Game VCs Are Inundated With Blockchain Game Pitches
Investors are inundated with blockchain gaming pitches. That comes as no surprise, but the magnitude of the shift in game entrepreneurship is astounding, given that such pitches were virtually non-existent a year ago.
According to investment bank Drake Star Partners, blockchain-related gaming firms received one-third of all game startup funding in the first quarter, with 128 companies collecting $1.2 billion.
The total value (publicly disclosed) of all video game related deals in 2021 was $85 billion according to Drake Star Partners.
The value of Microsoft > Activision Blizzard, Take Two > Zynga and Sony > Bungie, announced in Jan 2022, is already $85 billion.
— Daniel Ahmad (@ZhugeEX) January 31, 2022
That was comforting in some ways. It means that although blockchain games are popular, game developers and players need not be concerned that financing for traditional PC and console games will be crowded out. One of the reasons why blockchain games, particularly those that use non-fungible tokens (NFTs), have been unpopular among Western hardcore players and some creators is because of this worry. However, based on the Q1 data, which is a lagging indicator, it appeared to be unfounded.
However, there is one forward indicator that may be alarming to some. One investor told us last week at our GamesBeat Summit 2022 event that 90 percent of the inbound pitches at one gaming VC were about blockchain. I followed up by contacting several game venture capitalists. They claim that between 50 and 90 percent of the pitches they receive incorporate blockchain games in some form. According to one gaming VC, only one pitch received this year was unrelated to blockchain games. In November, Forte set a new record when it raised $725 million for its blockchain gaming infrastructure.
Mobile gamers favor a more diverse range of games than ever https://t.co/cVSBWV7P1V
— GamesBeat (@GamesBeat) May 13, 2022
The game venture capital community is divided on the blockchain. Some pro-blockchain investors, such as Yat Siu, chairman of Animoca Brands, are unconcerned about the trend since they believe blockchain will alter the gaming industry. Others, such as London Venture Partners’ David Gardner (who spoke at our event last week), are less enthusiastic.
The area, though, is undeniably hot. Blockchain game NFT revenues produced $2.3 billion in the third quarter, up from essentially nothing a year ago.
In an email, Ethan Kurzweil, a partner at Bessemer Venture Partners, wrote, “Many founders are rapidly re-writing their pitches to add a web3 element.” “Given enough time, web3 seems to find its way into every game pitch these days, whether it fits or not.” I’m not sure if VCs are driving the web 3 fervor or if it’s the other way around, but the web3 pendulum has indeed swung all the way to the limit.”
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— Ethan Kurzweil (@ethankurz) March 10, 2022
Given the hardcore players’ opposition to Ubisoft’s NFT efforts with Ghost Recon: Breakpoint, Team 17, GSC Game World, Troy Baker, and others, it’s unclear how popular it will be in public.
The data, according to Nansen, reveals the contrary, as the NFT market is entering a new growth phase, with more successful projects and a maturing market where innovative ideas are truly taking off. In January 2021, “dead” minted projects (defined as having less than ten sales in the previous 30 days) accounted for about half of the NFT market.
According to Nansen, the NFT market has outperformed the cryptocurrency market year to date, and both metaverse and social NFTs are driving the market’s growth. After seeing huge swings earlier in the year, the average NFT mint price has been hovering between.07 ETH and 1 ETH. According to Nansen’s analysis, mints are becoming more competitive, forcing project managers to cut pricing. The rapid rise of NFT minters is causing an increase in the fraction of projects fetching bigger sums than their mint price. According to Nansen’s estimate, only 500 persons were minting NFTs at the beginning of 2021, but there were 1.2 million by February.
In an email, Thibaud Morin, general partner of Level-Up, a European game VC firm, stated that 60 percent of the proposals received from European game entrepreneurs are related to blockchain.
Entrepreneurs are simply facing reality for some VCs. Moreover, some venture funders are concerned that gaming entrepreneurs are bending their ambitions and presentations to fit the latest trend. According to one VC, one blockchain game pitch contained many features of the NFT technique but made no mention of the game the entrepreneur was developing. And that is completely incorrect. It’s never a good thing when it happens.
In an email to GamesBeat, Ed Fries, founder of 1Up Ventures, said, “I don’t mind receiving web 3 game pitches, but they must fulfill the same qualifications we’d like to see in any game pitch, which is to say a brilliant new idea from an experienced team of game creators.”
“Almost every gaming pitch we get has something related to blockchain,” Stephen Chou, principal at Translink Capital, wrote in an email. We also see pitches from new teams at huge game companies and classic web 2 gaming businesses that are bringing web3 into their next round of funding. I believe that every gaming founder, regardless of their concept, must now have an opinion on blockchain gaming. It will unquestionably come up.”
These entrepreneurs may be telling venture capitalists what they believe they want to hear. Longtime industry officials, such as Owen Mahoney, CEO of Nexon, disagree and instead urge creative people to pitch the game they’ve always wanted to make.
There is no evidence that VCs are funding a large number of blockchain games in comparison to other categories. However, we’ll wait and see how the second-quarter results turn out.
“The majority of the gaming agreements we have seen at Lakestar in the past year have a web3 component,” Lakestar’s Mika Salmi said in an email. Web3 and gaming are a winning combo, but there are a lot of speculative attempts (in this case, good gameplay) that are missing a core value (much like the broader crypto/web 3 universe).”
“At Hiro, we’ve seen a large surge in web3 games pitches (and valuations) to over 50% of incoming – and a few have cut through,” said Luke Alvarez, Hiro Capital’s founding partner. “We are firm believers in Web3’s ability to involve the gaming community in-game innovation and accelerate decentralized creativity. However, no amount of clever token design can compensate for poor (or non-existent) game design. What matters is, as always, gameplay, gaming, gameplay.”
According to several VCs, there isn’t much reason to be concerned about blockchain games taking over because traditional gaming businesses can still raise a lot more money per deal.
Also, read – How Axie Infinity is driving the Future of Gaming?
“The entrepreneurial excitement at the convergence of gaming and web3 is off the charts,” Scott Rupp, a partner at Bitkraft Ventures, remarked. However, because many of these sales are smaller and include numerous parties, the dollar per deal spent on traditional deals versus web3 deals is still higher.” “We estimate that half of what we’re looking at right now has a web3 component.”