In Q3 2021, 140 investments across the video games industry were tracked by Ampere Analysis, with a total disclosed deal value of $12.6bn, up 85% quarter-on-quarter. In the first three quarters of the year, a total of $36.7bn has been invested in the games and adjacent sectors.

Early-stage funding drives deal volume uptick

The volume of investment activities increased by 40% from 100 in the previous quarter. This is mainly due to the active early-stage fundings for startups, especially in North America. Public listing activities have stayed low in volume, with only two companies (Krafton and Nexters) going public via IPO and SPAC, respectively. The projected IPO of Jam City has been cancelled by the management.

Mergers & acquisitions (M&A) accounted for 45% of total deal value in this quarter, up from 33% in Q2. TikTok's owner ByteDance announced the acquisition of Chinese VR hardware maker Pico for approx. $1.4bn, making it the biggest acquisition of the quarter.

VC funding centred on NFT and blockchain's integration with gaming

VC funding accounted for approximately 24% of the total value of deals in Q3 2021 but involved the most transactions–80 out of 140. Tencent has made the most corporate VC deals in this quarter at 15, mostly in China. However, the volume of deals was down from August, which is a sign that Beijing's increasing crackdown on major Internet companies may have had an impact on Tencent's pace of domestic investment.

NFTs (non-fungible tokens) and blockchains more generally are progressively integrated with gaming, making it an area that VC investors are flocking to. Ampere recorded 11 deals in related areas in this quarter, with a combined value of $1bn. The largest investment was Sorare's $680m funding round led by SoftBank, with the former being a French company focused on fantasy soccer game NFTs. Dapper Labs, the star in the NFT gaming space behind CryptoKitties and NBA Top Shot, closed a $250m series D funding round led by Google and other investors in September. In March this year, the company received $305m in funding from Coatue with participation from NBA legend Michael Jordan.

According to Ampere, in the first three quarters of this year, there have been 18 investments in NFT and blockchain gaming, with a cumulative value of $1.53bn. It is worth noting that companies involved in these deals are generally young and at their very early stages of fund-raising. As investors' interest is still growing in this emerging area, along with the consolidation of markets and regulations, there is a high potential for growth in deal value across this part of the market.

Europe becomes region with biggest deal volume

In terms of regions, of the 140 announced deals, Europe (51) surpassed North America (43) and APAC (35) and became the region with the most deal volume. North America saw a 95% increase in deal volume compared to the last quarter, while volume in Europe rose by 60% quarter-on-quarter. Deal volume in APAC reduced by 5% quarter-on-quarter, the second consecutive quarter with a decrease in deal volume. There were no deals collected from South America. The MEA region continued to grow in deal volume, from nine in Q2 to eleven in Q3.

Mobile investment maintained the buzz; VR regained focus amid metaverse boom

When it comes to market segments favoured by investors, with 47 deals focused on mobile gaming, this segment continued its streak as the most active for the third consecutive quarter. Casual game developers were especially appealing to investors: acquisitions in this space have remained high in recent quarters. On one hand, the general absence of enduring IP and rapid product turnover resulted in a prevalence of horizontal acquisitions (acquisitions in the same industry), where smaller casual game studios are being snapped up by other larger casual companies for its hits. On the other hand, large companies are leveraging the robust revenue stream to expand their catalogues or to expand into another business area or region, which has also fuelled the acquisitions of casual game companies.

Console/PC platforms have drawn investments' attention after some quiet quarters. Apart from the eye-catching IPO of South Korean developer Krafton, Chinese gaming giants Tencent and NetEase also made significant deals in those areas during the quarter.

Deal volume in the VR/AR industry increased from four in Q2 to nine in Q3, as investors are rediscovering its potential against the background of an arms race in building their metaverse strategy.

You can find the full 4-page Q3 2021 games investment report here, with more data, charts and our findings, covering analysis in investment type, region and sector.

For the previous quarterly reports, please see our Q2 2021 report, Q1 2021 report, Q4 2020 report and Q3 2020 report.