A year ago I spent a lot of time trying to track all the investments into the blockchain game sector.
And, actually, I’m still doing so only now it requires nothing like the same overhead as activity continues to drop as the figures below demonstrate.
Total investments during H1 2023: $889 million
Total investments in 2022: $8.2 billion
Total investments in 2021: $4.3 billion
Total investments in 2020: $88 million
Depending on your point of view, you could highlight the almost 1000% increase from 2020 to H1 2023 as a positive or the -90% decrease from 2022 to H1 2023 (technically down 85% year-on-year) as the disaster.
Taking everything crypto and macro into account, the truth is we’ve probably passed through the nadir.
In June I measured just $60 million of investment, which hopefully means VCs are now investing smaller amounts into better quality projects at sensible valuations.
That’s the foundation on which long-term success is eventually built.
But given that provisio, it’s clear to see from the number of deals just how unfashionable blockchain game and metaverse projects now are compared to you know what…
Still — ever the optimist — I think a lack of resources is probably what many companies in this sector require in order to think very carefully about burnrate, runway and generating revenue.
Raising a lot of money on a massive valuation now seems antithetical to finding success in a sector which is clearly much more complex from both a product and a go-to-market point of view than the traditional game space.
And this is being reflected in both valuations and how much money companies say they want to raise. In the graph below the red dots are generally higher up and more to the right. Market conditions have sucked them back to sanity (0,0).
Of course, in the long run, this means successful blockchain games will be even more valuable, both to their founders, shareholders and investors. We’ll also likely see large Series B and C rounds for those game demonstrating some level of product-market-fit during H2 2024.
But in the short term, I think its current lack means there’s a logical argument that company’s early stage valuations should be compressed relative to their non-blockchain peers.
More hard tacks today before the promise of jam tomorrow.
This Substack is sponsored by Hiro Capital: investing in the future of games
Calendar
Mighty Action Heroes hits open beta — 14th July
Xociety’s Frontier NFTs revealed — 14th July
The Sandbox’s Infinite Pulse land sale — 14th July
Marblex is burning 67% of its MBX token’s total supply — 19th July
Applications for Ember Sword’s second land sale close — 31th July
Mighty Action Heroes releases APK — 16th August
Let’s meet at Gamescom — 23-24th August
Funding news
Binance Labs has announced a $15 million strategic investment into blockchain gaming developer and platform operator Xterio. Having previously announced a $40 million Series A in August 2022 — which was led by FTX (!) — this takes Xterio’s total funding to $55 million.
Founded mainly by execs from Chinese midcore mobile publisher FunPlus, as well as its platform, Xterio is working on three games; mobile sandbox RPG Overworld, 4X mobile game Age of Dino and GTA-inspired mobile PVP racing shooter TTT.
It also lists a further eight games from thirdparty developers as being part of its platform including Blocklords and Abyssworld.
As part of the deal, Xterio will extend its platform to the BNB blockchain and Binance will help with the future launch of its token. The funding will also help Xterio build out its launchpad incubator.
And — as now is de rigueur — Xterio also throws in a paragraph about various AI features it’s working on including a toolkit that generates “production-quality 2D and 3D assets” while also offering an "emotion engine for artificial intelligence."
Emotion Engine? That sounds familiar!
From MATIC to POL news
Not specifically related to gaming but game-focused blockchain Polygon has released a white paper proposing a new protocol layer, which it labels Polygon 2.0. This will see its current native MATIC token replaced 1-for-1 by a new POL token.
The move is part of the extension of Polygon into a multichain future, which will include its current PoS chain, the new zkEVM chain, plus unlimited Supernets, which are dedicated chains for apps and games.
The new POL token will also support a wider set of potential roles for validators to perform across all these networks, and allow for expanded governance and the creation of an ecoystem treasury.
The transition process could start in weeks but have a token transition period of up to four years.
Additional Links
Flow blockchain outfit Dapper Labs has announced its third round of job cuts, losing 51 positions. Since November 2022 it’s reduced overall headcount by around 44%. CEO Roham Gharegozlou stated Dapper Labs remains “well capitalized” and Flow has several years of cash runway.
Ripple and the SEC are both claiming victory but XRP is up 72% and crypto’s mcap has jumped to $1.3 trillion so we all made it (today).
Coinbase’s Ethereum L2 Base, which is build on OP Stack, has gone live for developers, with public access to the mainnet expected in August.
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