Venture capital funding in video games has fallen to a three-year low

Venture capital funding in video games fell to its lowest in three years last quarter.

According to data from PitchBook as reported by Bloomberg, venture capital groups invested a total of $700.3 million in video games in the third quarter of 2023, which is the lowest since the second quarter of 2020.

The report points out that venture capital groups invested more than $2 billion every quarter for two years, up to the second quarter of 2022 when it hit a peak of $5.9 billion, but investment has since sharply dropped.

A number of factors are attributed to the drop, including the fallout from a boom in gaming during the Covid-19 pandemic which saw many people turning to video games to pass the time indoors.

Other factors include dying hype in Web3 and the metaverse, as well as an increase in layoffs, delays and cancellations across the games industry.

PitchBook analyst Eric Bellomo told Bloomberg that “game development is risky”, adding: “Having a small collection of games yields tremendous returns, but it’s very hard to pick those games at an early stage.”

Further reading

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Analysis: Why are video game companies laying off staff?

While it's been a bleak month for video games, overall the industry is in remarkably good health

2023 has seen widespread reports of job losses all over the games industry, with the latest report coming from Telltale Games.

Earlier this week, it was reported that Team17 is planning “significant” job losses as part of a company restructure. Last week it was announced that Epic Games would be laying off 16% of its staff, consisting of “around 830 employees”.

Earlier this year Microsoft confirmed plans to lay off approximately 10,000 employees, including some at Xbox and Bethesda, while CD Projekt Red announced plans in July to lay off around 10% of its staff.

Layoffs have also recently been occurring at a number of other companies, including Unity, Riot Games, Blizzard, Crystal Dynamics, Bioware and The Callisto Protocol studio Striking Distance.