Venture Capital Firms Adopt More Calculated Approach to Blockchain Gaming Investments
Summary:
Venture capital firms are now favoring an informed approach to investing in blockchain gaming initiatives, focusing on due diligence and comprehensive checklists. This is in stark contrast to the last cryptocurrency bull market, where investments were driven by fear of missing out (FOMO), leading to indiscriminate investments in GameFi projects. The new approach includes scrutiny of gameplay, artistic talent, developers, and security. This shift is informed by an increased awareness of the cyclical nature of the cryptocurrency markets. Recent successful funding rounds for GameFi projects have set optimistic precedents, with three consecutive quarterly increases recorded in the sector.
In the latest cryptocurrency bull market, venture capitalist firms indiscriminately invested in blockchain gaming initiatives, whereas now, they are adopting a more informed and enduring strategy, report industry leaders. Shi Khai Wei, who established the crypto-centric venture capital company, LongHash Ventures, described the former approach as "madness." He mentioned that numerous GameFi initiatives were receiving up to $100 million in funding despite being backed by small teams and grand promises.
Keiran Warwick, the creator of Illuvium's GameFi studio and recent recipient of $12 million in funding, concurred, noting that investor enthusiasm was mainly a reaction to a fear of missing out (FOMO). Illuvium also revealed the successful completion of a $12 million Series A funding round on March 26th.
Warwick explained that external influence played a crucial role. "If someone proposed a game that had the backing of four or five other firms, the presumption would be that the due diligence had been done, and we should follow their actions," he said. He asserted that this type of FOMO and momentum stems from the fear of missing out and the easy assumption that if other firms are investing, they should too.
But venture capitalists have since widened their perspectives and now expect to understand more about the gameplay, artistic talent, developers, and security audits, according to Warwick. He points out the considerable scrutiny that venture capitalists now apply to projects compared with before.
Wei agreed, stating that a more comprehensive checklist aids his firm in filtering out less credible projects. LongHash Ventures has invested heavily in GameFi this time around, as superior projects are either launched or on the brink of launch, and are entering at far more grounded valuations, Wei further elucidated. LongHash Ventures has acquired stakes in Yield Guild Games, Guildfi, Snack Club, Moonveil, and Ignite Tournaments. He mentioned that GameFi is currently a priority for LongHash Ventures and anticipates being ahead of the trend when the next wave of FOMO hits.
CEO of Yield Guild Games, Gabby Dizon, informed Cointelegraph that venture capitalists now also recognize the cyclical nature of cryptocurrency markets, after many of them were held back by their investments during the apex of the previous bull market.
King River Capital, Arrington Capital, and Animoca Ventures led the Series A funding round of Illuvium.io, where they raised $12 million in late March. Other recent GameFi projects to receive funding include Helika Games, Parallel Studios, and Elixer Games, which received $50 million, $35 million, and $14 million, respectively.
GameFi initiatives attracted over $2 billion of investment in the fourth quarter of 2021; however, funding amounts continued to decrease for six straight quarters following the first quarter of 2022. This downward trend reversed in the third quarter of that year. The GameFi sector has experienced three consecutive quarterly increases since then, the last of which amounted to $268 million.
Published At
4/17/2024 2:19:03 AM
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