Why Web3 gaming won’t see an uptick in VC activity 

This is a segment from The Drop newsletter. To read full editions, subscribe.

---

Venture capital spending may be bouncing back — with an estimated $4.5 billion spent last quarter.

But it doesn’t look like gaming’s getting a piece of that pie. 

Earlier this week, Empire noted that VC interest may be going more toward projects with real-world value. This is a symptom of a broader change across the landscape, thanks to institutional interest in the space. 

Unfortunately, even with the potential for more raises across the board — from mega deals ($100 million and upwards) to emerging deals (meaning seed or pre-seed) — it doesn’t look like gaming is getting the love. Not yet, anyway. 

I asked PitchBook’s Eric Bellomo — senior analyst on emerging technology — about gaming raises, but he wasn’t too optimistic. 

“While deal value increased substantially YoY, outsized deals like the Disney/Epic Games round inflated top-line figures. Deal volume continued to slide, falling 9.5% to 649 deals, in-line with 2018-2019 figures. Further, the number of investors actively investing in content developers continued its step deceleration since 2021. 

“Capital is still available, but we view the current environment as a new steady state, rather than a resurgence,” he told me. 

Part of this is fairly obvious, right? A lot of money went into this gaming subsector — but not a whole lot of successes came out.

“Enthusiasm has waned in the market broadly, as many well-funded startups have yet to produce breakout hits or venture-scale outcomes. A game’s underlying technology is far removed from the most important factor: Is the game fun and retentive?” Bellomo said. 

“Online shoppers don’t care if a merchant uses Shopify or a MACH-based service; they care about value and speed. They don’t care if a game was built in Unity or Unreal. The same holds in video games: Players only care if a game is fun and if their friends play. A discussion of tech stacks and architecture misses this point.”

He added that he doesn’t think we’ll see a resurgence in VC activity for “quite some time.” Mostly because, last cycle, gaming clearly benefited from a number of tailwinds from the attention that Web3 overall received with the focus on NFTs. 

But, hey, while games centered on gambling aren’t going to be the focus of big VC spending at this point, at least they’ve found some footing in terms of adoption.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.