If the amount of time people spend on an activity directly correlated with startup investment, gaming would be a top contender.
Today, it’s estimated that 61% of Americans play digital games for at least an hour weekly, as reported by the Entertainment Software Association. Globally, Generation Alpha, the youngest demographic, are the most active, averaging over five hours per week playing games. However, startup investors appear less than impressed. Gaming hasn’t been a significant area for venture investment lately, according to Crunchbase data.
Gaming-related startups raised approximately $2.4 billion in 2024, a decrease of 12% from the previous year. Funding in this sector has been declining annually since its peak in 2021. To illustrate this trend, consider the investment figures over the past six years:
Even quarterly improvements aren’t observed. In fact, the strongest funding quarter in the last five was Q1 2024. This year began slowly, with only $144 million invested across 24 global rounds. The largest financing was a $30 million Series A round in January secured by Grand Games, a Turkish mobile games developer, and led by Balderton Capital.
This contraction isn’t isolated to the gaming industry; it’s part of a broader trend. Most consumer-facing sectors, including e-commerce, consumer products, and consumer electronics, have experienced reduced funding in recent years. This contraction has continued despite overall startup funding growth, largely due to significant investments in substantial AI mega-rounds.
Additionally, gaming faces its own challenges, including mass layoffs that started in 2022 and continued through 2024. Early this year, a Game Developers Conference report noted that an estimated one in ten developers had been laid off in the past year. The biggest budget title developers, including Sweden’s Embracer Group, Microsoft, Sony, and Electronic Arts, made some of the most substantial cuts. Studios also canceled many titles due to the underperformance of some new releases.
Given such unfavorable conditions, which startups managed to secure capital? The largest round of 2024 went to Edinburgh-based Build A Rocket Boy, which raised over $110 million in a Series D funding round in January. The company is focused on an immersive gaming platform, creating a high-end game series, and developing design tools for user-generated content.
Second Dinner Studios, based in Irvine, California, secured $100 million in Series B funding, led by Griffin Gaming Partners. The game development studio is known for its popular game, Marvel Snap. Other significant funding rounds include:
- Hybe IM, a Korean media and games startup from entertainment company Hybe, raised $80 million in an August funding round led by Makers Fund.
- Volley, a developer of voice-controlled games for smart TVs and speakers, received $55 million in a July Series C round led by Lightspeed Venture Partners and Microsoft’s M12.
- Spyke Games, a Turkish mobile games development studio, secured $50 million in a May Series A funding round backed by Moon Active.
Considering the size of the gaming industry and the valuations of major players, the startup funding seems modest. Nintendo, Roblox, Take-Two Interactive Software, and Electronic Arts have a combined market value exceeding $200 billion. Just 16 months ago, Microsoft acquired Activision Blizzard for $75 billion. People are more connected to their devices than ever. While successful game franchises have demonstrated longevity, there’s a constant demand for the kinds of unique experiences that startups have historically provided.
