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Blockchain game pitches are flooding the inboxes of investors. That comes as no surprise, but the scale of the change in gaming entrepreneurship is pretty stunning considering a year ago such pitches were almost nonexistent.

It was perhaps no surprise to see blockchain-related game companies receive a third of all game startup funding — with 128 companies receiving $1.2 billion — in the first quarter, according to investment bank Drake Star Partners.

In some ways, that was reassuring. It meant that blockchain games are hot, but game developers and gamers don’t have to worry that the funding will crowd out the funding for traditional PC and console game companies. That fear is one of the reasons blockchain games — especially those that use non-fungible tokens (NFTs) — have been unpopular with Western hardcore gamers and some developers. Yet it seemed baseless based on the Q1 numbers, which are a lagging indicator.

But there is a forward indicator that might be a bit scary to some. Last week at our GamesBeat Summit 2022 event, one investor indicated 90% of the inbound pitches at one game VC were blockchain related. I followed up and asked a number of game venture capitalists. They say that anywhere from 50% to 90% of the pitches coming into them involve blockchain games in some way. One game VC told GamesBeat that only one pitch that came in this year was unrelated to blockchain games. Back in November, Forte snared a record funding by raising $725 million for its blockchain gaming infrastructure.


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Dean Takahashi (left) talks with Yat Siu, chairman of Animoca Brands.
Dean Takahashi (left) talks with Yat Siu, chairman of Animoca Brands.

The game VC community isn’t universally excited about blockchain. Some pro blockchain technology investors, like Yat Siu, chairman of Animoca Brands, aren’t so worried about the trend because they believe blockchain will be transformative for games. But other veterans like David Gardner of London Venture Partners (who spoke at our event last week) aren’t as enthusiastic.

But there’s no disputing the sector is hot. From virtually nothing a year earlier, blockchain game NFT revenues generated $2.3 billion in the third quarter, according to the Blockchain Game Alliance. Blockchain game companies such as Animoca Brands, Mythical Games, Sky Mavis, Dapper Labs, and numerous others are raising money in the hundreds of millions of dollars in venture capital, while NFT presales are supporting companies like Gala Games as they stake game developers on their latest blockchain game creations.

“Many founders are hastily re-writing their pitches to include a web 3 element,” said Ethan Kurzweil, a partner at Bessemer Venture Partners, in an email. “Given enough time, web 3 seems to work its way into every gaming pitch these days – whether it truly fits or not. I’m not sure whether it’s VCs pushing the web 3 zeal or the other way around but the web 3 pendulum has indeed swung all of the way to the limit.”

Yet it remains to be seen how much it will catch on in the mainstream, given the resistance of hardcore gamers to NFT moves by Ubisoft with Ghost Recon: Breakpoint, Team 17, GSC Game World, Troy Baker, and others. The Wall Street Journal recently argued in a piece that the NFT trend is collapsing. (That story looked at all NFTs, not just those related to blockchain games).

But Nansen data argued the data shows the opposite, as the NFT market is moving into a new growth phase in which we’re seeing more successful projects and a maturing market in which innovative projects are really taking off. Data suggests a contrast with January 2021 when “dead” minted projects (defined as having less than 10 sales in the past 30 days) made up almost half of the NFT market.

The average NFT mint price has also hovered between .07 ETH and 1 ETH since July 2021 after seeing major spikes earlier that year. Nansen’s report suggests mints are getting more competitive, compelling project leaders to lower prices. The increasing proportion of projects fetching higher sums than their mint price is happening amid insane growth of NFT minters. According to Nansen’s report, there were only 500 people minting NFTs at the start of 2021 and there are now a staggering 1.2 million as of February. The NFT market continues outperforming the cryptocurrency market year-to-date, and both metaverse and social NFTs are driving the growth of the NFT market, Nansen said.

Thibaud Morin, the managing partner of Level-Up, a European game VC fund, said in an email that 60% of the pitches coming in from European game startups are blockchain related.

To some VCs, entrepreneurs are just facing reality. And some venture capitalists are concerned that game entrepreneurs are bending their dreams and pitches to match the trendy hot thing. That’s never a good thing. One VC said that one blockchain game pitch covered lots of aspects of the NFT strategy but didn’t mention anything about the game the entrepreneur was building. And that’s just wrong.

Owen Mahoney, CEO of Nexon
Owen Mahoney, CEO of Nexon

 “I don’t mind receiving web 3 game pitches, but they need to meet the same requirements we’d like to see in any game pitch, which is to say a great new idea from an experienced team of game developers,” said Ed Fries, founder of 1Up Ventures, in an email to GamesBeat.

Meanwhile, Stephen Chou, principal at Translink Capital, said in an email, “Almost all the gaming pitches we see have something related to blockchain. And we are seeing pitches from new teams at large gaming studios, as well as traditional web 2 gaming startups incorporating web 3 for their next raise. I think no matter your idea, every gaming founder now must have a point of view regarding blockchain gaming. It’s 100% going to come up.”

Of course, the shady play here would be to pivot a game startup to the blockchain, raise money, and then pivot back to a non-blockchain use. VCs don’t recommend that strategy, as it will be hard to raise the second round of funding that is often necessary.

These entrepreneurs might be telling VCs what they think the VCs want to hear. But that’s anathema to longtime industry executives like Owen Mahoney, CEO of Nexon, who instead wants creative people to pitch the game that they always dreamed of making.

David Gardner of LVP

Of course, there is no indicator that the game VCs are actually funding a lot of blockchain games in wild disproportion to other categories. But we’ll see how the second-quarter numbers look.

Mika Salmi of Lakestar said in an email, “The majority of the gaming deals we have seen at Lakestar in the past year have a web 3 component. Web 3 and gaming is a winning combination but just like the broader crypto/web 3 universe, there are a lot of speculative efforts that are missing a core utility (in this case, good gameplay).”

“At Hiro we have seen a big increase in web 3 games pitches (and valuations) to > 50% of inbound – and a few have cut through,” said Luke Alvarez, founding partner at Hiro Capital. “We are passionate believers in the potential for Web3 to engage the player community in game innovation and to accelerate decentralised creativity. But no amount of smart token design can make up for poor (or no) game design. As always, what matters is gameplay, gameplay, gameplay.”

Perhaps there isn’t a lot of reason to fear that blockchain games are taking over, as traditional game companies can still raise a lot more money per deal, some VCs said.

“There’s no question that entrepreneurial energy at the intersection of games and web3 is off the charts,” said Scott Rupp, a partner at Bitkraft Ventures. “We’d estimated that 50% of what we are looking at now has a web 3 element.  However, a lot of these deals are smaller in size and have multiple participants, so dollars per deal going into traditional deals vs web3 deals are still generally higher.”

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