Konvoy: Games venture funding declines in Q2 2023, ripe for M&A

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Venture capital funding for gaming continues to decline in Q2 2023, per Konvoy Ventures latest games industry report. However, the venture firm believes this sets the stage for an active M&A environment.

Overall, Konvoy projects that the gaming industry is on track to reach $201 billion this year. This translates to 9.2% growth from last year’s $184 billion. The firm expects the market to continue growing at 8.9% annually. By 2027, the gaming market is projected to grow to $283 billion.

While the overall market is expected to grow, games venture capital deals are declining dramatically.

VC funding (pre-seed through Series I) totaled $472 million this quarter, a decline of 38% from Q1’s $761 million. While early stage deal (pre-seed to Series A) totals declined by 20%, a 60% drop in growth stage deal amounts drove the overall decline.

Additionally, the number of VC deals dropped by 20% from Q1 2023. Konvoy recorded 25% fewer early stage deals in Q2 which accounts for the difference.

The average deal size also shrunk alongside the funding totals and number of deals. In Q2 2023, the average deal size was $5.6 million, down 20% from $7.0 million the previous quarter.

Konvoy previously claimed that 2021’s growth in venture funding was an anomaly and current data is backing up that claim. VC funding this quarter is just 15% of Q4 2021’s peak funding total. Moreover, Q2 2023’s total is the lowest since Q2 2020 at the height of the pandemic.

H1 2023’s VC funding totals and number of deals are still greater than H1 2019 and H1 2020. This suggests that despite the headwinds, gaming is retaining some of its pandemic era