlyGrowthNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsGaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q1$168$787$557$444$288$232$688$1,237$723$1,535$1,906$657$563$513$236$255$141$422Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q12636323630284133425273634637404321262019: $1,9342020: $1,6522021: $5,4012022: $1,9682023: $3972019: 120 2020: 1352021: 2002022: 1862023: 64DateDeal size$12.3m May-23$12.0m Jun-23$37.0mJun-23$10.2m May-23$10.0m May-23$10.0m Jun-23CompanyGardens InteractiveHyperPlayMythical GamesTriumph LabsThingsArgus Labs$10.0m Jun-23Game Cloud NetworkLargest gaming venture deals in Q2 2023

Europe: Almost flat VC funding QoQ15LateEarlyGrowthNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsGaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q1$55$62$67$34$47$145$127$144$356$204$473$489$285$217$210$104$102$79Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q11617192221312730292547513529242023292019: $2622020: $3532021: $1,1772022: $1,2022023: $2072019: 81 2020: 1012021: 1312022: 1392023: 43DateDeal sizeLargest gaming venture deals in Q2 2023$19.1m Jun-23$9.5m Apr-23$20.0mApr-23$6.5m Jun-23$5.5m Jun-23$5.3m Apr-23CompanyDrestMetaGravityGoalsMillion VictoriesPixion GamesGrand-Attic

Australia: both deals done in Q2 are platforms16Note: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsLateEarlyGrowthGaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q1$0$13$0$1$0$0$7$5$0$68$38$214$27$17$0$6$7$0Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q10201003303643311212019: $142020: $82021: $1112022: $2582023: $132019: 3 2020: 42021: 122022: 112023: 3DateDeal size$3.0m Jun-23$3.5m May-23CompanyOne Future FootballBattle InfinityLargest gaming venture deals in Q2 2023

South America: Brazil continues to drive gaming VC activity – 11 out of the 12 deals done since 2019LateEarlyGrowthNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB Insights17Gaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q1$0$0$60$0$0$120$0$2$10$0$4$34$3$0$0$6$1$0Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q10010010110131002102019: $602020: $1202021: $162022: $372023: $72019: 1 2020: 12021: 32022: 42023: 3DateDeal size$0.6m Jun-23CompanyBoardibleLargest gaming venture deals in Q2 2023

Africa: No gaming deals done in Q2 202318LateEarlyGrowthNote: Early = Pre-Seed through Series A, Growth = Series B through D, Late = Series E+ VC; Source: CB InsightsGaming venture funding from Q1 2019 through Q2 2023, $mNumber of gaming venture deals from Q1 2019 through Q2 2023Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q1$0$0$0$0$3$0$0$0$6$0$2$22$1$1$0$27$0$0Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q10000120111223301002019: $02020: $32021: $82022: $242023: $272019: xxx 2020: xxx2021: xxx2022: xxx2023: xxxDateDeal sizeN/AN/ACompanyN/ALargest gaming venture deals in Q2 2023

Trends + Current Events1Apple announces the Vision Pro2Embracer Group restructuring3MSFT <> ATVI regulation update: almost there4A new era for UGC: what’s next195Gen AI and its applications within gaming

Apple announces the Vision Pro120•After years of rumors, Apple officially announced their latest expansion into the augmented reality and spatial computing industry with its Vision Pro headset•Deemed a “spatial computer that seamlessly blends digital content with the physical world”•The headset will run on a new operating system, VisionOS which was built to support the low latency of requirements of spatial computing•Built with an entirely new input system controlled entirely by the user’s eyes, hands and voiceSource: Apple•Infinite Canvas: 3D interface, infinite screen real estate, access to popular applications, portable 4K display•Entertainment: spatial audio system, can transform space into a personal movie theater, 180-degree high-resolution recordings, 100 Apple Arcade games, game controller support•Memories: capture, relive, and immerse yourself in favorite memories•Spatial FaceTime: FaceTime will now take advantage of the entire room•EyeSight: helps users stay connected with those around them•Spectrum of Immersion: Windows, Volumes, and Spaces “Today marks the beginning of a new era for computing” – Tim Cook

Embracer Group restructuring221•The Embracer Group has been known for its heavy investment and acquisition strategy – the company has spent more than $10b on >80 acquisitions since its IPO in 2016 and spent ~$1b on game development projects•The group currently has ~17,000 employees across 138 internal studios, 40 countries, and 12 operative groups•In June, CEO Lars Wingefors announced that the group will be heavily restructuring to weather market conditions•This is coming just months after the group announced a failed partnership that would have included >$2b in contracted revenueLeading M&A giant shifting focus on first-party IP, long-term efficiencySource: Embracer Group, Game World Observer, Seeking AlphaThe restructuring is expected to be complete by Oct 2023The restructure which will be led by Matthew Karch (COO) and Phil Rogers (CSO) and has 4 primary focuses:Close / divest some studios and freeze / shut down some games currently in development1Focus on internal studios and reduce 3P publishing; 1P games with large budget will receive more investment from external sources2Revise investment review process for current and potential new titles3Cut non-developmental costs, including headcount4

MSFT <> ATVI regulation update: almost there322Source: Competition and Markets Authority, European Commission, Federal Trade Commission, Microsoft, Activision BlizzardEU’s European Commission (EC)•Approved the acquisition on 5/15/23 after securing agreements to lessen the potential impact on the emerging cloud gaming market (the primary concern for UK’s CMA)•This includes a free license for EU gamers to stream any ATVI game via any cloud gaming service, and a free license for cloud gaming services in the region to host said games on their platform•The EC also decided to drop concerns around the harm to rival console makers and subscription services as MSFT is unlikely to pull AB games (e.g., Call of Duty) from rival consoles as profits would sufferUS’s Federal Trade Commission (FTC)•Requested to pause the merger on 6/12/23 which was granted by a CA federal court on 6/13•There was a hearing to determine if a preliminary injunction on the deal should be granted between 6/22-6/30•The FTC’s primary concern is the effect of CoD on the competitive market, console exclusivity, and the impact on the nascent cloud gaming field. A decision is expected in the coming weeks•If the injunction is granted, Microsoft has said they may consider abandoning the deal which they described as being a “three-year administrative nightmareUK’s Competition and Markets Authority (CMA)•Blocked the acquisition on 4/26/23 citing cloud concerns•Noted that the acquisition risked “stifling competition in this growing market (cloud gaming)”•Microsoft appealed the decision”We have already signed contracts to make Activision Blizzard’s popular games available on 150m more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.” – Brad Smith, Microsoft President

A new era for UGC: what’s next423•UGC trends are dramatically changing•Winning with tools will not work anymore – Roblox can no longer be the north star as it had the benefit of timing and market dynamics that aren’t present today•The most popular UGC platforms will spawn from popular IP (Fortnite, Minecraft, GTA V, etc)•UGC strategies are becoming more common for game studios •Simultaneously, a tools-first approach will immediately hit a chicken-and-egg problem (Players: no content to play, Creators: no players to build for)•UGC will open up completely new opportunities to generate income for creators and playersThe most popular UGC platforms will emerge from existing IP

Gen AI and its applications within gaming524Applications within gamingSource: Techcrunch•What’s the unlock?: Open-sourced tools (Stable Diffusion, GPT-4, PaLM 2, Dreambooth, etc) are giving founders access to innovative technologies•Content creation is at the forefront of these visions, making it more efficient to create and making tools more accessible•Value will accrue to creators (time efficient, lower learning curve), and model ownersAsset/map creationEmergent gameplayLabelingNPCs

Top gaming industry conferences / events2023 events scheduleEventLocationDatesCategoryPocket Gamer Connects*MultipleMultipleGamingDesign, Innovate, Communicate, Entertain (DICE) Summit*Las Vegas, NVFebruary 21-23, 2023GamingSouth by Southwest (SXSW)*Austin, TXMarch 10-19, 2023Gaming, Media, TechnologyGame Developers Conference (GDC)*San Francisco, CAMarch 20-24, 2023GamingNFT.NYCNew York, NYApril 12-14, 2023Blockchain, GamingAugmented World Expo (AWE)*Santa Clara, CAMay 31 – June 2, 2023Gaming, TechnologyElectronic Entertainment Expo (E3)Los Angeles, CAJune 13-16, 2023 (Cancelled)GamingGamescom*Cologne, GermanyAugust 23-27, 2023GamingTokyo Game ShowTokyo, JapanSeptember 21-24, 2023GamingBrazil Game ShowSão Paulo, BrazilOctober 2023 (TBA)Gaming, MediaSlush*Helsinki, FinlandNovember 30 – December 1, 2023Gaming, Technology* denotes events our team at Konvoy plans to attend25

Konvoy: Summary + Team26

Konvoy: by the numbersOur top newsletters published in Q2 2023:1.PWAs Will Shape the Future2.OTT: Gaming’s Next Unlock3.Gen Z4.Achievement Unlocked: Grandmaster5.Milestone-Based Financing$260mAssets under management (AUM)3Funds44Investments41%Of all funds invested outside of NA27

Konvoy invests in the platforms and technologies at the frontier of gamingInvestment StagePre-Seed, Seed, Series ACheck Size$1m – $5mSubmit your company idea hereFund III$150m28

Konvoy TeamLink to our socials here29Jason ChapmanJackson VaughanJosh ChapmanDani TranSenior AssociateTaylor HurstPrincipalDhinuka PereraHead of PlatformFounders and Managing Partners