‘FOMO’ once drove GameFi’s funding, but VCs say it’s different this time
Venture capital firms piled haphazardly into blockchain gaming projects during the last bull run, but this time they're taking a more mature and sustainable approach, industry executives say.
“[It was] It's crazy,” Shi Khai Wai, founder of cryptocurrency-focused VC firm Longhash Ventures, told Cointelegraph, noting that some GameFi projects were getting funding from just a few team members and some lofty prospects as high as $100 million.
Keiran Warwick, founder of GameFi studio Eluvium, which recently raised $12 million in VC funding, says much of the investor enthusiasm was fueled by fear of missing out (FOMO).
If someone tells you and they've played a game that four or five other companies have invested in, well, they've done their due diligence, and they know what they're doing, so we're the only ones going,” added Warwick.
“People who get this FOMO because they don't want to miss out and others are in, so we're in.”
But VCs have broadened their checklists and want to look at gameplay, artists, developers, security audits and more, Warwick points out.
“The amount of scrutiny that VCs are putting projects through now with this timing is huge.”
Wei attests to that, and says a longer track record will help to weed out more illegitimate projects.
Longhash is more invested in GameFi at this time when high-profile projects are launched or about to launch and are priced at a very reasonable price, Wei explained. His company has invested in Yield Guild Games, Guildfi, Snack Club, Moonveil and Ignite Tournaments.
According to Wei, GameFi has become a focus area for LongHash Ventures in recent months, and we hope the company will be around 6-12 months before the next wave of FOMO begins.
Why #web3?
Network effects are a real strength of Web3 and lead to cross-game collaboration as well.
“#Gaming, art and decentralized finance all come together. [in web3]Investment CEO Robbie Yung (@viewfromhk) from @manasearchuk told @lloydWahed. pic.twitter.com/JzUVndu60I
— Animoca Brands (@animocabrands) April 15, 2024
Gabby Dizon, co-founder of Yield Guild Games, told Cointelegraph that VCs are now more aware of the “cyclicality” of cryptocurrency markets, as many of them hamstrung themselves by investing at the peak of the last bull market.
Related: Crypto VC Funding Breaks 2-Year Fall in Q1 2024
It comes as Warwick's Eluvium.io secured $12 million in Series A funding led by King River Capital, Arrington Capital and Animoka Ventures in late March.
Other GameFi projects that have received funding in recent months include Helica Games, Parallel Studios, and Elixir Games with $50 million, $35 million, and $14 million, respectively.
In Q4 2021, more than $2 billion was invested in GameFi projects, but after the first quarter of 2022, the amount of money has decreased for six consecutive quarters, according to RootData.
However, the trend finally picked up in the third quarter of that year, and the GameFi sector has since shown three consecutive quarters of growth, including the last quarter, which reached $268 million.
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