‘FOMO’ once drove GameFi funding, but VCs say it’s different this time

During the previous market surge, venture capital firms impulsively invested heavily in blockchain gaming initiatives. However, industry insiders claim that these firms are now adopting a more thoughtful and long-term strategy for their investments in this sector.

Shi Khai Wei, the founder of LongHash Ventures, a venture capital firm specializing in cryptocurrencies, expressed amazement to CryptoMoon over some GameFi projects securing up to $100 million with small teams and vague commitments.

Kieran Warwick, the founder of Illuvium game studio by GameFi, shared his perspective after securing $12 million in venture capital funding. He noted that the intense investor interest was reminiscent of past trends, fueled largely by the fear of missing out (FOMO). In simpler terms, Warwick observed that the current investment buzz was similar to previous occurrences, primarily driven by a desire not to miss out on potential opportunities.

If someone proposes a business opportunity that has been backed by several other companies, Warwick explained, you might assume they have carefully researched the investment and are competent, so it seems reasonable for us to do the same.

“You get this FOMO and traction purely because people don’t want to miss out and they think, well, others are in, so we’re in.”

Nowadays, venture capitalists (VCs) ask for more than just a business plan. They require evidence of gameplay, artists’ portfolios, developer teams, and completed security audits, according to Warwick.

“The amount of scrutiny that VCs are putting projects under now versus then is huge.”

According to Wei, having a more extensive list aids his company in distinguishing between legitimate and questionable projects.

This time around, LongHash has shown greater interest in GameFi as a number of leading projects are about to debut or have recently launched, offering more reasonable price tags according to Wei. The firm has made investments in Yield Guild Games, Guildfi, Snack Club, Moonveil, and Ignite Tournaments.)

In the past few months, Wei mentioned that GameFi has emerged as a key investment sector for LongHash Ventures. He aims to ensure the company stays at least half a year ahead of the trend when the next surge of excitement (FOMO) hits the market.

What makes #web3 unique?

The power of network effects is the driving force behind web3 and fosters collaborations among various games, art, and decentralized finance platforms.

As Robby Yung, our investment CEO (@viewfromhk), put it to Lloyd Wahed from @manasearchuk: “The worlds of gaming, art, and decentralized finance interconnect in the web3 realm.”

— Animoca Brands (@animocabrands) April 15, 2024

Gabby Dizon, the CEO of Yield Guild Games, explained to CryptoMoon that venture capitalists have become more mindful of the ups and downs of cryptocurrency markets. Some VCs were negatively impacted by investing at the height of the previous market boom.

In late March, Warwick’s Illuvium.io successfully raised $12 million during its Series A funding round, with the investment spearheaded by King River Capital, Arrington Capital, and Animoca Ventures.

In the past few months, several GameFi projects, including Helika Games, Parallel Studios, and Elixer Games, have secured funding of $50 million, $35 million, and $14 million respectively. (Alternatively, Helika Games received $50 million, Parallel Studios received $35 million, and Elixer Games received $14 million in funding.)

Approximately $2.1 billion was poured into GameFi initiatives during the last quarter of 2021, as reported by RootData. However, investment sums have been declining for six successive quarters since the first quarter of 2022.

In contrast, the third quarter marked a break from the previous trend as the GameFi sector registered successive quarterly growths of over $200 million each, with the latest quarter bringing in an impressive $268 million.

2024-04-17 02:33

Read More