Venture Capital Funding in the Gaming Industry Falls by 38% in Q2 2023

The gaming industry saw a significant decline in venture capital funding in Q2 2023, with a 38% decrease compared to the previous quarter, according to Konvoy’s latest report. The total funding for Q2 amounted to $472 million, down from $761 million in Q1.

In the first half of 2023, the cumulative funding reached $1.2 billion, a significant drop from the $3.7 billion in H1 2022. This decline in funding was mainly driven by a 60% decrease in growth funding, which fell from $329 million to $131 million. Notably, there were no reports of late-stage funding for the sixth consecutive quarter.

The report also highlighted a 40% decrease in gaming funding, which fell from $900 million to $543 million. This is the lowest figure seen in the industry since before 2019. However, it’s important to note that this figure does not include M&A activity. Despite this decline in funding, the report forecasts that the gaming industry will still achieve a market valuation of $201 billion in 2023, representing a 9% increase from 2022.

The number of venture capital deals in Q2 2023 also reached their lowest point since Q3 2020. A total of 85 deals were signed, consisting of 77 early-stage deals and 8 growth deals. In comparison, Q1 saw 103 early-stage deals and 6 growth deals. So far this year, a total of 194 deals have been completed.

Konvoy’s report revealed that the games industry currently has a healthy M&A environment, with public gaming companies collectively holding $44.7 billion in cash and cash equivalents. Activision Blizzard, the parent company of King, had the highest cash reserves among gaming companies with $9.2 billion. Nintendo followed closely with $8.8 billion, and Sea Group with $6.1 billion. Other top performers in the mobile gaming sector include Electronic Arts ($2.4 billion), Nexon ($2 billion), Bandai Namco, and NetEase ($1.9 billion each).

In comparison to the gaming industry, tech companies fared even better in terms of cash reserves. They accumulated a total of $176.2 billion in cash and equivalents. Amazon ranked first with $49.3 billion, followed by Microsoft with $26.6 billion. Google secured the third position with a total of $25.9 billion. Leading mobile game makers Tencent ($2.1 billion) and Netflix ($6.7 billion) were also identified as top performers, along with Apple ($24.7 billion) and Sony, which is currently establishing its own mobile division ($10.3 billion).

Success by Region

In terms of investment, Asia proved to be the most lucrative market in Q2 2023. The region received a total of $221 million in venture funding, with $138 million allocated for early-stage funding and $83 million for growth. North America came in second place with $141 million, consisting of $98 million for early-stage investments and $43 million for growth. Europe was the only other region to exceed $100 million, receiving a total of $102 million, with $98 million going towards early-stage investment and $4 million towards growth.

In contrast, Australia attracted only $7 million in early-stage investment, and South America saw just $1 million. Neither of these regions received any growth funding, and no investment deals were reported in other markets.

Asia also had the highest number of deals, with 38 transactions, resulting in an average deal value of $5.8 million. Europe followed closely with 23 deals and an average deal value of $4.4 million. North America, despite having fewer deals (21), had the highest average deal value at $6.7 million.

Note: This article features several companies that were listed as the top 50 mobile game makers of 2022. The new list for 2023 will be revealed in the upcoming months.