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The Alumni Effect: A Deep Dive into Studios Founded by Ex-Rioters

WRITTEN BY | 14 Aug 2024
The Alumni Effect: A Deep Dive into Studios Founded by Ex-Rioters
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Anyone familiar with the investment landscape knows that even the most compelling idea requires an experienced and powerful team to attract investors. The recent announcement of Spectre Divide by Mountaintop Studios—a studio founded by former members of highly acknowledged gaming studios such as Naughty Dog, Blizzard, and Riot Games—sparked our attention. We aimed to explore how alumni-led startups navigate today’s challenging landscape and whether these ‘AAA-quality’ teams have forged fresh unicorn stories.

While many other prominent teams could have been the focus of this analysis, such as ex-Activision Blizzard (e.g., founded Frost Giant Studios, Velan Studios) and ex-Epic Games (e.g., Lightforge, Noodle Cat Games), we chose to concentrate solely on Riot due to the particularly active role ex-Rioters have played in securing funding in recent years. Since 2020, investors have deployed almost $0.5B capital across 38 rounds, backing roughly 30 studios founded by ex-Riot employees.

Are ex-Rioters raising more than the industry average? When did investment activity reach its peak? Are studios founded by former Riot employees still attracting capital? Have any of these VC-backed startups achieved significant success? Let’s find out!

For a quick overview, refer to our PDF featuring the essential data points from this article:

GDEV x InvestGame – Feature #2

For a comprehensive analysis, let’s delve into the detailed investigation below!

Ex-Riot vs. Industry Average: Investment Activity

Riot Games is a major force in the entertainment industry, renowned for driving the MOBA genre with League of Legends (2009) and launching the critically acclaimed tactical FPS Valorant (2020). Both games have remained dominant in their genres for years, thanks to Riot’s ability to sustain their popularity through bringing in gameplay innovations, robust LiveOps across multiple platforms, a strong esports presence, and a strategic transmedia approach to expanding its IPs. This unique expertise makes ex-Riot employees particularly appealing to both venture capitalists and our study.

During the 2020-2024 period, a total of 27 startups founded by former Riot employees secured investments across 38 funding rounds, amounting to $485m in disclosed value only. The investment trend followed a pattern similar to the broader gaming sector: a surge in deal-making during 2021-2022, followed by a noticeable decline (though still above pre-pandemic levels).

Screenshot 2024 08 19 At 22.21.37

Out of the 27 companies that raised funding:

— 18 making PC & Console games, of which 6 also developing for mobile platforms.
— 6 focusing on web3 projects, primarily content creators, with 5 in gaming and 1 in esports.
— 1 mobile game developer: location-based AR games developer Aglet is already shut down.
— 1 platform: VENN, which positioned itself as the “MTV for gaming and entertainment.”
— 1 tech company: a backend game development engine, Pragma.

This further highlights the high regard for experience gained from working on League of Legends and Valorant in the PC & Console market segment, especially if we consider that many of those projects are isometric RPG games: mix of MOBA and Battle-Royale Supervive by Theorycraft Games, co-op isometric RPG Seekers of Skyveil by Elodie Games, RPG Eternights by Studio Sai, co-op isometric Rogue-like Evercore Heroes by Vela Games, and co-op isometric Action-RPG Halcyon Zero by Pahdo Labs.

Among those 38 rounds, there are 4 Late-stage transactions (Pragma, Theorycraft Games, Singularity Six, Raid Base), and the rest are Early-stage VC: 22 Seed and 112 Series A rounds.

Comparing Early-stage rounds of ex-Rioters vs. the broader video game market reveals that the average deal size for ex-Rioters ($11.2m) is 53% higher than that of the gaming industry at large ($7.3m), at least in cases where the round amounts were publicly disclosed.

Screenshot 2024 08 19 At 22.21.52

The data suggests that ex-Riot developers are particularly adept at attracting capital. Their background and experience significantly boost a perceived potential in such studios at the early stages, making them more attractive to investors compared to the market average. However, as the market has cooled, the gap in average deal size has narrowed.

What’s even more impressive is the ability of these companies to secure follow-up funding rounds. Compared to the overall VC gaming market, a significantly higher proportion of ex-Riot teams have obtained additional financing within the 2-3-year timeframe of previous fundraising.

Screenshot

The difference is striking compared to other Early-stage VC-backed gaming companies founded in the same years. Market averages for next-year financing during the peak period of 2021-2022 were only 13-15%—roughly half the rate for ex-Riot Games developers.

The usual suspects appear when it comes to the VCs that made these results possible, many of whom have featured prominently in our VC ranking league tables. The most active investor is a16z, with 13 rounds and a $339m cumulative rounds value. Here are the Top-5 funds investing in former Riot team members.

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Now that we understand Riot alumni are indeed proficient in fundraising, let’s explore whether they are also succeeding in product delivery.

Product Overview: Lack of Success Stories

Most projects from former Rioters are still in development. Some have reached the Beta stage, but most are still in earlier production phases. Among these 27 stories, only seven companies have released products, and none have become widely known in the industry.

In the picture below, you can see the top-5 companies with ex-Riot founders by total funding raised.

Screenshot

While they are great for providing an overview, we won’t analyze them in detail. Instead, we’ll highlight stories of failure, success, and those in between.

First Achievements: Wonderstorm and Pragma
Founded in 2016 by Aaron Ehasz, a former creative director at Riot Games, Wonderstorm is producing the Netflix animated series The Dragon Prince. The series has six seasons in its catalog, and the next one is in production. Netflix’s six seasons can be considered a success, considering the high standards for renewal on streaming platforms. On the other hand, the company has yet to prove itself in the gaming world, as it is now developing a game based on the show.

Another exciting story is Pragma. Founded in 2020 by Riot Games’ Lead Engineer Chris Cobb, the company has raised $38.2m in three rounds, with the last Series B round in Oct’21, to create its back-end solutions for video game developers. The product was eventually released to the market and found customers. The company’s partners are People Can Fly, Omeda Studios, and Wonderstorm.

Singularity Six — A Story of Ups and Downs
Singularity Six, founded in 2018 by Riot Games veterans Aidan Karabaich and Anthony Leung, faced significant challenges with the launch of its debut MMO, Palia. After five years of development, the game was released on Mar’24 and received criticism from players due to poor technical performance and the high cost of cosmetics, leading to layoffs and eventually the company being acquired by Daybreak. Despite these setbacks, Singularity Six persevered and brought the game to completion, as negative reviews on Steam started to decline on Apr’24. Today, Palia boasts a stable player base of 8-12k users and enjoys 80% positive reviews. 

VENN and Aglet — The Shut Downs
On the other hand, there were more challenging stories, most notably VENN, founded in 2019 by ex-Riot Games Head of Esports Content Ariel Horn. Positioned as the “MTV for gaming and pop culture,” VENN raised a total of $43m in funding but was shut down in 2022. Despite its high-profile launch and initial media support, the network struggled to attract and retain viewers, leading to its downfall.

The mobile location-based AR gaming studio Aglet, created by former Riot Games employees, was also shut down. The company closed a $4.5m Seed funding round in Dec’20. However, the game couldn’t find its audience, and it eventually liquidated on April 24.

No Success Attributed to the Riot Experience
Most other companies are still in the beta stage or earlier, so there’s not much to report yet. However, we’ve observed so far that there hasn’t been a standout success story directly tied to what Riot Games is best known for—creating amazing games. While Wonderstorm and Pragma have shown decent results, their successes aren’t directly related to game development.

If you’re interested in exploring more Riot-founded companies and searching for these stories, we’ve prepared a table with all the deals we analyzed today, available exclusively to our Patreon subscribers!

The Conclusion: Going in Line With The Industry

What do we have so far? Let’s quickly sum it up:

  1. Ex-Riot founders typically secure larger average deal sizes and are more likely to close follow-up funding rounds compared to the broader industry.​
  2. Riot-founded studios gained remarkable popularity between 2021-2022, but as the market cooled down, we’ve seen fewer such cases in recent times.​
  3. Most of the studios are focusing on developing games for PC & Console platforms, in line with their previous backgrounds and expertise.
  4. There are no unicorn stories attributed solely to the founders’ Riot experience yet. Two companies—VENN and Aglet—were shut down, and one, Singularity Six, was “acquihired.”

Could this suggest that the decision to invest in ex-Riot team members may have been less successful than anticipated? Not at all. Game development and release for high-quality PC & Console titles typically take 3 to 5 years; as we’ve seen, most of these developers work in that segment. It’s simply too early for many of the companies, particularly those that raised funding in 2021-2022, to show their results.

The decline in fundraising activity is affecting the entire industry. The “easy money” that flowed freely in 2021-2022 is no longer available. This shift impacts not just ex-Rioters but the market as a whole. As a result, having a strong background at top studios is no longer enough; companies now need more substantial materials and proof points to build investor confidence.

What we can say for sure is that having such a background plays a crucial role in fundraising in a thriving market. However, how this factor ultimately impacts success will only become clear a few years later once the rest of the projects are out.

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