Roughly a month ago I published a list of $350 million invested in year 2008 into virtual worlds, casual MMOs, and casual & social games. The blog post got a lot of coverage when it was published and Adam Martin of T=Machine contributed to the discussion and posted his own list which had a lot of European deals. We decided that the right thing to do would be to put those lists together. I also continued to search for further data and uncovered more deals from e.g. Avista Partners’ monthly video game briefing. I wanted to also see what the total “game-like” segment looked like, so I expanded my criteria to include core gaming MMORPGs, relevant technology providers and ecosystem players (e.g. payment processors). When I had all the data in and summed it up, I was totally and utterly amazed at the massive scale of investments.
The Online games and Related Entertainment segment has amassed a truly astounding $1,7 billion of VC investments in years 2007-2008. Of this staggering figure $625 million was invested into the “Virtual Worlds, Casual MMO, Social games and Casual games” sector, $712 million was invested into core gaming MMORPG sector and a further $326 million into related companies (e.g. technology and payment providers).
The diagram below shows the distribution of investments over the years 2007-2008 and the three sectors:
The $712 million invested into MMORPG developers/publishers reflects the high cost to play in this space. The cost of the development of a Triple A core gaming MMORPG starts at $50 million, but can easily skyrocket. The reason these high risk investments continue to be made are the 11 million subscribers of World of Warcraft. WoW’s revenues in year 2007 were $1100 million of which $517 million was pure profit. The lackluster success of recent entrants such as Age of Conan and Warhammer Online underlines how risky taking on WoW is, but despite this the lure of WoW-scale profits will definitely continue to draw entrants.
The biggest deals of venture funding in MMORPG sector were:
- $300 million: Zenimax Media
- $175 million: Shanda Interactive Entertainment
- $30+70 million: Trion World Network
- $49 million: Realtime Worlds (which also received $31 million in Dec 2006)
- $40 million: Turbine
The biggest deals of venture funding in the Virtual Worlds, Casual MMO, Social and Casual games sector were:
- $100 million: 9You
- $83 million: Big Fish Games
- $29 million: Zynga
- $24 million: Sulake
- $20 million: Oberon
Detailed analysis of this sector is available in Part 2 of this post.
Finally, the biggest VC fundings in the Other related sector were:
- $24 million: Live Gamer
- $17 million: GameDuell
- $16 million: K2 Network
- $15,5 million: In2Games
- $14,4 million: Ukash
The data on VC investments has been collected from publicly available sources including but not limited to
- Virtual World’s Management
- Avista Partners’ video game briefing
The data was gathered by Jussi Laakkonen and Adam Martin. The data is most accurate for year 2008. Year 2006 and earlier years have been only covered sporadically and typically only for companies that have received follow-up funding in years 2007-2008. The data is provided AS IS and the authors make no warranties or guarantees about its accuracy.
Download the spreadsheet:
Note: a spreadsheet with categorizations is available in Part 2.
The analysis – tomorrow
A deeper analysis of the VC activity in this segment is available in Part 2 of this blog post. My analysis focuses on the Virtual Worlds, Casual MMO, Social and Casual games sector, as this is the sector in which my company Everyplay operates. Topics covered on Part 2 include:
- Monthly investment rates (peak months, current activity)
- Most active VCs uncovered
- Analysis on investments on company categories, deals stages and deal sizes
- Updated data spreadsheet with company categorizations (subjectively assigned)