David Higley, Shan Shan, Lia Zhang and Frankie Zhu joined the GamesBeat Summit to talk about investments, mergers and acquisitions in the games industry.
Financial and economic analysts are predicting an economic downturn in the second half of 2023. That’s never fun. The kind of belt-tightening that can be expected hits across all industries pretty evenly. Despite the looming situation, there’s still plenty of mergers and acquisitions going on. There’s still a wealth of venture capital to be had.
It’s just a little more focused, now.
“Gaming has been one of the more resilient industries or sectors, compared to the broader landscape,” said Lightspeed Venture Partners’ Shan. “We’re still seeing a lot of active behaviors in the early seed stage side, as well as seeing activity in M&A on the growth side.”
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M&A, for those curious, stands for mergers and acquisitions. It’s a good sign that there’s still moves being made. It suggests that the gaming industry is strong enough to survive the economy taking a big dip.
“What we’ve seen is definitely a lag and a slow down overall in terms of volume and deal flow,” said Makers Fund’s Lia Zhang. “However, it’s quite relative. If you look at what it was five or six years ago, we’re still significantly higher.”
So why is it a great time to invest?
Half a decade ago there was a lot of money moving around. Lots of companies and projects were seeking investments or being sold to investors. The people behind those projects are back, with new projects, companies and ideas. It makes for a rich list of potentially safe bets.
“A lot of these founders have actually come out in the last year or two from those M&A transactions,” said LionTree’s Frankie Zhu. “To start rebuilding their next big thing within gaming. They’re kind of in build mode, as well as looking for funding to fund their project. These are very experienced people in the industry.”
It also definitely helps that the games industry is an inherently creative space. Think about the film industry for a minute. There’s not a lot of innovation there that hits on mass market appeal. That innovation exists, but it shows up a lot more in the indie spaces than the next big blockbuster.
In games it’s almost the opposite. The big blockbusters – the Call of Duties, for example – do well, but gamers crave unique experiences. Indie devs are always playing with something new, but new game mechanics or ideas often make an average game popular. A really good idea can spawn a new success story pretty easily. There’s always something worth considering investments.
“There’s just so much innovation that’s going on, and we continue to see it,” said Zhu.
Another big factor is how easy it is to break into the industry. There are so many tools, like Unity and Unreal Engine, that are very easy to learn. It’s never been easier to make a game. It’s never been easier to make a great idea and show it off. Investors are more likely to invest in something tangible.
The games industry is strong
There’s lots of little reasons, too. But the games industry is healthy enough and developed enough that there’s comparatively less risk in investors throwing money around. There are track records and pedigrees out in the wild to bet on.
And there’s lots of great first time ideas. It might not be waterfalls of cash like half a decade ago, but the well is far from dry.
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