Singapore’s gaming-focused venture capital firm Play Ventures is on track to launch its second fund in the fourth quarter of this calendar year.
According to an industry source (who is not related to the company), the firm is aiming to raise about $80-100 million for the second vehicle. But Play Ventures founding partner Henric Suuronen declined to comment on the development.
However, Suuronen shared that the VC firm has received keen interest from its existing limited partners (LPs) to re-invest after seeing the performance of its $40 million debut fund, which was closed in August last year.
Play Ventures’s debut fund was backed by several gaming industry heavyweights including Rovio, the maker of Angry Birds; Modern Times Group, an international esports and gaming entertainment company; and Anton Gauffin, CEO of social gaming giant Huuuge Games. Other LPs include VCs and family offices from Asia, the US and Europe.
To date, Play Ventures has invested in 22 early-stage companies with another 2-3 more investments in its pipeline this year. Its portfolio includes Vietnam’s Gamejam, Singapore’s Potato Play and Finnish-Icelandic firm Mainframe Industries. It also comprises a mix of game studios producing free-to-play titles and B2B gaming services firms across Europe, the US and Asia.
Exits for gaming startups
The gaming sector is seeing a surge of interest as investors flock to post-COVID opportunities.
In US public markets, gaming-related ETFs have so far outperformed the market. As of 8 July, ETFs like VanEck’s Gaming and Esports ETF (ESPO) have risen by over 43 per cent while ETFMG Video Game Tech ETF (GAMR) is up over 36 per cent year-to-date, compared to a dip of over 8 per cent and 2 per cent for the Dow and S&P 500 respectively.
Several private market deals were also announced this year, the most prominent being Zynga’s $1.8-billion acquisition of Istanbul-based game studio Peak just last month. Suuronen shared that there’s still room in the market for more M&A activity which will likely be fuelled by the likes of cash-rich firms such as Tencent Holdings and Activision Blizzard.
“I expect at least 1-2 more billion-dollar deals to be announced this year. Once most of these big gaming companies hit a certain size, they have to do M&A to acquire customers and drive scale,” explained Suuronen.
“It is hard to tell whether this public exuberance is going to sustain through the year, but it still does not take away the IPO potential of gaming companies. The unicorn ratio in the gaming sector is very high. About one-third of unicorns in Europe are from the gaming sector alone. That speaks a lot about the growth potential of this market,” he added.
The gaming difference
Suuronen added that gaming companies also typically have shorter monetisation and exit timeframes, compared to more crowded segments such as B2C marketplaces or ride-hailing. Play’s own portfolio companies already secure over $20 million in revenues on average, with a number of them like Vietnam’s Gamejam already hitting profitability.
“Most gaming startups usually require just about 2-3 rounds of funding before exiting. This also means less dilution for shareholders. The time it takes for companies to exit can range anywhere from 3-10 years, depending on the size of the company and the scale of its ambitions,” shared Suuronen.
Few VCs, however, have yet to fully jump into gaming investments, making Play Ventures one of the few globally that focuses solely on the sector. The firm, however, has noted rising VC interest in the space and co-invests frequently with others such as Initial Capital, Makers Fund, Galaxy Digital and Korea Investment Partners (KIP). Some have also begun exploring follow-on rounds as well, such as Andreesen Horowitz’s participation in Mainframe Industries’s $8.3 million round in March this year.