In response to video games VC fund Konvoy Ventures’ report, the video games business has alternatives to develop, however funding has not bounced again fairly but.
Video games funding market overview
Within the first half of 2024, non-public funding for video games (i.e. non-public fairness, progress fairness, company minorities, PIPEs, and VC funding excluding M&A transactions) totals $2.89 billion. Whereas this exceeds 2023’s annual complete of $2.80 billion, this was a results of Disney’s $1.5 billion funding into Epic Video games. If this outlier is excluded, H1 2024’s remaining $1.39 billion in funding is down 9% YoY in comparison with H1 2023’s $1.53 billion complete.
Likewise, VC funding for video games can be persevering with to say no. Within the second quarter of 2024, enterprise capital corporations disclosed $492 million of investments into video games startups. That is down 20% from Q1 2024 and seven% from Q2 2023. Actually, that is the third lowest complete of any quarter since 2020. The primary half of 2024’s $1.09 billion represents a 20% from the identical interval in 2023.
Equally, the variety of VC funding placements has fallen. The 104 offers closed in Q2 2024 is down 22% from Q1 and down 12% from the identical quarter final yr.
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Slowing price of decline
| H1 2022 Whole | H1 2023 Whole | H1 2024 Whole | % Change 2022 – 2023 | % Change 2023 – 2024 | % Change 2022 – 2024 | |
|---|---|---|---|---|---|---|
| Non-public Video games Funding | $11,589* | $1,529* | $2,886* | -87% | +89%** | -75%** |
| Disclosed Video games VC Funding | $4,608* | $1,360* | $1,093* | -70% | -20% | -76% |
| Video games VC Offers | 488 | 264 | 238 | -46% | -10% | -51% |
**= contains Disney’s $1.5 billion funding in Epic Video games
Whereas these declines are vital, the tempo of decline is slowing. Non-public video games funding fell 87% from H1 2022 to H1 2023 in comparison with the 89% progress from H1 2023 to H1 2024. If Disney’s funding in Epic Video games is excluded, the expansion turns into a 9% decline.
Each disclosed VC funding and offers closed comply with the same sample with steeper declines between 2022 and 2023 in comparison with the change from 2023 to 2024.
Early stage funding focus
Whereas VC funding stays muted basically, Konvoy highlighted two tendencies shaping the market.
On the optimistic aspect, a better proportion of offers are making up 80% of disclosed VC funding. In 2024, 22% of offers accounted for 80% of (disclosed) allotted enterprise capital. That is almost double 2021’s price, the place simply 12% of offers accounted for this identical 80%. In response to Konvoy Ventures, this increased distribution of funding is more healthy for VC market.
Nevertheless, the agency additionally factors out how unusual progress and late VC funding rounds are in 2024. Since Q1 2022, 89% of video games VC funding placements went to early stage startups.
Collectively, this implies that progress and late stage startups are struggling to boost subsequent funding rounds. Whereas funding is extra distributed, it’s as a result of fewer massive offers are getting closed (or disclosed) to take up a disproportionate quantity of capital. Doubtless, the businesses that will have raised these lacking Collection B or later offers final raised earlier than U.S. rate of interest hikes started in March 2022.
And this pattern isn’t prone to cease any time quickly. Within the final quarter, a16z Video games and Bitkraft Ventures have raised a mixed $875 million to spend money on early stage video games startups.
Konvoy Ventures full Video games Trade Report, accessible now, contains regional knowledge in addition to highlighting key tendencies shaping the market.