2023’s third quarter saw venture funding in the game space fall 9% quarter-on-quarter, raising $454 million compared to $498 million in Q2, according to Konvoy Ventures' latest report. The majority of funding in both periods were early stage investments.
The figure represents just the latest quarter of decline. VC funding in the gaming industry peaked in Q4 2021, with a total of $3,324 million, with consistent quarter-on-quarter declines since this period. Notably, no quarter since Q4 2022 has seen VC funding exceed $1,000 million. However, while the drops may appear dramatic, Konvoy notes that we’re effectively seeing funding fall in line with pre-pandemic levels.
VC deals also fell 5% compared to Q2, with a total of 87 compared to 92 in the previous quarter. As with funding, there has been a steady downwards trajectory, with Q1 2022 seeing a total of 254 deals struck. As with the amount of funding, the majority (76) of investments were early stage, with seven deals struck in the growth stage and four unattributed deals. No late stage deals were struck in Q3, marking the fourth consecutive quarter with no activity to speak of in late stage investment.
Mergers and acquisitions have also normalised to pre-pandemic levels, with 26 in Q3 and a total of 95 in the year-to-date. While the number of mergers and acquisitions is unlikely to match or exceed 2019’s 141, should activity remain stable it’s likely that activity will exceed 100 by the end of the year.
Despite the fall in funding, the sector as a whole remains on an upward trajectory. Konvoy predicts the gaming industry will generate $188 billion in revenue this year and reach a massive $288 billion in 2028, representing a compound annual growth rate (CAGR) of 8.94%.
Playing the money game
Gaming companies hold $45 billion in cash and equivalents, with Activision singled out as the richest company with $13.2 billion in assets. This was followed by Nintendo ($8.9 billion) and Sea Group ($3.5 billion). Notably, each of the top game makers have robust mobile gaming arms.
In terms of tech companies with gaming branches, Amazon is singled out as the most successful with $51.5 billion. Microsoft is close behind with $49.7 billion, while Google is in third place with $34.7 billion. Again, mobile’s place in the gaming ecosystem is highlighted by the fact that all of the listed tech companies have strong mobile presences, either developing games for mobile, facilitating their sale through their app stores, or making concerted efforts to move into the space.
Asia saw the bulk of venture finding for the quarter, with $193 million over 39 deals. This was followed by North America ($172 million over 28) and Europe ($59 million over 18 deals.) Australia saw one VC deal struck, worth $30 million, while Africa registered one deal with no attached value. Despite its status as a booming market, South America saw no deals struck at all in Q3. This follows one deal in Q2, with a value of $1 million.
In July, Konvoy analysed the state of gaming in Q2.
