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Why gaming is a great bet for Venture Capitalists

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April 10
9:03 PM 2019

Investing in the gaming sector has traditionally been seen as an area that is fraught with danger among venture capitalists. It is a place where the hits can be enormous - you only need to look at games like Fortnite or PlayerUnknown's Battlegrounds to see that. But the trouble lies in spotting those games that are going to capture the hearts, minds and wallets of the gaming public.

However, it is also a sector that is getting just too big to avoid. The online battle arenas and first person shooters might be the headline grabbers, but there are other influences afoot.

For example, last year's Supreme Court decision might have been specific to sports betting, but it signaled a move towards a more relaxed attitude in the US towards gambling in general. Sites like Malta-based Winningroom are attracting a growing international customer base, and it is a sector that continues to grow with every passing month.

Let the games commence

At last year's GamesBeat Summit, a panel of investors explained why they see this as the ideal time to explore investments in the gaming world. Eric Goldberg is the managing director of Crossover Technologies and has 35 years experience in the gaming sector. He said that from an investor's perspective, games are definitely back in fashion. He and the panel discussed some specific areas of gaming tech that could be game changers.

Virtual and augmented reality

Spark International was one of the companies that led the investment in Oculus, prior to Facebook acquiring it for almost $3 billion in 2014. One of Spark's managing partners, Nabeel Hyatt, says the technology is the most exciting new development in gaming. But the problem for investors is in trying to time the market. Another serial investor, Gordon Rubenstein, commented that his company, Raine Ventures, has sunk money into four VR enterprises over the past year, but that he expects it to take 36 months for these to come to fruition.

eSport

eSport is turning into one of the biggest market disruptors, and is spreading rapidly from MOBA games like League of Legends into the conventional sporting arena through games like NBA 2K and FIFA. With multi million dollar prize pots and blue chip sponsors like Mercedes and Intel, it is little wonder that VCs are diving in from the ground floor in the establishment of new eSport teams that could dominate this exciting new sector.

Blockchain

Gaming is a sector that is hugely affected by hype - just as we saw with the somewhat premature excitement over VR back in 2016. Hyatt feels that blockchain is certainly going to have a major influence on gaming, but investors need to be cautious over a similar hype cycle. He said: "Gaming is secondarily at the forefront of a lot of new amazing trends over the last 40 years," and he counted blockchain among them. However, its exact role in the gaming sector, and the tangible innovations it will bring, have yet to be fully understood.

March Capital's Greg Milken agreed, saying he had received numerous pitches relating to blockchain gaming but had yet to see any that were really offering something new or solving a specific market problem.

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