Web3 Gaming Funding Deals in 2023

The current bear market has been brutal. We saw major crytpo institutions disappear over night (we’re looking at you FTX). As the markets have cooled off so has venture capital investment in the space. 

According to Blockdata Web3 gaming deals peaked in Q1’22. Shortly after we had the Luna/UST blow up, FTX scandal and a host of bankruptcies from crypto lenders. The bear market officially began. 

Deals plummeted by 90% by the end of 2022.   

But that’s 2022, ancient history in crypto years. 

We’re nearly halfway through 2023 and it’s time to check in on Web3 gaming fundraising. 

In this week’s Macro Trends, we analyzed all the publicly available data on Web3 gaming investment deals in 2023.  

We focused on the following:

• What categories are driving investments?
• Who are the most active investors?
• How is the VC investment landscape breaking down?

The Data

Our data is based on publicly available information and includes all Web3 gaming funding rounds. However, we did exclude funding rounds that were funds launched as there were no investments made yet. For simplification, we assumed the total investment amount came from the lead investor. 

As of the time of writing, we found 66 deals in the Web gaming space accounting for ~$430 million. 

While we don’t have a perfect comparison to last year, the total investment is significantly lower (see Blockdata chart above). In January alone of last year, we saw ~$400 million invested in the space. Whereas we are almost halfway through 2023 and we have just $430 million invested. However, the number of deals is similar to last year. 

Investment Categories

After scaping the data above, we broke down the target investments into six categories: 

• Game Development Company
• Game
• Studio
• Infrastructure
• Metaverse
• Ecosystem

We can see most of the investments were for specific Web3 games or in gaming studios. This accounted for 50% of the total investment. 

Ecosystem investments accounted for nearly 20% of the total. Examples include Play Ventures $5 million investment in Nefta gaming platform and Delphi Digital’s $2M investment in Phi, a social gaming onboarding platform.

Infrastructure plays made up 10% of the total invested and included a16z’s $25.5M investment in Towns, a Web3 group chat protocol.  

Investor Activity – Number of Deals

The data also gave us insight into the most active investors. 

Not surprisingly a16z was the most active investor in terms of number of investments with six deals that accounted for 9% of the total. This was followed by DWF Labs with five investments or 7.6% of the total. 

Interestingly, the top seven investors accounted for 40% of the number of deals. The Others category includes investors that only invested in a single deal each.  

Investor Activity – Share of Total Invested

If we look at the breakdown based on share of total dollars invested we get a similar but more concentrated picture. 

The top 10 investment firms accounted for 75% of the total investment spent.

Indeed, we can see a16z dominating in both categories: number of deals and total invested. Alternatively, Shima Capital completed the third most deals but its total value was just 2.5% of the total. This would indicate Shima is writing smaller investment checks and participating in more deals.

Another interesting data point is Sequoia Capital was the third largest investor by dollar amount but didn’t even make the top seven list in terms of number of deals. This would indicate they are doing fewer deals with larger investment checks.  

Final Thoughts

This week’s Macro research gave a detailed insight into the Web3 funding market for the year to date 2023. Although our total investment is down this year from the 2022 peak, we are still seeing good activity in the space. Not only are the big VC’s staying active we are seeing many smaller firms deploying capital as well. Not surprisingly, most of that investment is going toward building games. It will be interesting to see how the year’s second half plays out.  

Stay tuned for more macro trends next week.