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Active investors in game devs could fall in 2025 | Pitchbook

Dec 19, 2024 - venturebeat.com
The Pitchbook report highlights a decline in venture capital investment in the gaming sector, with the number of active investors in game developers significantly dropping since the COVID-19 pandemic. Despite the gaming industry's global market cap exceeding $1 trillion, only a small fraction is reinvested into high-risk ventures. The report attributes the decline to various factors, including increased interest rates, expensive game development cycles, and challenges in exit pathways like M&A and IPOs. Additionally, the rise of AI and machine learning has diverted investment from gaming. However, the sector is still considered underinvested relative to its market potential.

Despite the downturn, several key tailwinds suggest potential growth. The next generation of consumers is heavily engaged in gaming, with over 90% of 13 to 17-year-olds playing weekly. Gaming's value is recognized across various industries, and emerging markets in Latin America, India, and Africa could bring another billion consumers into the fold. New funds and specialist investors continue to emerge, and upcoming releases like Grand Theft Auto VI and new console generations are expected to attract more investment.

Key takeaways:

  • The number of active investors in gaming has significantly decreased since the COVID-19 pandemic, with a continued decline expected in 2025, indicating the sector is underinvested relative to its market capitalization.
  • Despite the current investment downturn, the gaming industry is seen as underinvested compared to its global market cap, with only $1.5 billion to $4 billion invested annually, excluding outlier years.
  • Several new funds and specialist investors have emerged to support the gaming sector, including Andreessen Horowitz, Bitkraft, and Griffin Gaming Partners, indicating ongoing interest in the industry.
  • Key growth drivers for the gaming industry include the next generation of consumers, the integration of gaming into various sectors, and emerging markets, which are expected to attract more investors in the future.
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