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Market Map: Game development startups level up creators

Investors are looking toward new tools that will help the next wave of game developers to create hit games.

In 1977, Sequoia made its first-ever investment in a small gaming startup called Atari. That small startup would go on to revolutionize home console gaming with “Pong” and “Pac-Man.”

Today, VC heavyweights like Andreessen Horowitz have established dedicated gaming funds as they search for the next great game and the tools to build it. Some gaming giants also license out tools other developers can use to create their own games, like “Fortnite” maker Epic Games, whose creative suite Unreal Engine is used by developers and filmmakers.

Game developers are also experimenting with new ways to play, like incorporating NFTs and blockchains into gameplay, despite Web3 gaming’s recent challenges. And with Apple’s foray into augmented and virtual reality, game makers now have a new medium beyond mobile and console gaming.

The market map below outlines the VC gaming ecosystem. Explore the development segment by clicking on the teal tile.

  
 
  
To go deeper, read our latest Q1 2023 Gaming Report. PitchBook subscribers can also explore the full market map with details on more than 3,000 companies.

Spotlight: Development

In Q2, 49 game development startups raised $661 million across three areas: 
 
  • Game engines: Tools used to create and run any variety of games of any size. Epic Games, Unity and "Grand Theft Auto" maker Rockstar Games have all created their own engines that they license out to customers.
  • Developer tools: Pre-made software that developers can implement in their own work, from in-game messaging services to payment options, plug-ins for buying in-game content, moderation services for multiplayer games and more.
  • Technology services: Startups creating the infrastructure for games and their engines. This includes delivery modes for cloud gaming like edge computing as well as content delivery networks for games.

CoreWeave, a cloud computing startup that partially specializes in development, deployment and game streaming, bagged one of gaming's biggest deals earlier this year, raising a $421 million Series B led by Magnetar Capital.

How deals and exits are trending

 

Gaming startups raised $1.1 billion across 110 deals in Q2. Deal value increased 12.1% from the previous quarter, a multiyear low for the period.

Some notable deals include a $48 million Series B for Anzu, the creator of an in-game advertising tool, led by Emmis Communications and joined by PayPal Ventures, Sony Innovation Fund and Bitkraft, among others. Video game studio Gardens also raised a $31.8 million Series A co-led by Krafton and Lightspeed.
 

Exits remain few and far between despite a few standouts. Atari acquired Nightdive Studios for $10 million in May, and in April Sega bought Angry Birds maker Rovio for $776 million. Also in April, PlayStation acquired multiplayer-focused studio Firewalk from ProbablyMonsters for an undisclosed amount.

More market maps:
Featured image by Joey Schaffer/PitchBook News

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