The number of investors active in gaming will fall further as the sector remains underinvested relative to public market capitalization.
And venture capital-backed content developers will struggle to siphon market share from incumbents, according to a report by Pitchbook.
The number of active investors in game developers has fallen precipitously in the past year since the onset of the COVID-19 pandemic, said Pitchbook, which monitors global venture capital investments. At the same time, another report from Pitchbook noted that Discord, the gaming communications platform, has a 93% chance of going public through an initial public offering (IPO) in 2025.
In 2021, the gaming boom was here. Pitchbook said 2,359 venture investors wrote checks backing publishers, developers & studios (up from 734 in 2020). By 2023, the number was halved to 1,142 investors, with 2024 pacing lower yet.
“We expect more of the same in 2025, with a further pullback in the number of investors backing content developers, but the industry’s long-term trajectory means the sector is underinvested relative to the $187.7 billion spent on games annually,” wrote Eric Bellomo, analyst for emerging technology at Pitchbook.
The reasons for the abrupt capital inflow and outflow are numerous. During the frenzy of the zero-interest-rate environment, record numbers of VC funds were initiated and record amounts of capital were raised across the venture ecosystem.
Gaming itself sat at the intersection of several emergent trends, which drew unprecedented amounts of capital into the industry. Facebook had pivoted to the Metaverse, cryptocurrencies and blockchain-based games exploded in the zeitgeist, and awareness of gaming increased …